WES
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Western Gas Partners Announces Third-Quarter 2009 Results

HOUSTON–(BUSINESS WIRE)–Nov. 11, 2009– Western Gas Partners, LP (NYSE: WES) today announced third-quarter 2009 financial and operating results. Net income available to limited partners for the third quarter of 2009 totaled $16.7 million, or $0.30 per limited partner unit (diluted). The Partnership’s third-quarter Adjusted EBITDA (1) was $26.4 million and distributable cash flow (1) was$24.2 million, resulting in a coverage ratio of 1.33 times for the period.

Total throughput attributable to Western Gas Partners, LP for the third quarter of 2009 averaged 1,209 MMcf/d, 3 percent below the prior quarter and approximately 8 percent below the third quarter of 2008. These results include the net throughput attributable to Chipeta for all periods of comparison.

Capital expenditures attributable to Western Gas Partners, LP totaled approximately $5.2 millionduring the third quarter of 2009. Of this amount, maintenance capital expenditures were approximately $3.3 million, or 12 percent of Adjusted EBITDA.

“While the positive effects of our recent Chipeta acquisition are apparent in the third quarter results, we are also very pleased by the continued performance of our other assets given the current overall market conditions,” said Western Gas Partners’ Chairman and Chief Executive Officer Robert Gwin. “The stability of our distributable cash flow, combined with a focus on cost reduction and capital spending discipline, enabled us to raise our distribution again while maintaining a strong coverage ratio. Together with the closing of our recently announced bank facility, this performance indicates our continuing ability to execute our growth strategy and deliver value to our unitholders.”

The Partnership previously declared a quarterly distribution of $0.32 per unit for the third quarter of 2009, payable on Nov. 13, 2009 to unitholders of record at the close of business on Oct. 30, 2009, representing a 3.2-percent increase over the prior quarter and an aggregate increase of 6.7 percent over the prior year. The third quarter coverage ratio of 1.33 times is based on the current quarterly distribution of $0.32 per unit.

CONFERENCE CALL TOMORROW AT 9 A.M. CST

The Partnership will host a conference call on Nov. 12, at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) to discuss third-quarter results. The dial-in number for the call is 888-713-4214 and the participant code is 95827064. For complete instructions on how to participate in the conference call, or to access the live audio webcast and slide presentation, please visitwww.westerngas.com. A replay of the call will also be available on the Web site for approximately two weeks following the conference call.

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

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 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.

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 provides information useful in assessing the Partnership’s financial condition and results of operations and that Distributable Cash Flow and Adjusted EBITDA are widely accepted financial indicators of a company’s 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.

    Three Months Ended Sept 30,   Nine Months Ended Sept 30,
    2009  

2008(1)

 

2009(1)

 

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

  $ 17,048   $ 17,949     $ 58,065     $ 51,671  
Add:                
Distributions from equity investee     1,555     1,422       4,125       3,673  
Non-cash share-based compensation expense     948     524       2,736       785  

Interest expense, net – affiliates (non-cash settled)

       

 

 

   

 

 

1,470

 
Income tax expense     171                 11,289  

Depreciation and amortization(2)

    9,586     9,012       28,101       25,775  
Impairments         9,354             9,354  
Less:                
Equity income, net     1,794     1,539       5,329       3,840  
Cash paid for maintenance capital expenditures     3,288     4,989       11,911       10,422  

Interest income, net – affiliates (non-cash settled)

        472              

Other income, net(2)

    12     110       27       142  
Income tax benefit         1,463       152        
                 
Distributable cash flow   $ 24,214   $ 29,688     $ 75,608     $ 89,613  
 

(1) Financial information for 2008 and the first six months of 2009 has been revised to include results attributable to the Chipeta assets.

(2) Includes the Partnership’s 51% share of depreciation and amortization and other income, net 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, interest expense, income tax expense and depreciation, amortization and impairment, less income from equity investment, interest income, income tax benefit and other income.

   

Three Months Ended

September 30,

 

Nine Months Ended 

September 30,

    2009  

2008(1)

 

2009(1)

 

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

  $ 17,048   $ 17,949     $ 58,065     $ 51,671  
Add:                
Distributions from equity investee     1,555     1,422       4,125       3,673  

Non-cash share-based compensation expense

    948     524       2,736       785  
Interest expense, net – affiliates     3,127     36       6,698       1,546  
Income tax expense     171                 11,289  

Depreciation and amortization(2)

    9,586     9,012       28,101       25,775  
Impairment         9,354             9,354  
                 
Less:                
Equity income, net     1,794     1,539       5,329       3,840  
Interest income – affiliate     4,225     4,697       12,675       6,478  

Other income, net(2)

    12     110       27       142  
Income tax benefit         1,463       152        
                 
Adjusted EBITDA   $ 26,404   $ 30,488     $ 81,542     $ 93,633  
 

(1) Financial information for 2008 and the first six months of 2009 has been revised to include results attributable to the Chipeta assets.

(2) Includes the Partnership’s 51% share of depreciation and amortization and other income, net attributable to Chipeta Processing LLC.

Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2009  

2008(1)

 

2009(1)

 

2008(1)

    (in thousands except per-unit amounts)
                 
Revenues                
Gathering, processing and transportation of natural gas   $ 37,952   $ 35,132     $ 114,299     $ 101,028  
Natural gas, natural gas liquids and condensate sales     20,591     53,428       60,932       164,834  
Equity income and other     2,453     6,022       7,430       13,218  
Total revenues   $ 60,996   $ 94,582     $ 182,661     $ 279,080  
                 
Operating expenses                
Cost of product   $ 12,888   $ 40,912     $ 37,479     $ 124,204  
Operation and maintenance     11,741     14,001       34,841       39,512  
General and administrative     5,980     4,332       15,067       9,564  
Property and other taxes     1,876     1,630       5,984       5,510  
Depreciation and amortization     10,216     9,380       29,642       26,890  
Impairment         9,354             9,354  
Total operating expenses   $ 42,701   $ 79,609     $ 123,013     $ 215,034  
                 
Operating income   $ 18,295   $ 14,973     $ 59,648     $ 64,046  
                 
Interest income, net – affiliates     1,098     4,661       5,977       4,932  

Other income, net

    13     126       29       159  
                 
Income before income taxes   $ 19,406   $ 19,760     $ 65,654     $ 69,137  
                 
Income tax expense (benefit)     171     (1,463 )     (152 )     11,289  
                 
Net income   $ 19,235   $ 21,223     $

65,806

    $ 57,848  
                 
Net income attributable to noncontrolling interests     2,187     3,274       7,741       6,177  
                 

Net income attributable to Western Gas Partners, LP

  $ 17,048   $ 17,949     $ 58,065     $ 51,671  
                 
Limited partner interest in net income:                
                 
Net income   $ 17,048   $ 17,949     $ 58,065     $ 51,671  
Less predecessor interest in net income         553       5,935       26,026  
Less general partner interest in net income     341     348       1,043       513  
Limited partner interest in net income   $ 16,707   $ 17,048     $ 51,087     $ 25,132  
                 

Net income per common unit – basic and diluted

  $ 0.30   $ 0.32     $ 0.92     $ 0.48  

Net income per subordinated unit – basic and diluted

  $ 0.30   $ 0.32     $ 0.91     $ 0.47  
 

____________________________

(1) Financial information for 2008 and the first six months of 2009 has been revised to include results attributable to the Chipeta assets.

Western Gas Partners, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

         
   

September 30,

2009

 

 

December 31, 

2008(1)

(in thousands)        
         
Current assets   $ 62,335   $ 47,155
Note receivable – Anadarko     260,000     260,000
Net property, plant and equipment     696,657     686,353
Other assets     40,897     39,647
Total assets   $ 1,059,889   $ 1,033,155
         
Current liabilities   $ 21,538   $ 42,435
Notes payable – Anadarko     276,451     175,000
Other long-term liabilities     11,173     11,095
Total liabilities   $ 309,162   $ 228,530
         

Common unit partner capital (29,474 and 29,093 units issued and outstanding at September 30, 2009 and December 31, 2008, respectively)

  $ 377,032

 

$ 368,049
Subordinated unit partner capital (26,536 units issued and outstanding at September 30, 2009 and December 31, 2008)     276,019     275,917
General partner capital (1,143 and 1,135 units issued and outstanding at September 30, 2009 and December 31, 2008, respectively)     11,221     10,988
Parent net investment         83,655
Noncontrolling interest     86,455     66,016
Total liabilities, equity and Partners’ capital   $ 1,059,889   $ 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

       
  Nine Months Ended September 30,
 

2009(1)

 

2008(1)

  (in thousands)
       
Cash flows from operating activities      
Net income $ 65,806     $ 57,848  

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

     
Depreciation, amortization and impairments   29,642       36,244  
Deferred income tax expense (benefit)   (336 )     2,433  
Change in other items, net   (15,461 )     8,190  
Net cash provided by operating activities $ 79,651     $ 104,715  
       
Cash flows from investing activities      
Chipeta acquisition $ (101,451 )   $  
Capital expenditures   (41,500 )     (68,930 )
Loan to Anadarko         (260,000 )
Investment in equity affiliate   (264 )     (8,095 )
Net cash used in investing activities $ (143,215 )   $ (337,025 )
       
Cash flows from financing activities      
Proceeds from issuance of common units $     $ 315,161  
Reimbursement to Parent from offering proceeds         (45,161 )
Issuance of note payable to Anadarko   101,451        
Contributions from noncontrolling interest owners and Parent   40,745       148,356  
Distributions to unitholders   (51,777 )     (8,567 )
Distributions to noncontrolling interest owners and Parent   (5,737 )     (19,734 )
Net pre-acquisition distributions to Anadarko   (1,169 )     (106,355 )
Net cash provided by financing activities $ 83,513     $ 283,700  
       
Net increase in cash and cash equivalents $ 19,949     $ 51,390  
Cash and cash equivalents at beginning of period   36,074        
Cash and cash equivalents at end of period $ 56,023     $ 51,390  
 

(1) Financial information for 2008 and the first six months of 2009 has been revised to include results attributable to the Chipeta assets.

Western Gas Partners, LP

OPERATING STATISTICS

         
    Three Months Ended

September 30,

  Nine Months Ended

September 30,

      2009     2008 (1)     2009(1)     2008(1)
                 
Throughput (MMcf/d)                
Gathering and transportation     876     1,010     899     982
Processing     392     346     389     250

Equity investment(2)

    119     111     120     110
Total throughput     1,387     1,467     1,408     1,342
                 
Throughput attributable to noncontrolling interests     178     155     176     109

Total throughput attributable to Western Gas Partners, LP

    1,209     1,312     1,232     1,233
                 

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

  $ 0.40   $ 0.41   $ 0.39   $ 0.43
 

____________________________

(1) Financial information for 2008 and the first six months of 2009 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 inFort 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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