Equity-Based Compensation

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

15. EQUITY-BASED COMPENSATION

The general partner has the authority to grant equity compensation awards under the Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan (“WES LTIP”) and the Western Gas Partners, LP 2017 Long-Term Incentive Plan (assumed by the Partnership in connection with the Merger) to its independent directors, executive officers, and employees. As of December 31, 2020, the WES LTIP and the Western Gas Partners, LP 2017 Long-Term Incentive Plan had 2,823,967 and 3,431,251 units, respectively, available for future issuance.

On February 10, 2020, the Board of Directors approved awards of phantom units (the “Awards”) to the Partnership’s executive officers under the WES LTIP. The Awards include (i) an award of time-vested phantom units that vest ratably over a three-year period (“Time-Based Awards”), (ii) a market award that vests after a three-year performance period 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 three-year performance period (“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 pay in-kind distributions in the form of Partnership common units. During the year ended December 31, 2020, the Partnership issued 48,070 common units as in-kind distributions under such Awards.

In addition, time-vested phantom units are awarded under the WES LTIP to non-executive employees and independent directors of the Partnership from time to time, which vest ratably over a three-year period and one year from the grant date, respectively. Prior to vesting, the awards to non-executive employees and independent 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 adjusted quarterly based on the current period unit price and the estimated performance rating at vesting. For ROA Awards, all performance-related fair-value changes are recognized in compensation expense during the performance period. The total fair value of phantom units vested was $0.5 million, $1.2 million, and $0.6 million for the years ended December 31, 2020, 2019, and 2018, respectively, based on the market price at the vesting date. Compensation expense for the long-term incentive plans was $7.9 million, $1.0 million, and $0.7 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, the Partnership had $16.9 million of estimated unrecognized compensation expense attributable to the WES LTIP that will be recognized over a weighted-average period of 1.6 years.

The following table summarizes time-vested award activity under the WES LTIP for the years ended December 31, 2020, 2019, and 2018:


	2020			2019			2018
Time-Vested Awards	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	$	—	—	$	35.08	7,128	$	43.39	5,763
Granted	15.49		1,442,821	29.75		25,212	35.08		7,128
Vested	9.54		(53,551)	31.62		(44,572)	43.39		(5,763)
Forfeited	16.27		(81,664)	—		—	—		—
Converted (1)	—		—	33.46		12,232	—		—
Non-vested units at end of year	15.69		1,307,606	—		—	35.08		7,128

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(1)At closing of the Merger, WES Operating phantom units awarded under the Western Gas Partners, LP 2017 Long-Term Incentive Plan converted into phantom units of the Partnership under the WES LTIP.

15. EQUITY-BASED COMPENSATION

The following table summarizes TUR Awards and ROA Awards activity under the WES LTIP for the year ended December 31, 2020:


	TUR Awards			ROA Awards
	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units
Non-vested units at January 1, 2020	$	—	—	$	—	—
Granted	17.79		124,067	16.27		124,067
Forfeited	17.79		(15,586)	16.27		(15,586)
Non-vested units at December 31, 2020	17.79		108,481	17.97		108,481

The following table summarizes award activity under the Western Gas Partners, LP 2017 Long-Term Incentive Plan for the years ended December 31, 2019 and 2018. There were no awards issued under this plan in 2020.


	2019			2018
	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units
Non-vested units at beginning of year	$	49.88	8,020	$	55.73	7,180
Granted	—		—	49.88		8,020
Vested	—		—	55.73		(7,180)
Converted (1)	49.88		(8,020)	—		—
Non-vested units at end of year	—		—	49.88		8,020

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(1)At closing of the Merger, WES Operating phantom units awarded under the Western Gas Partners, LP 2017 Long-Term Incentive Plan converted into phantom units of the Partnership under the WES LTIP.