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Western Gas Announces Fourth-Quarter and Full-Year 2008 Results
Provides Capital Program and Outlook for 2009

HOUSTON--(BUSINESS WIRE)--Mar. 10, 2009-- Western Gas Partners, LP (NYSE:WES) today announced fourth-quarter and full-year financial and operating results for 2008. The announced results include the full-year effect of the Partnership’s acquisition of Powder River assets fromAnadarko Petroleum Corporation (NYSE:APC), which closed in December 2008. In addition, the Partnership today announced its 2009 capital program and outlook for the year.

Net income available to limited partners(1) for 2008 totaled $41.3 million, or $0.77 per limited partner unit (diluted), with full-year 2008 Adjusted EBITDA of $112.5 million and full-year distributable cash flow of $105.2 million.(2)

Net income available to limited partners for the fourth quarter of 2008 totaled $16.1 million, or $0.30per limited partner unit (diluted). The Partnership’s fourth-quarter Adjusted EBITDA was $27.4 millionand distributable cash flow was $24.5 million, resulting in a coverage ratio of 1.44 times for the period. Adjusting these results to exclude the effects of the acquisitions and associated transaction costs, fourth-quarter Adjusted EBITDA and distributable cash flow would have been approximately$21.6 million and $19.1 million, respectively, which would have resulted in a coverage ratio of 1.18 times for the period.

“Western Gas achieved significant milestones during the year, completing our initial public offering and closing our first asset acquisition,” said Western Gas Partners’ President and Chief Executive Officer Robert Gwin. “Our business model is predominantly fee-based and minimizes direct exposure to commodity prices. This strategy, combined with the low capital intensity of our assets and our ability to manage operating costs, enabled us to deliver results consistent with expectations in a challenging market environment.”

Total throughput volumes for the quarter were 1,074 MMcf/d, an increase of approximately 2 percent over the fourth quarter of 2007.

Capital expenditures totaled approximately $12.8 million during the fourth quarter of 2008. Of this amount, maintenance capital expenditures were approximately $6.9 million. For the full-year 2008, the Partnership’s capital expenditures totaled $36.9 million, which included maintenance capital of$17.6 million, or 16 percent of Adjusted EBITDA, below the initial forecast of 30 percent of Adjusted EBITDA.

2009 CAPITAL PROGRAM AND OUTLOOK

The board of directors of the Partnership’s general partner has approved a 2009 capital budget of $31 million.

The Partnership’s 2009 performance will be driven primarily by system throughput, as its operations have minimal direct exposure to commodity prices. System throughput will be impacted by our customers’ successful drilling activity in the Partnership’s areas of operation, and the resulting volume of new production connected to our systems to offset natural field decline. Based on current expectations for drilling and completion activity, Adjusted EBITDA for 2009 is expected to be between $90 and $110 million. Total capital expenditures are expected to be between $27 and $31 million with maintenance capital expenditures expected to be between 15 percent and 20 percent of Adjusted EBITDA.

CONFERENCE CALL TOMORROW AT 9 A.M. CDT

The Partnership will host a conference call on March 11 at 9 a.m. Central Daylight Time (10 a.m. Eastern Daylight Time) to discuss fourth-quarter and year-end results and the outlook for 2009. The dial-in number is 1.888.680.0879 and the participant code is 52005646. 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 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, 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 Form S-1 registration statement filed with the Securities and Exchange Commission and other public filings and press releases by Western Gas PartnersWestern Gas Partners undertakes no obligation to publicly update or revise any forward-looking statements.

1 Excludes the results prior to the IPO and the results of the Powder River acquisitions prior to closing.

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

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.

 

Quarter Ended
December 31, 2008

   

Year Ended
December 31, 2008

  (in thousands)
             
Reconciliation of Net Income to Distributable Cash Flow and

Distributable Cash Flow Attributable to Initial Assets

           
             
Net income $ 20,113     $ 65,276
Add:            
Distributions from equity investee   1,455       5,128
Interest expense, net – affiliate (non-cash settled)        

1,147

Income tax expense   2,654       13,777
Depreciation and impairment   8,395       42,365
Less:            
Equity income, net   896       4,736
Cash paid for maintenance capital expenditures   6,908       17,624
Interest income, net – affiliate (non-cash settled)   324      
Other income   21       145
             
Distributable Cash Flow $ 24,468     $ 105,188
             

Less: Distributable cash flow attributable to Powder River acquisition

 

6,796

       

Add: Transaction costs

  1,455        
Distributable cash flow attributable to initial assets(1) $

19,127

       
             

(1) Initial assets refers to assets contributed to the Partnership in connection with its initial public offering and consists of Anadarko Gathering Company LLC, Pinnacle Gas Treating LLC and MIGC LLC.

