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Form 8-K Western Gas Partners LP For: Feb 24

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February 24, 2016 5:05 PM EST
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 8-K
 

 
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 
Date of Report (Date of earliest event reported): February 24, 2016
 
WESTERN GAS PARTNERS, LP
(Exact name of registrant as specified in its charter)
 
Delaware
(State or other jurisdiction
of incorporation or organization)
001-34046
(Commission
File Number)
26-1075808
(IRS Employer
Identification No.)
 
 
 
1201 Lake Robbins Drive
The Woodlands, Texas 77380-1046
(Address of principal executive office) (Zip Code)
 
 
 
(832) 636-6000
(Registrants’ telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Item 2.02 Results of Operations and Financial Condition.

On February 24, 2016, Western Gas Partners, LP and Western Gas Equity Partners, LP issued a joint press release announcing fourth-quarter and full-year 2015 results, as well as providing 2016 outlook. The press release is included in this report as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.
(d)    Exhibits
99.1
Press Release dated February 24, 2016.



SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
WESTERN GAS PARTNERS, LP
 
 
 
 
 
By:
Western Gas Holdings, LLC, its general partner
 
 
 
 
 
 
Dated:
February 24, 2016
By:
/s/ Donald R. Sinclair
 
 
 
Donald R. Sinclair
President and Chief Executive Officer



EXHIBIT INDEX


Exhibit
Number    Exhibit Title

99.1
Press Release dated February 24, 2016.




EXHIBIT 99.1

WESTERN GAS ANNOUNCES ACQUISITION AND
FOURTH-QUARTER AND FULL-YEAR 2015 RESULTS

ALSO PROVIDES 2016 OUTLOOK

HOUSTON, February 24, 2016 – Western Gas Partners, LP (NYSE: WES) (“WES” or the “Partnership”) today announced that it has agreed to acquire a 100% interest in Springfield Pipeline LLC (“Springfield”) from Anadarko Petroleum Corporation for $750.0 million. Springfield’s sole asset is a 50.1% interest in the Springfield oil and gas gathering system (the “Springfield system”), which gathers Anadarko’s and its partners’ Eagleford shale production in South Texas. The Springfield system consists of 548 miles of gas gathering lines with a capacity of 795 MMcf/d and 241 miles of oil gathering lines with a capacity of 130 MBbls/d, located in Dimmit, La Salle, Maverick and Webb Counties in South Texas. The assets to be acquired also include 24 compressor stations with centralized delivery points, 260,000 barrels of oil storage capacity and 75,000 Bbls/d of stabilization capacity.
The Springfield system generates 100% fee-based revenues through gathering agreements with four shippers having primary terms through December 31, 2034. Furthermore, approximately 75% of the annual volume forecast for the system is covered under minimum volume commitments from the four shippers throughout the term of the agreements. The transaction is expected to close by March 15, 2016, and will be immediately accretive to the Partnership, with the acquisition price representing an approximate 5.8 times multiple of the assets’ forecasted 2016 earnings before interest, taxes, depreciation and amortization. “This acquisition is a natural complement to our existing portfolio,” said Chief Executive Officer, Don Sinclair. “It is highly accretive to our distributable cash flow with limited volumetric risk, and marks our entry into the crude oil gathering and stabilization business, which offers us further business diversification.”

1


The Partnership intends to finance the acquisition through the issuance of $449 million in aggregate amount of 8.5% perpetual convertible preferred units (the “Preferred Units”) to First Reserve Advisors, L.L.C. and Kayne Anderson Capital Advisors, L.P., at a price of $32.00 per unit, the issuance of 1,253,761 and 835,841 WES common units at a price of $29.91 per common unit to Anadarko and Western Gas Equity Partners, LP (NYSE: WGP) (“WGP”), respectively, and the borrowing of $247.5 million on its revolving credit facility. The Preferred Units issuance includes an overallotment feature that may result in the issuance of up to an additional $252.6 million in aggregate amount of such units over the next 30 days, the net proceeds of which would be used to pay down the revolving credit facility borrowings. The Preferred Units will pay a distribution of $2.72 per year. After two years, the Preferred Units are convertible at the purchasers’ option into WES common units on a one for one basis (subject to customary anti-dilution adjustments), and are convertible at WES’s option in certain circumstances after three years. WGP will fund its WES unit purchase by drawing on a secured revolving credit facility that will close on or before the transaction closing date.
The terms of the acquisition were unanimously approved by the board of directors of the Partnership’s general partner, and by the board’s special committee, which is comprised entirely of independent directors. The Partnership’s special committee engaged Evercore Partners to act as its financial advisor and Bracewell LLP to act as its legal advisor. The WGP special committee engaged Robert W. Baird & Co. Incorporated to act as its financial advisor and Baker Botts L.L.P. to act as its legal advisor with respect to its purchase of WES common units.

2


FOURTH-QUARTER AND FULL-YEAR 2015 RESULTS
The Partnership and Western Gas Equity Partners, LP (NYSE: WGP) (“WGP”) today also announced fourth-quarter and full-year 2015 financial and operating results. “2015 was another year in which WES generated strong results” said Sinclair. “We delivered 15% distribution growth with a solid coverage ratio of 1.1 times, while maintaining investment grade credit metrics. We also exceeded the midpoint of our Adjusted EBITDA guidance despite losing a month of operations at our DBM complex due to the incident at the Ramsey plant and the divestment of our Dew and Pinnacle systems in July.”
Net income (loss) available to limited partners for both the Partnership and WGP includes the following: (i) impairment expense of $236.7 million and $501.1 million for the fourth quarter and year ended December 31, 2015, respectively, related to impairments at the Red Desert complex and the Hilight system, (ii) a net gain of $77.3 million associated with the divestiture of the Dew and Pinnacle systems in July 2015 and (iii) $20.3 million of net property losses associated with the incident at the DBM complex in December 2015. These items are excluded from the Partnership’s non-GAAP(1) measures.




