WES
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Western Gas Partners Announces Third-Quarter 2010 Results

DJ-Basin10

HOUSTON, Nov 03, 2010 (BUSINESS WIRE) — Western Gas Partners, LP (NYSE: WES) today announced third-quarter 2010 financial and operating results. Net income available to limited partners for the third quarter of 2010 totaled $30.6 million, or $0.44 per limited partner unit (diluted). The Partnership’s third-quarter Adjusted EBITDA(1) was $52.8 million and distributable cash flow(1) was $45.4 million, resulting in a coverage ratio(1) of 1.72 times for the period.

Total throughput attributable to Western Gas Partners, LP for the third quarter of 2010 averaged 1,621 MMcf/d, relatively flat compared to the prior quarter and less than 5 percent below the third quarter of 2009. These results include the net throughput attributable to the acquired Granger and Wattenberg assets for all periods of comparison.

Capital expenditures attributable to Western Gas Partners, LP, excluding acquisitions, totaled approximately $12.6 million during the third quarter of 2010. Of this amount, maintenance capital expenditures were approximately $6.0 million, or 11 percent of Adjusted EBITDA.

“We delivered very strong financial and operational performance in the third quarter,” said Western Gas Partners’ President and Chief Executive Officer Don Sinclair. “Our employees continue their focus on maximizing margins through commodity risk mitigation, cost control and capital discipline, and because of this our portfolio delivered distributable cash flow well in excess of the recently declared quarterly distribution for the period.”

In September 2010, the Partnership acquired a 10 percent member interest in White Cliffs Pipeline, L.L.C. (White Cliffs) for $38.0 million using cash on hand. White Cliffs owns a crude oil pipeline that originates in Platteville, Colorado and terminates in Cushing, Oklahoma. The pipeline commenced operations in June 2009.

“Given the strategic location of the White Cliffs pipeline in the growing Wattenberg field and its proximity to the emerging horizontal Niobrara oil play, we are very encouraged by the commercial opportunities surrounding this asset,” said Sinclair.

The Partnership previously declared a quarterly distribution of $0.37 per unit for the third quarter of 2010, payable on November 12, 2010 to unitholders of record at the close of business on October 29, 2010, representing a 6-percent increase over the prior quarter and a 16-percent increase over the third-quarter 2009 distribution of $0.32 per unit. The third-quarter 2010 coverage ratio of 1.72 times is based on the quarterly distribution of $0.37 per unit.

(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.

2010 GUIDANCE UPDATE

As a result of its year-to-date performance and expectations for the fourth quarter, the Partnership has raised its full-year 2010 guidance for Adjusted EBITDA to a range of $170 to $180 million and has reduced its guidance for maintenance capital expenditures as a percent of Adjusted EBITDA to a range of 11 to 13 percent. The Partnership’s full-year 2010 guidance for total capital expenditures remains unchanged at a range of $40 to $45 million.

CONFERENCE CALL TOMORROW AT 11 A.M. CDT

The Partnership will host a conference call on November 4, 2010, at 11 a.m. Central Daylight Time (12 p.m. Eastern Daylight Time) to discuss third-quarter results. The dial-in number for the call is 888-680-0869 and the participant code is 27724240. Please call in 10 minutes prior to the scheduled start time. For complete instructions on how to participate in the conference call, or to access the live audio webcast and slide presentation, 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 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.

           
      Three Months Ended   Nine Months Ended
      September 30,   September 30,
      2010  

2009 (1)

  2010  

2009 (1)

                           
      (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   $ 31,481   $ 25,138   $ 90,925   $ 77,165
Add:                        
  Distributions from equity investees     1,381     1,575     3,619     4,145
  Non-cash share-based compensation expense     570     948     1,817     2,736
  Income tax expense     1,505     4,884     10,480     10,951
  Depreciation, amortization and impairments (2)     18,419     16,334     52,346     47,977
  Other expense, net (2)             2,313    
Less:                        
  Equity income, net     1,911     1,814     4,599     5,349
  Cash paid for maintenance capital expenditures (2)     5,983     4,555     16,750     17,984
  Interest income, net (non-cash settled)         111     13     559
  Other income, net (2)     62     32         47
                           
Distributable cash flow   $ 45,400   $ 42,368   $ 140,138   $ 119,035
                           
Distribution declared for the                        
  three months ended September 30, 2010 (3)                      
  Limited partners   $ 25,589                  
  General partner     792                  
  Total   $ 26,381                  
                           
Distribution coverage ratio     1.72

x

 

             
 
     
(1)   Financial information for 2009 has been revised to include results attributable to the Granger and Wattenberg assets and 0.4% interest in White Cliffs.
(2)   Includes the Partnership’s 51% share of depreciation, amortization and impairments, other income, net, income tax, and cash paid for maintenance capital expenditures attributable to Chipeta Processing LLC.
(3)   Reflects distribution of $0.37 per unit payable on November 12, 2010.
     
