WESTERN GAS PARTNERS, LP 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 2019 Form 10-K as
filed with the
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, and keep-whole 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;
• 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;
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• 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;
• conflicts of interest among us, 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
and the note receivable from Anadarko ;
• 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;
• the economic uncertainty from the worldwide outbreak of the coronavirus
("COVID-19"); 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 2019 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
On
We currently own or have investments in assets located in the
Wholly
Owned and Operated Non-Operated Equity
Operated Interests Interests Interests
Gathering systems (1) 17 2 3 2
Treating facilities 38 3 - 3
Natural-gas processing plants/trains 26 3 - 5
NGLs pipelines 2 - - 4
Natural-gas pipelines 5 - - 1
Crude-oil pipelines 3 1 - 3
(1) Includes the DBM water systems.
Significant financial and operational events during the three months ended
• We decreased our per-unit distribution to$0.31100 for the first quarter of 2020, representing a 50.0% decrease from the fourth-quarter 2019 distribution and a 49.0% decrease from the first-quarter 2019 distribution. • We commenced operations of Latham Train II at theDJ Basin complex (with capacity of 250 MMcf/d) and Loving ROTF Train III at the DBM oil system (with capacity of 30 MBbls/d) in the first quarter of 2020. 38
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• InJanuary 2020 , WES Operating completed an offering of$3.2 billion in aggregate principal amount of senior notes and$300.0 million in aggregate principal amount of floating-rate senior notes. Net proceeds from these offerings were used to repay and terminate the Term loan facility, repay outstanding amounts under the RCF, and for general partnership purposes. See Liquidity and Capital Resources within this Item 2 for additional information. • InMarch 2020 , WES Operating purchased and retired$61.4 million of its 5.375% Senior Notes due 2021 and$38.6 million of its 4.000% Senior Notes due 2022 via open-market repurchases. See Liquidity and Capital Resources within this Item 2 for additional information. • Natural-gas throughput attributable to WES totaled 4,466 MMcf/d for the three months endedMarch 31, 2020 , representing a 6% increase compared to the three months endedMarch 31, 2019 . • Crude-oil and NGLs throughput attributable to WES totaled 760 MBbls/d for the three months endedMarch 31, 2020 , representing a 28% increase compared to the three months endedMarch 31, 2019 . • Produced-water throughput attributable to WES totaled 703 MBbls/d for the three months endedMarch 31, 2020 , representing a 38% increase compared to the three months endedMarch 31, 2019 . • Operating income (loss) was$(214.9) million for the three months endedMarch 31, 2020 , which includes goodwill and long-lived asset impairments of$596.8 million , and represents a 167% decrease compared to the three months endedMarch 31, 2019 . • Adjusted gross margin for natural-gas assets (as defined under the caption Key Performance Metrics within this Item 2) averaged$1.16 per Mcf for the three months endedMarch 31, 2020 , representing a 6% increase compared to the three months endedMarch 31, 2019 . • Adjusted gross margin for crude-oil and NGLs assets (as defined under the caption Key Performance Metrics within this Item 2) averaged$2.43 per Bbl for the three months endedMarch 31, 2020 , representing a 1% decrease compared to the three months endedMarch 31, 2019 . • Adjusted gross margin for produced-water assets (as defined under the caption Key Performance Metrics within this Item 2) averaged$0.97 per Bbl for the three months endedMarch 31, 2020 , representing a 1% increase compared to the three months endedMarch 31, 2019 .
The following table provides additional information on throughput for the periods presented below:
Three Months Ended March 31,
Inc/ Inc/ Inc/
2020 2019 (Dec) 2020 2019 (Dec) 2020 2019 (Dec)
Natural gas Crude oil & NGLs Produced water
(MMcf/d) (MBbls/d) (MBbls/d)
Delaware Basin 1,389 1,178 18 % 192 145 32 % 717 518 38 %
DJ Basin 1,407 1,258 12 % 128 102 25 % - - - %
Equity investments 444 377 18 % 414 304 36 % - - - %
Other 1,392 1,562 (11 )% 41 55 (25 )% - - - %
Total throughput 4,632 4,375 6 % 775 606 28 % 717 518 38 %
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• Exchange Agreement. WGRI, the general partner, and WES entered into a
partnership interests exchange agreement (the "Exchange Agreement"),
pursuant to which WES canceled the non-economic general partner
interest in WES and simultaneously issued a 2.0% general partner
interest to the general partner in exchange for which WGRI transferred
9,060,641 WES common units to WES, which immediately canceled such
units on receipt.
• Services, Secondment, and Employee Transfer Agreement. Occidental,
Anadarko , and WES Operating GP entered into an amended and restated
Services, Secondment, and Employee Transfer Agreement (the "Services
Agreement"), pursuant to which Occidental, Anadarko , and their
subsidiaries (i) seconded certain personnel employed by Occidental to
WES Operating GP, in exchange for which WES Operating GP pays a monthly
secondment and shared services fee to Occidental equivalent to the
direct cost of the seconded employees until their transfer to WES and
(ii) agreed to continue to provide certain administrative and
operational services to WES for up to a two-year transition period. In
January 2020 , pursuant to the Services Agreement, Occidental made a
one-time cash contribution of $20.0 million to WES Operating for
anticipated transition costs required to establish stand-alone human
resources and information technology functions. The Services Agreement
also includes provisions governing the transfer of certain employees to
WES and the assumption by WES of liabilities relating to those
employees at the time of their transfer. In late March 2020 , seconded
employees' employment was transferred to WES.