                                                                                                                                                                                   
(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.

3


WESTERN GAS PARTNERS, LP
Net income (loss) available to limited partners for 2015 totaled $(256.3) million, or $(1.95) per common unit (diluted), with full-year 2015 Adjusted EBITDA(1) of $758.0 million and full-year 2015 Distributable cash flow(1) of $636.4 million.
Net income (loss) available to limited partners for the fourth quarter of 2015 totaled $(219.2) million, or $(1.60) per common unit (diluted), with fourth-quarter 2015 Adjusted EBITDA(1) of $188.7 million and fourth-quarter 2015 Distributable cash flow(1) of $162.2 million.
WES paid a quarterly distribution of $0.800 per unit for the fourth quarter of 2015. This distribution represented a 3% increase over the prior quarter’s distribution and a 14% increase over the fourth-quarter 2014 distribution of $0.700 per unit. The full-year 2015 distribution of $3.050 per unit represented a 15% increase over the full-year 2014 distribution of $2.650 per unit. The fourth-quarter 2015 Coverage ratio(1) of 1.06 times was based on the quarterly distribution of $0.800 per unit. The Partnership’s Coverage ratio(1) for full-year 2015 was 1.11 times.
Total throughput attributable to WES for natural gas assets for the fourth quarter of 2015 averaged 3.6 Bcf/d, which was 4% below the prior quarter and 1% above the fourth quarter of 2014. Total fourth quarter throughput was flat with the prior quarter when adjusted for the divestiture of the Dew and Pinnacle systems in July 2015 and the loss of volumes at the DBM complex in December 2015. For the full-year 2015, total throughput attributable to WES for natural gas assets averaged 3.9 Bcf/d, which was 8% above the prior-year average. Total throughput for crude/NGL assets for the fourth quarter of 2015 averaged 142 MBbls/d, which was 2% below the prior quarter and 8% above the fourth quarter of 2014. For full-year 2015, total throughput for crude/NGL assets averaged 138 MBbls/d, which was 19% above the prior-year average.




                                                                                                                                                                                   
(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.

4


Capital expenditures attributable to WES, including equity investments but excluding acquisitions, totaled $129.3 million on a cash basis and $119.9 million on an accrual basis during the fourth quarter of 2015, with maintenance capital expenditures on a cash basis of $12.7 million, or 7% of Adjusted EBITDA(1). For the full-year 2015, capital expenditures attributable to WES, including equity investments but excluding acquisitions, totaled $604.3 million on a cash basis and $536.4 million on an accrual basis, with maintenance capital expenditures on a cash basis of $49.3 million, or 7% of Adjusted EBITDA(1).
WESTERN GAS EQUITY PARTNERS, LP
WGP indirectly owns the entire general partner interest in WES, 100% of the incentive distribution rights in WES and 49,296,205 WES common units. Net income (loss) available to limited partners for 2015 totaled $86.1 million, or $0.39 per common unit (diluted). Net income (loss) available to limited partners for the fourth quarter of 2015 totaled $(30.8) million, or $(0.14) per common unit (diluted).
WGP paid a quarterly distribution of $0.40375 per unit for the fourth quarter of 2015. This distribution represented a 6% increase over the prior quarter’s distribution and a 29% increase over the fourth-quarter 2014 distribution of $0.31250. The full-year 2015 distribution of $1.49125 per unit represented a 33% increase over the full-year 2014 distribution. WGP received distributions from WES of $89.2 million attributable to the fourth quarter and will pay $88.4 million in distributions for the same period.




                                                                                                                                                                                   
(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.

5


2016 WES OUTLOOK
WES and WGP also announced their 2016 outlook:
•
Adjusted EBITDA(1) between $860 million and $950 million
•
Total capital expenditures (including equity investments but excluding acquisitions) between $450 million and $490 million
•
Maintenance capital expenditures between 7% and 10% of Adjusted EBITDA(1) 
•
Distribution Coverage ratio(1) of 1.1 times
•
WES distribution growth of 10%
•
WGP distribution growth of 20%
“2016 will be even more challenging for our industry than 2015. However, with the support of Anadarko and the strength of our portfolio, we believe we can continue to deliver meaningful distribution growth even in this commodity price environment,” said Sinclair. “As you would expect, the estimated size of our capital program will be lower than 2015, but even with this decline, we feel very fortunate to have ongoing projects in the prolific Delaware Basin. As commodity prices improve, we expect to see additional projects materialize in our key areas of operation.”
The 2016 outlook includes:
•
Full-year results from the Springfield acquisition;
•
No further acquisitions in 2016;
•
Start-ups of Ramsey Trains IV and V at the DBM complex in the second and third quarters of 2016, respectively;
•
Ramsey Train III returning to limited service in April and full service in conjunction with the start-up of Train IV; and
•
Recovery of all business interruption insurance proceeds related to losses at the DBM complex by the end of the year.




                                                                                                                                                                                    
(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.

