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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023

Or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to      
WESTERN MIDSTREAM PARTNERS, LP
WESTERN MIDSTREAM OPERATING, LP
(Exact name of registrant as specified in its charter)
Commission file number:State or other jurisdiction of incorporation or organization:I.R.S. Employer Identification No.:
Western Midstream Partners, LP001-35753Delaware46-0967367
Western Midstream Operating, LP001-34046Delaware26-1075808
Address of principal executive offices:Zip Code:Registrant’s telephone number, including area code:
Western Midstream Partners, LP9950 Woodloch Forest Drive, Suite 2800The Woodlands,Texas77380(346)786-5000
Western Midstream Operating, LP9950 Woodloch Forest Drive, Suite 2800The Woodlands,Texas77380(346)786-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbolName of exchange
on which registered
Common units outstanding as of April 27, 2023:
Western Midstream Partners, LPCommon unitsWESNew York Stock Exchange384,615,443
Western Midstream Operating, LPNoneNoneNoneNone
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Western Midstream Partners, LPYes
þ
No
¨
Western Midstream Operating, LPYes
þ
No
¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Western Midstream Partners, LPYes
þ
No
¨
Western Midstream Operating, LPYes
þ
No
¨



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Western Midstream Partners, LPLarge Accelerated FilerAccelerated FilerNon-accelerated FilerSmaller Reporting CompanyEmerging Growth Company
þ☐☐☐☐
Western Midstream Operating, LPLarge Accelerated FilerAccelerated FilerNon-accelerated FilerSmaller Reporting CompanyEmerging Growth Company
☐☐þ☐☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Western Midstream Partners, LP¨
Western Midstream Operating, LP¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Western Midstream Partners, LPYes☐No
þ
Western Midstream Operating, LPYes☐
No
þ

FILING FORMAT

This quarterly report on Form 10-Q is a combined report being filed by two separate registrants: Western Midstream Partners, LP and Western Midstream Operating, LP. Western Midstream Operating, LP is a consolidated subsidiary of Western Midstream Partners, LP that has publicly traded debt, but does not have any publicly traded equity securities. Information contained herein related to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrant.

Part I, Item 1 of this quarterly report includes separate financial statements (i.e., consolidated statements of operations, consolidated balance sheets, consolidated statements of equity and partners’ capital, and consolidated statements of cash flows) for Western Midstream Partners, LP and Western Midstream Operating, LP. The accompanying Notes to Consolidated Financial Statements, which are included under Part I, Item 1 of this quarterly report, and Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is included under Part I, Item 2 of this quarterly report, are presented on a combined basis for each registrant, with any material differences between the registrants disclosed separately.



TABLE OF CONTENTS
PAGE
PART I
Item 1.
Item 2.
Item 3.
Item 4.
Item 5.
PART II
Item 1.
Item 1A.
Item 2.
Item 6.
3

COMMONLY USED ABBREVIATIONS AND TERMS

References to “we,” “us,” “our,” “WES,” “the Partnership,” or “Western Midstream Partners, LP” refer to Western Midstream Partners, LP (formerly Western Gas Equity Partners, LP) and its subsidiaries. The following list of abbreviations and terms are used in this document:

Defined TermDefinition
AnadarkoAnadarko Petroleum Corporation and its subsidiaries, excluding our general partner, which became a wholly owned subsidiary of Occidental on August 8, 2019.
Barrel, Bbl, Bbls/d, MBbls/d42 U.S. gallons measured at 60 degrees Fahrenheit, barrels per day, thousand barrels per day.
BoardThe board of directors of WES’s general partner.
Cactus IICactus II Pipeline LLC, in which we held a 15% interest that we sold in November 2022.
ChipetaChipeta Processing, LLC.
CondensateA natural-gas liquid with a low vapor pressure compared to drip condensate, mainly composed of propane, butane, pentane, and heavier hydrocarbon fractions.
DBMDelaware Basin Midstream, LLC.
DBM Water systemsDBM’s produced-water gathering and disposal systems in West Texas.
DJ Basin complex
The Platte Valley system, Wattenberg system, Lancaster plant, Latham plant, and Wattenberg processing plant.
EBITDA
Earnings before interest, taxes, depreciation, and amortization. For a definition of “Adjusted EBITDA,” see Reconciliation of Non-GAAP Financial Measures under Part I, Item 2 of this Form 10-Q.
Exchange ActThe Securities Exchange Act of 1934, as amended.
FRP
Front Range Pipeline LLC, in which we own a 33.33% interest.
GAAP
Generally accepted accounting principles in the United States.
General partner
Western Midstream Holdings, LLC, the general partner of the Partnership.
Imbalance
Imbalances result from (i) differences between gas and NGLs volumes nominated by customers and gas and NGLs volumes received from those customers and (ii) differences between gas and NGLs volumes received from customers and gas and NGLs volumes delivered to those customers.
Marcellus Interest
The 33.75% interest in the Larry’s Creek, Seely, and Warrensville gas-gathering systems and related facilities located in northern Pennsylvania.
MGR
Mountain Gas Resources, LLC, includes the Red Desert complex and the Granger straddle plant.
Mi Vida
Mi Vida JV LLC, in which we own a 50% interest.
MLP
Master limited partnership.
Mcf, MMcf, MMcf/d
Thousand cubic feet, million cubic feet, million cubic feet per day.
Mont Belvieu JV
Enterprise EF78 LLC, in which we own a 25% interest.
Natural-gas liquid(s) or NGL(s)
The combination of ethane, propane, normal butane, isobutane, and natural gasolines that, when removed from natural gas, become liquid under various levels of pressure and temperature.
Occidental
Occidental Petroleum Corporation and, as the context requires, its subsidiaries, excluding our general partner.
Panola
Panola Pipeline Company, LLC, in which we own a 15% interest.
Produced water
Byproduct associated with the production of crude oil and natural gas that often contains a number of dissolved solids and other materials found in oil and gas reservoirs.
Ranch Westex
Ranch Westex JV LLC, in which we owned a 50% interest through August 2022, and a 100% interest thereafter.
RCF
WES Operating’s $2.0 billion senior unsecured revolving credit facility.
Red Bluff Express
Red Bluff Express Pipeline, LLC, in which we own a 30% interest.
Related parties
Occidental, the Partnership’s equity interests (see Note 6—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q), and the Partnership and WES Operating for transactions that eliminate upon consolidation.
Rendezvous
Rendezvous Gas Services, LLC, in which we own a 22% interest.
Residue
The natural gas remaining after the unprocessed natural-gas stream has been processed or treated.
Saddlehorn
Saddlehorn Pipeline Company, LLC, in which we own a 20% interest.
4

Defined TermDefinition
SEC
U.S. Securities and Exchange Commission.
Services Agreement
That certain amended and restated Services, Secondment, and Employee Transfer Agreement, dated as of December 31, 2019, by and among Occidental, Anadarko, and WES Operating GP.
Springfield system
The Springfield gas-gathering system and Springfield oil-gathering system.
TEFR Interests
The interests in TEP, TEG, and FRP.
TEG
Texas Express Gathering LLC, in which we own a 20% interest.
TEP
Texas Express Pipeline LLC, in which we own a 20% interest.
WES Operating
Western Midstream Operating, LP, formerly known as Western Gas Partners, LP, and its subsidiaries.
WES Operating GP
Western Midstream Operating GP, LLC, the general partner of WES Operating.
West Texas complex
The DBM complex and DBJV and Haley systems.
WGRAH
WGR Asset Holding Company LLC.
White Cliffs
White Cliffs Pipeline, LLC, in which we own a 10% interest.
Whitethorn LLC
Whitethorn Pipeline Company LLC, in which we own a 20% interest.
Whitethorn
A crude-oil and condensate pipeline, and related storage facilities, owned by Whitethorn LLC.
$1.25 billion Purchase Program
The $1.25 billion buyback program ending December 31, 2024. The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions.

5
PART I.  FINANCIAL INFORMATION (UNAUDITED)

Item 1.  Financial Statements

WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended 
March 31,
thousands except per-unit amounts20232022
Revenues and other
Service revenues – fee based$647,867 $631,598 
Service revenues – product based46,810 40,867 
Product sales39,025 85,589 
Other280 243 
Total revenues and other (1)
733,982 758,297 
Equity income, net – related parties39,021 49,607 
Operating expenses
Cost of product51,459 72,848 
Operation and maintenance174,239 128,976 
General and administrative51,117 48,602 
Property and other taxes6,831 18,442 
Depreciation and amortization144,626 134,582 
Long-lived asset and other impairments (2)
52,401 — 
Total operating expenses (3)
480,673 403,450 
Gain (loss) on divestiture and other, net(2,118)370 
Operating income (loss)290,212 404,824 
Interest expense(81,670)(85,455)
Other income (expense), net1,215 106 
Income (loss) before income taxes209,757 319,475 
Income tax expense (benefit)1,416 1,805 
Net income (loss)208,341 317,670 
Net income (loss) attributable to noncontrolling interests4,696 8,953 
Net income (loss) attributable to Western Midstream Partners, LP$203,645 $308,717 
Limited partners’ interest in net income (loss):
Net income (loss) attributable to Western Midstream Partners, LP$203,645 $308,717 
General partner interest in net (income) loss(4,686)(6,783)
Limited partners’ interest in net income (loss) (4)
198,959 301,934 
Net income (loss) per common unit – basic (4)
$0.52 $0.75 
Net income (loss) per common unit – diluted (4)
$0.52 $0.75 
Weighted-average common units outstanding – basic (4)
384,468 403,254 
Weighted-average common units outstanding – diluted (4)
385,750 404,460 
_________________________________________________________________________________________
(1)Total revenues and other includes related-party amounts of $448.8 million and $428.7 million for the three months ended March 31, 2023 and 2022, respectively. See Note 5.
(2)See Note 7.
(3)Total operating expenses includes related-party amounts of $(3.1) million and $(17.6) million for the three months ended March 31, 2023 and 2022, respectively. See Note 5.
(4)See Note 4.
See accompanying Notes to Consolidated Financial Statements.
6
WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
thousands except number of unitsMarch 31,
2023		December 31,
2022
ASSETS
Current assets
Cash and cash equivalents$112,645 $286,656 
Accounts receivable, net558,300 554,263 
Other current assets64,353 59,506 
Total current assets735,298 900,425 
Property, plant, and equipment
Cost13,550,060 13,365,593 
Less accumulated depreciation5,008,838 4,823,993 
Net property, plant, and equipment8,541,222 8,541,600 
Goodwill4,783 4,783 
Other intangible assets705,158 713,075 
Equity investments931,852 944,696 
Other assets (1)
194,175 167,049 
Total assets (2)
$11,112,488 $11,271,628 
LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL
Current liabilities
Accounts and imbalance payables$362,398 $360,562 
Short-term debt
2,714 215,780 
Accrued ad valorem taxes52,717 72,875 
Accrued liabilities163,498 254,640 
Total current liabilities581,327 903,857 
Long-term liabilities
Long-term debt
6,693,941 6,569,582 
Deferred income taxes15,348 14,424 
Asset retirement obligations293,718 290,021 
Other liabilities426,590 385,629 
Total long-term liabilities
7,429,597 7,259,656 
Total liabilities (3)
8,010,924 8,163,513 
Equity and partners’ capital
Common units (384,615,227 and 384,070,984 units issued and outstanding at March 31, 2023, and December 31, 2022, respectively)
2,964,712 2,969,604 
General partner units (9,060,641 units issued and outstanding at March 31, 2023, and December 31, 2022)
2,261 2,105 
Total partners’ capital2,966,973 2,971,709 
Noncontrolling interests134,591 136,406 
Total equity and partners’ capital3,101,564 3,108,115 
Total liabilities, equity, and partners’ capital$11,112,488 $11,271,628 
________________________________________________________________________________________
(1)Other assets includes $6.3 million and $6.5 million of NGLs line-fill inventory as of March 31, 2023, and December 31, 2022, respectively. Other assets also includes $77.4 million and $60.4 million of materials and supplies inventory as of March 31, 2023, and December 31, 2022, respectively.
(2)Total assets includes related-party amounts of $1.3 billion as of March 31, 2023, and December 31, 2022, which includes related-party Accounts receivable, net of $307.6 million and $313.9 million as of March 31, 2023, and December 31, 2022, respectively. See Note 5.
(3)Total liabilities includes related-party amounts of $318.7 million and $312.3 million as of March 31, 2023, and December 31, 2022, respectively. See Note 5.

See accompanying Notes to Consolidated Financial Statements.
7
WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL
(UNAUDITED)
Partners’ Capital
thousandsCommon
Units		General Partner
Units		Noncontrolling
Interests		Total
Balance at December 31, 2022$2,969,604 $2,105 $136,406 $3,108,115 
Net income (loss)198,959 4,686 4,696 208,341 
Distributions to Chipeta noncontrolling interest owner— — (2,240)(2,240)
Distributions to noncontrolling interest owner of WES Operating— — (4,271)(4,271)
Distributions to Partnership unitholders(192,039)(4,530)— (196,569)
Unit repurchases (1)
(7,061)— — (7,061)
Equity-based compensation expense
7,199 — — 7,199 
Other(11,950)— — (11,950)
Balance at March 31, 2023$2,964,712 $2,261 $134,591 $3,101,564 
_________________________________________________________________________________________
(1)See Note 4.

Partners’ Capital
thousandsCommon
Units		General Partner
Units		Noncontrolling
Interests		Total
Balance at December 31, 2021$2,966,955 $(8,882)$137,687 $3,095,760 
Net income (loss)301,934 6,783 8,953 317,670 
Distributions to Chipeta noncontrolling interest owner— — (1,984)(1,984)
Distributions to noncontrolling interest owner of WES Operating— — (2,805)(2,805)
Distributions to Partnership unitholders(131,786)(2,963)— (134,749)
Unit repurchases (1)
(5,149)— — (5,149)
Contributions of equity-based compensation from Occidental
1,949 — — 1,949 
Equity-based compensation expense
5,794 — — 5,794 
Net contributions from (distributions to) related parties409 — — 409 
Other(6,088)— — (6,088)
Balance at March 31, 2022$3,134,018 $(5,062)$141,851 $3,270,807 
_________________________________________________________________________________________
(1)See Note 4.

See accompanying Notes to Consolidated Financial Statements.
8
WESTERN MIDSTREAM PARTNERS, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended 
March 31,
thousands20232022
Cash flows from operating activities
Net income (loss)$208,341 $317,670 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization144,626 134,582 
Long-lived asset and other impairments
52,401 — 
Non-cash equity-based compensation expense
7,199 7,743 
Deferred income taxes924 1,132 
Accretion and amortization of long-term obligations, net
1,692 1,782 
Equity income, net – related parties(39,021)(49,607)
Distributions from equity-investment earnings – related parties
39,609 45,870 
(Gain) loss on divestiture and other, net2,118 (370)
Other200 — 
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net(4,037)(165,134)
Increase (decrease) in accounts and imbalance payables and accrued liabilities, net(136,460)(14,292)
Change in other items, net24,832 (2,918)
Net cash provided by operating activities302,424 276,458 
Cash flows from investing activities
Capital expenditures(173,088)(83,971)
Contributions to equity investments – related parties(110)(2,070)
Distributions from equity investments in excess of cumulative earnings – related parties12,366 9,925 
Proceeds from the sale of assets to third parties— 383 
(Increase) decrease in materials and supplies inventory and other(18,346)4,116 
Net cash used in investing activities(179,178)(71,617)
Cash flows from financing activities
Borrowings, net of debt issuance costs 220,000 — 
Repayments of debt (313,138)— 
Increase (decrease) in outstanding checks18,768 (7,088)
Distributions to Partnership unitholders (1)
(196,569)(134,749)
Distributions to Chipeta noncontrolling interest owner(2,240)(1,984)
Distributions to noncontrolling interest owner of WES Operating(4,271)(2,805)
Net contributions from (distributions to) related parties— 409 
Unit repurchases(7,061)(5,149)
Other(12,746)(7,225)
Net cash provided by (used in) financing activities(297,257)(158,591)
Net increase (decrease) in cash and cash equivalents(174,011)46,250 
Cash and cash equivalents at beginning of period286,656 201,999 
Cash and cash equivalents at end of period$112,645 $248,249 
Supplemental disclosures
Interest paid, net of capitalized interest$133,245 $149,289 
Income taxes paid (reimbursements received)1,270 905 
Accrued capital expenditures91,067 36,821 
_________________________________________________________________________________________
(1)Includes related-party amounts. See Note 5.