• RCF amendment. WES Operating entered into an amendment to its RCF to,
among other things, (i) effective on February 14, 2020 , exercise the
final one-year extension option to extend the maturity date of the RCF
to February 14, 2025 , for the extending lenders, and (ii) modify the
change of control definition to provide, among other things, that,
subject to certain conditions, if the limited partners of WES elect to
remove the general partner as the general partner of WES in accordance
with the terms of the partnership agreement, then such removal will not
constitute a change of control under the RCF.
• Term loan facility amendment. WES Operating entered into an amendment
of its Term loan facility to, among other things, modify the change of
control definition to provide, among other things, that, subject to
certain conditions, if the limited partners of WES elect to remove the
general partner as the general partner of WES in accordance with the
terms of the partnership agreement, then such removal will not
constitute a change of control under the Term loan facility. See
Note 11-Debt and Interest Expense in the Notes to Consolidated
Financial Statements under Part I, Item 1 of this Form 10-Q for further
information.
• Termination of debt-indemnification agreements. WES Operating GP and
certain wholly owned subsidiaries of Occidental mutually terminated the
debt-indemnification agreements related to certain indebtedness
incurred by WES Operating.
• Termination of omnibus agreements. WES and WES Operating entered into
agreements with Occidental to terminate the WES and WES Operating
omnibus agreements. See Note 6-Related-Party Transactions in the Notes
to Consolidated Financial Statements under Part I, Item 1 of this Form
10-Q for further information on the WES and WES Operating omnibus
agreements.
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OUTLOOK
We expect our business to continue 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. Read Risk Factors under Part II, Item 1A of this Form 10-Q for additional information.
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
the first quarter of 2020, oil and natural-gas prices decreased significantly,
driven by the expectation of increased supply and sharp declines in demand
resulting from a worldwide macroeconomic downturn that has followed the global
outbreak of COVID-19. For example, NYMEX West Texas Intermediate crude-oil daily
settlement prices recently ranged from a high of
• With significant and increasing excess supply, domestic oil-storage
capacity may reach operational limits, causing downstream-storage
constraints and potential production curtailments that could adversely
impact revenues generated from our midstream gathering and processing
contracts. As available storage nears capacity, our customers may shut-in
field production due to their inability to access downstream-takeaway
alternatives or challenged wellhead economics.
• We have exposure to increased credit risk to the extent any of our
customers, including Occidental, is in financial distress. See Liquidity
and Capital Resources-Credit risk within this Item 2 for additional
information.
• An extended period of diminished earnings may restrict our ability to
fully access our RCF, which contains various customary covenants, certain
events of default, and a maximum consolidated leverage ratio based on
Adjusted EBITDA (as defined in the covenant) related to the trailing
twelve-month period. Further, any future waivers or amendments to the RCF
also may trigger pricing increases for available credit. See Liquidity and
Capital Resources-Debt and credit facilities within this Item 2 for
additional information.
• As of March 31, 2020 , it is reasonably possible that prolonged low
commodity prices, further commodity-price declines, and changes to
producers' drilling plans in response to lower prices could result in
future long-lived asset impairments.
To the extent producers continue with development plans in our areas of operation, we will continue to connect new wells or production facilities to our systems to maintain 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. Additionally, we will continue to evaluate 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. See Risk Factor, "The global outbreak of COVID-19 is likely to have an adverse impact on our operations and financial results." under Part II, Item 1A of this Form 10-Q for additional information.
Effects of credit-rating downgrade. Our costs of borrowing and ability to access
the capital markets are affected by market conditions and the credit ratings
assigned to WES Operating's debt by the major credit rating agencies. In
• WES Operating's annualized borrowing costs will increase by$17.5 million for the senior notes and floating-rate notes issued inJanuary 2020 that provide for increased interest rates following downgrade events. • Beginning in the second quarter of 2020, the interest rate on outstanding RCF borrowings will increase by 0.20% and the RCF facility-fee rate will increase by 0.05%, from 0.20% to 0.25%. 41
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• We may be obligated to provide financial assurance of our performance
under certain contractual arrangements requiring us to post collateral in
the form of letters of credit or cash. At March 31, 2020 , we had $6.5
million in letters of credit or cash-provided assurance of our performance
outstanding under contractual arrangements with credit-risk-related
contingent features.
Additional downgrades to WES Operating's credit ratings will further impact its borrowing costs negatively, and may adversely affect WES Operating's ability to issue public debt and effectively execute aspects of our business strategy.
First-quarter 2020 per-unit distribution reduction and revised capital guidance.