6


CONFERENCE CALL TOMORROW AT 11 A.M. CST
WES and WGP will host a joint conference call on Thursday, February 25, 2016, at 11:00 a.m. Central Standard Time (12:00 p.m. Eastern Standard Time) to discuss fourth-quarter and full-year 2015 results and the outlook for 2016. Individuals who would like to participate should dial 844-836-8745 (Domestic) or 412-317-5439 (International) approximately 15 minutes before the scheduled conference call time. Pre-registration is available through the investor relations page at www.westerngas.com. Pre-registrants will be issued a personal identification number to use when dialing in to the live conference call, which will enable the participant to bypass the operator and gain immediate access to the call. To access the live audio webcast of the conference call, please visit the investor relations section of the Partnership’s website at www.westerngas.com. A replay of the conference call will also be available on the website for two weeks following the call.
Western Gas Partners, LP (“WES”) is a growth-oriented Delaware master limited partnership formed by Anadarko Petroleum Corporation to acquire, own, develop and operate midstream energy assets. With midstream assets located in the Rocky Mountains, the Mid-Continent, North-central Pennsylvania and Texas, WES is engaged in the business of gathering, processing, compressing, treating and transporting natural gas, condensate, natural gas liquids and crude oil for Anadarko, as well as for other producers and customers.
Western Gas Equity Partners, LP (“WGP”) is a Delaware master limited partnership formed by Anadarko to own the following types of interests in WES: (i) the general partner interest and all of the incentive distribution rights in WES, both owned through WGP’s 100% ownership of WES’s general partner, and (ii) a significant limited partner interest in WES.



7


For more information about Western Gas Partners, LP and Western Gas Equity Partners, LP, please visit www.westerngas.com.

This news release contains forward-looking statements. Western Gas Partners and Western Gas Equity Partners believe that their 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 close the acquisition and financing announced in this release; ability to meet financial guidance or distribution growth expectations; the ability to safely and efficiently operate WES’s 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; construction costs or capital expenditures exceeding estimated or budgeted costs or expenditures; and the other factors described in the “Risk Factors” sections of WES’s and WGP’s most recent Forms 10-K and Forms 10-Q filed with the Securities and Exchange Commission and in their other public filings and press releases. Western Gas Partners and Western Gas Equity Partners undertake no obligation to publicly update or revise any forward-looking statements.

# # #

WESTERN GAS CONTACT
Benjamin Fink, CFA
SVP, Chief Financial Officer and Treasurer
832.636.6010

Western Gas Partners, LP Reconciliation of GAAP to Non-GAAP Measures

Below are reconciliations of (i) WES’s Distributable cash flow (non-GAAP) to net income (loss) attributable to Western Gas Partners, LP (GAAP), (ii) Adjusted EBITDA attributable to Western Gas Partners, LP (“Adjusted EBITDA”) (non-GAAP) to net income (loss) attributable to Western Gas Partners, LP (GAAP) and to net cash provided by operating activities (GAAP), and (iii) Adjusted gross margin attributable to Western Gas Partners, LP (“Adjusted gross margin”) (non-GAAP) to operating income (loss) (GAAP), as required under Regulation G of the Securities Exchange Act of 1934. Management believes that WES’s Distributable cash flow, Adjusted EBITDA, Adjusted gross margin, and Coverage ratio are widely accepted financial indicators of WES’s financial performance compared to other publicly traded partnerships and are useful in assessing its ability to incur and service debt, fund capital expenditures and make distributions. Distributable cash flow, Adjusted EBITDA, Adjusted gross margin and Coverage ratio, as defined by WES, may not be comparable to similarly titled measures used by other companies. Therefore, WES’s Distributable cash flow, Adjusted EBITDA, Adjusted gross margin and Coverage ratio should be considered in conjunction with net income (loss) and other applicable performance measures, such as operating income (loss) or cash flows from operating activities.


8


Distributable Cash Flow

WES defines Distributable cash flow as Adjusted EBITDA, plus interest income and the net settlement amounts from the sale and/or purchase of natural gas, drip condensate and NGLs under our commodity price swap agreements to the extent such amounts are not recognized as Adjusted EBITDA, 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 
 December 31,
 
Year Ended 
 December 31,
thousands except Coverage ratio
 
2015
 
2014 (1)
 
2015
 
2014 (1)
Reconciliation of Net income (loss) attributable to Western Gas Partners, LP to Distributable cash flow and calculation of the Coverage ratio
 
 
 
 
 
 
 
 
Net income (loss) attributable to Western Gas Partners, LP
 
$
(171,661
)
 
$
94,460

 
$
(73,538
)
 
$
393,842

Add:
 
 
 
 
 
 
 
 
Distributions from equity investees
 
25,244

 
23,574

 
98,298

 
81,022

Non-cash equity-based compensation expense
 
979

 
907

 
4,402

 
4,095

Interest expense, net (non-cash settled) (2)
 
4,480

 
—

 
14,400

 
—

Income tax (benefit) expense
 
(195
)
 
3,460

 
3,380

 
11,659

Depreciation and amortization (3)
 
59,792

 
53,635

 
241,556

 
183,945

Impairments
 
237,867

 
653

 
514,096

 
3,084

Above-market component of swap extensions with Anadarko
 
10,533

 
—

 
18,449

 
—

Other expense (3)
 
1,290

 
—

 
1,290

 
—

Less:
 
 
 
 
 
 
 
 
Gain (loss) on divestiture and other, net
 
(20,224
)
 
