| Related-Party Transactions | 6. 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 Nine Months Ended thousands 2022 2021 2022 2021 Revenues and other Service revenues – fee based $ 431,944 $ 418,520 $ 1,275,474 $ 1,188,679 Service revenues – product based 24,246 1,499 48,297 9,662 Product sales 20,323 11,662 38,232 27,034 Total revenues and other 476,513 431,681 1,362,003 1,225,375 Equity income, net – related parties (1) 41,317 48,506 139,388 159,337 Operating expenses Cost of product (2) (7,771) 17,384 (39,462) 53,968 Operation and maintenance 3,231 3,497 3,874 24,534 General and administrative (3) 81 1,808 2,289 13,003 Total operating expenses (4,459) 22,689 (33,299) 91,505 _________________________________________________________________________________________ (1) See Note 7 . (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 (see Incentive Plans within this Note 6 ). Balances for the three and nine months ended September 30, 2021, also include amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ). 6. RELATED-PARTY TRANSACTIONS Consolidated balance sheets thousands September 30, December 31, Assets Accounts receivable, net $ 327,285 $ 180,205 Other current assets 18,486 12,490 Equity investments (1) 1,142,103 1,167,187 Other assets 45,544 45,494 Total assets 1,533,418 1,405,376 Liabilities Accounts and imbalance payables 65,484 49,242 Accrued liabilities 7,439 13,914 Other liabilities 253,912 207,365 Total liabilities 326,835 270,521 _________________________________________________________________________________________ (1) See Note 7 . Consolidated statements of cash flows Nine Months Ended thousands 2022 2021 Distributions from equity - investment earnings – related parties $ 139,710 $ 164,772 Capital expenditures — (2,000) Contributions to equity investments – related parties (8,899) (3,683) Distributions from equity investments in excess of cumulative earnings – related parties 41,058 30,075 Distributions to Partnership unitholders (1) (260,774) (195,205) Distributions to WES Operating unitholders (2) (20,177) (9,934) Net contributions from (distributions to) related parties 1,161 6,673 Unit repurchases from Occidental (3) (252,500) — _________________________________________________________________________________________ (1) Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5 ). (2) Represents distributions paid to Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5 ). (3) Represents common units repurchased from Occidental (see Note 5 ). 6. RELATED-PARTY TRANSACTIONS 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 Nine Months Ended thousands 2022 2021 2022 2021 General and administrative (1) $ 795 $ 2,775 $ 4,662 $ 15,061 _________________________________________________________________________________________ (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 (see Incentive Plans within this Note 6 ). Balances for the three and nine months ended September 30, 2021, also include amounts charged by Occidental pursuant to the shared services agreement (see Services Agreement within this Note 6 ). Consolidated balance sheets thousands September 30, December 31, Other current assets $ 18,473 $ 12,490 Other assets 44,899 45,494 Accounts and imbalance payables (1) 100,159 97,749 Accrued liabilities 7,122 13,597 _________________________________________________________________________________________ (1) Includes balances related to transactions between the Partnership and WES Operating. Consolidated statements of cash flows Nine Months Ended thousands 2022 2021 Distributions to WES Operating unitholders (1) $ (1,008,572) $ (496,555) _________________________________________________________________________________________ (1) Represents distributions paid to the Partnership and Occidental, through its ownership of WGRAH, pursuant to WES Operating’s partnership agreement. Includes distributions made from WES Operating to the Partnership that were used by the Partnership to repurchase common units. See Note 4 and Note 5 . 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. 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 and nine months ended September 30, 2022, respectively, and 38% and 36% for the three and nine months ended September 30, 2021, respectively. Crude - oil and NGLs throughput (excluding equity - investment throughput) attributable to production owned or controlled by Occidental was 88% for the three and nine months ended September 30, 2022, and 88% and 89% for the three and nine months ended September 30, 2021, respectively. Produced - water throughput attributable to production owned or controlled by Occidental was 75% and 80% for the three and nine months ended September 30, 2022, respectively, and 89% and 87% for the three and nine months ended September 30, 2021, respectively. 6. RELATED-PARTY TRANSACTIONS 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, the Partnership began marketing and selling substantially all of its natural gas and NGLs directly to third parties beginning on January 1, 2021. Operating leases. 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 now 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 over the remaining term of the agreements. Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership, the lessor, entered into an operating and maintenance agreement pursuant to which Occidental provided operational and maintenance services with respect to a crude - oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021. The agreement and underlying contracts included (i) fixed consideration, which was measured as the minimum - volume commitment for both gathering and treating, and (ii) variable consideration, which consisted of all volumes above the minimum - volume commitment. For the three and nine months ended September 30, 2021, the Partnership recognized fixed-lease revenue of $43.9 million and $131.9 million, respectively, and variable-lease revenue of $0.6 million and $1.9 million, respectively, related to these agreements, with such amounts included in Service revenues – fee based in the consolidated statements of operations. 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 sections above. Related - party expenses do not bear a direct relationship to related - party revenues, and third - party expenses do not bear a direct relationship to third - party revenues. 6. RELATED-PARTY TRANSACTIONS 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. Incentive Plans. General and administrative expense includes non - cash equity - based compensation expense allocated to the Partnership by Occidental for awards granted to the executive officers of the general partner and to other employees prior to their employment with the Partnership under (i) the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated, (ii) Occidental’s 2015 Long - Term Incentive Plan, and (iii) Occidental’s Phantom Share Unit Award Plan (collectively referred to as the “Incentive Plans”). General and administrative expense includes costs related to the Incentive Plans of $0.1 million and $2.3 million for the three and nine months ended September 30, 2022, respectively, and $2.3 million and $7.9 million for the three and nine months ended September 30, 2021, respectively. These amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital. Construction reimbursement agreements and purchases from 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 equipment, inventory, and other miscellaneous assets from 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. |
