Westlake Chemical Partners LP 10-Q

Item 1. Financial Statements WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, 2023 December 31, 2022 (in thousands of dollars, except unit amounts) ASSETS Current assets Cash and cash equivalents $ 65,869 $ 64,782 Receivable under the Investment Management Agreement—Westlake Corporation ("Westlake") 84,358 64,996 Accounts receivable, net—Westlake 54,625 90,965 Accounts receivable, net—third parties 21,626 20,030 Inventories 4,394 4,715 Prepaid expenses and other current assets 599 305 Total current assets 231,471 245,793 Property, plant and equipment, net 959,114 990,213 Goodwill 5,814 5,814 Deferred charges and other assets, net 145,111 130,159 Total assets $ 1,341,510 $ 1,371,979 LIABILITIES Current liabilities Accounts payable—Westlake $ 25,261 $ 34,087 Accounts payable—third parties 18,984 15,317 Accrued and other liabilities 31,355 17,537 Total current liabilities 75,600 66,941 Long-term debt payable to Westlake 399,674 399,674 Deferred income taxes 1,656 1,656 Other liabilities 3,308 — Total liabilities 480,238 468,271 Commitments and contingencies (Note 12) EQUITY Common unitholders—publicly and privately held ( 21,105,904 and 21,099,638 units issued and outstanding at September 30, 2023 and December 31, 2022, respectively) 474,895 480,643 Common unitholder—Westlake ( 14,122,230 and 14,122,230 units issued and outstanding at September 30, 2023 and December 31, 2022, respectively) 49,919 53,859 General partner—Westlake ( 242,572 ) ( 242,572 ) Total Westlake Chemical Partners LP partners' capital 282,242 291,930 Noncontrolling interest in Westlake Chemical OpCo LP ("OpCo") 579,030 611,778 Total equity 861,272 903,708 Total liabilities and equity $ 1,341,510 $ 1,371,979 The accompanying notes are an integral part of the consolidated financial statements. 1 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 (in thousands of dollars, except unit amounts and per unit data) Revenue Net sales—Westlake $ 289,303 $ 364,273 $ 771,349 $ 1,020,042 Net co-products, ethylene and other sales—third parties 32,361 50,850 122,169 206,266 Total net sales 321,664 415,123 893,518 1,226,308 Cost of sales 228,683 324,629 606,742 947,073 Gross profit 92,981 90,494 286,776 279,235 Selling, general and administrative expenses 6,741 8,678 21,884 26,824 Income from operations 86,240 81,816 264,892 252,411 Other income (expense) Interest expense—Westlake ( 6,437 ) ( 3,645 ) ( 19,869 ) ( 8,703 ) Other income, net 1,272 618 3,153 683 Income before income taxes 81,075 78,789 248,176 244,391 Provision for income taxes 222 484 607 822 Net income 80,853 78,305 247,569 243,569 Less: Net income attributable to noncontrolling interest in OpCo 67,647 63,548 207,585 196,180 Net income attributable to Westlake Chemical Partners LP and limited partners' interest in net income $ 13,206 $ 14,757 $ 39,984 $ 47,389 Net income per limited partner unit attributable to Westlake Chemical Partners LP (basic and diluted) Common units $ 0.37 $ 0.42 $ 1.14 $ 1.35 Weighted average limited partner units outstanding (basic and diluted) Common units—publicly and privately held 21,103,180 21,096,317 21,100,832 21,093,578 Common units—Westlake 14,122,230 14,122,230 14,122,230 14,122,230 The accompanying notes are an integral part of the consolidated financial statements. 2 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) Partnership Common Unitholders — Publicly and Privately Held Common Unitholder — Westlake General Partner — Westlake Noncontrolling Interest in OpCo Total (in thousands of dollars) Balances at December 31, 2022 $ 480,643 $ 53,859 $ ( 242,572 ) $ 611,778 $ 903,708 Net income 8,921 5,971 — 76,560 91,452 Distribution to unitholders ( 9,947 ) ( 6,657 ) — — ( 16,604 ) Distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 88,678 ) ( 88,678 ) Balances at March 31, 2023 $ 479,617 $ 53,173 $ ( 242,572 ) $ 599,660 $ 889,878 Net income 7,120 4,766 — 63,378 75,264 Distribution to unitholders ( 9,946 ) ( 6,657 ) — — ( 16,603 ) Distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 80,581 ) ( 80,581 ) Balances at June 30, 2023 $ 476,791 $ 51,282 $ ( 242,572 ) $ 582,457 $ 867,958 Net income 7,911 5,295 — 67,647 80,853 Units issued for vested phantom units 141 — — — 141 Distribution to unitholders ( 9,948 ) ( 6,658 ) — — ( 16,606 ) Distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 71,074 ) ( 71,074 ) Balances at September 30, 2023 $ 474,895 $ 49,919 $ ( 242,572 ) $ 579,030 $ 861,272 The accompanying notes are an integral part of the consolidated financial statements. 