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Delaware | 1311 | 26-1075808 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
David P. Oelman Vinson & Elkins L.L.P. 1001 Fannin Street, Suite 2500 Houston, Texas 77002 (713) 758-2222 | G. Michael O’Leary Andrews Kurth LLP 600 Travis Street, Suite 4200 Houston, Texas 77002 (713) 220-4200 |
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted. |
PRELIMINARY PROSPECTUS | Subject to Completion | January 23, 2008 |
Ø | We are dependent on a single natural gas producer, Anadarko Petroleum Corporation, for almost all of the natural gas that we gather and transport. A material reduction in Anadarko’s production gathered or transported by our assets would result in a material decline in our revenues and cash available for distribution. |
Ø | We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner, to enable us to pay the minimum quarterly distribution to holders of our common and subordinated units. |
Ø | Because of the natural decline in production from existing wells, our success depends on our ability to obtain new sources of natural gas, which is dependent on certain factors beyond our control. Any decrease in the volumes of natural gas that we gather and transport could adversely affect our business and operating results. |
Ø | Anadarko owns and controls our general partner, which has sole responsibility for conducting our business and managing our operations. Anadarko and our general partner have conflicts of interest and may favor Anadarko’s interests to your detriment. |
Ø | Cost reimbursements due to Anadarko and our general partner for services provided to us or on our behalf will be substantial and will reduce our cash available for distribution to you. The amount and timing of such reimbursements will be determined by our general partner. |
Ø | You will have limited voting rights and are not entitled to elect our general partner or its directors. |
Ø | Even if you are dissatisfied, you cannot initially remove our general partner without its consent. |
Ø | Our general partner interest or the control of our general partner may be transferred to a third party without your consent. |
Ø | You will experience immediate and substantial dilution in pro forma net tangible book value of $6.09 per common unit. |
Ø | You will be required to pay taxes on your share of our income even if you do not receive any cash distributions from us. |
Per common unit | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discounts and commissions(1) | $ | $ | ||||||
Proceeds, before expenses, to Western Gas Partners, LP | $ | $ | ||||||
(1) | Excludes a structuring fee payable to UBS Securities LLC that is equal to % of the gross proceeds of this offering, or approximately $ . |
UBS Investment Bank | Citi | Credit Suisse | Morgan Stanley |
Banc of America Securities LLC |
Goldman, Sachs & Co. |
JPMorgan |
Lehman Brothers |
Wachovia Securities |
Scotia Capital | ||||||
Bear, Stearns & Co. Inc. | ||||||
Friedman Billings Ramsey | ||||||
Stifel Nicolaus |
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Opinion of Vinson & Elkins L.L.P. | ||||||||
Form of Anadarko Petroleum Corporation Fixed Rate | ||||||||
Form of Omnibus Agreement | ||||||||
Form of Services and Secondment Agreement | ||||||||
Dew Gas Gathering Agreement | ||||||||
Haley Gas Gathering Agreement | ||||||||
Hugoton Gas Gathering Agreement | ||||||||
Pinnacle Gas Gathering Agreement | ||||||||
Form of Contribution, Conveyance and Assumption Agreement | ||||||||
Form of Indemnification Agreement | ||||||||
Form of Western Gas Partners, LP 2008 Long-Term | ||||||||
Form of Tax Sharing Agreement | ||||||||
List of Subsidiaries of Western Gas Partners, LP | ||||||||
Consent of KPMG LLP | ||||||||
Consent of KPMG LLP | ||||||||
Consent of KPMG LLP | ||||||||
Consent of Director Nominee | ||||||||
Consent of Director Nominee | ||||||||
Consent of Director Nominee | ||||||||
Consent of Director Nominee |
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Approximate | Treating | Average | ||||||||||||
Asset | Length | # of receipt | Gas compression | capacity | throughput | |||||||||
Area | Type | (miles) | points | (horsepower) | (MMcf/d) | (MMcf/d) | ||||||||
East Texas | Gathering and Treating | 577 | 789 | 45,633 | 510 | 304 | (1) | |||||||
Rocky Mountains | Gathering and Treating | 114 | 162 | 20,385 | 92 | 55 | ||||||||
Transportation | 264 | 19 | 29,696 | — | 137 | |||||||||
Mid-Continent | Gathering | 1,753 | 1,507 | 130,720 | — | 123 | ||||||||
West Texas | Gathering | 87 | 50 | — | — | 185 | ||||||||
Total | 2,795 | 2,527 | 226,434 | 602 | 804 | |||||||||
(1) | To avoid duplicating volumes, 213 MMcf/d that is gathered on our Dew gathering system and delivered into our Pinnacle gas treating system is included only once in the calculation of average throughput. |
Ø | Pursuing accretive acquisitions. We expect to pursue accretive acquisition opportunities within the midstream energy industry from Anadarko and third parties. |
Ø | Capitalizing on organic growth opportunities. We expect to grow organically by meeting Anadarko’s gathering needs, which we expect to increase as a result of its anticipated drilling activity in our areas of operation. |
Ø | Attracting additional third-party volumes to our systems. We intend to actively market our midstream services to and pursue strategic relationships with third-party producers to attract additional volumes and/or expansion opportunities. |
Ø | Minimizing commodity price exposure. Our midstream services are provided under fee-based arrangements which minimize our direct commodity price exposure. We expect to utilize hedging to manage any significant future commodity price risk that could result from contracts we may acquire or enter into in the future. |
Ø | Affiliation with Anadarko. We believe Anadarko, as the owner of our general partner interest, all of our incentive distribution rights and a 57.3% limited partner interest in us, is motivated to promote and support the successful execution of our business plan and to pursue projects that enhance the value of our business. |
Ø | Relatively stable and predictable cash flow. Our cash flow is largely protected from fluctuations caused by commodity price volatility due to the fee-based, long-term nature of our midstream service agreements. |
Ø | Well-positioned, well-maintained and efficient assets. We believe that our established positions in our areas of operation provide us with opportunities to expand and attract additional volumes to our systems. Moreover, our systems consist of high-quality, well-maintained assets for which we have implemented modern treating, measuring and operating technologies. |
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Ø | Financial flexibility to pursue expansion and acquisition opportunities. We have up to $100 million of borrowing capacity available to us under Anadarko’s $750 million credit facility and, concurrently with the closing of this offering, we expect to obtain a $30 million working capital facility from Anadarko. In addition, we will have no indebtedness outstanding at the closing of this offering. We believe that our borrowing capacity and our ability to effectively access debt and equity capital markets provide us with the financial flexibility necessary to achieve our organic expansion and acquisition strategy. |
Ø | Experienced management team. Members of our general partner’s management team have extensive experience in building, acquiring, integrating, financing and managing midstream assets. In addition, our relationship with Anadarko provides us with the services of experienced personnel who successfully managed our assets and operations while they were owned by Anadarko. |
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Ø | Anadarko will contribute certain midstream assets to us; |
Ø | we will issue to Western Gas Holdings, LLC, our general partner and a subsidiary of Anadarko, 921,385 general partner units representing a 2.0% general partner interest in us as well as all of our incentive distribution rights; |
Ø | we will issue to Anadarko 3,823,925 common units and 22,573,925 subordinated units, representing an aggregate 57.3% limited partner interest in us;(1) |
Ø | we will issue 18,750,000 common units to the public, representing a 40.7% limited partner interest in us;(1) |
Ø | we will receive gross proceeds of $393.8 million from the issuance and sale of 18,750,000 common units at an assumed initial offering price of $21.00 per unit; |
Ø | we will use the proceeds from this offering to pay underwriting discounts and a structuring fee totaling approximately $25.6 million and other estimated offering expenses of $5.0 million; |
Ø | we will use the remaining $363.2 million of aggregate net proceeds of this offering to (i) make a loan of $337.6 million to Anadarko in exchange for a30-year note bearing interest at a fixed annual rate of 6.00%, (ii) reimburse Anadarko for $15.5 million of capital expenditures it incurred with respect to assets contributed to us and (iii) provide $10.0 million for general partnership purposes; |
Ø | we will have up to $100 million of long-term borrowing capacity available to us under Anadarko’s $750 million credit facility; |
Ø | we will enter into a $30 million working capital facility with Anadarko as the lender; |
Ø | we will enter into an omnibus agreement with Anadarko and our general partner pursuant to which, among other things, (i) we will reimburse Anadarko and our general partner for certain expenses incurred on our behalf, including expenses for various general and administrative services rendered by Anadarko and our general partner to us, and (ii) the parties will agree to certain indemnification obligations; |
Ø | our general partner will enter into a services and secondment agreement with Anadarko, pursuant to which certain employees of Anadarko will be under our control and render services to us or on our behalf; and |
Ø | our general partner will enter into a tax sharing agreement with Anadarko, pursuant to which we will pay Anadarko for our share of state and local income and other taxes that are included in combined or consolidated tax returns filed by Anadarko. |
(1) | If the underwriters exercise their option to purchase up to 2,812,500 additional common units within 30 days of this offering, the number of units purchased by the underwriters pursuant to such exercise will be issued to the public instead of Anadarko. |
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Public Common Units | 40.7 | % | ||
Anadarko Common and Subordinated Units | 57.3 | % | ||
General Partner Units | 2.0 | % | ||
Total | 100.0 | % |
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Marginal percentage interest | ||||||||
Total quarterly distribution | in distributions(1) | |||||||
per unit | Unitholders | General partner | ||||||
Minimum Quarterly Distribution | $0.300 | 98.0% | 2.0% | |||||
First Target Distribution | up to $0.345 | 98.0% | 2.0% | |||||
Second Target Distribution | above $0.345 up to $0.375 | 85.0% | 15.0% | |||||
Third Target Distribution | above $0.375 up to $0.450 | 75.0% | 25.0% | |||||
Thereafter | above $0.450 | 50.0% | 50.0% |
(1) | Assumes that there are no arrearages on common units and that our general partner maintains its 2.0% general partner interest and continues to own the incentive distribution rights. |
Ø | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives a total amount equal to 115% of the reset minimum quarterly distribution for that quarter; |
Ø | second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives a total amount per unit equal to 125% of the reset minimum quarterly distribution for the quarter; |
Ø | third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives a total amount per unit equal to 150% of the reset minimum quarterly distribution for the quarter; and |
Ø | thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
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Common units offered to the public | 18,750,000 common units | |
21,562,500 common units, if the underwriters exercise in full their option to purchase additional common units | ||
Units outstanding after this offering | 22,573,925 common units(1)and 22,573,925 subordinated units, each representing a 49.0% limited partner interest in us. Our general partner will own 921,835 general partner units, representing a 2.0% general partner interest in us. |
Use of proceeds | We expect to receive gross proceeds of $393.8 million from this offering. We will use the proceeds to (i) make a loan of $337.6 million to Anadarko in exchange for a30-year note bearing interest at a fixed annual rate of 6.00%, (ii) reimburse Anadarko for $15.5 million of capital expenditures it incurred with respect to assets contributed to us, (iii) provide $10.0 million for general partnership purposes and (iv) pay underwriting discounts and a structuring fee totaling approximately $25.6 million and other estimated offering expenses of $5.0 million. |
The net proceeds from any exercise of the underwriters’ option to purchase additional common units will be used to reimburse Anadarko for capital expenditures it incurred with respect to the assets contributed to us. |
Cash distributions | Our general partner will adopt a cash distribution policy that will require us to pay a minimum quarterly distribution of $0.30 per unit ($1.20 per unit on an annualized basis) to the extent we have sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to our general partner and its affiliates. We refer to this cash as “available cash,” and it is defined in our partnership agreement included in this prospectus as Appendix A and in the glossary included in this prospectus as Appendix B. Our ability to pay the minimum quarterly distribution is subject to various restrictions and other factors described in more detail under the caption “Our cash distribution policy and restrictions on distributions.” We will adjust the minimum quarterly distribution payable for the period from the completion of this offering through March 31, 2008, based on the actual length of that period. | |
Our partnership agreement requires that we distribute all of our available cash each quarter in the following manner: | ||
Ø first, 98.0% to the holders of common units and 2.0% to our general partner, until each common unit has received the minimum quarterly distribution of $0.30 plus any arrearages from prior quarters; | ||
Ø second, 98.0% to the holders of subordinated units and 2.0% to our general partner, until each subordinated unit |
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has received the minimum quarterly distribution of $0.30; and | ||
Ø third, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unit has received a distribution of $0.345. | ||
If cash distributions to our unitholders exceed $0.345 per unit in any quarter, our general partner will receive, in addition to distributions on its 2.0% general partner interest, increasing percentages, up to 48.0%, of the cash we distribute in excess of that amount. We refer to these distributions as “incentive distributions.” Please read “Provisions of our partnership agreement relating to cash distributions.” | ||
The amounts of pro forma available cash generated during each of the year ended December 31, 2006 and twelve months ended September 30, 2007 would have been sufficient to allow us to pay the full minimum quarterly distribution ($0.30 per unit per quarter, or $1.20 on an annualized basis) on all of our common and subordinated units for such periods. Please read “Our cash distribution policy and restrictions on distributions.” | ||
We believe that, based on the Statement of Estimated Adjusted EBITDA included under the caption “Our cash distribution policy and restrictions on distributions,” we will have sufficient cash available for distribution to pay the minimum quarterly distribution of $0.30 per unit on all common and subordinated units and the corresponding distributions on our general partner’s 2.0% interest for the four quarters ending December 31, 2008. | ||
Subordinated units | Anadarko will initially indirectly own all of our subordinated units. The principal difference between our common and subordinated units is that in any quarter during the subordination period, holders of the subordinated units are not entitled to receive any distribution until the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages. |
Conversion of subordinated units | The subordination period will end on the first business day after we have earned and paid at least (i) $1.20 (the minimum quarterly distribution on an annualized basis) on each outstanding common and subordinated unit and the corresponding distribution on our general partner’s 2.0% interest for each of three consecutive, non-overlapping four quarter periods ending on or after March 31, 2011 or (ii) $0.45 per quarter (150% of the minimum quarterly distribution, which is $1.80 on an annualized basis) on each outstanding common and subordinated unit and the corresponding distributions on our general partner’s 2.0% interest for each of four consecutive quarters. |
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In addition, the subordination period will end upon the removal of our general partner other than for cause if the units held by our general partner and its affiliates are not voted in favor of such removal. | ||
When the subordination period ends, all subordinated units will convert into common units on a one-for-one basis, and all common units thereafter will no longer be entitled to arrearages. | ||
General partner’s right to reset the target distribution levels | Our general partner has the right, at any time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48%) for each of the prior four consecutive fiscal quarters, to reset the initial target distribution levels at higher levels based on our cash distributions at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution will be adjusted to equal the reset minimum quarterly distribution, and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution. |
If our general partner elects to reset the target distribution levels, it will be entitled to receive Class B units and additional general partner units. The Class B units will be entitled to the same cash distributions per unit as our common units and will be convertible into an equal number of common units. The number of Class B units to be issued to our general partner will be equal to that number of common units which would have entitled their holder to an average aggregate quarterly cash distribution in the prior two quarters equal to the average of the distributions to our general partner on the incentive distribution rights in the prior two quarters. Our general partner will be issued the number of general partner units necessary to maintain our general partner’s interest in us immediately prior to the reset election. Please read “Provisions of our partnership agreement relating to cash distributions—General partner’s right to reset incentive distribution levels.” |
Issuance of additional units | We can issue an unlimited number of units without the consent of our unitholders. Please read “Units eligible for future sale” and “The partnership agreement—Issuance of additional securities.” |
Limited voting rights | Our general partner will manage and operate us. Unlike the holders of common stock in a corporation, you will have only limited voting rights on matters affecting our business. You will have no right to elect our general partner or its directors on an annual or continuing basis. Our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding limited partner units voting together as a single class, including any limited partner units owned by our general partner and its affiliates, including Anadarko. Upon consummation of this offering, Anadarko will own an |
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aggregate of 58.5% of our common and subordinated units. This will give Anadarko the ability to prevent the involuntary removal of our general partner. Please read “The partnership agreement—Voting rights.” | ||
Limited call right | If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a price that is not less than the then-current market price of the common units. |