On
• A quarterly cash distribution of$0.311 per unit for the first quarter of 2020, which reflects a 50% reduction to the distribution paid for the previous quarter. • For the year endedDecember 31, 2020 , capital expenditures are expected to be$450.0 million to$550.0 million , representing a 45% reduction to prior guidance. This reduction results from deferred producer activity in all basins and the elimination of associated capital expenditures, other than those expenditures that are necessary to support proper maintenance and long-term asset integrity. • We expect to achieve other cost reductions of approximately$75.0 million through operating and maintenance and general and administrative expense cost-saving initiatives. BASIS OF PRESENTATION FOR ACQUIRED ASSETS AND RESULTS OF OPERATIONS
AMA acquisition. In
Red Bluff Express acquisition. In
Presentation of the Partnership's assets. Our assets include assets owned and
ownership interests accounted for by us under the equity method of accounting,
through our 98% partnership interest in WES Operating as of
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RESULTS OF OPERATIONS
OPERATING RESULTS
The following tables and discussion present a summary of our results of
operations:
Three Months Ended
March 31,
thousands 2020 2019
Total revenues and other (1) $ 774,313 $ 671,883
Equity income, net - related parties 61,347 57,992
Total operating expenses (1) 1,050,523 410,357
Gain (loss) on divestiture and other, net (40 ) (590 )
Operating income (loss) (214,903 ) 318,928
Interest income - related parties 4,225 4,225
Interest expense (88,586 ) (65,876 )
Gain (loss) on early extinguishment of debt 7,345 -
Other income (expense), net (1,761 ) (35,206 )
Income (loss) before income taxes (293,680 ) 222,071
Income tax (benefit) expense (4,280 ) 10,092
Net income (loss) (289,400 ) 211,979
Net income attributable to noncontrolling interests (32,873 ) 93,319
Net income (loss) attributable to Western Midstream
Partners, LP (2) $ (256,527 ) $ 118,660
Key performance metrics (3)
Adjusted gross margin $ 701,315 $ 587,694
Adjusted EBITDA 513,587 428,330
Free cash flow 214,587 (71,822 )
(1) Total revenues and other includes amounts earned from services provided to
related parties and from the sale of residue gas and NGLs to related
parties. Total operating expenses includes amounts charged by related
parties for services and reimbursements of amounts paid by related parties
to third parties on our behalf. See Note 6-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.
(3) Adjusted gross margin, Adjusted EBITDA, and Free cash flow are defined under
the caption Key Performance Metrics within this Item 2. For reconciliations
of these non-GAAP financial measures to their most directly comparable
financial measures calculated and presented in accordance with GAAP, see Key
Performance Metrics-Reconciliation of non-GAAP financial measures within
this Item 2.
For purposes of the following discussion, any increases or decreases "for the
three months ended
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Throughput
Three Months Ended
March 31,
Inc/
2020 2019 (Dec)
Throughput for natural-gas assets (MMcf/d)
Gathering, treating, and transportation 539 527 2 %
Processing 3,649 3,471 5 %
Equity investment (1) 444 377 18 %
Total throughput 4,632 4,375 6 %
Throughput attributable to noncontrolling interests (2) 166 176 (6 )%
Total throughput attributable to WES for natural-gas assets
4,466 4,199 6 %
Throughput for crude-oil and NGLs assets (MBbls/d) Gathering, treating, and transportation
361 302 20 %
Equity investment (3) 414 304 36 %
Total throughput 775 606 28 %
Throughput attributable to noncontrolling interests (2) 15 12 25 %
Total throughput attributable to WES for crude-oil and NGLs assets
760 594 28 %
Throughput for produced-water assets (MBbls/d)
Gathering and disposal 717 518 38 %
Throughput attributable to noncontrolling interests (2) 14 10 40 %
Total throughput attributable to WES for produced-water assets
703 508 38 %
(1) Represents the 14.81% share of average Fort Union throughput, 22% share of
average Rendezvous throughput, 50% share of average Mi Vida and Ranch Westex
throughput, and 30% share of average Red Bluff Express throughput.
(2) For all periods presented, includes (i) the 25% third-party interest in
Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner
interest in WES Operating, which collectively represent WES's noncontrolling
interests.
(3) Represents the 10% share of average White Cliffs throughput; 25% share of
average Mont Belvieu JV throughput; 20% share of average TEG, TEP,
Whitethorn, and Saddlehorn throughput; 33.33% share of average FRP
throughput; and 15% share of average Panola and Cactus II throughput.