—

 
57,020

 
—

Equity income, net
 
12,114

 
16,514

 
71,251

 
57,836

Cash paid for maintenance capital expenditures (3)
 
12,711

 
13,009

 
49,300

 
48,563

Capitalized interest
 
1,492

 
2,485

 
8,318

 
9,832

Cash paid for (reimbursement of) income taxes
 
—

 
250

 
(138
)
 
(90
)
Other income (3) (4)
 
—

 
74

 
219

 
325

Distributable cash flow
 
$
162,236

 
$
144,357

 
$
636,363

 
$
561,181

Distributions declared (5)
 
 
 
 
 
 
 
 
Limited partners
 
$
102,862

 
 
 
$
392,077

 
 
General partner
 
49,726

 
 
 
179,610

 
 
Total
 
$
152,588

 
 
 
$
571,687

 
 
Coverage ratio
 
1.06

x
 
 
1.11

x
 

(1) 
In March 2015, WES acquired Anadarko’s interest in Delaware Basin JV Gathering LLC, which owns a 50% interest in a gathering system and related facilities (the “DBJV system”). WES will make a cash payment on March 1, 2020, to Anadarko as consideration for the acquisition. The net present value of this future obligation has been recorded on the consolidated balance sheet under Deferred purchase price obligation - Anadarko. Financial information has been recast to include the financial position and results attributable to the DBJV system.
(2) 
Includes accretion expense related to the Deferred purchase price obligation - Anadarko associated with the acquisition of DBJV.
(3) 
Includes WES’s 75% share of depreciation and amortization; other expense; cash paid for maintenance capital expenditures; and other income attributable to Chipeta. For the three months and year ended December 31, 2015, other expense also includes $0.4 million of lower of cost or market inventory adjustments at our DBM complex.
(4) 
Excludes income of zero for each of the three months ended December 31, 2015 and 2014, and zero and $0.5 million for the years ended December 31, 2015 and 2014, respectively, related to a component of a gas processing agreement accounted for as a capital lease.
(5) 
Reflects cash distributions of $0.800 and $3.050 per unit declared for the three months and year ended December 31, 2015, respectively.

9


Western Gas Partners, LP Reconciliation of GAAP to Non-GAAP Measures, continued

Adjusted EBITDA Attributable to Western Gas Partners, LP

WES defines Adjusted EBITDA as net income (loss) attributable to Western Gas Partners, LP, plus distributions from equity investees, non-cash equity-based compensation expense, interest expense, income tax expense, depreciation and amortization, impairments, and other expense (including lower of cost or market inventory adjustments recorded in cost of product), less gain (loss) on divestiture and other, net, income from equity investments, interest income, income tax benefit and other income.
 
 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
thousands
 
2015
 
2014 (1)
 
2015
 
2014 (1)
Reconciliation of Net income (loss) attributable to Western Gas Partners, LP to Adjusted EBITDA attributable to Western Gas Partners, LP
 
 
 
 
 
 
 
 
Net income (loss) attributable to Western Gas Partners, LP
 
$
(171,661
)
 
$
94,460

 
$
(73,538
)
 
$
393,842

Add:
 
 
 
 
 
 
 
 
Distributions from equity investees
 
25,244

 
23,574

 
98,298

 
81,022

Non-cash equity-based compensation expense
 
979

 
907

 
4,402

 
4,095

Interest expense
 
31,535

 
21,063

 
113,872

 
76,766

Income tax expense
 
—

 
3,460

 
5,285

 
11,659

Depreciation and amortization (2)
 
59,792

 
53,635

 
241,556

 
183,945

Impairments
 
237,867

 
653

 
514,096

 
3,084

Other expense (2)
 
1,290

 
—

 
1,290

 
—

Less:
 
 
 
 
 
 
 
 
Gain (loss) on divestiture and other, net
 
(20,224
)
 
—

 
57,020

 
—

Equity income, net
 
12,114

 
16,514

 
71,251

 
57,836

Interest income – affiliates
 
4,225

 
4,225

 
16,900

 
16,900

Other income (2) (3)
 
—

 
74

 
219

 
325

Income tax benefit
 
195

 
—

 
1,905

 
—

Adjusted EBITDA attributable to Western Gas Partners, LP
 
$
188,736

 
$
176,939

 
$
757,966

 
$
679,352

 
Reconciliation of Adjusted EBITDA attributable to Western Gas Partners, LP to Net cash provided by operating activities
 
 
 
 
 
 
 
 
Adjusted EBITDA attributable to Western Gas Partners, LP
 
$
188,736

 
$
176,939

 
$
757,966

 
$
679,352

Adjusted EBITDA attributable to noncontrolling interest
 
2,526

 
3,661

 
12,699

 
16,583

Interest income (expense), net
 
(27,310
)
 
(16,838
)
 
(96,972
)
 
(59,866
)
Uncontributed cash-based compensation awards
 
(48
)
 
(197
)
 
(214
)
 
(175
)
Accretion and amortization of long-term obligations, net
 
5,402

 
691

 
17,698

 
2,736

Current income tax benefit (expense)
 
(369
)
 
5,841

 
(1,448
)
 
1,666

Other income (expense), net (3)
 
(846
)
 
76

 
(619
)
 
336

Distributions from equity investments in excess of cumulative earnings
 
(3,835
)
 
(3,668
)
 
(16,244
)
 
(18,055
)
Changes in operating working capital:
 
 
 
 
 
 
 
 
Accounts receivable, net
 
18,490

 
45,968

 
(5,614
)
 
