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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from                    to                    
Commission File No. 001-36567
Westlake Chemical Partners LP
(Exact name of registrant as specified in its charter)

Delaware 32-0436529
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
2801 Post Oak Boulevard, Suite 600
Houston, Texas 77056
(Address of principal executive offices, including zip code)
(713) 585-2900
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common units representing limited partnership interestsWLKPThe New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x     No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes   x     No   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filer
¨
Accelerated filerx
Non-accelerated filer
¨ 
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)     Yes        No   x

The registrant had 35,221,868 common units outstanding as of October 28, 2022.


TABLE OF CONTENTS




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WESTLAKE CHEMICAL PARTNERS LP
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30,
2022
December 31,
2021
(in thousands of dollars, except unit amounts)
ASSETS
Current assets
Cash and cash equivalents$19,468 $17,057 
Receivable under the Investment Management Agreement—Westlake Corporation ("Westlake")135,863 106,243 
Accounts receivable, net—Westlake98,399 142,791 
Accounts receivable, net—third parties24,675 5,825 
Inventories5,359 8,898 
Prepaid expenses and other current assets458 396 
Total current assets284,222 281,210 
Property, plant and equipment, net1,006,633 1,043,539 
Goodwill5,814 5,814 
Deferred charges and other assets, net134,497 150,135 
Total assets$1,431,166 $1,480,698 
LIABILITIES
Current liabilities
Accounts payable—Westlake$35,583 $10,796 
Accounts payable—third parties19,459 35,105 
Accrued and other liabilities 22,615 60,895 
Total current liabilities77,657 106,796 
Long-term debt payable to Westlake399,674 399,674 
Deferred income taxes1,671 1,530 
Total liabilities479,002 508,000 
Commitments and contingencies (Note 12)
EQUITY
Common unitholders—publicly and privately held (21,099,638 and 21,092,186 units
   issued and outstanding at September 30, 2022 and December 31, 2021, respectively)
480,535 481,796 
Common unitholder—Westlake (14,122,230 and 14,122,230 units issued and outstanding
   at September 30, 2022 and December 31, 2021, respectively)
53,787 54,754 
General partner—Westlake(242,572)(242,572)
Total Westlake Chemical Partners LP partners' capital291,750 293,978 
Noncontrolling interest in Westlake Chemical OpCo LP ("OpCo")660,414 678,720 
Total equity952,164 972,698 
Total liabilities and equity$1,431,166 $1,480,698 
The accompanying notes are an integral part of the consolidated financial statements.
1

WESTLAKE CHEMICAL PARTNERS LP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands of dollars, except unit amounts and per unit data)
Revenue
Net sales—Westlake$364,273 $247,887 $1,020,042 $708,646 
Net co-products, ethylene and other sales—third parties50,850 46,079 206,266 175,756 
Total net sales415,123 293,966 1,226,308 884,402 
Cost of sales324,629 218,038 947,073 589,746 
Gross profit90,494 75,928 279,235 294,656 
Selling, general and administrative expenses8,678 7,792 26,824 24,734 
Income from operations81,816 68,136 252,411 269,922 
Other income (expense)
Interest expense—Westlake(3,645)(2,190)(8,703)(6,650)
Other income, net618 24 683 52 
Income before income taxes78,789 65,970 244,391 263,324 
Income tax provision (benefit)484 (105)822 333 
Net income78,305 66,075 243,569 262,991 
Less: Net income attributable to noncontrolling interest in OpCo
63,548 53,285 196,180 209,956 
Net income attributable to Westlake Chemical Partners LP and limited partners' interest in net income
$14,757 $12,790 $47,389 $53,035 
Net income per limited partner unit attributable to Westlake Chemical Partners LP per limited partner unit (basic and diluted)
Common units$0.42 $0.36 $1.35 $1.51 
Weighted average limited partner units outstanding (basic and diluted)
Common units—publicly and privately held21,096,317 21,087,746 21,093,578 21,081,379 
Common units—Westlake14,122,230 14,122,230 14,122,230 14,122,230 
The accompanying notes are an integral part of the consolidated financial statements.
2

WESTLAKE CHEMICAL PARTNERS LP
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Partnership
Common Unitholders
Public and Privately Held
Common Unitholder
Westlake
General
Partner
Westlake
Noncontrolling
Interests
in OpCo
Total
(in thousands of dollars)
Balance at December 31, 2021$481,796 $54,754 $(242,572)$678,720 $972,698 
Net income9,700 6,494 — 64,631 80,825 
Quarterly distribution to unitholders(9,946)(6,657)— — (16,603)
Quarterly distribution to noncontrolling interest retained in OpCo by Westlake— — — (60,688)(60,688)
Balance at March 31, 2022$481,550 $54,591 $(242,572)$682,663 $976,232 
Net income9,846 6,592 — 68,001 84,439 
Quarterly distribution to unitholders(9,943)(6,657)— — (16,600)
Quarterly distribution to noncontrolling interest retained in OpCo by Westlake— — — (75,130)(75,130)
Balance at June 30, 2022$481,453 $54,526 $(242,572)$675,534 $968,941 
Net income8,839 5,918 — 63,548 78,305 
Units issued for vested phantom units190 — — — 190 
Quarterly distribution to unitholders(9,947)(6,657)— — (16,604)
Quarterly distribution to noncontrolling interest retained in OpCo by Westlake— — — (78,668)(78,668)
Balance at September 30, 2022$480,535 $53,787 $(242,572)$660,414 $952,164 

The accompanying notes are an integral part of the consolidated financial statements.
3

WESTLAKE CHEMICAL PARTNERS LP
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Partnership
Common Unitholders—
Public and Privately Held
Common Unitholder—
Westlake
General
Partner—
Westlake
Noncontrolling
Interests
in OpCo
Total
(in thousands of dollars)
Balance at December 31, 2020$471,701 $48,270 $(242,572)$637,738 $915,137 
Net income9,069 6,077 — 61,476 76,622 
Quarterly distribution to unitholders(9,936)(6,657)— — (16,593)
Quarterly distribution to noncontrolling interest retained in OpCo by Westlake— — — (62,058)(62,058)
Balance at March 31, 2021$470,834 $47,690 $(242,572)$637,156 $913,108 
Net income15,029 10,070 — 95,195 120,294 
Units issued for vested phantom units149 — — — 149 
Quarterly distribution to unitholders(9,936)(6,657)— — (16,593)
Quarterly distribution to noncontrolling interest retained in OpCo by Westlake
— — — (65,200)(65,200)
Balance at June 30, 2021$476,076 $51,103 $(242,572)$667,151 $951,758 
Net income7,660 5,130 — 53,285 66,075 
Units issued for vested phantom units262 — — — 262 
Quarterly distribution to unitholders(9,936)(6,657)— — (16,593)
Quarterly distribution to noncontrolling interest retained in OpCo by Westlake
— — — (96,683)(96,683)
Balance at September 30, 2021$474,062 $49,576 $(242,572)$623,753 $904,819 

The accompanying notes are an integral part of the consolidated financial statements.
4