Natural-gas assets
Gathering, treating, and transportation throughput increased by 12 MMcf/d for the three months endedMarch 31, 2020 , primarily due to (i) increased production in areas around the Marcellus Interest system and (ii) increased throughput on the MIGC system due to new third-party customer volumes being shipped beginning in the second quarter of 2019. These increases were partially offset by production declines in areas around the Bison facility andSpringfield gas-gathering system. Processing throughput increased by 178 MMcf/d for the three months endedMarch 31, 2020 , primarily due to (i) increased production in areas around theWest Texas andDJ Basin complexes, (ii) the start-up of Latham Train II at theDJ Basin complex in the first quarter of 2020, and (iii) the start-up ofMentone Train II at theWest Texas complex inMarch 2019 . These increases were partially offset by (i) volumes being diverted away from the Granger straddle plant beginning in the fourth quarter of 2019 resulting from changes to the product mix of a third-party customer and (ii) lower throughput at the Chipeta complex due to production declines in the area and a third-party contract that terminated in the fourth quarter of 2019. Equity-investment throughput increased by 67 MMcf/d for the three months endedMarch 31, 2020 , primarily due to increased volumes on Red Bluff Express resulting from increased production in the area, partially offset by (i) decreased volumes atFort Union due to production declines in the area and (ii) decreased volumes at the Mi Vida plant due to a decrease in third-party processed volumes. 44
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Crude-oil and NGLs assets
Gathering, treating, and transportation throughput increased by 59 MBbls/d for
the three months ended
Produced-water assets
Gathering and disposal throughput increased by 199 MBbls/d for the three months
ended
Service Revenues
Three Months Ended
March 31 ,
Inc/
thousands except percentages 2020 2019 (Dec)
Service revenues - fee based
Total service revenues$ 717,317 $ 599,353 20 % Service revenues - fee based
Service revenues - fee based increased by
Service revenues - product based
Service revenues - product based decreased by
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Product Sales
Three Months Ended
March 31,
thousands except percentages and Inc/
per-unit amounts 2020 2019 (Dec)
Natural-gas sales $ 10,539 $ 27,324 (61 )%
NGLs sales 46,110 44,809 3 %
Total Product sales $ 56,649 $ 72,133 (21 )%
Per-unit gross average sales price:
Natural gas (per Mcf) $ 1.30 $ 2.34 (44 )%
NGLs (per Bbl) 15.45 25.54 (40 )%
Natural-gas sales
Natural-gas sales decreased by
NGLs sales
NGLs sales increased by
Equity Income, Net - Related Parties
Three Months Ended
March 31,
Inc/
thousands except percentages 2020 2019 (Dec)
Equity income, net - related parties
Equity income, net - related parties increased by
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Cost of Product and Operation and Maintenance Expenses
Three Months Ended
March 31,
Inc/
thousands except percentages 2020 2019 (Dec)
NGLs purchases $ 83,789 $ 79,819 5 %
Residue purchases 21,219 33,640 (37 )%
Other (1,738 ) 604 NM
Cost of product 103,270 114,063 (9 )%
Operation and maintenance 159,191 142,829 11 %
Total Cost of product and Operation and maintenance
expenses $ 262,461 $ 256,892 2 %
NM-Not Meaningful
NGLs purchases
NGLs purchases increased by
Residue purchases
Residue purchases decreased by
Other items
Other items decreased by
Operation and maintenance expense
Operation and maintenance expense increased by
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Other Operating Expenses
Three Months Ended
March 31 ,
Inc/
thousands except percentages 2020 2019 (Dec)
General and administrative
18,476 16,285 13 %
Depreciation and amortization 132,319 113,946 16 % Long-lived asset impairments 155,785 390 NM Goodwill impairment
441,017 - NM
Total other operating expenses
General and administrative expenses
General and administrative expenses increased by
Property and other taxes
Property and other taxes increased by
Depreciation and amortization expense
Depreciation and amortization expense increased by
Long-lived asset impairment expense
Long-lived asset impairment expense for the three months ended
During the three months ended
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Interest Income - Related Parties and Interest Expense
Three Months Ended
March 31,
Inc/
thousands except percentages 2020 2019 (Dec)
Note receivable - Anadarko $ 4,225 $ 4,225 - %
Interest income - related parties $ 4,225 $ 4,225 - %
Third parties
Long-term debt $ (89,769 ) $ (67,096 ) 34 %
Finance lease liabilities (405 ) - NM
Amortization of debt issuance costs and commitment fees (3,127 ) (3,152 ) (1 )%
Capitalized interest 4,758 6,205 (23 )%
Related parties
APCWH Note Payable - (1,833 ) (100 )%
Finance lease liabilities (43 ) - NM
Interest expense $ (88,586 ) $ (65,876 ) 34 %
Interest expense increased by
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Other Income (Expense), Net
Three Months Ended
March 31,
Inc/
thousands except percentages 2020 2019 (Dec)
Other income (expense), net $ (1,761 ) $ (35,206 ) 95 %
Other income (expense), net increased by
Income Tax (Benefit) Expense
Three Months Ended
March 31,
Inc/
thousands except percentages 2020 2019 (Dec)
Income (loss) before income taxes $ (293,680 ) $ 222,071 NM
Income tax (benefit) expense (4,280 ) 10,092 (142 )%
Effective tax rate 1 % 5 %
We are not a taxable entity for
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KEY PERFORMANCE METRICS
Three Months Ended
March 31 ,
Inc/thousands except percentages and per-unit amounts 2020 2019 (Dec) Adjusted gross margin for natural-gas assets
$ 471,366 $ 412,428 14 %
Adjusted gross margin for crude-oil and NGLs assets 167,828 131,370 28 % Adjusted gross margin for produced-water assets
62,121 43,896 42 %
Adjusted gross margin (1) (2) 701,315 587,694 19 %
Per-Mcf Adjusted gross margin for natural-gas assets (3)
1.16 1.09 6 %
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets (4)
2.43 2.46 (1 )%
Per-Bbl Adjusted gross margin for produced-water
assets (5) 0.97 0.96 1 %
Adjusted EBITDA (2) 513,587 428,330 20 %
Free cash flow (2) 214,587 (71,822 ) NM
(1) Adjusted gross margin is calculated as total revenues and other (less
reimbursements for electricity-related expenses recorded as revenue), less
cost of product, plus distributions from our equity investments, and
excluding the noncontrolling interests owners' proportionate share of
revenues and cost of product.
