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8-K/A - FORM 8-K/A - Western Midstream Operating, LPh76438e8vkza.htm
EX-23.1 - EX-23.1 - Western Midstream Operating, LPh76438exv23w1.htm
EX-99.1 - EX-99.1 - Western Midstream Operating, LPh76438exv99w1.htm
Exhibit 99.2
WESTERN GAS PARTNERS, LP
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
         
    Page  
Introduction
    2  
 
       
Unaudited pro forma condensed consolidated statement of income for the six months ended June 30, 2010
    5  
 
       
Unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2009
    6  
 
       
Unaudited pro forma condensed consolidated balance sheet as of June 30, 2010
    7  
 
       
Notes to unaudited pro forma condensed consolidated financial statements
    8  

 


 

Introduction to the unaudited pro forma
condensed consolidated financial statements of Western Gas Partners, LP
The unaudited pro forma condensed consolidated financial statements present the impact on Western Gas Partners, LP’s (collectively with its consolidated subsidiaries, the “Partnership”) results of operations and financial position attributable to the acquisition of certain midstream assets from affiliates of Anadarko Petroleum Corporation pursuant to the Contribution Agreement dated as of August 2, 2010 (the “Wattenberg Contribution Agreement”) with an effective date for accounting purposes of July 1, 2010. Pursuant to the Wattenberg Contribution Agreement, the Partnership acquired a 100% ownership interest in Kerr-McGee Gathering LLC, which owns the Wattenberg gathering system and related facilities, including the Fort Lupton processing plant. These assets, located in the Denver-Julesburg Basin, north and east of Denver, Colorado, are referred to collectively as the “Wattenberg Assets,” and the acquisition is referred to as the “Wattenberg Acquisition.” The consideration paid by the Partnership consisted of (i) $473.1 million in cash, which was funded with $250.0 million of borrowings under a bank-syndicated unsecured term loan, $200.0 million of borrowings under the Partnership’s revolving credit facility and $23.1 million cash on hand, as well as (ii) the issuance of 1,048,196 common units and 21,392 general partner units of the Partnership to affiliates of Anadarko Petroleum Corporation. For purposes of these condensed consolidated financial statements, “Anadarko” or “Parent” refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding the Partnership; and “affiliates” refers to wholly owned and partially owned subsidiaries of Anadarko, excluding the Partnership.
The unaudited pro forma condensed consolidated financial statements give effect to certain pro forma adjustments related to the Partnership’s previously completed acquisition of certain midstream assets from Anadarko pursuant to the Granger Contribution Agreement dated as of January 29, 2010 with an effective date for accounting purposes of January 1, 2010 by which the Partnership acquired a 100% ownership interest in the following assets located in Southwestern Wyoming: (i) the Granger gathering system with related compressors and other facilities, and (ii) the gas processing facilities, consisting of two cryogenic trains, two refrigeration trains, a natural gas liquids (“NGL”) fractionation facility and ancillary equipment. These assets are referred to collectively as the “Granger Assets” and the acquisition is referred to as the “Granger Acquisition.” Aggregate consideration for the Granger Acquisition consisted of (i) $241.7 million cash, which was funded with $210.0 million of borrowings under the Partnership’s revolving credit facility plus cash on hand; and (ii) the issuance of 620,689 common units and 12,667 general partner units to Anadarko.
The contribution of the Wattenberg Assets and the Granger Assets to the Partnership were recorded at Anadarko’s historical cost as these transactions are considered reorganizations of entities under common control. The unaudited pro forma condensed consolidated income statements for the six months ended June 30, 2010 and for the year ended December 31, 2009 and unaudited pro forma condensed consolidated balance sheet as of June 30, 2010 are based upon the historical consolidated financial statements of the Partnership and the historical financial statements of the Wattenberg Assets.
After each acquisition of assets from Anadarko, the Partnership is required to revise its financial statements to include the activities of the acquired assets as of the date of common control. Following the Granger Acquisition, the Partnership revised its historical financial statements for the year ended December 31, 2009 to include the activities of the Granger Assets as of the date of common control. However, the Partnership’s revised historic financial statements do not give effect to certain components of the acquisition, such as the incurrence of interest expense on acquisition-related debt and the elimination of federal income taxes, until the transaction had been completed. Therefore, certain pro forma adjustments give effect to the Granger Acquisition as if it had occurred at the beginning of each of the periods presented. The impact of the Granger Acquisition is already reflected in the Partnership’s unaudited balance sheet as of June 30, 2010.
The unaudited pro forma condensed consolidated financial statements have been prepared as if the Wattenberg Acquisition and the Granger Acquisition occurred on January 1, 2010, in the case of the unaudited pro forma condensed consolidated statement of income for the six months ended June 30, 2010, and as if the Wattenberg Acquisition and the Granger Acquisition occurred on January 1, 2009, in the case of the unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2009. The unaudited pro forma condensed consolidated balance sheet has been prepared as if the Wattenberg Acquisition occurred on June 30,

