WES
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Western Gas Partners Announces Fourth-Quarter and Full-Year 2010 Results

HOUSTON, Feb 23, 2011 (BUSINESS WIRE) — Western Gas Partners, LP (NYSE: WES) today announced fourth-quarter and full-year financial and operating results for 2010. The announced results include the full-year effect of the Partnership’s acquisition of the Granger and Wattenberg assets in 2010. In addition, the Partnership today announced its outlook for 2011.

Net income available to limited partners for 2010, which includes results associated with Granger for the full year and the Wattenberg assets from July 2010 forward, totaled $111.1 million, or $1.64 per limited partner unit (diluted), with full-year 2010 Adjusted EBITDA(1) of $214.8 million and full-year Distributable cash flow(1) of $190.1 million.

Net income available to limited partners for the fourth-quarter of 2010 totaled $34.0 million, or $0.46 per limited partner unit (diluted). The Partnership’s fourth-quarter Adjusted EBITDA(1) was $57.8 million and Distributable cash flow(1) was $50.0 million.

The Partnership previously declared a quarterly distribution of $0.38 per unit for the fourth quarter of 2010, paid on February 11, 2011 to unitholders of record at the close of business on February 1, 2011, representing a 3-percent increase over the prior quarter and a 15-percent increase over the fourth-quarter 2009 distribution of $0.33 per unit. The fourth-quarter 2010 coverage ratio of 1.64 times is based on the $0.38 per unit distribution and includes the full impact of the 8.4 million units issued to the public in November 2010.

“2010 was a great year in which we completed two major acquisitions of high-quality midstream assets in liquids-rich basins with active drilling programs,” said Western Gas Partners’ President and Chief Executive Officer Don Sinclair. “We increased our distribution every quarter during the year while continuing to maintain conservative coverages.”

Total throughput attributable to the Partnership for the fourth quarter averaged 1.62 Bcf/d, flat with the prior quarter and 4 percent below the fourth quarter of 2009. For the full year, throughput attributable to the Partnership averaged 1.63 Bcf/d, 5 percent below the prior year average.

Capital expenditures attributable to the Partnership totaled approximately $13.5 million during the fourth quarter. Of this amount, maintenance capital expenditures were approximately $5.6 million, or 10 percent of Adjusted EBITDA(1). For the full-year 2010, capital expenditures attributable to the Partnership totaled $75.5 million, which include the full-year capital expenditures associated with the Wattenberg assets we acquired in July 2010.

(1) Please see the tables at the end of this release for a reconciliation of non-GAAP to GAAP measures and calculation of the coverage ratio.

2011 OUTLOOK

Based on current expectations and assuming the previously announced Fort Lupton acquisition from Encana closes on March 1, 2011, Adjusted EBITDA for 2011 is expected to be between $230 million and $250 million. Total capital expenditures excluding acquisitions are expected to be between $97 million and $112 million with maintenance capital expenditures expected to be between 11 percent and 14 percent of Adjusted EBITDA. The 2011 capital expenditure forecast includes the Encana Fort Lupton facility expansion already underway as well as the sanctioning of a third train at Chipeta Processing LLC.

CONFERENCE CALL TOMORROW AT 11 A.M. CST

Management will host a conference call on Thursday, February 24, 2011, at 11 a.m. Central Standard Time (12 p.m. Eastern Standard Time) to discuss fourth-quarter and full-year 2010 results and the outlook for 2011. To participate via telephone, please dial 888-679-8035 and enter participant code 32025769. Please call in 10 minutes prior to the scheduled start time. To access the live audio webcast of the conference call and slide presentation, please visit 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 www.westerngas.com.

This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 2009 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.

Reconciliation of GAAP to Non-GAAP Measures

Below are reconciliations of Distributable cash flow (non-GAAP) 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, Adjusted EBITDA and Coverage ratio 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, Adjusted EBITDA and Coverage ratio, 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, Adjusted EBITDA and Coverage ratio 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   Year Ended
      December 31,   December 31,
      2010   2009   2010   2009
                           
      (in thousands, except coverage ratio)
                           
Reconciliation of Net income attributable to Western Gas Partners, LP to Distributable cash flow
and calculation of the Coverage ratio
Net income attributable to                        
  Western Gas Partners, LP   $ 35,143   $ 30,741   $ 126,068   $ 107,906
Add:                        
  Distributions from equity investees     2,316     1,407     5,935     5,552
  Non-cash equity-based compensation expense     2,970     844     4,787     3,580
  Expenses in excess of omnibus cap     133     842     133     842
  Income tax expense (1)     92     6,663     10,572     17,614
  Depreciation, amortization and impairments (1)     17,626     16,599     69,972     64,577
  Other expense, net (1)             2,126    
Less:                        
  Equity income, net     2,042     1,981     6,640     7,330
  Cash paid for maintenance capital expenditures (1)     5,563     5,933     22,314     23,916
  Cash paid for income taxes     507         507    
  Interest income, net (non-cash settled)         77     13     636
  Other income, net (1)     187     9         57
                           
