Business Context and Reporting Period
This Form 8-K, dated November 25, 2014, reports on Western Gas Equity Partners, LP (the registrant) and its consolidated subsidiary, Western Gas Partners, LP ("WES"). The filing details the completion of a major acquisition and related financing activities.
Key Financial Metrics and Transaction Details
The filing focuses on the acquisition of Nuevo Midstream, LLC ("Nuevo") rather than standard periodic financial results. Key transaction metrics include:
- Total Consideration: $1.5 billion in cash (subject to adjustments).
- Financing Sources:
- $275.0 million in cash on hand (including proceeds from a November 2014 equity offering).
- $475.0 million in borrowings under WES's revolving credit facility.
- $750.0 million raised via the issuance of Class C units to a subsidiary of Anadarko Petroleum Corporation.
- Class C Unit Issuance: 10,913,853 units issued at $68.72 per unit to APC Midstream Holdings LLC.
- Escrow: $125.0 million held in escrow to support Nuevo's indemnification obligations through November 25, 2015.
Note: The filing does not provide specific revenue, profit, cash flow, or margin figures for the reporting period.
Material Changes
The primary material change is the expansion of WES's asset base through the acquisition of Nuevo. Nuevo's assets include a cryogenic processing complex, gas gathering system, and related facilities serving production in Reeves, Loving, and Culberson Counties, Texas, and Eddy and Lea Counties, New Mexico. Additionally, WES has increased its debt load by $475.0 million and altered its capital structure through the issuance of Class C units.
Outlook, Risks, and Contingencies
- Class C Unit Terms: The newly issued Class C units will receive distributions in the form of additional Class C units until the end of 2017 (unless converted earlier). They are disregarded for cash distribution calculations until conversion to common units on a one-for-one basis.
- Indemnification: Mutual indemnification agreements exist between WES and Nuevo regarding breaches of representations and warranties.
- Potential Investment: Discussions are ongoing with a third party regarding a potential investment in 50% of Nuevo. The option period for this potential investment was extended to no later than December 19, 2014.
- Financial Statements: Pro forma financial information and financial statements of the acquired business are not included in this filing and will be filed within 71 days.
Investor Verification Checklist
- Verify the final adjusted purchase price of the Nuevo acquisition once working capital adjustments are finalized.
- Review the upcoming pro forma financial information (due within 71 days) to assess the impact on leverage and distributable cash flow.
- Monitor the status of the third-party discussions regarding the potential 50% investment in Nuevo, with a decision deadline of December 19, 2014.
- Confirm the terms of the $475.0 million revolver drawdown and its impact on WES's liquidity covenants.
- Track the conversion schedule of the $750.0 million Class C units issued to Anadarko.