3 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) Partnership Common Unitholders— Publicly and Privately Held Common Unitholder— Westlake General Partner— Westlake Noncontrolling Interest in OpCo Total (in thousands of dollars) Balances at December 31, 2021 $ 481,796 $ 54,754 $ ( 242,572 ) $ 678,720 $ 972,698 Net income 9,700 6,494 — 64,631 80,825 Distribution to unitholders ( 9,946 ) ( 6,657 ) — — ( 16,603 ) Distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 60,688 ) ( 60,688 ) Balances at March 31, 2022 $ 481,550 $ 54,591 $ ( 242,572 ) $ 682,663 $ 976,232 Net income 9,846 6,592 — 68,001 84,439 Distribution to unitholders ( 9,943 ) ( 6,657 ) — — ( 16,600 ) Distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 75,130 ) ( 75,130 ) Balances at June 30, 2022 $ 481,453 $ 54,526 $ ( 242,572 ) $ 675,534 $ 968,941 Net income 8,839 5,918 — 63,548 78,305 Units issued for vested phantom units 190 — — — 190 Distribution to unitholders ( 9,947 ) ( 6,657 ) — — ( 16,604 ) Distribution to noncontrolling interest retained in OpCo by Westlake — — — ( 78,668 ) ( 78,668 ) Balances at September 30, 2022 $ 480,535 $ 53,787 $ ( 242,572 ) $ 660,414 $ 952,164 The accompanying notes are an integral part of the consolidated financial statements. 4 Table of Contents WESTLAKE CHEMICAL PARTNERS LP CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, 2023 2022 (in thousands of dollars) Cash flows from operating activities Net income $ 247,569 $ 243,569 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 81,902 91,682 Loss from disposition of property, plant and equipment 4,438 4,388 Other losses (gains), net ( 86 ) 4,400 Changes in operating assets and liabilities Accounts receivable—third parties ( 1,510 ) ( 23,109 ) Net accounts receivable—Westlake 26,631 68,520 Inventories 321 3,539 Prepaid expenses and other current assets ( 294 ) ( 62 ) Accounts payable—third parties 4,772 ( 14,269 ) Accrued and other liabilities 9,553 ( 32,326 ) Other, net ( 28,968 ) ( 5,170 ) Net cash provided by operating activities 344,328 341,162 Cash flows from investing activities Additions to property, plant and equipment ( 33,979 ) ( 45,458 ) Investments with Westlake under the Investment Management Agreement ( 164,116 ) ( 276,000 ) Maturities of investments with Westlake under the Investment Management Agreement 145,000 247,000 Net cash used for investing activities ( 53,095 ) ( 74,458 ) Cash flows from financing activities Proceeds from debt payable to Westlake 155,250 — Repayment of debt payable to Westlake ( 155,250 ) — Distributions to noncontrolling interest retained in OpCo by Westlake ( 240,333 ) ( 214,486 ) Distributions to unitholders ( 49,813 ) ( 49,807 ) Net cash used for financing activities ( 290,146 ) ( 264,293 ) Net increase in cash and cash equivalents 1,087 2,411 Cash and cash equivalents at beginning of period 64,782 17,057 Cash and cash equivalents at end of period $ 65,869 $ 19,468 The accompanying notes are an integral part of the consolidated financial statements. 5 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 1. Description of Business and Basis of Presentation Description of Business Westlake Chemical Partners LP (the "Partnership") is a Delaware limited partnership formed in March 2014 to operate, acquire and develop ethylene production facilities and related assets. On August 4, 2014, the Partnership completed its initial public offering (the "IPO") of 12,937,500 common units representing limited partner interests. In connection with the IPO, the Partnership acquired a 10.6 % limited partner interest in Westlake Chemical OpCo LP ("OpCo") and a 100 % interest in Westlake Chemical OpCo GP LLC ("OpCo GP"), which is the general partner of OpCo. OpCo owns three ethylene production facilities and one common carrier ethylene pipeline (collectively, the "Contributed Assets"). Since the IPO, the Partnership has periodically purchased additional limited partner interest in OpCo. Most recently, on March 29, 2019, the Partnership purchased an additional 4.5 % newly-issued limited partner interest in OpCo for approximately $ 201,445 , resulting in an aggregate 22.8 % limited partner interest in OpCo, effective January 1, 2019. The remaining 77.2 % limited partner interest in OpCo is owned by Westlake Corporation. Basis of Presentation The accompanying unaudited consolidated interim financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim periods. Accordingly, certain information and footnotes required for complete financial statements under generally accepted accounting principles in the United States ("U.S. GAAP") have not been included. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Partnership included in the annual report on Form 10-K for the fiscal year ended December 31, 2022 (the "2022 Form 10-K"), filed with the SEC on March 1, 2023. These financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the notes to the consolidated financial statements of the Partnership for the fiscal year ended December 31, 2022. References to "Westlake" refer collectively to Westlake Corporation and its subsidiaries, other than the Partnership, OpCo and OpCo GP. The Partnership holds a 22.8 % limited partner interest and the entire non-economic general partner interest in OpCo. The remaining 77.2 % limited partner interest in OpCo is owned directly by Westlake, which has no rights to direct the activities that most significantly impact the economic performance of OpCo. As a result of the fact that