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| 8-K - FORM 8-K - Western Midstream Operating, LP | wes20178-kxexchangeclosing.htm |
EXHIBIT 99.1
WESTERN GAS PARTNERS, LP
INDEX TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
INTRODUCTION
The “Partnership” refers to Western Gas Partners, LP and its subsidiaries. The Partnership’s general partner, Western Gas Holdings, LLC (the “general partner”), is owned by Western Gas Equity Partners, LP (“WGP”). Western Gas Equity Holdings, LLC is WGP’s general partner and is a wholly owned subsidiary of Anadarko Petroleum Corporation. “Anadarko” refers to Anadarko Petroleum Corporation and its subsidiaries, excluding the Partnership and the general partner, and “affiliates” refers to subsidiaries of Anadarko, excluding the Partnership, but including equity interests in Fort Union Gas Gathering, LLC, White Cliffs Pipeline, LLC, Rendezvous Gas Services, LLC, Enterprise EF78 LLC, Texas Express Pipeline LLC, Texas Express Gathering LLC and Front Range Pipeline LLC.
The unaudited pro forma condensed consolidated financial statements present the impact to the results of operations and financial position of the Partnership attributable to the transactions consummated pursuant to the Interest Swap and Purchase Agreement, dated February 9, 2017 (the “PSA”), with Williams Partners L.P. (“WPZ”) and certain of WPZ’s subsidiaries, whereby the Partnership acquired WPZ’s 50% non-operated interest (the “DBJV Interest”) in the assets of Delaware Basin JV Gathering LLC (“DBJV”) in exchange for (a) the Partnership’s 33.75% non-operated interest (the “Non-Operated Marcellus Interest”) in two natural gas gathering systems located in northern Pennsylvania, commonly referred to as the Liberty and Rome systems, and (b) $155.0 million in cash (collectively, the “Transaction”). The Transaction is reflected as a nonmonetary transaction whereby the acquired DBJV Interest is recorded at the fair value of the Non-Operated Marcellus Interest plus the $155.0 million in cash.
The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2016, and the unaudited pro forma condensed consolidated balance sheet as of December 31, 2016, are based upon the historical consolidated financial statements of the Partnership, as presented in the Partnership’s 2016 Form 10-K, and the historical financial statements of the Non-Operated Marcellus Interest and the DBJV Interest. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2016, has been prepared as if the Transaction occurred on January 1, 2016. The unaudited pro forma condensed consolidated balance sheet has been prepared as if the Transaction occurred on December 31, 2016. 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 and state income taxes, except for the Texas margin tax. The unaudited pro forma condensed consolidated financial statements have also been prepared based on certain pro forma adjustments as described in Note 2—Pro Forma Adjustments.
The audited historical financial information of the Partnership included in these unaudited pro forma condensed consolidated financial statements (and the notes thereto) is qualified in its entirety by reference to the Partnership’s audited historical consolidated financial statements (and the notes thereto) set forth in its 2016 Form 10-K, as filed with the U.S. Securities and Exchange Commission on February 23, 2017. The unaudited pro forma condensed consolidated financial statements and the notes thereto should be read in conjunction with those historical financial statements and the notes thereto.
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INTRODUCTION (CONTINUED)
The pro forma adjustments reflected in the unaudited pro forma condensed consolidated financial statements are based upon currently available information and certain assumptions and estimates. The actual effects of the transactions described below will differ from the pro forma adjustments. However, the Partnership’s management believes that the applied estimates and assumptions provide a reasonable basis for the presentation of the significant elements of the Transaction described below, which are expected to have a continuing impact on the Partnership. In addition, the Partnership’s management believes that the pro forma adjustments are factually supportable and appropriately represent the expected impact of items that are directly attributable to the Transaction.
The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements reflect the following significant elements of the Transaction:
• | the Partnership’s acquisition of the DBJV Interest in exchange for the Partnership’s Non-Operated Marcellus Interest, reflected as a nonmonetary transaction whereby the acquired DBJV Interest is recorded at the fair value of the Non-Operated Marcellus Interest plus the $155.0 million in cash; and |
• | the Partnership’s payment of $155.0 million of cash consideration as part of the Transaction. |
From and after the closing of the Transaction, the Partnership will be subject to the terms and conditions of the PSA.
The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results that would have occurred if the Partnership had completed the Transaction on the dates indicated nor are they indicative of the future operating results of the Partnership.
