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Related-Party Transactions
12 Months Ended
Dec. 31, 2020
Related Party Fees and Other Arrangements, Limited Liability Company (LLC) or Limited Partnership (LP) [Abstract]  
Related-Party Transactions
6. RELATED-PARTY TRANSACTIONS

Summary of related-party transactions. The following tables summarize material related-party transactions included in the Partnership’s consolidated financial statements:
Consolidated statements of operations
Year Ended December 31,
thousands202020192018
Revenues and other
Service revenues – fee based$1,740,999 $1,441,875 $1,070,066 
Service revenues – product based8,509 7,062 3,339 
Product sales71,104 158,459 280,306 
Total revenues and other1,820,612 1,607,396 1,353,711 
Equity income, net – related parties (1)
226,750 237,518 195,469 
Operating expenses
Cost of product92,884 254,771 168,535 
Operation and maintenance49,533 146,990 115,948 
General and administrative (2)
40,295 101,485 49,672 
Total operating expenses182,712 503,246 334,155 
Gain (loss) on divestiture and other, net(2,870)— — 
Interest income – Anadarko note receivable11,736 16,900 16,900 
Interest expense(6)(1,970)(6,746)
_________________________________________________________________________________________
(1)See Note 7.
(2)Includes (i) amounts charged by Occidental pursuant to the shared services agreements (see Shared services agreements within this Note 6) and (ii) equity-based compensation expense allocated to the Partnership by Occidental, portions of which are not reimbursed to Occidental and are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6).
6. RELATED-PARTY TRANSACTIONS

Consolidated balance sheets
December 31,
thousands20202019
Assets
Accounts receivable, net (1)
$291,253 $113,345 
Other current assets5,493 4,982 
Anadarko note receivable 260,000 
Equity investments (2)
1,224,813 1,285,717 
Other assets50,967 60,221 
Total assets1,572,526 1,724,265 
Liabilities
Accounts and imbalance payables6,664 — 
Short-term debt (3)
 7,873 
Accrued liabilities19,195 3,087 
Other liabilities138,796 97,800 
Total liabilities164,655 108,760 
_________________________________________________________________________________________
(1)Increase attributable to the timing of certain related-party cash receipts. The Partnership received $77.8 million of the December 31, 2020, Accounts receivable, net balance by January 11, 2021.
(2)See Note 7.
(3)Includes amounts related to finance leases (see Note 14).

Consolidated statements of cash flows
Year Ended December 31,
thousands202020192018
Distributions from equity-investment earnings – related parties$246,637 $234,572 $187,392 
Acquisitions from related parties (2,007,926)(254)
Contributions to equity investments – related parties(19,388)(128,393)(133,629)
Distributions from equity investments in excess of cumulative earnings – related parties32,160 30,256 29,585 
APCWH Note Payable borrowings 11,000 321,780 
Repayment of APCWH Note Payable
 (439,595)— 
Distributions to Partnership unitholders (1)
(367,861)(566,868)(400,194)
Distributions to WES Operating unitholders (2)
(15,434)(19,768)(7,583)
Net contributions from (distributions to) related parties24,466 458,819 97,755 
Above-market component of swap agreements with Anadarko
 7,407 51,618 
Finance lease payments(6,382)(508)— 
_________________________________________________________________________________________
(1)Represents distributions paid to Occidental pursuant to the partnership agreement of the Partnership (see Note 4 and Note 5).
(2)Represents distributions paid to certain subsidiaries of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5).
6. RELATED-PARTY TRANSACTIONS

The following tables summarize material related-party transactions for WES Operating (which are included in the Partnership’s consolidated financial statements) to the extent the amounts differ from the Partnership’s consolidated financial statements:
Consolidated statements of operations
Year Ended December 31,
thousands202020192018
General and administrative (1)
$41,609 $99,613 $48,819 
_________________________________________________________________________________________
(1)Includes (i) amounts charged by Occidental pursuant to the shared services agreements (see Shared services agreements within this Note 6) and (ii) equity-based compensation expense allocated to WES Operating by Occidental, portions of which are not reimbursed to Occidental and are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital (see Incentive Plans within this Note 6).