(6,691
)
Accounts and imbalance payables and accrued liabilities, net
 
(12,565
)
 
(74,969
)
 
3,154

 
(39,162
)
Other
 
1,020

 
1,840

 
(797
)
 
3,485

Net cash provided by operating activities
 
$
171,201

 
$
139,344

 
$
669,609

 
$
580,209

Cash flow information of Western Gas Partners, LP
 
 
 
 
 
 
 
 
Net cash provided by operating activities
 
 
 
 
 
$
669,609

 
$
580,209

Net cash used in investing activities
 
 
 
 
 
$
(466,424
)
 
$
(2,670,998
)
Net cash provided by (used in) financing activities
 
 
 
 
 
$
(172,206
)
 
$
2,057,115

  
(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.
(2) 
Includes WES’s 75% share of depreciation and amortization; other expense; and other income attributable to Chipeta. For the three months and year ended December 31, 2015, other expense also includes $0.4 million of lower of cost or market inventory adjustments at our DBM complex.
(3) 
Excludes income of zero for each of the three months ended December 31, 2015 and 2014, and zero and $0.5 million for the years ended December 31, 2015 and 2014, respectively, related to a component of a gas processing agreement accounted for as a capital lease.

10


Western Gas Partners, LP Reconciliation of GAAP to Non-GAAP Measures, continued

Adjusted gross margin attributable to Western Gas Partners, LP

WES defines Adjusted gross margin as total revenues and other less reimbursements for electricity-related expenses recorded as revenue, and cost of product, plus distributions from equity investees and excluding the noncontrolling interest owner’s proportionate share of revenue and cost of product.
 
 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
thousands
 
2015
 
2014 (1)
 
2015
 
2014 (1)
Reconciliation of Adjusted gross margin attributable to Western Gas Partners, LP to Operating income (loss)
 
 
 
 
 
 
 
 
Adjusted gross margin attributable to Western Gas Partners, LP for natural gas assets
 
$
242,235

 
$
229,414

 
$
971,639

 
$
876,210

Adjusted gross margin for crude/NGL assets
 
22,933

 
22,022

 
88,642

 
73,714

Adjusted gross margin attributable to Western Gas Partners, LP
 
$
265,168

 
$
251,436

 
$
1,060,281

 
$
949,924

Adjusted gross margin attributable to noncontrolling interest
 
$
3,557

 
$
4,572

 
$
16,779

 
$
20,183

Gain (loss) on divestiture and other, net
 
(20,224
)
 
—

 
57,020

 
—

Equity income, net
 
12,114

 
16,514

 
71,251

 
57,836

Reimbursed electricity-related charges recorded as revenues
 
13,752

 
10,764

 
54,175

 
39,338

Less:
 
 
 
 
 
 
 
 
Distributions from equity investees
 
25,244

 
23,574

 
98,298

 
81,022

Operation and maintenance
 
78,134

 
71,821

 
296,774

 
255,844

General and administrative
 
9,611

 
10,535

 
38,108

 
36,223

Property and other taxes
 
4,892

 
4,723

 
30,533

 
26,066

Depreciation and amortization
 
60,448

 
54,278

 
244,163

 
186,514

Impairments
 
237,867

 
653

 
514,096

 
3,084

Operating income (loss)
 
$
(141,829
)

$
117,702


$
37,534


$
478,528

  
(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.


11


Western Gas Partners, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
thousands except per-unit amounts
 
2015
 
2014 (1)
 
2015
 
2014 (1)
Revenues and other
 
 
 
 
 
 
 
 
Gathering, processing and transportation of natural gas and natural gas liquids
 
$
239,373

 
$
202,385

 
$
938,121

 
$
745,145

Natural gas, natural gas liquids and drip condensate sales
 
131,075

 
162,493

 
617,949

 
624,233

Other
 
842

 
1,839

 
5,302

 
13,490

Total revenues and other
 
371,290

 
366,717

 
1,561,372

 
1,382,868

Equity income, net
 
12,114

 
16,514

 
71,251

 
57,836

Operating expenses
 
 
 
 
 
 
 
 
Cost of product
 
114,057

 
123,519

 
528,435

 
454,445

Operation and maintenance
 
78,134

 
71,821

 
296,774

 
255,844

General and administrative
 
9,611

 
10,535

 
38,108

 
36,223

Property and other taxes
 
4,892

 
4,723

 
30,533

 
26,066

Depreciation and amortization
 
60,448

 
54,278

 
244,163

 
186,514

Impairments
 
237,867

 
653

 
514,096

 
3,084

Total operating expenses
 
505,009

 
265,529

 
1,652,109

 
962,176

Gain (loss) on divestiture and other, net (2)
 
(20,224
)
 
—

 
57,020

 
—

Operating income (loss)
 
(141,829
)

117,702


37,534


478,528

Interest income – affiliates
 
4,225

 
4,225

 
16,900

 
16,900

Interest expense
 
(31,535
)
 
(21,063
)
 
(113,872
)
 
(76,766
)
Other income (expense), net
 
(846
)
 
76

 
(619
)
 
864

Income (loss) before income taxes
 
(169,985
)
 
100,940

 
(60,057
)
 
419,526

Income tax (benefit) expense
 
(195
)
 
3,460

 
3,380

 
11,659

Net income (loss)
 
(169,790
)
 
97,480

 
(63,437
)
 
