WES
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Western Gas Partners Announces Third-Quarter 2012 Results

HOUSTON–(BUSINESS WIRE)–Oct. 31, 2012– Western Gas Partners, LP (NYSE: WES) today announced third-quarter 2012 financial and operating results. Net income available to limited partners for the third quarter totaled $31.5 million, or $0.33 per common unit (diluted). The Partnership’s third-quarter Adjusted EBITDA (1) was $84.5 million and Distributable cash flow (1) was $64.4 million, resulting in a Coverage ratio (1) of 1.14 times for the period.

Total throughput attributable to Western Gas Partners, LP for the third quarter of 2012 averaged 2,461 MMcf/d, 3 percent higher than the prior quarter and 10 percent above the third quarter of 2011. These results include the net throughput attributable to the Mountain Gas Resources (“MGR”) and Bison assets acquired from Anadarko Petroleum Corporation for all periods of comparison, throughput attributable to the Platte Valley system beginning March 2011, and throughput attributable to the recently acquired 24-percent interest in Chipeta Processing LLC (“Chipeta”) beginning August 2012. Capital expenditures attributable to Western Gas Partners, LP, excluding acquisitions, totaled approximately $141.5 million during the third quarter of 2012. Of this amount, maintenance capital expenditures were approximately $10.8 million, or 13 percent of Adjusted EBITDA.

“With recent compression additions in the rapidly expanding DJ Basin, our business model is performing as expected while we continue to manage downstream issues related to natural gas liquids,” said Western Gas Partners’President and Chief Executive Officer Don Sinclair. “The stable performance of our core portfolio combined with progress on our major capital projects enables us to announce the goal of raising our quarterly distribution by a minimum of 15 percent in 2013.”

The Partnership previously declared a quarterly distribution of $0.50 per unit for the third quarter of 2012, payable on November 13, 2012, to unitholders of record at the close of business on October 31, 2012, representing a 4-percent increase over the prior quarter and a 19-percent increase over the third-quarter 2011 distribution of $0.42 per unit.

CONFERENCE CALL TOMORROW AT 11 A.M. CDT

The Partnership will host a conference call on November 1, 2012, at 11 a.m. Central Daylight Time (12 p.m. Eastern Daylight Time) to discuss third-quarter results. To participate via telephone, please dial 877.621.4819 and enter participant code 37619281. 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 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 master limited partnership formed byAnadarko Petroleum Corporation to own, operate, acquire and develop midstream energy assets. With midstream assets in East, West and South Texas, the Rocky Mountains and the Mid-Continent, the Partnership is engaged in the business of gathering, processing, compressing, treating and transporting natural gas, condensate, natural gas liquids and crude oil 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. 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 safely and efficiently operate our assets; 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; the ability to meet projected in-service dates for capital growth projects; 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 most recent Form 10-K filed with theSecurities 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 non-GAAP to GAAP measures and calculation of the Coverage ratio.

Reconciliation of GAAP to Non-GAAP Measures

Below are reconciliations of Distributable cash flow (non-GAAP) to net income attributable to Western Gas Partners, LP (GAAP) and Adjusted EBITDA (non-GAAP) to net income attributable to Western Gas Partners, LP (GAAP) and net cash provided by operating activities (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 (as applicable), such as operating income or cash flows 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 (including amortization of deferred debt issuance costs originally paid in cash, offset by non-cash capitalized interest), maintenance capital expenditures and income taxes.

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
thousands except Coverage ratio 2012  

2011 (1)

  2012  

2011 (1)

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 $ 39,517   $ 45,306   $ 123,957   $ 134,229
Add:                      
  Distributions from equity investees   5,584     3,988     15,603     11,988
  Non-cash equity-based compensation expense   9,417     2,389     16,407     6,235
  Interest expense, net (non-cash settled)   81         244    
  Income tax expense   72     4,668     699     15,564
  Depreciation, amortization and impairments (2)   27,084     28,215     79,514     76,282
  Other expense (2)           1,665     3,683
Less:                      
  Equity income, net   3,804     2,660     10,752     7,682
  Cash paid for maintenance capital expenditures (2) (3)   10,819     10,306     25,543     20,584
  Capitalized interest   2,224     121     3,827     134
  Cash paid for income taxes   423     190     495     190
  Other income (2) (4)   125     7     187     1,761
  Interest income, net (non-cash settled)       4,348         6,317
Distributable cash flow $ 64,360   $ 66,934   $ 197,285   $ 211,313
                         
