01—Abstract
Summary
Summary of the 10-K filed February 28, 2014. Cited figures are marked; the original filing is the authoritative source.
Western Gas Equity Partners, LP (WGP) is a Delaware master limited partnership formed by Anadarko Petroleum Corporation whose only cash-generating assets are its partnership interests in Western Gas Partners, LP (WES): a 2.0%a general partner interest, 100% of the incentive distribution rights, and a limited partner interest.
As of December 31, 2013, WGP held 49,296,205 WES common units, a 41.2% limited partner interest in WES. WES is a midstream MLP gathering, processing, compressing, treating and transporting natural gas, condensate, NGLs and crude oil, with Anadarko accounting for a substantial share of its throughput and revenues, including 79% of total revenues and 57% of throughput attributable to Anadarko for 2013. For 2013, WGP reported total revenues of $1,053,495 thousandb, operating income of $317,929 thousand, and net income attributable to Western Gas Equity Partners, LP of $160,214 thousand, versus $910,587 thousand revenues and $61,420 thousand net income attributable in 2012.
WES throughput rose to 3,200 MMcf/d attributable to WES, a 14% increase over 2012, and gross margin per Mcf attributable to WES averaged $0.58c, a 7% increase. Adjusted EBITDA attributable to WES was $457,773 thousand and distributable cash flow was $380,529 thousand, producing a coverage ratio of 1.17x. Investors should note that WGP's cash flow depends entirely on WES distributions, and that WES's growth relies heavily on acquisitions and projects from Anadarko.
During 2013, WES completed several acquisitions, including the Non-Operated Marcellus Interest, the Anadarko-Operated Marcellus Interest, a 25% interest in the Mont Belvieu JV, and OTTCO, and it brought the 200 MMcf/d Brasada facility online in June 2013. WES raised its quarterly distribution to $0.60d per unit for the fourth quarter of 2013, its nineteenth consecutive quarterly increase, while WGP raised its distribution to $0.23125 per unit. In February 2014, WES agreed to acquire Anadarko's interests in Texas Express for $375.0 million, to be financed partly with a $350.0 million borrowing under a new $1.2 billion revolving credit facility.
02—Key points
Key Highlights
- WGP's only cash-generating assets are its WES interests: 49,296,205 WES common units (41.2% LP interest), a 2.0% GP interest, and 100% of the IDRs, with distributions up to 48.0% of incremental WES cash.
- WGP net income attributable to WGP was $160,214 thousand in 2013 versus $61,420 thousand in 2012, and net income per common unit was $0.71 versus $0.01.
- WES throughput attributable to WES totaled 3,200 MMcf/d in 2013, a 14% increase over 2012; gross margin per Mcf attributable to WES averaged $0.58, a 7% increase.
- WES Adjusted EBITDA attributable to WES was $457,773 thousand and distributable cash flow was $380,529 thousand, with a 1.17x coverage ratio on $326,053 thousand of distributions declared.
- WES made 2013 acquisitions including the Non-Operated Marcellus Interest ($465.5 million cash plus units), the Anadarko-Operated Marcellus Interest, a 25% Mont Belvieu JV stake, and OTTCO, and completed the 200 MMcf/d Brasada facility in June 2013.
- Anadarko holds 91.0% of WGP's common units and accounted for 79% of WES total revenues and 57% of WES throughput in 2013, creating significant customer and sponsor concentration.
- WES signed a $375.0 million agreement on February 27, 2014 to acquire Anadarko's Texas Express and Front Range interests, funded in part by a $350.0 million draw on a new $1.2 billion revolving credit facility.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2013filed February 28, 2014Financial Statements
FY2013 against FY2012
| Line item | FY2013FY2012 | Change |
|---|---|---|
| Revenue | $1.09B$894.48M | +21.4% |
| Operating Expenses | $784.88M$716.21M | +9.6% |
| Operating Income | $323.55M$194.31M | +66.5% |
| Interest Expense | $51.80M$42.06M | +23.2% |
| Net Income | $163.80M$61.38M | +166.9% |
05—Questions
Frequently Asked Questions
How does WGP generate cash for its unitholders?
WGP's only cash-generating assets are its partnership interests in WES, consisting of a 2.0% general partner interest, 100% of the incentive distribution rights, and 49,296,205 WES common units representing a 41.2% limited partner interest as of December 31, 2013. WGP distributes all of its available cash quarterly, so its distributions depend entirely on the cash WES distributes to it. The filing notes that a reduction in WES distributions would disproportionately reduce WGP's cash because of the IDR structure.
How much did WGP and WES grow in 2013?
WGP's total revenues rose to $1,053,495 thousand in 2013 from $910,587 thousand in 2012, and net income attributable to WGP increased to $160,214 thousand from $61,420 thousand. WES throughput attributable to WES reached 3,200 MMcf/d, up 14% from 2012, and WES Adjusted EBITDA attributable to WES was $457,773 thousand, compared with $377,929 thousand in 2012.
How dependent is WES on Anadarko?
Heavily. The filing states that Anadarko accounted for 79% of WES total revenues and 57% of its gathering, transportation and treating throughput (excluding equity investment throughput) in 2013, and 56% of processing throughput. Anadarko also has dedicated production to several gathering systems and holds 91.0% of WGP's common units. WES has commodity price swap agreements with Anadarko through December 2016, and a portion expires at the end of 2014.
What distributions have been declared?
WGP raised its quarterly distribution to $0.23125 per unit for the fourth quarter of 2013, an 8% increase over the third quarter, and declared a $0.23125 distribution on January 20, 2014. WES raised its quarterly distribution to $0.60 per unit for the fourth quarter of 2013, a 3% increase over the third quarter and its nineteenth consecutive quarterly increase, and declared a $0.60 distribution on January 20, 2014. WES's 2013 distributions declared totaled $2.28 per unit.
What major transactions occurred after year-end 2013?
On February 26, 2014, WES entered into a five-year $1.2 billion senior unsecured revolving credit agreement, expandable to $1.5 billion, with $60.0 million outstanding at closing. On February 27, 2014, WES agreed to acquire Anadarko's 20% interest in Texas Express Pipeline and Texas Express Gathering and a 33.33% interest in Front Range Pipeline for $375.0 million, expected to close March 3, 2014, financed with $6.3 million of cash, a $350.0 million RCF borrowing, and 308,490 WES common units issued to Anadarko.
06—Continue