HOUSTON, Nov. 8, 2018 /PRNewswire/ -- Western Gas
Partners, LP (NYSE:WES) ("WES") and Western Gas Equity Partners, LP
(NYSE:WGP) ("WGP" or the "Partnership") today announced they have
entered into a merger agreement (the "Agreement") whereby WGP will
acquire all the publicly held common units of WES and substantially
all of the units owned by Anadarko Petroleum Corporation (NYSE:
APC) ("APC") in a unit-for-unit, tax-free exchange (the
"Simplification Transaction"). WES will survive as a partnership
with no publicly traded equity and remain the borrower for all
existing and future debt issuances, as well as the owner of all
operating assets and equity investments. WGP will own 98% of WES,
and APC will own the remaining 2%. In conjunction with the
Simplification Transaction, WES has agreed to acquire substantially
all of APC's remaining midstream assets for a price of $4.015 billion (the "Acquisition," and together
with the Simplification Transaction, the "Transactions"). The
Transactions were negotiated and unanimously approved by the
Special Committees of the Boards of Directors of the general
partners of WGP and WES, and were also unanimously approved by the
Boards of Directors of the general partners of WGP and WES, and the
APC Board of Directors.
Transaction Highlights
- The WES incentive distribution rights ("IDRs") and general
partner units will be eliminated.
- The Transactions are expected to be approximately 10% to 20%
accretive to both WES's and WGP's estimated distributable cash flow
per unit each year from 2019 to 2021.
- Public WES unitholders will receive 1.525 WGP common units for
each WES common unit in a tax-free exchange, which
represents a 7.6% premium to WES's closing price on November 7, 2018.
- WES and WGP will become a single publicly-traded partnership,
with a significantly larger public float and increased expected
trading liquidity.
- The Acquisition is an immediately accretive transaction of
high-growth, complementary assets in the Delaware and DJ Basins at ~9.5x 2019
forecasted Adjusted EBITDA1 of approximately
$420 million, which includes
$40 million of incremental general
and administrative expenses to be assumed post-closing.
- The Acquisition will be financed 50% with cash and 50% with
equity issued to APC.
- In 2019, WGP unitholders are expected to experience 6% - 8%
distribution growth, while current WES unitholders are expected to
experience 1% - 2% distribution growth.
- WGP expects to generate no less than 1.2x full-year
distribution coverage in 2019 and distribution growth of 6% - 8% in
2020 and 2021 with coverage of over 1.3x.
- WES believes it will retain its current ratings and outlooks
with all three major ratings agencies.
- Subject to WES unitholder approval, the Transactions are
expected to close in the first quarter of 2019.
"The transactions we announced today will transform the Western
Gas franchise, and put it on a new, stronger footing for continued
success in the future. We have executed these transactions at a
time when we are realizing strong organic cash flow growth and
expanding distribution coverage," said Chief Executive Officer,
Benjamin Fink. "This step serves to
strengthen our already considerable competitive advantages via a
lower cost of equity and a clean, simple capital structure. We are
delighted to have been able to structure a transaction in which we
expect all unitholders will realize annual distribution growth in
2019, as well as an enhanced long-term distribution growth
profile."
Simplification Transaction Details
Under the terms of the Agreement, the public unitholders of WES
will receive 1.525 units of WGP per WES unit owned. This
represents a 7.6% premium to WES's closing price on November 7, 2018. The WES common units currently
owned by Anadarko, including the Class C units, will be converted
into WGP common units at closing at the same exchange ratio. In
addition, the WES IDRs and general partner units will be exchanged
for newly issued WES common units.
The Simplification Transaction will not be taxable to either WES
or WGP unitholders and is expected to close in the first quarter of
2019, subject to the approval of holders of a majority of the WES
common units, regulatory approvals, and other customary closing
conditions.
The WGP Special Committee, consisting of directors not
associated with management or APC, evaluated the Transactions on
behalf of the public unitholders and the WGP Board of Directors.