See accompanying Notes to Consolidated Financial Statements.
9
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 Three Months Ended 
March 31,
thousands 20232022
Revenues and other
Service revenues – fee based$647,867 $631,598 
Service revenues – product based46,810 40,867 
Product sales39,025 85,589 
Other280 243 
Total revenues and other (1)
733,982 758,297 
Equity income, net – related parties39,021 49,607 
Operating expenses
Cost of product51,459 72,848 
Operation and maintenance174,239 128,976 
General and administrative50,885 47,861 
Property and other taxes6,831 18,442 
Depreciation and amortization144,626 134,582 
Long-lived asset and other impairments (2)
52,401 — 
Total operating expenses (3)
480,441 402,709 
Gain (loss) on divestiture and other, net(2,118)370 
Operating income (loss)290,444 405,565 
Interest expense(81,670)(85,455)
Other income (expense), net1,190 103 
Income (loss) before income taxes209,964 320,213 
Income tax expense (benefit)1,416 1,805 
Net income (loss)208,548 318,408 
Net income (loss) attributable to noncontrolling interest535 2,636 
Net income (loss) attributable to Western Midstream Operating, LP$208,013 $315,772 
________________________________________________________________________________________
(1)Total revenues and other includes related-party amounts of $448.8 million and $428.7 million for the three months ended March 31, 2023 and 2022, respectively. See Note 5.
(2)See Note 7.
(3)Total operating expenses includes related-party amounts of $(1.9) million and $(16.7) million for the three months ended March 31, 2023 and 2022, respectively. See Note 5.

See accompanying Notes to Consolidated Financial Statements.
10
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
thousands except number of unitsMarch 31,
2023		December 31,
2022
ASSETS
Current assets
Cash and cash equivalents$106,930 $286,101 
Accounts receivable, net559,311 554,263 
Other current assets62,277 57,291 
Total current assets728,518 897,655 
Property, plant, and equipment
Cost13,550,060 13,365,593 
Less accumulated depreciation5,008,838 4,823,993 
Net property, plant, and equipment8,541,222 8,541,600 
Goodwill4,783 4,783 
Other intangible assets705,158 713,075 
Equity investments931,852 944,696 
Other assets (1)
192,459 166,450 
Total assets (2)
$11,103,992 $11,268,259 
LIABILITIES, EQUITY, AND PARTNERS’ CAPITAL
Current liabilities
Accounts and imbalance payables$362,347 $404,468 
Short-term debt
2,714 215,780 
Accrued ad valorem taxes52,717 72,875 
Accrued liabilities138,373 197,289 
Total current liabilities556,151 890,412 
Long-term liabilities
Long-term debt
6,693,941 6,569,582 
Deferred income taxes15,348 14,424 
Asset retirement obligations293,718 290,021 
Other liabilities424,874 383,713 
Total long-term liabilities
7,427,881 7,257,740 
Total liabilities (3)
7,984,032 8,148,152 
Equity and partners’ capital
Common units (318,675,578 units issued and outstanding at March 31, 2023, and December 31, 2022)
3,093,570 3,092,012 
Total partners’ capital3,093,570 3,092,012 
Noncontrolling interest26,390 28,095 
Total equity and partners’ capital3,119,960 3,120,107 
Total liabilities, equity, and partners’ capital$11,103,992 $11,268,259 
_________________________________________________________________________________________
(1)Other assets includes $6.3 million and $6.5 million of NGLs line-fill inventory as of March 31, 2023, and December 31, 2022, respectively. Other assets also includes $77.4 million and $60.4 million of materials and supplies inventory as of March 31, 2023, and December 31, 2022, respectively.
(2)Total assets includes related-party amounts of $1.3 billion as of March 31, 2023, and December 31, 2022, which includes related-party Accounts receivable, net of $308.6 million and $313.9 million as of March 31, 2023, and December 31, 2022, respectively. See Note 5.
(3)Total liabilities includes related-party amounts of $318.4 million and $356.0 million as of March 31, 2023, and December 31, 2022, respectively. See Note 5.
See accompanying Notes to Consolidated Financial Statements.
11
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF EQUITY AND PARTNERS’ CAPITAL
(UNAUDITED)
thousandsCommon
Units		Noncontrolling
Interest		Total
Balance at December 31, 2022$3,092,012 $28,095 $3,120,107 
Net income (loss)208,013 535 208,548 
Distributions to Chipeta noncontrolling interest owner— (2,240)(2,240)
Distributions to WES Operating unitholders(213,513)— (213,513)
Contributions of equity-based compensation from WES
7,058 — 7,058 
Balance at March 31, 2023$3,093,570 $26,390 $3,119,960 


thousandsCommon
Units		Noncontrolling
Interest		Total
Balance at December 31, 2021$3,063,289 $29,377 $3,092,666 
Net income (loss)315,772 2,636 318,408 
Distributions to Chipeta noncontrolling interest owner— (1,984)(1,984)
Distributions to WES Operating unitholders(140,217)— (140,217)
Contributions of equity-based compensation from Occidental
1,949 — 1,949 
Contributions of equity-based compensation from WES
5,663 — 5,663 
Net contributions from (distributions to) related parties409 — 409 
Balance at March 31, 2022$3,246,865 $30,029 $3,276,894 
See accompanying Notes to Consolidated Financial Statements.
12
WESTERN MIDSTREAM OPERATING, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 Three Months Ended 
March 31,
thousands20232022
Cash flows from operating activities
Net income (loss)$208,548 $318,408 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization144,626 134,582 
Long-lived asset and other impairments
52,401 — 
Non-cash equity-based compensation expense
7,058 7,612 
Deferred income taxes924 1,132 
Accretion and amortization of long-term obligations, net
1,692 1,782 
Equity income, net – related parties(39,021)(49,607)
Distributions from equity-investment earnings – related parties
39,609 45,870 
(Gain) loss on divestiture and other, net2,118 (370)
Other200 — 
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net(5,048)(165,134)
Increase (decrease) in accounts and imbalance payables and accrued liabilities, net(148,148)(21,864)
Change in other items, net26,009 (2,294)
Net cash provided by operating activities290,968 270,117 
Cash flows from investing activities
Capital expenditures(173,088)(83,971)
Contributions to equity investments – related parties(110)(2,070)
Distributions from equity investments in excess of cumulative earnings – related parties12,366 9,925 
Proceeds from the sale of assets to third parties— 383 
(Increase) decrease in materials and supplies inventory and other(18,346)4,116 
Net cash used in investing activities(179,178)(71,617)
Cash flows from financing activities
Borrowings, net of debt issuance costs220,000 — 
Repayments of debt (313,138)— 
Increase (decrease) in outstanding checks18,726 (6,953)
Distributions to WES Operating unitholders (1)
(213,513)(140,217)
Distributions to Chipeta noncontrolling interest owner(2,240)(1,984)
Net contributions from (distributions to) related parties— 409 
Other(796)(1,140)
Net cash provided by (used in) financing activities(290,961)(149,885)
Net increase (decrease) in cash and cash equivalents(179,171)48,615 
Cash and cash equivalents at beginning of period286,101 195,598 
Cash and cash equivalents at end of period$106,930 $244,213 
Supplemental disclosures
Interest paid, net of capitalized interest$133,245 $149,289 
Income taxes paid (reimbursements received)1,270 905 
Accrued capital expenditures91,067 36,821 
________________________________________________________________________________________
(1)Includes related-party amounts. See Note 5.
See accompanying Notes to Consolidated Financial Statements.
13
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

General. Western Midstream Partners, LP is a Delaware master limited partnership formed in September 2012. Western Midstream Operating, LP (together with its subsidiaries, “WES Operating”) is a Delaware limited partnership formed in 2007 to acquire, own, develop, and operate midstream assets. Western Midstream Partners, LP owns, directly and indirectly, a 98.0% limited partner interest in WES Operating, and directly owns all of the outstanding equity interests of Western Midstream Operating GP, LLC, which holds the entire non-economic general partner interest in WES Operating.
For purposes of these consolidated financial statements, the “Partnership” refers to Western Midstream Partners, LP in its individual capacity or to Western Midstream Partners, LP and its subsidiaries, including Western Midstream Operating GP, LLC and WES Operating, as the context requires. “WES Operating GP” refers to Western Midstream Operating GP, LLC, individually as the general partner of WES Operating. The Partnership’s general partner, Western Midstream Holdings, LLC (the “general partner”), is a wholly owned subsidiary of Occidental Petroleum Corporation. “Occidental” refers to Occidental Petroleum Corporation, as the context requires, and its subsidiaries, excluding the general partner. “Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding Western Midstream Holdings, LLC. Anadarko became a wholly owned subsidiary of Occidental as a result of Occidental’s acquisition by merger of Anadarko on August 8, 2019. “Related parties” refers to Occidental (see Note 5), the Partnership’s investments accounted for under the equity method of accounting (see Note 6), and the Partnership and WES Operating for transactions that eliminate upon consolidation (see Note 5).
The Partnership is engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, natural-gas liquids (“NGLs”), and crude oil; and gathering and disposing of produced water. In its capacity as a natural-gas processor, the Partnership also buys and sells natural gas, NGLs, and condensate on behalf of itself and as an agent for its customers under certain contracts. As of March 31, 2023, the Partnership’s assets and investments consisted of the following:
Wholly
Owned and
Operated		Operated
Interests		Non-Operated
Interests		Equity
Interests
Gathering systems (1)
17 2 3 1 
Treating facilities37 3 — — 
Natural-gas processing plants/trains
25 3 — 3 
NGLs pipelines2 — — 5 
Natural-gas pipelines
6 — — 1 
Crude-oil pipelines
3 1 — 3 
_________________________________________________________________________________________
(1)Includes the DBM water systems.

These assets and investments are located in Texas, New Mexico, the Rocky Mountains (Colorado, Utah, and Wyoming), and North-central Pennsylvania.

14
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Basis of presentation. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and include the accounts of the Partnership and entities in which it holds a controlling financial interest, including WES Operating, WES Operating GP, proportionately consolidated interests, and equity investments (see table below). All significant intercompany transactions have been eliminated.
The following table outlines the ownership interests and the accounting method of consolidation used in the consolidated financial statements for entities not wholly owned (see Note 6):
Percentage Interest
Full consolidation
Chipeta (1)
75.00 %
Proportionate consolidation (2)
Springfield system50.10 %
Marcellus Interest systems33.75 %
Equity investments (3)
Mi Vida JV LLC (“Mi Vida”)50.00 %
Front Range Pipeline LLC (“FRP”)33.33 %
Red Bluff Express Pipeline, LLC (“Red Bluff Express”)30.00 %
Enterprise EF78 LLC (“Mont Belvieu JV”)25.00 %
Rendezvous Gas Services, LLC (“Rendezvous”)22.00 %
Texas Express Pipeline LLC (“TEP”)20.00 %
Texas Express Gathering LLC (“TEG”)20.00 %
Whitethorn Pipeline Company LLC (“Whitethorn LLC”)20.00 %
Saddlehorn Pipeline Company, LLC (“Saddlehorn”)20.00 %
Panola Pipeline Company, LLC (“Panola”)15.00 %
White Cliffs Pipeline, LLC (“White Cliffs”)10.00 %
_________________________________________________________________________________________
(1)The 25% third-party interest in Chipeta Processing LLC (“Chipeta”) is reflected within noncontrolling interests in the consolidated financial statements. See Noncontrolling interests below.
(2)The Partnership proportionately consolidates its associated share of the assets, liabilities, revenues, and expenses attributable to these assets.
(3)Investments in non-controlled entities over which the Partnership exercises significant influence are accounted for under the equity method of accounting. “Equity-investment throughput” refers to the Partnership’s share of average throughput for these investments.

Certain information and note disclosures commonly included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying consolidated financial statements and notes should be read in conjunction with the Partnership’s 2022 Form 10-K, as filed with the SEC on February 22, 2023. Management believes that the disclosures made are adequate to make the information not misleading.
The consolidated financial results of WES Operating are included in the Partnership’s consolidated financial statements. Throughout these notes to consolidated financial statements, and to the extent material, any differences between the consolidated financial results of the Partnership and WES Operating are discussed separately. The Partnership’s consolidated financial statements differ from those of WES Operating primarily as a result of (i) the presentation of noncontrolling interest ownership (see Noncontrolling interests below), (ii) the elimination of WES Operating GP’s investment in WES Operating with WES Operating GP’s underlying capital account, (iii) the general and administrative expenses incurred by the Partnership, which are separate from, and in addition to, those incurred by WES Operating, (iv) the inclusion of the impact of Partnership equity balances and Partnership distributions, and (v) transactions between the Partnership and WES Operating that eliminate upon consolidation.
15
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Presentation of the Partnership’s assets. The Partnership’s assets include assets owned and ownership interests accounted for by the Partnership under the equity method of accounting, through its 98.0% partnership interest in WES Operating, as of March 31, 2023 (see Note 6). The Partnership also owns and controls the entire non-economic general partner interest in WES Operating GP, and the Partnership’s general partner is owned by Occidental.

Use of estimates. In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, using historical experience and other reasonable methods. Changes in facts and circumstances or additional information may result in revised estimates, and actual results may differ from these estimates. Effects on the business, financial condition, and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information included herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements.

Noncontrolling interests. The Partnership’s noncontrolling interests in the consolidated financial statements consist of (i) the 25% third-party interest in Chipeta and (ii) the 2.0% limited partner interest in WES Operating owned by an Occidental subsidiary. WES Operating’s noncontrolling interest in the consolidated financial statements consists of the 25% third-party interest in Chipeta. See Note 4.

Segments. The Partnership’s operations continue to be organized into a single operating segment, the assets of which gather, compress, treat, process, and transport natural gas; gather, stabilize, and transport condensate, NGLs, and crude oil; and gather and dispose of produced water in the United States.

Equity-based compensation. During the three months ended March 31, 2023, the Partnership issued 829,931 common units under its long-term incentive plans. Compensation expense was $7.2 million and $5.8 million for the three months ended March 31, 2023 and 2022, respectively.

