Western Gas Partners has acquired certain midstream assets located in southwest Wyoming from Anadarko Petroleum Corporation for total consideration of $254.4 million.
"We are pleased to begin the new year with our third and largest acquisition since our initial public offering," said Western Gas Partners' President and Chief Executive Officer Don Sinclair. "We expect the acquisition to be immediately accretive to distributable cash flow, and believe these assets have significant potential for organic growth by serving the prolific Moxa, Pinedale, and Jonah fields."
Western Gas purchased Anadarko's 100% ownership interest in two systems: (i) the Granger Gathering System -- a 750-mile gathering system with related compression and other facilities, and (ii) the Granger Plants -- two cryogenic trains with combined capacity of 200 million cubic feet per day (MMcf/d), two refrigeration trains with capacity of 145 MMcf/d, an NGL (natural gas liquids) fractionation facility with capacity of 9,500 barrels per day, and ancillary equipment. The average throughput on these systems for the fourth quarter of 2009 was approximately 240 MMcf/d, with Anadarko throughput representing nearly half of this amount.
Contracts covering substantially all of the systems' Anadarko-affiliated throughput were recently converted into 10-year, fee-based arrangements. To mitigate the remaining commodity price risk associated with this acquisition, the Partnership and Anadarko have entered into fixed-price commodity swap agreements through the end of 2014.
"These swap agreements cover all non-fee-based system volumes and will enhance cash flow visibility on these assets, keeping our distributable cash flow largely insulated from changes in commodity prices," said Sinclair.
Given the recent change in the system contract mix, historic financial performance is not reflective of the assets' forecasted future performance. Accordingly, the assets were valued using projected financial performance exclusive of transaction costs. The purchase price represents a multiple of 7.2x the system assets' 2010 forecasted earnings before depreciation, interest and taxes.
The acquisition was financed primarily with a $210 million draw on the Partnership's revolving credit facility plus cash on hand, as well as through the issuance of 620,689 common units to Anadarko and 12,667 general partner units to Western Gas Holdings, LLC, the Partnership's general partner, at an implied price of approximately $20.08 per unit. Following the transaction, the Partnership will continue to have substantial additional borrowing capacity, both under its own standalone credit facility and through its $100 million of availability under Anadarko's $1.3 billion committed credit facility.
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