Estimated ratio of taxable income to distributions | We estimate that if you own the common units you purchase in this offering through the record date for distributions for the period ending December 31, 2010, you will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be 35% or less of the cash distributed to you with respect to that period. For example, if you receive an annual distribution of $1.20 per unit, we estimate that your average allocable federal taxable income per year will be no more than $0.42 per unit. Please read “Material tax consequences—Tax consequences of unit ownership—Ratio of taxable income to distributions” and “Material tax consequences—Tax consequences of unit ownership—Limitations on deductibility of losses.” |
Material tax consequences | For a discussion of other material federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, or the U.S., please read “Material tax consequences.” |
Exchange listing | Our common units have been approved for listing on the New York Stock Exchange, subject to notice of issuance, under the symbol “WES.” |
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Ø | the receipt by the Partnership of gross proceeds of $393.8 million from the issuance and sale of 18,750,000 common units at an assumed initial offering price of $21.00 per unit; |
Ø | the use of the proceeds from this offering to pay underwriting discounts and a structuring fee totaling approximately $25.6 million and other estimated offering expenses of $5.0 million; and |
Ø | the use of the remaining $363.2 million of aggregate net proceeds of this offering to (i) make a loan of $337.6 million to Anadarko in exchange for a30-year note bearing interest at a fixed annual rate of 6.00%, (ii) reimburse Anadarko for $15.5 million of capital expenditures it incurred with respect to assets contributed to us and (iii) provide $10.0 million for general partnership purposes. |
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Partnership pro forma | ||||||||||||||||||||||||||||
as adjusted | ||||||||||||||||||||||||||||
Predecessor combined | Nine months | |||||||||||||||||||||||||||
Nine months ended | ended | Year ended | ||||||||||||||||||||||||||
Year ended December 31, | September 30, | September 30, | December 31, | |||||||||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||||||||
(in thousands, except for operating and per unit data) | ||||||||||||||||||||||||||||
Statement of Income Data: | ||||||||||||||||||||||||||||
Total revenues | $ | 81,152 | $ | 71,650 | $ | 68,049 | $ | 85,513 | $ | 57,481 | $ | 85,513 | $ | 93,304 | ||||||||||||||
Costs and expenses | 39,960 | 35,720 | 31,301 | 33,184 | 29,057 | 33,184 | 43,857 | |||||||||||||||||||||
Depreciation | 18,009 | 15,447 | 14,841 | 17,104 | 12,635 | 17,104 | 19,710 | |||||||||||||||||||||
Total operating expenses | 57,969 | 51,167 | 46,142 | 50,288 | 41,692 | 50,288 | 63,567 | |||||||||||||||||||||
Operating income | 23,183 | 20,483 | 21,907 | 35,225 | 15,789 | 35,225 | 29,737 | |||||||||||||||||||||
Other expense (income) | 26 | (66 | ) | — | — | 25 | — | 377 | ||||||||||||||||||||
Interest expense (income) | 9,631 | 8,650 | 7,146 | 6,643 | 7,943 | (15,022 | ) | (20,030 | ) | |||||||||||||||||||
Income tax expense | 3,814 | 4,789 | 5,504 | 10,469 | 1,740 | 160 | 978 | |||||||||||||||||||||
Net income | $ | 9,712 | $ | 7,110 | $ | 9,257 | $ | 18,113 | $ | 6,081 | $ | 50,087 | $ | 48,412 | ||||||||||||||
General partner interest in pro forma net income | 1,315 | 968 | ||||||||||||||||||||||||||
Common unitholders’ interest in pro forma net income | 24,386 | 27,089 | ||||||||||||||||||||||||||
Subordinated unitholder’s interest in pro forma net income | 24,386 | 20,355 | ||||||||||||||||||||||||||
Net income per common unit (basic and diluted) | $ | 1.08 | $ | 1.20 | ||||||||||||||||||||||||
Net income per subordinated unit (basic and diluted) | $ | 1.08 | $ | 0.90 | ||||||||||||||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||||||||||
Net, property, plant and equipment | $ | 310,871 | $ | 200,451 | $ | 196,065 | $ | 353,294 | $ | 302,057 | $ | 353,294 | ||||||||||||||||
Total assets | 332,228 | 206,373 | 199,110 | 360,692 | 324,772 | 708,306 | ||||||||||||||||||||||
Total partners’ capital/parent net equity | 238,531 | 160,585 | 162,542 | 273,507 | 234,063 | 691,561 | ||||||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||||||
Operating activities | 27,323 | 30,131 | 31,160 | 41,810 | 12,941 | |||||||||||||||||||||||
Investing activities | (42,713 | ) | (21,076 | ) | (16,548 | ) | (37,247 | ) | (27,952 | ) | ||||||||||||||||||
Financing activities | 15,844 | (9,067 | ) | (14,596 | ) | (5,021 | ) | 15,007 | ||||||||||||||||||||
Adjusted EBITDA(1) | 41,192 | 35,930 | 36,748 | 52,329 | 28,424 | 52,329 | 49,447 | |||||||||||||||||||||
Capital expenditures, net | 42,299 | 20,841 | 16,548 | 37,020 | 27,709 | |||||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||
Affiliate | ||||||||||||||||||||||||||||
Throughput, MMBtu/d | 820 | 757 | 715 | 904 | 778 | 904 | 878 | |||||||||||||||||||||
Average rate per MMBtu | $ | 0.22 | $ | 0.21 | $ | 0.21 | $ | 0.28 | $ | 0.22 | $ | 0.28 | $ | 0.23 | ||||||||||||||
Third Party | ||||||||||||||||||||||||||||
Throughput, MMBtu/d | 72 | 41 | 31 | 90 | 64 | 90 | 93 | |||||||||||||||||||||
Average rate per MMBtu | $ | 0.19 | $ | 0.16 | $ | 0.13 | $ | 0.25 | $ | 0.21 | $ | 0.25 | $ | 0.23 | ||||||||||||||
Total | ||||||||||||||||||||||||||||
Throughput, MMBtu/d | 892 | 798 | 746 | 994 | 842 | 994 | 971 | |||||||||||||||||||||
Average rate per MMBtu | $ | 0.21 | $ | 0.21 | $ | 0.21 | $ | 0.28 | $ | 0.22 | $ | 0.28 | $ | 0.23 |
(1) | Adjusted EBITDA is defined in “—Non-GAAP financial measure” below. |
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Ø | our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to financing methods, capital structure or historical cost basis; |
Ø | the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; and |
Ø | the viability of acquisitions and capital expenditure projects and the returns on investment of various investment opportunities. |
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Partnership pro forma | ||||||||||||||||||||||||||||
Predecessor combined | as adjusted | |||||||||||||||||||||||||||
Nine months | ||||||||||||||||||||||||||||
Year ended | Nine months | ended | Year ended | |||||||||||||||||||||||||
December 31, | ended September 30, | September 30, | December 31, | |||||||||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Reconciliation of Adjusted EBITDA to Net Income | ||||||||||||||||||||||||||||
Net income | $ | 9,712 | $ | 7,110 | $ | 9,257 | $ | 18,113 | $ | 6,081 | $ | 50,087 | $ | 48,412 | ||||||||||||||
Add: | ||||||||||||||||||||||||||||
Interest expense (income) | 9,631 | 8,650 | 7,146 | 6,643 | 7,943 | (15,022 | ) | (20,030 | ) | |||||||||||||||||||
Income tax expense | 3,814 | 4,789 | 5,504 | 10,469 | 1,740 | 160 | 978 | |||||||||||||||||||||
Depreciation | 18,009 | 15,447 | 14,841 | 17,104 | 12,635 | 17,104 | 19,710 | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Other income (expense) | (26 | ) | 66 | — | — | (25 | ) | — | (377 | ) | ||||||||||||||||||
Adjusted EBITDA | $ | 41,192 | $ | 35,930 | $ | 36,748 | $ | 52,329 | $ | 28,424 | $ | 52,329 | $ | 49,447 | ||||||||||||||
Reconciliation of Adjusted EBITDA to Net Cash Provided by Operating Activities | ||||||||||||||||||||||||||||
Net cash provided by operating activities(1) | $ | 27,323 | $ | 30,131 | $ | 31,160 | $ | 41,810 | $ | 12,941 | $ | 66,722 | $ | 64,888 | ||||||||||||||
Interest expense (income) | 9,631 | 8,650 | 7,146 | 6,643 | 7,943 | (15,022 | ) | (20,030 | ) | |||||||||||||||||||
Current income tax expense | — | — | — | 3,406 | — | 159 | — | |||||||||||||||||||||
Other income (expense) | (26 | ) | 66 | — | — | (25 | ) | — | (377 | ) | ||||||||||||||||||
Changes in operating working capital: | ||||||||||||||||||||||||||||
Accounts receivable | (374 | ) | 662 | (933 | ) | 1,062 | 1,410 | 1,062 | (374 | ) | ||||||||||||||||||
Accounts payable and accrued expenses | 4,556 | (3,373 | ) | 551 | (580 | ) | 6,015 | (580 | ) | 4,556 | ||||||||||||||||||
Other, including changes in non-current assets and liabilities | 30 | (74 | ) | (1,176 | ) | (12 | ) | 90 | (12 | ) | 30 | |||||||||||||||||
Adjusted EBITDA | $ | 41,192 | $ | 35,930 | $ | 36,748 | $ | 52,329 | $ | 28,424 | $ | 52,329 | $ | 49,447 | ||||||||||||||
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(1) | Reconciliation of reported amounts of net cash provided by operating activities from reported amounts to pro forma amounts for the nine months ended September 30, 2007 and year ended December 31, 2006: |
Nine months ended | Year ended | |||||||
September 30, 2007 | December 31, 2006 | |||||||
Net cash provided by operating activities—reported | $ | 41,810 | $ | 27,323 | ||||
Adjustments: | ||||||||
Additional MIGC net income | 4,375 | |||||||
Interest income for MIGC | (574 | ) | ||||||
Depreciation for MIGC | 918 | |||||||
Depreciation for MIGC basis step up | 783 | |||||||
Income tax for MIGC | 2,647 | |||||||
Income tax for MIGC depreciation on step up | (245 | ) | ||||||
Reported interest expense | 6,643 | 9,631 | ||||||
Pro forma interest income | 15,193 | 20,258 | ||||||
Pro forma interest expense | (171 | ) | (228 | ) | ||||
Reported income tax expense | 10,469 | 3,814 | ||||||
Reported deferred tax adjustment | (7,063 | ) | (3,814 | ) | ||||
Pro forma income tax | (160 | ) | (978 | ) | ||||
Pro forma deferred tax adjustment | 1 | (a) | 978 | |||||
Net cash provided by operating activities—pro forma | $ | 66,722 | $ | 64,888 | ||||
(a) Pro forma income tax expense | 160 | |||||||
Current income tax expense | 159 | |||||||
Deferred income tax expense | 1 |
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Ø | the prices of, level of production of and demand for natural gas; |
Ø | the volume of natural gas we gather, compress, treat and transport; |
Ø | the volumes and prices of condensate that we retain and sell; |
Ø | demand charges and volumetric fees associated with our transportation services; |
Ø | the level of competition from other midstream energy companies; |
Ø | the level of our operating and maintenance and general and administrative costs; |
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Ø | regulatory action affecting the supply of or demand for natural gas, the rates we can charge, how we contract for services, our existing contracts, our operating costs or our operating flexibility; and |
Ø | prevailing economic conditions. |
Ø | the level of capital expenditures we make; |
Ø | the cost of acquisitions; |
Ø | our debt service requirements and other liabilities; |
Ø | fluctuations in our working capital needs; |
Ø | our ability to borrow funds and access capital markets; |
Ø | restrictions contained in debt agreements to which we are a party; and |
Ø | the amount of cash reserves established by our general partner. |
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Ø | worldwide economic conditions; |
Ø | weather conditions and seasonal trends; |
Ø | the levels of domestic production and consumer demand; |
Ø | the availability of imported liquified natural gas, or LNG; |
Ø | the availability of transportation systems with adequate capacity; |
Ø | the volatility and uncertainty of regional pricing differentials such as in the Mid-Continent; |
Ø | the price and availability of alternative fuels; |
Ø | the effect of energy conservation measures; |
Ø | the nature and extent of governmental regulation and taxation; and |
Ø | the anticipated future prices of natural gas, LNG and other commodities. |
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Ø | rates, services and terms and conditions of service; |
Ø | the types of services MIGC may offer to its customers; |
Ø | the certification and construction of new facilities; |
Ø | the acquisition, extension, disposition or abandonment of facilities; |
Ø | the maintenance of accounts and records; |
Ø | relationships between affiliated companies involved in certain aspects of the natural gas business; |
Ø | the initiation and discontinuation of services; |
Ø | market manipulation in connection with interstate sales, purchases or transportation of natural gas; and |
Ø | participation by interstate pipelines in cash management arrangements. |
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Ø | the federal Clean Air Act and analogous state laws that impose obligations related to air emissions; |
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Ø | the federal Comprehensive Environmental Response, Compensation and Liability Act, also known as CERCLA or the Superfund law, and analogous state laws that regulate the cleanup of hazardous substances that may be or have been released at properties currently or previously owned or operated by us or at locations to which our wastes are or have been transported for disposal; |
Ø | the federal Water Pollution Control Act, also known as the Clean Water Act, and analogous state laws that regulate discharges from our facilities into state and federal waters, including wetlands; |
Ø | the federal Resource Conservation and Recovery Act, also known as RCRA, and analogous state laws that impose requirements for the storage, treatment and disposal of solid and hazardous waste from our facilities; and |
Ø | the Toxic Substances Control Act, also known as TSCA, and analogous state laws that impose requirements on the use, storage and disposal of various chemicals and chemical substances at our facilities. |
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Ø | mistaken assumptions about volumes, revenues and costs, including synergies; |
Ø | an inability to successfully integrate the assets or businesses we acquire; |
Ø | the assumption of unknown liabilities; |
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Ø | limitations on rights to indemnity from the seller; |
Ø | mistaken assumptions about the overall costs of equity or debt; |
Ø | the diversion of management’s and employees’ attention from other business concerns; |
Ø | unforeseen difficulties operating in new geographic areas; and |
Ø | customer or key employee losses at the acquired businesses. |
Ø | damage to pipelines and plants, related equipment and surrounding properties caused by hurricanes, tornadoes, floods, fires and other natural disasters and acts of terrorism; |
Ø | inadvertent damage from construction, farm and utility equipment; |
Ø | leaks of natural gas and other hydrocarbons or losses of natural gas as a result of the malfunction of equipment or facilities; |
Ø | leaks of natural gas containing hazardous quantities of hydrogen sulfide from our Pinnacle gathering system or Bethel treating facility; |
Ø | fires and explosions; and |
Ø | other hazards that could also result in personal injury and loss of life, pollution and suspension of operations. |
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Ø | our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; |
Ø | our funds available for operations, future business opportunities and distributions to unitholders will be reduced by that portion of our cash flow required to make interest payments on our debt; |
Ø | we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and |
Ø | our flexibility in responding to changing business and economic conditions may be limited. |
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Ø | Neither our partnership agreement nor any other agreement requires Anadarko to pursue a business strategy that favors us. |
Ø | Anadarko is not limited in its ability to compete with us and may offer business opportunities or sell midstream assets to parties other than us. |
Ø | Our general partner is allowed to take into account the interests of parties other than us, such as Anadarko, in resolving conflicts of interest. |
Ø | The officers of our general partner will also devote significant time to the business of Anadarko and will be compensated by Anadarko accordingly. |
Ø | Our partnership agreement limits the liability of and reduces the fiduciary duties owed by of our general partner, and also restricts the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty. |
Ø | Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval. |
Ø | Our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership securities and the creation, reduction or increase of reserves, each of which can affect the amount of cash that is distributed to our unitholders. |
Ø | Our general partner determines the amount and timing of any capital expenditures and whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders and to our general partner and the ability of the subordinated units to convert to common units. |
Ø | Our general partner determines which costs incurred by it are reimbursable by us. |
Ø | Our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period. |
Ø | Our partnership agreement permits us to classify up to $27.1 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or to our general partner in respect of the general partner interest or the incentive distribution rights. |
Ø | Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf. |
Ø | Our general partner intends to limit its liability regarding our contractual and other obligations. |
Ø | Our general partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if they own more than 80% of the common units. |
Ø | Our general partner controls the enforcement of the obligations that it and its affiliates owe to us. |
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Ø | Our general partner decides whether to retain separate counsel, accountants or others to perform services for us. |
Ø | Our general partner may elect to cause us to issue Class B units to it in connection with a resetting of the target distribution levels related to our general partner’s incentive distribution rights without the approval of the special committee of the board of directors of our general partner or our unitholders. This election may result in lower distributions to our common unitholders in certain situations. |
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Ø | how to allocate corporate opportunities among us and its affiliates; |
Ø | whether to exercise its limited call right; |
Ø | how to exercise its voting rights with respect to the units it owns; |
Ø | whether to exercise its registration rights; |
Ø | whether to elect to reset target distribution levels; and |
Ø | whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement. |
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Ø | provides that whenever our general partner makes a determination or takes, or declines to take, any other action in its capacity as our general partner, our general partner is required to make such determination, or take or decline to take such other action, in good faith, and will not be subject to any other or different standard imposed by our partnership agreement, Delaware law, or any other law, rule or regulation, or at equity; |
Ø | provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as such decisions are made in good faith, meaning that it believed that the decision was in the best interest of our partnership; |
Ø | provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or their assignees resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers and directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and |
Ø | provides that our general partner will not be in breach of its obligations under the partnership agreement or its fiduciary duties to us or our unitholders if a transaction with an affiliate or the resolution of a conflict of interest is: |
(a) | approved by the special committee of the board of directors of our general partner, although our general partner is not obligated to seek such approval; | |
(b) | approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner and its affiliates; |
(c) | on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or |
(d) | fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us. |
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Ø | our existing unitholders’ proportionate ownership interest in us will decrease; |
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Ø | the amount of cash available for distribution on each unit may decrease; |