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WESTERN GAS PARTNERS, LP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2016
(UNAUDITED)
thousands except per-unit amounts | Partnership Historical | Less: Non-Operated Marcellus Interest Historical | Add: DBJV Interest and Pro Forma Adjustments | Partnership Pro Forma | ||||||||||||
Revenues and other – affiliates | ||||||||||||||||
Gathering, processing and transportation | $ | 750,087 | $ | (22,523 | ) | (a) | $ | 45,865 | (b) | $ | 773,429 | |||||
Natural gas and natural gas liquids sales | 478,145 | — | 2,329 | (b) | 480,474 | |||||||||||
Other | — | — | — | — | ||||||||||||
Total revenues and other – affiliates | 1,228,232 | (22,523 | ) | 48,194 | 1,253,903 | |||||||||||
Revenues and other – third parties | ||||||||||||||||
Gathering, processing and transportation | 477,762 | (82,371 | ) | (a) | 12,785 | (b) | 408,176 | |||||||||
Natural gas and natural gas liquids sales | 94,168 | — | 125 | (b) | 94,293 | |||||||||||
Other | 4,108 | — | 6 | (b) | 4,114 | |||||||||||
Total revenues and other – third parties | 576,038 | (82,371 | ) | 12,916 | 506,583 | |||||||||||
Total revenues and other | 1,804,270 | (104,894 | ) | 61,110 | 1,760,486 | |||||||||||
Equity income, net – affiliates | 78,717 | — | — | 78,717 | ||||||||||||
Operating expenses | ||||||||||||||||
Cost of product (1) | 494,194 | — | 4,489 | (b) | 498,683 | |||||||||||
Operation and maintenance (1) | 308,010 | (19,335 | ) | (a) | 18,003 | (b) | 306,678 | |||||||||
General and administrative (1) | 45,591 | — | 1,175 | (b) | 46,766 | |||||||||||
Property and other taxes | 40,145 | — | 1,342 | (b) | 41,487 | |||||||||||
Depreciation and amortization | 272,933 | (17,450 | ) | (a) | 30,842 | (h) | 286,325 | |||||||||
Impairments | 15,535 | (260 | ) | (a) | 618 | (b) | 15,893 | |||||||||
Total operating expenses | 1,176,408 | (37,045 | ) | 56,469 | 1,195,832 | |||||||||||
Gain (loss) on divestiture and other, net | (14,641 | ) | — | — | (14,641 | ) | ||||||||||
Proceeds from business interruption insurance claims | 16,270 | — | — | 16,270 | ||||||||||||
Operating income (loss) | 708,208 | (67,849 | ) | 4,641 | 645,000 | |||||||||||
Interest income – affiliates | 16,900 | — | — | 16,900 | ||||||||||||
Interest expense (2) | (114,921 | ) | — | — | (114,921 | ) | ||||||||||
Other income (expense), net | 479 | — | — | 479 | ||||||||||||
Income (loss) before income taxes | 610,666 | (67,849 | ) | 4,641 | 547,458 | |||||||||||
Income tax (benefit) expense | 8,372 | — | — | 8,372 | ||||||||||||
Net income (loss) | 602,294 | (67,849 | ) | 4,641 | 539,086 | |||||||||||
Net income attributable to noncontrolling interest | 10,963 | — | — | 10,963 | ||||||||||||
Net income (loss) attributable to Western Gas Partners, LP | $ | 591,331 | $ | (67,849 | ) | $ | 4,641 | $ | 528,123 | |||||||
Limited partners’ interest in net income (loss): | ||||||||||||||||
Net income (loss) attributable to Western Gas Partners, LP | $ | 591,331 | $ | 528,123 | ||||||||||||
Pre-acquisition net (income) loss allocated to Anadarko | (11,326 | ) | (11,326 | ) | ||||||||||||
Series A Preferred units interest in net (income) loss (3) | (76,893 | ) | (76,893 | ) | ||||||||||||
General partner interest in net (income) loss (3) | (236,561 | ) | (235,431 | ) | ||||||||||||
Common and Class C limited partners’ interest in net income (loss) (3) | 266,551 | 204,473 | ||||||||||||||
Net income (loss) per common unit – basic and diluted | $ | 1.74 | $ | 1.30 | ||||||||||||
(1) | As it relates to the “Partnership Historical” column, cost of product includes product purchases from Anadarko of $80.5 million, operation and maintenance includes charges from Anadarko of $72.3 million, and general and administrative includes charges from Anadarko of $38.1 million for the year ended December 31, 2016. |
(2) | As it relates to the “Partnership Historical” column, includes affiliate amounts of $7.7 million for the year ended December 31, 2016. |
(3) | Represents net income (loss) earned on and subsequent to the date of acquisition of the Partnership assets. |
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
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WESTERN GAS PARTNERS, LP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2016
(UNAUDITED)
thousands except number of units | Partnership Historical | Less: Non-Operated Marcellus Interest Historical | Add: DBJV Interest and Pro Forma Adjustments | Partnership Pro Forma | |||||||||||||
ASSETS | |||||||||||||||||
Current assets | |||||||||||||||||
Cash and cash equivalents | $ | 357,925 | $ | 86,637 | (c) | $ | (155,000 | ) | (f) | $ | 287,028 | ||||||
(2,534 | ) | (g) | |||||||||||||||
Accounts receivable, net (1) | 223,223 | (88,089 | ) | (c) | (36,442 | ) | (g) | 98,692 | |||||||||
Other current assets | 12,866 | (65 | ) | (c) | — | 12,801 | |||||||||||
Total current assets | 594,014 | (1,517 | ) | (193,976 | ) | 398,521 | |||||||||||
Note receivable – Anadarko | 260,000 | — | — | 260,000 | |||||||||||||