The WGP Special Committee unanimously recommended approval of the
Transactions to the Board of Directors of WGP. The WES Special
Committee, consisting of directors not associated with management
or APC, evaluated the Transactions on behalf of the WES Board of
Directors and the public unitholders and also unanimously
recommended approval of the Transactions to the WES Board of
Directors. The Transactions were unanimously approved by the Board
of Directors of each of WGP, WES and APC.
Acquired Asset Overview2
- ~95% of forecasted 2019 Adjusted EBITDA1 of the
acquired assets is expected to be generated from the Delaware and DJ Basins
- ~530 miles of crude oil gathering and ~190 MBbls/d of
stabilization in the Delaware
Basin
- ~620 miles of produced water gathering and 505 MBbls/d of
disposal in the Delaware
Basin
- 50% non-operated equity interest in each of two Delaware Basin gas processing plants with 325
MMcf/d of gross capacity
- ~280 miles of crude oil gathering and ~155 MBbls/d of
stabilization in the DJ Basin
- 290 MMcf/d of natural gas processing capacity in the DJ
Basin
- 20% non-operated equity interest in Saddlehorn Pipeline
- 15% non-operated equity interest in Panola Pipeline
On a pro forma basis, WGP's portfolio will be highly focused on
the Delaware and DJ Basins, which
WGP forecasts will generate 40% and 37%, respectively, of its
expected 2019 Adjusted EBITDA1, with an additional 10%
generated from investments in long haul transportation and
fractionation assets. Additionally, on a run-rate basis, WGP
forecasts that 97% of the pro forma portfolio's Adjusted gross
margin1 will be generated by long-term, fixed-fee
contracts, with approximately 66% of natural gas throughput and
approximately 80% of liquids throughput supported by either minimum
volumetric commitments with associated deficiency payments or cost
of service commitments.
"As a result of this transaction, we are now one of the largest
midstream service providers in the U.S. The significantly accretive
acquisition of virtually all of Anadarko's midstream assets
perfectly complements our Delaware
and DJ natural gas infrastructure by adding overlapping oil and
produced water gathering and disposal assets," said Chief Operating
Officer, Gennifer Kelly. "Our
enhanced ability to offer integrated midstream services will
provide meaningful additional competitive advantages and economies
of scale in each basin."
Financing, Balance Sheet, and Pro Forma Equity
Capitalization
To fund the cash consideration of the Acquisition, WES has
received an underwritten commitment for a $2.0 billion senior unsecured term loan facility
(the "Term Loan"), which will close concurrently with the closing
of the Transactions. The $2.008
billion of WES units issued to APC as part of the
Acquisition consideration will be issued at a price of $43.87 per unit, which is based on the 30 day
VWAP as of November 6, 2018. A
portion of such common units will not convert into WGP common units
in order for APC to maintain a 2% interest in WES. The remainder
will convert into WGP common units at a ratio of 1.4056 to 1 (which
represents no premium to the 30 day VWAPs for WES and WGP as of
November 6, 2018). After giving
effect to the Transactions, WGP estimates that there will be
approximately 453 million common units outstanding, and APC will
own approximately 55.5% of WGP. The public float of WGP will be
more than 4x greater than its current public float of approximately
49 million units.
WES believes that it will maintain its current ratings and
outlooks with all three major ratings agencies. The pro-forma
leverage ratio at the end of 2019 is expected to be between 4.0x to
4.25x and return to a range of 3.5x to 4.0x in 2020 without the
need for future equity issuance.
