Attached files
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8-K/A - FORM 8-K/A - Western Midstream Partners, LP | d519859d8ka.htm |
EX-23.1 - EX-23.1 - Western Midstream Partners, LP | d519859dex231.htm |
EX-99.1 - EX-99.1 - Western Midstream Partners, LP | d519859dex991.htm |
EXHIBIT 99.2
WESTERN GAS EQUITY PARTNERS, LP
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Introduction |
2 | |||
Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2012 |
4 | |||
Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2012 |
5 | |||
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements |
6 |
INTRODUCTION
The unaudited pro forma condensed consolidated financial statements present the impact to the results of operations and financial position of Western Gas Equity Partners, LP attributable to the acquisition on March 1, 2013, of a 33.75% interest in both the Liberty and Rome gas gathering systems from Anadarko Marcellus Midstream, L.L.C. (AMM), a wholly owned subsidiary of Anadarko Petroleum Corporation. The interest acquired is referred to as the Non-Operated Marcellus Interest and the acquisition as the Non-Operated Marcellus Interest acquisition.
WGP refers to Western Gas Equity Partners, LP in its individual capacity or to Western Gas Equity Partners, LP and its subsidiaries, including Western Gas Holdings, LLC and Western Gas Partners, LP (WES), as the context requires. WES GP refers to Western Gas Holdings, LLC, individually as the general partner of WES, and excludes WES itself. WGPs general partner, Western Gas Equity Holdings, LLC (WGP GP), is a wholly owned subsidiary of Anadarko Petroleum Corporation. Anadarko Petroleum Corporation refers to Anadarko Petroleum Corporation excluding its subsidiaries and affiliates. Anadarko refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding WGP and the general partner. WGP and Affiliates refers to subsidiaries of Anadarko, including WGP in its individual capacity, and affiliates refers to subsidiaries of Anadarko, excluding WGP and its consolidated subsidiaries, and includes the interests in Fort Union Gas Gathering, LLC, White Cliffs Pipeline, LLC and Rendezvous Gas Services, LLC.
WGP has no independent operations or material assets other than its partnership interests in WES; the consolidated financial results of WES are included in WGPs consolidated financial statements due to WGPs 100% ownership interest in and the control of the WES GP. References to WES assets refer to the assets indirectly owned by WGP through its partnership interests in WES as of December 31, 2012. WESs acquisition of the Non-Operated Marcellus Interest from Anadarko is considered a transfer of net assets between entities under common control and recorded at Anadarkos historic carrying value. After an acquisition of assets from Anadarko, WES, and WGP, by virtue of its consolidation of WES, may be required to recast their financial statements to include the activities of such assets as of the date of common control in September 2006.
The unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2012, and the unaudited pro forma condensed consolidated balance sheet as of December 31, 2012, are based upon the historical consolidated financial statements of WGP, as presented in WGPs Form 10-K for the year ended December 31, 2012, and the historical financial statements of the Non-Operated Marcellus Interest, as presented in Exhibit 99.1 of this Current Report on Form 8-K/A. The unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2012, has been prepared as if the Non-Operated Marcellus Interest acquisition occurred on January 1, 2012. The unaudited pro forma condensed consolidated balance sheet has been prepared as if the Non-Operated Marcellus Interest acquisition occurred on December 31, 2012. The unaudited pro forma condensed consolidated financial statements have been prepared based on the assumption that WGP 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 Non-Operated Marcellus Interest and WGP included in these unaudited pro forma condensed consolidated financial statements (and the notes thereto) is qualified in its entirety by reference to the audited historical financial statements of the Non-Operated Marcellus Interest as set forth in Exhibit 99.1 of this Current Report on Form 8-K/A as of and for the year ended December 31, 2012, WGPs audited historical consolidated financial statements as set forth in its Form 10-K as of and for the year ended December 31, 2012, as filed with the U.S. Securities and Exchange Commission, and the related notes contained in those reports. The unaudited pro forma condensed consolidated financial statements should be read in conjunction with those historical financial statements and the related notes thereto.
2
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; therefore, the actual effects of these transactions will differ from the pro forma adjustments. However, WGPs management believes that the applied estimates and assumptions provide a reasonable basis for the presentation of the significant effects of certain transactions that are expected to have a continuing impact on WGP. In addition, WESs management believes that the pro forma adjustments are factually supportable and appropriately represent the expected impact of items that are directly attributable to the transfer of the Non-Operated Marcellus Interest to WES.
