Mergers & Acquisitions Topics

Mergers & Acquisitions

Western Gas Announces Acquisition and Third-Quarter 2008 Results

2008 NOV 24 - (VerticalNews.com) -- Western Gas Partners, LP (NYSE:WES) announced third-quarter 2008 financial and operating results for the Partnership. In addition, it announced that it had agreed to acquire certain midstream assets located in the Powder River Basin from Anadarko Petroleum Corporation (NYSE:APC) for total consideration of $210 million.

HIGHLIGHTS

-- Declared third-quarter cash distribution of $0.30 per unit

-- Generated quarterly distribution coverage of 1.27 times

-- Continued focus on capital discipline and operating cost management

-- Agreed to acquire midstream assets from Anadarko in exchange for $175 million cash and approximately 2.56 million common units, with the cash portion funded through the issuance of a note to Anadarko

"We're pleased with the third-quarter results and excited to announce our first asset acquisition following our initial public offering in May. The timing and financing of this acquisition clearly demonstrate our commitment to execute upon our growth strategy across market cycles," said Western Gas Partners' President and Chief Executive Officer Robert Gwin. "Our relationship with Anadarko provides us with substantial acquisition opportunities from a sponsor that is capable of financing transactions during challenging capital markets conditions."

"This transaction reflects Anadarko's commitment to grow the Partnership for the benefit of all Western Gas unitholders," said Anadarko's Chairman and Chief Executive Officer James Hackett.

FINANCIAL & OPERATING HIGHLIGHTS

Net income available to limited partners for the third quarter totaled $17.0 million, or $0.32 per limited partner unit on a diluted basis. Distributable cash flow(1) for the third quarter of 2008 was $20.7 million, which provided distribution coverage of 1.27 times the current quarterly distribution. On Oct. 24, 2008, the Board of Directors of the Partnership's general partner declared a quarterly cash distribution of $0.30 per unit for the third quarter of 2008 to be paid on Nov. 14, 2008 to all unitholders of record at the close of business on Oct. 31, 2008.

Total revenues for the third quarter of 2008 were $38.3 million, an increase of 33 percent over the third quarter of 2007. Adjusted EBITDA(1) of $20.3 million was approximately 11 percent higher than the prior-year comparable period. The increases in total revenues and Adjusted EBITDA are primarily due to higher gathering rates and improved margins from condensate sales.

Reported throughput volumes for the quarter were 990,000 Mmbtu/d, an increase of approximately 5 percent over the third quarter of 2007. The increase was primarily due to adjustments from prior periods related to the Haley System. Excluding prior-period adjustments, distribution coverage would have been approximately 1.22 times and throughput for the quarter would have decreased by approximately 2 percent relative to the prior-year comparable quarter.

Capital expenditures totaled approximately $9.8 million during the third quarter of 2008. Of this amount, maintenance capital expenditures were approximately $3.8 million, or 19 percent of Adjusted EBITDA, substantially below the initial forecast of 30 percent of Adjusted EBITDA. The Partnership has further reduced forecasted 2008 capital expenditures, from $39.8 million to $34.3 million, which includes estimated maintenance capital of $16.4 million.

"Our focus and discipline on capital spending has enabled us to continue to deliver distributable cash flow and distribution coverage in excess of forecast," said Danny Rea, Western Gas Partners' Senior Vice President and Chief Operating Officer.

MIDSTREAM ACQUISITION ANNOUNCEMENT

The Partnership also announced that it has agreed to acquire certain midstream assets from Anadarko for total consideration of $210 million. These assets are located in the Powder River Basin and are connected or adjacent to the Partnership's MIGC pipeline. Specifically, the Partnership has agreed to acquire Anadarko's 100-percent ownership interest in the Hilight System, its 50-percent interest in the Newcastle System and its 14.81-percent interest in Fort Union Gas Gathering, L.L.C. Each of these assets is operated by Anadarko.

"Upon closing, we expect the acquisition will be immediately accretive to distributable cash flow per unit. In addition, these assets enhance our position in the high-growth Powder River Basin, and provide our portfolio with substantial third-party business and organic growth opportunities," said Gwin.

The acquisition will be financed primarily with debt, through the issuance of a five-year, $175 million note to Anadarko, as well as through the issuance of 2,556,891 common units to Anadarko at an implied price of approximately $13.69 per unit. Following the transaction, the Partnership will continue to have substantial borrowing capacity and $100 million of availability under Anadarko's $1.3 billion credit facility.

The acquisition and financing transactions are expected to close in December 2008 and are subject to standard closing conditions and adjustments, including a right of first refusal related to the Newcastle System. Management will provide guidance for 2009 following the close of the transaction.

The terms of the transaction were unanimously approved by the board of directors of the Partnership's general partner, based in part on the unanimous recommendation from the board's special committee, which is comprised entirely of independent directors. The special committee engaged Tudor, Pickering, Holt & Co. to act as its financial advisor and to render a fairness opinion and Bracewell & Giuliani, LLP as its legal advisor.

CONFERENCE CALL TOMORROW AT 9 A.M. CST

The Partnership will host a conference call on Wednesday, Nov. 12, at 9 a.m. Central Standard Time (10 a.m. Eastern Standard Time) to discuss third-quarter results and the announced acquisition. The dial-in number is 1.800.573.4840 and the participant code is 75310583. For complete instructions on how to participate in the conference call, or to listen to 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 limited partnership formed by Anadarko Petroleum Corporation (NYSE:APC) 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, treating and transporting natural gas for Anadarko and other producers and customers. For more information about Western Gas Partners, please visit www.westerngas.com.

Keywords: Western Gas Partners, LP.