2019 Outlook
- Adjusted EBITDA1 between $1.8
billion and $1.9 billion
- Total capital expenditures between $1.3
billion and $1.4 billion,
including equity investments and assuming the future exercise of
the option for a 30% interest in Red Bluff Express pipeline for
approximately $110 million
- Total maintenance capital between $110
million and $120 million
- Distribution coverage ratio of at least 1.2x including the
impact of the Class C unit conversion
WGP expects that WES's existing unitholders will receive a 2019
full-year distribution that is 1% to 2% higher than its estimated
2018 full-year distribution of $3.83
per unit. Additionally, WGP expects that its current unitholders
will receive a 2019 full-year distribution that is 6% to 8% higher
than its estimated 2018 full-year distribution of $2.36 per unit. In 2020 and 2021, WGP expects
that the pro forma portfolio will be capable of continuing to grow
distributions annually by 6% to 8% while generating distribution
coverage of over 1.3x with expanding distribution coverage in each
year. Furthermore, given its significantly increased overall scale
and focus on key basins, WGP announced that following the close of
the Transactions it will begin providing quarterly disclosure of:
(i) DJ and Delaware Basin volumes
and (ii) produced water gathering and disposal volumes separately
from crude oil and NGL volumes.
"Our outlook reflects the combination of an immediately
accretive acquisition with an organic portfolio that was already
projected to generate over 20% Adjusted EBITDA growth in 2019,"
said Chief Financial Officer, Jaime
Casas. "We believe the resulting portfolio will continue to
generate healthy cash flow growth and distribution coverage, thus
enabling us to execute our capital plan without the need for equity
financing."
Advisors
Barclays Capital Inc. acted as financial and structuring advisor
to the APC and WES management teams. Citi and Richards, Layton & Finger, P.A. acted as
financial and legal advisors, respectively, to the Special
Committee of WGP. Lazard Freres & Co. LLC and Bracewell LLP
acted as financial and legal advisors, respectively, to the Special
Committee of WES. Goldman Sachs & Co. LLC acted as financial
advisor to the APC Board of Directors. Vinson & Elkins L.L.P.
served as transaction counsel to Anadarko, WES and WGP.
Conference Call & Presentation
WES and WGP will host a joint conference call on November 8, 2018, at 7:30
a.m. Central Standard Time (8:30 a.m.
Eastern Standard Time) to discuss the Transactions discussed
above. Individuals who would like to participate should dial
866-692-8319 (Domestic) or 469-473-3852 (International)
approximately 15 minutes before the scheduled conference call time,
and enter participant access code 9735588. To access the live audio
webcast of the conference call, please visit the investor relations
section of the WES and WGP website, www.westerngas.com. A replay of
the conference call will also be available on the website for two
weeks following the call.
About Western Gas
WES is a growth-oriented Delaware master limited partnership formed by
Anadarko Petroleum Corporation to acquire, own, develop and operate
midstream assets. With midstream assets located in the Rocky
Mountains, North-central Pennsylvania, Texas and New
Mexico, WES is engaged in the business of gathering,
compressing, treating, processing and transporting natural gas;
gathering, stabilizing and transporting condensate, natural gas
liquids and crude oil; and gathering and disposing of produced
water for Anadarko, as well as for third-party producers and
customers. In addition, in its capacity as a processor of natural
gas, WES also buys and sells natural gas, NGLs and condensate on
behalf of itself and as agent for its customers under certain of
its contracts.
WGP is a Delaware master
limited partnership formed by Anadarko Petroleum Corporation to own
the following types of interests in WES: (i) the general partner
interest and all of the incentive distribution rights in WES, both
owned through WGP's 100% ownership of WES's general partner, and
(ii) a significant limited partner interest in WES.
For more information about Western Gas Partners,
LP, Western Gas Equity Partners, LP, and Western Gas Flash
Feed updates, please visit www.westerngas.com.
Important Information for Investors and
Unitholders
This news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval.
In connection with the proposed transaction discussed herein,
Western Gas Equity Partners, LP ("WGP") will file with the
Securities and Exchange Commission (the "Commission") a
registration statement on Form S-4, which will include a prospectus
of WGP and a proxy statement of Western Gas Partners, LP
("WES"). WES and WGP also plan to file other documents with
the Commission regarding the proposed transaction. After the
registration statement has been declared effective by the
Commission, a definitive proxy statement/prospectus will be mailed
to the unitholders of WES. INVESTORS AND UNITHOLDERS OF WES ARE
URGED TO READ THE PROXY STATEMENT/PROSPECTUS (INCLUDING ALL
AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER DOCUMENTS RELATING TO
THE PROPOSED TRANSACTION THAT WILL BE FILED WITH THE COMMISSION
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
TRANSACTION. Investors and unitholders will be able to obtain free
copies of the proxy statement/prospectus and other documents
containing important information about WES and WGP once such
documents are filed with the Commission, through the website
maintained by the Commission at http://www.sec.gov. Copies of the
documents filed with the Commission by WES and WGP will be
available free of charge on their internet website at
www.westerngas.com or by contacting their Investor Relations
Department at 832-636-6000.