The pro forma adjustments included in the unaudited pro forma condensed consolidated financial statements reflect the acquisition of the Non-Operated Marcellus Interest on March 1, 2013, including the following significant transactions:
| WESs $250.0 million of borrowings under its revolving credit facility to fund a portion of the cash consideration paid for the acquisition of the Non-Operated Marcellus Interest; |
| WESs use of $215.5 million of cash on hand to fund a portion of the cash consideration paid for the acquisition of the Non-Operated Marcellus Interest; |
| WESs issuance of 449,129 common units and 9,166 general partner units in connection with the acquisition of the Non-Operated Marcellus Interest; and |
| AMMs contribution of the Non-Operated Marcellus Interest to WES. |
From and after the closing of the Non-Operated Marcellus Interest acquisition and related transactions, the Non-Operated Marcellus Interest will be subject to the terms and conditions of various agreements between WES and Anadarko, including the following:
| the contribution agreement by which WES acquired the Non-Operated Marcellus Interest, pursuant to which Anadarko agreed to indemnify WES against certain losses resulting from any breach of Anadarkos representations, warranties, covenants or agreements, and for certain other matters; |
| an omnibus agreement that provides for certain indemnities, reimbursement for expenses paid by Anadarko on behalf of WES and compensation to Anadarko for providing WES with certain general and administrative services and insurance coverage; |
| a tax sharing agreement pursuant to which WES will reimburse Anadarko for WESs estimated share of Texas margin tax borne by Anadarko as a result of the financial results of the Non-Operated Marcellus Interest being included in a combined or consolidated tax return filed by Anadarko with respect to activity subsequent to March 1, 2013; and |
| other routine agreements with Anadarko or its subsidiaries that arise in the ordinary course of business for gathering services and other operational matters. |
The unaudited pro forma condensed consolidated financial statements are not necessarily indicative of the results that would have occurred if WES had acquired the Non-Operated Marcellus Interest on the dates indicated nor are they indicative of the future operating results of WES.
3
WESTERN GAS EQUITY PARTNERS, LP
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2012
(UNAUDITED)
Non-Op | ||||||||||||||||
Marcellus | ||||||||||||||||
WGP | Interest | Pro Forma | WGP | |||||||||||||
thousands except per-unit amounts | Historical | Historical | Adjustments | Pro Forma | ||||||||||||
Revenues affiliates |
||||||||||||||||
Gathering, processing and transportation of natural gas |
$ | 233,494 | $ | 16,503 | $ | | $ | 249,997 | ||||||||
Natural gas, natural gas liquids and condensate sales |
436,423 | | | 436,423 | ||||||||||||
Equity income and other, net |
17,717 | | | 17,717 | ||||||||||||
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Total revenues affiliates |
687,634 | 16,503 | | 704,137 | ||||||||||||
Revenues third parties |
||||||||||||||||
Gathering, processing and transportation of natural gas |
87,689 | 44,644 | | 132,333 | ||||||||||||
Natural gas, natural gas liquids and condensate sales |
71,916 | | | 71,916 | ||||||||||||
Other, net |
2,201 | | | 2,201 | ||||||||||||
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|
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Total revenues third parties |
161,806 | 44,644 | | 206,450 | ||||||||||||
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Total revenues |
849,440 | 61,147 | | 910,587 | ||||||||||||
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Operating expenses |
||||||||||||||||
Cost of product (1) |
336,079 | | | 336,079 | ||||||||||||
Operation and maintenance (1) |
131,344 | 8,762 | | 140,106 | ||||||||||||
General and administrative (1) |
97,582 | 2,146 | | 99,728 | ||||||||||||
Property and other taxes |
19,688 | | | 19,688 | ||||||||||||
Depreciation, amortization and impairments |
117,261 | 3,347 | | 120,608 | ||||||||||||
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Total operating expenses |
701,954 | 14,255 | | 716,209 | ||||||||||||
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Operating income |
147,486 | 46,892 | | 194,378 | ||||||||||||
Interest income affiliates |
16,900 | | | 16,900 | ||||||||||||
Interest expense (2) |
(42,060) | | (4,259) | (a) | (46,319) | |||||||||||
Other income (expense), net |
292 | | | 292 | ||||||||||||
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Income before income taxes |
122,618 | 46,892 | (4,259) | 165,251 | ||||||||||||
Income tax expense |
29,452 | 19,457 | (19,295) | (b) | 29,614 | |||||||||||
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Net income |
93,166 | 27,435 | 15,036 | 135,637 | ||||||||||||
Net income attributable to noncontrolling interests |
59,181 | | 23,462 | (e) | 82,643 | |||||||||||
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Net income attributable to Western Gas Equity Partners, LP |