Distributions declared (5)                      
  Limited partners $ 47,968         $ 135,699      
  General partner   8,378           19,125      
  Total $ 56,346         $ 154,824      
Coverage ratio   1.14 x         1.27 x    
 
(1) Financial information has been recast to include results attributable to the MGR assets.
(2) Includes the Partnership’s 51% share prior to August 1, 2012 and 75% share after August 1, 2012, of depreciation, amortization and impairments; other expense; cash paid for maintenance capital expenditures; and other income attributable to Chipeta.
(3) Net of a prior period adjustment reclassifying approximately $0.7 million from capital expenditures to operating expenses for the nine months ended September 30, 2012.
(4) Excludes income of $0.4 million and $1.2 million for the three and nine months ended September 30, 2012, respectively, and $0.2 million and $1.0 million for the three and nine months ended September 30, 2011, respectively, related to a component of a gas processing agreement accounted for as a capital lease.
(5) Reflects distributions of $0.50 and $1.44 per unit declared for the three and nine months ended September 30, 2012, respectively.
   
 

Reconciliation of GAAP to Non-GAAP Measures, continued

Adjusted EBITDA attributable to Western Gas Partners, LP (“Adjusted EBITDA”)

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, expense in excess of the expense reimbursement cap provided in the omnibus agreement (which cap is no longer effective), interest expense, income tax expense, depreciation, amortization and impairments, and other expense, less income from equity investments, interest income, income tax benefit, and other income.

      Three Months Ended   Nine Months Ended
      September 30,   September 30,
thousands   2012    

2011 (1)

 

  2012    

2011 (1)

Reconciliation of Net income attributable to
  Western Gas Partners, LP to Adjusted EBITDA
Net income attributable to Western Gas Partners, LP   $ 39,517     $ 45,306     $ 123,957     $ 134,229  
Add:                              
  Distributions from equity investees     5,584       3,988       15,603       11,988  
  Non-cash equity-based compensation expense     9,417       2,389       16,407       6,235  
  Interest expense     10,977       8,930       30,118       21,738  
  Income tax expense     72       4,668       699       15,564  
  Depreciation, amortization and impairments (2)     27,084       28,215       79,514       76,282  
  Other expense (2)                 1,665       3,683  
Less:                              
  Equity income, net     3,804       2,660       10,752       7,682  
  Interest income, net – affiliates     4,225       8,573       12,675       18,992  
  Other income (2) (3)     125       7       187       1,761  
Adjusted EBITDA   $ 84,497     $ 82,256     $ 244,349     $ 241,284  
                                 
Reconciliation of Adjusted EBITDA to
  Net cash provided by operating activities
Adjusted EBITDA attributable to Western Gas Partners, LP   $ 84,497     $ 82,256     $ 244,349     $ 241,284  
Adjusted EBITDA attributable to noncontrolling interests     3,866       4,593       13,709       11,793  
Interest income (expense), net     (6,752 )     (357 )     (17,443 )     (2,746 )
Non-cash equity-based compensation expense     (9,417 )     (2,389 )     (16,407 )     (6,235 )
Current income tax expense     (60 )     (5,477 )     (185 )     (10,882 )
Other income (expense), net (3)     126       7       (1,475 )     (1,919 )

Distributions from equity investees less than (in excess of) equity income, net

    (1,780 )     (1,328 )     (4,851 )     (4,306 )
Changes in operating working capital:                              
  Accounts receivable and natural gas imbalance receivable     (604 )     1,891       5,062       (18,925 )
 

Accounts payable, accrued liabilities and natural gas imbalance payable

    62,600       16,301       71,420       30,359  
  Other     (3,766 )     (334 )     621       4,978  
Net cash provided by operating activities   $ 128,710     $ 95,163     $ 294,800     $ 243,401  
                                 
Cash flow information of Western Gas Partners, LP                              
Net cash provided by operating activities                   $ 294,800     $ 243,401  
Net cash used in investing activities                   $ (899,943 )   $ (405,241 )
Net cash provided by financing activities                   $ 426,078     $ 386,223  
 
(1) Financial information has been recast to include results attributable to the MGR assets.
(2) Includes the Partnership’s 51% share prior to August 1, 2012 and 75% share after August 1, 2012, of depreciation, amortization and impairments; other expense; and other income attributable to Chipeta.
(3) Excludes income of $0.4 million and $1.2 million for the three and nine months ended September 30, 2012, respectively, and $0.2 million and $1.0 million for the three and nine months ended September 30, 2011, respectively, related to a component of a gas processing agreement accounted for as a capital lease.
   