Consolidated balance sheets
December 31,
thousands20202019
Accounts receivable, net$246,083 $113,581 

Consolidated statements of cash flows
Year Ended December 31,
thousands202020192018
Distributions to WES Operating unitholders (1)
$(771,546)$(1,025,931)$(514,906)
_________________________________________________________________________________________
(1)Represents distributions paid to the Partnership and certain subsidiaries of Occidental pursuant to WES Operating’s partnership agreement (see Note 4 and Note 5). For the year ended December 31, 2019, includes distributions to the Partnership and a subsidiary of Occidental related to the repayment of the WGP RCF (see Note 13).

Related-party revenues. Related-party revenues include (i) income from the Partnership’s investments accounted for under the equity method of accounting (see Note 7) and (ii) amounts earned by the Partnership from services provided to Occidental and from the sale of natural gas, condensate, and NGLs to Occidental.
    
Gathering and processing agreements. The Partnership has significant gathering and processing arrangements with affiliates of Occidental on most of its systems. While Occidental is the contracting counterparty of the Partnership, these arrangements with Occidental include not just Occidental-produced volumes, but also, in some instances, the volumes of other working-interest owners of Occidental who rely on the Partnership’s facilities and infrastructure to bring their volumes to market. Natural-gas throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 41%, 38%, and 36% for the years ended December 31, 2020, 2019, and 2018, respectively. Crude-oil and NGLs throughput (excluding equity-investment throughput) attributable to production owned or controlled by Occidental was 88%, 84%, and 80% for the years ended December 31, 2020, 2019, and 2018, respectively. Produced-water throughput attributable to production owned or controlled by Occidental was 87%, 82%, and 91% for the years ended December 31, 2020, 2019, and 2018, respectively.
6. RELATED-PARTY TRANSACTIONS

In connection with the sale of its Eagle Ford assets in 2017, Anadarko remained the primary counterparty to the Partnership’s Brasada gas processing agreement and entered into an agency relationship with Sanchez Energy Corporation (“Sanchez”), now Mesquite Energy, Inc. (“Mesquite”) that allows Mesquite to process gas under such agreement. For this reason, Anadarko continues to be liable under the Brasada gas processing agreement through 2034 to the extent Mesquite does not perform. For all periods presented, Mesquite has performed Anadarko’s obligations under the Brasada gas processing agreement pursuant to its agency arrangement with Anadarko.
Further, in connection with the sale of its Uinta Basin assets in 2020, Kerr McGee Oil & Gas Onshore LP, a subsidiary of Occidental, retained the deficiency payment obligations under a gas processing agreement at the Chipeta plant. This contingent payment obligation extends through the earlier of October 1, 2022, or the termination of the processing agreement.

Commodity purchase and sale agreements. Through December 31, 2020, the Partnership sold a significant amount of its natural gas and NGLs to Anadarko Energy Services Company (“AESC”), Occidental’s marketing affiliate. Prior to April 1, 2020, AESC acted as an agent on behalf of either the Partnership or the Partnership’s customers for third-party sales. Where AESC sold natural gas and NGLs on the Partnership’s customers’ behalf, the Partnership recognized associated service revenues and cost of product expense for the marketing services performed by AESC. When product sales were on the Partnership’s behalf, the Partnership recognized product sales revenues based on Occidental’s sales price to the third party and recorded the associated cost of product expense associated with the marketing activities provided by AESC. Effective April 1, 2020, changes to marketing-contract terms with AESC terminated AESC’s prior status as an agent of the Partnership for third-party sales and established AESC as a customer of the Partnership. Accordingly, the Partnership no longer recognizes service revenues and/or product sales revenues and the equivalent cost of product expense for the marketing services performed by AESC. This change has no impact to Operating income (loss), Net income (loss), the balance sheets, cash flows, or any non-GAAP metric used to evaluate the Partnership’s operations (see Key Performance Metrics under Part II, Item 7 of this Form 10-K). In addition, the Partnership purchases natural gas from AESC pursuant to purchase agreements.

Marketing Transition Services Agreement. Effective December 31, 2019, certain subsidiaries of Anadarko entered into a transition services agreement (the “Marketing Transition Services Agreement”) to provide marketing-related services to certain of the Partnership’s subsidiaries through December 31, 2020, subject to the option to extend such services for an additional six-month period. The Marketing Transition Services Agreement was terminated on December 31, 2020. While the Partnership still has some marketing agreements with affiliates of Occidental, the Partnership began marketing and selling substantially all of its natural gas and NGLs directly to third parties beginning on January 1, 2021.