 

Adjusted EBITDA

The Partnership defines Adjusted EBITDA as net income (loss), plus distributions from equity investee and interest expense, income tax expense, and depreciation and impairment, less income from equity investment, interest income, income tax benefit and other income (expense).

    Quarter Ended December 31,   Year Ended December 31,
    2008   2007(1)

 

  2008   2007(1)

 

    (in thousands)
                         
Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDA attributable to Initial Assets                        
                         
Net Income   $ 20,113   $ 11,900     $ 65,276   $ 36,658  
Add:                        
Distributions from equity investee     1,455     1,348       5,128     1,348  
Interest expense, net – affiliates         1,645       1,259     7,805  
Interest expense from note – affiliate     253           253      
Income tax expense     2,654     5,493       13,777     19,540  
Depreciation and impairment     8,395     7,722       42,365     30,481  
Other expense         15           15  
Less:                        
Equity income, net     896     935       4,736     4,017  
Interest income, net – affiliates     288                
Interest income from note – affiliate     4,224           10,703      
Other income     21           145      
                         
Adjusted EBITDA   $ 27,441   $ 27,188     $ 112,474   $ 91,830  
                         
Less: Adjusted EBITDA attributable to Powder River acquisition   $

7,309

                 

Add: Transaction costs

    1,455                  

Adjusted EBITDA attributable to initial assets(2)

 

$

21,587

                 
                         

(1) Financial information for 2007 has been revised to include results attributable to the Powder River acquisition.

(2) Initial assets refers to assets contributed to the Partnership in connection with its initial public offering and consists of Anadarko Gathering Company LLC, Pinnacle Gas Treating LLC and MIGC LLC.

 

Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

         
    Quarter Ended   Year Ended
    December 31,   December 31,
    2008   2007(1)   2008   2007(1)
    (in thousands, except per-unit amounts)
                         
Revenues                        

Gathering, processing and transportation of natural gas

  $ 30,379   $ 27,713   $ 123,540   $ 104,026

Natural gas, natural gas liquids and condensate sales

    23,034     40,940     170,891     148,923
Equity income and other     3,999     1,811     17,217     8,544
Total Revenues   $ 57,412   $ 70,464   $ 311,648   $ 261,493
                         
Operating Expenses                        
Cost of product   $ 14,479   $ 26,904   $ 134,715   $ 112,283
Operation and maintenance     9,525     12,718     44,765     40,756
General and administrative     5,541     2,557     14,385     8,364
Property and other taxes     985     1,510     5,701     5,591
Depreciation     8,395     7,722     33,011     30,481
Impairment             9,354    
Total Operating Expenses   $ 38,925   $ 51,411   $ 241,931   $ 197,475
     

 

                 
Operating Income   $ 18,487   $ 19,053   $ 69,717   $ 64,018
                         
Interest income (expense), net – affiliates     4,259     (1,645)     9,191     (7,805)
Other income (expense)     21     (15)     145     (15)
                         
Income Before Income Taxes   $ 22,767   $ 17,393   $ 79,053   $ 56,198
                         
Income Tax Expense     2,654     5,493     13,777     19,540
                         
Net Income   $ 20,113   $ 11,900   $ 65,276   $ 36,658
                         
Calculation of Limited Partner Interest in Net Income:                        
                         
Net income   $ 20,113     n/a   $ 65,276     n/a
Less predecessor interest in net income     3,655     n/a     23,173     n/a
Less general partner interest in net income     329     n/a     842     n/a
Limited partner interest in net income   $ 16,129     n/a   $ 41,261     n/a
                         
Net income per limited partner unit – basic   $ 0.30     n/a  

$

0.78     n/a
Net income per limited partner unit – diluted   $ 0.30     n/a   $ 0.77     n/a
                         
Limited partner units outstanding – basic     53,434     n/a     53,216     n/a
Limited partner units outstanding – diluted     53,464     n/a     53,246     n/a
                         

(1) Financial information for 2007 has been revised to include results attributable to the Powder River acquisition.