WESTLAKE CHEMICAL PARTNERS LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
20222021
(in thousands of dollars)
Cash flows from operating activities
Net income$243,569 $262,991 
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization91,682 82,830 
Loss from disposition of property, plant and equipment4,388 1,763 
Other losses, net4,400 866 
Changes in operating assets and liabilities
Accounts receivable—third parties(23,109)(2,037)
Net accounts receivable—Westlake68,520 56,228 
Inventories3,539 (3,116)
Prepaid expenses and other current assets(62)(174)
Accounts payable—third parties(14,269)2,689 
Accrued and other liabilities(32,326)3,690 
Other, net(5,170)(19,153)
Net cash provided by operating activities341,162 386,577 
Cash flows from investing activities
Additions to property, plant and equipment(45,458)(38,490)
Maturities of investments with Westlake under the Investment Management Agreement247,000 203,000 
Investments with Westlake under the Investment Management Agreement(276,000)(276,000)
Other 126 
Net cash used for investing activities(74,458)(111,364)
Cash flows from financing activities
Quarterly distributions to noncontrolling interest retained in OpCo by Westlake(214,486)(223,941)
Quarterly distributions to unitholders(49,807)(49,779)
Net cash used for financing activities(264,293)(273,720)
Net increase in cash and cash equivalents2,411 1,493 
Cash and cash equivalents at beginning of period17,057 17,154 
Cash and cash equivalents at end of period$19,468 $18,647 
The accompanying notes are an integral part of the consolidated financial statements.
5

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)

1. Description of Business and Basis of Presentation
Description of Business
Westlake Chemical Partners LP (the "Partnership") is a Delaware limited partnership formed in March 2014 to operate, acquire and develop ethylene production facilities and related assets. On August 4, 2014, the Partnership completed its initial public offering (the "IPO") of 12,937,500 common units representing limited partner interests.
In connection with the IPO, the Partnership acquired a 10.6% limited partner interest in Westlake Chemical OpCo LP ("OpCo") and a 100% interest in Westlake Chemical OpCo GP LLC ("OpCo GP"), which is the general partner of OpCo. OpCo owns three ethylene production facilities and one common carrier ethylene pipeline (collectively, the "Contributed Assets"). Since the IPO, the Partnership has periodically purchased additional limited partner interest in OpCo. Most recently, on March 29, 2019, the Partnership purchased an additional 4.5% newly-issued limited partner interest in OpCo for approximately $201,445, resulting in an aggregate 22.8% limited partner interest in OpCo, effective January 1, 2019. The remaining 77.2% limited partner interest in OpCo is owned by Westlake Corporation.
Basis of Presentation
The accompanying unaudited consolidated interim financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the "SEC") for interim periods. Accordingly, certain information and footnotes required for complete financial statements under generally accepted accounting principles in the United States ("U.S. GAAP") have not been included. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Partnership included in the annual report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Form 10-K"), filed with the SEC on March 2, 2022. These financial statements have been prepared in conformity with the accounting principles and practices as disclosed in the notes to the consolidated financial statements of the Partnership for the fiscal year ended December 31, 2021.
References to "Westlake" refer collectively to Westlake Corporation (formerly known as Westlake Chemical Corporation) and its subsidiaries, other than the Partnership, OpCo and OpCo GP.
The Partnership holds a 22.8% limited partner interest and the entire non-economic general partner interest in OpCo. The remaining 77.2% limited partner interest in OpCo is owned directly by Westlake, which has no rights to direct the activities that most significantly impact the economic performance of OpCo. As a result of the fact that substantially all of OpCo's activities are conducted on behalf of Westlake, and the fact that OpCo exhibits disproportionality of voting rights to economic interest, OpCo was deemed to be a variable interest entity. The Partnership, through its ownership of OpCo's general partner, has the power to direct the activities that most significantly impact the economic performance of OpCo, and it also has the obligation or right to absorb losses or receive benefits from OpCo that could potentially be significant to OpCo. As such, the Partnership was determined to be OpCo's primary beneficiary and therefore consolidates OpCo's results of operations and financial position. Westlake's retained interest of 77.2% is recorded as noncontrolling interest in the Partnership's consolidated financial statements.
In the opinion of the Partnership's management, the accompanying unaudited consolidated interim financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Partnership's financial position as of September 30, 2022, its results of operations for the three and nine months ended September 30, 2022 and 2021 and the changes in its cash position for the nine months ended September 30, 2022 and 2021.
Results of operations and changes in cash position for the interim periods presented are not necessarily indicative of the results that will be realized for the fiscal year ending December 31, 2022 or any other interim period. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ materially from those estimates.

6

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
2. Accounts Receivable—Third Parties
Accounts receivable—third parties consist of the following:
September 30,
2022
December 31,
2021
Trade customers$28,985 $5,875 
Allowance for credit losses(4,310)(50)
Accounts receivable, net—third parties$24,675 $5,825 
3. Inventories
Inventories consist of the following:
September 30,
2022
December 31,
2021
Finished products$4,405 $5,458 
Feedstock, additives and chemicals954 3,440 
Inventories$5,359 $8,898 
4. Property, Plant and Equipment
Depreciation expense on property, plant and equipment of $23,368 and $23,010 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2022 and 2021, respectively. Depreciation expense on property, plant and equipment of $71,252 and $68,795 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2022 and 2021, respectively.
5. Deferred Charges and Other Assets
Amortization expense on other assets of $6,023 and $3,576 is included in cost of sales in the consolidated statements of operations for the three months ended September 30, 2022 and 2021, respectively. Amortization expense on other assets of $20,430 and $14,035 is included in cost of sales in the consolidated statements of operations for the nine months ended September 30, 2022 and 2021, respectively.
6. Distributions and Net Income Per Limited Partner Unit
On October 31, 2022, the board of directors of Westlake Chemical Partners GP LLC ("Westlake GP"), the Partnership's general partner, declared a quarterly cash distribution for the three months ended September 30, 2022 of $0.4714 per unit. This distribution is payable on November 28, 2022 to unitholders of record as of November 10, 2022.
Distributions are declared subsequent to quarter end; therefore, the table below represents total cash distributions declared from earnings of the related periods pertaining to such distributions.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net income attributable to the Partnership$14,757 $12,790 $47,389 $53,035 
Less:
Limited partners' distribution declared on common units
16,604 16,600 49,799 49,788 
Net income in excess of distribution (Distribution in excess of net income)$(1,847)$(3,810)$(2,410)$3,247 
7

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
Net income per unit applicable to common limited partner units is computed by dividing the respective limited partners' interest in net income by the weighted-average number of common units outstanding for the period. Because the Partnership has more than one class of participating securities, it uses the two-class method when calculating the net income per unit applicable to limited partners. The classes of participating securities include common units and incentive distribution rights. Net income attributable to the Partnership is allocated to the unitholders in accordance with their respective ownership percentages in preparation of the consolidated statements of changes in equity. However, when distributions related to the incentive distribution rights are made, net income equal to the amount of those distributions is first allocated to the general partner before the remaining net income is allocated to the unitholders based on their respective ownership percentages. Basic and diluted net income per unit is the same because the Partnership does not have any potentially dilutive units outstanding for the periods presented.
Three Months Ended September 30, 2022
Limited Partners' Common UnitsIncentive Distribution RightsTotal
Net income attributable to the Partnership:
Distribution$16,604 $ $16,604 
Distribution in excess of net income(1,847) (1,847)
Net income$14,757 $ $14,757 
Weighted average units outstanding:
Basic and diluted35,218,547 35,218,547 
Net income per limited partner unit:
Basic and diluted$0.42 
Three Months Ended September 30, 2021
Limited Partners' Common UnitsIncentive Distribution RightsTotal
Net income attributable to the Partnership:
Distribution$16,600 $ $16,600 
Distribution in excess of net income(3,810) (3,810)
Net income$12,790 $ $12,790 
Weighted average units outstanding:
Basic and diluted35,209,976 35,209,976 
Net income per limited partner unit:
Basic and diluted$0.36 
Nine Months Ended September 30, 2022
Limited Partners' Common UnitsIncentive Distribution RightsTotal
Net income attributable to the Partnership:
Distribution$49,799 $ $49,799 
Distribution in excess of net income(2,410) (2,410)
Net income$47,389 $ $47,389 
Weighted average units outstanding:
Basic and diluted35,215,808 35,215,808 
Net income per limited partner unit:
Basic and diluted$1.35 
8