Operating lease. Effective December 31, 2019, an affiliate of Occidental and a wholly owned subsidiary of the Partnership, the lessor, entered into an operating and maintenance agreement pursuant to which Occidental provides operational and maintenance services with respect to a crude-oil gathering system and associated treating facilities owned by the Partnership through December 31, 2021. See Note 14.

Related-party expenses. Operation and maintenance expense includes amounts accrued for or paid to related parties for the operation of the Partnership’s assets and for services provided to related parties, including field labor, measurement and analysis, and other disbursements. A portion of general and administrative expense is paid by Occidental, which results in related-party transactions pursuant to the reimbursement provisions of the Partnership’s and WES Operating’s agreements with Occidental. Related-party expenses do not bear a direct relationship to related-party revenues, and third-party expenses do not bear a direct relationship to third-party revenues.
6. RELATED-PARTY TRANSACTIONS

Shared services agreements. General and administrative expense includes costs incurred pursuant to the agreements discussed below. Under these agreements, Occidental has performed certain centralized corporate functions for the Partnership and WES Operating.

Services Agreement. Pursuant to the Services Agreement, which was amended and restated on December 31, 2019, specified employees of Occidental were seconded to WES Operating GP to provide, under the direction, supervision, and control of the general partner, (i) operating and routine maintenance service and (ii) corporate, administrative, and other services, with respect to the assets owned and operated by the Partnership. Occidental was reimbursed for the services provided by the seconded employees. In January 2020, pursuant to the Services Agreement, Occidental made a one-time cash contribution of $20.0 million to WES Operating for anticipated transition costs required to establish stand-alone human resources and information technology functions. In late March 2020, seconded employees’ employment was transferred to the Partnership. Occidental continues to provide certain limited administrative and operational services to the Partnership, with most services expected to be fully transitioned to the Partnership by December 31, 2021. For additional information on the Services Agreement, see Note 1.

WES omnibus agreement. Prior to December 31, 2019, the Partnership had an omnibus agreement with Occidental and the general partner (the “WES omnibus agreement”) that governed (i) the Partnership’s obligation to reimburse Occidental for expenses incurred or payments made on its behalf in connection with Occidental’s provision of general and administrative services provided to the Partnership, including certain public company expenses and general and administrative expenses, (ii) the Partnership’s obligation to pay Occidental, in quarterly installments, an administrative services fee of $250,000 per year, which was subject to an annual increase pursuant to the omnibus agreement, and (iii) the Partnership’s obligation to reimburse Occidental for all insurance coverage expenses it incurred or payments it made on the Partnership’s behalf. The WES omnibus agreement was terminated as part of the December 2019 Agreements (see Note 1).

WES Operating omnibus agreement. Prior to December 31, 2019, WES Operating had a separate omnibus agreement with Occidental and WES Operating GP (the “WES Operating omnibus agreement”) that governed (i) Occidental’s obligation to indemnify WES Operating for certain liabilities and WES Operating’s obligation to indemnify Occidental for certain liabilities, (ii) WES Operating’s obligation to reimburse Occidental for expenses incurred or payments made on its behalf in conjunction with Occidental’s provision of general and administrative services provided to WES Operating, including salary and benefits of Occidental personnel, public company expenses, general and administrative expenses, and salaries and benefits of WES Operating’s executive management who were employees of Occidental, and (iii) WES Operating’s obligation to reimburse Occidental for all insurance coverage expenses it incurred or payments it made with respect to WES Operating’s assets. Occidental, in accordance with the partnership agreement and the WES Operating omnibus agreement, determined, in its reasonable discretion, amounts to be reimbursed by WES Operating in exchange for services provided under the WES Operating omnibus agreement. The WES Operating omnibus agreement was terminated as part of the December 2019 Agreements (see Note 1).
6. RELATED-PARTY TRANSACTIONS