407,867

Net income (loss) attributable to noncontrolling interest
 
1,871

 
3,020

 
10,101

 
14,025

Net income (loss) attributable to Western Gas Partners, LP
 
$
(171,661
)
 
$
94,460

 
$
(73,538
)
 
$
393,842

Limited partners’ interest in net income (loss):
 
 
 
 
 
 
 
 
Net income (loss) attributable to Western Gas Partners, LP
 
$
(171,661
)
 
$
94,460

 
$
(73,538
)
 
$
393,842

Pre-acquisition net (income) loss allocated to Anadarko
 
—

 
(3,071
)
 
(1,742
)
 
(16,353
)
General partner interest in net (income) loss
 
(47,581
)
 
(37,041
)
 
(180,996
)
 
(120,980
)
Limited partners’ interest in net income (loss)
 
$
(219,242
)
 
$
54,348

 
$
(256,276
)
 
$
256,509

Net income (loss) per common unit – basic
 
$
(1.60
)
 
$
0.42

 
$
(1.95
)
 
$
2.13

Net income (loss) per common unit – diluted
 
(1.60
)
 
0.42

 
(1.95
)
 
2.12

Weighted-average common units outstanding – basic
 
128,576

 
124,263

 
128,345

 
119,822

Weighted-average common units outstanding – diluted
 
139,905

 
128,652

 
139,459

 
120,928

 
(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.
(2) 
For the three months and year ended December 31, 2015, includes a net loss of $20.3 million (inclusive of estimated property insurance recoveries) related to an incident at the DBM complex on December 3, 2015.




12


Western Gas Partners, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
December 31,
thousands except number of units
 
2015
 
2014 (1)
Current assets
 
$
286,881

 
$
186,350

Note receivable – Anadarko
 
260,000

 
260,000

Net property, plant and equipment
 
4,289,974

 
4,571,443

Other assets
 
1,870,407

 
1,936,725

Total assets
 
$
6,707,262

 
$
6,954,518

Current liabilities
 
$
199,232

 
$
239,833

Long-term debt
 
2,707,357

 
2,422,954

Asset retirement obligations and other
 
124,569

 
157,356

Deferred purchase price obligation – Anadarko
 
188,674

 
—

Total liabilities
 
$
3,219,832

 
$
2,820,143

Equity and partners’ capital
 
 
 
 
Common units (128,576,965 and 127,695,130 units issued and outstanding at December 31, 2015 and 2014, respectively)
 
$
2,588,991

 
$
3,119,714

Class C units (11,411,862 and 10,913,853 units issued and outstanding at December 31, 2015 and 2014, respectively)
 
710,891

 
716,957

General partner units (2,583,068 units issued and outstanding at December 31, 2015 and 2014)
 
120,164

 
105,725

Net investment by Anadarko
 
—

 
122,509

Noncontrolling interest
 
67,384

 
69,470

Total liabilities, equity and partners’ capital
 
$
6,707,262

 
$
6,954,518

(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.

13


Western Gas Partners, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Year Ended 
 December 31,
thousands
 
2015
 
2014 (1)
Cash flows from operating activities
 
 
 
 
Net income (loss)
 
$
(63,437
)
 
$
407,867

Adjustments to reconcile net income (loss) to net cash provided by operating activities and changes in working capital:
 
 
 
 
Depreciation and amortization
 
244,163

 
186,514

Impairments
 
514,096

 
3,084

Gain (loss) on divestiture and other, net (2)
 
(57,020
)
 
—

Change in other items, net
 
31,807

 
(17,256
)
Net cash provided by operating activities
 
669,609

 
580,209

Cash flows from investing activities
 
 
 
 
Capital expenditures
 
$
(602,289
)
 
$
(722,443
)
Contributions in aid of construction costs from affiliates
 
461

 
183

Acquisitions from affiliates
 
(12,664
)
 
(379,193
)
Acquisitions from third parties
 
(3,514
)
 
(1,523,327
)
Investments in equity affiliates
 
(11,442
)
 
(64,278
)
Distributions from equity investments in excess of cumulative earnings
 
16,244

 
18,055

Proceeds from the sale of assets to affiliates
 
925

 
—

Proceeds from the sale of assets to third parties
 
145,855

 
5

Net cash used in investing activities
 
(466,424
)
 
(2,670,998
)
Cash flows from financing activities
 
 
 
 
Borrowings, net of debt issuance costs
 
$
889,606

 
$
1,646,878

Repayments of debt
 
(610,000
)
 
(650,000
)
Increase (decrease) in outstanding checks
 
(1,751
)
 
1,693

Proceeds from the issuance of common and general partner units, net of offering expenses
 
57,353

 
704,489

Proceeds from the issuance of Class C units
 
—

 
750,000

Distributions to unitholders
 
(545,143
)
 
(408,621
)
Distributions to noncontrolling interest owner
 
(12,187
)
 
(15,149
)
Net contributions from Anadarko
 
31,467

 
27,825

Above-market component of swap extensions with Anadarko
 
18,449

 
—

Net cash provided by (used in) financing activities
 
(172,206
)
 
2,057,115

Net increase (decrease) in cash and cash equivalents
 
30,979

 
(33,674
)
Cash and cash equivalents at beginning of period
 
67,054

 
100,728

Cash and cash equivalents at end of period
 
$
98,033

 
$
67,054

 
(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.
(2) 
For the year ended December 31, 2015, includes a net loss of $20.3 million (inclusive of estimated property insurance recoveries) related to an incident at the DBM complex on December 3, 2015.