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
Nine Months Ended September 30, 2021
Limited Partners' Common UnitsIncentive Distribution RightsTotal
Net income attributable to the Partnership:
Distribution$49,788 $ $49,788 
Net income in excess of distribution3,247  3,247 
Net income$53,035 $ $53,035 
Weighted average units outstanding:
Basic and diluted35,203,609 35,203,609 
Net income per limited partner unit:
Basic and diluted$1.51 
The amended Partnership Agreement provides that the Partnership will distribute cash that is deemed to be operating surplus each quarter to all the unitholders, pro rata, until each unit has received a distribution of $1.2938. If cash distributions to the Partnership's unitholders exceed $1.2938 per common unit in any quarter, the Partnership's unitholders and Westlake, as the holder of the Partnership's incentive distribution rights, will receive distributions according to the following percentage allocations:
Marginal Percentage Interest in Distributions
Total Quarterly Distribution Per UnitUnitholdersIDR Holders
Above $1.2938 up to $1.4063
85.0 %15.0 %
Above $1.4063 up to $1.6875
75.0 %25.0 %
Above $1.6875
50.0 %50.0 %
The Partnership's distribution for the three months ended September 30, 2022 did not exceed the $1.2938 per unit threshold, and, as a result, no distribution was made with respect to the Partnership's incentive distribution rights to Westlake, as the holder of the Partnership's incentive distribution rights.
Distribution Per Common Unit
Distributions per common unit for the three and nine months ended September 30, 2022 and 2021 were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Distributions per common unit$0.4714 $0.4714 $1.4142 $1.4142 
7. Partners' Equity
On October 4, 2018, the Partnership and Westlake Chemical Partners GP LLC, the general partner of the Partnership, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell the Partnership's common units, from time to time, up to an aggregate offering amount of $50,000. The Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration for utilization under this agreement. No common units were issued under this program as of September 30, 2022.
On March 29, 2019, the Partnership completed the issuance and sale of 2,940,818 common units at a price of $21.40 per unit through a private placement. TTWF LP, Westlake's principal stockholder and a related party, acquired 1,401,869 common units out of 2,940,818 common units issued in the private placement.
9

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
8. Related Party Transactions
The Partnership and OpCo regularly enter into related party transactions with Westlake. See below for a description of transactions with related parties.
Sales to Related Parties
OpCo sells ethylene to Westlake under the Ethylene Sales Agreement. Additionally, the Partnership and OpCo from time to time provide other services or products for which it charges Westlake a fee.
Sales to related parties were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Net sales—Westlake$364,273 $247,887 $1,020,042 $708,646 
As of September 30, 2022, OpCo has estimated an annual deficiency for the full year 2022, and thus, the Partnership has recognized buyer deficiency fees of $13,940 during the three and nine months ended September 30, 2022. The buyer deficiency fee is measured based upon the lower of the actual production deficiency at period end or the estimated annual production deficiency. The buyer deficiency fees are classified as a component of net sales—Westlake.
Cost of Sales from Related Parties
Charges for goods and services purchased by the Partnership and OpCo from Westlake and included in cost of sales relate primarily to feedstock purchased under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement.
Charges from related parties in cost of sales were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Feedstock purchased from Westlake and included in cost of sales
$201,044 $119,000 $603,243 $302,095 
Other charges from Westlake and included in cost of sales
49,144 35,615 135,574 94,923 
Total$250,188 $154,615 $738,817 $397,018 
10

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
Services from Related Parties Included in Selling, General and Administrative Expenses
Charges for services purchased by the Partnership from Westlake and included in selling, general and administrative expenses primarily relate to services Westlake performs on behalf of the Partnership under the Omnibus Agreement, including the Partnership's finance, legal, information technology, human resources, communication, ethics and compliance and other administrative functions.
Charges from related parties included within selling, general and administrative expenses were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Services received from Westlake and included in selling, general and administrative expenses
$7,080 $6,925 $20,510 $21,837 
Goods and Services from Related Parties Capitalized as Assets
Charges for goods and services purchased by the Partnership and OpCo from Westlake which were capitalized as assets relate primarily to the services of Westlake employees under the Services and Secondment Agreement.
Charges from related parties for goods and services capitalized as assets were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Goods and services purchased from Westlake and capitalized as assets
$832 $3,606 $2,205 $4,542 
Receivable under the Investment Management Agreement
On August 1, 2017, the Partnership, OpCo and Westlake executed an investment management agreement (the "Investment Management Agreement") that authorized Westlake to invest the Partnership's and OpCo's excess cash with Westlake for a term of up to a maximum of nine months. Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo. Accrued interest of $691 and $71 was included in the receivable under the Investment Management Agreement balance at September 30, 2022 and December 31, 2021, respectively. Total interest earned related to the Investment Management Agreement was $691 and $81 for the three months ended September 30, 2022 and 2021, respectively, and $934 and $225 for the nine months ended September 30, 2022 and 2021, respectively.
The Partnership's receivable under the Investment Management Agreement was as follows:
September 30,
2022
December 31,
2021
Receivable under the Investment Management Agreement$135,863 $106,243 
11

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
Accounts Receivable from Related Parties
The Partnership's accounts receivable from Westlake result primarily from ethylene sales to Westlake and the buyer deficiency fee and shortfall fee recognized under the Ethylene Sales Agreement.
The buyer deficiency fees discussed above under "Sales to Related Parties" recognized in the nine months ended September 30, 2022 are scheduled to be received by the Partnership after December 31, 2022.
As a result of the force majeure events in 2021, the Partnership recognized revenue for a buyer deficiency fee of $51,395 and a shortfall fee of $58,906 during 2021. The buyer deficiency fee was collected from Westlake in January 2022 and the shortfall fee recognized in 2021 is recoverable during 2022 per the Ethylene Sales Agreement.
The Partnership's accounts receivable from Westlake were as follows:
September 30,
2022
December 31,
2021
Accounts receivable—Westlake$98,399 $142,791 
Accounts Payable to Related Parties
The Partnership's accounts payable to Westlake result primarily from feedstock purchases under the Feedstock Supply Agreement and services provided under the Services and Secondment Agreement and the Omnibus Agreement.
The Partnership's accounts payable to Westlake were as follows:
September 30,
2022
December 31,
2021
Accounts payable—Westlake$35,583 $10,796 
Related Party Leases
OpCo is obligated to Westlake under various long-term and short-term noncancelable operating leases, primarily related to rail car leases and land. Operating lease rentals paid to Westlake for such leases were $719 and $997 for the three months ended September 30, 2022 and 2021, respectively, and $1,979 and $2,292 for the nine months ended September 30, 2022 and 2021, respectively, and reflected in other charges from Westlake that are included in cost of sales.
OpCo has two site lease agreements with Westlake, each of which has a term of 50 years. Pursuant to the site lease agreements, OpCo pays Westlake one dollar per site per year.
12