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. REVENUE FROM CONTRACTS WITH CUSTOMERS

The following table summarizes revenue from contracts with customers:
 Three Months Ended 
March 31,
thousands20232022
Revenue from customers
Service revenues – fee based$647,867 $631,598 
Service revenues – product based46,810 40,867 
Product sales39,025 85,589 
Total revenue from customers733,702 758,054
Revenue from other than customers
Other280 243 
Total revenues and other$733,982 $758,297 

Contract balances. Receivables from customers, which are included in Accounts receivable, net on the consolidated balance sheets were $555.3 million and $545.0 million as of March 31, 2023, and December 31, 2022, respectively.
Contract assets primarily relate to (i) revenue accrued but not yet billed under cost-of-service contracts with fixed and variable fees and (ii) accrued deficiency fees the Partnership expects to charge customers once the related performance periods are completed. The following table summarizes activity related to contract assets from contracts with customers:
thousands
Contract assets balance at December 31, 2022
$22,561 
Amounts transferred to Accounts receivable, net that were included in the contract assets balance at the beginning of the period(1,307)
Additional estimated revenues recognized5,231 
Contract assets balance at March 31, 2023
$26,485 
Contract assets at March 31, 2023
Other current assets$7,937 
Other assets18,548 
Total contract assets from contracts with customers$26,485 

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. REVENUE FROM CONTRACTS WITH CUSTOMERS

Contract liabilities primarily relate to (i) fixed and variable fees under cost-of-service contracts that are received from customers for which revenue recognition is deferred, (ii) aid-in-construction payments received from customers that must be recognized over the expected period of customer benefit, and (iii) fees that are charged to customers for only a portion of the contract term and must be recognized as revenues over the expected period of customer benefit. The following table summarizes activity related to contract liabilities from contracts with customers:
thousands
Contract liabilities balance at December 31, 2022
$369,285 
Cash received or receivable, excluding revenues recognized during the period23,738 
Revenues recognized that were included in the contract liability balance at the beginning of the period(10,179)
Contract liabilities balance at March 31, 2023
$382,844 
Contract liabilities at March 31, 2023
Accrued liabilities$14,307 
Other liabilities368,537 
Total contract liabilities from contracts with customers$382,844 

Transaction price allocated to remaining performance obligations. Revenues expected to be recognized from certain performance obligations that are unsatisfied (or partially unsatisfied) as of March 31, 2023, are presented in the following table. The Partnership applies the optional exemptions in Revenue from Contracts with Customers (Topic 606) and does not disclose consideration for remaining performance obligations with an original expected duration of one year or less or for variable consideration related to unsatisfied (or partially unsatisfied) performance obligations. Therefore, the following table represents only a portion of expected future revenues from existing contracts as most future revenues from customers are dependent on future variable customer volumes and, in some cases, variable commodity prices for those volumes.
thousands
Remainder of 2023$826,454 
20241,138,601 
20251,078,564 
2026923,013 
2027832,803 
Thereafter1,915,544 
Total$6,714,979 

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. PARTNERSHIP DISTRIBUTIONS

Partnership distributions. Under its partnership agreement, the Partnership distributes all of its available cash (beyond proper reserves as defined in its partnership agreement) to unitholders of record on the applicable record date within 55 days following each quarter’s end. The amount of available cash (beyond proper reserves as defined in the partnership agreement) generally is all cash on hand at the end of the quarter, plus, at the discretion of the general partner, working capital borrowings made subsequent to the end of such quarter, less the amount of cash reserves established by the general partner to provide for the proper conduct of the Partnership’s business, including (i) to fund future capital expenditures; (ii) to comply with applicable laws, debt instruments, or other agreements; or (iii) to provide funds for unitholder distributions for any one or more of the next four quarters. Working capital borrowings generally include borrowings made under a credit facility or similar financing arrangement and are intended to be repaid or refinanced within 12 months. In all cases, working capital borrowings are used solely for working capital purposes or to fund unitholder distributions.
The Board of Directors of the general partner (the “Board”) declared the following cash distributions to the Partnership’s unitholders for the periods presented:
thousands except per-unit amounts
Quarters Ended
Total Quarterly
Per-unit
Distribution		Total Quarterly
Cash Distribution		Distribution
Date		Record
Date
2022
March 31$0.500 $206,197 May 13, 2022May 2, 2022
June 300.500 197,744 August 12, 2022August 1, 2022
September 300.500 197,065 November 14, 2022October 31, 2022
December 310.500 196,569 February 13, 2023February 1, 2023
2023
March 31 (1)
$0.856 $336,987 May 15, 2023May 1, 2023
_________________________________________________________________________________________
(1)Includes the regular quarterly distribution of $0.500 per unit, or $196.8 million, as well as the Enhanced Distribution of $0.356 per unit discussed below.

To facilitate the distribution of available cash, during 2022 the Partnership adopted a financial policy that provided for an additional distribution (“Enhanced Distribution”) to be paid in conjunction with the regular first-quarter distribution of the following year (beginning in 2023), in a target amount equal to Free cash flow generated in the prior year after subtracting Free cash flow used for the prior year’s debt repayments, regular-quarter distributions, and unit repurchases. This Enhanced Distribution is subject to Board discretion, the establishment of cash reserves for the proper conduct of the Partnership’s business and is also contingent on the attainment of prior year-end net leverage thresholds (the ratio of total principal debt outstanding less total cash on hand as of the end of such period, as compared to trailing-twelve-months Adjusted EBITDA), after taking the Enhanced Distribution for such prior year into effect. Free cash flow and Adjusted EBITDA are defined under the caption Reconciliation of Non-GAAP Financial Measures within Part I, Item 2 of this Form 10-Q. In April 2023, the Board approved an Enhanced Distribution of $0.356 per unit, or $140.1 million, related to the Partnership’s 2022 performance.

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. PARTNERSHIP DISTRIBUTIONS

WES Operating partnership distributions. WES Operating makes quarterly cash distributions to the Partnership and WGR Asset Holding Company LLC (“WGRAH”), a subsidiary of Occidental, in proportion to their share of limited partner interests in WES Operating. See Note 4. WES Operating made the following cash distributions to its limited partners for the periods presented:
thousands
Quarters Ended
Total Quarterly
Cash Distribution		Distribution
Date
2022
March 31$213,513 May 2022
June 30213,513 August 2022
September 30213,513 November 2022
December 31213,513 February 2023
2023
March 31 (1)
$342,895 May 2023
_________________________________________________________________________________________
(1)Includes amounts related to the Enhanced Distribution discussed above.


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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. EQUITY AND PARTNERS’ CAPITAL

Holdings of Partnership equity. The Partnership’s common units are listed on the New York Stock Exchange under the ticker symbol “WES.” As of March 31, 2023, Occidental held 190,281,578 common units, representing a 48.3% limited partner interest in the Partnership, and through its ownership of the general partner, Occidental indirectly held 9,060,641 general partner units, representing a 2.3% general partner interest in the Partnership. The public held 194,333,649 common units, representing a 49.4% limited partner interest in the Partnership.

Partnership equity repurchases. In 2022, the Board authorized the Partnership to buy back up to $1.25 billion of the Partnership’s common units through December 31, 2024 (the “$1.25 billion Purchase Program”). The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. During the three months ended March 31, 2023, the Partnership repurchased 285,688 common units for an aggregate purchase price of $7.1 million. During the three months ended March 31, 2022, the Partnership repurchased 225,355 common units on the open market for an aggregate purchase price of $5.1 million. The units were canceled immediately upon receipt. As of March 31, 2023, the Partnership had an authorized amount of $755.3 million remaining under the program.

Holdings of WES Operating equity. As of March 31, 2023, (i) the Partnership, directly and indirectly through its ownership of WES Operating GP, owned a 98.0% limited partner interest and the entire non-economic general partner interest in WES Operating and (ii) Occidental, through its ownership of WGRAH, owned a 2.0% limited partner interest in WES Operating, which is reflected as a noncontrolling interest within the consolidated financial statements of the Partnership (see Note 1).

Partnership’s net income (loss) per common unit. The common and general partner unitholders’ allocation of net income (loss) attributable to the Partnership was equal to their cash distributions plus their respective allocations of undistributed earnings or losses in accordance with their weighted-average ownership percentage during each period using the two-class method.
The Partnership’s basic net income (loss) per common unit is calculated by dividing the limited partners’ interest in net income (loss) by the weighted-average number of common units outstanding during the period. Diluted net income (loss) per common unit includes the effect of outstanding units issued under the Partnership’s long-term incentive plans.
The following table provides a reconciliation between basic and diluted net income (loss) per common unit:
 Three Months Ended 
March 31,
thousands except per-unit amounts20232022
Net income (loss)
Limited partners’ interest in net income (loss)$198,959 $301,934 
Weighted-average common units outstanding
Basic384,468 403,254 
Dilutive effect of non-vested phantom units1,282 1,206 
Diluted385,750 404,460 
Excluded due to anti-dilutive effect663 469 
Net income (loss) per common unit
Basic$0.52 $0.75 
Diluted$0.52 $0.75 

WES Operating’s net income (loss) per common unit. Net income (loss) per common unit for WES Operating is not calculated because it has no publicly traded units.

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

Summary of related-party transactions. The following tables summarize material related-party transactions included in the Partnership’s consolidated financial statements:
Consolidated statements of operations
 Three Months Ended 
March 31,
thousands20232022
Revenues and other
Service revenues – fee based$423,501 $414,899 
Service revenues – product based8,116 2,243 
Product sales17,168 11,567 
Total revenues and other448,785 428,709 
Equity income, net – related parties (1)
39,021 49,607 
Operating expenses
Cost of product (2)
(3,947)(19,543)
Operation and maintenance747 (59)
General and administrative (3)
67 1,975 
Total operating expenses(3,133)(17,627)
_________________________________________________________________________________________
(1)See Note 6.
(2)Includes related-party natural-gas and NGLs imbalances.
(3)Includes equity-based compensation expense allocated to the Partnership by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital.

Consolidated balance sheets
thousandsMarch 31,
2023		December 31,
2022
Assets
Accounts receivable, net$307,570 $313,937 
Other current assets4,175 1,578 
Equity investments (1)
931,852 944,696 
Other assets36,158 29,058 
Total assets1,279,755 1,289,269 
Liabilities
Accounts and imbalance payables19,490 32,150 
Accrued liabilities6,109 11,756 
Other liabilities (2)
293,077 268,399 
Total liabilities318,676 312,305 
_________________________________________________________________________________________
(1)See Note 6.
(2)Includes contract liabilities from contracts with customers. See Note 2.

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

Consolidated statements of cash flows
Three Months Ended 
March 31,
thousands20232022
Distributions from equity-investment earnings – related parties
$39,609 $45,870 
Contributions to equity investments – related parties(110)(2,070)
Distributions from equity investments in excess of cumulative earnings – related parties12,366 9,925 
Distributions to Partnership unitholders (1)
(99,671)(68,455)
Distributions to WES Operating unitholders (2)
(4,271)(2,805)
Net contributions from (distributions to) related parties— 409 
_________________________________________________________________________________________
(1)Represents common and general partner unit distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 3 and Note 4).
(2)Represents distributions paid to Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement (see Note 3 and Note 4).

The following tables summarize material related-party transactions for WES Operating (which are included in the Partnership’s consolidated financial statements) to the extent the amounts differ materially from the Partnership’s consolidated financial statements:
Consolidated statements of operations
 Three Months Ended 
March 31,
thousands20232022
General and administrative (1)
$1,281 $2,948 
_________________________________________________________________________________________
(1)Includes (i) an intercompany service fee between the Partnership and WES Operating and (ii) equity-based compensation expense allocated to WES Operating by Occidental, which is not reimbursed to Occidental and is reflected as a contribution to partners’ capital in the consolidated statements of equity and partners’ capital.

Consolidated balance sheets
thousandsMarch 31,
2023		December 31,
2022
Accounts receivable, net$308,581 $313,937 
Other current assets3,720 1,487 
Other assets34,442 28,459 
Accounts and imbalance payables (1)
19,490 76,131 
Accrued liabilities5,792 11,439 
_________________________________________________________________________________________
(1)Includes balances related to transactions between the Partnership and WES Operating.

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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

Consolidated statements of cash flows
Three Months Ended 
March 31,
thousands20232022
Distributions to WES Operating unitholders (1)
$(213,513)$(140,217)
_________________________________________________________________________________________
(1)Represents distributions paid to the Partnership and Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement. See Note 3 and Note 4.    

Related-party revenues. Related-party revenues include amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental.

Gathering and processing agreements. The Partnership has significant gathering, processing, and produced-water disposal arrangements with affiliates of Occidental on most of its systems (see also Part II, Item 5 of this Form 10-Q). While Occidental is the contracting counterparty of the Partnership, these arrangements with Occidental include not just Occidental-produced volumes, but also, in some instances, the volumes of other working-interest owners of Occidental who rely on the Partnership’s facilities and infrastructure to bring their volumes to market. Natural-gas throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 35% and 36% for the three months ended March 31, 2023 and 2022, respectively. Crude-oil and NGLs throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 88% and 89% for the three months ended March 31, 2023 and 2022, respectively. Produced-water throughput attributable to production owned or controlled by Occidental was 80% and 84% for the three months ended March 31, 2023 and 2022, respectively.
The Partnership is currently discussing varying interpretations of certain contractual provisions with Occidental regarding the calculation of the cost-of-service rates under an oil-gathering contract related to the Partnership’s DJ Basin oil-gathering system. If such discussions are resolved in a manner adverse to the Partnership, such resolution could have a negative impact on the Partnership’s financial condition and results of operations, including a reduction in rates and a non-cash charge to earnings.
In connection with the sale of its Eagle Ford assets in 2017, Anadarko remained the primary counterparty to the Partnership’s Brasada gas processing agreement and entered into an agency relationship with Sanchez Energy Corporation (“Sanchez”), now Mesquite Energy, Inc. (“Mesquite”), that allows Mesquite to process gas under such agreement. In December 2021, the Brasada gas processing agreement was assigned from Anadarko to Mesquite effective July 1, 2023. For this reason, Anadarko continues to be liable under the Brasada gas processing agreement until June 30, 2023, to the extent Mesquite does not perform. For all periods presented, Mesquite has performed Anadarko’s obligations under the Brasada gas processing agreement pursuant to its agency arrangement with Anadarko.
Further, in connection with the sale of its Uinta Basin assets in 2020, Kerr McGee Oil & Gas Onshore LP, a subsidiary of Occidental, retained the deficiency payment obligations under a gas processing agreement at the Chipeta plant. This contingent payment obligation ended as of September 30, 2022.

Marketing Transition Services Agreement. During the year ended December 31, 2020, Occidental provided marketing-related services to certain of the Partnership’s subsidiaries (the “Marketing Transition Services Agreement”). While the Partnership still has some marketing agreements with affiliates of Occidental, on January 1, 2021, the Partnership began marketing and selling substantially all of its crude oil and residue gas, and a majority of its NGLs, directly to third parties.


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WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. RELATED-PARTY TRANSACTIONS

Operating leases. The Partnership has entered into operating leases with Occidental for corporate offices, shared field offices, and easements supporting the Partnership’s operations. Also, as a result of the surface-use and salt-water disposal agreements being amended under the CUA (see Related-party commercial agreement below), these agreements are classified as operating leases and a $30.0 million right-of-use (“ROU”) asset, included in Other assets on the consolidated balance sheets, was recognized during the first quarter of 2021. The ROU asset is being amortized to Operation and maintenance expense through 2038, the remaining term of the agreements.

Related-party expenses. Operation and maintenance expense includes amounts accrued for or paid to related parties for field-related costs provided by related parties at certain of the Partnership’s assets. A portion of general and administrative expense is paid by Occidental, which results in related-party transactions pursuant to the reimbursement provisions of the Partnership’s and WES Operating’s agreements with Occidental. Cost of product expense includes amounts related to certain continuing marketing arrangements with affiliates of Occidental, related-party imbalances, and transactions with affiliates accounted for under the equity method of accounting. See Marketing Transition Services Agreement in the section above. Related-party expenses bear no direct relationship to related-party revenues, and third-party expenses bear no direct relationship to third-party revenues.

Services Agreement. General and administrative expense includes costs incurred pursuant to the agreement dated as of December 31, 2019, by and among Occidental, Anadarko, and WES Operating GP, under which Occidental has performed certain centralized corporate functions for the Partnership and WES Operating (“Services Agreement”). Most of the administrative and operational services previously provided by Occidental fully transitioned to the Partnership by December 31, 2021, with certain limited transition services remaining in place pursuant to the terms of the Services Agreement.

Construction reimbursement agreements and purchases and sales with related parties. From time to time, the Partnership enters into construction reimbursement agreements with Occidental providing that the Partnership will manage the construction of certain midstream infrastructure for Occidental in the Partnership’s areas of operation. Such arrangements generally provide for a reimbursement of costs incurred by the Partnership on a cost or cost-plus basis.
Additionally, from time to time, in support of the Partnership’s business, the Partnership purchases and sells equipment, inventory, and other miscellaneous assets from or to Occidental or its affiliates.

Related-party commercial agreement. During the first quarter of 2021, an affiliate of Occidental and certain wholly owned subsidiaries of the Partnership entered into a Commercial Understanding Agreement (“CUA”). Under the CUA, certain West Texas surface-use and salt-water disposal agreements were amended to reduce usage fees owed by the Partnership in exchange for the forgiveness of certain deficiency fees owed by Occidental and other unrelated contractual amendments. The present value of the reduced usage fees under the CUA was $30.0 million at the time the agreement was executed.