 
Western Gas Partners, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                           
      Three Months Ended   Nine Months Ended
      September 30,   September 30,
thousands except per-unit amounts   2012  

2011 (1)

  2012  

2011 (1)

                           
Revenues                        

Gathering, processing and transportation of natural gas and natural gas liquids

  $

78,219

    $ 75,686     $ 235,849     $ 222,432  

Natural gas, natural gas liquids and condensate sales

    136,106       137,860       386,818       371,800  
Equity income and other, net     4,695       4,000       13,936       13,836  
Total revenues     219,020       217,546       636,603       608,068  
Operating expenses                        
Cost of product     89,107       89,666       254,719       240,765  
Operation and maintenance     33,261       31,773       97,041       87,859  
General and administrative     14,554       8,597       34,233       24,630  
Property and other taxes     5,328       4,629       14,998       13,302  
Depreciation, amortization and impairments     27,528       28,935       81,270       78,413  
Total operating expenses     169,778       163,600       482,261       444,969  
Operating income     49,242       53,946       154,342       163,099  
Interest income, net – affiliates     4,225       8,573       12,675       18,992  
Interest expense     (10,977 )     (8,930 )     (30,118 )     (21,738 )
Other income (expense), net     522       258       (287 )     (895 )
Income before income taxes     43,012       53,847       136,612       159,458  
Income tax expense     72       4,668       699       15,564  
Net income     42,940       49,179       135,913       143,894  
Net income attributable to noncontrolling interests     3,423       3,873       11,956       9,665  

Net income attributable to Western Gas Partners, LP

  $ 39,517     $ 45,306     $ 123,957     $ 134,229  
Limited partners’interest in net income:                        

Net income attributable to Western Gas Partners, LP

  $ 39,517     $ 45,306     $ 123,957     $ 134,229  
Pre-acquisition net (income) loss allocated to Anadarko           (8,497 )           (28,497 )
General partner interest in net (income) loss     (8,042 )     (2,394 )     (18,508 )     (5,684 )
Limited partners’interest in net income   $ 31,475     $ 34,415     $ 105,449     $ 100,048  
                           
Net income per unit – basic and diluted                        
  Common units   $ 0.33     $ 0.41     $ 1.14     $ 1.32  
 

Subordinated units (2)

  $     $     $     $ 0.96  
Weighted average units outstanding – basic and diluted                        
  Common units     95,883       84,667       92,627       59,647  
  Subordinated units (2)                       21,968  
 
(1) Financial information has been recast to include results attributable to the MGR assets.
(2) All subordinated units were converted to common units on a one-for-one basis on August 15, 2011. For purposes of calculating net income per common and subordinated unit, the conversion of the subordinated units is deemed to have occurred on July 1, 2011.
   
 
Western Gas Partners, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
             
    September 30,   December 31,
thousands except number of units   2012   2011
             
Current assets   $ 78,239   $ 256,448
Note receivable – Anadarko     260,000     260,000
Net property, plant and equipment     2,342,923     2,052,224
Other assets     272,782     268,954
Total assets   $ 2,953,944   $ 2,837,626
             
Current liabilities   $ 210,081   $ 76,596
Long-term debt     1,010,435     669,178
Asset retirement obligations and other     71,109     174,546
Total liabilities   $ 1,291,625   $ 920,320
             
Equity and partners’capital            

Common units (95,934,351 and 90,140,999 units issued and outstanding at September 30, 2012, and December 31, 2011, respectively)

  $ 1,552,399   $ 1,495,253

General partner units (1,957,845 and 1,839,613 units issued and outstanding at September 30, 2012, and December 31, 2011, respectively)

