Equity-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

15. EQUITY-BASED COMPENSATION

The general partner has the authority to grant equity compensation awards to its independent directors, executive officers, and employees under the (i) Western Gas Equity Partners, LP 2012 Long-Term Incentive Plan (the “2012 LTIP”), (ii) the Western Gas Partners, LP 2017 Long-Term Incentive Plan (the “2017 LTIP,” assumed by the Partnership in connection with the Merger), and (iii) the Western Midstream Partners, LP 2021 Long-Term Incentive Plan (the “2021 LTIP”). These plans are collectively referred to as the “WES LTIPs.” The 2012 LTIP, the 2017 LTIP, and the 2021 LTIP permit the issuance of up to 3,000,000, 3,431,251, and 9,500,000 units, respectively, of which 484,909, 2,308,578, and 9,500,000 units, respectively, remained available for future issuance as of December 31, 2021.

On March 22, 2021, the Board approved the 2021 LTIP. Subject to the capitalization adjustment provisions included in the 2021 LTIP, the total aggregate number of common units that may be delivered with respect to awards under the 2021 LTIP is 9,500,000 (the “2021 LTIP Limit”). Common units withheld from an award or surrendered by a participant to satisfy tax withholding obligations or to satisfy the payment of any exercise price with respect to an award will not be considered to be common units delivered under the 2021 LTIP for purposes of the 2021 LTIP Limit. If any award is forfeited, cancelled, exercised, settled in cash, or otherwise terminates or expires without the actual delivery of common units, the common units subject to such award will again be available for awards under the 2021 LTIP. The 2021 LTIP provides for the grant of unit options, unit appreciation rights, restricted units, phantom units, other unit-based awards, cash awards, and a unit award or a substitute award to employees and directors of the Partnership and its general partner.

The Board awards phantom units (the “Awards”) to the Partnership’s executive officers under the WES LTIPs. The Awards include (i) an award of time-vested phantom units that vest ratably over a period of three years (“Time-Based Awards”), (ii) a market award that vests after a performance period of three years 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 performance period of three years (“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 granted in 2020 pay in-kind distributions in the form of Partnership common units. During the years ended December 31, 2021 and 2020, the Partnership issued 21,681 and 48,070 common units, respectively, as in-kind distributions under such Awards. Prior to vesting, the Time-Based Awards granted in 2021 pay cash distributions ratably. The TUR and ROA Awards granted in 2021 pay cash distributions at vesting based on actual performance.

In addition, time-vested phantom units may be awarded under the WES LTIPs to non-executive employees and independent directors of the Partnership, which vest ratably over a period of three years 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 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 $8.5 million, $0.5 million, and $1.2 million for the years ended December 31, 2021, 2020, and 2019, respectively, based on the market price at the vesting date. Compensation expense for the WES LTIPs was $17.6 million, $7.9 million, and $1.0 million for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, the Partnership had $27.4 million of estimated unrecognized compensation expense attributable to the WES LTIPs that will be recognized over a weighted-average period of 1.1 years.

15. EQUITY-BASED COMPENSATION

The following table summarizes time-vested award activity under the WES LTIPs for the years ended December 31, 2021, 2020, and 2019:


	2021			2020			2019
	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	$	15.69	1,307,606	$	—	—	$	35.08	7,128
Granted	17.86		1,041,635	15.49		1,442,821	29.75		25,212
Vested	14.82		(497,648)	9.54		(53,551)	31.62		(44,572)
Forfeited	16.83		(75,921)	16.27		(81,664)	—		—
Converted (1)	—		—	—		—	33.46		12,232
Non-vested units at end of year	16.97		1,775,672	15.69		1,307,606	—		—

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(1)At closing of the Merger, 8,020 WES Operating phantom units awarded under the 2017 LTIP converted into phantom units of the Partnership under the 2012 LTIP.

The following table summarizes TUR Awards activity under the WES LTIPs for the years ended December 31, 2021 and 2020:


	2021			2020
	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units
Non-vested units at beginning of year	$	17.79	108,481	$	—	—
Granted	22.77		237,720	17.79		124,067
Forfeited	21.78		(20,984)	17.79		(15,586)
Non-vested units at end of year	21.17		325,217	17.79		108,481

The following table summarizes ROA Awards activity under the WES LTIPs for the years ended December 31, 2021 and 2020:


	2021			2020
	Weighted-Average Grant-Date Fair Value		Units	Weighted-Average Grant-Date Fair Value		Units
Non-vested units at beginning of year	$	16.27	108,481	$	—	—
Granted	15.88		237,720	16.27		124,067
Forfeited	15.96		(20,984)	16.27		(15,586)
Non-vested units at end of year	16.01		325,217	16.27		108,481