14


Western Gas Partners, LP
OPERATING STATISTICS
(Unaudited)
 
 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
MMcf/d except throughput measured in barrels and per-unit amounts
 
2015
 
2014 (1)
 
2015
 
2014 (1)
Throughput for natural gas assets
 
 
 
 
 
 
 
 
Gathering, treating and transportation
 
1,294

 
1,607

 
1,487

 
1,627

Processing
 
2,272

 
1,991

 
2,331

 
1,925

Equity investment (2)
 
196

 
170

 
178

 
171

Total throughput for natural gas assets
 
3,762

 
3,768

 
3,996

 
3,723

Throughput attributable to noncontrolling interest for natural gas assets
 
122

 
153

 
142

 
165

Total throughput attributable to Western Gas Partners, LP for natural gas assets (3)
 
3,640

 
3,615

 
3,854

 
3,558

Total throughput (MBbls/d) for crude/NGL assets (4)
 
142

 
131

 
138

 
116

Adjusted gross margin per Mcf attributable to Western Gas Partners, LP for natural gas assets (5)
 
$
0.72

 
$
0.69

 
$
0.69

 
$
0.67

Adjusted gross margin per Bbl for crude/NGL assets (6)
 
$
1.76

 
$
1.83

 
$
1.76

 
$
1.75

   
(1) 
Throughput has been recast to include throughput attributable to the DBJV system.
(2) 
Represents WES’s 14.81% share of average Fort Union and 22% share of average Rendezvous throughput. Excludes equity investment throughput measured in barrels (captured in “Total throughput (MBbls/d) for crude/NGL assets” as noted below).
(3) 
Includes affiliate, third-party and equity investment throughput (as equity investment throughput is defined in the above footnote), excluding the noncontrolling interest owner’s proportionate share of throughput.
(4) 
Represents total throughput measured in barrels, consisting of throughput from WES’s Chipeta NGL pipeline, WES’s 10% share of average White Cliffs throughput, WES’s 25% share of average Mont Belvieu JV throughput, WES’s 20% share of average TEG and TEP throughput and WES’s 33.33% share of average FRP throughput.
(5) 
Average for period. Calculated as Adjusted gross margin attributable to Western Gas Partners, LP for natural gas assets (total revenues and other for natural gas assets less reimbursements for electricity-related expenses recorded as revenue, and cost of product for natural gas assets plus distributions from WES’s equity investments in Fort Union and Rendezvous, and excluding the noncontrolling interest owners’ proportionate share of revenue and cost of product) divided by total throughput (MMcf/d) attributable to Western Gas Partners, LP for natural gas assets.
(6) 
Average for period. Calculated as Adjusted gross margin for crude/NGL assets (total revenues and other for crude/NGL assets less reimbursements for electricity-related expenses recorded as revenue, and cost of product for crude/NGL assets plus distributions from WES’s equity investments in White Cliffs, the Mont Belvieu JV, TEG, TEP and FRP), divided by total throughput (MBbls/d) for crude/NGL assets.


15


Western Gas Equity Partners, LP
CALCULATION OF CASH AVAILABLE FOR DISTRIBUTION
(Unaudited)
 
Three Months Ended
thousands except per-unit amount and Coverage ratio
December 31, 2015
Distributions declared by Western Gas Partners, LP:
 
General partner interest
$
3,005

Incentive distribution rights
46,721

Common units held by WGP
39,437

Less:
 
Public company general and administrative expense
757

Cash available for distribution
$
88,406

Declared distribution per common unit
$
0.40375

Distributions declared by Western Gas Equity Partners, LP
$
88,389

Coverage ratio
1.00
x


16


Western Gas Equity Partners, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
 
 
Three Months Ended 
 December 31,
 
Year Ended 
 December 31,
thousands except per-unit amounts
 
2015
 
2014 (1)
 
2015
 
2014 (1)
Revenues and other
 
 
 
 
 
 
 
 
Gathering, processing and transportation of natural gas and natural gas liquids
 
$
239,373

 
$
202,385

 
$
938,121

 
$
745,145

Natural gas, natural gas liquids and drip condensate sales
 
131,075

 
162,493

 
617,949

 
624,233

Other
 
842

 
1,839

 
5,302

 
13,490

Total revenues and other
 
371,290

 
366,717

 
1,561,372

 
1,382,868

Equity income, net
 
12,114

 
16,514

 
71,251

 
57,836

Operating expenses
 
 
 
 
 
 
 
 
Cost of product
 
114,057

 
123,519

 
528,435

 
454,445

Operation and maintenance
 
78,134

 
71,821

 
296,774

 
255,844

General and administrative
 
10,369

 
11,246

 
41,217

 
39,439

Property and other taxes
 
4,893

 
4,757

 
30,572

 
26,100

Depreciation and amortization
 
60,448

 
54,278

 
244,163

 
186,514

Impairments
 
237,867

 
653

 
514,096

 
3,084

Total operating expenses
 
505,768

 
266,274

 
1,655,257

 
965,426

Gain (loss) on divestiture and other, net (2)
 
(20,224
)
 
—

 
57,020

 
—

Operating income (loss)
 
(142,588
)

116,957


34,386


475,278

Interest income – affiliates
 
4,225

 
4,225

 
16,900

 
16,900

Interest expense
 
(31,535
)
 
(21,066
)
 
(113,874
)
 
(76,769
)
Other income (expense), net
 
(834
)
 
89

 
(578
)
 