Ø | because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase; |
Ø | the ratio of taxable income to distributions may increase; |
Ø | the relative voting strength of each previously outstanding unit may be diminished; and |
Ø | the market price of the common units may decline. |
Ø | we were conducting business in a state but had not complied with that particular state’s partnership statute; or |
Ø | your right to act with other unitholders to remove or replace our general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute “control” of our business. |
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Ø | our quarterly distributions; |
Ø | our quarterly or annual earnings or those of other companies in our industry; |
Ø | the loss of a large customer; |
Ø | announcements by us or our competitors of significant contracts or acquisitions; |
Ø | changes in accounting standards, policies, guidance, interpretations or principles; |
Ø | general economic conditions; |
Ø | the failure of securities analysts to cover our common units after this offering or changes in financial estimates by analysts; |
Ø | future sales of our common units; and |
Ø | other factors described in these “Risk factors.” |
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Ø | the historical capitalization of our Predecessor as of September 30, 2007; and |
Ø | our pro forma as adjusted capitalization as of September 30, 2007, reflecting this offering of 18,750,000 common units at an assumed initial public offering price of $21.00, the other formation transactions described under “Prospectus summary—Formation transactions and partnership structure—General” and the application of the net proceeds from this offering as described under “Use of proceeds.” |
As of | |||||||
September 30, 2007 | |||||||
Pro forma as | |||||||
Historical | adjusted(1) | ||||||
(in millions) | |||||||
Debt | $ | — | $ | — | |||
Total partners’ equity/parent net equity: | |||||||
Parent net equity | 273.5 | ||||||
Common units—public(2)(3) | — | 363.2 | |||||
Common units—Anadarko(2)(3) | — | 46.0 | |||||
Subordinated units—Anadarko(2) | — | 271.3 | |||||
General partner units(2) | — | 11.1 | |||||
Total partners’ equity/parent net equity | 273.5 | 691.6 | |||||
Total capitalization | $ | 273.5 | $ | 691.6 | |||
(1) | On a pro forma as adjusted basis, as of September 30, 2007, the public and Anadarko would have held 18,750,000 and 3,823,925 common units, respectively, Anadarko would have held 22,573,925 subordinated units and our general partner would have held 921,385 general partner units representing a 2.0% general partner interest in us. |
(2) | An increase or decrease in the initial public offering price of $1.00 per common unit would cause the public common unitholders’ capital to increase or decrease by $17.5 million. In the case of a $1.00 per common unit increase, Anadarko’s partners’ capital would decrease by $17.5 million, and, in the case of a $1.00 per common unit decrease, Anadarko’s partners’ capital would increase by $15.5 million. |
(3) | A 1,000,000 unit increase in the number of common units issued to the public would result in an $19.6 million increase in the public common unitholders’ capital and an $19.6 million decrease in the partners’ capital of Anadarko. |
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Initial public offering price per common unit | $ | 21.00 | ||||||
Net tangible book value per unit before the offering(1) | 9.84 | |||||||
Increase in net tangible book value per unit attributable to purchasers in the offering | 5.07 | |||||||
Less: Pro forma net tangible book value per unit after the offering(2) | 14.91 | |||||||
Immediate dilution in tangible net book value per common unit to purchasers in the offering(3) | $ | 6.09 | ||||||
(1) | Determined by dividing the number of units (3,823,925 common units, 22,573,925 subordinated units and 921,385 general partner units) to be issued to our general partner and its affiliates, including Anadarko, for the contribution of assets and liabilities to Western Gas Partners, LP into the net tangible book value of the contributed assets and liabilities. | |
(2) | Determined by dividing the total number of units to be outstanding after the offering (22,573,925 common units, 22,573,925 subordinated units and 921,385 general partner units) into our pro forma net tangible book value, after giving effect to the application of the expected net proceeds of the offering. |
(3) | If the initial public offering price were to increase or decrease by $1.00 per common unit, then dilution in net tangible book value per common unit would equal $7.09 and $5.14, respectively. |
Units acquired | Total consideration | |||||||||||||||
Number | Percent | Amount | Percent | |||||||||||||
(in thousands) | ||||||||||||||||
General partner and affiliates(1)(2)(3) | 27,319,235 | 59.3 | % | $ | 257,976 | 39.6 | % | |||||||||
Purchasers in the offering | 18,750,000 | 40.7 | % | 393,750 | 60.4 | % | ||||||||||
Total | 46,069,235 | 100.0 | % | $ | 651,726 | 100.0 | % | |||||||||
(1) | The units acquired by our general partner and its affiliates, including Anadarko, consist of 3,823,925 common units, 22,573,925 subordinated units and 921,385 general partner units. |
(2) | The assets contributed by our general partner and its affiliates were recorded at historical cost in accordance with GAAP. Book value of the consideration provided by our general partner and its affiliates, as of September 30, 2007, equals parent net investment, which was $273.5 million, reduced by $15.5 million for reimbursement to Anadarko of capital expenditures it incurred with respect to assets contributed to us. |
(3) | Assumes the underwriters’ option to purchase additional common units is not exercised. |
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Ø | Our general partner will have the authority to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the establishment or increase of those reserves could result in a reduction in cash distributions to you from the levels we currently anticipate pursuant to our stated distribution policy. Any determination to establish cash reserves made by our general partner in good faith will be binding on our unitholders. Our partnership agreement provides that in order for a determination by our general partner to be made in good faith, our general partner must believe that the determination is in our best interests. |
Ø | While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including the provisions requiring us to make cash distributions contained therein, may be amended. Our partnership agreement generally may not be amended during the subordination period without the approval of our public common unitholders. However, our partnership agreement can be amended with the consent of our general partner and the approval of a majority of the outstanding common units (including common units held by Anadarko) and the Class B units issued upon the reset of incentive distribution rights, if any, voting as a single class after the subordination period has ended. At the closing of this offering, Anadarko will own our general partner and approximately 58.5% of our outstanding common and subordinated units. |
Ø | Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement. |
Ø | UnderSection 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. |
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Ø | We may lack sufficient cash to pay distributions to our unitholders due to increases in our operating or general and administrative expense, principal and interest payments on our debt, tax expenses, working capital requirements and anticipated cash needs. |
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Minimum quarterly distributions | |||||||||
Number of units | One quarter | Annualized | |||||||
Publicly held common units | 18,750,000 | $ | 5,625,000 | $ | 22,500,000 | ||||
Common units held by Anadarko(1) | 3,823,925 | 1,147,178 | 4,588,710 | ||||||
Subordinated units held by Anadarko | 22,573,925 | 6,772,178 | 27,088,710 | ||||||
General partner units held by our general partner | 921,385 | 276,416 | 1,105,662 | ||||||
Total | 46,069,235 | $ | 13,820,772 | $ | 55,283,082 | ||||
(1) | Assumes the underwriters do not exercise their option to purchase 2,812,500 common units and that the 2,812,500 common units will be issued to Anadarko upon the expiration of the underwriters’ 30-day option period. Accordingly, irrespective of whether the underwriters exercise their option to purchase additional common units, the total number of common units we have outstanding upon the completion of this offering and the expiration of the option period will not be impacted. |
Ø | “Unaudited Pro Forma Available Cash,” in which we present the amount of cash we would have had available for distribution on a pro forma basis for our fiscal year ended December 31, 2006 and the twelve months ended September 30, 2007, derived from our unaudited pro forma combined financial statements that are included in this prospectus, as adjusted to give pro forma effect to the offering and the formation transactions; and |
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Ø | “Statement of Estimated Adjusted EBITDA,” in which we demonstrate our ability to generate the minimum estimated Adjusted EBITDA necessary for us to pay the minimum quarterly distribution on all units for each quarter in the twelve months ending December 31, 2008. |
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Twelve months | ||||||||
Year ended | ended | |||||||
December 31, | September 30, | |||||||
2006 | 2007 | |||||||
(in millions, except per unit data) | ||||||||
Net income(1): | $ | 14.1 | $ | 21.7 | ||||
Add: | ||||||||
Other income (expense) | 0.4 | — | ||||||
Depreciation(2) | 19.7 | 22.5 | ||||||
Income taxes(2) | 6.2 | 12.5 | ||||||
Interest expense(2) | 9.1 | 8.3 | ||||||
Adjusted EBITDA(3): | 49.5 | 65.0 | ||||||
Add: | ||||||||
Pro forma net cash interest income(4) | 20.3 | 20.3 | ||||||
Pro forma incremental Anadarko contract revenue(5) | 38.5 | 28.0 | ||||||
Less: | ||||||||
General and administrative expenses of being a publicly traded partnership(6) | 2.5 | 2.5 | ||||||
Pro forma net cash interest expense(7) | 0.2 | 0.2 | ||||||
Capital expenditures(8) | 42.3 | 51.6 | ||||||
Pro forma available cash | $ | 63.3 | $ | 59.0 | ||||
Pro forma cash distributions | ||||||||
Distributions per unit(9) | $ | 1.20 | $ | 1.20 | ||||
Distributions to public common unitholders(9) | $ | 22.5 | $ | 22.5 | ||||
Distributions to Anadarko and our general partner(9) | 32.8 | 32.8 | ||||||
Total distributions | $ | 55.3 | $ | 55.3 | ||||
Excess | $ | 8.0 | $ | 3.7 | ||||
Percent of minimum quarterly distributions payable to common unitholders | 100 | % | 100 | % | ||||
Percent of minimum quarterly distributions payable to subordinated unitholders | 100 | % | 100 | % |
(1) | Reflects pro forma net income of our Predecessor as if the acquisition of MIGC occurred on (i) January 1, 2006 for the year ended December 31, 2006 and (ii) October 1, 2006 for the twelve months ended September 30, 2007, derived from our Predecessor’s combined financial statements. | |
(2) | Reflects an adjustment to reconcile net income to Adjusted EBITDA. |
(3) | We define Adjusted EBITDA as net income (loss), plus interest expense, income taxes and depreciation, less interest income and other income (expense). For a reconciliation of Adjusted EBITDA to its most directly comparable financial measures calculated and presented in accordance with GAAP, please read “Summary historical and pro forma financial and operating data —Non-GAAP financial measure.” |
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(4) | Represents interest income we expect to receive annually with respect to the $337.6 million30-year note bearing interest at a fixed annual rate of 6.00% that we will receive from Anadarko concurrently with the closing of this offering. | |
(5) | Represents incremental revenue we expect to receive pursuant to the new gas gathering agreements we have entered into with Anadarko. These new gathering agreements include fees for gathering and treating that are higher than the fees reflected in our historical financial results. If the new gathering agreements had been in place for the year ended December 31, 2006 and the twelve months ended September 30, 2007, the average rate received for our gathering and treating volumes would have increased by $0.13/Mcf and $0.09/Mcf, respectively. | |
(6) | Reflects an adjustment to our Adjusted EBITDA for estimated cash expenses associated with being a publicly traded partnership, such as expenses associated with annual and quarterly reporting; tax return and Schedule K-1 preparation and distribution expenses; Sarbanes-Oxley compliance expenses; expenses associated with listing on the New York Stock Exchange; independent auditor fees; legal fees; investor relations expenses; and registrar and transfer agent fees. We expect these expenses to total approximately $2.5 million per year. | |
(7) | Represents estimated cash interest expense related to annual commitment fees of 0.175% on Anadarko’s credit facility, under which we are a co-borrower, and our working capital facility. | |
(8) | For the year ended December 31, 2006 and for the twelve months ended September 30, 2007, our capital expenditures were $42.3 million and $51.6 million, respectively. The capital expenditures are assumed to have occurred ratably throughout the year. For these periods, capital expenditures include both maintenance and expansion capital expenditures (excluding $18.0 million for compressor lease repurchases for the twelve months ended September 30, 2007) because we did not segregate these costs in historic periods. If we were able to isolate these costs, we would reflect borrowings to offset expansion capital expenditures and our pro forma available cash would be reduced by incremental interest expense on those borrowings as opposed to being reduced by the entire amount of such expansion capital expenditures in the table presented above. The $18.0 million for compressor lease repurchases was excluded because during the twelve months ended September 30, 2007, Anadarko exercised its early buyout option contained in three of its compressor leases, under which compressors were leased from a third party to Anadarko and subleased by Anadarko to us. Anadarko then transferred the compressors to us as a contribution to our capital. Absent this offering, these leases would have been refinanced and no capital expenditures would have been incurred. | |
(9) | The table above is based on the assumption that the underwriters’ option has not been exercised and the 30-day option period for such exercise has expired. Set forth below is the assumed number of outstanding common, subordinated and general partner units upon the closing of this offering and expiration of the underwriters’ option period, and the aggregate distribution amounts payable on such units during the year following the closing of this offering at our minimum quarterly distribution rate of $0.30 per unit per quarter ($1.20 per unit on an annualized basis). |
Minimum quarterly distributions | |||||||||||
Number of units | One quarter | Annualized | |||||||||
Publicly held common units | 18,750,000 | $ | 5,625,000 | $ | 22,500,000 | ||||||
Common units held by Anadarko(a) | 3,823,925 | 1,147,178 | 4,588,710 | ||||||||
Subordinated units held by Anadarko | 22,573,925 | 6,772,178 | 27,088,710 | ||||||||
General partner units held by our general partner | 921,385 | 276,416 | 1,105,662 | ||||||||
Total | 46,069,235 | $ | 13,820,772 | $ | 55,283,082 | ||||||
(a) | The number of common units held by Anadarko includes 2,812,500 common units subject to the underwriters’ option to purchase additional common units. If and to the extent this option is exercised, the remainder of these common units, if any, will be issued to Anadarko at the expiration of the underwriters’ option period. |
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Twelve months ending | ||||
December 31, | ||||
2008 | ||||
(in millions) | ||||
Revenues | ||||
Gathering and transportation of natural gas | $ | 121.0 | ||
Condensate | 9.2 | |||
Natural gas and other | 0.0 | |||
Total revenues | 130.2 | |||
Costs and expenses | ||||
Cost of product | 4.2 | |||
Operating and maintenance expense | 48.5 | |||
General and administrative expense | 8.5 | |||
Depreciation and amortization expense | 24.0 | |||
Total costs and expenses | 85.2 | |||
Operating income | 45.0 | |||
Interest expense | (0.4 | ) | ||
Interest income — Anadarko note | 20.3 | |||
Texas margin tax | (0.3 | ) | ||
Net income | $ | 64.6 | ||
Adjustments to reconcile net income to estimated Adjusted EBITDA: | ||||
Add: | ||||
Depreciation and amortization expense | 24.0 | |||
Interest expense | 0.4 | |||
Texas margin tax | 0.3 | |||
Less: | ||||
Interest income — Anadarko note | (20.3 | ) | ||
Estimated Adjusted EBITDA(1) | $ | 69.0 | ||
Adjustments to reconcile estimated Adjusted EBITDA to estimated cash available for distribution: | ||||
Less: | ||||
Cash interest expense | 0.4 | |||
Estimated expansion capital expenditures | 15.9 | |||
Estimated maintenance capital expenditures | 28.0 | |||
Texas margin tax | 0.3 | |||
Add: | ||||
Cash interest income — Anadarko note | 20.3 | |||
Cash on hand and borrowings for expansion capital expenditures | 15.9 | |||
Estimated cash available for distribution | $ | 60.6 | ||
Aggregate annualized minimum quarterly distributions | 55.3 | |||
Excess of cash available for distribution over aggregate annualized minimum quarterly distributions | 5.3 | |||
Calculation of minimum estimated Adjusted EBITDA necessary to pay aggregate annualized minimum quarterly distributions: | ||||
Estimated Adjusted EBITDA | 69.0 | |||
Excess of cash available for distribution over minimum annual cash distributions | (5.3 | ) | ||
Minimum estimated Adjusted EBITDA necessary to pay aggregate annualized minimum quarterly distributions | $ | 63.7 | ||
(1) | We define Adjusted EBITDA as net income (loss), plus interest expense, income taxes and depreciation, less interest income and other income (expenses). For a reconciliation of Adjusted EBITDA to its most directly comparable financial measures calculated and presented in accordance with GAAP, please read “Summary historical and pro forma financial and operating data—Non-GAAP financial measure.” |
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Ø | Revenues and operating expenses are net of intercompany transactions. |
Ø | Realized gathering throughput volume is the primary factor that will influence whether the amount of cash available for distribution for the twelve months ending December 31, 2008 is above or below our forecast. For example, if all other assumptions are held constant, a 5.0% decline in volumes below forecasted levels would result in a $5.0 million decline in revenues. Additionally, a 5.0% decline in the trading margin between condensate and natural gas would result in a $0.2 million decline in cash available for distribution. A decline in forecasted cash flow of greater than $5.3 million would result in our generating less than the minimum cash required to pay distributions. |
Ø | Transportation volumes are provided pursuant to firm and interruptible transportation arrangements. |
Ø | Gathering and treating volumes. We estimate that we will gather and/or treat an average of812 MMcf/d of natural gas for the twelve months ending December 31, 2008 as compared to845 MMcf/d for the year ended December 31, 2006 and 870 MMcf/d for the twelve months ended September 30, 2007. The decreased volumes estimated for the twelve months ending December 31, 2008 are primarily due to the end of an interim agreement for treating services on approximately 40 MMcf/d at our Pinnacle gas treating facility, together with the natural production declines from the wells connected to our systems, partially offset by new well connections. |
Ø | Gathering and treating fees. We estimate that we will receive an average gathering and treating fee of $0.34/Mcf for the twelve months ending December 31, 2008 as compared to $0.21/Mcf for the year ended December 31, 2006 and $0.25/Mcf for the twelve months ended September 30, 2007. The expected increase in our gathering and treating fees is due to the new gathering and treating agreements that we recently negotiated with Anadarko. |