substantially all of OpCo's activities are conducted on behalf of Westlake, and the fact that OpCo exhibits disproportionality of voting rights to economic interest, OpCo was deemed to be a variable interest entity. The Partnership, through its ownership of OpCo's general partner, has the power to direct the activities that most significantly impact the economic performance of OpCo, and it also has the obligation or right to absorb losses or receive benefits from OpCo that could potentially be significant to OpCo. As such, the Partnership was determined to be OpCo's primary beneficiary and therefore consolidates OpCo's results of operations and financial position. Westlake's retained interest of 77.2 % is recorded as noncontrolling interest in the Partnership's consolidated financial statements. In the opinion of the Partnership's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Partnership's financial position as of September 30, 2023, its results of operations for the three and nine months ended September 30, 2023 and 2022 and the changes in its cash position for the nine months ended September 30, 2023 and 2022. Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2023 or any other interim period. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates. 6 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 2. Accounts Receivable—Third Parties Accounts receivable—third parties consist of the following: September 30, 2023 December 31, 2022 Trade customers $ 18,464 $ 18,813 Allowance for credit losses ( 195 ) ( 280 ) Other receivables 3,357 1,497 Accounts receivable, net—third parties $ 21,626 $ 20,030 3. Inventories Inventories consist of the following: September 30, 2023 December 31, 2022 Finished products $ 3,823 $ 4,093 Feedstock, additives and chemicals 571 622 Inventories $ 4,394 $ 4,715 4. Property, Plant and Equipment Depreciation expense on property, plant and equipment of $ 21,282 and $ 23,368 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2023 and 2022, respectively. Depreciation expense on property, plant and equipment of $ 63,167 and $ 71,252 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2023 and 2022, respectively. 5. Deferred Charges and Other Assets Amortization expense on deferred charges and other assets of $ 6,944 and $ 6,023 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2023 and 2022, respectively . Amortization expense on deferred charges and other assets of $ 18,735 and $ 20,430 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2023 and 2022, respectively. 6. Distributions and Net Income Per Limited Partner Unit On October 31, 2023, the board of directors of Westlake Chemical Partners GP LLC ("Westlake GP"), the Partnership's general partner, declared a quarterly cash distribution for the three months ended September 30, 2023 of $ 0.4714 per unit. This distribution is payable on November 27, 2023 to unitholders of record as of November 10, 2023. Distributions are declared subsequent to quarter end; therefore, the table below represents total cash distributions declared from earnings of the related periods pertaining to such distributions. Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net income attributable to the Partnership $ 13,206 $ 14,757 $ 39,984 $ 47,389 Less: Limited partners' distribution declared on common units 16,607 16,604 49,814 49,799 Distribution in excess of net income $ ( 3,401 ) $ ( 1,847 ) $ ( 9,830 ) $ ( 2,410 ) 7 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Net income per unit applicable to common limited partner units is computed by dividing the respective limited partners' interest in net income by the weighted-average number of common units outstanding for the period. Because the Partnership has more than one class of participating securities, it uses the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include common units and incentive distribution rights. Net income attributable to the Partnership is allocated to the unitholders in accordance with their respective ownership percentages in preparation of the consolidated statements of changes in equity. However, when distributions related to the incentive distribution rights are made, net income equal to the amount of those distributions is first allocated to the general partner before the remaining net income is allocated to the unitholders based on their respective ownership percentages. Basic and diluted net income per unit is the same because the Partnership does not have any potentially dilutive units outstanding for the periods presented. Three Months Ended September 30, 2023 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 16,607 $ — $ 16,607 Distribution in excess of net income ( 3,401 ) — ( 3,401 ) Net income $ 13,206 $ — $ 13,206 Weighted average units outstanding: Basic and diluted 35,225,410 35,225,410 Net income per limited partner unit: Basic and diluted $ 0.37 Three Months Ended September 30, 2022 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 16,604 $ — $ 16,604 Distribution