WES
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Western Gas Partners Announces Fourth-Quarter and Full-Year 2009 Results

HOUSTON, Mar 10, 2010 (BUSINESS WIRE) — Western Gas Partners, LP (NYSE: WES) today announced fourth-quarter and full-year financial and operating results for 2009. The announced results include the effects of the Partnership’s acquisition of the Chipeta assets from Anadarko Petroleum Corporation (NYSE: APC), which closed in July 2009. In addition, the Partnership today announced its 2010 capital program and outlook for the year.

Net income available to limited partners for 2009 totaled $70.0 million, or $1.24 per limited partner unit (diluted), with 2009 Adjusted EBITDA of $111.2 million and 2009 distributable cash flow of $102.2 million.(1)

Net income available to limited partners for the fourth quarter of 2009 totaled $18.9 million, or $0.33 per limited partner unit (diluted). The Partnership’s fourth-quarter Adjusted EBITDA was $29.6 million and distributable cash flow was $26.6 million. These results include the impact of a $2.5 million benefit from a prior period. The coverage ratio for the fourth quarter of 1.13 times excludes the prior-period item and includes the full dilution from the 6.9 million units issued to the public in December 2009 and the 0.6 million units issued to Anadarko in connection with the Granger acquisition in January 2010.

“With a cash flow base that is largely insulated from commodity price changes, our portfolio delivered consistent results in a challenging environment,” said Western Gas Partners’ President and Chief Executive Officer Don Sinclair. “We are most proud of our ability to increase our quarterly distribution three consecutive times in 2009 while maintaining conservative levels of coverage, resulting in a distribution growth rate of 10% for the year.”

Total throughput attributable to the Partnership for the fourth quarter of 2009 averaged 1,180 MMcf/d, 2.4 percent below the prior quarter and 5.8 percent below the fourth quarter of 2008. For the full-year 2009, throughput attributable to the Partnership averaged 1,219 MMcf/d, 1.5 percent below the prior-year average.

Capital expenditures attributable to the Partnership totaled approximately $8.8 million during the fourth quarter of 2009. Of this amount, maintenance capital expenditures were approximately $4.0 million, or 14 percent of Adjusted EBITDA. For the full-year 2009, capital expenditures attributable to the Partnership totaled $42.6 million, which included 51% of the full-year capital expenditures associated with the Chipeta assets.

2010 CAPITAL PROGRAM AND OUTLOOK

The board of directors of the Partnership’s general partner has approved a 2010 capital budget of $32.5 million.

The Partnership’s 2010 performance is expected to be driven primarily by system throughput, as its operations have minimal direct exposure to commodity prices. System throughput will be impacted by successful drilling activity by customers in the Partnership’s areas of operation, and the resulting volume of new production connected to the Partnership’s systems to offset natural field declines. Based on current expectations for drilling and completion activity, Adjusted EBITDA for 2010 is expected to be between $130 and $150 million. Total capital expenditures are expected to be between $28 and $32 million, with maintenance capital expenditures expected to be between 15 percent and 18 percent of Adjusted EBITDA.

CONFERENCE CALL TOMORROW AT 9 A.M. CST

Management will host a conference call on Thursday, Mar. 11, 2010, at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) to discuss fourth-quarter and full-year 2009 results and the outlook for 2010. The dial-in number for the call is 888.679.8034 and the participant code is 53653840. Please call in 10 minutes prior to the scheduled start time. To access the live audio webcast of the conference call, please visit http://www.westerngas.com. A replay of the call will also be available on the Web site for approximately two weeks following the conference call.

Western Gas Partners, LP is a growth-oriented Delaware limited partnership formed by Anadarko Petroleum Corporation to own, operate, acquire and develop midstream energy assets. With midstream assets in East and West Texas, the Rocky Mountains and the Mid-Continent, the Partnership is engaged in the business of gathering, compressing, processing, treating and transporting natural gas for Anadarko and other producers and customers. For more information about Western Gas Partners, please visit http://www.westerngas.com.