Customer concentration. Occidental was the only customer from which revenues exceeded 10% of consolidated revenues for all periods presented in the consolidated statements of operations.
25
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. EQUITY INVESTMENTS

The following table presents the financial statement impact of the Partnership’s equity investments for the three months ended March 31, 2023:

thousandsBalance at December 31, 2022Equity
income, net		ContributionsDistributions
Distributions
in excess of
cumulative
earnings (1)
Balance at March 31, 2023
White Cliffs$16,095 $538 $— $(164)$(858)$15,611 
Rendezvous16,114 (715)— (100)(476)14,823 
Mont Belvieu JV91,310 6,884 — (6,893)(382)90,919 
TEG15,856 1,655 — (1,661)(74)15,776 
TEP184,687 10,079 — (10,141)(3,069)181,556 
FRP192,716 9,963 — (10,007)(3,353)189,319 
Whitethorn LLC146,595 (184)110 509 — 147,030 
Saddlehorn104,191 5,238 — (5,123)(394)103,912 
Panola19,311 567 — (698)(59)19,121 
Mi Vida48,862 1,477 — (1,812)(2,956)45,571 
Red Bluff Express108,959 3,519 — (3,519)(745)108,214 
Total$944,696 $39,021 $110 $(39,609)$(12,366)$931,852 
_________________________________________________________________________________________
(1)Distributions in excess of cumulative earnings, classified as investing cash flows in the consolidated statements of cash flows, are calculated on an individual-investment basis.

26
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. PROPERTY, PLANT, AND EQUIPMENT

A summary of the historical cost of property, plant, and equipment is as follows:
thousandsEstimated Useful LifeMarch 31,
2023		December 31,
2022
LandN/A$10,982 $10,982 
Gathering systems – pipelines30 years5,555,746 5,519,592 
Gathering systems – compressors15 years2,331,782 2,266,410 
Processing complexes and treating facilities25 years3,437,494 3,419,201 
Transportation pipeline and equipment
4 to 48 years
175,394 174,241 
Produced-water disposal systems
20 years976,958 932,627 
Assets under constructionN/A270,503 263,353 
Other
3 to 40 years
791,201 779,187 
Total property, plant, and equipment13,550,060 13,365,593 
Less accumulated depreciation5,008,838 4,823,993 
Net property, plant, and equipment$8,541,222 $8,541,600 

“Assets under construction” represents property that is not yet placed into productive service as of the respective balance sheet date and is excluded from capitalized costs being depreciated.

Long-lived asset impairments. During the three months ended March 31, 2023, the Partnership recognized a long-lived asset impairment of $52.1 million for assets located in the Rockies due to a reduction in estimated future cash flows resulting from a contract termination notice received in the first quarter of 2023. This asset was impaired to its estimated fair value of $22.8 million. The fair value was measured using the income approach and Level-3 fair value inputs. The income approach was based on the Partnership’s projected future earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and free cash flows, which requires significant assumptions including, among others, future throughput volumes based on current expectations of producer activity and operating costs.

27
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. SELECTED COMPONENTS OF WORKING CAPITAL

A summary of accounts receivable, net is as follows:
The PartnershipWES Operating
thousandsMarch 31, 2023December 31, 2022March 31, 2023December 31, 2022
Trade receivables, net$558,300 $548,859 $559,311 $548,859 
Other receivables, net— 5,404 — 5,404 
Total accounts receivable, net$558,300 $554,263 $559,311 $554,263 

A summary of other current assets is as follows:
The PartnershipWES Operating
thousandsMarch 31, 2023December 31, 2022March 31, 2023December 31, 2022
NGLs inventory$2,792 $3,797 $2,792 $3,797 
Imbalance receivables34,146 32,658 34,146 32,658 
Prepaid insurance10,975 13,262 9,355 11,139 
Contract assets7,937 3,381 7,937 3,381 
Other8,503 6,408 8,047 6,316 
Total other current assets$64,353 $59,506 $62,277 $57,291 

A summary of accrued liabilities is as follows:
The PartnershipWES Operating
thousandsMarch 31, 2023December 31, 2022March 31, 2023December 31, 2022
Accrued interest expense$58,541 $110,486 $58,541 $110,486 
Short-term asset retirement obligations
6,159 10,493 6,159 10,493 
Short-term remediation and reclamation obligations
6,648 5,383 6,648 5,383 
Income taxes payable2,920 2,428 2,920 2,428 
Contract liabilities14,307 20,903 14,307 20,903 
Accrued payroll and benefits24,914 44,855 — — 
Other50,009 60,092 49,798 47,596 
Total accrued liabilities$163,498 $254,640 $138,373 $197,289 


28
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. DEBT AND INTEREST EXPENSE

WES Operating is the borrower for all outstanding debt and is expected to be the borrower for all future debt issuances. The following table presents the outstanding debt:
 March 31, 2023December 31, 2022
thousandsPrincipalCarrying
Value
Fair
Value (1)
PrincipalCarrying
Value
Fair
Value (1)
Short-term debt
Floating-Rate Senior Notes due 2023
$— $— $— $213,138 $213,121 $214,823 
Finance lease liabilities2,714 2,714 2,714 2,659 2,659 2,659 
Total short-term debt
$2,714 $2,714 $2,714 $215,797 $215,780 $217,482 
Long-term debt
3.100% Senior Notes due 2025
$730,706 $728,273 $703,032 $730,706 $727,953 $692,491 
3.950% Senior Notes due 2025
399,163 397,056 383,140 399,163 396,825 379,107 
4.650% Senior Notes due 2026
474,242 472,299 459,488 474,242 472,161 452,201 
4.500% Senior Notes due 2028
400,000 396,840 378,827 400,000 396,698 368,346 
4.750% Senior Notes due 2028
400,000 397,443 381,273 400,000 397,340 368,141 
4.050% Senior Notes due 2030
1,200,000 1,191,606 1,101,320 1,200,000 1,191,345 1,053,038 
5.450% Senior Notes due 2044
600,000 593,915 524,661 600,000 593,878 503,742 
5.300% Senior Notes due 2048
700,000 687,553 598,444 700,000 687,494 580,570 
5.500% Senior Notes due 2048
350,000 342,815 302,297 350,000 342,783 291,194 
5.250% Senior Notes due 2050
1,000,000 984,006 859,814 1,000,000 983,945 829,804 
RCF495,000 495,000 495,000 375,000 375,000 375,000 
Finance lease liabilities7,135 7,135 7,135 4,160 4,160 4,160 
Total long-term debt
$6,756,246 $6,693,941 $6,194,431 $6,633,271 $6,569,582 $5,897,794 
_________________________________________________________________________________________
(1)Fair value is measured using the market approach and Level-2 fair value inputs.

Debt activity. The following table presents the debt activity for the three months ended March 31, 2023:
thousandsCarrying Value
Balance at December 31, 2022$6,785,362 
RCF borrowings220,000 
Repayments of RCF borrowings(100,000)
Repayment of Floating-Rate Senior Notes due 2023(213,138)
Finance lease liabilities3,030 
Other1,401 
Balance at March 31, 2023$6,696,655 

29
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. DEBT AND INTEREST EXPENSE

WES Operating Senior Notes. In mid-January 2020, WES Operating issued the Fixed-Rate 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, 5.250% Senior Notes due 2050, and the Floating-Rate Senior Notes due 2023. Including the effects of the issuance prices, underwriting discounts, and interest-rate adjustments, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, were 3.790%, 4.671%, and 5.869%, respectively, at March 31, 2023 and 2022. The effective interest rate of these notes is subject to adjustment from time to time due to a change in credit rating.
During the first quarter of 2023, WES Operating redeemed the total principal amount outstanding on the Floating-Rate Senior Notes due 2023 at par value with cash on hand. In April 2023, WES Operating completed the public offering of $750.0 million in aggregate principal amount of 6.150% Senior Notes due 2033. Interest will be payable semi-annually on April 1st and October 1st of each year, with the initial interest payment being due on October 1, 2023. Net proceeds from the offering were used to repay borrowings under the RCF and for general partnership purposes.
During the second quarter of 2022, WES Operating (i) redeemed the total principal amount outstanding of the 4.000% Senior Notes due 2022 at par value and (ii) purchased and retired $1.4 million of the 3.100% Senior Notes due 2025 via open-market repurchases.
As of March 31, 2023, WES Operating was in compliance with all covenants under the relevant governing indentures.

Revolving credit facility. WES Operating’s $2.0 billion senior unsecured revolving credit facility (“RCF”), which is expandable to a maximum of $2.5 billion, matures in February 2026 for each extending lender. The non-extending lender’s commitments mature in February 2025 and represent $400.0 million out of $2.0 billion of total commitments from all lenders.
As of March 31, 2023, there were $495.0 million of outstanding borrowings and $5.1 million of outstanding letters of credit, resulting in $1.5 billion of available borrowing capacity under the RCF. As of March 31, 2023 and 2022, the interest rate on any outstanding RCF borrowings was 6.21% and 1.95%, respectively. The facility-fee rate was 0.20% and 0.25% at March 31, 2023 and 2022, respectively. As of March 31, 2023, the outstanding borrowings under the RCF were classified as long-term debt on the consolidated balance sheet and WES Operating was in compliance with all covenants under the RCF.
In April 2023, WES Operating (i) repaid all outstanding borrowings under the RCF with proceeds from the senior note offering, and (ii) entered into an amendment to its RCF to, among other things, extend the maturity date to April 2028 and provide for a maximum borrowing capacity up to $2.0 billion through the maturity date.

Interest expense. The following table summarizes the amounts included in interest expense:
 Three Months Ended 
March 31,
thousands20232022
Long-term and short-term debt
$(81,151)$(83,428)
Finance lease liabilities(163)(42)
Commitment fees and amortization of debt-related costs(2,881)(3,032)
Capitalized interest 2,525 1,047 
Interest expense$(81,670)$(85,455)

30
WESTERN MIDSTREAM PARTNERS, LP AND WESTERN MIDSTREAM OPERATING, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
10. COMMITMENTS AND CONTINGENCIES

Environmental obligations. The Partnership is subject to various environmental-remediation obligations arising from federal, state, and local regulations regarding air and water quality, hazardous and solid waste disposal, and other environmental matters. As of March 31, 2023, and December 31, 2022, the consolidated balance sheets included $9.2 million and $7.4 million, respectively, of liabilities for remediation and reclamation obligations. The current portion of these amounts is included in Accrued liabilities, and the long-term portion of these amounts is included in Other liabilities. The majority of payments related to these obligations are expected to be made over the next year. See Note 8.

Litigation and legal proceedings. From time to time, the Partnership is involved in legal, tax, regulatory, and other proceedings in various forums regarding performance, contracts, and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which the final disposition could have a material adverse effect on the Partnership’s financial condition, results of operations, or cash flows.

Other commitments. The Partnership has payment obligations, or commitments, that include, among other things, a revolving credit facility, other third-party long-term debt, obligations related to the Partnership’s capital spending programs, pipeline and offload commitments, and various operating and finance leases. The payment obligations related to the Partnership’s capital spending programs, the majority of which is expected to be paid in the next 12 months, primarily relate to construction, expansion, and asset-integrity projects at the West Texas complex, DBM water systems, DBM oil system, and DJ Basin complex.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements, wherein WES Operating is fully consolidated, and which are included under Part I, Item 1 of this quarterly report, and the historical consolidated financial statements, and the notes thereto, which are included under Part II, Item 8 of the 2022 Form 10-K as filed with the SEC on February 22, 2023.
The Partnership’s assets include assets owned and ownership interests accounted for by us under the equity method of accounting, through our 98.0% partnership interest in WES Operating, as of March 31, 2023 (see Note 6—Equity Investments in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q). We also own and control the entire non-economic general partner interest in WES Operating GP, and our general partner is owned by Occidental.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made in this Form 10-Q, and may make in other public filings, press releases, and statements by management, forward-looking statements concerning our operations, economic performance, and financial condition. These forward-looking statements include statements preceded by, followed by, or that otherwise include the words “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” or similar expressions or variations on such expressions. These statements discuss future expectations, contain projections of results of operations or financial condition, or include other “forward-looking” information.
Although we and our general partner believe that the expectations reflected in our forward-looking statements are reasonable, neither we nor our general partner can provide any assurance that such expectations will prove correct. These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from expectations include, but are not limited to, the following:

•our ability to pay distributions to our unitholders;

•our assumptions about the energy market;

•future throughput (including Occidental production) that is gathered or processed by, or transported through, our assets;

•our operating results;

•competitive conditions;

•technology;

•the availability of capital resources to fund acquisitions, capital expenditures, and other contractual obligations, and our ability to access financing through the debt or equity capital markets;

•the supply of, demand for, and price of oil, natural gas, NGLs, and related products or services;

•commodity-price risks inherent in percent-of-proceeds, percent-of-product, keep-whole, and fixed-recovery processing contracts;

•weather and natural disasters;

•inflation;

•the availability of goods and services;

•general economic conditions, internationally, domestically, or in the jurisdictions in which we are doing business;
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•federal, state, and local laws and state-approved voter ballot initiatives, including those laws or ballot initiatives that limit producers’ hydraulic-fracturing activities or other oil and natural-gas development or operations;

•environmental liabilities;

•legislative or regulatory changes, including changes affecting our status as a partnership for federal income tax purposes;

•changes in the financial or operational condition of Occidental;

•the creditworthiness of Occidental or our other counterparties, including financial institutions, operating partners, and other parties;

•changes in Occidental’s capital program, corporate strategy, or other desired areas of focus;

•our commitments to capital projects;

•our ability to access liquidity under the RCF;

•our ability to repay debt;

•the resolution of litigation or other disputes;

•conflicts of interest among us and our general partner and its related parties, including Occidental, with respect to, among other things, the allocation of capital and operational and administrative costs and our future business opportunities;

•our ability to maintain and/or obtain rights to operate our assets on land owned by third parties;

•our ability to acquire assets on acceptable terms from third parties;

•non-payment or non-performance of significant customers, including under gathering, processing, transportation, and disposal agreements;

•the timing, amount, and terms of future issuances of equity and debt securities;

•the outcome of pending and future regulatory, legislative, or other proceedings or investigations, and continued or additional disruptions in operations that may occur as we and our customers comply with any regulatory orders or other state or local changes in laws or regulations;

•cyber attacks or security breaches; and

•other factors discussed below, in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates” included in the 2022 Form 10-K, in our quarterly reports on Form 10-Q, and in our other public filings and press releases.

Risk factors and other factors noted throughout or incorporated by reference in this Form 10-Q could cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.



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EXECUTIVE SUMMARY

We are a midstream energy company organized as a publicly traded partnership, engaged in the business of gathering, compressing, treating, processing, and transporting natural gas; gathering, stabilizing, and transporting condensate, NGLs, and crude oil; and gathering and disposing of produced water. In our capacity as a natural-gas processor, we also buy and sell natural gas, NGLs, and condensate on behalf of ourselves and as an agent for our customers under certain contracts. To provide superior midstream service, we focus on ensuring the reliability and performance of our systems, creating sustainable cost efficiencies, enhancing our safety culture, and protecting the environment. We own or have investments in assets located in Texas, New Mexico, the Rocky Mountains (Colorado, Utah, and Wyoming), and North-central Pennsylvania. As of March 31, 2023, our assets and investments consisted of the following:
Wholly
Owned and
Operated		Operated
Interests		Non-Operated
Interests		Equity
Interests
Gathering systems (1)
17 2 3 1 
Treating facilities37 3 — — 
Natural-gas processing plants/trains
25 3 — 3 
NGLs pipelines2 — — 5 
Natural-gas pipelines
6 — — 1 
Crude-oil pipelines
3 1 — 3 
_________________________________________________________________________________________
(1)Includes the DBM water systems.

Significant financial and operational events during the three months ended March 31, 2023, included the following:

•WES Operating redeemed the $213.1 million total principal amount outstanding of the Floating-Rate Senior Notes due 2023 at par value with cash on hand.

•We repurchased 285,688 common units for an aggregate purchase price of $7.1 million.

•Our regular first-quarter 2023 per-unit distribution is unchanged from the fourth-quarter 2022 per-unit distribution of $0.500.