2


 

Introduction to the unaudited pro forma
condensed consolidated financial statements of Western Gas Partners, LP
2010. The unaudited pro forma condensed consolidated financial statements have been prepared based on the assumption that the Partnership will continue to be treated as a partnership for U.S. federal and state income tax purposes and therefore will not be subject to U.S. federal income taxes or state income taxes, except for the Texas margin tax on the portion of the Partnership’s pro forma income that is allocable to Texas. The unaudited pro forma condensed consolidated financial statements have also been prepared based on certain pro forma adjustments, as described in Note 2Pro forma adjustments. The following financial statements are qualified in their entirety by reference to and should be read in conjunction with such historical financial statements and related notes contained in those reports: (i) Wattenberg Assets’ historical financial statements set forth in Exhibit 99.1 of this Current Report on Form 8-K/A as of and for the six months ended June 30, 2010 (unaudited) and as of and for the year ended December 31, 2009; (ii) the Partnership’s unaudited historical consolidated financial statements set forth in its Quarterly Report on Form 10-Q as of and for the six months ended June 30, 2010, as filed with the Securities and Exchange Commission (“SEC”); and (iii) the Partnership’s audited historical consolidated financial statements as of and for the year ended December 31, 2009, as revised to reflect the results generated by the Granger Assets from the date on which those assets were acquired by Anadarko, set forth in the Partnership’s Current Report on Form 8-K, as filed with the SEC on May 4, 2010.
The pro forma adjustments reflected in the pro forma condensed consolidated financial statements are based upon currently available information and certain assumptions and estimates; therefore, the actual effects of these transactions will differ from the pro forma adjustments. However, the Partnership’s management considers the applied estimates and assumptions to provide a reasonable basis for the presentation of the significant effects of certain transactions that are expected to have a continuing impact on the Partnership. In addition, the Partnership’s management considers the pro forma adjustments to be factually supportable and to appropriately represent the expected impact of items that are directly attributable to the transfer of the Wattenberg Assets and the Granger Assets to the Partnership.
The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements reflect the Wattenberg Acquisition and certain aspects of the Granger Acquisition, including the following significant transactions:
    the Partnership’s $250.0 million of borrowings under a bank-syndicated unsecured term loan and $200.0 million of borrowings under its revolving credit facility to partially finance the Wattenberg Acquisition;
 
    the Partnership’s $210.0 million of borrowings under its revolving credit facility to partially finance the Granger Acquisition;
 
    the Partnership’s payment of $473.1 million of cash consideration to Anadarko for the Wattenberg Acquisition;
 
    the Partnership’s issuance of 1,048,196 common units and 21,392 general partner units to Anadarko for the Wattenberg Acquisition; and
 
    Anadarko’s contribution of the Wattenberg Assets to the Partnership.
Immediately subsequent to the Wattenberg Acquisition, Anadarko held 1,411,394 general partner units, representing a 2.0% general partner interest in the Partnership; 100% of the Partnership incentive distribution rights; and 10,302,631 common units and 26,536,306 subordinated units, representing an aggregate 52.2% limited partner interest in the Partnership. The public held 32,319,337 common units, representing a 45.8% limited partner interest in the Partnership.