in excess of net income ( 1,847 ) — ( 1,847 ) Net income $ 14,757 $ — $ 14,757 Weighted average units outstanding: Basic and diluted 35,218,547 35,218,547 Net income per limited partner unit: Basic and diluted $ 0.42 Nine Months Ended September 30, 2023 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 49,814 $ — $ 49,814 Distribution in excess of net income ( 9,830 ) — ( 9,830 ) Net income $ 39,984 $ — $ 39,984 Weighted average units outstanding: Basic and diluted 35,223,062 35,223,062 Net income per limited partner unit: Basic and diluted $ 1.14 8 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Nine Months Ended September 30, 2022 Limited Partners' Common Units Incentive Distribution Rights Total Net income attributable to the Partnership: Distribution $ 49,799 $ — $ 49,799 Distribution in excess of net income ( 2,410 ) — ( 2,410 ) Net income $ 47,389 $ — $ 47,389 Weighted average units outstanding: Basic and diluted 35,215,808 35,215,808 Net income per limited partner unit: Basic and diluted $ 1.35 The amended Partnership Agreement provides that the Partnership will distribute cash that is deemed to be operating surplus each quarter to all the unitholders, pro rata, until each unit has received a distribution of $ 1.2938 . If cash distributions to the Partnership's unitholders exceed $ 1.2938 per common unit in any quarter, the Partnership's unitholders and Westlake, as the holder of the Partnership's incentive distribution rights, will receive distributions according to the following percentage allocations: Marginal Percentage Interest in Distributions Total Quarterly Distribution Per Unit Unitholders IDR Holders Above $ 1.2938 up to $ 1.4063 85.0 % 15.0 % Above $ 1.4063 up to $ 1.6875 75.0 % 25.0 % Above $ 1.6875 50.0 % 50.0 % The Partnership's distribution for the three months ended September 30, 2023 did not exceed the $ 1.2938 per unit threshold, and, as a result, no distribution was made with respect to the Partnership's incentive distribution rights to Westlake, as the holder of the Partnership's incentive distribution rights. Distributions Per Common Unit Distributions per common unit for the three and nine months ended September 30, 2023 and 2022 were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Distributions per common unit $ 0.4714 $ 0.4714 $ 1.4142 $ 1.4142 7. Partners' Equity On October 4, 2018, the Partnership and Westlake Chemical Partners GP LLC, the general partner of the Partnership, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell the Partnership's common units, from time to time, up to an aggregate offering amount of $ 50,000 . The Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration and subsequent renewals thereof for utilization under this agreement. No common units were issued under this program as of September 30, 2023. On March 29, 2019, the Partnership completed the issuance and sale of 2,940,818 common units at a price of $ 21.40 per unit through a private placement. TTWF LP, Westlake's principal stockholder and a related party, acquired 1,401,869 common units out of 2,940,818 common units issued in the private placement. 9 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) 8. Related Party Transactions The Partnership and OpCo regularly enter into related party transactions with Westlake. See below for a description of transactions with related parties. Sales to Related Parties OpCo sells ethylene to Westlake under the Ethylene Sales Agreement. Additionally, the Partnership and OpCo from time to time provide other services or products for which it charges Westlake a fee. Sales to related parties were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net sales—Westlake $ 289,303 $ 364,273 $ 771,349 $ 1,020,042 Cost of Sales from Related Parties Charges for goods and services purchased by the Partnership and OpCo from Westlake and included in cost of sales relate primarily to feedstock purchased under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement. Charges from related parties in cost of sales were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Feedstock purchased from Westlake and included in cost of sales $ 120,040 $ 201,044 $ 303,809 $ 603,243 Other charges from Westlake and included in cost of sales 31,072 49,144 91,707 135,574 Total $ 151,112 $ 250,188 $ 395,516 $ 738,817 Services from Related Parties Included in Selling, General and Administrative Expenses Charges for services purchased by the Partnership from Westlake and included in selling, general and administrative expenses primarily relate to services Westlake performs on behalf of the Partnership under the Omnibus Agreement, including the Partnership's finance, legal, information technology, human resources, communication, ethics and compliance and other administrative functions. Charges from related parties included within selling, general and administrative expenses were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Services received from Westlake and included in selling, general and