Ø | Gathering and treating revenues. We estimate that gathering and treating revenues for the twelve months ending December 31, 2008 will be $102.1 million as compared to $65.0 million for the year ended December 31, 2006 and $78.1 million for the twelve months ended September 30, 2007. |
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Ø | Transportation volumes. We estimate that we will transport an average of178 MMcf/d of natural gas for the twelve months ending December 31, 2008 as compared to126 MMcf/d for the year ended December 31, 2006 and134 MMcf/d for the twelve months ended September 30, 2007. The increase in forecasted volumes is primarily attributable to an additional 45 MMcf/d of firm capacity that was contracted for by Anadarko in connection with the recent expansion of the MIGC system. Our transportation volumes increased by an average of 71 Mcf/d as a result of the inclusion of MIGC for the full year ended December 31, 2006. |
Ø | Transportation fees. We estimate that we will receive an average of $0.30/Mcf for the twelve months ended December 31, 2008 as compared to $0.37/Mcf for the year ended December 31, 2006 and $0.37/Mcf for the twelve months ended September 30, 2007. Our anticipated transportation fees are consistent with fees realized on a historical basis and contained in the FERC-approved rates for MIGC. |
Ø | Transportation revenues. We estimate that transportation revenues for the twelve months ending December 31, 2008 will be $18.9 million as compared to $17.0 million for the year ended December 31, 2006 and $18.0 million for the twelve months ended September 30, 2007. |
Ø | Condensate margin. We estimate that we will receive an aggregate condensate margin of $5.0 million, based on revenues of $9.2 million and associated product costs of $4.2 million, for the twelve months ending December 31, 2008 as compared to $3.7 million for the year ended December 31, 2006 and $4.1 million for the twelve months ended September 30, 2007. The expected margin increase is due primarily to a higher forecasted spread between crude oil and natural gas prices in 2008 ($76.00/Bbl and $7.82/Mcf, respectively, based on NYMEX prices as of September 28, 2007) than existed in the year ended December 31, 2006 ($66.22/Bbl and $7.23/Mcf, respectively) and in the twelve months ended September 30, 2007 ($57.64/Bbl and $6.01/Mcf, respectively). Condensate margin is the difference between the revenue from sale of condensate recovered during the gathering of natural gas and the cost of the natural gas required to deliver the same thermal content to the shipper. |
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Ø | We estimate that maintenance capital expenditures for the twelve months ending December 31, 2008 will be $28.0 million. These expenditures are expected to include $13.0 million of well connection costs associated with maintaining throughput on our systems as well as approximately $5.0 million of one-time expenses at the Dew gathering facility and the Pinnacle gas treating facility to increase available compression. The remainder of the expenditures are primarily expected to be incurred to replace partially or fully depreciated assets and to overhaul existing assets. |
Ø | We estimate that expansion capital expenditures for the twelve months ending December 31, 2008 will be $15.9 million. These expenditures are expected to include $11.5 million associated with the expansion of the sulfur treating capacity at our Bethel plant in East Texas that we expect to complete in 2008. We also expect to spend $3.4 million to add additional compression on our Dew gathering system in East Texas. |
Ø | We expect to use $10 million of the net proceeds of this offering to finance a portion of our expansion capital expenditures during the forecast period. |
Ø | We expect to finance the balance of our expansion capital expenditures of $5.9 million through borrowings under Anadarko’s credit facility, under which we are a co-borrower, or our working capital facility. |
Ø | Our average debt level will be $2.9 million, comprised of funds drawn either on Anadarko’s credit facility, under which we are a co-borrower, or our working capital facility. |
Ø | We estimate interest expense of $0.4 million for the twelve months ending December 31, 2008, which includes commitment fees of 0.175% on Anadarko’s credit facility, under which we are a co-borrower, and our working capital facility and interest associated with funds expected to be drawn. We estimate our borrowings under Anadarko’s credit facility and our working capital facility to bear an average annualized variable interest rate of 6.00% through December 31, 2008. An increase or decrease of 1.0% in the annual interest rate would not result in a material change to our annual interest expense. |
Ø | Anadarko and we will remain in compliance with the financial and other covenants in the Anadarko credit facility and other debt instruments. |
Ø | There will not be any new federal, state or local regulation of the midstream energy sector, or any new interpretation of existing regulations, that will be materially adverse to our business. |
Ø | There will not be any major adverse change in the midstream energy sector or in market, insurance or general economic conditions. |
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Ø | less,the amount of cash reserves established by our general partner to: |
- | provide for the proper conduct of our business; | |
- | comply with applicable law, any of our debt instruments or other agreements; or | |
- | provide funds for distributions to our unitholders for any one or more of the next four quarters; |
Ø | plus, if our general partner so determines, all or a portion of cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. |
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Ø | $27.1 million (as described below); |
Ø | all of our cash receipts after the closing of this offering, excluding cash from the following: |
- | borrowings that are not working capital borrowings; | |
- | sales of equity and debt securities; | |
- | sales or other dispositions of assets outside the ordinary course of business; | |
- | the termination of interest rate swap agreements or commodity hedge contracts prior to the termination date specified herein; | |
- | capital contributions received; and | |
- | corporate reorganizations or restructurings;plus |
Ø | working capital borrowings made after the end of a quarter but on or before the date of determination of operating surplus for the quarter;plus |
Ø | cash distributions paid on equity issued to finance all or a portion of the construction, acquisition or improvement or replacement of a capital asset (such as equipment or facilities) during the period beginning on the date that we enter into a binding obligation to commence the construction, acquisition or improvement of a capital improvement or replacement of a capital asset and ending on the earlier to occur of the date the capital improvement or capital asset commences commercial service or the date that it is abandoned or disposed of;less |
Ø | all of our operating expenditures (as defined below) after the closing of this offering;less |
Ø | the amount of cash reserves established by our general partner to provide funds for future operating expenditures;less |
Ø | all working capital borrowings not repaid within twelve months after having been incurred or repaid within such twelve-month period with the proceeds of additional working capital borrowings. |
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Ø | repayment of working capital borrowings deducted from operating surplus pursuant to the last bullet point of the definition of operating surplus above when such repayment actually occurs; |
Ø | payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness, other than working capital borrowings; |
Ø | expansion capital expenditures; |
Ø | actual maintenance capital expenditures (as discussed in further detail below); |
Ø | investment capital expenditures; |
Ø | payment of transaction expenses relating to interim capital transactions; |
Ø | distributions to our partners (including distributions in respect of our Class B units and incentive distribution rights); or |
Ø | non-pro rata purchases of units of any class made with the proceeds of a substantially concurrent equity issuance. |
Ø | borrowings other than working capital borrowings; |
Ø | sales of our equity and debt securities; and |
Ø | sales or other dispositions of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or as part of normal retirement or replacement of assets. |
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Ø | it will reduce the risk that maintenance capital expenditures in any one quarter will be large enough to render operating surplus less than the initial quarterly distribution to be paid on all the units for the quarter and subsequent quarters; |
Ø | it will increase our ability to distribute as operating surplus cash we receive from non-operating sources; and |
Ø | it will be more difficult for us to raise our distribution above the minimum quarterly distribution and pay incentive distributions on the incentive distribution rights held by our general partner. |
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Ø | distributions of available cash from operating surplus on each of the outstanding common units, subordinated units and general partner units equaled or exceeded the minimum quarterly distribution for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date; |
Ø | the “adjusted operating surplus” (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of the minimum quarterly distributions on all of the outstanding common, subordinated units and general partner units during those periods on a fully diluted basis during those periods; and |
Ø | there are no arrearages in payment of the minimum quarterly distribution on the common units. |
Ø | distributions of available cash from operating surplus on each of the outstanding common units, subordinated units and general partner units equaled or exceeded $0.45 per quarter (150.0% of the minimum quarterly distribution) for each calendar quarter in the immediately preceding four-quarter period; |
Ø | the “adjusted operating surplus” (as defined below) generated during each calendar quarter in the immediately preceding four-quarter period equaled or exceeded the sum of $0.45 (150.0% of the minimum quarterly distribution) on each of the outstanding common, subordinated and general partner units during that period on a fully diluted basis; and |
Ø | there are no arrearages in payment of the minimum quarterly distributions on the common units. |
Ø | the subordination period will end and each subordinated unit will immediately convert into one common unit; |
Ø | any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and |
Ø | our general partner will have the right to convert its general partner units and its incentive distribution rights into common units or to receive cash in exchange for those interests. |
Ø | operating surplus generated with respect to that period;less |
Ø | any net increase in working capital borrowings with respect to that period;less |
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Ø | any net decrease in cash reserves for operating expenditures with respect to that period not relating to an operating expenditure made with respect to that period;plus |
Ø | any net decrease in working capital borrowings with respect to that period;plus |
Ø | any net increase in cash reserves for operating expenditures with respect to that period required by any debt instrument for the repayment of principal, interest or premium. |
Ø | first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; |
Ø | second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period; |
Ø | third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and |
Ø | thereafter, in the manner described in “General partner interest and incentive distribution rights” below. |
Marginal percentage | |||||||||
interest in | |||||||||
distributions(1) | |||||||||
Total quarterly distribution | General | ||||||||
per unit | Unitholders | partner | |||||||
Minimum Quarterly Distribution | $0.300 | 98.0% | 2.0% | ||||||
First Target Distribution | up to $0.345 | 98.0% | 2.0% | ||||||
Second Target Distribution | above $0.345 up to $0.375 | 85.0% | 15.0% | ||||||
Third Target Distribution | above $0.375 up to $0.450 | 75.0% | 25.0% | ||||||
Thereafter | above $0.450 | 50.0% | 50.0% |
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(1) | Assumes that there are no arrearages on common units and that our general partner maintains its 2.0% general partner interest and continues to own the incentive distribution rights. |
Ø | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and |
Ø | thereafter, in the manner described in “—General partner interest and incentive distribution rights” below. |
Ø | we have distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and |
Ø | we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution; |
Ø | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives a total of $0.345 per unit for that quarter (the “first target distribution”); |
Ø | second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives a total of $0.375 per unit for that quarter (the “second target distribution”); |
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Ø | third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives a total of $0.45 per unit for that quarter (the “third target distribution”); and |
Ø | thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
Ø | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives an amount equal to 115.0% of the reset minimum quarterly distribution for that quarter; |
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Ø | second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives an amount per unit equal to 125.0% of the reset minimum quarterly distribution for the quarter; |
Ø | third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives an amount per unit equal to 150.0% of the reset minimum quarterly distribution for the quarter; and |
Ø | thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
Marginal percentage | ||||||||||
interest in distribution | ||||||||||
Quarterly distribution | General | Quarterly distribution per unit | ||||||||
per unit prior to reset | Unitholders | partner | following hypothetical reset | |||||||
Minimum Quarterly Distribution | $0.300 | 98.0% | 2.0% | $0.600 | ||||||
First Target Distribution | up to $0.345 | 98.0% | 2.0% | up to $0.690 | (1) | |||||
Second Target Distribution | above $0.345 up to $0.375 | 85.0% | 15.0% | above $0.690(1) up to $0.750 | (2) | |||||
Third Target Distribution | above $0.375 up to $0.450 | 75.0% | 25.0% | above $0.750(2) up to $0.900 | (3) | |||||
Thereafter | above $0.450 | 50.0% | 50.0% | above $0.900 | (3) |
(1) | This amount is 115.0% of the hypothetical reset minimum quarterly distribution. | |
(2) | This amount is 125.0% of the hypothetical reset minimum quarterly distribution. | |
(3) | This amount is 150.0% of the hypothetical reset minimum quarterly distribution. |
Cash | ||||||||||||||||||||
Quarterly | distributions | Cash distributions to general partner prior to reset | ||||||||||||||||||
distribution | to common | 2.0% general | Incentive | |||||||||||||||||
per unit | unitholders | Class B | partner | distribution | Total | |||||||||||||||
prior to reset | prior to reset | units | interest | rights | Total | distributions | ||||||||||||||
Minimum Quarterly Distribution | $0.300 | $ | 13,544,355 | $ | — | $ | 276,415 | $ | — | $ | 276,415 | $ | 13,820,770 | |||||||
First Target Distribution | up to $0.345 | 2,031,653 | — | 41,463 | — | 41,463 | 2,073,116 | |||||||||||||
Second Target Distribution | above $0.345 up to $0.375 | 1,354,436 | — | 31,869 | 207,149 | 239,018 | 1,593,454 | |||||||||||||
Third Target Distribution | above $0.375 up to $0.450 | 3,386,088 | — | 90,296 | 1,038,401 | 1,128,697 | 4,514,785 | |||||||||||||
Thereafter | above $0.450 | 6,772,178 | — | 270,887 | 6,501,290 | 6,772,177 | 13,544,355 | |||||||||||||
$ | 27,088,710 | $ | — | $ | 710,930 | $ | 7,746,840 | $ | 8,457,770 | $ | 35,546,480 | |||||||||
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Cash | ||||||||||||||||||||
Quarterly | distributions | Cash distributions to general partner after reset | ||||||||||||||||||
distribution | to common | 2.0% General | Incentive | |||||||||||||||||
per unit | unitholders | Class B | partner | distribution | Total | |||||||||||||||
after reset | after reset | units | interest | rights | Total | distributions | ||||||||||||||
Minimum Quarterly Distribution | $0.600 | $ | 27,088,710 | $ | 7,746,840 | $ | 710,930 | $ | — | $ | 8,457,770 | $ | 35,546,480 | |||||||
First Target Distribution | up to $0.690 | — | — | — | — | — | — | |||||||||||||
Second Target Distribution | above $0.690 up to $0.750 | — | — | — | — | — | — | |||||||||||||
Third Target Distribution | above $0.750 up to $0.900 | — | — | — | — | — | — | |||||||||||||
Thereafter | above $0.900 | — | — | — | — | — | — | |||||||||||||
$ | 27,088,710 | $ | 7,746,840 | $ | 710,930 | $ | — | $ | 8,457,770 | $ | 35,546,480 | |||||||||
Ø | first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit that was issued in this offering, an amount of available cash from capital surplus equal to the initial public offering price; |
Ø | second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit, an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and |
Ø | thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus. |
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Ø | the minimum quarterly distribution; |
Ø | target distribution levels; |
Ø | the unrecovered initial unit price; and |
Ø | the number of common units into which a subordinated unit is convertible. |
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Ø | first, to our general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances; |
Ø | second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until the capital account for each common unit is equal to the sum of: (1) the unrecovered initial unit price; (2) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; and (3) any unpaid arrearages in payment of the minimum quarterly distribution; |
Ø | third, 98.0% to the subordinated unitholders, pro rata, and 2.0% to our general partner, until the capital account for each subordinated unit is equal to the sum of: (1) the unrecovered initial unit price; and (2) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; |
Ø | fourth, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we distributed 98.0% to the unitholders, pro rata, and 2.0% to our general partner, for each quarter of our existence; |
Ø | fifth, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85.0% to the unitholders, pro rata, and 15.0% to our general partner for each quarter of our existence; |
Ø | sixth, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that we distributed 75.0% to the unitholders, pro rata, and 25.0% to our general partner for each quarter of our existence; and |
Ø | thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
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Ø | first, 98.0% to holders of subordinated units in proportion to the positive balances in their capital accounts and 2.0% to our general partner, until the capital accounts of the subordinated unitholders have been reduced to zero; |
Ø | second, 98.0% to the holders of common units in proportion to the positive balances in their capital accounts and 2.0% to our general partner, until the capital accounts of the common unitholders have been reduced to zero; and |
Ø | thereafter, 100.0% to our general partner. |
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Ø | the receipt by the Partnership of gross proceeds of $393.8 million from the issuance and sale of 18,750,000 common units at an assumed initial offering price of $21.00 per unit; |
Ø | the use of the proceeds from this offering to pay underwriting discounts and a structuring fee totaling approximately $25.6 million and other estimated offering expenses of $5.0 million; and |
