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Western Gas Buys Stakes in Marcellus NGL Systems
Western Gas Partners LP is expanding its business in the Marcellus Shale after agreeing to pay $620 million-plus for stakes in two natural gas liquids (NGL) gathering systems in Pennsylvania that have combined throughput of more than 1.2 Bcf/d.
Western said Wednesday it agreed to pay Anadarko Petroleum Corp., its majority owner, $490 million for a one-third interest in the Liberty and Rome systems. It also is paying $133.5 million to an affiliate of Chesapeake Energy Corp. to acquire a one-third stake in the Larry’s Creek, Seely and Warrensville systems. The systems serve producers in north-central Pennsylvania.
The acquisitions “further enhance both our geographic diversity and our fee-based asset portfolio,” said COO Danny Rea. “We expect that the high quality of the underlying resources in combination with the large inventory of wells not yet connected to the systems will provide significant near-term growth.”
The partnership would finance the Anadarko acquisition with $220 million cash, as well as by borrowing of $246 million and issuing 449,129 common units to Anadarko at an implied price of about $54.55/unit. The transaction, expected to close Friday, would be immediately accretive to the partnership, with the acquisition price representing about a 7.6 times multiple of the assets’ forecasted 2013 earnings before interest, taxes, depreciation and amortization (EBITDA).
The deal with the Chesapeake affiliate would be financed by debt; it also would be immediately accretive at a price representing about 9.7 times the multiple of the assets’ forecasted 2013 EBITDA. The acquisition is expected to close by March 15.
The terms of the Anadarko acquisition were unanimously approved by Anadarko’s board and a special committee, which is comprised of independent directors.
Western Gas (WES) and Western Gas Equity Partners LP (WGP) also reported their 4Q2012 and full-year 2012 financial and operating results.
“WES delivered an 18% distribution growth rate while maintaining healthy coverages and received its second investment-grade credit rating, and we successfully launched the initial public offering of WGP,” said CEO Don Sinclair. “While we believe the challenges in the NGL markets that we experienced in 2012 will continue in 2013, our high-quality portfolio, combined with our ability to consistently execute accretive acquisitions from our sponsor, positions us to deliver consistent growth.”
WES reported a net loss in in 4Q2012 of $16.6 million (minus 27 cents/unit) on adjusted EBITDA of $83.3 million and distributable cash flow of $67.2 million. For 2012 the partnership earned $78.9 million (84 cents/unit) on adjusted EBITDA of $327.7 million and cash flow of $264.4 million.
Total throughput in 4Q2012 was 8% more than in the year-ago period. For the year, throughput averaged 2.4 Bcf/d, 9% higher than in 2011. The results included the net throughput attributed to the Mountain Gas Resources and Bison assets that WES acquired from Anadarko, as well as throughput attributed to the recently acquired 24% interest in Chipeta Processing LLC, also from Anadarko. Chipeta serves the Uinta Basin (see Shale Daily, July 20, 2012).
At the end of 2012 WGP indirectly owned 2% of the general partner (Anadarko) interest and 100% of the incentive distribution rights in WES, as well as more than 29 million WES units. WGP closed its initial public offering (IPO) in December, and the results of periods prior were attributed to Anadarko subsidiaries.
For the 20-day period beginning when the IPO closed through Dec. 31, WES lost $9.8 million (minus 4 cents/unit) for 4Q2012 and for 2012.
Based on the current forecast, which includes the effects of the Anadarko and Chesapeake acquisitions, WES expects 2013 adjusted EBITDA to be $410-450 million. Capital expenditures are slated to be $550-600 million, with maintenance capital 9-12% of adjusted earnings. The forecast this year include plans to complete the Brasada and Lancaster plants, which would serve the Eagle Ford Shale and the Denver-Julesburg Basin. Based on an expectation of no less than 15% distribution growth at WES, WGP expects its 2013 distribution growth “will be no less than 33%.”
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