3


 

Introduction to the unaudited pro forma
condensed consolidated financial statements of Western Gas Partners, LP
From and after the closing of the Wattenberg Contribution Agreement and related transactions, the Wattenberg Assets will be subject to the terms and conditions of various agreements between the Partnership and Anadarko, including the following:
    an omnibus agreement, which provides for certain indemnifications, reimbursement for expenses paid by Anadarko on behalf of the Partnership and compensation to Anadarko for providing the Partnership with certain general and administrative services and insurance coverage;
 
    a services and secondment agreement, pursuant to which specified employees of Anadarko are seconded to the general partner to provide operating, routine maintenance and other services with respect to the assets owned and operated by the Partnership under the direction, supervision and control of the general partner;
 
    a tax sharing agreement, pursuant to which the Partnership will reimburse Anadarko for the Partnership’s share of Texas margin tax borne by Anadarko as a result of the Wattenberg Assets’ results being included in a combined or consolidated tax return filed by Anadarko with respect to periods including and subsequent to August 2, 2010; and
 
    other routine agreements with Anadarko or its subsidiaries that arise in the ordinary course of business for gathering services and other operational matters.
In connection with the Wattenberg Acquisition, the Partnership and Anadarko amended the omnibus agreement and services and secondment agreement. Pursuant to this amendment, the cap for the reimbursement by the Partnership to Anadarko of general and administrative expenses not attributable to operating as a public company was increased from $8.3 million to $9.0 million for the year ended December 31, 2010. Previously, in connection with the Granger Acquisition, the cap for the reimbursement by the Partnership to Anadarko of general and administrative expenses not attributable to operating as a public company had been increased from $6.9 million for the year ended December 31, 2009 to $8.3 million for the year ended December 31, 2010. The cap is subject to further increases based on increases in the Consumer Price Index and, with the concurrence of the special committee of the board of directors of the Partnership’s general partner, subject to further increases arising in connection with expansions of the Partnership’s operations through the acquisition or construction of new assets or businesses. The unaudited pro forma condensed consolidated financial statements do not reflect incremental expense associated with the amendments of the omnibus agreement or services and secondment agreement made in connection with the Wattenberg Acquisition or the Granger acquisition.
In connection with the Wattenberg Acquisition, the Partnership entered into a 10-year, fee-based gathering agreement with Anadarko for all of its affiliate throughput on the Wattenberg Assets. In connection with the Wattenberg Acquisition, the Partnership also entered into five-year commodity price swap agreements with Anadarko effective July 2010 to mitigate exposure to commodity price volatility that would otherwise be present as a result of the Partnership’s acquisition of the Wattenberg Assets. Previously, contracts covering substantially all the Granger Assets’ affiliate throughput were converted into 10-year fee-based gathering arrangements effective October 1, 2009. Also in connection with the Granger Acquisition, the Partnership entered into five-year commodity price swap agreements with Anadarko effective January 1, 2010 to mitigate exposure to commodity price volatility that would otherwise be present as a result of the Partnership’s acquisition of the Granger Assets. The impact of the affiliate contract changes for periods prior to such contract changes and the impact of the commodity price swap agreements prior to their effective dates are not reflected in the unaudited pro forma condensed consolidated financial statements.
The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results that would have occurred if the Partnership had acquired the Wattenberg Assets and the Granger Assets on the dates indicated nor are they indicative of the future operating results of the Partnership.