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
Debt Payable to Related Parties
See Note 9 for a description of related party debt payable balances.
Interest on related party debt payable balances for the three months ended September 30, 2022 and 2021 was $3,645 and $2,190, respectively. Interest on related party debt payable balances for the nine months ended September 30, 2022 and 2021 was $8,703 and $6,650, respectively. Interest on related party debt payable is presented as interest expense—Westlake in the consolidated statements of operations. At September 30, 2022 and December 31, 2021, accrued interest on related party debt was $3,544 and $2,176, respectively, and is reflected as a component of accrued and other liabilities in the consolidated balance sheets.
Debt payable to related parties was as follows:
September 30,
2022
December 31,
2021
Total debt payable to Westlake$399,674 $399,674 
Major Customer and Concentration of Credit Risk
During the three months ended September 30, 2022 and 2021, Westlake accounted for approximately 87.8% and 84.3%, respectively, of the Partnership's net sales. During the nine months ended September 30, 2022 and 2021, Westlake accounted for approximately 83.2% and 80.1%, respectively, of the Partnership's net sales.
13

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
9. Long-Term Debt Payable to Westlake
Long-term debt payable to Westlake consists of the following:
September 30,
2022
December 31,
2021
OpCo Revolver $22,619 $22,619 
MLP Revolver 377,055 377,055 
Total debt$399,674 $399,674 
On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the Amended and Restated Senior Unsecured Revolving Credit Agreement (as so amended, the "OpCo Revolver"). Prior to the OpCo Revolver Amendment, the OpCo Revolver bore interest at the London Interbank Offered Rate ("LIBOR") plus 2.0%. The OpCo Revolver Amendment, among other things, extended the maturity date of the OpCo Revolver from September 25, 2023 to July 12, 2027 and provided for the replacement of LIBOR with the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR"). Borrowings under the OpCo Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the OpCo Revolver is 1.75%. As of September 30, 2022, outstanding borrowings under the OpCo Revolver bore interest at SOFR plus the Applicable Margin and credit spread adjustment.
On July 12, 2022, the Partnership entered into the Fourth Amendment (the "MLP Revolver Amendment") to the Senior Unsecured Revolving Credit Agreement (the "MLP Revolver"). Prior to the MLP Revolver Amendment, the MLP Revolver bore interest at a variable rate of either (a) LIBOR plus 2.0% or, if LIBOR were no longer available, (b) the Alternate Base Rate plus 1.0%. The MLP Revolver Amendment, among other things, extended the maturity date of the MLP Revolver from March 19, 2023 to July 12, 2027 and provided for the replacement of LIBOR with SOFR. Borrowings under the MLP Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio. As of September 30, 2022, outstanding borrowings under the MLP Revolver bore interest at SOFR plus the Applicable Margin and credit spread adjustment.
The weighted average interest rate on all debt was 3.4% and 2.1% at September 30, 2022 and December 31, 2021, respectively.
As of September 30, 2022, the Partnership was in compliance with all of the covenants under the OpCo Revolver and the MLP Revolver.
10. Fair Value Measurements
The Partnership reports certain assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). Under the accounting guidance for fair value measurements, inputs used to measure fair value are classified in one of three levels:
Level 1: Quoted market prices in active markets for identical assets or liabilities.
Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.
Level 3: Unobservable inputs that are not corroborated by market data.
14

WESTLAKE CHEMICAL PARTNERS LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSContinued
(Unaudited)
(in thousands of dollars, except unit amounts and per unit data)
The Partnership has financial assets and liabilities subject to fair value measures. These financial assets and liabilities include cash and cash equivalents, accounts receivable, net, accounts payable and debt payable to Westlake, all of which are recorded at carrying value. The amounts reported in the consolidated balance sheets for accounts receivable, net and accounts payable approximate their fair value due to the short maturities of these instruments. The carrying and fair values of the Partnership's debt at September 30, 2022 and December 31, 2021 are summarized in the table below. The Partnership's debt includes the OpCo Revolver and the MLP Revolver at September 30, 2022. The fair value of debt is determined based on the present value of expected future cash flows using a discounted cash flow methodology. Because the Partnership's valuation methodology used for debt requires the use of significant unobservable inputs, the inputs used to measure the fair value of the Partnership's debt are classified as Level 3 within the fair value hierarchy. Inputs used to estimate the fair values of the Partnership's debt include the selection of an appropriate discount rate.
September 30, 2022December 31, 2021
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
OpCo Revolver$22,619 $23,169 $22,619 $23,276 
MLP Revolver377,055 382,278 377,055 383,574 
11. Supplemental Information
Accrued and Other Liabilities
Accrued and other liabilities were $22,615 and $60,895 at September 30, 2022 and December 31, 2021, respectively. Accrued maintenance expense and accrued taxes, which are components of accrued and other liabilities, were $6,128 and $5,462, respectively, at September 30, 2022 and $5,597 and $2,264, respectively, at December 31, 2021. No other component of accrued and other liabilities was more than five percent of total current liabilities.
Non-cash Investing Activity
Capital expenditure related liabilities, included in accounts payable—third parties and accrued and other liabilities, were $7,654 and $10,517 at September 30, 2022 and 2021, respectively.
12. Commitments and Contingencies
The Partnership is subject to environmental laws and regulations that can impose civil and criminal sanctions and that may require the Partnership to mitigate the effects of contamination caused by the release or disposal of hazardous substances into the environment. These laws include the federal Clean Air Act, the federal Water Pollution Control Act, the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), the Toxic Substances Control Act and various other federal, state and local laws and regulations. Under CERCLA, an owner or operator of property may be held strictly liable for remediating contamination without regard to whether that person caused the contamination, and without regard to whether the practices that resulted in the contamination were legal at the time they occurred. Because the Partnership's production sites have a history of industrial use, it is impossible to predict precisely what effect these legal requirements will have on the Partnership. Westlake will indemnify the Partnership for liabilities that occurred or existed prior to August 4, 2014.
On September 27, 2021, shortly after the turnaround on Petro 2 commenced, there was a flash fire at the quench tower of the Petro 2 facility. Several contractors working on the quench tower were injured. There are lawsuits pending in connection with the flash fire. We expect insurance to cover most of the costs associated with these lawsuits.
The Partnership is also involved in other legal proceedings incidental to the conduct of its business. The Partnership does not believe that any of these legal proceedings will have a material adverse effect on its financial condition, results of operations or cash flows.
15