Distributable cash flow   $ 49,981   $ 49,096   $ 190,119   $ 168,132
                           
Distribution declared for the                        
  three months ended December 31, 2010 (2)                      
  Limited partners   $ 29,478                  
  General partner     1,086                  
  Total   $ 30,564                  
                           
Distribution coverage ratio     1.64

x

 

             
 
     
(1)   Includes the Partnership’s 51% share of income tax expense; depreciation, amortization and impairments; other expense, net; cash paid for maintenance capital expenditures; and other income, net, attributable to Chipeta Processing LLC.
(2)   Reflects distribution of $0.38 per unit paid on February 11, 2011.
     
 

Adjusted EBITDA attributable to Western Gas Partners, LP

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

         
    Quarter Ended   Year Ended
    December 31,   December 31,
    2010   2009   2010   2009
                         
    (in thousands)
Reconciliation of Net income attributable to Western Gas Partners, LP to Adjusted EBITDA
Net income attributable to Western Gas Partners, LP   $ 35,143   $ 30,741   $ 126,068   $ 107,906
Add:                        
Distributions from equity investees     2,316     1,407     5,935     5,552
Non-cash equity-based compensation expense     2,970     844     4,787     3,580
Expenses in excess of omnibus cap     133     842     133     842
Interest expense     6,019     3,257     18,794     9,955
Income tax expense(1)     92     6,663     10,572     17,614
Depreciation, amortization and impairments (1)     17,626     16,599     69,972     64,577
Other expense, net (1)             2,126    
Less:                        
Equity income, net     2,042     1,981     6,640     7,330
Interest income – affiliate     4,225     4,302     16,913     17,536
Other income, net (1)     187     9         57
                         

Adjusted EBITDA attributable to

Western Gas Partners, LP

  $ 57,845   $ 54,061   $ 214,834   $ 185,103
 
     
(1)   Includes the Partnership’s 51% share of income tax expense; depreciation, amortization and impairments; other expense, net; cash paid for maintenance capital expenditures; and other income, net, attributable to Chipeta Processing LLC.
 
                           
Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)
                           
        Quarter Ended     Year Ended
        December 31,     December 31,
        2010     2009     2010     2009
        (in thousands, except per-unit amounts)
Revenues                          
Gathering, processing and transportation of                          
natural gas and natural gas liquids       $ 59,819       $ 57,356       $ 231,829       $ 226,399  
Natural gas, natural gas liquids and                          
condensate sales         62,028         61,885         258,820         253,618  
Equity income and other, net         5,263         2,490         12,673         10,529  
Total revenues       $ 127,110       $ 121,731       $ 503,322       $ 490,546  
                           
Operating expenses                          
Cost of product       $ 39,126       $ 32,772       $ 157,049       $ 164,072  
Operation and maintenance         19,448         23,184         83,459         89,535  
General and administrative         7,586         6,795         24,918         28,452  
Property and other taxes         2,575         2,846         13,454         13,566  
Depreciation, amortization and impairments         18,335         17,266         72,793         66,784  
Total operating expenses       $ 87,070       $ 82,863       $ 351,673       $ 362,409  
                           
Operating income       $ 40,040       $ 38,868       $ 151,649       $ 128,137  
                           
Interest income – affiliates         4,225         4,302         16,913         17,536  
Interest expense         (6,019 )       (3,257 )       (18,794 )       (9,955 )
Other income (expense), net         188         11         (2,123 )       62  
                           
Income before income taxes       $ 38,434       $ 39,924       $ 147,645       $ 135,780  
                           
Income tax expense         92         6,663         10,572         17,614  
                           
Net income       $ 38,342       $ 33,261       $ 137,073       $ 118,166  
                           
Net income attributable to noncontrolling interests         3,199         2,520         11,005         10,260  
                           
Net income attributable to                          
Western Gas Partners, LP       $ 35,143       $ 30,741       $ 126,068       $ 107,906  
                           
Limited partner interest in net income:                          
                           
Net income attributable to Western Gas Partners, LP       $ 35,143       $ 30,741       $ 126,068       $ 107,906  
Pre-acquisition net income allocated to Parent                 (11,463 )       (11,937 )       (36,498 )
General partner interest in net income         (1,178 )       (385 )       (3,067 )       (1,428 )
Limited partner interest in net income       $ 33,965       $ 18,893       $ 111,064       $ 69,980  
                           
