Western Midstream renegotiates Occidental contracts for Delaware Basin

Jan 20 (Reuters) - Pipeline operator Western Midstream Partners WES.N said on Tuesday it has renegotiated contracts with Occidental Petroleum OXY.N related to its Delaware Basin assets, securing a simpler fixed-fee structure for natural gas gathering.

As part of the deal, Occidental will transfer 15.3 million common units worth about $610 million back to Western Midstream, which would reduce the company's ownership to roughly 40% after the units are redeemed.

The U.S. shale producer is Western's biggest shareholder, according to data from LSEG.

Following the amendment, about 9% of Western Midstream's revenue will remain under cost-of-service rates, most of which expire between the late 2020s and mid-to-late 2030s, when they may convert to fixed-fee terms.

Under cost-of-service contracts, Western charged based on the actual cost of providing midstream services plus an allowed return, while under the new agreement Occidental will pay a fixed fee.

Western Midstream also signed a new natural gas gathering and processing agreement with ConocoPhillips COP.N for a portion of its Delaware Basin volumes.

The ConocoPhillips agreement, which runs into the early 2030s, will diversify revenues by reducing related-party revenue by more than 10%, Western Midstream said.

Terms of the amended contract with Occidental have become effective as of January 1 this year, and the agreement with ConocoPhillips will be effective as of February 1, while the common units will be redeemed on February 3, Western said.

The shift to fixed‑fee terms is not expected to affect adjusted core profit through 2027, with only minimal impact from 2028 to 2032 as the remaining contract liability is recognized.