Acquisitions and Divestitures

12 Months Ended

Dec. 31, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisitions and Divestitures

3. ACQUISITIONS AND DIVESTITURES

Marcellus Interest systems. During the second quarter of 2024, the Partnership closed on the sale of its 33.75% interest in the Marcellus Interest systems for proceeds of $206.2 million, resulting in a net gain on sale of $63.9 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statement of operations.

Mont Belvieu JV, Whitethorn LLC, Panola, and Saddlehorn. During the first quarter of 2024, the Partnership closed on the sale of the following equity investments to third parties: (i) the 25.00% interest in Enterprise EF78 LLC (the “Mont Belvieu JV”), (ii) the 20.00% interest in Whitethorn Pipeline Company LLC (“Whitethorn LLC”), (iii) the 15.00% interest in Panola Pipeline Company, LLC (“Panola”), and (iv) the 20.00% interest in Saddlehorn Pipeline Company, LLC (“Saddlehorn”). The combined proceeds received in the first quarter of 2024 of $588.6 million includes $5.9 million in pro-rata distributions through closing, resulting in a net gain on sale of $239.7 million that was recorded as Gain (loss) on divestiture and other, net in the consolidated statement of operations.

Meritage. On October 13, 2023, the Partnership closed on the acquisition of Meritage Midstream Services II, LLC (“Meritage”) for $885.0 million (subject to certain customary post-closing adjustments) funded with cash, including proceeds from the Partnership’s $600.0 million senior note issuance in September 2023 (see Note 13) and borrowings on the senior unsecured revolving credit facility (“RCF”). The cash purchase price, adjusted for working capital and certain customary post-closing adjustments and reduced by the $38.4 million of cash acquired (as presented in the table below), was $878.2 million.

The assets acquired, located in Converse, Campbell, and Johnson counties, Wyoming, include approximately 1,500 miles of high- and low-pressure natural-gas gathering pipelines, approximately 380 MMcf/d of natural-gas processing capacity, and the Thunder Creek NGL pipeline, which is a 120 mile, 38 MBbls/d FERC-regulated NGLs pipeline that connects to the processing facility. The acquisition expands the Partnership’s existing Powder River Basin asset base, increasing total natural-gas processing capacity in that region to 440 MMcf/d.

The Meritage acquisition has been accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed in the Meritage acquisition were recorded in the consolidated balance sheet at their estimated fair values as of the acquisition date. Results of operations attributable to the Meritage acquisition were included in the Partnership’s consolidated statements of operations beginning on the acquisition date in the fourth quarter of 2023. For the year ended December 31, 2023, acquisition-related transaction costs of $6.1 million, consisting primarily of third-party consulting and legal fees, are included in General and administrative expenses in the consolidated statements of operations.

3. ACQUISITIONS AND DIVESTITURES

The following is the final acquisition-date fair value for the assets acquired and liabilities assumed in the Meritage acquisition on October 13, 2023.

thousands
Assets acquired:
Cash and cash equivalents	$	38,412
Accounts receivable, net	34,060
Other current assets	1,980
Property, plant, and equipment	926,347
Other assets	6,498
Total assets acquired	1,007,297
Liabilities assumed:
Accounts payable and accrued liabilities	34,733
Other current liabilities	5,451
Asset retirement obligation	22,156
Other liabilities	28,356
Total liabilities assumed	90,696
Net assets acquired	$	916,601

The acquisition-date fair values are based on an assessment of the fair value of the assets acquired and liabilities assumed in the Meritage acquisition using inputs that are not observable in the market and thus represent Level 3 inputs. The fair values of the processing plants, gathering system, and related facilities and equipment are based on market and cost approaches.

The following table presents pro forma condensed financial information of the Partnership as if the Meritage acquisition had occurred on January 1, 2022:

	Year Ended December 31,
thousands	2023		2022
Revenues and other	$	3,239,035	$	3,408,767
Net income (loss) attributable to Western Midstream Partners, LP	1,003,204		1,213,106

The following table presents pro forma condensed financial information of WES Operating (which are included in the Partnership’s pro forma condensed financial information) as if the Meritage acquisition had occurred on January 1, 2022:

	Year Ended December 31,
thousands	2023		2022
Revenues and other	$	3,239,035	$	3,408,767
Net income (loss) attributable to Western Midstream Operating, LP	1,026,800		1,240,623

3. ACQUISITIONS AND DIVESTITURES

The pro forma information is presented for illustration purposes only and is not necessarily indicative of the operating results that would have occurred had the Meritage acquisition been completed at the assumed date, nor is it necessarily indicative of future operating results of the combined entity. The pro forma adjustments reflect pre-acquisition results of the Meritage acquisition including (i) adjustments of $105.0 million and $221.6 million for the years ended December 31, 2023 and 2022, respectively, to decrease revenues and cost of product to apply the Partnership’s revenue recognition policy to record revenue and cost of product on a net basis within revenues for certain contracts; (ii) adjustments of $5.0 million and $2.1 million for the years ended December 31, 2023 and 2022, respectively, to decrease depreciation and amortization expense based on the acquisition-date fair value of property, plant, and equipment and estimated useful lives; and (iii) adjustments of $1.8 million to decrease interest expense and $20.9 million to increase interest expense for the years ended December 31, 2023 and 2022, respectively, related to the $600.0 million senior note issuance in September 2023 and borrowings on the RCF to finance the Meritage acquisition. The pro forma adjustments include estimates and assumptions based on currently available information. Management believes the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected. The pro forma information reflects recurring adjustments, but does not reflect any cost savings or other synergies anticipated as a result of the Meritage acquisition, nor any future acquisition-related expenses.

The pro forma information in the table above includes $41.4 million of revenues and $24.6 million of operating expenses attributable to the assets acquired as part of the Meritage acquisition that are included in the Partnership’s and WES Operating’s consolidated statements of operations for the year ended December 31, 2023.

Cactus II. In November 2022, the Partnership sold its 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, the Partnership acquired the remaining 50% interest in Ranch Westex JV LLC (“Ranch Westex”) from a third party for $40.1 million. Subsequent to the acquisition, (i) the Partnership is 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.