Net income per unit – basic and diluted       $ 0.46       $ 0.33       $ 1.64       $ 1.24  
Weighted average limited partner units                          
outstanding – basic and diluted         73,388         57,658         67,823         56,220  
 
             
Western Gas Partners, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)
 
      December 31,     December 31,
      2010     2009
(in thousands, including number of units)
Current assets     $ 43,184     $ 86,264
Note receivable – Anadarko       260,000       260,000
Net property, plant and equipment       1,359,350       1,360,988
Other assets       103,003       81,666
Total assets     $ 1,765,537     $ 1,788,918
             
Current liabilities     $ 42,194     $ 35,157
Long-term debt       474,000       175,000
Other long-term liabilities       44,275       273,288
Total liabilities     $ 560,469     $ 483,445
             
Common unit partner capital (51,037 and 36,375 units issued and outstanding at     $ 810,717     $ 497,230
December 31, 2010 and 2009, respectively)            
Subordinated unit partner capital (26,536 units issued and outstanding at       282,384       276,571
December 31, 2010 and 2009)            
General partner capital (1,583 and 1,284 units issued and outstanding at       21,505       13,726
December 31, 2010 and 2009, respectively)            
Parent net investment      

      427,024
Noncontrolling interests       90,462       90,922
Total liabilities, equity and partners’ capital     $ 1,765,537     $ 1,788,918
 
             
Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
 
      Year Ended
      December 31,
      2010     2009
      (in thousands)
Cash flows from operating activities            
Net income     $ 137,073       $ 118,166  
Adjustments to reconcile net income to net cash provided by operating activities:            
Depreciation, amortization and impairments       72,793         66,784  
Change in other items, net       7,208         (20,080 )
Net cash provided by operating activities     $ 217,074       $ 164,870  
             
Cash flows from investing activities            
Capital expenditures     $ (76,834 )     $ (74,588 )
Acquisitions from affiliates       (734,780 )       (101,451 )
Acquisition from third parties       (18,047 )      

 
Investments in equity affiliates       (310 )       (382 )
Proceeds from sales of assets       5,630        

 
Net cash used in investing activities     $ (824,341 )     $ (176,421 )
             
Cash flows from financing activities            
Proceeds from issuance of common and general partner units, net of            
offering and other expenses     $ 345,803       $ 122,539  
Borrowings on revolving credit facility       409,988        

 
Issuance of Wattenberg term loan       250,000        

 
Issuance of note payable to Anadarko      

        101,451  
Repayment of note payable to Anadarko      

        (101,451 )
Repayments of revolving credit facility       (361,000 )      

 
Revolving credit facility issuance costs      

        (4,263 )
Distributions to unitholders       (94,194 )       (70,066 )
Net contributions from (distributions to) Anadarko       24,929         (35,013 )
Contributions from noncontrolling interest owners and Parent       2,053         40,262  
Distributions to noncontrolling interest owners and Parent       (13,222 )       (7,998 )
Net cash provided by financing activities     $ 564,357       $ 45,461  
             
Net (decrease) increase in cash and cash equivalents     $ (42,910 )     $ 33,910  
Cash and cash equivalents at beginning of period       69,984         36,074  
Cash and cash equivalents at end of period     $ 27,074       $ 69,984  
 
                                   
Western Gas Partners, LP

OPERATING STATISTICS

(Unaudited)
                                   
    Quarter Ended     Year Ended
    December 31,     December 31,
    2010     2009     2010     2009
                                   
Throughput (MMcf/d)                                  
Gathering and transportation (1)         996       1,094       1,031       1,145
Processing (2)         716       672       681       637
Equity investment (3)         115       120       116       120
Total throughput         1,827       1,886       1,828       1,902
                                   
Throughput attributable to noncontrolling interests         204       188       197       180
Total throughput attributable to         1,623       1,698       1,631       1,722
Western Gas Partners, LP                                  
                                   
Gross margin per Mcf attributable to   $     0.56     $ 0.54     $ 0.55     $ 0.49
Western Gas Partners, LP (4)                                  
 
(1)   Excludes natural gas liquids pipeline volumes measured in barrels.
(2)   Includes 100% of Chipeta system volumes and 50% of Newcastle system volumes.
(3)   Represents the Partnership’s proportionate share of volumes attributable to its 14.81% interest in Fort Union Gas Gathering, LLC, and excludes crude oil volumes measured in barrels attributable to the Partnership’s interest in White Cliffs Pipeline, LLC.
(4)   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. Calculation includes income attributable to the Partnership’s investments in Fort Union and White Cliffs and volumes attributable to the Partnership’s investment in Fort Union.
 

SOURCE: Western Gas Partners, LP

Western Gas Partners, LP

Benjamin Fink, CFA, 832-636-6010

SVP & Chief Financial Officer

[email protected]

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