Ø | the use of the remaining $363.2 million of aggregate net proceeds of this offering to (i) make a loan of $337.6 million to Anadarko in exchange for a30-year note bearing interest at a fixed annual rate of 6.00%, (ii) reimburse Anadarko for $15.5 million of capital expenditures it incurred with respect to assets contributed to us and (iii) provide $10.0 million for general partnership purposes. |
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Partnership pro forma | |||||||||||||||||||||||||||||||
Predecessor combined | as adjusted | ||||||||||||||||||||||||||||||
Nine months | |||||||||||||||||||||||||||||||
Nine months | ended | Year ended | |||||||||||||||||||||||||||||
Year ended December 31, | ended September 30, | September 30, | December 31, | ||||||||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2007 | 2006 | 2007 | 2006 | |||||||||||||||||||||||
(in thousands, except operating and per unit data) | |||||||||||||||||||||||||||||||
Statement of Income Data: | |||||||||||||||||||||||||||||||
Total revenues | $ | 81,152 | $ | 71,650 | $ | 68,049 | $ | 61,401 | $ | 50,266 | $ | 85,513 | $ | 57,481 | $ | 85,513 | $ | 93,304 | |||||||||||||
Costs and expenses | 39,960 | 35,720 | 31,301 | 33,804 | 31,135 | 33,184 | 29,057 | 33,184 | 43,857 | ||||||||||||||||||||||
Depreciation | 18,009 | 15,447 | 14,841 | 14,294 | 16,509 | 17,104 | 12,635 | 17,104 | 19,710 | ||||||||||||||||||||||
Total operating expenses | 57,969 | 51,167 | 46,142 | 48,098 | 47,644 | 50,288 | 41,692 | 50,288 | 63,567 | ||||||||||||||||||||||
Operating income | 23,183 | 20,483 | 21,907 | 13,303 | 2,622 | 35,225 | 15,789 | 35,225 | 29,737 | ||||||||||||||||||||||
Other expense (income) | 26 | (66 | ) | — | — | — | — | 25 | — | 377 | |||||||||||||||||||||
Interest expense (income) | 9,631 | 8,650 | 7,146 | 6,782 | 9,019 | 6,643 | 7,943 | (15,022 | ) | (20,030 | ) | ||||||||||||||||||||
Income tax expense (benefit) | 3,814 | 4,789 | 5,504 | 2,529 | (2,331 | ) | 10,469 | 1,740 | 160 | 978 | |||||||||||||||||||||
Change in accounting principle | — | — | — | 1,510 | — | — | |||||||||||||||||||||||||
Net income (loss) | $ | 9,712 | $ | 7,110 | $ | 9,257 | $ | 5,502 | $ | (4,066 | ) | $ | 18,113 | $ | 6,081 | $ | 50,087 | $ | 48,412 | ||||||||||||
General partner interest in pro forma net income | 1,315 | 968 | |||||||||||||||||||||||||||||
Common unitholders’ interest in pro forma net income | 24,386 | 27,089 | |||||||||||||||||||||||||||||
Subordinated unitholders’ interest in pro forma net income | 24,386 | 20,355 | |||||||||||||||||||||||||||||
Net income per common unit (basic and diluted) | $ | 1.08 | $ | 1.20 | |||||||||||||||||||||||||||
Net income per subordinated unit (basic and diluted) | $ | 1.08 | $ | 0.90 | |||||||||||||||||||||||||||
Balance Sheet Data (at period end): | |||||||||||||||||||||||||||||||
Net, property, plant and equipment | $ | 310,871 | $ | 200,451 | $ | 196,065 | $ | 192,415 | $ | 200,398 | $ | 353,294 | $ | 302,057 | $ | 353,294 | |||||||||||||||
Total assets | 332,228 | 206,373 | 199,110 | 195,747 | 203,623 | 360,692 | 324,772 | 708,306 | |||||||||||||||||||||||
Total partners’ capital/parent net equity | 238,531 | 160,585 | 162,542 | 167,881 | 175,886 | 273,507 | 234,063 | 691,561 |
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Partnership pro forma | ||||||||||||||||||||||||||||||||
Predecessor combined | as adjusted | |||||||||||||||||||||||||||||||
Nine months | ||||||||||||||||||||||||||||||||
Nine months | ended | Year ended | ||||||||||||||||||||||||||||||
Year ended December 31, | ended September 30, | September 30, | December 31, | |||||||||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2007 | 2006 | 2007 | 2006 | ||||||||||||||||||||||||
(in thousands, except operating and per unit data) | ||||||||||||||||||||||||||||||||
Cash Flow Data: | ||||||||||||||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||||||||||||||
Operating activities | 27,323 | 30,131 | 31,160 | 41,810 | 12,941 | |||||||||||||||||||||||||||
Investing activities | (42,713 | ) | (21,076 | ) | (16,548 | ) | (37,247 | ) | (27,952 | ) | ||||||||||||||||||||||
Financing activities | 15,844 | (9,067 | ) | (14,596 | ) | (5,021 | ) | 15,007 | ||||||||||||||||||||||||
Adjusted EBITDA(1) | 41,192 | 35,930 | 36,748 | 52,329 | 28,424 | 52,329 | 49,447 | |||||||||||||||||||||||||
Capital expenditures, net | 42,299 | 20,841 | 16,548 | 37,020 | 27,709 | |||||||||||||||||||||||||||
Operating Data: | ||||||||||||||||||||||||||||||||
Affiliate | ||||||||||||||||||||||||||||||||
Throughput, MMBtu/d | 820 | 757 | 715 | 667 | 700 | 904 | 778 | 904 | 878 | |||||||||||||||||||||||
Average rate per MMBtu | $ | 0.22 | $ | 0.21 | $ | 0.21 | $ | 0.19 | $ | 0.17 | $ | 0.28 | $ | 0.22 | $ | 0.28 | $ | 0.23 | ||||||||||||||
Third Party | ||||||||||||||||||||||||||||||||
Throughput, MMBtu/d | 72 | 41 | 31 | 32 | 15 | 90 | 64 | 90 | 93 | |||||||||||||||||||||||
Average rate per MMBtu | $ | 0.19 | $ | 0.16 | $ | 0.13 | $ | 0.09 | $ | 0.14 | $ | 0.25 | $ | 0.21 | $ | 0.25 | $ | 0.23 | ||||||||||||||
Total | ||||||||||||||||||||||||||||||||
Throughput, MMBtu/d | 892 | 798 | 746 | 699 | 715 | 994 | 842 | 994 | 971 | |||||||||||||||||||||||
Average rate per MMBtu | $ | 0.21 | $ | 0.21 | $ | 0.21 | $ | 0.18 | $ | 0.16 | $ | 0.28 | $ | 0.22 | $ | 0.28 | $ | 0.23 |
(1) | Adjusted EBITDA is defined in “Summary historical and pro forma financial and operatingdata—Non-GAAP financial measure.” For a reconciliation of Adjusted EBITDA to their most directly comparable financial measures calculated and presented in accordance with GAAP, please read “Summary historical and pro forma financial and operatingdata—Non-GAAP financial measure.” |
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Ø | our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to financing methods, capital structure or historical cost basis; |
Ø | the ability of our assets to generate sufficient cash flow to make distributions to our unitholders; and |
Ø | the viability of acquisitions and capital expenditure projects and the returns on investment of various investment opportunities. |
Ø | We anticipate incurring approximately $2.5 million of general and administrative expenses attributable to operating as a publicly traded partnership, such as expenses associated with annual and quarterly reporting; tax return andSchedule K-1 preparation and distribution expenses; Sarbanes-Oxley compliance expenses; expenses associated with listing on the New York Stock Exchange; independent auditor fees; legal fees; investor relations expenses; and registrar and transfer agent fees. These incremental general and administrative expenses are not reflected in our historical or our pro forma combined financial statements. |
Ø | We anticipate incurring $6.0 million in general and administrative expenses to be allocated to us by Anadarko pursuant to the omnibus agreement. This amount is expected to be greater than the amount allocated to us by Anadarko for the management services fee and reflected in our historical combined financial statements. |
Ø | The impact of all affiliated transactions historically has been net settled within our combined financial statements because these transactions related to Anadarko and were funded by Anadarko’s working capital. Third-party transactions were funded by our working capital. In the future, all affiliate and third-party transactions will be funded by our working capital. This will impact the comparability of our cash flow statements, working capital analysis and liquidity discussion. |
Ø | Prior to this offering, we incurred interest expense on intercompany notes payable to Anadarko. These balances were extinguished through non-cash transactions prior to this offering; therefore, interest expense attributable to these balances and reflected in our historical combined financial statements will not be incurred in future periods. |
Ø | We have entered into new gas gathering agreements with Anadarko which include fees for gathering and treating that are higher than those fees reflected in our historical financial results. |
Ø | Our combined financial statements reflect the gathering fees we historically charged Anadarko under our historic affiliate cost of service based arrangements. Under these arrangements, we recovered, on an annual basis, our operation and maintenance, general and administrative and depreciation expenses in addition to earning a return on our invested capital. Effective January 1, 2008, we entered into new10-year gas gathering agreements with Anadarko. Under the terms of these new agreements, we expect our operation and maintenance expense to increase as a result of us bearing all of the cost of employee benefits specifically identified and related to operational personnel working on our assets as compared to bearing only those employee benefit costs reasonably allocated by Anadarko to us in historic periods. Since our new gas gathering agreements are designed to fully recover these costs, our future revenues are expected to increase by an amount equal to the increase in operation and maintenance expense. Although we do not expect this change in methodology for computing affiliate gathering rates to impact our net cash flows or net income, we do expect this |
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methodology change to impact the components thereof as compared to historic periods. If we applied the methodology employed under our new gas gathering agreements with Anadarko to historic periods, we estimate our gathering revenues and operation and maintenance expense for the years ended December 31, 2006, 2005, and 2004, would have increased by $2.8 million, $1.4 million and $0.9 million, respectively. |
Ø | Concurrently with the closing of this offering, we will loan $337.6 million to Anadarko in exchange for an interest-only,30-year note bearing interest at a fixed annual rate of 6.00%. Interest income attributable to the note is not reflected in our historical combined financial statements, but will be included in our combined financial statements in the future. |
Ø | As a co-borrower under Anadarko’s credit facility, we will incur an annual commitment fee of 0.175% of our committed and unused borrowing capacity of up to $100 million, or up to $175,000. In addition, Anadarko will enter into a working capital facility with us, under which we will incur an annual commitment fee of 0.175% of the unused portion of our committed borrowing capacity of $30 million, or up to $52,500. |
Ø | Our historical combined financial statements include U.S. federal and state income tax expense incurred by us. Due to our status as a partnership, we will not be subject to U.S. federal income tax and certain state income taxes in the future. However, we will make payments to Anadarko pursuant to a tax sharing agreement for our share of state and local income and other taxes that are included in combined or consolidated tax returns filed by Anadarko. |
Ø | Following the closing of this offering, we intend to make cash distributions to our unitholders and our general partner at an initial distribution rate of $0.30 per unit per quarter ($1.20 per unit on an annualized basis). Based on the terms of our cash distribution policy, we expect that we will distribute to our unitholders and our general partner most of the cash generated by our operations. As a result, we expect that we will rely upon external financing sources, including commercial bank borrowings and debt and equity issuances, to fund our acquisition and expansion capital expenditures. Historically, we largely relied on internally generated cash flows and capital contributions from Anadarko to satisfy our capital expenditure requirements. |
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Ø | We installed additional compression on our Dew system, which added an incremental 16,537 horsepower in 2007 and anticipate adding an additional 2,680 of horsepower in 2008; |
Ø | We are expanding our Bethel treating facility by installing an additional 11 LTD of sulfur treating capacity in order to provide additional sour gas treating capacity for drilling in the area, which we expect to complete in 2008; and |
Ø | We are expanding our Hugoton gathering system. |
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Year ended December 31, | Nine months ended September 30, | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Revenues-affiliates | ||||||||||||||||||||
Gathering and transportation of natural gas | $ | 65,946 | $ | 58,363 | $ | 54,407 | $ | 69,311 | $ | 46,546 | ||||||||||
Condensate | 7,440 | 7,006 | 6,407 | 6,266 | 5,374 | |||||||||||||||
Natural gas and other | 1,327 | 789 | 4,526 | 918 | 324 | |||||||||||||||
Total | 74,713 | 66,158 | 65,340 | 76,495 | 52,244 | |||||||||||||||
Revenues-third parties | ||||||||||||||||||||
Gathering and transportation of natural gas | 5,022 | 2,420 | 1,458 | 6,067 | 3,660 | |||||||||||||||
Condensate, natural gas and other | 1,417 | 3,072 | 1,251 | 2,951 | 1,577 | |||||||||||||||
Total | 6,439 | 5,492 | 2,709 | 9,018 | 5,237 | |||||||||||||||
Total revenues | 81,152 | 71,650 | 68,049 | 85,513 | 57,481 | |||||||||||||||
Operating expenses-affiliates | ||||||||||||||||||||
Cost of product | 3,830 | 5,551 | 4,425 | 4,439 | 4,196 | |||||||||||||||
General and administrative | 3,198 | 2,829 | 2,251 | 2,370 | 2,394 | |||||||||||||||
Total | 7,028 | 8,380 | 6,676 | 6,809 | 6,590 | |||||||||||||||
Operating expenses-third parties | ||||||||||||||||||||
Cost of product | 714 | 456 | 553 | — | — | |||||||||||||||
Operation and maintenance(1) | 27,585 | 23,044 | 20,678 | 21,840 | 18,598 | |||||||||||||||
General and administrative | — | 9 | 48 | 751 | 204 | |||||||||||||||
Property and other taxes | 4,633 | 3,831 | 3,346 | 3,784 | 3,665 | |||||||||||||||
Total | 32,932 | 27,340 | 24,625 | 26,375 | 22,467 | |||||||||||||||
Depreciation | 18,009 | 15,447 | 14,841 | 17,104 | 12,635 | |||||||||||||||
Total operating expenses | 57,969 | 51,167 | 46,142 | 50,288 | 41,692 | |||||||||||||||
Operating income | 23,183 | 20,483 | 21,907 | 35,225 | 15,789 | |||||||||||||||
Other income (expense) | (26 | ) | 66 | — | — | (25 | ) | |||||||||||||
Interest expense | 9,631 | 8,650 | 7,146 | 6,643 | 7,943 | |||||||||||||||
Income before income taxes | 13,526 | 11,899 | 14,761 | 28,582 | 7,821 | |||||||||||||||
Income tax expense | 3,814 | 4,789 | 5,504 | 10,469 | 1,740 | |||||||||||||||
Net income | $ | 9,712 | $ | 7,110 | $ | 9,257 | $ | 18,113 | $ | 6,081 | ||||||||||
Adjusted EBITDA(2) | $ | 41,192 | $ | 35,930 | $ | 36,748 | $ | 52,329 | $ | 28,424 |
(1) | Third-party operation and maintenance expenses do not bear a direct relationship to third-party revenues because all operating expenses ultimately settled with third parties, including utilities, field labor, measurement and analysis and other expenses, are included within third-party operation and maintenance expenses. |
(2) | We define Adjusted EBITDA as net income (loss), plus interest expense, income taxes and depreciation, less interest income and other income (expense). For a reconciliation of this measure to its directly comparable financial measures calculated and presented in accordance with GAAP, please read “Summary historical and pro forma financial and operatingdata—Non-GAAP financial measure.” |
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Ø | any increases or decreases “for the year ended December 31, 2006” refer to the comparison of the twelve-month period ended December 31, 2006 to the twelve-month period ended December 31, 2005; |
Ø | any increases or decreases “for the year ended December 31, 2005” refer to the comparison of the twelve-month period ended December 31, 2005 to the twelve-month period ended December 31, 2004; and |
Ø | any increases or decreases “for the nine months ended September 30, 2007” refer to the comparison of the nine-month period ended September 30, 2007 to the nine-month period ended September 30, 2006. |
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Nine months ended | ||||||||||||||||||||
Year ended December 31, | September 30, | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in thousands, except operating and per unit data) | ||||||||||||||||||||
Revenues | ||||||||||||||||||||
Affiliate | $ | 74,713 | $ | 66,158 | $ | 65,340 | $ | 76,495 | $ | 52,244 | ||||||||||
Third-party | 6,439 | 5,492 | 2,709 | 9,018 | 5,237 | |||||||||||||||
Total revenues | $ | 81,152 | $ | 71,650 | $ | 68,049 | $ | 85,513 | $ | 57,481 | ||||||||||
Throughput (MMbtu/d) | ||||||||||||||||||||
Affiliate | 820 | 757 | 715 | 904 | 778 | |||||||||||||||
Third-party | 72 | 41 | 31 | 90 | 64 | |||||||||||||||
Total throughput | 892 | 798 | 746 | 994 | 842 | |||||||||||||||
Weighted average price per MMbtu | ||||||||||||||||||||
Affiliate | $ | 0.22 | $ | 0.21 | $ | 0.21 | $ | 0.28 | $ | 0.22 | ||||||||||
Third-party | $ | 0.19 | $ | 0.16 | $ | 0.13 | $ | 0.25 | $ | 0.21 | ||||||||||
Total | $ | 0.21 | $ | 0.21 | $ | 0.21 | $ | 0.28 | $ | 0.22 |
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Nine months ended | ||||||||||||||||||||
Year ended December 31, | September 30, | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating expenses | ||||||||||||||||||||
Affiliate | $ | 7,028 | $ | 8,380 | $ | 6,676 | $ | 6,809 | $ | 6,590 | ||||||||||
Third-party | 32,932 | 27,340 | 24,625 | 26,375 | 22,467 | |||||||||||||||
Depreciation | 18,009 | 15,447 | 14,841 | 17,104 | 12,635 | |||||||||||||||
Total operating expenses | $ | 57,969 | $ | 51,167 | $ | 46,142 | $ | 50,288 | $ | 41,692 | ||||||||||
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Nine months ended | ||||||||||||||||||||
Year ended December 31, | September 30, | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Operating income — excluding MIGC | $ | 19,670 | $ | 20,483 | $ | 21,907 | $ | 26,255 | $ | 15,074 | ||||||||||
Operating income — MIGC | 3,513 | — | — | 8,970 | 715 | |||||||||||||||
Operating income — reported | $ | 23,183 | $ | 20,483 | $ | 21,907 | $ | 35,225 | $ | 15,789 | ||||||||||
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Year ended December 31, | Nine months ended September 30 | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in thousands, except tax rates) | ||||||||||||||||||||
Income before income taxes | $ | 13,526 | $ | 11,899 | $ | 14,761 | $ | 28,582 | $ | 7,821 | ||||||||||
Income tax expense | 3,814 | 4,789 | 5,504 | 10,469 | 1,740 | |||||||||||||||
Effective tax rate | 28.20 | % | 40.25 | % | 37.29 | % | 36.63 | % | 22.25 | % |
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Ø | $10 million of net offering proceeds to be retained for general partnership purposes; |
Ø | cash generated from operations; |
Ø | borrowings under Anadarko’s credit facility up to the amount of our borrowing limit; |
Ø | borrowings under our working capital facility with Anadarko; |
Ø | interest income from our $337.6 million note receivable from Anadarko; |
Ø | issuances of additional partnership units; and |
Ø | debt offerings. |
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Year ended December 31, | Nine months ended September 30, | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net cash provided by (used in): | ||||||||||||||||||||
Operating activities | $ | 27,323 | $ | 30,131 | $ | 31,160 | $ | 41,810 | $ | 12,941 | ||||||||||
Investing activities | $ | (42,713 | ) | $ | (21,076 | ) | $ | (16,548 | ) | $ | (37,247 | ) | $ | (27,952 | ) | |||||
Financing activities | $ | 15,844 | $ | (9,067 | ) | $ | (14,596 | ) | $ | (5,021 | ) | $ | 15,007 | |||||||
Net increase (decrease) in cash | $ | 454 | $ | (12 | ) | $ | 16 | $ | (458 | ) | $ | (4 | ) |
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Ø | Maintenance capital expenditures, which include those expenditures required to maintain the existing operating capacity and service capability of our assets, including the replacement of system components and equipment that have suffered significant wear and tear, become obsolete or approached the end of their useful lives, those expenditures necessary to remain in compliance with regulatory or legal requirements or those expenditures necessary to complete additional well connections to maintain existing system volumes and related cash flows; or |
Ø | Expansion capital expenditures, which include those expenditures incurred in order to extend the useful lives of our assets, increase gathering, treating and transmission throughput from current levels, reduce costs or increase revenues. |