$ | 33,985 | $ | 27,435 | $ | (8,426) | $ | 52,994 | ||||||||
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Limited partners interest in net income: |
||||||||||||||||
Net income attributable to Western Gas Equity Partners, LP |
$ | 33,985 | $ | 52,994 | ||||||||||||
Results attributable to the pre-IPO period |
(31,176) | (46,856) | ||||||||||||||
Limited partners interest in net income |
$ | 2,809 | $ | 6,138 | ||||||||||||
Net income per common unit basic and diluted (3) |
$ | 0.01 | $ | 0.03 | ||||||||||||
Weighted average units outstanding - basic and diluted |
218,896 | 218,896 |
(1) | As it relates to the WGP Historical column, cost of product includes product purchases from affiliates (as defined in the Introduction) of $145.3 million, operation and maintenance includes charges from affiliates of $51.2 million, and general and administrative includes charges from affiliates of $90.7 million for the year ended December 31, 2012. As it relates to the Non-Op Marcellus Interest Historical column, general and administrative expense includes charges from affiliates of $2.1 million for the year ended December 31, 2012. |
(2) | As it relates to the WGP Historical column, interest expense includes affiliate (as defined in the Introduction) interest expense of $2.8 million for the year ended December 31, 2012. |
(3) | Amounts not applicable to periods prior to the IPO of Western Gas Equity Partners, LP on December 12, 2012. |
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
4
WESTERN GAS EQUITY PARTNERS, LP
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2012
(UNAUDITED)
Non-Op | ||||||||||||||||
Marcellus | ||||||||||||||||
WGP | Interest | Pro Forma | WGP | |||||||||||||
thousands | Historical | Historical | Adjustments | Pro Forma | ||||||||||||
ASSETS |
||||||||||||||||
Current assets |
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Cash and cash equivalents |
$ | 422,556 | $ | | $ | 250,000 | (c) | $ | 207,056 | |||||||
(465,500) | (d) | |||||||||||||||
Accounts receivable, net (1) |
36,671 | 11,879 | | 48,550 | ||||||||||||
Other current assets (2) |
6,998 | | | 6,998 | ||||||||||||
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Total current assets |
466,225 | 11,879 | (215,500) | 262,604 | ||||||||||||
Note receivable Anadarko |
260,000 | | | 260,000 | ||||||||||||
Plant, property and equipment |
||||||||||||||||
Cost |
3,183,148 | 249,244 | | 3,432,392 | ||||||||||||
Less accumulated depreciation |
709,773 | 4,663 | | 714,436 | ||||||||||||
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Net property, plant and equipment |
2,473,375 | 244,581 | | 2,717,956 | ||||||||||||
Goodwill |
87,936 | 17,400 | | 105,336 | ||||||||||||
Other intangible assets |
55,490 | | | 55,490 | ||||||||||||
Equity investments |
106,130 | | | 106,130 | ||||||||||||
Other assets |
27,798 | | | 27,798 | ||||||||||||
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Total assets |
$ | 3,476,954 | $ | 273,860 | $ | (215,500) | $ | 3,535,314 | ||||||||
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LIABILITIES, EQUITY AND PARTNERS CAPITAL |
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Current liabilities |
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Accounts and natural gas imbalance payables (3) |
$ | 24,633 | $ | 521 | $ | | $ | 25,154 | ||||||||
Accrued ad valorem taxes |
11,949 | | | 11,949 | ||||||||||||
Income taxes payable |
552 | | 72 | (b) | 624 | |||||||||||
Accrued liabilities (4) |
121,073 | 27,527 | | 148,600 | ||||||||||||
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Total current liabilities |
158,207 | 28,048 | 72 | 186,327 | ||||||||||||
Long-term debt third parties |
1,168,278 | | 250,000 | (c) | 1,418,278 | |||||||||||
Deferred income taxes |
1,578 | 45,575 | (45,484) | (b) | 1,669 | |||||||||||
Asset retirement obligations and other |
68,472 | 277 | | 68,749 | ||||||||||||
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Total long-term liabilities |
1,238,328 | 45,852 | 204,516 | 1,488,696 | ||||||||||||
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Total liabilities |
1,396,535 | 73,900 | 204,588 | 1,675,023 | ||||||||||||
Equity and partners capital |
||||||||||||||||
Common units |
912,376 | | (220,128) | (d) | 668,786 | |||||||||||
(23,462) | (e) | |||||||||||||||
Net investment by Anadarko |
| 199,960 | (245,372) | (d) | | |||||||||||
45,412 | (b) | |||||||||||||||
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Total partners capital |
912,376 | 199,960 | (443,550) | 668,786 | ||||||||||||
Noncontrolling interests |
1,168,043 | | 23,462 | (e) | 1,191,505 | |||||||||||
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Total equity and partners capital |
2,080,419 | 199,960 | (420,088) | 1,860,291 | ||||||||||||
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Total liabilities, equity and partners capital |
$ | 3,476,954 | $ | 273,860 | $ | (215,500) | $ | 3,535,314 | ||||||||