Incentive Plans. General and administrative expense includes equity-based compensation expense allocated to the Partnership by Occidental for awards granted to the executive officers of the general partner and to other employees prior to their employment with the Partnership under (i) the Anadarko Petroleum Corporation 2012 Omnibus Incentive Compensation Plan, as amended and restated, (ii) Occidental’s 2015 Long-Term Incentive Plan, and (iii) Occidental’s Phantom Share Unit Award Plan (collectively referred to as the “Incentive Plans”). Grants made under equity-based compensation plans result in equity-based compensation expense, which is determined by reference to the fair value of equity compensation. For equity-based awards ultimately settled through the issuance of units or stock, the fair value is measured as of the grant date. General and administrative expense includes costs related to the Incentive Plans of $14.6 million, $12.9 million, and $6.6 million for the years ended December 31, 2020, 2019, and 2018, respectively. Portions of these amounts are reflected as contributions to partners’ capital in the consolidated statements of equity and partners’ capital. As of December 31, 2020, $12.5 million of estimated unrecognized compensation expense attributable to the Incentive Plans will be allocated to the Partnership over a weighted-average period of 0.7 years.

December 2019 Agreements. As discussed in more detail in Note 1, on December 31, 2019, the Partnership and certain of its subsidiaries, including WES Operating and WES Operating GP, entered into agreements with Occidental and/or certain of its subsidiaries, including Anadarko.

Merger transactions. As discussed in more detail in Note 1, on February 28, 2019, the Partnership, WES Operating, Anadarko, and certain of their affiliates completed the Merger and the other transactions contemplated in the Merger Agreement, which included the acquisition of AMA from Anadarko. See Note 3.

Anadarko note receivable. In May 2008, WES Operating loaned $260.0 million to Anadarko in exchange for a 30-year note that bore interest at a fixed annual rate of 6.50%, payable quarterly and classified as interest income in the consolidated statements of operations. On September 11, 2020, the Partnership and Occidental entered into a Unit Redemption Agreement, pursuant to which (i) WES Operating transferred and assigned its interest in the Anadarko note receivable to its limited partners on a pro-rata basis, transferring 98% of its interest (and accrued interest owed under) the Anadarko note receivable to the Partnership and the remaining 2% of its interest to WGRAH, a subsidiary of Occidental, (ii) the Partnership subsequently assigned the 98% interest in (and accrued interest owed under) the Anadarko note receivable to Anadarko, which Anadarko canceled and retired immediately upon receipt, in exchange for which Occidental caused certain of its subsidiaries to transfer an aggregate of 27,855,398 common units of the Partnership to the Partnership, and (iii) the Partnership canceled such common units immediately upon receipt.

Purchases from related parties. During the fourth quarter of 2020, a subsidiary of the Partnership entered into an agreement to purchase three electrical substations located in the DJ Basin from a subsidiary of Occidental for $2.0 million. This purchase was recorded as an Accrued capital expenditure as of December 31, 2020, and cash was paid in January of 2021. During 2019, the Partnership purchased $18.4 million of materials and supplies inventory from Occidental.

Related-party asset contributions. The following table summarizes related-party contributions of other assets to the Partnership:
 Year Ended December 31,
thousands20192018
Cash consideration paid$(425)$(254)
Net carrying value335 59,089 
Partners’ capital adjustment$(90)$58,835 
6. RELATED-PARTY TRANSACTIONS

APCWH Note Payable. In June 2017, APC Water Holdings 1, LLC (“APCWH”) entered into an eight-year note payable agreement with Anadarko, which was repaid in the first quarter of 2019 at the Merger completion date. See Note 13.

Commodity-price swap agreements. WES Operating previously entered into commodity-price swap agreements with Anadarko to mitigate exposure to the commodity-price risk inherent in WES Operating’s percent-of-proceeds, percent-of-product, and keep-whole natural-gas processing contracts. These commodity-price swap agreements expired without renewal on December 31, 2018.
Notional volumes for each product-based commodity-price swap agreement were not specifically defined. Instead, the commodity-price swap agreements applied to the actual volumes of natural gas, condensate, and NGLs purchased and sold. The commodity-price swap agreements did not satisfy the definition of a derivative financial instrument and, therefore did not require fair-value measurement. Net losses on commodity-price swap agreements were $0.7 million (due to settlement of 2018 activity in 2019) and $7.9 million for the years ended December 31, 2019 and 2018, respectively, reported in the consolidated statements of operations as related-party Product sales. A capital contribution from Anadarko related to the commodity-price swap agreements of $7.4 million and $51.6 million was recorded in the consolidated statements of equity and partners’ capital for the years ended December 31, 2019 and 2018, respectively.

Concentration of credit risk. Occidental was the only customer from which revenues exceeded 10% of consolidated revenues for all periods presented in the consolidated statements of operations.