    41,416     31,729
Net investment by Anadarko         269,600
Noncontrolling interests     68,504     120,724
Total liabilities, equity and partners’capital   $ 2,953,944   $ 2,837,626
             
 
Western Gas Partners, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
               
    Nine Months Ended
    September 30,
thousands   2012  

2011 (1)

       
Cash flows from operating activities            
Net income   $ 135,913     $ 143,894  
Adjustments to reconcile net income to net cash provided by operating activities:            
  Depreciation, amortization and impairments     81,270       78,413  
  Change in other items, net     77,617       21,094  
Net cash provided by operating activities   $ 294,800     $ 243,401  
               
Cash flows from investing activities            
Capital expenditures   $ (294,596 )   $ (78,573 )
Acquisitions from affiliates     (605,960 )     (25,000 )
Acquisitions from third parties           (301,957 )
Investments in equity affiliates     (147 )     (93 )
Proceeds from sale of assets to affiliates     760       382  
Net cash used in investing activities   $ (899,943 )   $ (405,241 )
               
Cash flows from financing activities            
Borrowings, net of debt issuance costs   $ 885,291     $ 1,055,939  
Repayments of debt     (549,000 )     (869,000 )

Proceeds from issuance of common and general partner units, net of offering expenses

    216,462       335,348  
Distributions to unitholders     (141,505 )     (99,795 )
Contributions from noncontrolling interest owners     26,888       16,876  
Distributions to noncontrolling interest owners     (14,303 )     (10,219 )
Net contributions from (distributions to) Anadarko     2,245       (42,926 )
Net cash provided by financing activities   $ 426,078     $ 386,223  
               
Net increase (decrease) in cash and cash equivalents   $ (179,065 )   $ 224,383  
Cash and cash equivalents at beginning of period     226,559       27,074  
Cash and cash equivalents at end of period   $ 47,494     $ 251,457  
 
(1) Financial information has been recast to include results attributable to the MGR assets.
   
 
Western Gas Partners, LP
OPERATING STATISTICS
(Unaudited)
                             
        Three Months Ended   Nine Months Ended
        September 30,   September 30,
MMcf/d except per-unit amounts   2012  

2011 (1)

  2012  

2011 (1)

                             
Throughput                        
  Gathering, treating and transportation (2)     1,201     1,274       1,255     1,327  
  Processing (3)     1,228     1,012       1,182     940  
  Equity investment (4)     236     212       236     191  
    Total throughput (5)     2,665     2,498       2,673     2,458  
  Throughput attributable to noncontrolling interests     204     258       254     237  
 

Total throughput attributable to Western Gas Partners, LP

    2,461     2,240       2,419     2,221  

Gross margin per Mcf attributable to Western Gas Partners, LP (6)

  $ 0.55   $ 0.59     $ 0.55   $ 0.58  
 
(1) Throughput has been recast to include volumes attributable to the MGR assets.
(2) Excludes average NGL pipeline volumes from the Chipeta assets of 22 MBbls/d and 25 MBbls/d for the three months ended September 30, 2012 and 2011, respectively, and 25 MBbls/d and 23 MBbls/d for the nine months ended September 30, 2012 and 2011, respectively.
(3) Consists of 100% of Chipeta, Granger, Hilight and Red Desert complex volumes, and 50% of Newcastle system volumes for all periods presented, as well as throughput beginning March 2011 attributable to the Platte Valley system.
(4) Represents our 14.81% share of Fort Union and 22% share of Rendezvous gross volumes, and excludes our 10% share of average White Cliffs pipeline volumes consisting of 6 MBbls/d and 4 MBbls/d for the three months ended September 30, 2012 and 2011, respectively, and 6 MBbls/d and 3 MBbls/d for the nine months ended September 30, 2012 and 2011, respectively.
(5) Includes affiliate, third-party and equity-investment volumes.
(6) Average for period. Calculated as gross margin, excluding the noncontrolling interest owners’proportionate share of revenues and cost of product, divided by total throughput attributable to the Partnership. Calculation includes income attributable to our investments in Fort Union, White Cliffs and Rendezvous and volumes attributable to our investments in Fort Union and Rendezvous.
 

Source: Western Gas Partners, LP

Western Gas Partners, LP

Benjamin Fink, CFA

SVP, Chief Financial Officer and Treasurer

832.636.6010

[email protected]

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