01—Abstract
Summary
Summary of the 10-K/A filed February 23, 2023. Cited figures are marked; the original filing is the authoritative source.
This Part III disclosure from Western Midstream Partners, LP (WES) covers 2022 executive compensation for its named executive officers: Michael P.
Ure (President and CEO), Kristen S. Shults (SVP and CFO, promoted May 2, 2022), Christopher B. Dial, Robert W.
Bourne, Catherine A. Green, and former SVP and Co-COO Craig W. Collins, who left WES effective November 11, 2022.
The filing states that WES has substantially completed its shift to becoming a functionally independent company and that the Board is focused on cost efficiencies, service quality, safety and reliability, and a balanced approach to distributions, debt reduction, and common unit repurchases. The Board established a Compensation Committee in February 2022. Pay is weighted toward at-risk compensation: the filing states that more than 77%a of executive officer pay is at risk, that 88% of the CEO's target direct compensation is performance- or time-based, and that 77% of the other NEOs' target direct compensation is at risk on average.
The 2022 performance results cited in the filing include year-end net leverage of approximately 3.1 times against an enhanced distribution target of 3.4 times, and Adjusted EBITDA of $2,127.9 millionb against a $1,975 million target. Free cash flow was $1,357.8 million against a $1,250 million target, and the Board approved a 157% payout under the 2022 WES Cash Bonus Program. The 2020 performance unit awards paid out at 163.3% of target for ROA units and 150% for TUR units.
WES had repurchased 19,532,305 units for $487.6 millionc, which the filing says is 39% of a $1.25 billion repurchase program. CEO Ure's 2022 total compensation was $7,648,005, and the filing reports a CEO pay ratio of 46 times the median employee's total annual compensation of $166,363, based on 1,217 employees. Collins's 2022 total of $5,048,486 includes $1,906,098 in All Other Compensation, which includes severance-related benefits under the Executive Severance Plan.
02—Key points
Key Highlights
- CEO Michael P. Ure's 2022 total compensation was $7,648,005, down from $8,718,045 in 2021 as reported in the Summary Compensation Table; the CEO pay ratio was 46 times the median employee's $166,363.
- The 2022 WES Cash Bonus Program paid out at 157% of target, based on Adjusted EBITDA of $2,127.9 million (target $1,975 million), free cash flow of $1,357.8 million (target $1,250 million), and methane reduction of 5.8% against a 5% goal.
- WES repurchased 19,532,305 units for $487.6 million, which the filing states is 39% of a $1.25 billion unit repurchase program through year-end 2022.
- Year-end 2022 net leverage was approximately 3.1 times, surpassing the 3.4 times Enhanced Distribution leverage target.
- The 2020 performance unit awards were certified in February 2023 and paid at 163.3% of target for ROA units and 150% of target for TUR units, settled in WES units.
- Craig W. Collins left WES effective November 11, 2022, and received a $1,644,750 Executive Severance Plan payment plus prorated long-term incentive awards with an estimated value of $1,025,256.
- The filing states that executive pay design includes clawback provisions, prohibits hedging and short-selling of WES securities, and excludes excise tax gross-ups and guaranteed bonuses.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-K/AFY2022filed February 23, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $3.25B$2.88B | +13.0% |
| Operating Expenses | $1.95B$1.75B | +11.8% |
| Operating Income | $1.59B$1.34B | +18.8% |
| Interest Expense | $333.94M$376.51M | −11.3% |
| Net Income | $1.22B$916.29M | +32.8% |
| EPS (Basic) | $3.01$2.18 | +38.1% |
| EPS (Diluted) | $3.00$2.18 | +37.6% |
05—Questions
Frequently Asked Questions
How is executive pay linked to unitholder performance at WES?
The filing states that 50% of 2022 annual long-term incentive awards are time-based units, while 25% are tied to three-year return on assets (ROA) and 25% to three-year relative total unitholder return (TUR), with payouts ranging from 0% to 200% of target. The annual cash bonus is based on financial, operational, and sustainability metrics, and the filing states that 72% of the CEO's targeted annual direct compensation is tied to unit performance through long-term incentive awards.
What severance protections do the named executive officers have?
Under the Executive Severance Plan, the CEO receives 2.0 times the sum of base salary and target bonus, and other NEOs receive 1.5 times. Under the Executive Change in Control Severance Plan, the CEO receives 2.99 times and other NEOs receive 2.0 times, with full vesting of long-term incentive awards. For a not-for-cause termination as of December 31, 2022, the filing lists a total of $19,110,093 for Mr. Ure.
What changed in the executive team and compensation governance in 2022?
Kristen S. Shults was promoted to CFO on May 2, 2022, and received a one-time promotional grant with a target value of $1,050,000. Daniel Holderman was hired as SVP and Co-Chief Operating Officer, and Michael Forsyth was appointed SVP, North Operations. The Board established a Compensation Committee in February 2022, and Meridian Compensation Partners was replaced by Zayla Partners as the committee's compensation consultant in August 2022.
How much did directors receive in 2022?
Non-employee directors received an annual retainer of $110,000, a committee retainer of $2,000 per member or $22,000 for a chair, and an annual phantom unit grant with a fair value of approximately $145,000. Total 2022 director compensation was $278,259 to $279,009 for each of the four non-employee directors listed.
06—Continue