administrative expenses $ 6,670 $ 7,080 $ 19,966 $ 20,510 Goods and Services from Related Parties Capitalized as Assets Charges for goods and services purchased by the Partnership and OpCo from Westlake which were capitalized as assets relate primarily to the services of Westlake employees under the Services and Secondment Agreement. Charges from related parties for goods and services capitalized as assets were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Goods and services purchased from Westlake and capitalized as assets $ 1,035 $ 832 $ 2,907 $ 2,205 10 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Receivable under the Investment Management Agreement On August 1, 2017, the Partnership, OpCo and Westlake executed an investment management agreement (the "Investment Management Agreement") that authorized Westlake to invest the Partnership's and OpCo's excess cash with Westlake for durations of up to a maximum of nine months. Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo. Accrued interest of $ 1,186 and $ 940 was included in the receivable under the Investment Management Agreement balance at September 30, 2023 and December 31, 2022, respectively. Total interest earned related to the Investment Management Agreement was $ 1,186 and $ 691 for the three months ended September 30, 2023 and 2022, respectively, and $ 3,151 and $ 934 for the nine months ended September 30, 2023 and 2022, respectively. The Partnership's receivable under the Investment Management Agreement was as follows: September 30, 2023 December 31, 2022 Receivable under the Investment Management Agreement $ 84,358 $ 64,996 Accounts Receivable from Related Parties The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake and the buyer deficiency fee and shortfall fee recognized under the Ethylene Sales Agreement. Based on OpCo's 2022 production, the Partnership recognized buyer deficiency fees of $ 23,835 during 2022. The buyer deficiency fee was received by the Partnership in January 2023. Additionally, as a result of force majeure events in 2021, the Partnership recognized a shortfall fee of $ 58,906 during 2021, of which $ 7,193 remained to be collected by the Partnership as of December 31, 2022. Of this amount, $ 6,451 was received in the nine months ended September 30, 2023 and the remaining amount will be collected during the remainder of 2023 pursuant to the terms of the Ethylene Sales Agreement. The Partnership's accounts receivable from Westlake were as follows: September 30, 2023 December 31, 2022 Accounts receivable—Westlake $ 54,625 $ 90,965 Accounts Payable to Related Parties The Partnership's accounts payable to Westlake result primarily from feedstock purchases under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement and the Omnibus Agreement. The Partnership's accounts payable to Westlake were as follows: September 30, 2023 December 31, 2022 Accounts payable—Westlake $ 25,261 $ 34,087 Related Party Leases OpCo is obligated to Westlake under various long-term and short-term noncancelable operating leases, primarily related to rail cars and land. Operating lease rentals paid to Westlake for such leases were $ 433 and $ 719 for the three months ended September 30, 2023 and 2022, respectively, an d $ 1,480 and $ 1,979 for the nine months ended September 30, 2023 and 2022, respectively, and are reflected in other charges from Westlake that are included in cost of sales. OpCo has two site lease agreements with Westlake, each of which has a term of 50 years. Pursuant to the site lease agreements, OpCo pays Westlake one dollar per site per year. 11 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) Debt Payable to Related Parties See Note 9 for a description of related party debt payable balances. Interest on related party debt payable balances, net of capitalized interest, for the three months ended September 30, 2023 and 2022 was $ 6,437 and $ 3,645 , respecti vely. Interest on related party debt payable balances, net of capitalized interest, for the nine months ended September 30, 2023 and 2022 was $ 19,869 and $ 8,703 , respectively. Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations. At September 30, 2023 and December 31, 2022, accrued interest on related party debt was $ 6,486 and $ 4,733 , respectively, and is reflected as a component of accrued and other liabilities in the consolidated balance sheets. Debt payable to related parties was as follows: September 30, 2023 December 31, 2022 Long-term debt payable to Westlake $ 399,674 $ 399,674 Major Customer and Concentration of Credit Risk During the three months ended September 30, 2023 and 2022, Westlake accounted for approximately 89.9 % and 87.8 %, respectively, of the Partnership's net sale s. During the nine months ended September 30, 2023 and 2022, Westlake accounted for approximately 86.3 % and 83.2 %, respectively, of the Partnership's net sales. 