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This Management's Discussion and Analysis of Financial Condition and Results of Operations section should be read in conjunction with the accompanying consolidated financial statements and the notes thereto and the consolidated financial statements and notes thereto included in Westlake Chemical Partners LP's annual report on Form 10-K for the fiscal year ended December 31, 2021 (the "2021 Form 10-K"), as filed with the SEC on March 2, 2022. Unless otherwise indicated, references in this report to "we," "our," "us" or like terms, refer to Westlake Chemical Partners LP (the "Partnership"), Westlake Chemical OpCo LP ("OpCo") and Westlake Chemical OpCo GP LLC ("OpCo GP"). References to "Westlake" refer to Westlake Corporation (formerly known as Westlake Chemical Corporation) and its consolidated subsidiaries other than the Partnership, OpCo GP and OpCo. The following discussion contains forward-looking statements. Please read "Forward-Looking Statements" for a discussion of limitations inherent in such statements.
Partnership Overview
We are a Delaware limited partnership formed by Westlake to operate, acquire and develop ethylene production facilities and related assets. On August 4, 2014, we closed our initial public offering (the "IPO") of 12,937,500 common units. In connection with the IPO, we acquired a 10.6% interest in OpCo and a 100% interest in OpCo GP, which is the general partner of OpCo. On April 29, 2015, we purchased an additional 2.7% newly-issued limited partner interest in OpCo, resulting in an aggregate 13.3% limited partner interest in OpCo, effective April 1, 2015. The 12,686,115 subordinated units of the Partnership, all of which were previously owned by Westlake, were converted into common units of the Partnership on August 30, 2017. On September 29, 2017, we completed a secondary public offering of 5,175,000 common units and purchased an additional 5.0% newly-issued limited partner interest in OpCo, resulting in an aggregate 18.3% limited partner interest in OpCo, effective July 1, 2017. On March 29, 2019, we completed a private placement of 2,940,818 common units and used the net proceeds to purchase an additional 4.5% interest in OpCo, effective January 1, 2019, resulting in us owning an aggregate 22.8% limited partner interest in OpCo.
Currently, our sole revenue generating asset is our 22.8% limited partner interest in OpCo, a limited partnership formed by Westlake and us in anticipation of the IPO to own and operate an ethylene production business. We control OpCo through our ownership of its general partner. Westlake retains the remaining 77.2% limited partner interest in OpCo as well as a significant interest in us through its ownership of our general partner, 40.1% of our limited partner units (consisting of 14,122,230 common units) and our incentive distribution rights. OpCo's assets include (1) two ethylene production facilities ("Petro 1" and "Petro 2" and, collectively, "Lake Charles Olefins") at Westlake's Lake Charles, Louisiana site; (2) one ethylene production facility ("Calvert City Olefins") at Westlake's Calvert City, Kentucky site; and (3) a 200-mile common carrier ethylene pipeline (the "Longview Pipeline") that runs from Mont Belvieu, Texas to Westlake's Longview, Texas facility.
How We Generate Revenue
We generate revenue primarily by selling ethylene and the resulting co-products we produce. OpCo and Westlake have entered into an ethylene sales agreement (the "Ethylene Sales Agreement") pursuant to which we generate a substantial majority of our revenue. The Ethylene Sales Agreement is a long-term, fee-based agreement with a minimum purchase commitment and includes variable pricing based on OpCo's actual feedstock and natural gas costs and estimated other costs of producing ethylene (including OpCo's estimated operating costs and a five-year average of OpCo's expected future maintenance capital expenditures and other turnaround expenditures based on OpCo's planned ethylene production capacity for the year), plus a fixed margin per pound of $0.10 less revenue from co-products sales. Pursuant to the Ethylene Sales Agreement, Westlake's obligation to pay for the annual minimum commitment (95% of OpCo's budgeted ethylene production), which is measured on an annual basis, is not reduced for a force majeure event lasting fewer than 45 consecutive days. In the event of a force majeure event, we recognize buyer deficiency fees representing fixed margin and unavoided operating and maintenance capital expenditures and maintenance expenses per pound of volume committed by Westlake during the force majeure period. In the event Westlake purchases less than its annual commitment, we recognize buyer deficiency fees representing fixed margin and all expenses and expenditures incurred per pound of volume committed but not taken by Westlake. Payment for the buyer deficiency fee is scheduled to be received by the Partnership after the conclusion of the year.
Westlake has an option to take 95% of volumes in excess of the minimum commitment on an annual basis under the Ethylene Sales Agreement if we produce more than our planned production. Under the Ethylene Sales Agreement, the price for the sale of such excess ethylene to Westlake is based on a formula similar to that used for the minimum purchase commitment, with the exception of certain fixed costs. In addition, under the Ethylene Sales Agreement, if production costs billed to Westlake on an annual basis are less than 95% of the actual production costs incurred by OpCo during the contract year, OpCo is entitled to recover the shortfall in such production costs (proportionate to the volume sold to Westlake) in the subsequent year ("Shortfall"). The Shortfall is generally recognized during the period in which the related operating, maintenance or turnaround activities occur.
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Operating Expenses, Maintenance Capital Expenditures and Turnaround Costs
Our management seeks to maximize the profitability of our operations by effectively managing operating expenses, maintenance capital expenditures and turnaround costs. Our operating expenses are comprised primarily of feedstock costs and natural gas, labor expenses (including contractor services), utility costs (other than natural gas) and turnaround and maintenance expenses. With the exception of feedstock (including natural gas) and utilities-related expenses, operating expenses generally remain relatively stable across broad ranges of production volumes but can fluctuate from period to period depending on the circumstances, particularly maintenance and turnaround activities. Our maintenance capital expenditures and turnaround costs are comprised primarily of maintenance of our ethylene production facilities and the amortization of capitalized turnaround costs. These capital expenditures relate to the maintenance and integrity of our facilities. We capitalize the costs of major maintenance activities, or turnarounds, and amortize the costs over the period until the next planned turnaround of the affected facility.
Operating expenses, maintenance capital expenditures and turnaround costs are built into the price per pound of ethylene charged to Westlake under the Ethylene Sales Agreement. Because the expenses other than feedstock costs and natural gas are based on forecasted amounts and remain a fixed component of the price per pound of ethylene sold under the Ethylene Sales Agreement for any given 12-month period, our ability to manage operating expenses, maintenance expenditures and turnaround costs may directly affect our profitability and cash flows. The impact on profitability is partially mitigated by the fact that we generally recognize any Shortfall as revenue in the period such costs and expenses are incurred. We seek to manage our operating and maintenance expenses on our ethylene production facilities by scheduling maintenance and turnarounds over time to avoid significant variability in our operating margins and minimize the impact on our cash flows, without compromising our commitment to safety and environmental stewardship. In addition, we reserve cash on an annual basis from what we would otherwise distribute to minimize the impact of turnaround costs in the year of incurrence. The purchase price under the Ethylene Sales Agreement is not designed to cover capital expenditures for expansions.
MLP Distributable Cash Flow and EBITDA
The body of accounting principles generally accepted in the United States is commonly referred to as "GAAP." For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. We use the non-GAAP measures of MLP distributable cash flow and EBITDA to analyze our performance. We define distributable cash flow as net income plus depreciation, amortization and disposition of property, plant and equipment, less contributions for turnaround reserves, maintenance capital expenditures and mark-to-market adjustment on derivative contracts. We define MLP distributable cash flow as distributable cash flow less distributable cash flow attributable to Westlake's noncontrolling interest in OpCo and distributions attributable to the incentive distribution rights holder. MLP distributable cash flow does not reflect changes in working capital balances. We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. We use each of MLP distributable cash flow and EBITDA to analyze our performance. Fees for a buyer deficiency and Shortfall are included in net income in the periods in which they are recognized. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly-traded partnerships; our ability to incur and service debt and fund capital expenditures; and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
MLP distributable cash flow is not a substitute for the GAAP measures of net income and net cash provided by operating activities. MLP distributable cash flow has important limitations as an analytical tool because it excludes some but not all items that affect net income and net cash provided by operating activities. EBITDA is not a substitute for the GAAP measures of net income, income from operations and net cash provided by operating activities. In addition, it should be noted that companies calculate EBITDA differently and, therefore, EBITDA as presented for us may not be comparable to EBITDA reported by other companies. EBITDA has material limitations as a performance measure because it excludes interest expense, depreciation and amortization, and income taxes. Reconciliations for each of MLP distributable cash flow and EBITDA are included in the "Results of Operations" section below.
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Recent Developments
On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the Amended and Restated Senior Unsecured Revolving Credit Agreement (as so amended, the "OpCo Revolver"). The OpCo Revolver Amendment, among other things, extended the maturity date of the OpCo Revolver to July 12, 2027 and provided for the replacement of the London Interbank Offered Rate ("LIBOR") with the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR"). Borrowings under the OpCo Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the OpCo Revolver is 1.75%.
On July 12, 2022, the Partnership entered into the Fourth Amendment (the "MLP Revolver Amendment") to the Senior Unsecured Revolving Credit Agreement (the "MLP Revolver"). The MLP Revolver Amendment, among other things, extended the maturity date of the MLP Revolver to July 12, 2027 and provided for the replacement of LIBOR with SOFR. Borrowings under the MLP Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio.

