Western Midstream Partners LP

(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 increased by $38.4 million for the year ended December 31, 2023, primarily due to (i) increased throughput at the West Texas complex and DBM oil system, (ii) increased throughput at the Powder River Basin complex attributable to the acquisition of Meritage, and (iii) increased throughput, partially offset by decreased deficiency fees at the DBM water systems. These increases were partially offset by (i) a decrease in distributions from Cactus II, which was sold in the fourth quarter of 2022, (ii) a lower cumulative catch-up adjustment for changes in estimated consideration in 2023 as compared to 2022 and decreased demand-fee revenue, partially offset by increased throughput at the Springfield system, (iii) decreased deficiency fees at the Chipeta complex, (iv) decreased processing fees at the Brasada complex resulting from a change in contract terms effective July 1, 2023, (v) a decrease in distributions from Ranch Westex, which was acquired in the third quarter of 2022 and is included in the West Texas complex subsequent to the acquisition, and (vi) decreased throughput at the Granger complex.

Per-Mcf Adjusted gross margin for natural-gas assets decreased by $0.04 for the year ended December 31, 2023, primarily due to (i) a lower cumulative catch-up adjustment for changes in estimated consideration in 2023 as compared to 2022 and decreased demand-fee revenue at the Springfield system, and (ii) decreased deficiency fees at the Chipeta complex. These decreases were partially offset by (i) increased throughput at the West Texas complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets, and (ii) increased deficiency fees at the DJ Basin complex.

Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.02 for the year ended December 31, 2023, primarily due to (i) 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, (ii) a higher cumulative catch-up adjustment for changes in estimated consideration in 2023 as compared to 2022, partially offset by decreased throughput and deficiency fees at the DJ Basin oil system, which has a higher-than-average per-Bbl margin as compared to our other crude-oil and NGLs assets, and (iii) an increase in distributions from FRP. These increases were partially offset by decreases in distributions from Whitethorn LLC, Mont Belvieu JV, and Saddlehorn.

Per-Bbl Adjusted gross margin for produced-water assets decreased by $0.11 for the year ended December 31, 2023, primarily due to a lower average fee resulting from a cost-of-service rate redetermination effective January 1, 2023, and lower deficiency fee revenues.

Adjusted EBITDA. Adjusted EBITDA decreased by $59.3 million for the year ended December 31, 2023, primarily due to (i) a $145.2 million decrease in total revenues and other, (ii) a $108.0 million increase in operation and maintenance expenses, (iii) a $55.8 million decrease in distributions from equity investments, and (iv) a $34.4 million increase in general and administrative expenses excluding non-cash equity-based compensation expense. These amounts were offset partially by (i) a $256.2 million decrease in cost of product (net of lower of cost or market inventory adjustments), and (ii) a $22.1 million decrease in property and other taxes.

Free cash flow. Free cash flow decreased by $304.3 million for the year ended December 31, 2023, primarily due to (i) a $247.9 million increase in capital expenditures, (ii) a $40.1 million decrease in net cash provided by operating activities, and (iii) a $24.8 million decrease in distributions from equity investments in excess of cumulative earnings. These amounts were offset partially by an $8.5 million decrease in contributions to equity investments.

See Capital Expenditures and Historical Cash Flow within this Item 7 for further information.