Business Context and Reporting Period
This Form 8-K was filed by Western Gas Equity Partners, LP (WES) on December 1, 2016. The report details a material definitive agreement entered into on the same date regarding the extension of commodity price swap agreements with Anadarko Petroleum Corporation.
Key Financial Metrics and Agreement Terms
The filing does not provide standard financial metrics such as revenue, profit, cash flow, or debt levels for a specific reporting period. Instead, it outlines the terms of a commodity price swap extension covering the period from January 1, 2017, through December 31, 2017. The agreement applies to actual volumes of natural gas, condensate, and NGLs purchased and sold at the DJ Basin complex and MGR assets.
Key pricing terms for 2017 are summarized below:
| Commodity | DJ Basin Swap Price | DJ Basin Market Price | MGR Swap Price | MGR Market Price |
|---|---|---|---|---|
| Ethane | $18.41 | $5.09 | $23.11 | $4.08 |
| Propane | $47.08 | $18.85 | $52.90 | $19.24 |
| Isobutane | $62.09 | $26.83 | $73.89 | $25.79 |
| Normal Butane | $54.62 | $26.20 | $64.93 | $25.16 |
| Natural Gasoline | $72.88 | $41.84 | $81.68 | $45.01 |
| Condensate | $76.47 | $45.40 | $81.68 | $53.55 |
| Natural Gas (per MMBtu) | $5.96 | $3.05 | $4.87 | $3.05 |
Revenues or costs attributable to settled volumes 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 WES's consolidated statement of equity.
Material Changes and Outlook
The primary material change is the extension of favorable pricing terms for 2017 compared to prevailing market prices as of December 1, 2016. Management notes that there can be no assurance that these agreements will be renewed or extended beyond December 31, 2017, on similar terms or at all.
Risks and Contingencies
- Renewal Risk: The filing explicitly states there is no guarantee of renewal beyond the 2017 term.
- Volume Uncertainty: Notional volumes are not specifically defined; the agreement applies only to actual volumes purchased and sold.
Investor Verification Checklist
- Verify the actual volumes of natural gas, condensate, and NGLs expected to be processed at the DJ Basin and MGR assets in 2017 to estimate the total value of the capital contribution.
- Confirm the accounting treatment of the capital contribution in upcoming quarterly filings to assess its impact on partners' capital.
- Monitor future 8-K filings or 10-Q reports for any updates regarding the renewal status of these swap agreements as the December 31, 2017, expiration approaches.