4


 

WESTERN GAS PARTNERS, LP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2010

(unaudited, in thousands except earnings per unit)
                                 
    Partnership     Wattenberg Assets     Pro Forma     Partnership  
    Historical(1)     Historical     Adjustments     Pro Forma  
Revenues — affiliates
                               
Gathering, processing and transportation of natural gas
  $ 74,079     $ 16,679     $     $ 90,758  
Natural gas, natural gas liquids and condensate sales
    85,941       26,902             112,843  
Equity income and other
    2,952                   2,952  
 
                       
Total revenues — affiliates
    162,972       43,581             206,553  
Revenues — third parties
                               
Gathering, processing and transportation of natural gas
    11,430       10,218             21,648  
Natural gas, natural gas liquids and condensate sales
    6,319       11,332             17,651  
Other
    1,566                   1,566  
 
                       
Total revenues — third parties
    19,315       21,550             40,865  
 
                       
Total revenues
    182,287       65,131             247,418  
 
                       
 
                               
Operating expenses
                               
Cost of product
    57,532       16,536             74,068  
Operation and maintenance
    28,903       15,693             44,596  
General and administrative
    9,433       2,091       (510 )(a)     11,014  
Property and other taxes
    5,568       1,700             7,268  
Depreciation and amortization
    27,238       8,093             35,331  
 
                       
Total operating expenses
    128,674       44,113       (510 )     172,277  
 
                       
Operating income
    53,613       21,018       510       75,141  
 
                               
Interest income, net
    1,324       32       (32 )(b)     (6,012 )
 
                    (6,858 )(c)        
 
                    (478 )(d)        
Other income, net
    (2,374 )                 (2,374 )
 
                       
 
                               
Income before income taxes
    52,563       21,050       (6,858 )     66,755  
 
                               
Income tax expense (benefit)
    973       8,002       (9,063 )(e)     (88 )
 
                       
 
                               
Net income
    51,590       13,048       2,205       66,843  
 
                               
Net income attributable to noncontrolling interests
    5,265                   5,265  
 
                       
 
                               
Net income attributable to Western Gas Partners, LP
  $ 46,325     $ 13,048     $ 2,205     $ 61,578  
 
                       
General partner interest in net income
                          $ 4,616  
Limited partner interest in net income
                          $ 56,962  
 
                               
Net income per common unit (basic and diluted)
                          $ 0.87  
Net income per subordinated unit (basic and diluted)
                          $ 0.87  
 
                               
Weighted average number of common units outstanding (basic and diluted)
                            39,110  
Weighted average number of subordinated units outstanding (basic and diluted)
                            26,536  
 
(1)   Partnership historical information includes results attributable to the Granger Assets, as described in the introduction to the unaudited pro forma condensed consolidated financial statements, but reflect certain elements of the Granger Acquisition from the effective date or closing date forward.
See accompanying notes to unaudited pro forma condensed consolidated financial statements.

5


 

WESTERN GAS PARTNERS, LP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2009

(unaudited, in thousands except earnings per unit)
                                 
    Partnership     Wattenberg Assets     Pro Forma     Partnership  
    Historical(1)     Historical     Adjustments     Pro Forma  
Revenues — affiliates
                               
Gathering, processing and transportation of natural gas
  $ 146,707     $ 32,065     $     $ 178,772  
Natural gas, natural gas liquids and condensate sales
    180,131       26,158             206,289  
Equity income and other
    8,577                   8,577  
 
                       
Total revenues — affiliates
    335,415       58,223             393,638  
Revenues — third parties
                               
Gathering, processing and transportation of natural gas
    27,088       20,540             47,628  
Natural gas, natural gas liquids and condensate sales
    7,462       23,328             30,790  
Other
    1,258       346             1,604  
 
                       
Total revenues — third parties
    35,808       44,214             80,022  
 
                       
Total revenues
    371,223       102,437             473,660  
 
                       
 
                               
Operating expenses
                               
Cost of product
    124,913       22,620             147,533  
Operation and maintenance
    60,613       28,922             89,535  
General and administrative
    24,306       4,147       (117 )(a)     28,336  
Property and other taxes
    10,293       3,273             13,566  
Depreciation and amortization
    51,090       15,694             66,784  
 