 

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 share-based compensation expense, expenses in excess of the omnibus cap, interest expense, income tax expense and depreciation, amortization and impairments, less income from equity investment, interest income, income tax benefit, other income and other nonrecurring adjustments that are not settled in cash.

      Three Months Ended   Nine Months Ended
      September 30,   September 30,
      2010   2009 (1)   2010   2009 (1)
                           
      (in thousands)
Reconciliation of Net income attributable to Western Gas Partners, LP to Adjusted EBITDA
Net income attributable to Western Gas Partners, LP   $ 31,481   $ 25,138   $ 90,925   $ 77,165
Add:                        
Distributions from equity investees     1,381     1,575     3,619     4,145
Non-cash share-based compensation expense     570     948     1,817     2,736
Interest expense, net     5,648     3,127     12,775     6,698
Income tax expense     1,505     4,884     10,480     10,951
Depreciation, amortization and impairments (2)     18,419     16,334     52,346     47,977
Other expense, net (2)             2,313    
Less:                        
Equity income     1,911     1,814     4,599     5,349
Interest income, net – affiliate     4,225     4,336     12,688     13,234
Other income, net (2)     62     32         47
                           
Adjusted EBITDA   $ 52,806   $ 45,825   $ 156,988   $ 131,042
 
     
(1)   Financial information for 2009 has been revised to include results attributable to the Granger and Wattenberg assets and 0.4% interest in White Cliffs.
(2)   Includes the Partnership’s 51% share of depreciation, amortization and impairments, other income, net, income tax, and cash paid for maintenance capital expenditures attributable to Chipeta Processing LLC.
 
 
Western Gas Partners, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                             
        Three Months Ended   Nine Months Ended
        September 30,   September 30,
        2010    

2009 (1)

 

  2010    

2009 (1)

 

                             
        (in thousands except per-unit amounts)
Revenues                            

Gathering, processing and transportation of natural gas

      $ 59,605     $ 56,581     $ 172,010     $ 169,043  

Natural gas, natural gas liquids and condensate sales (2)

        59,886       66,732       196,792       191,733  
Equity income and other, net         2,800       2,739       7,410       8,039  
Total revenues       $ 122,291     $ 126,052     $ 376,212     $ 368,815  
                             
Operating expenses                            
Cost of product (2)       $ 37,443     $ 44,955     $ 117,923     $ 131,300  
Operation and maintenance         19,414       21,911       64,011       66,351  
General and administrative         5,811       7,800       17,332       21,655  
Property and other taxes         3,610       3,454       10,879       10,720  
Depreciation, amortization and impairments         19,126       16,965       54,458       49,518  
Total operating expenses       $ 85,404     $ 95,085     $ 264,603     $ 279,544  
                             
Operating income       $ 36,887     $ 30,967     $ 111,609     $ 89,271  
                             
Interest income (expense), net         (1,423 )     1,209       (87 )     6,536  
Other income (expense), net         63       33       (2,311 )     50  
                             
Income before income taxes       $ 35,527     $ 32,209     $ 109,211     $ 95,857  
                             
Income tax expense         1,505       4,884       10,480       10,951  
                             
Net income       $ 34,022     $ 27,325     $ 98,731     $ 84,906  
                             
Net income attributable to noncontrolling interests         2,541       2,187       7,806       7,741  
                             
Net income attributable to                            
Western Gas Partners, LP       $ 31,481     $ 25,138     $ 90,925     $ 77,165  
                             
Limited partner interest in net income:                            
                             
Net income attributable to Western Gas Partners, LP       $ 31,481     $ 25,138     $ 90,925     $ 77,165  
Less pre-acquisition net income allocated to Parent         (36 )     (8,090 )     (11,937 )     (25,036 )
Less general partner interest in net income         (888 )     (341 )     (1,890 )     (1,042 )
Limited partner interest in net income       $ 30,557     $ 16,707     $ 77,098     $ 51,087  
                             
Net income per common unit –                            
basic and diluted       $ 0.44     $ 0.30     $ 1.17     $ 0.92  
Net income per subordinated unit –                            
basic and diluted       $ 0.44     $ 0.30     $ 1.17     $ 0.91  
Weighted average limited partner units                            
outstanding – basic and diluted         68,793       55,931       65,948       55,736  
 
     
(1)   Financial information for 2009 has been revised to include results attributable to the Granger and Wattenberg assets and 0.4% interest in White Cliffs.
(2)   Data reflects a reclassification for the effects of commodity price swap agreements attributable to product purchases.
 