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(1) | As it relates to the WGP Historical column, accounts receivable, net includes amounts receivable from affiliates of $17.5 million as of December 31, 2012. |
(2) | As it relates to the WGP Historical column, other current assets includes natural gas imbalance receivables from affiliates of $0.4 million as of December 31, 2012. |
(3) | As it relates to the WGP Historical column, accounts and natural gas imbalance payables includes amounts payable to affiliates of $2.5 million as of December 31, 2012. |
(4) | As it relates to the WGP Historical column, accrued liabilities include amounts payable to affiliates of $0.1 million as of December 31, 2012. |
See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
5
WESTERN GAS EQUITY 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 WGP and the audited historical financial statements of the Non-Operated Marcellus Interest. As described in the Introduction, these unaudited pro forma condensed consolidated financial statements present the impact of the Non-Operated Marcellus Interest acquisition on WGPs results of operations and financial position. The contribution of the Non-Operated Marcellus Interest to WES was recorded at Anadarkos historical cost as this transaction is considered a reorganization of entities under common control.
2. PRO FORMA ADJUSTMENTS
The following adjustments for WGP have been prepared as if the acquisition of the Non-Operated Marcellus Interest (i) occurred on January 1, 2012, in the case of the unaudited pro forma condensed consolidated statement of income for the year ended December 31, 2012, and (ii) on December 31, 2012, in the case of the unaudited pro forma condensed consolidated balance sheet as of December 31, 2012:
(a) | the inclusion of interest expense on $250.0 million of borrowings under WESs revolving credit facility, which bears interest at a variable rate, to partially finance the acquisition of the Non-Operated Marcellus Interest; |
(b) | the elimination of historical current and deferred income taxes, as WGP converted to a limited partnership legal form in September 2012 and is subsequently not subject to federal and state income taxes, other than Texas margin tax. Texas margin taxes that continue to be borne by WGP on the portion of WGPs pro forma income that is allocable to Texas have not been eliminated; |
(c) | the receipt of $250.0 million of borrowings under WESs revolving credit facility; |
(d) | the acquisition of the Non-Operated Marcellus Interest by WES, including the payment of $465.5 million of cash (representing $215.5 million of cash on hand and $250.0 million borrowed under WESs revolving credit facility) and the issuance of 449,129 WES common units to AMM. 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 |
(e) | the impact to noncontrolling interests resulting from the issuance of 449,129 WES common units to AMM in conjunction with the acquisition of the Non-Operated Marcellus Interest by WES. |
6
WESTERN GAS EQUITY PARTNERS, LP
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
3. PRO FORMA NET INCOME PER UNIT
Earnings per unit is calculated based on the assumption that WGP distributes to its unitholders an amount of cash equal to net income attributable to WGP, 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. Net income equal to the amount of available cash (as defined by WGPs partnership agreement) is allocated to WGP common unitholders consistent with actual cash distributions. Net income attributable to periods prior to WGPs IPO, including compensation expense for grants of awards under the Western Gas Holdings, LLC Equity Incentive Plan, as amended and restated, was attributable to subsidiaries of Anadarko and therefore not allocated to the limited partners for purposes of calculating net income per unit. As a result, pre-IPO net income, representing the financial results prior to WGPs IPO on December 12, 2012, has been excluded from the limited partners interest in net income. Net income available to limited partners for the 20-day period beginning on the date of WGPs IPO closed through December 31, 2012, was calculated based on the number of common units outstanding after the IPO.
For purposes of calculating pro forma net income per unit, management assumed that annual pro forma cash distributions were equal to annual pro forma earnings. Pro forma basic and diluted net income per unit is calculated by dividing the limited partners interest in net income by the pro forma weighted average number of units outstanding as of December 31, 2012.
Upon closing the acquisition of the Non-Operated Marcellus Interest, WGP, through its ownership of WES GP, held 2,145,096 WES general partner units, representing a 2.0% general partner interest in WES, 100% of WESs incentive distribution rights and 49,296,205 WES common units, representing a 46.0% limited partner interest in WES. AMM held 449,129 WES common units, representing a 0.4% limited partner interest in WES. The public held 55,364,348 WES common units upon closing of the acquisition of the Non-Operated Marcellus Interest, representing a 51.6% limited partner interest in WES.
7