Business Context and Reporting Period
This Form 8-K, filed on February 27, 2013, by Western Gas Equity Partners, LP (the parent of Western Gas Partners, LP or "WES"), reports the completion of a material asset acquisition on March 1, 2013. The transaction involves the acquisition of a 33.75% interest in two gathering systems serving the Marcellus shale in north-central Pennsylvania from Anadarko Marcellus Midstream, L.L.C.
Key Financial Metrics and Transaction Details
- Total Consideration: $465.5 million in cash plus 449,129 common units of WES.
- Cash Funding Sources: Approximately $250 million in borrowings under WES's revolving credit facility and $215.5 million of cash on hand.
- Ownership Impact: Following the issuance of common units, Anadarko indirectly owns an aggregate 46.6% limited partner interest in WES (49,745,334 common units) as of March 1, 2013.
- Financial Statements: The filing states that financial statements of the business acquired and pro forma financial information will be filed within 71 days; no specific revenue, profit, or margin data for the acquired assets is provided in this text.
Material Changes and Agreements
The primary material change is the expansion of WES's asset base in the Marcellus shale region. To facilitate the transaction, WES entered into several key agreements:
- Contribution Agreement: Dated February 27, 2013, governing the transfer of the gathering systems.
- Indemnification Agreements: Anadarko E&P agreed to indemnify WES's General Partner for recourse liabilities related to the new revolving loans. Concurrently, the indemnity agreement between the General Partner and Western Gas Resources, Inc. (WGRI) was amended to reduce WGRI's indemnification obligation by the amount covered by Anadarko.
- Partnership Amendment: Amendment No. 10 to the Limited Partnership Agreement was executed to permit a special, one-time cash distribution to the Contributing Party equal to the cash consideration paid, without a corresponding distribution to other partners.
Outlook, Risks, and Management Commentary
The acquisition was unanimously approved by the Board of Directors of WES's General Partner and a special committee of independent directors. The special committee relied on an opinion from an independent financial advisor stating that the consideration paid was fair from a financial point of view to WES. The filing does not provide specific forward-looking guidance, risk factors, or management commentary regarding future cash flows or operational outlook beyond the transaction details.
Investor Verification Checklist
- Verify the pro forma financial impact of the acquisition once filed within the 71-day window.
- Review the specific terms of the revolving credit facility utilized for the $250 million borrowing.
- Confirm the operational capacity and production volumes of the acquired Marcellus shale gathering systems.
- Assess the implications of Anadarko's increased ownership stake (46.6%) on future governance and distribution policies.
- Examine the full text of the Contribution Agreement and Indemnification Agreements (Exhibits 2.1, 10.1, and 10.2) for undisclosed liabilities or covenants.