Business Context and Reporting Period
This Form 8-K was filed by Western Gas Equity Partners, LP (WES) on December 9, 2015, reporting events occurring on December 8, 2015. The filing details the extension of material definitive commodity price swap agreements with Anadarko Petroleum Corporation covering the DJ Basin complex and Hugoton system for the period of January 1, 2016, through December 31, 2016.
Key Financial Metrics and Agreements
The filing does not report standard financial metrics such as revenue, profit, cash flow, or debt levels for a specific reporting period. Instead, it outlines the terms of commodity price swaps where notional volumes are not fixed but apply to actual volumes of natural gas, condensate, and NGLs purchased and sold. The agreements lock in prices significantly higher than prevailing market rates as of the execution date.
| Commodity | Unit | DJ Basin Swap Price | DJ Basin Market Price | Hugoton Swap Price | Hugoton Market Price |
|---|---|---|---|---|---|
| Ethane | per barrel | $18.41 | $0.60 | — | — |
| Propane | per barrel | $47.08 | $10.98 | — | — |
| Isobutane | per barrel | $62.09 | $17.23 | — | — |
| Normal butane | per barrel | $54.62 | $16.86 | — | — |
| Natural gasoline | per barrel | $72.88 | $26.15 | — | — |
| Condensate | per barrel | $76.47 | $34.65 | $78.61 | $18.81 |
| Natural gas | per MMBtu | $5.96 | $2.11 | $5.50 | $2.12 |
Revenues or costs for volumes settled during the extension period will be recognized at the applicable market price. The difference between the swap price and the market price will be recorded as a capital contribution from Anadarko in the consolidated statement of equity.
Material Changes and Outlook
The primary material change is the extension of favorable pricing terms for 2016, which provides a hedge against market volatility. Management notes that there can be no assurance these agreements will be renewed or extended beyond December 31, 2016, on similar terms or at all. The filing does not provide specific guidance on future earnings or liquidity beyond the terms of this specific agreement.
Investor Verification Checklist
- Verify the actual volumes of natural gas, condensate, and NGLs purchased and sold in 2016 to calculate the total value of the capital contribution from Anadarko.
- Monitor the renewal status of the swap agreements as they approach the December 31, 2016, expiration date.
- Review the consolidated statement of equity to confirm the recording of the capital contribution as the price differential is realized.
- Assess the impact of the swap extension on the company's exposure to commodity price fluctuations compared to the prior period.