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Results of Operations
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(dollars in thousands)
Revenue
Net sales—Westlake$364,273 $247,887 $1,020,042 $708,646 
Net co-products, ethylene and other sales—third parties50,850 46,079 206,266 175,756 
Total net sales415,123 293,966 1,226,308 884,402 
Cost of sales324,629 218,038 947,073 589,746 
Gross profit90,494 75,928 279,235 294,656 
Selling, general and administrative expenses8,678 7,792 26,824 24,734 
Income from operations81,816 68,136 252,411 269,922 
Other income (expense)
Interest expense—Westlake(3,645)(2,190)(8,703)(6,650)
Other income, net618 24 683 52 
Income before income taxes78,789 65,970 244,391 263,324 
Income tax provision (benefit)484 (105)822 333 
Net income78,305 66,075 243,569 262,991 
Less: Net income attributable to noncontrolling interest in OpCo
63,548 53,285 196,180 209,956 
Net income attributable to Westlake Chemical Partners LP
$14,757 $12,790 $47,389 $53,035 
MLP distributable cash flow (1)
$16,734 $12,977 $55,609 $54,760 
EBITDA (2)
$111,825 $94,746 $344,776 $352,804 
____________
(1) See "Reconciliation of MLP Distributable Cash Flow to Net Income and Net Cash Provided by Operating Activities" below.
(2) See "Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities" below.
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Average
Sales Price
VolumeAverage
Sales Price
Volume
Product sales prices and volume percentage change from prior-year period
+24.5 %+13.4 %+28.4 %+12.1 %
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Domestic US prices percentage change from prior-year period for fuel cost and feedstock
Fuel cost (Natural Gas)+102.8 %+107.1 %
Feedstock (Ethane)+58.0 %+81.7 %