(2) For a reconciliation of Adjusted gross margin, Adjusted EBITDA, and Free
cash flow to the most directly comparable financial measure calculated and
presented in accordance with GAAP, see the below descriptions.
(3) Average for period. Calculated as Adjusted gross margin for natural-gas
assets, divided by total throughput (MMcf/d) attributable to WES for
natural-gas assets.
(4) Average for period. Calculated as Adjusted gross margin for crude-oil and
NGLs assets, divided by total throughput (MBbls/d) attributable to WES for
crude-oil and NGLs assets.
(5) Average for period. Calculated as Adjusted gross margin for produced-water
assets, divided by total throughput (MBbls/d) attributable to WES for
produced-water assets.
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 interests 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. To facilitate investor and industry analyst comparisons
between us and our peers, 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.
Adjusted gross margin increased by $113.6 million for the three months ended
March 31, 2020 , primarily due to (i) increased throughput at the West Texas
complex and the DBM oil system, and (ii) increased throughput and higher average
fees at the DJ Basin complex, DBM water systems, and DJ Basin oil system. These
increases were partially offset by a decrease in distributions from Whitethorn
LLC related to commercial activities.
Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.07 for the
three months ended March 31, 2020 , 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.
Per-Bbl Adjusted gross margin for crude-oil and NGLs assets decreased by $0.03
for the three months ended March 31, 2020 , primarily due to a decrease in
distributions from Whitethorn LLC related to commercial activities, partially
offset by (i) increased throughput and higher average gathering and processing
fees at the DJ Basin oil system and (ii) revenue related to a new lease
agreement with Occidental effective December 31, 2019 , at the DBM oil system.
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Adjusted EBITDA. We define Adjusted EBITDA attributable to
• 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.
Adjusted EBITDA increased by
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. In prior periods, management considered "Distributable cash flow,"
defined as Adjusted EBITDA, plus (i) interest income and (ii) the net settlement
amounts from the sale and/or purchase of natural gas, condensate, and NGLs under
WES Operating's commodity-price swap agreements to the extent such amounts were
not recognized as Adjusted EBITDA, less (i) Service revenues - fee based
recognized in Adjusted EBITDA in excess of (less than) customer billings, (ii)
net cash paid (or to be paid) for interest expense (including amortization of
deferred debt issuance costs originally paid in cash and offset by non-cash
capitalized interest), (iii) maintenance capital expenditures, (iv) income
taxes, and (v) Distributable cash flow attributable to noncontrolling interests
to the extent such amounts are not excluded from Adjusted EBITDA, as a viable
performance-measurement and distribution-assessment tool. Although management
continues to recognize Distributable cash flow as a useful metric for purposes
of comparing our operating and financial performance against that of its peers,
management considers Free cash flow as a superior and improved
performance-measurement tool in light of an ongoing transition within the
midstream industry that has shifted investor focus from distribution-growth to
capital discipline, cost efficiency, and balance-sheet strength. Henceforth,
Free cash flow will be the metric that we use to assess our ability to make
distributions to our unitholders; however, 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.
Free cash flow increased by
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Reconciliation of non-GAAP financial measures. Adjusted gross margin, Adjusted EBITDA, and Free cash flow are not defined in GAAP. The GAAP measure used by us that is most directly comparable to Adjusted gross margin is operating income (loss). Net income (loss) and net cash provided by operating activities are the GAAP measures used by us that are most directly comparable to Adjusted EBITDA. The GAAP measure used by us 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 operating income (loss), 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 operating income (loss), 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) operating income (loss), 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 (a) a reconciliation of the GAAP financial measure of operating income (loss) to the non-GAAP financial measure of Adjusted gross margin, (b) 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 (c) 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
March 31,
thousands 2020 2019
Reconciliation of Operating income (loss) to Adjusted gross margin Operating income (loss)
$ (214,903 ) $ 318,928
Add:
Distributions from equity investments 65,920 62,013 Operation and maintenance 159,191 142,829 General and administrative 40,465 22,844 Property and other taxes 18,476 16,285 Depreciation and amortization 132,319 113,946 Impairments (1) 596,802 390
Less:
Gain (loss) on divestiture and other, net (40 ) (590 ) Equity income, net - related parties 61,347 57,992
Reimbursed electricity-related charges recorded as revenues 19,223 16,589 Adjusted gross margin attributable to noncontrolling interests (2)
16,425 15,550
Adjusted gross margin $ 701,315 $ 587,694
Adjusted gross margin for natural-gas assets $ 471,366 $ 412,428
Adjusted gross margin for crude-oil and NGLs assets 167,828 131,370
Adjusted gross margin for produced-water assets 62,121 43,896
(1) Includes goodwill impairment for the three months ended March 31, 2020 . See
Note 9-Goodwill in the Notes to Consolidated Financial Statements under
Part I, Item 1 of this Form 10-Q.
(2) For all periods presented, includes (i) the 25% third-party interest in
Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner
interest in WES Operating, which collectively represent WES's noncontrolling
interests.