                       
Total operating expenses
    271,215       74,656       (117 )     345,754  
 
                       
Operating income
    100,008       27,781       117       127,906  
 
                               
Interest income, net
    7,449       180       (180 )(b)     (12,503 )
 
                    (504 )(f)        
 
                    (13,715 )(c)        
 
                    (5,733 )(d)        
Other income, net
    54       7             61  
 
                       
 
                               
Income before income taxes
    107,511       27,968       (20,015 )     115,464  
 
                               
Income tax expense
    6,975       10,632       (17,519 )(e)     88  
 
                       
 
                               
Net income
    100,536       17,336       (2,496 )     115,376  
 
                               
Net income attributable to noncontrolling interests
    10,260                   10,260  
 
                       
Net income attributable to Western Gas Partners, LP
  $ 90,276     $ 17,336     $ (2,496 )   $ 105,116  
 
                       
General partner interest in net income
                          $ 6,726  
Limited partner interest in net income
                          $ 98,390  
 
                               
Net income per common unit (basic and diluted)
                          $ 1.70  
Net income per subordinated unit (basic and diluted)
                          $ 1.70  
 
                               
Weighted average number of common units outstanding (basic and diluted)
                            31,353  
Weighted average number of subordinated units outstanding (basic and diluted)
                            26,536  
 
(1)   Partnership historical information includes results attributable to the Granger Assets, as described in the introduction to the unaudited pro forma condensed consolidated financial statements, but reflect certain elements of the Granger Acquisition from the effective date or closing date forward.
See accompanying notes to unaudited pro forma condensed consolidated financial statements.

6


 

WESTERN GAS PARTNERS, LP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2010

(unaudited, in thousands)
                                 
    Partnership     Wattenberg Assets     Pro Forma     Partnership  
    Historical(1)     Historical     Adjustments     Pro Forma  
ASSETS
                               
Current assets
                               
Cash and cash equivalents
  $ 64,402     $     $ 450,000 (g)   $ 41,302  
 
                    (473,100 )(h)        
Accounts receivable, net
    12,926       4,632             17,558  
Natural gas imbalance receivables
    592       87             679  
Other current assets
    2,766       764       (666 )(e)     2,864  
 
                       
Total current assets
    80,686       5,483       (23,766 )     62,403  
Note receivable — Anadarko
    260,000                   260,000  
Property, plant and equipment
                               
Cost
    1,263,677       457,285             1,720,962  
Less accumulated depreciation
    280,257       53,414             333,671  
 
                       
Net property, plant and equipment
    983,420       403,871             1,387,291  
Goodwill
    31,248       26,100             57,348  
Equity investment
    20,819                   20,819  
Other assets
    2,198                   2,198  
 
                       
Total assets
  $ 1,378,371     $ 435,454     $ (23,766 )   $ 1,790,059  
 
                       
LIABILITIES, EQUITY AND PARTNERS’ CAPITAL
                               
Current liabilities
                               
Accounts payable
  $ 8,111     $ 2,788     $     $ 10,899  
Natural gas imbalance payable
    1,815                   1,815  
Accrued ad valorem taxes
    5,702       1,700             7,402  
Income taxes payable
    548                   548  
Accrued liabilities
    12,022       4,809             16,831  
 
                       
Total current liabilities
    28,198       9,297             37,495  
Long-term liabilities
                               
Long-term debt — third party
    110,000             450,000 (g)     560,000  
Note payable — Anadarko
    175,000                   175,000  
Deferred income taxes
    394       122,262       (122,210 )(e)     446  
Asset retirement obligations and other
    15,631       41,455             57,086  
 
                       
Total long-term liabilities
    301,025       163,717       327,790       792,532  
 
                       
Total liabilities
    329,223       173,014       327,790       830,027  
 
                               
Commitments and contingencies
                       
 
                               
Equity and partners’ capital
                               
Common unitholders
    662,262             (87,334 )(h)     574,928  
Subordinated unitholders
    277,953                   277,953  
General partner interest
    17,372             (1,782 )(h)     15,590  
Parent net investment
          262,440       (383,984 )(h)      
 