This news release contains forward-looking statements. Western Gas Partners believes that its expectations are based on reasonable assumptions. No assurance, however, can be given that such expectations will prove to have been correct. A number of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this news release. These factors include the ability to meet financial guidance or distribution growth expectations; the ability to obtain new sources of natural gas supplies; the effect of fluctuations in commodity prices and the demand for natural gas and related products; and construction costs or capital expenditures exceeding estimated or budgeted costs or expenditures, as well as other factors described in the “Risk Factors” section of the Partnership’s 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission and other public filings and press releases by Western Gas Partners. Western Gas Partners undertakes no obligation to publicly update or revise any forward-looking statements.

1 Please see the tables at the end of this release for a reconciliation of GAAP to non-GAAP measures.

Reconciliation of GAAP to Non-GAAP Measures

Below are reconciliations of Distributable Cash Flow and Adjusted EBITDA (non-GAAP) to Net Income (GAAP) as required under Regulation G of the Securities Exchange Act of 1934. Management believes that the presentation of Distributable Cash Flow and Adjusted EBITDA are widely accepted financial indicators of a company’s financial performance compared to other publicly traded partnerships and are useful in assessing our ability to incur and service debt, fund capital expenditures and make distributions. Distributable Cash Flow and Adjusted EBITDA, as defined by the Partnership, may not be comparable to similarly titled measures used by other companies. Therefore, the Partnership’s consolidated Distributable Cash Flow and Adjusted EBITDA should be considered in conjunction with net income and other performance measures, such as operating income or cash flow from operating activities.

Distributable Cash Flow

The Partnership defines Distributable Cash Flow as Adjusted EBITDA, plus interest income, less net cash paid for interest expense, maintenance capital expenditures and income taxes.

         
    Quarter Ended December 31,   Year Ended December 31,
   

 

2009

 

2008(1)

 

  2009  

2008(1)

 

   

 

(in thousands)

                         

Reconciliation of Net Income attributable to Western Gas Partners, LP to Distributable Cash Flow

                         

Net income attributable to Western Gas Partners, LP(2)

  $ 19,278   $ 21,987     $ 77,345   $ 73,658  
Add:                        
Distributions from equity investee     1,363     1,455       5,487     5,128  
Non-cash share-based compensation expense     844     1,140       3,580     1,924  
Expenses in excess of omnibus cap     842    

      842    

 
Interest expense, net (non-cash settled)    

   

     

    1,148  

Income tax expense(3)

    164     2,699       12     13,931  

Depreciation and amortization(3)

    9,757     8,792       37,858     34,568  
Impairments    

   

     

    9,354  
Less:                        
Equity income, net     1,653     896       6,982     4,736  
Cash paid for maintenance capital expenditures     4,018     7,098       15,929     17,519  
Interest income, net – affiliates (non-cash settled)    

    323      

   

 

Other income, net(3)

    11     37       37     179  
                         

Distributable cash flow(2)

  $ 26,566   $ 27,719     $ 102,176   $ 117,277  
 
(1)   Financial information for 2008 has been revised to include results attributable to the Chipeta assets.
(2)   Net income attributable to Western Gas Partners, LP and distributable cash flow include an out-of-period reduction in cost of product expense at the Hilight system of $2.5 million for the quarter ended December 31, 2009 and $1.8 million for the year ended December 31, 2009. Of the amount recorded in the fourth quarter of 2009, $1.8 million relates to the year ended December 31, 2008 while $0.7 million relates to the first three quarters of 2009.
(3)   Includes the Partnership’s 51% share of depreciation and amortization, other income, net and income tax expense attributable to Chipeta Processing LLC.
     
 

Reconciliation of GAAP to Non-GAAP Measures, continued

Adjusted EBITDA

The Partnership defines Adjusted EBITDA as Net Income (loss) attributable to Western Gas Partners, LP, plus distributions from equity investee, non-cash share-based compensation expense, expenses in excess of the omnibus cap, interest expense, income tax expense and depreciation, amortization and impairment, less income from equity investment, interest income, income tax benefit, other income and other nonrecurring adjustments that are not settled in cash.