•In April 2023, the Board approved an Enhanced Distribution of $0.356 per unit, or $140.1 million, related to our 2022 performance. This Enhanced Distribution is payable, along with our regular first-quarter 2023 distribution, on May 15, 2023, to our unitholders of record at the close of business on May 1, 2023.

•Natural-gas throughput attributable to WES totaled 4,107 MMcf/d for the three months ended March 31, 2023, representing a 3% decrease and a 1% increase compared to the three months ended December 31, 2022, and March 31, 2022, respectively.

•Crude-oil and NGLs throughput attributable to WES totaled 611 MBbls/d for the three months ended March 31, 2023, representing a 6% decrease and a 9% decrease compared to the three months ended December 31, 2022, and March 31, 2022, respectively.

•Produced-water throughput attributable to WES totaled 957 MBbls/d for the three months ended March 31, 2023, representing a 12% increase and a 27% increase compared to the three months ended December 31, 2022, and March 31, 2022, respectively.

•Gross margin was $537.9 million for the three months ended March 31, 2023, representing a 1% increase and a 2% decrease compared to the three months ended December 31, 2022, and March 31, 2022, respectively. See Reconciliation of Non-GAAP Financial Measures within this Item 2.

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•Adjusted gross margin for natural-gas assets (as defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2) averaged $1.30 per Mcf for the three months ended March 31, 2023, representing a 2% increase and a 3% decrease compared to the three months ended December 31, 2022, and March 31, 2022, respectively.

•Adjusted gross margin for crude-oil and NGLs assets (as defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2) averaged $2.65 per Bbl for the three months ended March 31, 2023, representing a 5% increase and a 9% increase compared to the three months ended December 31, 2022, and March 31, 2022, respectively.

•Adjusted gross margin for produced-water assets (as defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2) averaged $0.81 per Bbl for the three months ended March 31, 2023, representing a 12% decrease and a 19% decrease compared to the three months ended December 31, 2022, and March 31, 2022, respectively.

The following table provides additional information on throughput for the periods presented below:
Three Months Ended
March 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Throughput for natural-gas assets (MMcf/d)
Delaware Basin1,569 1,524 3 %1,326 18 %
DJ Basin1,306 1,343 (3)%1,321 (1)%
Equity investments423 463 (9)%479 (12)%
Other948 1,055 (10)%1,084 (13)%
Total throughput for natural-gas assets
4,246 4,385 (3)%4,210 1 %
Throughput for crude-oil and NGLs assets (MBbls/d)
Delaware Basin205 203 1 %192 7 %
DJ Basin69 77 (10)%88 (22)%
Equity investments314 347 (10)%374 (16)%
Other35 35 — %35 — %
Total throughput for crude-oil and NGLs assets
623 662 (6)%689 (10)%
Throughput for produced-water assets (MBbls/d)
Delaware Basin977 868 13 %766 28 %
Total throughput for produced-water assets
977 868 13 %766 28 %
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OUTLOOK

We expect our business to be affected by the below-described key trends and uncertainties. Our expectations are based on assumptions made by us and information currently available to us. To the extent our underlying assumptions about, or interpretations of, available information prove incorrect, our actual results may vary materially from expected results.

Impact of crude-oil, natural-gas, and NGLs prices. Crude-oil, natural-gas, and NGLs prices can fluctuate significantly, and have done so over time. Commodity-price fluctuations affect the level of our customers’ activities and our customers’ allocations of capital within their own asset portfolios. During 2020, oil and natural-gas prices were negatively impacted by the worldwide macroeconomic downturn that followed the global outbreak of COVID-19. In 2021, prices began to increase and in the first quarter of 2022, commodity prices increased significantly in connection with the war in Ukraine. For example, the New York Mercantile Exchange (“NYMEX”) West Texas Intermediate crude-oil daily settlement prices during 2022 ranged from a high of $123.70 per barrel in March 2022 to a low of $71.02 per barrel in December 2022, and prices during the three months ended March 31, 2023, ranged from a high of $81.62 per barrel in January 2023 to a low of $66.74 per barrel in March 2023. The extent and duration of the recent commodity-price volatility cannot be predicted.
To the extent producers continue with development plans in our areas of operation, we intend to continue connecting new wells or production facilities to our systems to maintain or increase throughput on our systems and mitigate the impact of production declines. However, our success in connecting additional wells or production facilities is dependent on the activity levels of our customers, any capacity constraints, and the availability of downstream-takeaway alternatives. In some cases, we take ownership of volumes at the tailgate of our plants based on certain contractual arrangements with our producer customers, which introduces additional commodity-price exposure. Additionally, we intend to continue evaluating the crude-oil, NGLs, and natural-gas price environments and adjust our capital spending plans to reflect our customers’ anticipated activity levels, while maintaining appropriate liquidity and financial flexibility.

Impact of inflation and supply-chain disruptions. Although inflation in the United States has been relatively low in recent years, the U.S. economy currently is experiencing significant inflation relative to historical precedent, from, among other things, supply-chain disruptions caused by, or governmental stimulus or fiscal policies adopted in response to, the COVID-19 crisis and in connection with the war in Ukraine. More specifically, the bottlenecks and disruptions from the lingering effects of the COVID-19 crisis have caused difficulties within the U.S. and global supply chains, creating logistical delays along with labor shortages. Continued inflation has raised our costs for labor, materials, fuel, and services, which has increased our operating costs and capital expenditures. Increases in inflationary pressure could materially and negatively impact our financial results. To the extent permitted by regulations and escalation provisions in certain of our existing agreements, we have the ability to recover a portion of increased costs in the form of higher fees.

Impact of interest rates. Overall, short- and long-term interest rates increased during 2022, and have continued to increase during 2023, resulting in increased interest expense on RCF borrowings. Any future increases in interest rates likely will result in additional increases in financing costs. Additionally, as with other yield-oriented securities, our unit price could be impacted by our implied distribution yield relative to market interest rates. Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of investors who invest in our units, and a rising interest-rate environment could have an adverse impact on our unit price and our ability to issue additional equity, or increase the cost of issuing equity, to make acquisitions, to reduce debt, or for other purposes. However, we expect our cost of capital to remain competitive, as our competitors face similar interest-rate dynamics.


36
ACQUISITIONS AND DIVESTITURES

Cactus II. In November 2022, we sold our 15.00% interest in Cactus II to two third parties for $264.8 million, which includes a $1.8 million pro-rata distribution through closing. Total proceeds were received during the fourth quarter of 2022, resulting in a net gain on sale of $109.9 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statements of operations.

Ranch Westex. In September 2022, we acquired the remaining 50% interest in Ranch Westex from a third party for $40.1 million. Subsequent to the acquisition, (i) we are the sole owner and operator of the asset, (ii) Ranch Westex is no longer accounted for under the equity method of accounting, and (iii) the Ranch Westex processing plant is included as part of the operations of the West Texas complex.

RESULTS OF OPERATIONS

OPERATING RESULTS

The following tables and discussion present a summary of our results of operations:
Three Months Ended
thousandsMarch 31, 2023December 31, 2022March 31, 2022
Total revenues and other (1)
$733,982 $779,437 $758,297 
Equity income, net – related parties39,021 44,095 49,607 
Total operating expenses (1)
480,673 499,434 403,450 
Gain (loss) on divestiture and other, net(2,118)104,560 370 
Operating income (loss)290,212 428,658 404,824 
Interest expense(81,670)(84,606)(85,455)
Other income (expense), net1,215 1,486 106 
Income (loss) before income taxes209,757 345,538 319,475 
Income tax expense (benefit)1,416 504 1,805 
Net income (loss)208,341 345,034 317,670 
Net income (loss) attributable to noncontrolling interests4,696 8,710 8,953 
Net income (loss) attributable to Western Midstream Partners, LP (2)
$203,645 $336,324 $308,717 
_________________________________________________________________________________________
(1)Total revenues and other includes amounts earned from services provided to related parties and from the sale of natural gas, condensate, and NGLs to related parties. Total operating expenses includes amounts charged by related parties for services received. See Note 5—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
(2)For reconciliations to comparable consolidated results of WES Operating, see Items Affecting the Comparability of Financial Results with WES Operating within this Item 2.

For purposes of the following discussion, any increases or decreases refer to the comparison of the three months ended March 31, 2023, to the three months ended December 31, 2022, or to the three months ended March 31, 2022, as applicable.

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Throughput
Three Months Ended
March 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Throughput for natural-gas assets (MMcf/d)
Gathering, treating, and transportation369 402 (8)%406 (9)%
Processing3,454 3,520 (2)%3,325 4 %
Equity investments (1)
423 463 (9)%479 (12)%
Total throughput4,246 4,385 (3)%4,210 1 %
Throughput attributable to noncontrolling interests (2)
139 154 (10)%152 (9)%
Total throughput attributable to WES for natural-gas assets
4,107 4,231 (3)%4,058 1 %
Throughput for crude-oil and NGLs assets (MBbls/d)
Gathering, treating, and transportation309 315 (2)%315 (2)%
Equity investments (1)
314 347 (10)%374 (16)%
Total throughput623 662 (6)%689 (10)%
Throughput attributable to noncontrolling interests (2)
12 13 (8)%14 (14)%
Total throughput attributable to WES for crude-oil and NGLs assets
611 649 (6)%675 (9)%
Throughput for produced-water assets (MBbls/d)
Gathering and disposal977 868 13 %766 28 %
Throughput attributable to noncontrolling interests (2)
20 17 18 %15 33 %
Total throughput attributable to WES for produced-water assets
957 851 12 %751 27 %
_________________________________________________________________________________________
(1)Represents our share of average throughput for investments accounted for under the equity method of accounting.
(2)For all periods presented, includes (i) the 2.0% limited partner interest in WES Operating owned by an Occidental subsidiary and (ii) for natural-gas assets, the 25% third-party interest in Chipeta, which collectively represent WES’s noncontrolling interests.

Natural-gas assets

Total throughput attributable to WES for natural-gas assets decreased by 124 MMcf/d compared to the three months ended December 31, 2022, primarily due to (i) lower volumes at Chipeta due to volumes being diverted away from the plant for part of December 2022 through February 2023, (ii) lower volumes due to production declines in areas around the DJ Basin complex and the Marcellus Interest systems, (iii) lower volumes due to production declines and extended winter weather conditions during the first quarter of 2023 in areas around the Granger and Red Desert complexes, and (iv) lower volumes at Mi Vida and on Red Bluff Express. These decreases were offset partially by higher volumes at the West Texas complex due to increased production in the area.
Total throughput attributable to WES for natural-gas assets increased by 49 MMcf/d compared to the three months ended March 31, 2022, primarily due to higher volumes at the West Texas complex due to increased production in the area. This increase was offset partially by (i) decreased volumes at the Ranch Westex plant, which we acquired in the third quarter of 2022 and is included as part of the West Texas complex subsequent to the acquisition, (ii) lower volumes at Chipeta due to volumes being diverted away from the plant for part of December 2022 through February 2023, (iii) lower volumes due to production declines and extended winter weather conditions during the first quarter of 2023 in areas around the Granger and Red Desert complexes, (iv) lower volumes due to production declines in the area around the Marcellus Interest systems, and (v) lower volumes at Mi Vida.


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Crude-oil and NGLs assets

Total throughput attributable to WES for crude-oil and NGLs assets decreased by 38 MBbls/d compared to the three months ended December 31, 2022, primarily due to (i) lower volumes on the Cactus II pipeline, which was sold in the fourth quarter of 2022, and (ii) decreased volumes on FRP and at the DJ Basin oil system resulting from production declines in the area.
Total throughput attributable to WES for crude-oil and NGLs assets decreased by 64 MBbls/d compared to the three months ended March 31, 2022, primarily due to (i) lower volumes on the Cactus II pipeline, which was sold in the fourth quarter of 2022, and (ii) lower volumes at the DJ Basin oil system resulting from production declines in the area. These decreases were offset partially by (i) higher volumes at the DBM oil system resulting from increased production in the area and (ii) increased volumes on the Whitethorn pipeline.

Produced-water assets

Total throughput attributable to WES for produced-water assets increased by 106 MBbls/d and 206 MBbls/d compared to the three months ended December 31, 2022, and March 31, 2022, respectively, due to higher production and new third-party connections brought online during the first quarter of 2023 and the second half of 2022.

Service Revenues
Three Months Ended
thousands except percentagesMarch 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Service revenues – fee based$647,867 $647,948 — %$631,598 3 %
Service revenues – product based46,810 46,971 — %40,867 15 %
Total service revenues$694,677 $694,919 — %$672,465 3 %

Service revenues – fee based

Service revenues – fee based decreased by $0.1 million compared to the three months ended December 31, 2022, primarily due to decreases of (i) $20.2 million at the Springfield system due to an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2022, (ii) $2.2 million at the DBM water systems due to decreased deficiency fees and a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2023, partially offset by increased throughput, and (iii) $1.7 million at the DBM oil system due to a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2023, and decreased deficiency fees. These decreases were partially offset by increases of (i) $16.4 million at the DJ Basin oil system due to an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2022, partially offset by decreased throughput, and (ii) $10.0 million at the West Texas complex due to increased throughput.
Service revenues – fee based increased by $16.3 million compared to the three months ended March 31, 2022, primarily due to increases of (i) $28.6 million and $3.1 million at the West Texas complex and DBM oil system, respectively, as a result of increased throughput and (ii) $2.1 million at the DBM water systems due to increased throughput, partially offset by decreased deficiency fees and a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2023. These increases were partially offset by decreases of (i) $5.2 million at the Chipeta complex due to decreased deficiency fees, (ii) $3.3 million at the DJ Basin complex due to decreased throughput, partially offset by increased deficiency fees, (iii) $3.0 million at the DJ Basin oil system due to decreased throughput, (iv) $2.8 million at the Springfield system primarily due to decreased demand-fee revenue, and (v) $1.9 million at the Marcellus Interest systems due to decreased throughput.

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Service revenues – product based

Service revenues – product based increased by $5.9 million compared to the three months ended March 31, 2022, primarily due to increases of (i) $10.3 million at the West Texas complex due to increased volumes and changes in contract mix, and (ii) $4.8 million at the DJ Basin complex due to changes in contract mix. These increases were partially offset by decreases of (i) $2.8 million at the Chipeta complex as a result of lower volumes, (ii) $2.5 million at the Granger complex due to decreased average prices, (iii) $1.9 million at the Red Desert complex due to decreased throughput and average prices, and (iv) $1.8 million at the Hilight system due to decreased average prices.

Product Sales
Three Months Ended
thousands except percentages and per-unit amountsMarch 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Natural-gas sales
$2,775 $27,712 (90)%$19,071 (85)%
NGLs sales36,250 56,556 (36)%66,518 (46)%
Total Product sales$39,025 $84,268 (54)%$85,589 (54)%
Per-unit gross average sales price:
Natural gas (per Mcf)$1.75 $3.78 (54)%$4.38 (60)%
NGLs (per Bbl)28.78 29.21 (1)%46.48 (38)%

Natural-gas sales

Natural-gas sales decreased by $24.9 million compared to the three months ended December 31, 2022, primarily due to decreases of (i) $8.2 million and $3.7 million at the DJ Basin and Red Desert complexes, respectively, due to decreases in volumes sold and average prices, (ii) $7.9 million at the West Texas complex due to decreased average prices, and (iii) $4.1 million at the Chipeta complex due to decreased volumes sold.
Natural-gas sales decreased by $16.3 million compared to the three months ended March 31, 2022, primarily due to decreases of (i) $13.2 million at the West Texas complex due to decreased average prices, partially offset by increased volumes sold, and (ii) $2.5 million and $2.0 million at the DJ Basin and Red Desert complexes, respectively, due to decreases in volumes sold and average prices.