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Three Months Ended
March 31,
thousands 2020 2019Reconciliation of Net income (loss) to Adjusted EBITDA Net income (loss)
$ (289,400 ) $ 211,979
Add:
Distributions from equity investments 65,920 62,013 Non-cash equity-based compensation expense 5,234 1,798 Interest expense 88,586 65,876 Income tax expense - 10,092 Depreciation and amortization 132,319 113,946 Impairments (1) 596,802 390 Other expense 4,048 35,213
Less:
Gain (loss) on divestiture and other, net (40 ) (590 ) Gain (loss) on early extinguishment of debt 7,345 - Equity income, net - related parties 61,347 57,992 Interest income - related parties 4,225 4,225 Income tax benefit 4,280 - Adjusted EBITDA attributable to noncontrolling interests (2) 12,765 11,350 Adjusted EBITDA$ 513,587 $ 428,330
Reconciliation of Net cash provided by operating activities to Adjusted EBITDA Net cash provided by operating activities
$ 393,311 $ 343,073 Interest (income) expense, net 84,361 61,651 Uncontributed cash-based compensation awards - (570 ) Accretion and amortization of long-term obligations, net (2,100 ) (1,511 ) Current income tax (benefit) expense (2,112 ) 6,027 Other (income) expense, net (3) 1,761 (432 )
Distributions from equity investments in excess of cumulative earnings - related parties
5,052 7,792
Changes in assets and liabilities:
Accounts receivable, net (7,702 ) (9,486 )
Accounts and imbalance payables and accrued liabilities, net 28,924 55,529
Other items, net 24,857 (22,393 )
Adjusted EBITDA attributable to noncontrolling interests (2) (12,765 ) (11,350 ) Adjusted EBITDA
$ 513,587 $ 428,330 Cash flow information Net cash provided by operating activities$ 393,311 $ 343,073 Net cash used in investing activities (178,724 ) (2,515,732 ) Net cash provided by (used in) financing activities (162,267 ) 2,180,564
(1) Includes goodwill impairment for the three months ended
Note 9-
Part I, Item 1 of this Form 10-Q.
(2) For all periods presented, includes (i) the 25% third-party interest in
Chipeta and (ii) the 2.0% Occidental subsidiary-owned limited partner
interest in WES Operating, which collectively represent WES's noncontrolling
interests.
(3) Excludes the non-cash loss on interest-rate swaps of
three months ended March 31, 2019 . See Note 11-Debt and Interest Expense in
the Notes to Consolidated Financial Statements under Part I, Item 1 of this
Form 10-Q.
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Three Months Ended
March 31,
thousands 2020 2019Reconciliation of Net cash provided by operating activities to Free cash flow Net cash provided by operating activities
$ 393,311 $ 343,073
Less:
Capital expenditures 172,816 386,144 Contributions to equity investments 10,960 36,543
Add:
Distributions from equity investments in excess of cumulative earnings
5,052 7,792
Free cash flow $ 214,587 $ (71,822 )
Cash flow information
Net cash provided by operating activities $ 393,311 $ 343,073
Net cash used in investing activities (178,724 ) (2,515,732 )
Net cash provided by (used in) financing activities (162,267 ) 2,180,564
LIQUIDITY AND CAPITAL RESOURCES
Our primary cash requirements are for capital expenditures, debt service,
customary operating expenses, quarterly distributions, and distributions to our
noncontrolling interest owners. Our sources of liquidity as of March 31, 2020 ,
included cash and cash equivalents, cash flows generated from operations,
interest income on our Anadarko note receivable, 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 requirements. The amount of future distributions to
unitholders will depend on our results of operations, financial condition,
capital requirements, and other factors, and will be determined by the Board of
Directors on a quarterly basis. Due to our cash distribution policy, we may rely
on external financing sources, including equity and debt issuances, to fund
capital expenditures and future acquisitions. However, we also may use operating
cash flows to fund capital expenditures or acquisitions, which could result in
borrowings under the RCF to pay distributions or to fund other short-term
working capital requirements.
Our partnership agreement requires that we distribute all of our available cash
(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 completely 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. We have made cash distributions to our unitholders each quarter since
our IPO in 2012. The Board of Directors declared a cash distribution to
unitholders for the first quarter of 2020 of $0.31100 per unit, or $140.9
million in the aggregate. The cash distribution is payable on May 14, 2020 , to
our unitholders of record at the close of business on May 1, 2020 . See Outlook
within this Item 2.
Management continuously monitors our leverage position and coordinates our
capital expenditures and quarterly distributions strategy with expected cash
inflows and projected debt-repayments. We will continue to evaluate funding
alternatives, including additional borrowings and the issuance of debt or equity
securities, to secure funds as needed or to refinance maturing debt balances
with longer-term debt issuances. 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. As of
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Capital expenditures. Our business is capital intensive, requiring significant investment to maintain and improve existing facilities or to develop new midstream infrastructure. Capital expenditures includes maintenance capital expenditures, which include those expenditures required to maintain existing operating capacity and service capability of our assets, such as to replace system components and equipment that have been subject to significant use over time, become obsolete or reached the end of their useful lives, to remain in compliance with regulatory or legal requirements, or to complete additional well connections to maintain existing system throughput and related cash flows; and expansion capital expenditures, which include expenditures to construct new midstream infrastructure and expenditures incurred to extend the useful lives of our assets, reduce costs, increase revenues, or increase system throughput or capacity from current levels, including well connections that increase existing system throughput. 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. Acquisitions and capital expenditures as presented in the consolidated statements of cash flows and capital incurred were as follows:
Three Months Ended
March 31,
thousands 2020 2019
Acquisitions $ - $ 2,100,804 Capital expenditures (1)
Capital incurred (1)
(1) For the three months endedMarch 31, 2020 and 2019, included$4.8 million and$4.7 million , respectively, of capitalized interest.
