Attached files
file | filename |
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8-K/A - FORM 8-K/A - Western Midstream Operating, LP | h76438e8vkza.htm |
EX-23.1 - EX-23.1 - Western Midstream Operating, LP | h76438exv23w1.htm |
EX-99.1 - EX-99.1 - Western Midstream Operating, LP | h76438exv99w1.htm |
Exhibit 99.2
WESTERN GAS PARTNERS, LP
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
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
condensed consolidated financial statements of Western Gas Partners, LP
The unaudited pro forma condensed consolidated financial statements present the impact on Western
Gas Partners, LPs (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 Partnerships 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 Partnerships 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 Partnerships 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 Anadarkos 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 Partnerships 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 Partnerships 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
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 Partnerships
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 Partnerships 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 Partnerships 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 Partnerships 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
Partnerships 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 Partnerships 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 Partnerships $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 Partnerships $210.0 million of borrowings under its revolving credit facility to partially finance the Granger Acquisition; | ||
| the Partnerships payment of $473.1 million of cash consideration to Anadarko for the Wattenberg Acquisition; | ||
| the Partnerships issuance of 1,048,196 common units and 21,392 general partner units to Anadarko for the Wattenberg Acquisition; and | ||
| Anadarkos 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
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 Partnerships 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 Partnerships general partner, subject to
further increases arising in connection with expansions of the Partnerships 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 Partnerships 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 Partnerships 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)
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)
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)
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
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 Partnerships 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 Anadarkos
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 Partnerships $250.0 million of borrowings under a bank-syndicated unsecured term loan and $200.0 million of borrowings under the Partnerships revolving credit facility to partially finance the Wattenberg Acquisition. | ||
(d) | The inclusion of interest expense prior to the Granger Acquisition on the Partnerships $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 Partnerships 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. |
8
Notes to the unaudited pro forma condensed consolidated financial statements of
Western Gas Partners, LP
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 partners 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 Partnerships 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 Partnerships 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.
9
Notes to the unaudited pro forma condensed consolidated financial statements of
Western Gas Partners, LP
Western Gas Partners, LP
The following table illustrates the Partnerships 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 | ||||||
10