Year ended December 31, | Nine months ended September 30, | |||||||||||||||||||
2006 | 2005 | 2004 | 2007 | 2006 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Total capital expenditures, net | $ | 42,299 | $ | 20,841 | $ | 16,548 | $ | 37,020 | $ | 27,709 |
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Less than | More than | |||||||||||||||||||
Total | 1 year | 2-3 years | 4-5 years | 5 years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Lease commitments | $ | 13,359 | $ | 3,123 | $ | 4,177 | $ | 4,277 | $ | 1,782 |
Less than | More than | |||||||||||||||||||
Total | 1 year | 2-3 years | 4-5 years | 5 years | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Lease commitments | $ | 5,360 | $ | 799 | $ | 1,936 | $ | 1,958 | $ | 667 |
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Approximate # | Gas | Treating | Average | ||||||||||||||||
Length | of | compression | capacity | throughput | |||||||||||||||
Area | Asset type | (miles) | receipt points | (horsepower) | (MMcf/d) | (MMcf/d) | |||||||||||||
East Texas | Gathering and Treating | 577 | 789 | 45,633 | 510 | 304 | (1 | ) | |||||||||||
Rocky Mountains | Gathering and Treating | 114 | 162 | 20,385 | 92 | 55 | |||||||||||||
Transportation | 264 | 19 | 29,696 | — | 137 | ||||||||||||||
Mid-Continent | Gathering | 1,753 | 1,507 | 130,720 | — | 123 | |||||||||||||
West Texas | Gathering | 87 | 50 | — | — | 185 | |||||||||||||
Total | 2,795 | 2,527 | 226,434 | 602 | 804 | ||||||||||||||
(1) | To avoid duplicating volumes, 213 MMcf/d that is gathered on our Dew gathering system and delivered into our Pinnacle gas treating system is included only once in the calculation of average throughput. |
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Ø | Pursuing accretive acquisitions. We expect to pursue accretive acquisition opportunities within the midstream energy industry from Anadarko and third parties. Given Anadarko’s large portfolio of midstream assets, we believe that we will have access to an array of acquisition opportunities, though Anadarko is under no legal obligation to offer assets or business opportunities to us. In addition, we may also pursue selected asset acquisitions from third parties to the extent such acquisitions complement our or Anadarko’s existing asset base or allow us to capture operational efficiencies from Anadarko’s production. |
Ø | Capitalizing on organic growth opportunities. The significant dedication to us by Anadarko provides us with a platform for organic growth. We expect to achieve this growth by meeting Anadarko’s gathering needs, which we expect to increase as a result of its anticipated drilling activity in our areas of operation. We also intend to actively pursue new volumes associated with Anadarko’s development of undeveloped acreage that is accessible by our gathering systems. Examples of organic growth opportunities potentially arising from our relationship with Anadarko include: |
- | Anadarko’s active drilling program in the East Texas Bossier play, including the Cotton Valley Lime formations; and | |
- | Anadarko’s increased drilling and recompletion activity in the Hugoton field as a result of recent rule changes by the Kansas Corporation Commission. |
Ø | Attracting additional third-party volumes to our systems. We intend to actively market our midstream services to and pursue strategic relationships with third-party producers to attract additional volumes and/or expansion opportunities. Recent examples of such expansions include: |
- | the planned expansion of the sour gas treating capacity of our Bethel plant to accommodate the recent drilling activity by third parties in the Cotton Valley Lime formations; and | |
- | the expansion of the Hugoton gathering system to obtain volumes previously gathered by a competitor’s system. |
Ø | Minimizing commodity price exposure. Our midstream services are provided under fee-based arrangements which minimize our direct commodity price exposure. We expect to utilize hedging to manage any significant future commodity price risk that could result from contracts we may acquire or enter into in the future. |
Ø | Affiliation with Anadarko. We believe that Anadarko, as the owner of our general partner interest, all of our incentive distribution rights and a 57.3% limited partner interest in us, is motivated to promote and support the successful execution of our business plan and to pursue projects that enhance the value of our business. We believe that our relationship with Anadarko will enhance our ability to achieve our primary business objective through, for example, the following: |
- | Anadarko Petroleum Corporation has dedicated to us all of the natural gas production it owns or controls from (i) wells that are currently connected to gathering systems, and (ii) additional wells that are drilled within one mile of connected wells or our gathering systems, as the systems currently exist and as they are expanded to connect additional wells in the future; |
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- | as Anadarko develops the acreage in proximity to our gathering systems or acquires additional acreage in our areas of operation, we believe that it will deliver additional volumes to our facilities, although it is not obligated to do so; | |
- | Anadarko manages a large portfolio of midstream assets in highly active oil and natural gas producing areas, such as the Rocky Mountains, and we believe that Anadarko may offer us the opportunity to purchase some or all of such assets in the future, although it is not obligated to do so; and | |
- | we have access to Anadarko’s broad operational, commercial, technical, risk management and administrative infrastructure, its significant pool of management talent and its strong commercial relationships throughout the energy industry. |
Ø | Relatively stable and predictable cash flow. Given the fee-based, long-term nature of our midstream service agreements, our cash flow is largely protected from fluctuations caused by commodity price volatility. In addition, our contracts have primary terms ranging up to 20 years, and we generally do not take title to the natural gas that we gather, compress, treat or transport. Moreover, our systems are connected to wells in producing basins that generally have long lives with predictable flow rates. |
Ø | Well-positioned, well-maintained and efficient assets. We believe that our established positions in our areas of operation provide us with opportunities to expand and attract additional volumes to our systems. Moreover, our systems consist of high-quality, well-maintained assets for which we have implemented modern treating, measuring and operating technologies. These applications have allowed us to manage our operations efficiently with limited field personnel, resulting in lower costs and minimal downtime. |
Ø | Financial flexibility to pursue expansion and acquisition opportunities. We have up to $100 million of borrowing capacity available to us under Anadarko’s $750 million credit facility and, concurrently with the closing of this offering, we expect to obtain a $30 million working capital facility from Anadarko. In addition, we will have no indebtedness outstanding at the closing of this offering. We believe that our borrowing capacity and our ability to effectively access debt and equity capital markets provide us with the financial flexibility necessary to achieve our organic expansion and acquisition strategy. |
Ø | Experienced management team. Our general partner’s management team, which includes senior executives of Anadarko, has on average over 15 years of industry experience. Members of our general partner’s management team have extensive experience in building, acquiring, integrating, financing and managing midstream assets. In addition, our relationship with Anadarko provides us with the services of experienced personnel who successfully managed our assets and operations while they were owned by Anadarko. |
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Ø | Fee-Based. Fee-based arrangements may be used for gathering, compression, treating and processing services. Under these arrangements, the service provider typically receives a fee for each unit of natural gas gathered and compressed at the wellhead and an additional fee per unit of natural gas treated or processed at its facility. As a result, the service provider bears no direct commodity price risk exposure. We provide our gathering, compression and treating services to Anadarko and third-party producers under fee-based arrangements which minimize our direct commodity price exposure. |
Ø | Percent-of-Proceeds, Percent-of-Value or Percent-of-Liquids. Percent-of-proceeds, percent-of-value or percent-of-liquids arrangements may be used for gathering and processing services. Under these arrangements, the service provider typically remits to the producers either a percentage of the proceeds from the sale of residue gasand/or NGLs or a percentage of the actual residue gasand/or NGLs at the tailgate. These types of arrangements expose the processor to commodity price risk, as the revenues from the contracts directly correlate with the fluctuating price of natural gas and NGLs. We do not currently have any percent-of-proceeds, percent-of-value or percent-of-liquids arrangements. |
Ø | Keep-Whole. Keep-whole arrangements may be used for processing services. Under these arrangements, the service provider keeps 100% of the NGLs produced, and the processed natural gas, or value of the gas, is returned to the producer. Since some of the gas is used and removed during processing, the processor compensates the producer for the amount of gas used and removed in processing by supplying additional gas or by paying anagreed-upon value for the gas utilized. These arrangements have the highest commodity price exposure for the processor because the costs are dependent on the price of natural gas and the revenues are based on the price of NGLs. We do not currently have any keep-whole arrangements. |
Ø | Firm. Firm transportation service requires the reservation of pipeline capacity by a customer between certain receipt and delivery points. Firm customers generally pay a “demand” or “capacity reservation” fee based on the amount of capacity being reserved, regardless of whether the capacity is used, plus a usage fee based on the amount of natural gas transported. Firm storage contracts involve the reservation of a specific amount of storage capacity, including injection and withdrawal rights, and generally include a capacity reservation charge based on the amount of capacity being reserved plus an injectionand/or withdrawal fee. |
Ø | Interruptible. Interruptible transportation and storage service is typically short-term in nature and is generally used by customers that either do not need firm service or have been unable to contract for firm service. These customers pay only for the volume of gas actually transported or stored. The obligation to provide this service is limited to available capacity not otherwise used by firm |
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Ø | Dew gathering and Pinnacle gas treating: ETC Texas Pipeline, Ltd., Enbridge Pipelines (East Texas) LP, XTO Energy and Kinder Morgan Tejas Pipeline, LP. |
Ø | Helper and Clawson gathering systems: Questar Transportation Services Company. |
Ø | Hugoton gathering system: ONEOK Gas Gathering Company, DCP Midstream, LP, Pioneer Resources. |
Ø | Haley gathering system: Enterprise GC, LP, Southern Union Energy Services Company. |
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Ø | rates, services, and terms and conditions of service; |
Ø | the types of services MIGC may offer to its customers; |
Ø | the certification and construction of new facilities; |
Ø | the acquisition, extension, disposition or abandonment of facilities; |
Ø | the maintenance of accounts and records; |
Ø | relationships between affiliated companies involved in certain aspects of the natural gas business; |
Ø | the initiation and discontinuation of services; |
Ø | market manipulation in connection with interstate sales, purchases or transportation of natural gas; and |
Ø | participation by interstate pipelines in cash management arrangements. |
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Ø | requiring the installation of pollution-control equipment or otherwise restricting the way we can handle or dispose of our wastes; |
Ø | limiting or prohibiting construction activities in sensitive areas, such as wetlands, coastal regions or areas inhabited by endangered or threatened species; |
Ø | requiring investigatory and remedial actions to mitigate pollution conditions caused by our operations or attributable to former operations; and |
Ø | enjoining the operations of facilities deemed to be in non-compliance with permits issued pursuant to such environmental laws and regulations. |
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Name | Age | Position with Western Gas Holdings, LLC | ||||
Robert G. Gwin | 44 | President, Chief Executive Officer and Director | ||||
Danny J. Rea | 49 | Senior Vice President, Chief Operating Officer and Director | ||||
Michael C. Pearl | 36 | Senior Vice President and Chief Financial Officer | ||||
Amanda M. McMillian | 34 | Vice President, General Counsel and Corporate Secretary | ||||
Jeremy M. Smith | 35 | Vice President and Treasurer | ||||
R.A. Walker | 50 | Chairman of the Board and Director | ||||
Karl F. Kurz | 46 | Director | ||||
Robert K. Reeves | 50 | Director | ||||
Milton Carroll | 57 | Director Nominee | ||||
Anthony R. Chase | 52 | Director Nominee | ||||
James R. Crane | 54 | Director Nominee | ||||
David J. Tudor | 49 | Director Nominee |
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Ø | to align the interests of Anadarko’s executives with those of its shareholders; |
Ø | to attract and retain highly qualified and talented executives to lead Anadarko; and |
Ø | to foster a team approach to achievement of Anadarko’s business objectives. |
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Ø | base salary; |
Ø | bonuses; |
Ø | equity compensation, which may include equity-based compensation under Anadarko’s 1999 Stock Incentive Plan, the Western Gas Partners, LP 2008 Long-Term Incentive Plan and the Western Gas Holdings, LLC Equity Incentive Plan; and |
Ø | Anadarko’s other benefits, including welfare and retirement benefits, perquisites, severance benefits and change of control benefits, plus other benefits on the same basis as other eligible Anadarko employees. |
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Ø | retirement benefits to match competitive practices in Anadarko’s industry, including the Anadarko Employee Savings Plan, Anadarko’s Savings Restoration Plan, and the Anadarko Retirement Plan and Retirement Restoration Plan; |
Ø | severance benefits under the Anadarko Severance Plan or the Anadarko Officer Severance Plan, as applicable; |
Ø | certain change of control benefits under key employee change of control contracts or key manager change of control contracts; |
Ø | director and officer indemnification agreements; |
Ø | a limited number of perquisites, including financial counseling, tax preparation and estate planning, an executive physical program, management disability insurance, and personal excess liability insurance; and |
Ø | medical, dental, vision, flexible spending accounts, life insurance and disability coverage, which are also provided to all other eligibleU.S.-based Anadarko employees. |
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Ø | each person or group of persons known by us to be a beneficial owner of 5% or more of the then outstanding units; |
Ø | each member of and nominee to the board of directors of our general partner; |
Ø | each named executive officer of our general partner; and |
Ø | all directors and officers of our general partner as a group. |
Percentage of | Percentage of | ||||||||||||||
Percentage of | subordinated | total common | |||||||||||||
common units | Subordinated | units | and subordinated | ||||||||||||
Common units | to be | units to be | to be | units to be | |||||||||||
Name and address of | to be | beneficially | beneficially | beneficially | beneficially | ||||||||||
beneficial owner(1) | beneficially owned(2) | owned | owned | owned | owned | ||||||||||
Anadarko Petroleum Corporation(3) | 3,823,925 | 16.9% | 22,573,925 | 100.0% | 58.5% | ||||||||||
WGR Holdings, LLC(3) | 3,823,925 | 16.9% | 22,573,925 | 100.0% | 58.5% | ||||||||||
Robert G. Gwin | — | — | — | — | — | ||||||||||
Danny J. Rea | — | — | — | — | — | ||||||||||
Michael C. Pearl | — | — | — | — | — | ||||||||||
Amanda M. McMillian | — | — | — | — | — | ||||||||||
Jeremy M. Smith | — | — | — | — | — | ||||||||||
R.A. Walker | — | — | — | — | — | ||||||||||
Karl F. Kurz | — | — | — | — | — | ||||||||||
Robert K. Reeves | — | — | — | — | — | ||||||||||
Milton Carroll(4) | — | — | — | — | — | ||||||||||
Anthony R. Chase(4) | — | — | — | — | — | ||||||||||
James R. Crane(4) | — | — | — | — | — | ||||||||||
David J. Tudor(4) | — | — | — | — | — | ||||||||||
All directors, director nominees and executive officers as a group (12 persons)(4) | — | — | — | — | — |
* | Less than 1% | |
(1) | Unless otherwise indicated, the address for all beneficial owners in this table is 1201 Lake Robbins Drive, The Woodlands, Texas 77380. |
(2) | Does not include common units that may be purchased in the directed unit program. Please see “Underwriting—Directed Unit Program.” |
(3) | Anadarko Petroleum Corporation is the ultimate parent company of WGR Holdings, LLC and may, therefore, be deemed to beneficially own the units held by WGR Holdings, LLC. Following this offering, WGR Holdings, LLC will own a 100% interest in our general partner and a 57.3% limited interest in us. |
(4) | Does not include approximately 6,000 phantom units that we expect to be granted to each of Messrs. Carroll, Chase, Crane and Tudor at the close of this offering pursuant to the Western Gas Partners, LP 2008 Incentive Plan. These phantom units |
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will vest 100% on the first anniversary of the date of the grant. Each vested phantom unit will entitle the holder to receive a common unit or, in the discretion of our general partner’s board of directors, cash equal to the fair market value of a common unit. Holders of phantom units are entitled to distribution equivalents on a current basis. Holders of phantom units have no voting rights until such time as the phantom units become vested and common units are issued to such holders. |
Shares | Percentage of | |||||||||||
Shares of | underlying | Total shares of | total shares of | |||||||||
common stock | options | common stock | common stock | |||||||||
Name and address of | owned directly | exercisable | beneficially | beneficially | ||||||||
beneficial owner(1) | or indirectly(2) | within 60 days(2) | owned(2) | owned(2) | ||||||||
Robert G. Gwin(3)(4) | 22,545 | 33,534 | 56,079 | * | ||||||||
Danny J. Rea(3)(4) | 10,456 | 19,251 | 29,707 | * | ||||||||
Michael C. Pearl(4) | 7,342 | 959 | 8,301 | * | ||||||||
Amanda M. McMillian(4) | 4,269 | — | 4,269 | * | ||||||||
Jeremy M. Smith(4) | 8,433 | — | 8,433 | * | ||||||||
R.A. Walker(3)(4) | 64,492 | 69,334 | 133,826 | * | ||||||||
Karl F. Kurz(3)(4) | 62,649 | 59,201 | 121,850 | * | ||||||||
Robert K. Reeves(3)(4) | 41,754 | 136,968 | 178,722 | * | ||||||||
Milton Carroll | — | — | — | — | ||||||||
Anthony R. Chase | — | — | — | — | ||||||||
James R. Crane | — | — | — | — | ||||||||
David J. Tudor | — | — | — | — | ||||||||
All directors, director nominees and executive officers as a group (12 persons)(3)(4) | 221,940 | 319,247 | 541,187 | * |
* | Less than 1% | |
(1) | Unless otherwise indicated, the address for all beneficial owners in this table is 1201 Lake Robbins Drive, The Woodlands, Texas 77380. |
(2) | As of September 30, 2007, there were 466,357,933 shares of Anadarko Petroleum Corporation common stock issued and outstanding. |