Participants in the Solicitation
WES, WGP, their respective general partners and their respective
general partners' directors and executive officers may be deemed to
be participants in the solicitation of proxies from the unitholders
of WES in connection with the proposed transaction. Information
about the directors and executive officers of WES is set forth in
WES's Annual Report on Form 10-K which was filed with the
Commission on February 16, 2018.
Information about the directors and executive officers of WGP is
set forth in WGP's Annual Report on Form 10-K which was filed with
the Commission on February 16, 2018.
Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect
interests, by security holdings or otherwise, will be contained in
the proxy statement/prospectus and other relevant materials to be
filed with the Commission when they become available. Free copies
of these documents can be obtained using the contact information
above.
Cautionary Statement Regarding Forward-Looking
Statements
This presentation contains forward-looking statements. For
example, statements regarding future financial performance, future
competitive positioning, future market demand, future benefits to
unitholders, future economic and industry conditions, the proposed
transaction (including its benefits, results, effects and timing)
and whether and when the transaction will be consummated, are
forward-looking statements within the meaning of federal securities
laws. WES, WGP and their respective general partners believe that
their expectations are based on reasonable assumptions. No
assurance, however, can be given that such expectations will prove
to have been correct.
A number of factors could cause actual results to differ
materially from the projections, anticipated results or other
expectations expressed in this presentation. Such factors include,
but are not limited to: the failure of the unitholders of WES
to approve the proposed transaction; the risk that the conditions
to the closing of the proposed transaction are not satisfied; the
risk that regulatory approvals required for the proposed
transaction are not obtained or are obtained subject to conditions
that are not anticipated; potential adverse reactions or changes to
business relationships resulting from the announcement or
completion of the proposed transaction; uncertainties as to the
timing of the proposed transaction; competitive responses to the
proposed transaction; unexpected costs, charges or expenses
resulting from the proposed transaction; the outcome of pending or
potential litigation; the inability to retain key personnel;
uncertainty of the expected financial performance of the pro-forma
partnership, following completion of the proposed transaction; and
any changes in general economic and/or industry specific
conditions.
WES and WGP caution that the foregoing list of factors is not
exclusive. Additional information concerning these and other risk
factors is contained in WES's and WGP's most recently filed Annual
Reports on Form 10-K, subsequent Quarterly Reports on Form 10-Q,
recent Current Reports on Form 8-K, and other Commission filings,
which are available at the Commission's website,
http://www.sec.gov. All subsequent written and oral
forward-looking statements concerning WES, WGP, the proposed
transaction or other matters attributable to WES and WGP or any
person acting on their behalf are expressly qualified in their
entirety by the cautionary statements above. Each forward
looking statement speaks only as of the date of the particular
statement. Except as required by law, WES, WGP and their respective
general partners undertake no obligation to publicly update or
revise any forward-looking statements.
Western Gas Contacts
Jonathon
E. VandenBrand
Director, Investor Relations
jon.vandenbrand@anadarko.com
832.636.6000
Jack Spinks
Manager, Investor Relations
jack.spinks@anadarko.com
832.636.6000
(1)
|
A reconciliation of
any forecasted Adjusted EBITDA to net cash provided by operating
activities and net income, or forecasted Adjusted gross margin to
operating income is not provided because the items necessary to
estimate such amounts are not reasonably accessible or estimable at
this time.
|
(2)
|
System statistics,
including mileage and capacities, are as of September 30,
2018.
|
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SOURCE Western Gas Partners, LP