NGLs sales

NGLs sales decreased by $20.3 million compared to the three months ended December 31, 2022, primarily due to decreases of (i) $12.1 million and $1.4 million at the DJ Basin and Granger complexes, respectively, due to a decrease in volumes sold, partially offset by an increase in average prices, (ii) $4.1 million at the West Texas complex due to a decrease in average prices, partially offset by an increase in volumes sold, and (iii) $2.0 million at the Chipeta complex due to lower volumes sold.
NGLs sales decreased by $30.3 million compared to the three months ended March 31, 2022, primarily due to decreases of (i) $14.0 million at the West Texas complex due to a decrease in average prices, partially offset by an increase in volumes sold, (ii) $9.7 million, $4.1 million, and $1.4 million at the Chipeta complex, Granger complex, and Hilight system, respectively, as a result of decreases in average prices and volumes sold, and (iii) $3.5 million at the Brasada complex due to a contract expiration in the third quarter of 2022. These decreases were partially offset by an increase of $4.6 million at the DJ Basin complex due to an increase in volumes sold partially offset by a decrease in average prices.
40
Equity Income, Net – Related Parties
Three Months Ended
thousands except percentagesMarch 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Equity income, net – related parties$39,021 $44,095 (12)%$49,607 (21)%

Equity income, net – related parties decreased by $5.1 million compared to the three months ended December 31, 2022, primarily due to decreases of (i) $2.1 million at TEP due to decreased revenue coupled with increased ad valorem taxes, (ii) $1.8 million at FRP due to decreased revenue, and (iii) $1.6 million at Mi Vida due to decreased revenue and increases in certain expenses. These decreases were partially offset by an increase of $2.2 million at White Cliffs due to a goodwill impairment recorded in the fourth quarter of 2022.
Equity income, net – related parties decreased by $10.6 million compared to the three months ended March 31, 2022, primarily due to decreases of (i) $3.9 million at Ranch Westex, which we acquired in the third quarter of 2022 and is included as part of the West Texas complex subsequent to the acquisition (see Acquisitions and Divestitures within this Item 2), (ii) $3.6 million at Cactus II due to the divestiture of our interest in the fourth quarter of 2022 (see Acquisitions and Divestitures within this Item 2), (iii) 2.7 million at Mi Vida due to increases in certain expenses, and (iv) $1.0 million at the Mont Belvieu JV due to decreases in revenue.

Cost of Product and Operation and Maintenance Expenses
Three Months Ended
thousands except percentagesMarch 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Residue purchases$15,638 $30,145 (48)%$34,992 (55)%
NGLs purchases51,829 57,725 (10)%70,404 (26)%
Other(16,008)4,793 NM(32,548)51 %
Cost of product51,459 92,663 (44)%72,848 (29)%
Operation and maintenance174,239 166,923 4 %128,976 35 %
Total Cost of product and Operation and maintenance expenses$225,698 $259,586 (13)%$201,824 12 %
_________________________________________________________________________________________
NM—Not meaningful

Residue purchases

Residue purchases decreased by $14.5 million compared to the three months ended December 31, 2022, primarily due to decreases of (i) $7.4 million at the West Texas complex primarily due to lower average prices and (ii) $6.1 million at the Chipeta complex primarily due to decreased volumes purchased.
Residue purchases decreased by $19.4 million compared to the three months ended March 31, 2022, primarily due to decreases of (i) $11.9 million at the West Texas complex attributable to changes in contract mix during 2022 and lower average prices, (ii) $5.2 million at the Chipeta complex due to decreased volumes purchased and lower average prices, and (iii) $3.8 million at the DJ Basin complex primarily due to a change in contract mix during the second quarter of 2022. These decreases were offset partially by an increase of $3.3 million at the Granger complex primarily due to an increase in average prices.

NGLs purchases

NGLs purchases decreased by $5.9 million compared to the three months ended December 31, 2022, primarily due to a decrease of $5.1 million at the West Texas complex due to lower average prices.
NGLs purchases decreased by $18.6 million compared to the three months ended March 31, 2022, primarily due to decreases of (i) $9.0 million at the West Texas complex primarily due to lower average prices, partially offset by increased volumes purchased, (ii) $3.5 million at the Brasada complex due to a contract expiration in the third quarter of 2022, (iii) $3.3 million at the Chipeta complex due to decreased volumes purchased, and (iv) $3.0 million at the Granger complex due to lower average prices.
41

Other items

Other items decreased by $20.8 million compared to the three months ended December 31, 2022, primarily due to a decrease of $19.2 million at the DJ Basin complex attributable to changes in imbalance positions.
Other items increased by $16.5 million compared to the three months ended March 31, 2022, primarily due to increases of $9.7 million at the DJ Basin complex attributable to changes in imbalance positions and $8.7 million at the West Texas complex primarily due to increased offload fees and changes in imbalance positions.

Operation and maintenance expense

Operation and maintenance expense increased by $7.3 million compared to the three months ended December 31, 2022, primarily due to increases of (i) $4.5 million for maintenance and repair expense, (ii) $4.3 million in regulatory and environmental expense, and (iii) $2.6 million for salaries and wages costs. These increases were offset partially by decreases of $2.5 million for mechanical-integrity costs and $2.3 million in utility expense.
Operation and maintenance expense increased by $45.3 million compared to the three months ended March 31, 2022, primarily due to increases of (i) $13.5 million for maintenance and repair expense, (ii) $6.4 million in regulatory and environmental expense, (iii) $5.7 million in utility expense, (iv) $5.6 million for salaries and wages costs, (v) $2.7 million for mechanical-integrity costs, (vi) $2.7 million in contract labor and consulting expense, (vii) $2.7 million in land-related costs, and (viii) $2.4 million in water-disposal costs.
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Other Operating Expenses
Three Months Ended
thousands except percentagesMarch 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
General and administrative$51,117 $49,382 4 %$48,602 5 %
Property and other taxes6,831 18,065 (62)%18,442 (63)%
Depreciation and amortization144,626 151,910 (5)%134,582 7 %
Long-lived asset and other impairments
52,401 20,491 156 %— 100 %
Total other operating expenses$254,975 $239,848 6 %$201,626 26 %

General and administrative expenses

General and administrative expenses increased by $1.7 million compared to the three months ended December 31, 2022, primarily due to an increase of $4.3 million in personnel costs, partially offset by a decrease of $2.5 million in contract and consulting costs, primarily related to information technology services and fees incurred in 2022.
General and administrative expenses increased by $2.5 million compared to the three months ended March 31, 2022, primarily due to an increase of $2.3 million in personnel costs.

Property and other taxes

Property and other taxes decreased by $11.2 million and $11.6 million compared to the three months ended December 31, 2022, and March 31, 2022, respectively, primarily due to decreases in the ad valorem property tax accrual related to the finalization of 2022 assessments at the DJ Basin complex.

Depreciation and amortization expense

Depreciation and amortization expense decreased by $7.3 million compared to the three months ended December 31, 2022, primarily due to decreases of (i) $5.4 million and $3.6 million at the MGR assets and Hilight system, respectively, as a result of a change in estimate for asset retirement obligations during the fourth quarter of 2022 and (ii) $2.5 million at the West Texas complex as a result of accretion adjustments to our asset retirement obligation during the first quarter of 2023. These decreases were partially offset by an increase of $5.3 million at the DJ Basin complex due to acceleration of depreciation expense.
Depreciation and amortization expense increased by $10.0 million compared to the three months ended March 31, 2022, primarily due to increases of (i) $4.5 million and $2.4 million at the DJ Basin complex and MGR assets, respectively, due to acceleration of depreciation expense as well as accretion adjustments to our asset retirement obligation during the first quarter of 2023 and (ii) $1.3 million at the Hilight system as a result of a change in estimate for asset retirement obligations during the first quarter of 2023.

Long-lived asset and other impairment expense

Long-lived asset and other impairment expense for the three months ended March 31, 2023, was primarily due to a $52.1 million impairment for assets located in the Rockies.
Long-lived asset and other impairment expense for the three months ended December 31, 2022, was primarily due to a $19.9 million other-than-temporary impairment of our investment in White Cliffs.
For further information on Long-lived asset and other impairment expense, see Note 7—Property, Plant, and Equipment in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

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Interest Expense
Three Months Ended
thousands except percentagesMarch 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Long-term and short-term debt
$(81,151)$(83,390)(3)%$(83,428)(3)%
Finance lease liabilities(163)(318)(49)%(42)NM
Commitment fees and amortization of debt-related costs(2,881)(3,063)(6)%(3,032)(5)%
Capitalized interest2,525 2,165 17 %1,047 141 %
Interest expense$(81,670)$(84,606)(3)%$(85,455)(4)%

Interest expense

Interest expense decreased by $2.9 million compared to the three months ended December 31, 2022, primarily due to the redemption of the total principal amount outstanding on the Floating-Rate Senior Notes due 2023 during the first quarter of 2023.
Interest expense decreased by $3.8 million compared to the three months ended March 31, 2022, primarily due to decreases of (i) $5.1 million due to the redemption of the total principal amount outstanding of the 4.000% Senior Notes due 2022 during the second quarter of 2022, (ii) $3.6 million due to credit-rating related interest rate changes on the 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050, and (iii) $1.5 million due to higher capitalized interest. These decreases were offset partially by an increase of $7.0 million due to higher outstanding borrowings and average interest rates under the RCF during the first quarter of 2023.
See Liquidity and Capital Resources—Debt and credit facilities within this Item 2.

Income Tax Expense (Benefit)

We are not a taxable entity for U.S. federal income tax purposes; therefore, our federal statutory rate is zero percent. However, income apportionable to Texas is subject to Texas margin tax.

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RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

Adjusted gross margin. We define Adjusted gross margin attributable to Western Midstream Partners, LP (“Adjusted gross margin”) as total revenues and other (less reimbursements for electricity-related expenses recorded as revenue), less cost of product, plus distributions from equity investments, and excluding the noncontrolling interest owners’ proportionate share of revenues and cost of product. We believe Adjusted gross margin is an important performance measure of our operations’ profitability and performance as compared to other companies in the midstream industry. Cost of product expenses include (i) costs associated with the purchase of natural gas and NGLs pursuant to our percent-of-proceeds, percent-of-product, and keep-whole contracts, (ii) costs associated with the valuation of gas and NGLs imbalances, and (iii) costs associated with our obligations under certain contracts to redeliver a volume of natural gas to shippers, which is thermally equivalent to condensate retained by us and sold to third parties. The electricity-related expenses included in our Adjusted gross margin definition relate to pass-through expenses that are reimbursed by certain customers (recorded as revenue with an offset recorded as Operation and maintenance expense).

Adjusted EBITDA. We define Adjusted EBITDA attributable to Western Midstream Partners, LP (“Adjusted EBITDA”) as net income (loss), plus (i) distributions from equity investments, (ii) non-cash equity-based compensation expense, (iii) interest expense, (iv) income tax expense, (v) depreciation and amortization, (vi) impairments, and (vii) other expense (including lower of cost or market inventory adjustments recorded in cost of product), less (i) gain (loss) on divestiture and other, net, (ii) gain (loss) on early extinguishment of debt, (iii) income from equity investments, (iv) interest income, (v) income tax benefit, (vi) other income, and (vii) the noncontrolling interest owners’ proportionate share of revenues and expenses. We believe the presentation of Adjusted EBITDA provides information useful to investors in assessing our financial condition and results of operations and that Adjusted EBITDA is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures, and make distributions. Adjusted EBITDA is a supplemental financial measure that management and external users of our consolidated financial statements, such as industry analysts, investors, commercial banks, and rating agencies, use, among other measures, to assess the following:
•our operating performance as compared to other publicly traded partnerships in the midstream industry, without regard to financing methods, capital structure, or historical cost basis;
•the ability of our assets to generate cash flow to make distributions; and
•the viability of acquisitions and capital expenditures and the returns on investment of various investment opportunities.

Free cash flow. We define “Free cash flow” as net cash provided by operating activities less total capital expenditures and contributions to equity investments, plus distributions from equity investments in excess of cumulative earnings. Management considers Free cash flow an appropriate metric for assessing capital discipline, cost efficiency, and balance-sheet strength. Although Free cash flow is the metric used to assess WES’s ability to make distributions to unitholders, this measure should not be viewed as indicative of the actual amount of cash that is available for distributions or planned for distributions for a given period. Instead, Free cash flow should be considered indicative of the amount of cash that is available for distributions, debt repayments, and other general partnership purposes.


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Adjusted gross margin, Adjusted EBITDA, and Free cash flow are not defined in GAAP. The GAAP measure that is most directly comparable to Adjusted gross margin is gross margin. Net income (loss) and net cash provided by operating activities are the GAAP measures that are most directly comparable to Adjusted EBITDA. The GAAP measure that is most directly comparable to Free cash flow is net cash provided by operating activities. Our non-GAAP financial measures of Adjusted gross margin, Adjusted EBITDA, and Free cash flow should not be considered as alternatives to the GAAP measures of gross margin, net income (loss), net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP. Adjusted gross margin, Adjusted EBITDA, and Free cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect gross margin, net income (loss), and net cash provided by operating activities. Adjusted gross margin, Adjusted EBITDA, and Free cash flow should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Our definitions of Adjusted gross margin, Adjusted EBITDA, and Free cash flow may not be comparable to similarly titled measures of other companies in our industry, thereby diminishing their utility as comparative measures.
Management compensates for the limitations of Adjusted gross margin, Adjusted EBITDA, and Free cash flow as analytical tools by reviewing the comparable GAAP measures, understanding the differences between Adjusted gross margin, Adjusted EBITDA, and Free cash flow compared to (as applicable) gross margin, net income (loss), and net cash provided by operating activities, and incorporating this knowledge into its decision-making processes. We believe that investors benefit from having access to the same financial measures that our management considers in evaluating our operating results.
The following tables present (i) a reconciliation of the GAAP financial measure of gross margin to the non-GAAP financial measure of Adjusted gross margin, (ii) a reconciliation of the GAAP financial measures of net income (loss) and net cash provided by operating activities to the non-GAAP financial measure of Adjusted EBITDA, and (iii) a reconciliation of the GAAP financial measure of net cash provided by operating activities to the non-GAAP financial measure of Free cash flow:
Three Months Ended
thousandsMarch 31, 2023December 31, 2022March 31, 2022
Reconciliation of Gross margin to Adjusted gross margin
Total revenues and other$733,982 $779,437 $758,297 
Less:
Cost of product51,459 92,663 72,848 
Depreciation and amortization144,626 151,910 134,582 
Gross margin537,897 534,864 550,867 
Add:
Distributions from equity investments51,975 69,282 55,795 
Depreciation and amortization144,626 151,910 134,582 
Less:
Reimbursed electricity-related charges recorded as revenues23,569 23,577 18,404 
Adjusted gross margin attributable to noncontrolling interests (1)
15,774 17,490 18,090 
Adjusted gross margin$695,155 $714,989 $704,750 
_________________________________________________________________________________________
(1)For all periods presented, includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% limited partner interest in WES Operating owned by an Occidental subsidiary, which collectively represent WES’s noncontrolling interests.


46
To facilitate investor and industry analysis, we also disclose per-Mcf Adjusted gross margin for natural-gas assets, per-Bbl Adjusted gross margin for crude-oil and NGLs assets, and per-Bbl Adjusted gross margin for produced-water assets.
Three Months Ended
thousands except per-unit amountsMarch 31, 2023December 31, 2022March 31, 2022
Gross margin
Gross margin for natural-gas assets (1)
$393,673 $403,043 $409,384 
Gross margin for crude-oil and NGLs assets (1)
89,281 75,690 88,816 
Gross margin for produced-water assets (1)
59,549 61,189 57,686 
Per-Mcf Gross margin for natural-gas assets (2)
1.03 1.00 1.08 
Per-Bbl Gross margin for crude-oil and NGLs assets (2)
1.59 1.24 1.43 
Per-Bbl Gross margin for produced-water assets (2)
0.68 0.77 0.84 
Adjusted gross margin
Adjusted gross margin for natural-gas assets
$480,009 $492,591 $488,909 
Adjusted gross margin for crude-oil and NGLs assets
145,577 150,611 148,247 
Adjusted gross margin for produced-water assets
69,569 71,787 67,594 
Per-Mcf Adjusted gross margin for natural-gas assets (3)
1.30 1.27 1.34 
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets (3)
2.65 2.53 2.44 
Per-Bbl Adjusted gross margin for produced-water assets (3)
0.81 0.92 1.00 
_________________________________________________________________________________________
(1)Excludes corporate-level depreciation and amortization.
(2)Average for period. Calculated as Gross margin for natural-gas assets, crude-oil and NGLs assets, or produced-water assets, divided by the respective total throughput (MMcf or MBbls) for natural-gas assets, crude-oil and NGLs assets, or produced-water assets.
(3)Average for period. Calculated as Adjusted Gross margin for natural-gas assets, crude-oil and NGLs assets, or produced-water assets, divided by the respective total throughput (MMcf or MBbls) attributable to WES for natural-gas assets, crude-oil and NGLs assets, or produced-water assets.