(3) | Does not include unvested restricted stock units of Anadarko Petroleum Corporation held by the following directors and executive officers in the amounts indicated: Robert G. Gwin—7,200; Danny J. Rea—3,500; R.A. Walker—20,600; Karl F. Kurz—21,500; Robert K. Reeves—16,800; and a total of 69,600 unvested restricted stock units are held by the directors and executive officers as a group. Restricted stock units typically vest equally over three years beginning on the first anniversary of the date of grant, and upon vesting are payable in Anadarko common stock, subject to applicable tax withholding. Holders of restricted stock units receive dividend equivalents on the units, but do not have voting rights. Generally, a holder will forfeit any unvested restricted units if he or she terminates voluntarily or is terminated for cause prior to the vesting date. Holders of restricted stock units have the ability to defer such awards. |
(4) | Includes unvested shares of restricted common stock of Anadarko Petroleum Corporation held by the following directors and executive officers in the amounts indicated: Robert G. Gwin—12,433; Danny J. Rea—4,132; Michael C. Pearl—6,915; Amanda M. McMillian—3,472; Jeremy M. Smith—4,832; R.A. Walker—37,933; Karl F. Kurz—35,666; Robert K. Reeves—10,799; and a total of 116,182 unvested shares of restricted common stock are held by the directors and executive officers as a group. Restricted stock awards typically vest equally over three years beginning on the first anniversary of the date of grant. Holders of restricted stock receive dividends on the shares and also have voting rights. Generally, a holder of restricted stock will forfeit any unvested restricted shares if he or she terminates voluntarily or is terminated for cause prior to the vesting date. |
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The consideration received by Anadarko and its subsidiaries for the contribution of the assets and liabilities to us | Ø 3,823,925 common units; | |
Ø 22,573,925 subordinated units; | ||
Ø 921,385 general partner units, and | ||
Ø our incentive distribution rights. |
Distributions of available cash to our general partner and its affiliates | We will generally make cash distributions 98.0% to our unitholders pro rata, including Anadarko as the indirect holder of an aggregate 3,823,925 common units and 22,573,925 subordinated units, and 2.0% to our general partner, assuming it makes any capital contributions necessary to maintain its 2.0% interest in us. In addition, if distributions exceed the minimum quarterly distribution and other higher target distribution levels, our general partner will be entitled to increasing percentages of the distributions, up to 50.0% of the distributions above the highest target distribution level. | |
Assuming we have sufficient available cash to pay the full minimum quarterly distribution on all of our outstanding units for four quarters, our general partner and its affiliates would receive an annual distribution of approximately $1.1 million on their general partner units and $31.7 million on their common and subordinated units. | ||
Payments to our general partner and its affiliates | Our general partner and its affiliates will be entitled to reimbursement for all expenses incurred on our behalf, including salaries and employee benefit costs for employees who provide services to us, and all other necessary or |
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appropriate expenses allocable to us or reasonably incurred by our general partner and its affiliates in connection with operating our business. The partnership agreement provides that our general partner will determine in good faith the amount of such expenses that are allocable to us. | ||
Withdrawal or removal of our general partner | If our general partner withdraws or is removed, its general partner interest and its incentive distribution rights will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests. Please read “The partnership agreement—Withdrawal or removal of the general partner.” |
Liquidation | Upon our liquidation, our partners, including our general partner, will be entitled to receive liquidating distributions according to their respective capital account balances. |
Ø | Anadarko’s obligation to indemnify us for certain liabilities and our obligation to indemnify Anadarko for certain liabilities; |
Ø | our obligation to reimburse Anadarko for all expenses incurred or payments made on our behalf in conjunction with Anadarko’s provision of general and administrative services to us, including salary and benefits of Anadarko personnel, our public company expenses, general and administrative expenses and salaries and benefits of our executive management who are employees of Anadarko; and |
Ø | our obligation to reimburse Anadarko for all insurance coverage expenses it incurs or payments it makes with respect to our assets. |
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Estimates for the | |||
twelve months | |||
ending | |||
December 31, | |||
2008 | |||
(in millions) | |||
Reimbursement of general and administrative expenses | $ | 6.0 | |
Reimbursement of public company expenses | $ | 2.5 |
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Ø | approved by the special committee of our general partner, although our general partner is not obligated to seek such approval; |
Ø | approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates; |
Ø | on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or |
Ø | fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us. |
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Ø | provides that our general partner shall not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as such decisions are made in good faith, meaning it believed that the decision was in the best interest of our partnership; |
Ø | provides generally that affiliated transactions and resolutions of conflicts of interest not approved by the special committee of the board of directors of our general partner and not involving a vote of the common unitholders must either be (1) on terms no less favorable to us than those generally provided to or available from unrelated third parties or (2) “fair and reasonable” to us, as determined by our general partner in good faith, provided that, in determining whether a transaction or resolution is “fair and reasonable,” our general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; and |
Ø | provides that our general partner and its officers and directors will not be liable for monetary damages to us, or our limited partners or their assignees resulting from any act or omission unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that our general partner or its officers or directors, as the case may be, acted in bad faith or engaged in fraud or willful misconduct. |
Ø | the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into our securities, and the incurring of any other obligations; |
Ø | the purchase, sale or other acquisition or disposition of our securities, or the issuance of additional options, rights, warrants and appreciation rights relating to our securities; |
Ø | the mortgage, pledge, encumbrance, hypothecation or exchange of any or all of our assets; |
Ø | the negotiation, execution and performance of any contracts, conveyances or other instruments; |
Ø | the distribution of our cash; |
Ø | the selection and dismissal of employees and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; |
Ø | the maintenance of insurance for our benefit and the benefit of our partners; |
Ø | the formation of, or acquisition of an interest in, the contribution of property to, and the making of loans to, any limited or general partnership, joint venture, corporation, limited liability company or other entity; |
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Ø | the control of any matters affecting our rights and obligations, including the bringing and defending of actions at law or in equity, otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense, the settlement of claims and litigation; |
Ø | the indemnification of any person against liabilities and contingencies to the extent permitted by law; |
Ø | the making of tax, regulatory and other filings, or the rendering of periodic or other reports to governmental or other agencies having jurisdiction over our business or assets; and |
Ø | the entering into of agreements with any of its affiliates to render services to us or to itself in the discharge of its duties as our general partner. |
Ø | the amount and timing of asset purchases and sales; |
Ø | cash expenditures; |
Ø | borrowings; |
Ø | the issuance of additional units; and |
Ø | the creation, reduction or increase of reserves in any quarter. |
Ø | enabling our general partner or its affiliates to receive distributions on any subordinated units held by them or the incentive distribution rights; or |
Ø | hastening the expiration of the subordination period. |
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State-law fiduciary duty standards | Fiduciary duties are generally considered to include an obligation to act in good faith and with due care and loyalty. The duty of care, in the absence of a provision in a partnership agreement providing otherwise, would generally require a general partner to act for the partnership in the same manner as a prudent person would act on his own behalf. The duty of loyalty, in the absence of a provision in a partnership agreement providing otherwise, would generally prohibit a general partner of a Delaware limited partnership from taking any action or engaging in any transaction where a conflict of interest is present. | |
The Delaware Act generally provides that a limited partner may institute legal action on behalf of the partnership to recover damages from a third party where a general partner has refused to institute the action or where an effort to cause a general partner to do so is not likely to succeed. In addition, the statutory or case law of some jurisdictions may permit a limited partner to institute legal action on behalf of himself and all other similarly situated limited partners to recover damages from a general partner for violations of its fiduciary duties to the limited partners. | ||
Partnership agreement modified standards | Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement provides that when our general partner is acting in |
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its capacity as our general partner, as opposed to in its individual capacity, it must act in “good faith” and will not be subject to any other standard under applicable law. In addition, when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or the unitholders whatsoever. These standards reduce the obligations to which our general partner would otherwise be held. | ||
In addition to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or their assignees for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that our general partner or its officers and directors acted in bad faith or engaged in fraud or willful misconduct. | ||
Special provisions regarding affiliated transactions. Our partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest that are not approved by a vote of common unitholders and that are not approved by the special committee of the board of directors of our general partner must be on terms no less favorable to us than those generally being provided to, or available from, unrelated third parties; or “fair and reasonable” to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). | ||
If our general partner does not seek approval from the special committee and the board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good faith. In any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which our general partner would otherwise be held. |
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Ø | surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges; |
Ø | special charges for services requested by a common unitholder; and |
Ø | other similar fees or charges. |
Ø | represents that the transferee has the capacity, power and authority to become bound by our partnership agreement; |
Ø | automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and |
Ø | is deemed to have given the consents and approvals contained in our partnership agreement, such as the approval of all transactions and agreements that we are entering into in connection with our formation and this offering. |
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Ø | with regard to distributions of available cash, please read “Provisions of our partnership agreement relating to cash distributions;” |
Ø | with regard to the fiduciary duties of our general partner, please read “Conflicts of interest and fiduciary duties;” |
Ø | with regard to the transfer of common units, please read “Description of the common units—Transfer of common units;” and |
Ø | with regard to allocations of taxable income and taxable loss, please read “Material tax consequences.” |
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Ø | during the subordination period, the approval of a majority of the common units, excluding those common units held by our general partner and its affiliates, and a majority of the subordinated units, voting as separate classes; and |
Ø | after the subordination period, the approval of a majority of the common units and Class B units, if any, voting as a single class. |
Issuance of additional units | No approval right. | |
Amendment of the partnership agreement | Certain amendments may be made by the general partner without the approval of the unitholders. Other amendments generally require the approval of a unit majority. Please read “—Amendment of the partnership agreement.” | |
Merger of our partnership or the sale of all or substantially all of our assets | Unit majority in certain circumstances. Please read “—Merger, consolidation, conversion, sale or other disposition of assets.” | |
Dissolution of our partnership | Unit majority. Please read “—Termination and dissolution.” | |
Continuation of our business upon dissolution | Unit majority. Please read “—Termination and dissolution.” |
Withdrawal of the general partner | Under most circumstances, the approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is required for the withdrawal of our general partner prior to March 31, 2018 in a manner that would cause a dissolution of our partnership. Please read “—Withdrawal or removal of the general partner.” |
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Removal of the general partner | Not less than 662/3% of the outstanding units, voting as a single class, including units held by our general partner and its affiliates. Please read “—Withdrawal or removal of the general partner.” |
Transfer of the general partner interest | Our general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to an affiliate or another person in connection with its merger or consolidation with or into, or sale of all or substantially all of its assets to, such person. The approval of a majority of the common units, excluding common units held by the general partner and its affiliates, is required in other circumstances for a transfer of the general partner interest to a third party prior to March 31, 2018. Please read “—Transfer of general partner units.” |
Transfer of incentive distribution rights | Except for transfers to an affiliate or another person as part of our general partner’s merger or consolidation, sale of all or substantially all of its assets or the sale of all of the ownership interests in such holder, the approval of a majority of the common units, excluding common units held by the general partner and its affiliates, is required in most circumstances for a transfer of the incentive distribution rights to a third party prior to March 31, 2018. Please read “—Transfer of incentive distribution rights.” |
Transfer of ownership interests in our general partner | No approval required at any time. Please read “—Transfer of ownership interests in the general partner.” |
Ø | to remove or replace the general partner; |
Ø | to approve some amendments to the partnership agreement; or |
Ø | to take other action under the partnership agreement; |
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Ø | enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or |
Ø | enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of our general partner, which consent may be given or withheld at its option. |
Ø | a change in our name, the location of our principal place of business, our registered agent or our registered office; |
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Ø | the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement; |
Ø | a change that our general partner determines to be necessary or appropriate to qualify or continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither we nor the operating partnership nor any of its subsidiaries will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; |
Ø | an amendment that is necessary, in the opinion of our counsel, to prevent us or our general partner or its directors, officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940 or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, or ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed; |
Ø | an amendment that our general partner determines to be necessary or appropriate for the authorization of additional partnership securities or the right to acquire partnership securities, including any amendment that our general partner determines is necessary or appropriate in connection with: |
- | the adjustments of the minimum quarterly distribution, first target distribution, second target distribution and third target distribution in connection with the reset of our general partner’s incentive distribution rights as described under “Provisions of our partnership agreement relating to cash distributions—General partner’s right to reset incentive distribution levels,” or | |
- | any modification of the incentive distribution rights made in connection with the issuance of additional partnership securities or rights to acquire partnership securities, provided that, any such modifications and related issuance of partnership securities have received approval by a majority of the members of the special committee of our general partner; |
Ø | any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone; |
Ø | an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our partnership agreement; |
Ø | any amendment that our general partner determines to be necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by our partnership agreement; |
Ø | a change in our fiscal year or taxable year and related changes; |
Ø | conversions into, mergers with or conveyances to another limited liability entity that is newly formed and has no assets, liabilities or operations at the time of the conversion, merger or conveyance other than those it receives by way of the conversion, merger or conveyance; or |
Ø | any other amendments substantially similar to any of the matters described in the clauses above. |
Ø | do not adversely affect the limited partners (or any particular class of limited partners) in any material respect; |
Ø | are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; |
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Ø | are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading; |
Ø | are necessary or appropriate for any action taken by our general partner relating to splits or combinations of units under the provisions of our partnership agreement; or |
Ø | are required to effect the intent expressed in this prospectus or the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement. |
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Ø | the election of our general partner to dissolve us, if approved by the holders of units representing a unit majority; |
Ø | there being no limited partners, unless we are continued without dissolution in accordance with applicable Delaware law; |
Ø | the entry of a decree of judicial dissolution of our partnership; or |
Ø | the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with our partnership agreement or its withdrawal or removal following the approval and admission of a successor. |
Ø | the action would not result in the loss of limited liability of any limited partner; and |
Ø | neither our partnership, our operating partnership nor any of our other subsidiaries would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue. |