                    121,544 (e)        
 
                       
Total partners’ capital
    957,587       262,440       (351,556 )     868,471  
Noncontrolling interest
    91,561                   91,561  
 
                       
Total equity and partners’ capital
    1,049,148       262,440       (351,556 )     960,032  
 
                       
Total liabilities, equity and partners’ capital
  $ 1,378,371     $ 435,454     $ (23,766 )   $ 1,790,059  
 
                       
 
(1)   Partnership historical information includes the Granger Assets as described in the introduction to the unaudited pro forma condensed consolidated financial statements.
See accompanying notes to unaudited pro forma condensed consolidated financial statements.

7


 

Notes to the unaudited pro forma condensed consolidated financial statements of
Western Gas Partners, LP
1. Basis of presentation
The unaudited pro forma condensed consolidated financial statements are based upon the historical consolidated financial statements of the Partnership and the historical financial statements of the Wattenberg Assets. The unaudited pro forma condensed consolidated financial statements present the impact of the Wattenberg Acquisition and certain aspects of the Granger Acquisition, which are described in the introduction to the unaudited pro forma condensed consolidated financial statements, on the Partnership’s results of operations, and present the impact of the Wattenberg Acquisition on the unaudited pro forma condensed consolidated financial position. The contributions of the Wattenberg Assets and the Granger Assets to the Partnership were recorded at Anadarko’s historical cost as these transactions are considered reorganizations of entities under common control.
2. Pro forma adjustments
The following adjustments for the Partnership have been prepared (i) as if the Wattenberg Acquisition and the Granger Acquisition occurred on January 1, 2009, in the case of the unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2009, (ii) as if the Wattenberg Acquisition and the Granger Acquisition occurred on January 1, 2010, in the case of the unaudited pro forma condensed consolidated statement of income for the six months ended June 30, 2010, and (iii) as if the Wattenberg Acquisition occurred on June 30, 2010, in the case of the unaudited pro forma condensed consolidated balance sheet:
 
  (a)   The elimination of transaction costs included in the historical financial statements of the Partnership which are directly related to the Wattenberg Acquisition and the Granger Acquisition.
 
  (b)   The elimination of historical interest income, net resulting from the non-cash settlement of receivables from Anadarko prior to the acquisition of the Wattenberg Assets.
 
  (c)   The inclusion of interest expense on the Partnership’s $250.0 million of borrowings under a bank-syndicated unsecured term loan and $200.0 million of borrowings under the Partnership’s revolving credit facility to partially finance the Wattenberg Acquisition.
 
  (d)   The inclusion of interest expense prior to the Granger Acquisition on the Partnership’s $210.0 million of borrowings under its revolving credit facility to partially finance the Granger Acquisition.
 
  (e)   The elimination of historical current and deferred income taxes as the Partnership is generally not subject to federal and state income taxes, other than Texas margin tax. Texas margin taxes that continue to be borne by the Partnership on the portion of the Partnership’s pro forma income that is allocable to Texas have not been eliminated.
 
  (f)   The elimination of historical interest income, net resulting from the non-cash settlement of receivables from Anadarko prior to the acquisition of the Granger Assets.
 
  (g)   The borrowing by the Partnership of $250.0 million under a bank-syndicated unsecured term loan and $200.0 million under its revolving credit facility in connection with the Wattenberg Acquisition.
 
  (h)   The acquisition of the Wattenberg Assets, including the payment of $473.1 million of cash and the issuance of 1,048,196 common units and 21,392 general partner units by the Partnership to Anadarko. The excess of cash consideration paid over the historical net book value of assets acquired and liabilities assumed is recorded as a decrease to partners’ capital for the common unitholders and general partner.