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Reconciliation of MLP Distributable Cash Flow to Net Income and Net Cash Provided by Operating Activities
The following table presents reconciliations of MLP distributable cash flow to net income and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(dollars in thousands)
Net cash provided by operating activities$115,495 $99,459 $341,162 $386,577 
Loss from disposition of property, plant and equipment(958)(372)(4,388)(1,763)
Changes in operating assets and liabilities and other(36,232)(33,012)(93,205)(121,823)
Net income78,305 66,075 243,569 262,991 
Add:
Depreciation, amortization and disposition of property, plant and equipment
30,349 26,958 96,070 84,590 
Less:
Contribution to turnaround reserves(7,323)(10,795)(21,811)(35,590)
Maintenance capital expenditures(14,348)(15,346)(38,172)(41,433)
Distributable cash flow attributable to noncontrolling interest in OpCo(70,249)(53,915)(224,047)(215,798)
MLP distributable cash flow$16,734 $12,977 $55,609 $54,760 
Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities
The following table presents reconciliations of EBITDA to net income, income from operations and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(dollars in thousands)
Net cash provided by operating activities$115,495 $99,459 $341,162 $386,577 
Loss from disposition of property, plant and equipment(958)(372)(4,388)(1,763)
Changes in operating assets and liabilities and other(36,232)(33,012)(93,205)(121,823)
Net income78,305 66,075 243,569 262,991 
Less:
Other income, net618 24 683 52 
Interest expense(3,645)(2,190)(8,703)(6,650)
Income tax benefit (provision)(484)105 (822)(333)
Income from operations81,816 68,136 252,411 269,922 
Add:
Depreciation and amortization29,391 26,586 91,682 82,830 
Other income, net618 24 683 52 
EBITDA$111,825 $94,746 $344,776 $352,804 
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Summary
For the quarter ended September 30, 2022, net income was $78.3 million on net sales of $415.1 million. This represents an increase in net income of $12.2 million as compared to net income of $66.1 million on net sales of $294.0 million for the quarter ended September 30, 2021. Net income attributable to the Partnership for the third quarter of 2022 was $14.8 million as compared to $12.8 million for the third quarter of 2021, an increase of $2.0 million. Income from operations was $81.8 million for the third quarter of 2022 as compared to $68.1 million for the third quarter of 2021. Net income, net income attributable to the Partnership and operating income for the third quarter of 2022 as compared to the third quarter of 2021 were higher primarily due to higher ethylene sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement, higher co-products sales prices and volumes, and a buyer deficiency fee of $13.9 million recognized during the third quarter of 2022 resulting from lower planned ethylene offtake by Westlake, partially offset by higher ethane feedstock costs and natural gas prices. Net sales for the third quarter of 2022 increased by $121.1 million as compared to net sales for the third quarter of 2021, mainly due to higher production during the third quarter of 2022 following the Petro 2 turnaround activities that occurred in the third quarter of 2021, resulting in higher sales volumes for co-products and ethylene sold to Westlake, higher ethylene sales prices to Westlake, and the $13.9 million buyer deficiency fee recognized during the third quarter of 2022.
For the nine months ended September 30, 2022, net income was $243.6 million on net sales of $1,226.3 million. This represents a decrease in net income of $19.4 million as compared to net income of $263.0 million on net sales of $884.4 million for the nine months ended September 30, 2021. Net income attributable to the Partnership for the nine months ended September 30, 2022 was $47.4 million as compared to $53.0 million for the nine months ended September 30, 2021, a decrease of $5.6 million. Income from operations was $252.4 million for the nine months ended September 30, 2022 as compared to $269.9 million for the nine months ended September 30, 2021. Net income, net income attributable to the Partnership and operating income for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021 were lower primarily due to increased ethane feedstock costs and natural gas prices and lower ethylene sales prices and volumes to third parties, partially offset by higher ethylene sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement and higher co-products sales prices and volumes. A buyer deficiency fee of $13.9 million was recognized in the nine months ended September 30, 2022 as compared to a buyer deficiency and Shortfall of $21.5 million in the nine months ended September 30, 2021. Net sales for the nine months ended September 30, 2022 increased by $341.9 million as compared to net sales for the nine months ended September 30, 2021, mainly due to higher co-products sales prices and volumes and higher ethylene sales prices and volumes to Westlake per the terms of the Ethylene Sales Agreement, partially offset by lower ethylene sales prices and volumes to third parties and the larger buyer deficiency fee and Shortfall recognized during the nine months ended September 30, 2021 as compared to the buyer deficiency fee recognized during the nine months ended September 30, 2022.
RESULTS OF OPERATIONS
Third Quarter 2022 Compared with Third Quarter 2021
Net Sales. Total net sales increased by $121.1 million, or 41.2%, to $415.1 million in the third quarter of 2022 from $294.0 million in the third quarter of 2021. The increase in net sales in the third quarter of 2022 was primarily due to higher sales prices and volumes for ethylene sold to Westlake and co-products driven by increased production during the third quarter of 2022 compared to the third quarter of 2021 due to the Petro 2 turnaround activities that occurred in the third quarter of 2021 and the buyer deficiency fee recognized during the third quarter of 2022. The average sales price in the third quarter of 2022 increased by 24.5%, primarily due to higher ethylene sales prices to Westlake and co-products sales prices. The average sales volume in the third quarter of 2022 increased by 13.4%, primarily due to higher production resulting in increased sales volumes to Westlake and increased co-products sales volumes as compared to the third quarter of 2021.
Gross Profit. Gross profit increased to $90.5 million in the third quarter of 2022 from $75.9 million in the third quarter of 2021. The gross profit margin in the third quarter of 2022 was 21.8%, as compared to 25.8% for the third quarter of 2021. The increase in gross profit was primarily due to higher ethylene sales prices and volumes sold to Westlake and higher co-products sales prices and volumes in the third quarter of 2022 compared to the third quarter of 2021, partially offset by higher ethane feedstock costs and natural gas prices. The third quarter 2022 gross profit margin was lower than the third quarter of 2021 mainly due to higher ethane feedstock costs and natural gas prices, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake in the third quarter of 2022.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $0.9 million, or 11.5%, to $8.7 million in the third quarter of 2022 as compared to $7.8 million in the third quarter of 2021. The increase in the third quarter of 2022 was mainly attributable to an increase in the provision for doubtful accounts as compared to the third quarter of 2021.
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Interest Expense. Interest expense of $3.6 million in the third quarter of 2022 increased from $2.2 million in the third quarter 2021 due to a higher average interest rate on debt compared to the third quarter of 2021.
MLP Distributable Cash Flow. MLP distributable cash flow increased by $3.7 million to $16.7 million in the third quarter of 2022 from $13.0 million in the third quarter of 2021. The increase in the third quarter of 2022, as compared to the prior-year period, was primarily attributable to increased earnings at OpCo, as well as decreased turnaround reserves and maintenance expense.
EBITDA. EBITDA increased by $17.1 million to $111.8 million in the third quarter of 2022 from $94.7 million in the third quarter of 2021. The increase was primarily due to higher ethylene sales prices and volumes sold to Westlake, higher co-products sales prices and volumes and the buyer deficiency fee recognized during the third quarter of 2022, partially offset by higher ethane feedstock costs and natural gas prices.
Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021
Net Sales. Total net sales increased by $341.9 million, or 38.7%, to $1,226.3 million in the nine months ended September 30, 2022 from $884.4 million in the nine months ended September 30, 2021. The increase in net sales in the nine months ended September 30, 2022 was primarily due to higher co-products sales prices and volumes and higher ethylene sales prices and volumes to Westlake, partially offset by lower ethylene sales prices and volumes to third parties. In addition, the buyer deficiency fee of $13.9 million during the nine months ended September 30, 2022 was lower than the buyer deficiency fee and Shortfall of $21.5 million recognized during the nine months ended September 30, 2021. The average sales price in the nine months ended September 30, 2022 increased by 28.4% compared to the nine months ended September 30, 2021, primarily due to higher co-products and ethylene sales prices to Westlake, partially offset by lower ethylene sales prices to third parties. The average sales volume increased by 12.1% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The increase in sales volumes for the nine months ended September 30, 2022 was primarily due to higher production resulting in increased co-products and ethylene sales volumes to Westlake, partially offset by lower ethylene sales volumes to third parties.
Gross Profit. Gross profit decreased to $279.2 million for the nine months ended September 30, 2022 from $294.7 million for the nine months ended September 30, 2021. The gross profit margin in the nine months ended September 30, 2022 was 22.8%, as compared to 33.3% for the nine months ended September 30, 2021. The nine months ended September 30, 2022 gross profit margin was lower mainly due to increased ethane feedstock costs and natural gas prices, lower third party ethylene sales prices and volumes and the larger buyer deficiency fee and Shortfall recognized during the nine months ended September 30, 2021, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake compared to the nine months ended September 30, 2021.
Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by $2.1 million, or 8.5%, to $26.8 million in the nine months ended September 30, 2022 as compared to $24.7 million in the nine months ended September 30, 2021. The increase in the nine months ended September 30, 2022 was mainly attributable to a higher provision for doubtful accounts, partially offset by a decrease in service costs as compared to the nine months ended September 30, 2021.
Interest Expense. Interest expense increased by $2.0 million to $8.7 million in the nine months ended September 30, 2022 from $6.7 million in the nine months ended September 30, 2021, due to a higher average interest rate on debt.
MLP Distributable Cash Flow. MLP distributable cash flow increased by $0.8 million to $55.6 million in the nine months ended September 30, 2022 from $54.8 million in the nine months ended September 30, 2021. The increase in the nine months ended September 30, 2022, as compared to the prior-year period, was primarily attributable to decreased turnaround reserves and maintenance expense, partially offset by lower earnings at OpCo.
EBITDA. EBITDA decreased by $8.0 million to $344.8 million in the nine months ended September 30, 2022 from $352.8 million in the nine months ended September 30, 2021. The decrease, as compared to the prior-year period, was primarily due to higher ethane feedstock costs and natural gas prices for third party sales, lower ethylene sales prices and volumes to third parties, and the larger buyer deficiency fee and Shortfall recognized during the nine months ended September 30, 2021, partially offset by higher sales prices and volumes for co-products and ethylene sold to Westlake in the nine months ended September 30, 2022.
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CASH FLOW DISCUSSION FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
Operating Activities