 

Western Gas Partners, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

       
  December 31,
2008
  December 31,
2007(1)
  (in thousands)
   
Cash and cash equivalents $ 33,306   $
Other current assets   12,073     9,658
Note receivable – Anadarko   260,000    
Net property, plant and equipment   517,815     511,775
Goodwill   14,436     12,347
Equity investment   18,183     10,511
Other assets   628     27
Total Assets $ 856,441   $ 544,318
           
Accounts payable $ 5,544   $ 3,737
Other current liabilities   10,797     8,640
Note payable – Anadarko   175,000    
Other long-term liabilities   10,146     139,801
Total Liabilities $ 201,487   $ 152,178
           
Common unit partner capital 
(29,093 units issued and outstanding at December 31, 2008)
$ 368,049

 

$
Subordinated unit partner capital 
(26,536 units issued and outstanding at December 31, 2008)
  275,917    
General partner capital 
(1,135 units issued and outstanding at December 31, 2008)
  10,988    
Parent net investment       392,140
Total Partners’ Capital and Parent Net Investment $ 654,954   $ 392,140

Total Liabilities, Partners’ Capital and Parent Net Investment

$ 856,441   $ 544,318
           

(1) Financial information as of December 31, 2007 has been revised to include assets, liabilities and parent net equity attributable to the Powder River acquisition.

 

Western Gas Partners, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

   
  Year Ended December 31,
  2008     2007(1)

 

  (in thousands)
   
Cash Flows from Operating Activities  
Net income $ 65,276     $ 36,658  

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

         
Depreciation and impairment   42,365       30,481  
Deferred income taxes   1,624       10,816  
Changes in assets and liabilities:          
(Increase) in accounts receivable   (4,047 )     (3,466 )
(Increase) in natural gas imbalance receivable   (912 )     (226 )
Increase (decrease) in accounts payable and accrued expenses   4,840       142  
Increase (decrease) in other items, net   650       (1,497 )
Net cash provided by operating activities $ 109,796     $ 72,908  
   
Cash Flows from Investing Activities          
Capital expenditures $ (36,864 )   $ (54,328 )
Acquisition of Powder River Basin operations   (175,000 )      
Investment in equity – affiliate   (8,095 )      
Loan to Anadarko   (260,000 )      
Net cash used in investing activities $ (479,959 )   $ (54,328 )
   
Cash Flows from Financing Activities          
Proceeds from issuance of common units $ 315,161     $  
Issuance of note payable to Anadarko   175,000        
Reimbursement of capital expenditures to parent   (45,161 )      
Distributions to unitholders   (24,814 )      
Net advance to parent   (16,717 )     (19,038 )
Net cash provided by (used in) financing activities $ 403,469     $ (19,038 )
   
Net Increase (Decrease) in Cash and Cash Equivalents   33,306       (458 )
Cash and Cash Equivalents at Beginning of Period         458  
Cash and Cash Equivalents at End of Period $ 33,306     $  
           

(1) Financial information for 2007 has been revised to include results attributable to the Powder River acquisition.

 

Western Gas Partners, LP

Operating Statistics

       
  Quarter Ended   Year Ended
  December 31,   December 31,
  2008   2007(1)   2008   2007(1)
 

 

                       
Throughput volumes (MMcf/d)                      
Gathering and transportation   923     946     966     1,007
Processing   30     29     30     30
Reported throughput   953     975     996     1,037
Equity investment(2)   121     82     112     84
Total throughput   1,074     1,057     1,108     1,121
                       
Average gross margin per Mcf(3) $ 0.44   $ 0.47   $ 0.44   $ 0.37
                       

(1) Operating statistics for 2007 have been revised to include results attributable to the Powder River acquisition.

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

(3) Calculated as gross operating margin (operating revenues less cost of product) divided by reported throughput.

 

Source: Western Gas Partners, LP

Western Gas Partners, LP
Chris Campbell, CFA, 832-636-6012
chris.campbell@westerngas.com


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