Property, plant and equipment | |||||||||||||||||
Cost | 6,861,942 | (460,821 | ) | (c) | 679,966 | (h) | 7,081,087 | ||||||||||
Less accumulated depreciation | 1,812,010 | (60,036 | ) | (c) | — | 1,751,974 | |||||||||||
Net property, plant and equipment | 5,049,932 | (400,785 | ) | 679,966 | 5,329,113 | ||||||||||||
Goodwill | 417,610 | — | — | 417,610 | |||||||||||||
Other intangible assets | 803,698 | — | — | 803,698 | |||||||||||||
Equity investments | 594,208 | — | — | 594,208 | |||||||||||||
Other assets | 13,566 | — | — | 13,566 | |||||||||||||
Total assets | $ | 7,733,028 | $ | (402,302 | ) | $ | 485,990 | $ | 7,816,716 | ||||||||
LIABILITIES, EQUITY AND PARTNERS’ CAPITAL | |||||||||||||||||
Current liabilities | |||||||||||||||||
Accounts and imbalance payables | $ | 123,285 | $ | (1,517 | ) | (c) | $ | (38,976 | ) | (g) | $ | 82,792 | |||||
Accrued ad valorem taxes | 23,121 | — | — | 23,121 | |||||||||||||
Accrued liabilities | 168,899 | (17 | ) | (c) | — | 168,882 | |||||||||||
Total current liabilities | 315,305 | (1,534 | ) | (38,976 | ) | 274,795 | |||||||||||
Long-term debt | 3,091,461 | — | — | 3,091,461 | |||||||||||||
Deferred income taxes | 6,402 | — | — | 6,402 | |||||||||||||
Asset retirement obligations and other | 142,641 | (2,372 | ) | (c) | 3,732 | (h) | 144,001 | ||||||||||
Deferred purchase price obligation – Anadarko | 41,440 | — | — | 41,440 | |||||||||||||
Total long-term liabilities | 3,281,944 | (2,372 | ) | 3,732 | 3,283,304 | ||||||||||||
Total liabilities | 3,597,249 | (3,906 | ) | (35,244 | ) | 3,558,099 | |||||||||||
Equity and partners’ capital | |||||||||||||||||
Series A Preferred units | 639,545 | — | — | 639,545 | |||||||||||||
Common units | 2,536,872 | — | — | 2,536,872 | |||||||||||||
Class C units | 750,831 | — | — | 750,831 | |||||||||||||
General partner units | 143,968 | — | — | 143,968 | |||||||||||||
Retained equity | — | (398,396 | ) | (d) | 521,234 | (e) | 122,838 | (i) | |||||||||
Total partners’ capital | 4,071,216 | (398,396 | ) | 521,234 | 4,194,054 | ||||||||||||
Noncontrolling interest | 64,563 | — | — | 64,563 | |||||||||||||
Total equity and partners’ capital | 4,135,779 | (398,396 | ) | 521,234 | 4,258,617 | ||||||||||||
Total liabilities, equity and partners’ capital | $ | 7,733,028 | $ | (402,302 | ) | $ | 485,990 | $ | 7,816,716 | ||||||||
(1) | As it relates to the “Partnership Historical” column, accounts receivable, net includes amounts receivable from affiliates of $76.6 million as of December 31, 2016. |
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
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WESTERN GAS PARTNERS, LP
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma condensed consolidated financial statements are based upon the audited historical consolidated financial statements of the Partnership and the unaudited historical consolidated financial statements of the Non-Operated Marcellus Interest and the DBJV Interest as of and for the year ended December 31, 2016. As described in the Introduction, these unaudited pro forma condensed consolidated financial statements present the impact of the Transaction on the Partnership’s results of operations and financial position. The Transaction is reflected as a nonmonetary transaction.
2. PRO FORMA ADJUSTMENTS
The following adjustments for the Partnership have been prepared as if the Transaction (i) occurred on January 1, 2016, in the case of the unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2016, and (ii) on December 31, 2016, in the case of the unaudited pro forma condensed consolidated balance sheet as of December 31, 2016:
(a) | The elimination of historical revenue and operating expenses related to the Partnership’s divestiture of the Non-Operated Marcellus Interest; |
(b) | Represents the revenue and operating expenses related to the Partnership’s acquisition of the DBJV Interest; |
(c) | The elimination of assets and liabilities related to the Partnership’s divestiture of the Non-Operated Marcellus Interest; |
(d) | Represents the net equity impact of the divestiture of the Non-Operated Marcellus Interest; |
(e) | Represents the net equity impact of the acquisition of the DBJV Interest. Since the Transaction is reflected as a nonmonetary transaction, the acquired DBJV Interest is recorded at the fair value of the Non-Operated Marcellus Interest plus the $155.0 million in cash; |
(f) | Cash consideration paid of $155.0 million; |
(g) | The elimination of accounts receivable and payable balances with WPZ; |
(h) | Represents the allocation to property, plant and equipment, with related changes in depreciation and amortization expense and asset retirement obligations; and |
(i) | Represents the gain on the Transaction as of December 31, 2016, with this estimated gain not reflected in the unaudited pro forma condensed consolidated statement of operations since it is a nonrecurring item directly related to the Transaction. |
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