Operating activities provided cash of $341.2 million in the first nine months of 2022 compared to cash provided by operating activities of $386.6 million in the first nine months of 2021. The $45.4 million decrease in cash flows from operating activities was mainly due to a decrease in cash provided by working capital during the nine months ended September 30, 2022 as compared to the prior-year period. Changes in components of working capital, which we define for the purposes of this cash flow discussion as accounts receivable, net—Westlake, accounts receivable, net—third parties, inventories, prepaid expenses and other current assets less accounts payable—Westlake, accounts payable—third parties and accrued and other liabilities, provided cash of $2.3 million in the first nine months of 2022 as compared to $57.3 million of cash provided in the first nine months of 2021, resulting in an overall unfavorable change of $55.0 million. The unfavorable change in working capital was mainly attributable to an unfavorable change in accounts payable and accrued and other liabilities due to the timing of payment of accruals related to the Petro 2 turnaround activities in 2021, as well as accounts receivable—third parties due to higher sales in the nine months ended September 30, 2022 since our Petro 2 turnaround in the second half of 2021. These changes were partially offset by a favorable change in accounts receivable—Westlake due to the collection of the 2021 buyer deficiency fee and a portion of the 2021 Shortfall during the first nine months of 2022.
Investing Activities
Net cash used for investing activities during the first nine months of 2022 was $74.5 million as compared to net cash used for investing activities of $111.4 million in the first nine months of 2021. The $36.9 million decrease in net cash used for investing activities was mainly due to decreased net cash used under the Investment Management Agreement, partially offset by increased capital expenditures in the first nine months of 2022, as compared to the prior-year period. Capital expenditures during the first nine months of 2022 and 2021 were primarily related to projects to improve production capacity or reduce costs, maintenance and safety and environmental projects at our facilities.
Financing Activities
Net cash used for financing activities during the first nine months of 2022 was $264.3 million as compared to net cash used for financing activities of $273.7 million in the first nine months of 2021. The outflows during the first nine months of 2022 were related to distributions of $214.5 million to Westlake and of $49.8 million to other unitholders by the Partnership. The cash outflows during the first nine months of 2021 were related to distributions of $223.9 million to Westlake and of $49.8 million to other unitholders by the Partnership.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Financing Arrangements
Pursuant to the terms of the Equity Distribution Agreement, entered in October 2018 and amended in February 2020, among the Partnership and various investment banks, the Partnership may offer and sell the Partnership's common units from time to time to or through the investment banks, as the Partnership's sales agents or as principals, having an aggregate offering amount of up to $50.0 million (the "ATM Program"). The Partnership intends to use the net proceeds of sales of the common units, if any, for general partnership purposes, including the funding of potential drop-downs and other acquisitions. No common units had been issued under the ATM Program as of September 30, 2022.
Based on the terms of our cash distribution policy, we expect that we will distribute to our partners most of the excess cash generated by our operations. To the extent we do not generate sufficient cash flow to fund capital expenditures, we expect to fund them primarily from external sources, including borrowing directly from Westlake, as well as future issuances of equity interests or debt.
The Partnership maintains separate bank accounts, but Westlake continues to provide treasury services on our behalf under the Services and Secondment Agreement. Our sources of liquidity include cash generated from operations, the OpCo Revolver, the MLP Revolver and, if necessary and possible under then current market conditions, the issuance of additional equity interests or debt. We believe that cash generated from these sources will be sufficient to meet our short-term working capital requirements and long-term capital expenditure requirements and to make quarterly cash distributions. Westlake may also provide other direct and indirect financing to us from time to time, although it is not obligated to do so.
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In order to fund non-annual turnaround expenditures, we cause OpCo to reserve an amount for turnaround costs during each twelve-month period designed to cover future turnaround activities. Each of OpCo's ethylene production facilities requires turnaround maintenance approximately every five years. By reserving additional cash annually, we intend to reduce the variability in OpCo's cash flow. Westlake's purchase price for ethylene purchased under the Ethylene Sales Agreement includes a component (adjusted annually) designed to cover, over the long term, substantially all of OpCo's turnaround expenditures.
Westlake's credit facility and various indentures do not prevent OpCo from making distributions to us.
On October 31, 2022, the board of directors of Westlake Chemical Partners GP LLC, our general partner, approved a quarterly distribution of $0.4714 per unit payable on November 28, 2022 to unitholders of record as of November 10, 2022, which equates to a total amount of approximately $16.6 million per quarter, or approximately $66.4 million per year in aggregate, based on the number of common units outstanding on September 30, 2022. We do not have a legal or contractual obligation to pay distributions on a quarterly basis or any other basis at our minimum quarterly distribution rate or any other rate.
Capital Expenditures
Westlake has historically funded expansion capital expenditures related to Lake Charles Olefins and Calvert City Olefins. Total capital expenditures for the nine months ended September 30, 2022 and 2021 were $45.5 million and $38.5 million, respectively. No such funding was required by OpCo during the nine months ended September 30, 2022 and 2021. We expect that Westlake will loan additional cash to OpCo to fund its expansion capital expenditures in the future, but Westlake is under no obligation to do so.
Cash and Cash Equivalents
As of September 30, 2022, our cash and cash equivalents totaled $19.5 million. In addition, we have cash invested under the Investment Management Agreement (as described below) and a revolving credit facility with Westlake available to supplement cash if needed, as described under "Indebtedness" below.
In August 2017, the Partnership, OpCo and Westlake executed the Investment Management Agreement that authorized Westlake to invest the Partnership's and OpCo's excess cash with Westlake for a term of up to a maximum of nine months. Per the terms of the Investment Management Agreement, the Partnership earns a market return plus five basis points and Westlake provides daily availability of the invested cash to meet any liquidity needs of the Partnership or OpCo. The Partnership had $135.9 million of cash invested under the Investment Management Agreement at September 30, 2022.
Indebtedness
OpCo Revolver
In connection with the IPO, OpCo entered into a $600.0 million revolving credit facility with an affiliate of Westlake, as amended in June 2017, September 2018, March 2020 and July 2022 (the "OpCo Revolver") that may be used to fund growth projects and working capital needs. The OpCo Revolver is scheduled to mature on July 12, 2027. On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the OpCo Revolver. The OpCo Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with the Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR"). Borrowings under the OpCo Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the OpCo Revolver is 1.75%. As of September 30, 2022, outstanding borrowings under the OpCo Revolver totaled $22.6 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly.
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MLP Revolver
In 2015, we entered into a senior, unsecured revolving credit agreement with an affiliate of Westlake, as amended in August and November 2017, March 2020 and July 2022 (the "MLP Revolver"). The MLP Revolver has a borrowing capacity of $600.0 million and is scheduled to mature on July 12, 2027. On July 12, 2022, the Partnership entered into the Fourth Amendment (the "MLP Revolver Amendment") to the MLP Revolver. The MLP Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with the SOFR. Borrowings under the MLP Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio. The MLP Revolver provides that we may pay all or a portion of the interest on any borrowings in kind, in which case any such amounts would be added to the principal amount of the loan. The MLP Revolver requires that we maintain a consolidated leverage ratio of either (1) during any one-year period following certain types of acquisitions (including acquisitions of additional interests in OpCo), 5.50:1.0 or less, or (2) during any other period, 4.50:1.00 or less. The MLP Revolver also contains certain other customary covenants. The repayment of borrowings under the MLP Revolver is subject to acceleration upon the occurrence of an event of default. As of September 30, 2022, outstanding borrowings under the MLP Revolver totaled $377.1 million and bore interest at SOFR plus the Applicable Margin and credit spread adjustment, which is accrued in arrears quarterly. We intend to use the MLP Revolver to purchase additional limited partnership interests in OpCo in the future, in the event OpCo desires to sell such additional interests to us, for other acquisitions and for general corporate purposes.
Off-Balance Sheet Arrangements
None.
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FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this report are forward-looking statements. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements can be identified by the use of words such as "believes," "intends," "may," "should," "could," "anticipates," "expects," "will" or comparable terminology, or by discussions of strategies or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Forward-looking statements relate to matters such as:
the amount of ethane that we are able to process, which could be adversely affected by, among other things, operating difficulties;
the volume of ethylene that we are able to sell;
the price at which we are able to sell ethylene;
industry market outlook, including prices and margins in third-party ethylene and co-products sales;
widespread outbreak of an illness or any other communicable disease, or any other public health crisis, including the coronavirus ("COVID-19") pandemic and efforts to contain its transmission;
our plans and Westlake's plans to respond to the challenges presented by the COVID-19 pandemic;
the impact of ongoing supply chain constraints and workforce availability caused by the COVID-19 pandemic and the conflict between Russia and Ukraine;
the parties to whom we will sell ethylene and on what basis;
volumes of ethylene that Westlake may purchase, in addition to the minimum commitment under the Ethylene Sales Agreement;
timing, funding and results of capital expenditures;
our intended quarterly distributions and the manner of making such distributions;
our ability to meet our liquidity needs;
timing of and amount of capital expenditures;
our At-the-Market program and the use of any net proceeds from any sales under that program;
our and OpCo's ability to extend our credit agreements with Westlake;
potential loans from Westlake to OpCo to fund OpCo's expansion capital expenditures in the future;
expected mitigation of exposure to commodity price fluctuations;
turnaround activities and the variability of OpCo's cash flow;
receipt of any buyer deficiency fee and Shortfall under the Ethylene Sales Agreement;
compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings, including any new laws, regulations or treaties that may come into force to limit or control carbon dioxide and other greenhouse gas emissions or to address other issues of climate change;
our ability to receive indemnification from Westlake for environmental and other losses; and
effects of pending legal proceedings.
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