Acquisitions during 2019 included AMA and the 30% interest in Red Bluff Express.
See Note 3-Acquisitions and Divestitures in the Notes to Consolidated Financial
Statements under Part I, Item 1 of this Form 10-Q.
Capital expenditures, excluding acquisitions, decreased by
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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 activities, investing activities and financing activities:
Three Months Ended
March 31,
thousands 2020 2019
Net cash provided by (used in):
Operating activities $ 393,311 $ 343,073
Investing activities (178,724 ) (2,515,732 )
Financing activities (162,267 ) 2,180,564
Net increase (decrease) in cash and cash equivalents
Operating Activities. Net cash provided by operating activities increased for
the three months ended
Investing Activities. Net cash used in investing activities for the three months
ended
•
and expansion at the West Texas and DJ Basin complexes, DBM water systems,
and DBM oil system;
•
for construction activities; and
•
cumulative earnings.
Net cash used in investing activities for the three months ended
•
•$386.1 million of capital expenditures, primarily related to construction and expansion at the DBM oil and DBM water systems and theWest Texas andDJ Basin complexes; •$92.5 million of cash paid for the acquisition of our interest inRed Bluff Express; •$36.5 million of capital contributions paid to Cactus II,Red Bluff Express, the TEFR Interests,Whitethorn LLC , and White Cliffs for construction activities; and •$7.8 million of distributions received from equity investments in excess of cumulative earnings.
Financing Activities. Net cash provided by financing activities for the three
months ended
•$3.0 billion of repayments of outstanding borrowings under the Term loan facility;
•
•
•$90.1 million to purchase and retire portions of WES Operating's 5.375% Senior Notes due 2021 and 4.000% Senior Notes due 2022 via open-market repurchases; •$5.8 million of distributions paid to the noncontrolling interest owners of WES Operating; 57
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•$3.5 billion of net proceeds from the Senior Notes and Floating-Rate Notes issued inJanuary 2020 , which were used to repay the$3.0 billion outstanding borrowings under the Term loan facility, repay outstanding amounts under the RCF, and for general partnership purposes; •$125.0 million of borrowings under the RCF, which were used for general partnership purposes, including the funding of capital expenditures; and •$20.0 million of a one-time cash contribution from Occidental received inJanuary 2020 , pursuant to the Services Agreement, for anticipated transition costs required to establish stand-alone human resources and information technology functions.
Net cash provided by financing activities for the three months ended
•
costs, which were used to fund the acquisition of AMA and to repay the
APCWH Note Payable;
•
intercompany transactions attributable to the acquisition of AMA;
•
partnership purposes, including the funding of capital expenditures;
•
to fund the construction of the DBM water systems;
•
above-market component of swap agreements;
•
APCWH Note Payable;
•
•$101.0 million of distributions paid to the noncontrolling interest owners of WES Operating; •$28.0 million of repayments of the total outstanding balance under the WGP RCF, which matured inMarch 2019 ; and •$1.9 million of distributions paid to the noncontrolling interest owner of Chipeta. 58
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Debt and credit facilities. As of
WES Operating Senior Notes. InJanuary 2020 , WES Operating issued the following notes: • 3.100% Senior Notes due 2025, 4.050% Senior Notes due 2030, and 5.250% Senior Notes due 2050, offered to the public at prices of 99.962%, 99.900%, and 99.442%, respectively, of the face amount (collectively referred to as the "Senior Notes"). Including the effects of the issuance and underwriting discounts, the effective interest rates of the Senior Notes due 2025, 2030, and 2050, are 3.287%, 4.168%, and 5.362%, respectively. Interest is paid on each such series semi-annually onFebruary 1 andAugust 1 of each year, beginningAugust 1, 2020 ; and • Floating-Rate Senior Notes due 2023 (the "Floating-Rate Notes"). As ofMarch 31, 2020 , the interest rate on the Floating-Rate Notes was 2.69%. Interest is paid quarterly in arrears onJanuary 13 ,April 13 ,July 13 , andOctober 13 of each year, beginningApril 13, 2020 . Interest will accrue fromJanuary 13, 2020 at a benchmark rate (which will initially be a three-month LIBOR rate) on the interest determination date plus 0.85%. Net proceeds from the Senior Notes and Floating-Rate Notes were used to repay the$3.0 billion outstanding borrowings under the Term loan facility and outstanding amounts under the RCF, and for general partnership purposes. The interest payable on each of the Senior Notes and Floating-Rate Notes are subject to adjustment from time to time if the credit rating assigned to such notes declines below certain specified levels or if credit-rating downgrades are subsequently followed by credit-rating upgrades. As a result of credit-rating downgrades received from Fitch and S&P, the annualized borrowing costs will increase by$17.5 million . See Outlook within this Item 2. During the first quarter of 2020, WES Operating purchased and retired$61.4 million of the 5.375% Senior Notes due 2021 and$38.6 million of the 4.000% Senior Notes due 2022 via open-market repurchases. For the three months endedMarch 31, 2020 , a gain of$9.6 million was recognized for the early retirement of these notes. AtMarch 31, 2020 , WES Operating was in compliance with all covenants under the relevant governing indentures. We may, from time to time, seek to retire, rearrange, or amend some or all of our outstanding debt or debt 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. The amounts involved may be material.
