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Western Gas Partners Makes Largest Buy Since IPO

February 8, 2010
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Western Gas Partners LP has bought midstream assets in southwest Wyoming from Anadarko Petroleum Corp. for $254.4 million, making it the largest acquisition since Western Gas Partners' initial public offering (IPO).

"We expect the acquisition to be immediately accretive to distributable cash flow and believe these assets have significant potential for organic growth by serving the prolific Moxa, Pinedale and Jonah fields," said Western Gas Partners CEO Don Sinclair.

Western Gas Partners bought Anadarko's 100% ownership interest in the Granger Gathering System, a 750-mile system with related compression and other facilities; and the Granger Plants, two cryogenic trains with combined capacity of 200 MMcf/d, two refrigeration trains with capacity of 145 MMcf/d, a natural gas liquids (NGL) fractionation facility with capacity of 9,500 b/d, and ancillary equipment. The average throughput on these systems for the fourth quarter was approximately 240 MMcf/d, with Anadarko throughput representing nearly half of this amount.

Contracts covering substantially all of the systems' Anadarko-affiliated throughput were recently converted into 10-year, fee-based arrangements. To mitigate the remaining commodity price risk associated with this acquisition Western Gas Partners and Anadarko have entered into fixed-price commodity swap agreements through the end of 2014.

"These swap agreements cover all non fee-based system volumes and will enhance cash flow visibility on these assets, keeping our distributable cash flow largely insulated from changes in commodity prices," said Sinclair.

Given the recent change in the system contract mix, historic financial performance is not reflective of the assets' forecasted future performance, Western Gas Partners said, noting that the assets were valued using projected financial performance exclusive of transaction costs. The purchase price represents a multiple of 7.2 times the system assets' 2010 forecasted earnings before depreciation, interest and taxes.

Western Gas Partners was launched by a public offering by Anadarko in 2008 in which it acquired some Powder River Basin infrastructure (see NGI, Jan. 9, 2009). Last July the partnership acquired a 51% stake in Chipeta Processing LLC, which owns a gas processing complex in the Uinta Basin (see NGI, July 27, 2009).

The acquisition was financed primarily with a $210 million draw on the Western Gas Partners' revolving credit facility plus cash on hand, as well as through the issuance of 620,689 common units to Anadarko and 12,667 general partner units to Western Gas Holdings LLC, the partnership's general partner, at an implied price of approximately $20.08/unit. Following the transaction, the partnership will continue to have substantial additional borrowing capacity, both under its own stand-alone credit facility and through its $100 million of availability under Anadarko's $1.3 billion committed credit facility.

The acquisition closed on Jan. 29 with an effective date of Jan. 1.

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