47
Three Months Ended
thousandsMarch 31, 2023December 31, 2022March 31, 2022
Reconciliation of Net income (loss) to Adjusted EBITDA
Net income (loss)$208,341 $345,034 $317,670 
Add:
Distributions from equity investments51,975 69,282 55,795 
Non-cash equity-based compensation expense
7,199 6,538 7,743 
Interest expense81,670 84,606 85,455 
Income tax expense1,416 504 1,805 
Depreciation and amortization144,626 151,910 134,582 
Impairments52,401 20,491 — 
Other expense200 209 — 
Less:
Gain (loss) on divestiture and other, net(2,118)104,560 370 
Equity income, net – related parties39,021 44,095 49,607 
Other income1,215 1,484 106 
Adjusted EBITDA attributable to noncontrolling interests (1)
11,015 12,654 13,917 
Adjusted EBITDA$498,695 $515,781 $539,050 
Reconciliation of Net cash provided by operating activities to Adjusted EBITDA
Net cash provided by operating activities$302,424 $489,219 $276,458 
Interest (income) expense, net81,670 84,606 85,455 
Accretion and amortization of long-term obligations, net
(1,692)(1,783)(1,782)
Current income tax expense (benefit)492 262 673 
Other (income) expense, net(1,215)(1,486)(106)
Distributions from equity investments in excess of cumulative earnings – related parties12,366 22,839 9,925 
Changes in assets and liabilities:
Accounts receivable, net4,037 (96,659)165,134 
Accounts and imbalance payables and accrued liabilities, net136,460 72,881 14,292 
Other items, net(24,832)(41,444)2,918 
Adjusted EBITDA attributable to noncontrolling interests (1)
(11,015)(12,654)(13,917)
Adjusted EBITDA$498,695 $515,781 $539,050 
Cash flow information
Net cash provided by operating activities$302,424 $489,219 $276,458 
Net cash used in investing activities(179,178)138,015 (71,617)
Net cash provided by (used in) financing activities(297,257)(499,671)(158,591)
_________________________________________________________________________________________
(1)For all periods presented, includes (i) the 25% third-party interest in Chipeta and (ii) the 2.0% limited partner interest in WES Operating owned by an Occidental subsidiary, which collectively represent WES’s noncontrolling interests.

48
Three Months Ended
thousandsMarch 31, 2023December 31, 2022March 31, 2022
Reconciliation of Net cash provided by operating activities to Free cash flow
Net cash provided by operating activities$302,424 $489,219 $276,458 
Less:
Capital expenditures173,088 145,723 83,971 
Contributions to equity investments – related parties110 733 2,070 
Add:
Distributions from equity investments in excess of cumulative earnings – related parties12,366 22,839 9,925 
Free cash flow$141,592 $365,602 $200,342 
Cash flow information
Net cash provided by operating activities$302,424 $489,219 $276,458 
Net cash used in investing activities(179,178)138,015 (71,617)
Net cash provided by (used in) financing activities(297,257)(499,671)(158,591)

Gross margin. Refer to Operating Results within this Item 2 for a discussion of the components of Gross margin as compared to the prior periods, including Service Revenues, Product Sales, Cost of Product (Residue purchases, NGLs purchases, and Other items), and Other Operating Expenses (Depreciation and amortization expense).
Gross margin increased by $3.0 million compared to the three months ended December 31, 2022, due to (i) a $41.2 million decrease in cost of product and (ii) a $7.3 million decrease in depreciation and amortization. These amounts were offset partially by a $45.5 million decrease in total revenues and other.
Gross margin decreased by $13.0 million compared to the three months ended March 31, 2022, due to (i) a $24.3 million decrease in total revenues and other and (ii) a $10.0 million increase in depreciation and amortization. These amounts were offset partially by a $21.4 million decrease in cost of product.

Net income (loss). Refer to Operating Results within this Item 2 for a discussion of the primary components of Net income (loss) as compared to the prior periods.
Net income (loss) decreased by $136.7 million compared to the three months ended December 31, 2022, primarily due to (i) a $106.7 million decrease in gain (loss) on divestiture and other, net, and (ii) a $45.5 million decrease in total revenues and other. These amounts were offset partially by an $18.8 million decrease in total operating expenses.
Net income (loss) decreased by $109.3 million compared to the three months ended March 31, 2022, primarily due to (i) a $77.2 million increase in total operating expenses and (ii) a $24.3 million decrease in total revenues and other.

Net cash provided by operating activities. Refer to Historical cash flow within this Item 2 for a discussion of the primary components of Net cash provided by operating activities as compared to the prior periods.

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KEY PERFORMANCE METRICS
Three Months Ended
thousands except percentages and per-unit amountsMarch 31, 2023December 31, 2022Inc/
(Dec)		March 31, 2022Inc/
(Dec)
Adjusted gross margin$695,155 $714,989 (3)%$704,750 (1)%
Per-Mcf Adjusted gross margin for natural-gas assets (1)
1.30 1.27 2 %1.34 (3)%
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets (1)
2.65 2.53 5 %2.44 9 %
Per-Bbl Adjusted gross margin for produced-water assets (1)
0.81 0.92 (12)%1.00 (19)%
Adjusted EBITDA498,695 515,781 (3)%539,050 (7)%
Free cash flow141,592 365,602 (61)%200,342 (29)%
_________________________________________________________________________________________
(1)Average for period. Calculated as Adjusted gross margin for natural-gas assets, crude-oil and NGLs assets, or produced-water assets, divided by the respective total throughput (MMcf or MBbls) attributable to WES for natural-gas assets, crude-oil and NGLs assets, or produced-water assets.

Adjusted gross margin. Adjusted gross margin decreased by $19.8 million compared to the three months ended December 31, 2022, primarily due to (i) an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2022 at the Springfield system, (ii) a decrease in distributions from Cactus II, which was sold in the fourth quarter of 2022, (iii) decreased throughput at the Chipeta and Granger complexes, and (iv) a decrease in distributions from Mont Belvieu JV and Whitethorn LLC. These decreases were partially offset by (i) an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2022 at the DJ Basin oil system, partially offset by decreased throughput, and (ii) increased throughput at the West Texas complex.
Adjusted gross margin decreased by $9.6 million compared to the three months ended March 31, 2022, primarily due to (i) decreased throughput at the DJ Basin and Granger complexes, (ii) decreased deficiency fees and throughput at the Chipeta complex, and (iii) a decrease in distributions from Cactus II, which was sold in the fourth quarter of 2022. These decreases were partially offset by increased throughput at the West Texas complex.
Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.03 compared to the three months ended December 31, 2022, primarily due to increased throughput at the West Texas complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets, partially offset by an annual cost-of-service rate adjustment that increased revenue during the fourth quarter of 2022 at the Springfield system.
Per-Mcf Adjusted gross margin for natural-gas assets decreased by $0.04 compared to the three months ended March 31, 2022, primarily due to contract mix and lower commodity prices, partially offset by increased throughput at the West Texas complex.
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.12 compared to the three months ended December 31, 2022, primarily due to an annual cost-of-service rate adjustment that decreased revenue during the fourth quarter of 2022 at the DJ Basin oil system. This increase was offset partially by (i) a decrease in distributions from Cactus II, which was sold in the fourth quarter of 2022, and (ii) a decrease in distributions from Whitethorn LLC.
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.21 compared to the three months ended March 31, 2022, primarily due to decreases in throughput and distributions from Cactus II, which was sold in the fourth quarter of 2022, and had lower-than-average per-Bbl margin as compared to our other crude-oil and NGLs assets.
Per-Bbl Adjusted gross margin for produced-water assets decreased by $0.11 and $0.19 compared to the three months ended December 31, 2022, and March 31, 2022, respectively, primarily due to a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2023, and lower deficiency fee revenues.
50
Adjusted EBITDA. Adjusted EBITDA decreased by $17.1 million compared to the three months ended December 31, 2022, primarily due to (i) a $45.5 million decrease in total revenues and other, (ii) a $17.3 million decrease in distributions from equity investments, and (iii) a $7.3 million increase in operation and maintenance expenses. These amounts were offset partially by (i) a $41.2 million decrease in cost of product (net of lower of cost or market inventory adjustments) and (ii) an $11.2 million decrease in property and other taxes.
Adjusted EBITDA decreased by $40.4 million compared to the three months ended March 31, 2022, primarily due to (i) a $45.3 million increase in operation and maintenance expenses and (ii) a $24.3 million decrease in total revenues and other. These amounts were offset partially by (i) a $21.6 million decrease in cost of product (net of lower of cost or market inventory adjustments) and (ii) an $11.6 million decrease in property and other taxes.

Free cash flow. Free cash flow decreased by $224.0 million compared to the three months ended December 31, 2022, primarily due to (i) a decrease of $186.8 million in net cash provided by operating activities, (ii) an increase of $27.4 million in capital expenditures, and (iii) a decrease of $10.5 million in distributions from equity investments in excess of cumulative earnings.
Free cash flow decreased by $58.8 million compared to the three months ended March 31, 2022, primarily due to an increase of $89.1 million in capital expenditures, offset partially by an increase of $26.0 million in net cash provided by operating activities.
See Capital Expenditures and Historical Cash Flow within this Item 2 for further information.

LIQUIDITY AND CAPITAL RESOURCES

Our primary cash uses include equity and debt service, operating expenses, and capital expenditures. Our sources of liquidity as of March 31, 2023, included cash and cash equivalents, cash flows generated from operations, available borrowing capacity under the RCF, and potential issuances of additional equity or debt securities. We believe that cash flows generated from these sources will be sufficient to satisfy our short-term working capital requirements and long-term capital-expenditure and debt-service requirements.
The amount of future distributions to unitholders will be determined by the Board on a quarterly basis. Under our partnership agreement, we distribute all of our available cash (beyond proper reserves as defined in our partnership agreement) within 55 days following each quarter’s end. Our cash flow and resulting ability to make cash distributions are dependent on our ability to generate cash flow from operations. Generally, our available cash is our cash on hand at the end of a quarter after the payment of our expenses and the establishment of cash reserves and cash on hand resulting from working capital borrowings made after the end of the quarter. The general partner establishes cash reserves to provide for the proper conduct of our business, including (i) to fund future capital expenditures, (ii) to comply with applicable laws, debt instruments, or other agreements, or (iii) to provide funds for unitholder distributions for any one or more of the next four quarters. The Board declared a cash distribution of $0.500 per unit for the first quarter of 2023, and an Enhanced Distribution of $0.356 per unit (discussed below), for an aggregate of $0.856 per unit, or $337.0 million, which is payable on May 15, 2023, to our unitholders of record at the close of business on May 1, 2023.
To facilitate the distribution of available cash, during 2022 we adopted a financial policy that provided for an additional distribution (“Enhanced Distribution”) to be paid in conjunction with the regular first-quarter distribution of the following year (beginning in 2023), in a target amount equal to Free cash flow generated in the prior year after subtracting Free cash flow used for the prior year’s debt repayments, regular-quarter distributions, and unit repurchases. This Enhanced Distribution is subject to Board discretion, the establishment of cash reserves for the proper conduct of our business and is also contingent on the attainment of prior year-end net leverage thresholds (the ratio of our total principal debt outstanding less total cash on hand as of the end of such period, as compared to our trailing-twelve-months Adjusted EBITDA), after taking the Enhanced Distribution for such prior year into effect. Free cash flow and Adjusted EBITDA are defined under the caption Reconciliation of Non-GAAP Financial Measures within this Item 2. In April 2023, the Board approved an Enhanced Distribution of $0.356 per unit, or $140.1 million, related to our 2022 performance.

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In 2022, we announced a common-unit buyback program of up to $1.25 billion through December 31, 2024. The common units may be purchased from time to time in the open market at prevailing market prices or in privately negotiated transactions. The timing and amount of purchases under the program will be determined based on ongoing assessments of capital needs, our financial performance, the market price of our common units, and other factors, including organic growth and acquisition opportunities and general market conditions. The program does not obligate us to purchase any specific dollar amount or number of units and may be suspended or discontinued at any time. During the three months ended March 31, 2023, we repurchased 285,688 common units for an aggregate purchase price of $7.1 million. The units were canceled immediately upon receipt. As of March 31, 2023, we had an authorized amount of $755.3 million remaining under the program.
Management continuously monitors our leverage position and other financial projections to manage the capital structure according to long-term objectives. We may, from time to time, seek to retire, rearrange, or amend some or all of our outstanding debt or financing agreements through cash purchases, exchanges, open-market repurchases, privately negotiated transactions, tender offers, or otherwise. Such transactions, if any, will depend on prevailing market conditions, our liquidity position and requirements, contractual restrictions, and other factors and the amounts involved may be material. Our ability to generate cash flows is subject to a number of factors, some of which are beyond our control. Read Risk Factors under Part II, Item 1A of this Form 10-Q.

Working capital. Working capital is an indication of liquidity and potential needs for short-term funding. Working capital requirements are driven by changes in accounts receivable and accounts payable and other factors such as credit extended to, and the timing of collections from, our customers, and the level and timing of our spending for acquisitions, maintenance, and other capital activities. As of March 31, 2023, we had a $154.0 million working capital surplus, which we define as the amount by which current assets exceed current liabilities. As of March 31, 2023, there was $1.5 billion available for borrowing under the RCF due to $495.0 million of outstanding borrowings, which were repaid in April 2023. See Note 8—Selected Components of Working Capital and Note 9—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Capital expenditures. Our business is capital intensive, requiring significant investment to maintain and improve existing facilities or to develop new midstream infrastructure. Capital expenditures include maintenance capital expenditures, which include those expenditures required to maintain existing operating capacity and service capability of our assets, and expansion capital expenditures, which include expenditures to construct new midstream infrastructure and expenditures incurred to reduce costs, increase revenues, or increase system throughput or capacity from current levels.
Capital expenditures in the consolidated statements of cash flows reflect capital expenditures on a cash basis, when payments are made. Capital incurred is presented on an accrual basis. Capital expenditures as presented in the consolidated statements of cash flows and capital incurred were as follows:
Three Months Ended 
March 31,
thousands20232022
Capital expenditures (1)
$173,088 $83,971 
Capital incurred (1)
181,803 85,553 
_________________________________________________________________________________________
(1)For the three months ended March 31, 2023 and 2022, included $2.5 million and $1.0 million, respectively, of capitalized interest.

Capital expenditures increased by $89.1 million for the three months ended March 31, 2023, primarily due to increases of (i) $44.3 million at the West Texas complex, primarily attributable to facility expansion, including ongoing construction of Mentone Train III, and pipeline projects, (ii) $34.6 million at the DBM water systems due to construction of additional water-disposal wells and facilities and pipeline projects, and (iii) $4.4 million at the DBM oil system, primarily related to an increase in pipeline, oil treating, and oil pumping projects.

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Historical cash flow. The following table and discussion present a summary of our net cash flows provided by (used in) operating, investing, and financing activities:
Three Months Ended 
March 31,
thousands20232022
Net cash provided by (used in):
Operating activities$302,424 $276,458 
Investing activities(179,178)(71,617)
Financing activities(297,257)(158,591)
Net increase (decrease) in cash and cash equivalents$(174,011)$46,250 

Operating activities. Net cash provided by operating activities increased for the three months ended March 31, 2023, primarily due to (i) the impact of changes in assets and liabilities and (ii) lower interest expense. These increases were partially offset by (i) lower cash operating income and (ii) lower distributions from equity investments. Refer to Operating Results within this Item 2 for a discussion of our results of operations as compared to the prior periods.