938

Income (loss) before income taxes
 
(170,732
)
 
100,205

 
(63,166
)
 
416,347

Income tax (benefit) expense
 
(195
)
 
3,460

 
3,380

 
11,659

Net income (loss)
 
(170,537
)
 
96,745

 
(66,546
)
 
404,688

Net income (loss) attributable to noncontrolling interests
 
(139,766
)
 
36,510

 
(154,409
)
 
165,468

Net income (loss) attributable to Western Gas Equity Partners, LP
 
$
(30,771
)
 
$
60,235

 
$
87,863

 
$
239,220

Limited partners’ interest in net income (loss): 
 
 
 
 
 
 
 
 
Net income (loss) attributable to Western Gas Equity Partners, LP
 
$
(30,771
)
 
$
60,235

 
$
87,863

 
$
239,220

Pre-acquisition net (income) loss allocated to Anadarko
 
—

 
(3,071
)
 
(1,742
)
 
(16,353
)
Limited partners’ interest in net income (loss)
 
$
(30,771
)
 
$
57,164

 
$
86,121

 
$
222,867

Net income (loss) per common unit – basic and diluted
 
$
(0.14
)
 
$
0.26

 
$
0.39

 
$
1.02

Weighted-average number of common units outstanding – basic and diluted
 
218,916

 
218,910

 
218,913

 
218,910

 
(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.
(2) 
For the three months and year ended December 31, 2015, includes a net loss of $20.3 million (inclusive of estimated property insurance recoveries) related to an incident at the DBM complex on December 3, 2015.








17


Western Gas Equity Partners, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
 
December 31,
thousands except number of units
 
2015
 
2014
Current assets
 
$
289,028

 
$
187,059

Note receivable – Anadarko
 
260,000

 
260,000

Net property, plant and equipment
 
4,289,974

 
4,571,443

Other assets
 
1,870,407

 
1,936,725

Total assets
 
$
6,709,409

 
$
6,955,227

Current liabilities
 
$
199,309

 
$
241,058

Long-term debt
 
2,707,357

 
2,422,954

Asset retirement obligations and other
 
124,569

 
157,356

Deferred purchase price obligation – Anadarko
 
188,674

 
—

Total liabilities
 
$
3,219,909

 
$
2,821,368

Equity and partners’ capital
 
 
 
 
Common units (218,919,380 and 218,909,977 units issued and outstanding at December 31, 2015 and 2014, respectively)
 
$
1,060,842

 
$
1,260,195

Net investment by Anadarko
 
—

 
122,509

Noncontrolling interests
 
2,428,658

 
2,751,155

Total liabilities, equity and partners’ capital
 
$
6,709,409

 
$
6,955,227

 
(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.


18


Western Gas Equity Partners, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
 
Year Ended 
 December 31,
thousands
 
2015
 
2014 (1)
Cash flows from operating activities
 
 
 
 
Net income (loss)
 
$
(66,546
)
 
$
404,688

Adjustments to reconcile net income (loss) to net cash provided by operating activities and changes in working capital:
 
 
 
 
Depreciation and amortization
 
244,163

 
186,514

Impairments
 
514,096

 
3,084

Gain (loss) on divestiture and other, net (2)
 
(57,020
)
 
—

Change in other items, net
 
32,080

 
(17,910
)
Net cash provided by operating activities
 
666,773

 
576,376

Cash flows from investing activities
 
 
 
 
Capital expenditures
 
$
(602,289
)
 
$
(722,443
)
Contributions in aid of construction costs from affiliates
 
461

 
183

Acquisitions from affiliates
 
(12,664
)
 
(379,193
)
Acquisitions from third parties
 
(3,514
)
 
(1,523,327
)
Investments in equity affiliates
 
(11,442
)
 
(64,278
)
Distributions from equity investments in excess of cumulative earnings
 
16,244

 
18,055

Proceeds from the sale of assets to affiliates
 
925

 
—

Proceeds from the sale of assets to third parties
 
145,855

 
5

Net cash used in investing activities
 
(466,424
)
 
(2,670,998
)
Cash flows from financing activities
 
 
 
 
Borrowings, net of debt issuance costs
 
$
889,606

 
$
1,648,028

Repayments of debt
 
(611,150
)
 
(650,000
)
Increase (decrease) in outstanding checks
 
(1,751
)
 
1,693

Proceeds from the issuance of WES common units, net of offering expenses
 
57,353

 
691,178

Proceeds from the issuance of WES Class C units
 
—

 
750,000

Distributions to WGP unitholders
 
(306,477
)
 
(228,481
)
Distributions to Chipeta noncontrolling interest owner
 
(12,187
)
 
(15,149
)
Distributions to noncontrolling interest owners of WES
 
(233,178
)
 
(176,344
)
Net contributions from Anadarko
 
31,467

 
27,825

Above-market component of swap extensions with Anadarko
 
18,449

 
—

Net cash provided by (used in) financing activities
 
(167,868
)
 
2,048,750

Net increase (decrease) in cash and cash equivalents
 
32,481

 
(45,872
)
Cash and cash equivalents at beginning of period
 
67,213

 
113,085

Cash and cash equivalents at end of period
 
$
99,694

 
$
67,213

 
(1) 
Financial information has been recast to include the financial position and results attributable to the DBJV system.
(2) 
For the year ended December 31, 2015, includes a net loss of $20.3 million (inclusive of estimated property insurance recoveries) related to an incident at the DBM complex on December 3, 2015.


19

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