WGP RCF. The WGP RCF, which previously was available to purchase WES Operating
common units and for general partnership purposes, matured in
Revolving credit facility. In
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The RCF contains certain covenants that limit, among other things, WES Operating's ability, and that of certain of its subsidiaries, to incur additional indebtedness, grant certain liens, merge, consolidate, or allow any material change in the character of its business, enter into certain related-party transactions and use proceeds other than for partnership purposes. The RCF also contains various customary covenants, certain events of default, and a maximum consolidated leverage ratio as of the end of each fiscal quarter (which is defined as the ratio of consolidated indebtedness as of the last day of a fiscal quarter to Consolidated Earnings Before Interest, Taxes, Depreciation, and Amortization for the most-recent four-consecutive fiscal quarters ending on such day) of 5.0 to 1.0, or a consolidated leverage ratio of 5.5 to 1.0 with respect to quarters ending in the 270-day period immediately following certain acquisitions. As a result of certain covenants contained in the RCF, our capacity to borrow under the RCF may be limited. See Outlook within this Item 2.
Term loan facility. In
Finance lease liabilities. The Partnership has subleased equipment from
Occidental via finance leases extending through
APCWH Note Payable. In
Interest-rate swaps. In
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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-imbalance agreements. We examine and monitor the
creditworthiness of customers and may establish credit limits for customers. A
substantial portion of our throughput is sourced from producers, including
Occidental, that recently received credit-rating downgrades. We are subject to
the risk of non-payment or late payment by producers for gathering, processing,
transportation, and disposal fees. We also depend on Occidental to remit
payments to us for the value of volumes of residue gas, NGLs, crude oil, and
condensate that it markets on our behalf under our Marketing Transition Services
Agreement. Additionally, we are evaluating counterparty credit risk and, in
certain circumstances, are exercising our rights to request adequate assurance.
We expect our exposure to 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. Additionally, we are exposed to credit risk
on our
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) attributable to WES to net income (loss) attributable to WES Operating. The differences between net income (loss) attributable to WES and net income (loss) attributable to WES Operating are reconciled as follows:
Three Months Ended
March 31,
thousands 2020 2019
Net income (loss) attributable to WES $ (256,527 ) $ 118,660 Limited partner interests in WES Operating not held by WES (1) (5,208 ) 91,465 General and administrative expenses (2)
1,407 2,284
Other income (expense), net (2 ) (58 )
Interest expense - 245
Net income (loss) attributable to WES Operating $ (260,330 ) $ 212,596 (1) Represents the portion of net income (loss) allocated to the limited partner
interests in WES Operating not held by WES. A subsidiary of Occidental held
a 2.0% limited partner interest in WES Operating as of March 31, 2020 and
2019. Immediately prior to the Merger closing, the WES Operating IDRs and
the general partner units were converted into a non-economic general partner
interest in WES Operating and WES Operating common units, and at Merger
completion, all WES Operating common units held by the public and
subsidiaries of Anadarko (other than common units held by WES, WES Operating
GP, and 6.4 million common units held by a subsidiary of Anadarko ) were
converted into WES common units. 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.
(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,
thousands 2020 2019
WES net cash provided by operating activities $ 393,311 $ 343,073
General and administrative expenses (1) 1,407 2,284
Non-cash equity-based compensation expense (1,129 ) (252 )
Changes in working capital 763 (1,229 )
Other income (expense), net (2 ) (58 )
Interest expense - 245
Debt related amortization and other items, net - (21 )
WES Operating net cash provided by operating activities $ 394,350 $ 344,042
WES net cash provided by (used in) financing activities $ (162,267 ) $ 2,180,564
Distributions to WES unitholders (2) 281,786 131,910
Distributions to WES from WES Operating (3) (284,507 ) (162,359 )
Registration expenses related to the issuance of WES common units - 855
WGP RCF repayments - 28,000
WES Operating net cash provided by (used in) financing activities
(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 4-Partnership Distributions and
Note 5-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 4-Partnership
Distributions and Note 5-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 for further information).
WES Operating distributions. WES Operating distributes all of its available cash
(as defined in its partnership agreement) to WES Operating unitholders of record
on the applicable record date within 45 days following each quarter's end. For
the quarters ended
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CONTRACTUAL OBLIGATIONS
Our contractual obligations include, among other things, a revolving credit
facility, other third-party long-term debt, capital obligations related to
expansion projects, and various operating and finance leases. Refer to
Note 11-Debt and Interest Expense and Note 12-Commitments and Contingencies in
the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form
10-Q for an update to contractual obligations as of
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements other than short-term operating leases and standby letters of credit. We have entered into short-term operating leases for vehicles and equipment with third parties as lessor. For information on standby letters of credit, see Note 11-Debt and Interest Expense in the Notes to Consolidated Financial Statements under Part I, Item 1 of this Form 10-Q.
RECENT ACCOUNTING DEVELOPMENTS
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.
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