         
   

Quarter Ended December 31,

 

Year Ended December 31,

    2009  

2008(1)

 

  2009  

2008(1)

 

    (in thousands)
                         
Reconciliation of Net Income attributable to Western Gas Partners, LP to Adjusted EBITDA
                         

Net income attributable to Western Gas Partners, LP(2)

  $ 19,278   $ 21,987     $ 77,345   $ 73,658  
Add:                        
Distributions from equity investee     1,363     1,455       5,487     5,128  
Non-cash share-based compensation expense     844     1,140       3,580     1,924  
Expenses in excess of omnibus cap     842    

      842    

 
Interest expense, net     3,257     288       9,955     1,512  

Income tax expense(3)

    164     2,699       12     13,931  

Depreciation and amortization(3)

    9,757     8,792       37,858     34,568  
Impairment    

   

     

    9,354  
                         
Less:                        
Equity income, net     1,653     896       6,982     4,736  
Interest income – affiliate     4,225     4,547       16,900     10,703  

Other income, net(3)

    11     37       37     179  
                         

Adjusted EBITDA(2)

  $ 29,616   $ 30,881     $ 111,160   $ 124,457  
 
(1)   Financial information for 2008 has been revised to include results attributable to the Chipeta assets.
(2)   Net income attributable to Western Gas Partners, LP and distributable cash flow include an out-of-period reduction in cost of product expense at the Hilight system of $2.5 million for the quarter ended December 31, 2009 and $1.8 million for the year ended December 31, 2009. Of the amount recorded in the fourth quarter of 2009, $1.8 million relates to the year ended December 31, 2008 while $0.7 million relates to the first three quarters of 2009.
(3)   Includes the Partnership’s 51% share of depreciation and amortization, other income, net and income tax expense attributable to Chipeta Processing LLC.
     
 
         

Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

         
    Quarter Ended   Year Ended
    December 31,   December 31,
    2009  

2008(1)

 

  2009  

2008(1)

 

    (in thousands except per-unit amounts)
                         
Revenues                
Gathering, processing and transportation of natural gas   $ 37,517   $ 37,836     $ 151,816   $ 138,864  
Natural gas, natural gas liquids and condensate sales     22,819     23,591       83,751     188,426  
Equity income and other     2,121     3,999       9,552     17,216  
Total revenues   $ 62,457   $ 65,426     $ 245,119   $ 344,506  
                         
Operating expenses                        

Cost of product(2)

  $ 13,657   $ 15,806     $ 51,136   $ 140,010  
Operation and maintenance     11,058     11,317       45,901     50,828  
General and administrative     5,069     5,780       20,136     15,345  
Property and other taxes     1,267     1,250       7,251     6,760  
Depreciation and amortization     10,424     9,152       40,065     36,042  
Impairment    

   

     

    9,354  
Total operating expenses   $ 41,475   $ 43,305     $ 164,489   $ 258,339  
                         
Operating income   $ 20,982   $ 22,121     $ 80,630   $ 86,167  
                         
Interest income, net     968     4,259       6,945     9,191  
Other income, net     11     37       42     196  
                         
Income before income taxes   $ 21,961   $ 26,417     $ 87,617   $ 95,554  
                         
Income tax expense (benefit)     164     2,699       12     13,988  
                         
Net income   $ 21,797   $ 23,718     $ 87,605   $ 81,566  
                         
Net income attributable to noncontrolling interests     2,519     1,731       10,260     7,908  
                         

Net income attributable to Western Gas Partners, LP

  $ 19,278   $ 21,987     $ 77,345   $ 73,658  
                         
Limited partner interest in net income:                
                         

Net income attributable to Western Gas Partners, LP

  $ 19,278   $ 21,987     $ 77,345   $ 73,658  
Less net income attributable to Parent    

    5,530       5,937     31,555  
Less general partner interest in net income     385     328       1,428     842  
Limited partner interest in net income   $ 18,893   $ 16,129     $ 69,980   $ 41,261  
                         

Net income per common unit – basic and diluted

  $ 0.33   $ 0.30     $ 1.25   $ 0.78  

Net income per subordinated unit – basic and diluted

  $ 0.33   $ 0.30     $ 1.24   $ 0.77  
 
(1)   Financial information for 2008 has been revised to include results attributable to the Chipeta assets.
(2)   Cost of product expense includes an out-of-period reduction at the Hilight system of $2.5 million for the quarter ended December 31, 2009 and $1.8 million for the year ended December 31, 2009. Of the amount recorded in the fourth quarter of 2009, $1.8 million relates to the year ended December 31, 2008 while $0.7 million relates to the first three quarters of 2009.
     
