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 decreased by $9.2 million for the three months ended June 30, 2024, primarily due to (i) the sale of our interests in the Marcellus Interest systems, Saddlehorn, Mont Belvieu JV, Whitethorn LLC, and Panola during 2024, (ii) decreases at the Granger complex, and (iii) decreased skim-oil volumes at the DBM water systems. These decreases were offset partially by (i) increased throughput, partially offset by decreased deficiency fees, at the West Texas and DJ Basin complexes and (ii) increased throughput at the DBM oil system.

Adjusted gross margin increased by $278.3 million for the six months ended June 30, 2024, primarily due to (i) increased throughput, a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased deficiency fees on certain contracts with increasing throughput minimums at the West Texas complex, (ii) increased throughput at the Powder River Basin complex attributable to the acquisition of Meritage, (iii) increased throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024 at the DBM water and DBM oil systems, and (iv) increased throughput at the DJ Basin complex. These increases were offset partially by (i) decreased processing fees at the Brasada complex resulting from a change in contract terms effective July 1, 2023, partially offset by increased throughput, (ii) decreased distributions from TEP, and (iii) the sale of our interests in Mont Belvieu JV, Saddlehorn, and the Marcellus Interest systems during 2024.

Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.04 for the six months ended June 30, 2024, primarily due to (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, in addition to a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, and increased deficiency fees on certain contracts with increasing throughput minimums, and (ii) increased throughput at the DJ Basin complex, which has a higher-than-average per-Mcf margin as compared to our other natural-gas assets. These increases were offset partially by decreased processing fees at the Brasada complex resulting from a change in contract terms effective July 1, 2023.

Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.04 for the three months ended June 30, 2024, primarily due to (i) the sale of our interests in Whitethorn LLC and Saddlehorn in the first quarter of 2024, both of which had lower-than-average per-Bbl margins as compared to our other crude-oil and NGLs assets and (ii) increased throughput at the DBM oil system. These increases were offset partially by decreased distributions from Mont Belvieu JV due to the sale of our interest in the first quarter of 2024.

Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.33 for the six months ended June 30, 2024, primarily due to the sale of our interests in Mont Belvieu JV, Saddlehorn, and Whitethorn LLC in the first quarter of 2024, all of which had lower-than-average per-Bbl margins as compared to our other crude-oil and NGLs assets. This increase was offset partially by (i) a decrease in distributions from TEP and (ii) decreased revenues associated with demand volumes at the DJ Basin oil system.

Per-Bbl Adjusted gross margin for produced-water assets increased by $0.14 for the six months ended June 30, 2024, primarily due to a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024.

Adjusted EBITDA. Adjusted EBITDA decreased by $30.3 million for the three months ended June 30, 2024, primarily due to (i) a $28.4 million increase in operation and maintenance expenses, (ii) a $15.4 million decrease in distributions from equity investments, (iii) an $8.0 million increase in cost of product (net of lower of cost or market inventory adjustments), and (iv) a $3.5 million increase in property taxes. These amounts were offset partially by (i) a $17.9 million increase in total revenues and other and (ii) a $5.9 million decrease in general and administrative expenses excluding non-cash equity-based compensation expense.

Adjusted EBITDA increased by $199.4 million for the six months ended June 30, 2024, primarily due to a $321.1 million increase in total revenues and other. This was offset partially by (i) a $60.6 million increase in operation and maintenance expenses, (ii) a $24.7 million decrease in distributions from equity investments, (iii) a $21.3 million increase in general and administrative expenses excluding non-cash equity-based compensation expense, (iv) a $6.0 million increase in property and other taxes, and (v) a $4.1 million increase in cost of product (net of lower of cost or market inventory adjustments).

Free cash flow. Free cash flow increased by $199.9 million for the three months ended June 30, 2024, primarily due to a $231.7 million increase in net cash provided by operating activities, partially offset by (i) an $18.1 million increase in capital expenditures and (ii) a $13.8 million decrease in distributions from equity investments in excess of cumulative earnings.

Free cash flow increased by $168.1 million for the six months ended June 30, 2024, primarily due to a $237.9 million increase in net cash provided by operating activities, partially offset by a $71.1 million increase in capital expenditures.

See Capital Expenditures and Historical Cash Flow within this Item 2 for further information.