Equity-Based Compensation

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

15. EQUITY-BASED COMPENSATION

The general partner has the authority to grant equity compensation awards to its outside directors, executive officers, and employees under the Western Gas Partners, LP 2017 Long-Term Incentive Plan (the “2017 LTIP”) and the Western Midstream Partners, LP 2021 Long-Term Incentive Plan (the “2021 LTIP”). These plans are collectively referred to as the “WES LTIPs.” The 2017 LTIP and the 2021 LTIP permit the issuance of up to 3,431,251 and 9,500,000 units, respectively, of which 322,228 and 8,385,682 units, respectively, remained available for future issuance as of December 31, 2024. The Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan expired during the year ended December 31, 2022.

On March 22, 2021, the Board approved the 2021 LTIP. Subject to the capitalization adjustment provisions included in the 2021 LTIP, the total aggregate number of common units that may be delivered with respect to awards under the 2021 LTIP is 9,500,000 (the “2021 LTIP Limit”). Common units withheld from an award or surrendered by a participant to satisfy tax withholding obligations or to satisfy the payment of any exercise price with respect to an award will not be considered to be common units delivered under the 2021 LTIP for purposes of the 2021 LTIP Limit. If any award is forfeited, canceled, exercised, settled in cash, or otherwise terminates or expires without the actual delivery of common units, the common units subject to such award will again be available for awards under the 2021 LTIP. The 2021 LTIP provides for the grant of unit options, unit appreciation rights, restricted units, phantom units, other unit-based awards, cash awards, and a unit award or a substitute award to employees and directors of the Partnership and its general partner.

The Board awards phantom units (the “Awards”) to certain members of the leadership team of the Partnership under the WES LTIPs. The Awards include (i) an award of time-vested phantom units that vest ratably over a period of three years (“Time-Based Awards”), (ii) a market-based award that vests after a performance period of three years based on the Partnership’s relative total unitholder return as compared to a group of peer companies (“TUR Awards”), and (iii) a performance award that vests based on the Partnership’s average return on assets over a performance period of three years (“ROA Awards”). At vesting, the number of vested units for the TUR Awards and the ROA Awards will be determined in accordance with the terms of the respective award agreements that provide for payout percentages ranging from 0% to 200% based on results achieved over the applicable performance period. At vesting, the Awards generally will be settled in Partnership common units. Prior to vesting, the Awards granted in 2020 paid in-kind distributions in the form of Partnership common units. During the years ended December 31, 2023, and 2022, the Partnership issued 3,253 and 13,754 common units, respectively, as in-kind distributions under such Awards. Prior to vesting, the Time-Based Awards granted after 2020 pay distribution equivalents in cash ratably. The TUR and ROA Awards granted after 2020 pay cash distributions at vesting based on actual performance.

In addition, time-vested phantom units may be awarded under the WES LTIPs to non-executive employees and outside directors of the Partnership, which vest ratably over a period of three years and one year from the grant date, respectively. Prior to vesting, the awards to non-executive employees and outside directors pay distribution equivalents in cash.

The equity-based compensation expense attributable to these awards is amortized over the vesting periods applicable to the awards using the straight-line method. Expense is recognized based on the grant-date fair value and recorded, net of actual forfeitures, as General and administrative expense in the consolidated statements of operations. The fair value of the Time-Based Awards and non-executive awards is based on the observable market price of the Partnership’s units on the grant date of the award. The fair value of the TUR Awards is determined using a Monte Carlo simulation at the grant date of the award. The fair value of the ROA Awards is based on the observable market price of the Partnership’s units on the grant date of the award and compensation expense is adjusted quarterly based on the estimated performance rating at vesting. The total fair value of phantom units vested was $38.2 million, $23.4 million, and $21.7 million for the years ended December 31, 2024, 2023, and 2022, respectively, based on the market price at the vesting date. Compensation expense for the WES LTIPs was $38.0 million, $32.0 million, and $25.5 million for the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024, the Partnership had $49.7 million of estimated unrecognized compensation expense attributable to the WES LTIPs that will be recognized over a weighted-average period of 1.1 years.

15. EQUITY-BASED COMPENSATION

The following table summarizes time-vested award activity under the WES LTIPs:


	2024			2023			2022
	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units
Non-vested units at beginning of year	$	26.24	1,736,702	$	21.33	1,689,030	$	16.97	1,775,672
Granted	29.39		1,393,972	28.19		1,140,789	26.11		866,900
Vested	25.25		(1,018,247)	19.66		(910,062)	16.84		(793,367)
Forfeited	27.87		(298,663)	25.73		(183,055)	21.12		(160,175)
Non-vested units at end of year	28.96		1,813,764	26.24		1,736,702	21.33		1,689,030

The following table summarizes TUR Awards activity under the WES LTIPs:


	2024			2023			2022
	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units
Non-vested units at beginning of year	$	32.22	463,529	$	24.62	388,817	$	21.17	325,217
Granted	36.15		360,497	40.44		231,395	37.80		94,173
Vested	22.77		(304,445)	17.79		(155,052)	—		—
Forfeited	37.28		(96,693)	40.22		(1,631)	28.54		(30,573)
Non-vested units at end of year	38.01		422,888	32.22		463,529	24.62		388,817

The following table summarizes ROA Awards activity under the WES LTIPs:


	2024			2023			2022
	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units
Non-vested units at beginning of year	$	22.51	463,529	$	18.12	388,817	$	16.01	325,217
Granted	27.98		407,789	28.48		245,143	25.95		94,173
Vested	15.88		(351,737)	16.27		(168,800)	—		—
Forfeited	28.04		(96,694)	28.38		(1,631)	19.74		(30,573)
Non-vested units at end of year	27.78		422,887	22.51		463,529	18.12		388,817