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 $8.4 million for the three months ended September 30, 2024, primarily due to (i) lower average prices and decreased product recoveries, partially offset by increased throughput at the West Texas complex, and (ii) a decrease in distributions from FRP. These decreases were offset partially by increased throughput at the DBM oil system.

Adjusted gross margin increased by $363.9 million for the nine months ended September 30, 2024, primarily due to (i) increased throughput at the Powder River Basin complex attributable to the acquisition of Meritage, (ii) increased throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024, at the West Texas complex, DBM water systems, and DBM oil system, and (iii) increased throughput at the DJ Basin complex. These increases were offset partially by (i) decreased distributions from TEP, (ii) the sale of our interests in the Mont Belvieu JV, Marcellus Interest systems, and Saddlehorn during 2024, and (iii) decreased processing fees at the Brasada complex resulting from a change in contract terms effective July 1, 2023, partially offset by increased throughput.

Per-Mcf Adjusted gross margin for natural-gas assets decreased by $0.04 for the three months ended September 30, 2024, primarily due to (i) decreased product recoveries and average prices, partially offset by 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 throughput at the Powder River Basin complex, which has a lower-than-average per-Mcf margin as compared to our other natural-gas assets.

Per-Mcf Adjusted gross margin for natural-gas assets increased by $0.04 for the nine months ended September 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.

Per-Bbl Adjusted gross margin for crude-oil and NGLs assets decreased by $0.08 for the three months ended September 30, 2024, primarily due to decreased distributions at FRP and TEP, partially offset by increased throughput at the DBM oil system, which has a higher-than-average per-Mcf margin as compared to our other crude-oil and NGLs assets.

Per-Bbl Adjusted gross margin for crude-oil and NGLs assets increased by $0.43 for the nine months ended September 30, 2024, primarily due to (i) the sale of our interests in the 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, and (ii) increased throughput at the DBM oil system, which has a higher-than-average per-Mcf margin as compared to our other crude-oil and NGLs assets, in addition to a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024. These increases were offset partially by (i) decreased distributions at 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 $0.13 for the nine months ended September 30, 2024, primarily due to higher throughput and a higher average fee resulting from a cost-of-service rate redetermination effective January 1, 2024.

Adjusted EBITDA. Adjusted EBITDA decreased by $11.2 million for the three months ended September 30, 2024, primarily due to (i) a $22.3 million decrease in total revenues and other, (ii) a $7.7 million increase in operation and maintenance expenses, (iii) a $3.6 million decrease in distributions from equity investments, and (iv) a $3.4 million increase in general and administrative expenses excluding non-cash equity-based compensation expense. These amounts were offset partially by (i) a $21.2 million decrease in cost of product (net of lower of cost or market inventory adjustments) and (ii) a $4.8 million decrease in property and other taxes.

Adjusted EBITDA increased by $255.4 million for the nine months ended September 30, 2024, primarily due to a $428.5 million increase in total revenues and other. This was offset partially by (i) an $87.2 million increase in operation and maintenance expenses, (ii) a $37.0 million decrease in distributions from equity investments, (iii) a $29.4 million increase in general and administrative expenses excluding non-cash equity-based compensation expense, (iv) a $9.3 million increase in cost of product (net of lower of cost or market inventory adjustments), and (v) a $4.0 million increase in property and other taxes.

Free cash flow. Free cash flow decreased by $59.7 million for the three months ended September 30, 2024, primarily due to (i) an $80.1 million decrease in net cash provided by operating activities and (ii) a $2.0 million decrease in distributions from equity investments in excess of cumulative earnings. These decreases were offset partially by a $22.4 million decrease in capital expenditures.

Free cash flow increased by $332.7 million for the nine months ended September 30, 2024, primarily due to a $394.4 million increase in net cash provided by operating activities, partially offset by (i) a $58.7 million increase in capital expenditures and (ii) a $4.2 million decrease in distributions from equity investments in excess of cumulative earnings.

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