 
           

Western Gas Partners, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

           
   

December 31, 2009

   

December 31, 2008(1)

(in thousands)
               
Current assets   $ 79,863     $ 47,155
Note receivable – Anadarko     260,000       260,000
Net property, plant and equipment     700,496       686,353
Other assets     43,870       39,647
Total assets   $ 1,084,229     $ 1,033,155
               
Current liabilities   $ 18,113     $ 42,435
Notes payable – Anadarko     175,000       175,000
Other long-term liabilities     12,667       11,095
Total liabilities   $ 205,780     $ 228,530
               
Common unit partner capital (36,375 and 29,093 units issued and outstanding at December 31, 2009 and 2008, respectively)   $ 497,230  

 

$ 368,050
Subordinated unit partner capital (26,536 units issued and outstanding at December 31, 2009 and 2008)     276,571       275,917
General partner capital (1,284 and 1,135 units issued and outstanding at December 31, 2009 and 2008, respectively)     13,726       10,988
Parent net investment    

      83,654
Noncontrolling interest     90,922       66,016
Total liabilities, equity and Partners’ capital   $ 1,084,229     $ 1,033,155
 
(1)   Financial information for 2008 has been revised to include results attributable to the Chipeta assets.
     
 
     

Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

     
    Year Ended December 31,
    2009    

2008(1)

 

    (in thousands)
     
Cash flows from operating activities    
Net income   $ 87,605     $ 81,566  

Adjustments to reconcile net income to net cash provided by operating activities:

           
Depreciation, amortization and impairments     40,065       45,396  
Change in other items, net     (13,712 )     18,468  
Net cash provided by operating activities   $ 113,958     $ 145,430  
     
Cash flows from investing activities            
Acquisitions   $ (101,451 )   $ (175,000 )
Capital expenditures     (62,174 )     (99,491 )
Loan to Anadarko    

      (260,000 )
Investment in equity affiliate     (382 )     (8,095 )
Net cash used in investing activities   $ (164,007 )   $ (542,586 )
     
Cash flows from financing activities            
Proceeds from issuance of common and general partner units   $ 122,539     $ 315,161  
Reimbursement to Parent from offering proceeds    

      (45,161 )
Issuance of note payable to Anadarko     101,451       175,000  
Repayment of note payable to Anadarko     (101,451 )    

 
Revolving credit facility issuance costs     (4,263 )    

 
Contributions from noncontrolling interest owners and Parent     40,262       55,362  
Distributions to unitholders     (70,066 )     (24,814 )
Distributions to noncontrolling interest owners and Parent     (7,998 )     (37,869 )
Net pre-acquisition distributions to Anadarko     3,485       (4,449 )
Net cash provided by financing activities   $ 83,959     $ 433,230  
     
Net increase in cash and cash equivalents   $ 33,910     $ 36,074  
Cash and cash equivalents at beginning of period     36,074      

 
Cash and cash equivalents at end of period   $ 69,984     $ 36,074  
 
(1)   Financial information for 2008 has been revised to include results attributable to the Chipeta assets.
     
 
         

Western Gas Partners, LP

OPERATING STATISTICS

         
   

Quarter Ended December 31,

 

Year Ended December 31,

      2009    

2008(1)

 

    2009    

2008(1)

 

                 
Throughput (MMcf/d)                
Gathering and transportation     836     922       883     967  
Processing     412     380       396     283  

Equity investment(2)

    120     121       120     112  
Total throughput     1,368     1,423       1,399     1,362  
                 
Throughput attributable to noncontrolling interests     188     171       180     124  
Total throughput attributable to Western Gas Partners, LP     1,180     1,252       1,219     1,238  
                 

Gross margin per Mcf attributable to Western Gas Partners, LP(3)

  $ 0.41   $ 0.40     $ 0.40   $ 0.42  
 
(1)   Financial information for 2008 has been revised to include results attributable to the Chipeta assets.
(2)   Represents the Partnership’s proportionate share of volumes attributable to its 14.81% interest in Fort Union.
(3)   Average for period. Calculated as gross margin (total revenues less cost of product), excluding the noncontrolling interest owners’ proportionate share of Chipeta’s revenues and cost of product, divided by total throughput attributable to Western Gas Partners, LP.
 

SOURCE: Western Gas Partners, LP

Western Gas Partners, LP

Chris Campbell, CFA, 832.636.6012

[email protected]

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