 
Western Gas Partners, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
               
     

September 30,

  December 31,
      2010   2009 (1)
               
(in thousands, including number of units)
Current assets   $ 53,696   $ 86,264
Note receivable – Anadarko     260,000     260,000
Net property, plant and equipment     1,375,733     1,360,988
Other assets     103,809     81,666
Total assets   $ 1,793,238   $ 1,788,918
             
Current liabilities   $ 51,728   $ 35,157
Long-term debt     735,000     175,000
Other long-term liabilities     57,508     273,288
Total liabilities   $ 844,236   $ 483,445
               
Common unit partner capital (42,622 and 36,375 units issued and outstanding at   $ 562,400   $

497,230

September 30, 2010, and December 31, 2009, respectively)            
Subordinated unit partner capital (26,536 units issued and outstanding at     280,453    

276,571

September 30, 2010, and December 31, 2009)            
General partner capital (1,411 and 1,284 units issued and outstanding at     15,977    

13,726

September 30, 2010, and December 31, 2009, respectively)            
Parent net investment        

427,024

Noncontrolling interests     90,172     90,922
Total liabilities, equity and partners’ capital   $ 1,793,238   $ 1,788,918
 
     
(1)   Financial information for 2009 has been revised to include results attributable to the Wattenberg assets and 0.4% interest in White Cliffs.
 
           
Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
           
    Nine Months Ended
    September 30,
    2010    

2009 (1)

    (in thousands)
Cash flows from operating activities          
Net income   $ 98,731       $ 84,906  
Adjustments to reconcile net income to net cash provided by operating activities:          
Depreciation, amortization and impairments     54,458         49,518  
Change in other items, net     5,627         (9,698 )
Net cash provided by operating activities   $ 158,816       $ 124,726  
           
Cash flows from investing activities          
Wattenberg acquisition   $ (473,100 )    

$

 
White Cliffs acquisition     (38,047 )      

 
Granger acquisition     (241,680 )      

 
Chipeta acquisition    

        (101,451 )
Capital expenditures     (62,976 )       (58,993 )
Investments in equity affiliates     (310 )       (264 )
Proceeds from sales of assets     5,230        

 
Net cash used in investing activities   $ (810,883 )     $ (160,708 )
           
Cash flows from financing activities          
Borrowings, net of issuance costs   $ 669,987      

$

 
Repayments of revolving credit facility     (100,000 )      

 
Issuance of note payable to Anadarko    

        101,451  
Proceeds from issuance of common units, net of $4.3 million in offering     99,279        

 
and other expenses          
Distributions to unitholders     (67,813 )       (51,777 )
Contributions from noncontrolling interest owners and Parent     2,053         40,745  
Distributions to noncontrolling interest owners     (10,313 )       (5,737 )
Net contributions from (distributions to) Parent     25,290         (28,751 )
Net cash provided by financing activities   $ 618,483       $ 55,931  
           
Net (decrease) increase in cash and cash equivalents   $ (33,584 )     $ 19,949  
Cash and cash equivalents at beginning of period     69,984         36,074  
Cash and cash equivalents at end of period   $ 36,400       $ 56,023  
 
 
(1)   Financial information for 2009 has been revised to include results attributable to the Granger and Wattenberg assets and 0.4% interest in White Cliffs.
 
                 
Western Gas Partners, LP

OPERATING STATISTICS

(Unaudited)
                 
    Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2010  

2009 (1)

  2010  

2009 (1)

                 
Throughput (MMcf/d)                
Gathering and transportation(2)     994     1,144       1,043     1,163  
Processing (3)     707     614       668     623  
Equity investment (4)     115     119       117     120  
Total throughput     1,816     1,877       1,828     1,906  
                 

Throughput attributable to noncontrolling interests

    195     178       194     176  
Total throughput attributable to     1,621     1,699       1,634     1,730  
Western Gas Partners, LP                
                 
Gross margin per Mcf attributable to   $ 0.54   $ 0.49     $ 0.55   $ 0.48  
Western Gas Partners, LP (5)                
                 
 
(1)   Revised to include results attributable to the Granger and Wattenberg assets.
(2)   Excludes throughput related to oil and natural gas liquids.
(3)  

Includes 100% of Chipeta volumes and 50% of Newcastle system volumes.

(4)   Represents the Partnership’s proportionate share of volumes attributable to its 14.81% interest in Fort Union.
(5)   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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