9. Long-Term Debt Payable to Westlake Long-term debt payable to Westlake consists of the following: September 30, 2023 December 31, 2022 OpCo Revolver $ 22,619 $ 22,619 MLP Revolver 377,055 377,055 Long-term debt payable to Westlake $ 399,674 $ 399,674 As of September 30, 2023, outstanding borrowings under the OpCo Revolver and the MLP Revolver bore interest at the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR") plus the Applicable Margin plus a 0.10 % credit spread adjustment. The Applicable Margin under the OpCo Revolver is 1.75 %. The Applicable Margin under the MLP Revolver varies between 1.75 % and 2.75 %, depending on the Partnership's Consolidated Leverage Ratio. The OpCo Revolver and the MLP Revolver are scheduled to mature on July 12, 2027. The weighted average interest rate on all long-term debt was 7.1 % and 4.8 % at September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, the Partnership was in compliance with all of the covenants under the OpCo Revolver and the MLP Revolver. 10. Fair Value Measurements The Partnership reports certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Under the accounting guidance for fair value measurements, inputs used to measure fair value are classified in one of three levels: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. 12 Table of Contents WESTLAKE CHEMICAL PARTNERS LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — Continued (Unaudited) (in thousands of dollars, except unit amounts and per unit data) The Partnership has financial assets and liabilities subject to fair value measures. These financial assets and liabilities include cash and cash equivalents, accounts receivable, net, accounts payable and long-term debt payable to Westlake, all of which are recorded at carrying value. The amounts reported in the consolidated balance sheets for accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Partnership's long-term debt at September 30, 2023 and December 31, 2022 are summarized in the table below. The fair value of long-term debt is determined based on the present value of expected future cash flows using a discounted cash flow methodology. Because the Partnership's valuation methodology used for long-term debt requires the use of significant unobservable inputs, the inputs used to measure the fair value of the Partnership's long-term debt are classified as Level 3 within the fair value hierarchy. Inputs used to estimate the fair values of the Partnership's long-term debt include the selection of an appropriate discount rate. September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Long-term debt payable to Westlake $ 399,674 $ 409,637 $ 399,674 $ 405,879 11. Supplemental Information Accrued and Other Liabilities Accrued and other liabilities were $ 31,355 and $ 17,537 at September 30, 2023 and December 31, 2022, respectively. Accrued maintenance expense, accrued capital expenditures, accrued interest on related party debt and accrued taxes, which are components of accrued and other liabilities, were $ 10,020 , $ 5,320 , $ 6,486 and $ 4,881 , respectively, at September 30, 2023 and $ 3,752 , $ 2,442 , $ 4,733 and $ 2,652 , respectively, at December 31, 2022. No other component of accrued and other liabilities was more than five percent of total current liabilities. Cash Flow Information Non-cash Investing Activity Capital expenditure related liabilities, included in accounts payable—third parties and accrued and other liabilities, were $ 8,262 and $ 7,654 at September 30, 2023 and 2022, respectively. Interest Paid Interest paid by the Partnership, net of interest capitalized, was $ 18,095 and $ 7,335 for the nine months ended September 30, 2023 and 2022, respectively. 12. Commitments and Contingencies The Partnership is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require the Partnership to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. These laws include the federal Clean Air Act, the federal Water Pollution Control Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the Toxic Substances Control Act and various other federal, state and local laws and regulations. Under CERCLA, an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because the Partnership's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Partnership. Pursuant to the Omnibus Agreement, certain subsidiaries of Westlake will indemnify the Partnership for liabilities that occurred or existed prior to August 4, 2014. On September 27, 2021, shortly after the turnaround on Petro 2 commenced, there was a flash fire at the quench tower of the Petro 2 facility. Contractors working on the quench tower were injured. There are lawsuits pending in connection with the flash fire. Litigation and discovery are continuing, and settlements have been reached with most of the plaintiffs. The Partnership is also involved in other legal proceedings incidental to the conduct of its business. After considering all relevant facts and circumstances, including applicable insurance, the Partnership does not believe that any of these legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows. 13 Table of Contents