Investing activities. Net cash used in investing activities for the three months ended March 31, 2023, primarily included the following:
•$173.1 million of capital expenditures, primarily related to construction, expansion, and asset-integrity projects at the West Texas complex, DBM water systems, DBM oil system, and DJ Basin complex;

•$18.3 million of increases to materials and supplies inventory; and

•$12.4 million of distributions received from equity investments in excess of cumulative earnings.

Net cash used in investing activities for the three months ended March 31, 2022, primarily included the following:
•$84.0 million of capital expenditures, primarily related to construction, expansion, and asset-integrity projects at the West Texas complex, DBM water systems, DJ Basin complex, and DBM oil system;

•$9.9 million of distributions received from equity investments in excess of cumulative earnings; and

•$4.1 million of decreases to materials and supplies inventory.

Financing activities. Net cash used in financing activities for the three months ended March 31, 2023, primarily included the following:
•$213.1 million to redeem the total principal amount outstanding on the Floating-Rate Senior Notes due 2023 at par value;

•$203.1 million of distributions paid to WES unitholders and noncontrolling interest owners;

•$100.0 million of repayments of outstanding borrowings under the RCF;

•$7.1 million of unit repurchases; and

•$220.0 million of borrowings under the RCF, which were used for general partnership purposes.

Net cash used in financing activities for the three months ended March 31, 2022, primarily included the following:
•$139.5 million of distributions paid to WES unitholders and noncontrolling interest owners; and

•$5.1 million of unit repurchases.

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Debt and credit facilities. As of March 31, 2023, the carrying value of outstanding debt was $6.7 billion, we have no borrowings due within the next year, and have $1.5 billion of available borrowing capacity under WES Operating’s $2.0 billion RCF. In April 2023, we (i) completed the public offering of $750.0 million in aggregate principal amount of 6.150% Senior Notes due 2033, (ii) repaid all outstanding borrowings under the RCF with proceeds from the senior note offering, and (iii) entered into an amendment to our RCF to, among other things, extend the maturity date to April 2028 and provide for a maximum borrowing capacity up to $2.0 billion through the maturity date.
For additional information on our senior notes and the RCF, see Note 9—Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Offload commitments. During the year ended December 31, 2022, we entered into offload agreements with third parties providing firm-processing capacity through 2025. As of March 31, 2023, we have future minimum payments under offload agreements totaling $12.4 million for the remainder of 2023 and a total of $10.5 million in years thereafter.

Credit risk. We bear credit risk through exposure to non-payment or non-performance by our counterparties, including Occidental, financial institutions, customers, and other parties. Generally, non-payment or non-performance results from a customer’s inability to satisfy payables to us for services rendered, minimum-volume-commitment deficiency payments owed, or volumes owed pursuant to gas- or NGLs-imbalance agreements. We examine and monitor the creditworthiness of customers and may establish credit limits for customers. We are subject to the risk of non-payment or late payment by producers for gathering, processing, transportation, and disposal fees. Additionally, we continue to evaluate counterparty credit risk and, in certain circumstances, are exercising our rights to request adequate assurance.
We expect our exposure to the concentrated risk of non-payment or non-performance to continue for as long as our commercial relationships with Occidental generate a significant portion of our revenues. While Occidental is our contracting counterparty, gathering and processing arrangements with affiliates of Occidental on most of our systems include not just Occidental-produced volumes, but also, in some instances, the volumes of other working-interest owners of Occidental who rely on our facilities and infrastructure to bring their volumes to market. See Note 5—Related-Party Transactions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
Our ability to make cash distributions to our unitholders may be adversely impacted if Occidental becomes unable to perform under the terms of gathering, processing, transportation, and disposal agreements.

ITEMS AFFECTING THE COMPARABILITY OF FINANCIAL RESULTS WITH WES OPERATING

Our consolidated financial statements include the consolidated financial results of WES Operating. Our results of operations do not differ materially from the results of operations and cash flows of WES Operating, which are reconciled below.

Reconciliation of net income (loss). The differences between net income (loss) attributable to WES and WES Operating are reconciled as follows:
Three Months Ended
thousandsMarch 31, 2023December 31, 2022March 31, 2022
Net income (loss) attributable to WES$203,645 $336,324 $308,717 
Limited partner interest in WES Operating not held by WES (1)
4,161 6,883 6,317 
General and administrative expenses (2)
232 892 741 
Other income (expense), net(25)(27)(3)
Income taxes— 7 — 
Net income (loss) attributable to WES Operating$208,013 $344,079 $315,772 
_________________________________________________________________________________________
(1)Represents the portion of net income (loss) allocated to the limited partner interest in WES Operating not held by WES. A subsidiary of Occidental held a 2.0% limited partner interest in WES Operating for all periods presented.
(2)Represents general and administrative expenses incurred by WES separate from, and in addition to, those incurred by WES Operating.

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Reconciliation of net cash provided by (used in) operating and financing activities. The differences between net cash provided by (used in) operating and financing activities for WES and WES Operating are reconciled as follows:
Three Months Ended 
March 31,
thousands20232022
WES net cash provided by operating activities$302,424 $276,458 
General and administrative expenses (1)
232 741 
Non-cash equity-based compensation expense
(141)(131)
Changes in working capital(11,522)(6,948)
Other income (expense), net(25)(3)
WES Operating net cash provided by operating activities$290,968 $270,117 
WES net cash provided by (used in) financing activities$(297,257)$(158,591)
Distributions to WES unitholders (2)
196,569 134,749 
Distributions to WES from WES Operating (3)
(209,242)(137,412)
Increase (decrease) in outstanding checks(42)135 
Unit repurchases7,061 5,149 
Other11,950 6,085 
WES Operating net cash provided by (used in) financing activities$(290,961)$(149,885)
_________________________________________________________________________________________
(1)Represents general and administrative expenses incurred by WES separate from, and in addition to, those incurred by WES Operating.
(2)Represents distributions to WES common unitholders paid under WES’s partnership agreement. See Note 3—Partnership Distributions and Note 4—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
(3)Difference attributable to elimination in consolidation of WES Operating’s distributions on partnership interests owned by WES. See Note 3—Partnership Distributions and Note 4—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

Noncontrolling interest. WES Operating’s noncontrolling interest consists of the 25% third-party interest in Chipeta. See Note 1—Description of Business and Basis of Presentation in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

WES Operating distributions. WES Operating distributes all of its available cash on a quarterly basis to WES Operating unitholders in proportion to their share of limited partner interests in WES Operating. See Note 3—Partnership Distributions in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.

CRITICAL ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in accordance with GAAP requires management to make informed judgments and estimates that affect the amounts of assets and liabilities as of the date of the financial statements and the amounts of revenues and expenses recognized during the periods reported. There have been no significant changes to our critical accounting estimates from those disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2022.

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Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Commodity-price risk. There have been no significant changes to our commodity-price risk discussion from the disclosure set forth under Part II, Item 7A in our Form 10-K for the year ended December 31, 2022, except as noted below and in Outlook under Part I, Item 2 of this Form 10-Q.
For the three months ended March 31, 2023, 95% of our wellhead natural-gas volume (excluding equity investments) and 100% of our crude-oil and produced-water throughput (excluding equity investments) were serviced under fee-based contracts. A 10% increase or decrease in commodity prices would not have a material impact on our operating income (loss), financial condition, or cash flows for the next 12 months, excluding the effect of imbalances.

Interest-rate risk. The Federal Open Market Committee increased its target range seven times for the federal funds rate in 2022 and increased its target range twice during the three months ended March 31, 2023. Any future increases in the federal funds rate likely will result in an increase in financing costs. As of March 31, 2023, we had $495.0 million of outstanding borrowings under the RCF that bear interest at a rate based on the Secured Overnight Financing Rate (“SOFR”) or an alternative base rate at WES Operating’s option. While a 10% change in the applicable benchmark interest rate would not materially impact interest expense on our outstanding borrowings at March 31, 2023, it would impact the fair value of the senior notes.
Additional variable-rate debt may be issued in the future, either under the RCF or other financing sources, including commercial paper borrowings or debt issuances.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures. The Chief Executive Officer and Chief Financial Officer of WES’s general partner and WES Operating GP (for purposes of this Item 4, “Management”) performed an evaluation of WES’s and WES Operating’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. WES’s and WES Operating’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and to ensure that the information required to be disclosed in the reports that are filed or submitted under the Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, Management concluded that WES’s and WES Operating’s disclosure controls and procedures were effective as of March 31, 2023.

Changes in Internal Control Over Financial Reporting. There were no changes in WES’s or WES Operating’s internal control over financial reporting during the quarter ended March 31, 2023, that have materially affected, or are reasonably likely to materially affect, WES’s or WES Operating’s internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings

On July 1, 2020, the U.S. Department of Justice, on behalf of the U.S. Environmental Protection Agency (the “EPA”), and the State of Colorado commenced an enforcement action in the United States District Court for the District of Colorado against Kerr-McGee Gathering LLC (“KMG”), a wholly owned subsidiary of WES, for alleged non-compliance with the leak detection and repair requirements of the federal Clean Air Act (“LDAR requirements”) at its Fort Lupton, Platte Valley, and Lancaster facilities in the DJ Basin complex. KMG previously had been in negotiations with the EPA and the State of Colorado to resolve these allegations of non-compliance. Per the complaint, plaintiffs pray for injunctive relief, remedial action, and civil penalties. We reached an agreement with the EPA on a proposed consent decree that was filed with the court on April 20, 2023. We would expect the consent decree to become effective following a 30-day comment period. While such resolution as proposed will include an injunctive relief component and payment of a civil penalty, which exceeds the disclosure threshold amount required by Item 103 of Regulation S-K, management believes the resolution of these claims will not have a material impact on WES’s results of operations, cash flows, or financial condition.
On October 29, 2020, WGR Operating, LP (“WGR”), on behalf of itself and derivatively on behalf of Mont Belvieu JV, filed suit against Enterprise Products Operating, LLC (“Enterprise”) and Mont Belvieu JV (as a nominal defendant) in the District Court of Harris County, Texas. Our lawsuit seeks a declaratory judgment regarding proper revenue allocation as set forth in the Operating Agreement between Mont Belvieu JV (of which WGR is a 25% owner) and Enterprise (the “Operating Agreement”) related to fractionation trains at the Mont Belvieu complex in Chambers County, Texas. Specifically, the Operating Agreement sets forth a revenue allocation structure, whereby revenue would be allocated to the various fracs at the Mont Belvieu complex in sequential order, with Fracs VII and VIII (which are owned by Mont Belvieu JV) following Fracs I through VI, but preceding any “Later Frac Facilities.” Subsequent to the construction of Fracs VII and VIII, Enterprise built Fracs IX, X, and XI, which it wholly owns, and has treated such subsequent fracs as outside the Mont Belvieu revenue allocation. We do not believe Enterprise’s attempt to bypass the agreed-to revenue allocation is proper under the parties’ agreements and now seek judicial determination. We currently sue only for declaratory judgment to avoid potential future damages. We cannot make any assurances regarding the ultimate outcome of this proceeding and its resulting impact on WGR or WES.
On November 22, 2022, WGR filed suit against Enterprise Crude Oil LLC (“ECO”) in the District Court of Harris County, Texas. Our lawsuit alleges that ECO breached a contract related to the Whitethorn joint venture pursuant to which ECO must share with WGR certain of the profits and losses generated by ECO’s hydrocarbon trading activity conducted utilizing the Whitethorn pipeline. Specifically, we claim that ECO has engaged in trades knowing that the revenue to be realized would be less than the minimum floor set under the contract and has failed to allocate revenues and expenses as prescribed by the contract, resulting in improper losses to WGR. Enterprise has filed a counterclaim to our lawsuit, alleging that, between 2017 and 2019, it had mistakenly overpaid WGR approximately $12.0 million in trading profits and seeking recovery of such amount. We cannot make any assurances regarding the ultimate outcome of this proceeding and its resulting impact on WGR or WES.
Except as discussed above, we are not a party to any legal, regulatory, or administrative proceedings other than proceedings arising in the ordinary course of business. Management believes that there are no such proceedings for which a final disposition could have a material adverse effect on results of operations, cash flows, or financial condition, or for which disclosure is otherwise required by Item 103 of Regulation S-K.
    
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Item 1A.  Risk Factors

Security holders and potential investors in our securities should carefully consider the risk factors set forth under Part I, Item 1A in our Form 10-K for the year ended December 31, 2022, together with all of the other information included in this document, and in our other public filings, press releases, and public discussions with management.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The following table sets forth information with respect to repurchases made by WES of its common units in the open market or in privately negotiated transactions under the $1.25 billion Purchase Program during the first quarter of 2023:
PeriodTotal number of units purchasedAverage price paid per unit
Total number of units purchased as part of publicly announced plans or programs (1)
Approximate dollar value of units that may yet be purchased under the plans or programs (1)
January 1-31, 2023
— $— — $762,409,380 
February 1-28, 2023
— — — 762,409,380 
March 1-31, 2023
285,688 24.72 285,688 755,348,136 
Total285,688 24.72 285,688 
______________________________________________________________________________________
(1)In 2022, the Board authorized WES to buy back up to $1.25 billion of our common units through December 31, 2024. See Note 4—Equity and Partners’ Capital in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q for additional details.

Item 5.  Other Information

On May 2, 2023, Anadarko E&P Onshore LP, a subsidiary of Occidental (“AEP”), and DBM entered into an amendment (the “Gas Gathering Agreement Amendment”) to that certain Gas Gathering Agreement (“Gas Gathering Agreement”) between AEP and DBM, dated October 8, 2018, pursuant to which the parties agreed to, among other things, extend the primary term of the Gas Gathering Agreement to be through at least December 31, 2035, with the ability to extend the term up to six additional years, dependent upon concurrent extensions of AEP’s Delaware Basin gas processing contract.
The above summary of the Gas Gathering Agreement Amendment is qualified in its entirety by reference to the Gas Gathering Agreement Amendment, a copy of which will be filed with the Form 10-Q for the quarterly period ended June 30, 2023.
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Item 6.  Exhibits

Exhibits designated by an asterisk (*) are filed herewith and those designated with asterisks (**) are furnished herewith; all exhibits not so designated are incorporated herein by reference to a prior filing as indicated.

Exhibit Index
Exhibit
Number		Description
#2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
59
Exhibit
Number		Description
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
60
Exhibit
Number		Description
4.19
4.20
4.21
4.22
4.23
4.24
‡10.1
*31.1
*31.2
*31.3
*31.4
**32.1
**32.2
*101.INSXBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
*101.SCHInline XBRL Schema Document
*101.CALInline XBRL Calculation Linkbase Document
*101.DEFInline XBRL Definition Linkbase Document
*101.LABInline XBRL Label Linkbase Document
*101.PREInline XBRL Presentation Linkbase Document
*104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
______________________________________________________________________________________
#Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a copy of any omitted schedule to the Securities and Exchange Commission upon request.
‡Management contracts or compensatory plans or arrangements required to be filed pursuant to Item 15.
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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

WESTERN MIDSTREAM PARTNERS, LP
May 3, 2023
/s/ Michael P. Ure
Michael P. Ure
President and Chief Executive Officer
Western Midstream Holdings, LLC
(as general partner of Western Midstream Partners, LP)
May 3, 2023
/s/ Kristen S. Shults
Kristen S. Shults
Senior Vice President and Chief Financial Officer
Western Midstream Holdings, LLC
(as general partner of Western Midstream Partners, LP)
WESTERN MIDSTREAM OPERATING, LP
May 3, 2023
/s/ Michael P. Ure
Michael P. Ure
President and Chief Executive Officer
Western Midstream Operating GP, LLC
(as general partner of Western Midstream Operating, LP)
May 3, 2023
/s/ Kristen S. Shults
Kristen S. Shults
Senior Vice President and Chief Financial Officer
Western Midstream Operating GP, LLC
(as general partner of Western Midstream Operating, LP)
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