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Notes to the unaudited pro forma condensed consolidated financial statements of
Western Gas Partners, LP
3. Pro forma net income per limited partner unit
Earnings per limited partner unit is calculated based on the assumption that the Partnership distributes to its unitholders an amount of cash equal to net income attributable to Western Gas Partners, LP, notwithstanding the general partner’s ultimate discretion over the amount of cash to be distributed for the period, the existence of other legal or contractual limitations that would prevent distributions of all of the net income for the period or any other economic or practical limitation on the ability to make a full distribution of all of the net income for the period. Earnings per unit is calculated by applying the provisions of the partnership agreement that govern actual cash distributions to the earnings for each period as if all earnings were distributed for such period, including giving effect to incentive distributions, when applicable, and regardless of the actual amount of available cash, as defined in the partnership agreement, at the end of the period.
The Partnership’s net income allocable to the limited partners is allocated between the common and subordinated unitholders by applying the provisions of the partnership agreement that govern actual cash distributions as if all earnings for the period had been distributed. Accordingly, if current net income allocable to the limited partners is less than the minimum quarterly distribution, more income is allocated to the common unitholders than the subordinated unitholders for that quarterly period.
For purposes of calculating pro forma net income per limited partner unit, management assumed that annual pro forma cash distributions were equal to annual pro forma earnings. Pro forma basic and diluted net income per limited partner unit is calculated by dividing limited partners’ interest in net income by the pro forma weighted average number of units outstanding. The common units and general partner units outstanding are based on the weighted average number of shares outstanding during the periods, adjusted to give effect to the common units and general partner units issued in connection with the Wattenberg Acquisition and the Granger Acquisition as if such units were issued on January 1, 2010, in the case of the unaudited pro forma earnings per limited partner unit for the six months ended June 30, 2010, and as if such units were issued on January 1, 2009, in the case of the unaudited pro forma earnings per limited partner unit for the year ended December 31, 2009.
Pursuant to the limited partnership agreement, to the extent that the quarterly distributions exceed certain targets, the general partner is entitled to receive certain incentive distributions that will result in more net income being proportionately allocated to the general partner than to the holders of common and subordinated units. The pro forma net income per unit would have been sufficient to generate incentive distribution payments to our general partner and the effect of such incentive distributions are included in the general partner interest in pro forma net income for the six months ended June 30, 2010 and for the year ended December 31, 2009. However, because (i) the limited partnership agreement requires the Partnership to distribute available cash rather than the earnings reflected in the Partnership’s income statement and (ii) the pro forma net income per unit calculation has been prepared on a year-to-date basis in lieu of a quarterly basis, actual cash distributions declared and paid by the Partnership may vary significantly from reported pro forma net income per unit.

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Notes to the unaudited pro forma condensed consolidated financial statements of
Western Gas Partners, LP
The following table illustrates the Partnership’s calculation of pro forma net income per unit for common and subordinated limited partner units (unaudited, in thousands except earnings per-unit information):
                 
    Six Months Ended     Year Ended  
    June 30, 2010     December 31, 2009  
Limited partner interest in pro forma net income:
               
Pro forma net income attributable to Western Gas Partners, LP
  $ 61,578     $ 105,116  
Less general partner interest in pro forma net income
    4,616       6,726  
 
           
Limited partner interest in pro forma net income
  $ 56,962     $ 98,390  
 
               
Pro forma net income allocable to common units
  $ 33,936     $ 53,289  
Pro forma net income allocable to subordinated units
    23,026       45,101  
 
           
Limited partner interest in pro forma net income
  $ 56,962     $ 98,390  
 
               
Pro forma net income per limited partner unit — basic and diluted:
               
Pro forma net income per common unit
  $ 0.87     $ 1.70  
Pro forma net income per subordinated unit
  $ 0.87     $ 1.70  
Pro forma net income per limited partner unit
  $ 0.87     $ 1.70  
 
               
Pro forma weighted average number of limited partner units outstanding — basic and diluted:
               
Common units
    39,110       31,353  
Subordinated units
    26,536       26,536  
 
           
Total limited partner units
    65,646       57,889  
 
           

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