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Ø | the subordination period will end, and all outstanding subordinated units will immediately convert into common units on a one-for-one basis; |
Ø | any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and |
Ø | our general partner will have the right to convert its general partner interest and its incentive distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests at that time. |
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Ø | an affiliate of our general partner (other than an individual); or |
Ø | another entity as part of the merger or consolidation of our general partner with or into another entity or the transfer by our general partner of all or substantially all of its assets to another entity, |
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Ø | the subordination period will end and all outstanding subordinated units will immediately convert into common units on a one-for-one basis; |
Ø | any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and |
Ø | our general partner will have the right to convert its general partner units and its incentive distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests at that time. |
Ø | the highest cash price paid by our general partner or any of its affiliates for any limited partner interests of the class purchased within the 90 days preceding the date on which our general partner first mails notice of its election to purchase those limited partner interests; and |
Ø | the current market price as of the date three days before the date the notice is mailed. |
Ø | that the unitholder is an individual or an entity subject to United States federal income taxation on the income generated by us; or |
Ø | that, if the unitholder is an entity not subject to United States federal income taxation on the income generated by us, as in the case, for example, of a mutual fund taxed as a regulated investment company or a partnership, all the entity’s owners are subject to United States federal income taxation on the income generated by us. |
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Ø | the required certification within 30 days after request; or |
Ø | provides a false certification; then |
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Ø | our general partner; |
Ø | any departing general partner; |
Ø | any person who is or was an affiliate of a general partner or any departing general partner; |
Ø | any person who is or was a director, officer, member, partner, fiduciary or trustee of any entity set forth in the preceding three bullet points; |
Ø | any person who is or was serving as director, officer, member, partner, fiduciary or trustee of another person at the request of our general partner or any departing general partner; and |
Ø | any person designated by our general partner. |
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Ø | a current list of the name and last known address of each partner; |
Ø | a copy of our tax returns; |
Ø | information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each partner became a partner; |
Ø | copies of our partnership agreement, our certificate of limited partnership and related amendments and powers of attorney under which they have been executed; |
Ø | information regarding the status of our business and our financial condition; and |
Ø | any other information regarding our affairs as is just and reasonable. |
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Ø | 1% of the total number of the securities outstanding, or |
Ø | the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. |
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161
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162
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Ø | gross income from operations exceeds the amount required to pay the minimum quarterly distributions on all units, yet we only distribute the minimum quarterly distributions on all units; or |
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Ø | we make a future offering of common units and use the proceeds of the offering in a manner that does not produce substantial additional deductions during the period described above, such as to repay indebtedness outstanding at the time of this offering or to acquire property that is not eligible for depreciation or amortization for federal income tax purposes or that is depreciable or amortizable at a rate significantly slower than the rate applicable to our assets at the time of this offering. |
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Ø | interest on indebtedness properly allocable to property held for investment; |
Ø | our interest expense attributed to portfolio income; and |
Ø | the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income. |
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Ø | his relative contributions to us; |
Ø | the interests of all the partners in profits and losses; |
Ø | the interest of all the partners in cash flow; and |
Ø | the rights of all the partners to distributions of capital upon liquidation. |
Ø | any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder; |
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Ø | any cash distributions received by the unitholder as to those units would be fully taxable; and |
Ø | all of these distributions would appear to be ordinary income. |
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169
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170
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Ø | a short sale; |
Ø | an offsetting notional principal contract; or |
Ø | a futures or forward contract with respect to the partnership interest or substantially identical property. |
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173
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174
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Ø | accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at “—Administrative matters—Accuracy-related penalties;” |
Ø | for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductibility of interest on any resulting tax liability; and |
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Ø | in the case of a listed transaction, an extended statute of limitations. |
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Ø | whether the investment is prudent under Section 404(a)(1)(B) of ERISA; |
Ø | whether in making the investment, the plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA; and |
Ø | whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential after-tax investment return. Please read “Material tax consequences—Tax-Exempt organizations and other investors.” |
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Number of | ||||
Underwriters | common units | |||
UBS Securities LLC | ||||
Citigroup Global Markets Inc. | ||||
Credit Suisse Securities (USA) LLC | ||||
Morgan Stanley & Co. Incorporated | ||||
Banc of America Securities LLC | ||||
Goldman, Sachs & Co. | ||||
J.P. Morgan Securities Inc. | ||||
Lehman Brothers Inc. | ||||
Wachovia Capital Markets, LLC | ||||
Scotia Capital (USA) Inc. | ||||
Bear, Stearns & Co. Inc. | ||||
Friedman, Billings, Ramsey & Co., Inc. | ||||
Stifel, Nicolaus & Company, Incorporated | ||||
Total | 18,750,000 | |||
Ø | receipt and acceptance of our common units by the underwriters; |
Ø | the validity of the representations and warranties made to the underwriters; |
Ø | the absence of any material change in the financial markets; |
Ø | our delivery of customary closing documents to the underwriters; and |
Ø | the underwriters’ right to reject orders in whole or in part. |
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No exercise | Full exercise | |||||||
Per Unit | $ | $ | ||||||
Total | $ | $ |
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Ø | stabilizing transactions; |
Ø | short sales; |
Ø | purchases to cover positions created by short sales; |
Ø | imposition of penalty bids; and |
Ø | syndicate covering transactions. |
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Ø | the information set forth in this prospectus and otherwise available to the representatives; |
Ø | our history and prospects, and the history and prospects of the industry in which we compete; |
Ø | our past and present financial performance and an assessment of the directors and officers of our general partner; |
Ø | our prospects for future earnings and cash flow and the present state of our development; |
Ø | the general condition of the securities markets at the time of this offering; |
Ø | the recent market prices of, and demand for, publicly traded common units of generally comparable master limited partnerships; and |
Ø | other factors determined relevant by the underwriters and us. |
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Ø | Affiliates of UBS Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Banc of America Securities, LLC, Goldman, Sachs & Co., J.P. Morgan Securities Inc. and Wachovia Capital Markets, LLC are lenders under Anadarko’s $750 million credit facility, under which we are a co-borrower. In addition, an affiliate of J.P. Morgan Securities Inc. serves as Administrative Agent of this facility; |
Ø | UBS Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Lehman Brothers Inc. and Scotia Capital (USA) Inc. each provided advisory services to Anadarko in connection with the disposition of certain assets during 2007. In addition, Citigroup Global Markets Inc. and Lehman Brothers Inc. also served as structuring advisor to Anadarko in connection with certain joint ventures during 2007. In December 2007, Citigroup Global Markets Inc. provided advisory services to Anadarko in connection with the WGRAH financing; |
Ø | In the ordinary course of its business, Anadarko engages in numerous interest rate and commodity hedging transactions with a variety of counterparties, including affiliates of UBS Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, J.P. Morgan Securities Inc. and Wachovia Capital Markets, LLC; and |
Ø | In April 2007, UBS Securities LLC, Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC served as Co-Advisors and Joint Lead Arrangers of Anadarko’s354-day credit facility. UBS Securities LLC and Credit Suisse Securities (USA) LLC also served as Joint Bookrunning Managers of this facility. In addition, an affiliate of UBS Securities LLC serves as Administrative Agent, and affiliates of Citigroup Global Markets Inc. and Credit Suisse Securities (USA) LLC serve as Co-Syndication Agents, of this facility. Affiliates of UBS Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Goldman, Sachs & Co., Wachovia Capital Markets, LLC and Scotia Capital (USA) Inc. are lenders under this facility. |
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184
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185
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186
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F-1
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Ø | Holdings GP and Holdings LP will contribute the Contributed Assets to the Partnership; |
F-2
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Ø | The Partnership will issue to Holdings GP 921,385 general partner units representing a 2.0% general partner interest in the Partnership and 100% of the Partnership incentive distribution rights, which will entitle Holdings GP to increasing percentages of cash distributions. Please read “Our cash distribution policy and restrictions on distributions,” contained elsewhere in this prospectus; |
Ø | The Partnership will issue 3,823,925 common units and 22,573,925 subordinated units, representing an aggregate 57.3% limited partner interest in the Partnership, to Holdings LP, assuming that the underwriters do not exercise their option to purchase additional common units; |
Ø | The Partnership will issue 18,750,000 common units to the public in connection with this offering, representing a 40.7% limited partner interest; |
Ø | The Partnership will receive gross proceeds of $393.750 million from the issuance and sale of the 18,750,000 common units at an assumed initial offering price of $21.00 per unit; |
Ø | The Partnership will use proceeds from this offering to pay underwriting discounts and a structuring fee totaling $25.594 million and other offering expenses estimated to be $5.0 million; |
Ø | The Partnership will use the remaining $363.156 million of aggregate net proceeds of this offering to (i) make a loan of $337.625 million to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.00%, (ii) reimburse Anadarko for $15.531 million of capital expenditures it incurred with respect to assets contributed to us and (iii) provide $10.0 million for general partnership purposes; |
Ø | The Partnership is a co-borrower under Anadarko’s $750 million credit facility and has up to $100 million of long-term borrowing capacity available to it; |
Ø | The Partnership will enter into a $30 million working capital facility with Anadarko as the lender; |
Ø | The Partnership will enter into an omnibus agreement with Anadarko and Holdings GP pursuant to which, among other things, (i) the Partnership will reimburse Anadarko and Holdings GP for certain expenses incurred on behalf of the Partnership, including expenses for various general and administrative services rendered by Anadarko and Holdings GP to the Partnership, and (ii) the parties will agree to certain indemnification obligations; and |
Ø | Holdings GP will enter into a services and secondment agreement with Anadarko, pursuant to which certain employees of Anadarko will be under the control of and render services to or on behalf of the Partnership. |
F-3
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MIGC | ||||||||||||||||||||||
January 1, | ||||||||||||||||||||||
Western Gas | 2006 | |||||||||||||||||||||
Partners | through | Pro forma | Offering | |||||||||||||||||||
Predecessor | August 23, | adjustments | adjustments | Pro forma | ||||||||||||||||||
historical | 2006 | (see note 2) | Pro forma | (see note 3) | as adjusted | |||||||||||||||||
(in thousands, except unit and per unit data) | ||||||||||||||||||||||
Revenues — affiliates | ||||||||||||||||||||||
Gathering and transportation of natural gas | $ | 65,946 | $ | 7,583 | $ | — | $ | 73,529 | $ | — | $ | 73,529 | ||||||||||
Condensate | 7,440 | — | — | 7,440 | — | 7,440 | ||||||||||||||||
Natural gas and other | 1,327 | 103 | — | 1,430 | — | 1,430 | ||||||||||||||||
Total revenues — affiliates | 74,713 | 7,686 | — | 82,399 | — | 82,399 | ||||||||||||||||
Revenues — third parties | ||||||||||||||||||||||
Gathering and transportation of natural gas | 5,022 | 3,427 | — | 8,449 | — | 8,449 | ||||||||||||||||
Condensate, natural gas and other | 1,417 | 1,039 | — | 2,456 | — | 2,456 | ||||||||||||||||
Total revenues — third parties | 6,439 | 4,466 | — | 10,905 | — | 10,905 | ||||||||||||||||
Total Revenues | 81,152 | 12,152 | — | 93,304 | — | 93,304 | ||||||||||||||||
Operating Expenses — affiliates | ||||||||||||||||||||||
Cost of product | 3,830 | — | — | 3,830 | — | 3,830 | ||||||||||||||||
General and administrative | 3,198 | — | — | 3,198 | — | 3,198 | ||||||||||||||||
Total operating expenses — affiliates | 7,028 | — | — | 7,028 | — | 7,028 | ||||||||||||||||
Operating Expenses — third parties | ||||||||||||||||||||||
Cost of product | 714 | — | — | 714 | — | 714 | ||||||||||||||||
Operation and maintenance | 27,585 | 2,592 | — | 30,177 | — | 30,177 | ||||||||||||||||
General and administrative | — | 1,305 | — | 1,305 | — | 1,305 | ||||||||||||||||
Property and other taxes | 4,633 | — | — | 4,633 | — | 4,633 | ||||||||||||||||
Total operating expenses — third parties | 32,932 | 3,897 | — | 36,829 | — | 36,829 | ||||||||||||||||
Depreciation | 18,009 | 918 | 783 | (a) | 19,710 | — | 19,710 | |||||||||||||||
Total Operating Expenses | 57,969 | 4,815 | 783 | 63,567 | — | 63,567 | ||||||||||||||||
Operating Income | 23,183 | 7,337 | (783 | ) | 29,737 | — | 29,737 | |||||||||||||||
Interest expense (income) — affiliates | 9,631 | (574 | ) | 9,057 | (9,057 | )(a) | (20,030 | ) | ||||||||||||||
(20,258 | )(b) | |||||||||||||||||||||
228 | (c) | |||||||||||||||||||||
Other expense | 26 | 351 | — | 377 | — | 377 | ||||||||||||||||
Income Before Income Taxes | 13,526 | 7,560 | (783 | ) | 20,303 | 29,087 | 49,390 | |||||||||||||||
Income Tax Expense | 3,814 | 2,647 | (245 | )(b) | 6,216 | (5,238 | )(d) | 978 | ||||||||||||||
Net Income | $ | 9,712 | $ | 4,913 | $ | (538 | ) | $ | 14,087 | $ | 34,325 | $ | 48,412 | |||||||||
General partner’s interest in net income | $ | 968 | ||||||||||||||||||||
Common limited partners’ interest in net income | $ | 27,089 | ||||||||||||||||||||
Subordinated limited partners’ interest in net income | $ | 20,355 | ||||||||||||||||||||
Net income per limited partner unit | ||||||||||||||||||||||
Common units (basic and diluted) | $ | 1.20 | ||||||||||||||||||||
Subordinated units (basic and diluted) | $ | 0.90 | ||||||||||||||||||||
Weighted average number of limited partner units outstanding | ||||||||||||||||||||||
Common units (basic and diluted) | 22,573,925 | |||||||||||||||||||||
Subordinated units (basic and diluted) | 22,573,925 | |||||||||||||||||||||
F-4
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Western Gas | |||||||||||
Partners | Offering | Pro forma | |||||||||
Predecessor | adjustments | as | |||||||||
historical | (see note 3) | adjusted | |||||||||
(in thousands except unit and per unit data) | |||||||||||
Revenues — affiliates | |||||||||||
Gathering and transportation of natural gas | $ | 69,311 | $ | — | $ | 69,311 | |||||
Condensate | 6,266 | — | 6,266 | ||||||||
Natural gas and other | 918 | — | 918 | ||||||||
Total revenues — affiliates | 76,495 | — | 76,495 | ||||||||
Revenues — third parties | |||||||||||
Gathering and transportation of natural gas | 6,067 | — | 6,067 | ||||||||
Condensate, natural gas and other | 2,951 | — | 2,951 | ||||||||
Total revenues — third parties | 9,018 | — | 9,018 | ||||||||
Total Revenues | 85,513 | — | 85,513 | ||||||||
Operating Expenses — affiliates | |||||||||||
Cost of product | 4,439 | — | 4,439 | ||||||||
General and administrative | 2,370 | — | 2,370 | ||||||||
Total operating expenses — affiliates | 6,809 | — | 6,809 | ||||||||
Operating Expenses — third parties | |||||||||||
Operation and maintenance | 21,840 | — | 21,840 | ||||||||
General and administrative | 751 | — | 751 | ||||||||
Property and other taxes | 3,784 | — | 3,784 | ||||||||
Total operating expenses — third parties | 26,375 | — | 26,375 | ||||||||
Depreciation | 17,104 | — | 17,104 | ||||||||
Total Operating Expenses | 50,288 | — | 50,288 | ||||||||
Operating Income | 35,225 | — | 35,225 | ||||||||
Interest expense (income) — affiliates | 6,643 | (6,643 | )(a) | (15,022 | ) | ||||||
(15,193 | )(b) | ||||||||||
171 | (c) | ||||||||||
Income Before Income Taxes | 28,582 | 21,665 | 50,247 | ||||||||
Income Tax Expense | 10,469 | (10,309 | )(d) | 160 | |||||||
Net Income | $ | 18,113 | $ | 31,974 | $ | 50,087 | |||||
General partner’s interest in net income | $ | 1,315 | |||||||||
Common limited partners’ interest in net income | $ | 24,386 | |||||||||
Subordinated limited partners’ interest in net income | $ | 24,386 | |||||||||
Net income per limited partner unit | |||||||||||
Common units (basic and diluted) | 1.08 | ||||||||||
Subordinated units (basic and diluted) | 1.08 | ||||||||||
Weighted average number of limited partner units outstanding | |||||||||||
Common units (basic and diluted) | 22,573,925 | ||||||||||
Subordinated units (basic and diluted) | 22,573,925 | ||||||||||
F-5
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Western Gas Partners | Offering | Pro forma | ||||||||||
Predecessor | adjustments | as | ||||||||||
historical | (see note 3) | adjusted | ||||||||||
(in thousands) | ||||||||||||
Current Assets | ||||||||||||
Cash | $ | — | $ | 393,750 | (e) | $ | 10,000 | |||||
(30,594 | )(f) | |||||||||||
(337,625 | )(g) | |||||||||||
(15,531 | )(h) | |||||||||||
Accounts receivable | 1,732 | 1,732 | ||||||||||
Natural gas imbalance receivable — affiliate | 820 | 820 | ||||||||||
Deferred tax asset | 16 | (11 | )(d) | 5 | ||||||||
Total current assets | 2,568 | 9,989 | 12,557 | |||||||||
Other assets | 47 | 47 | ||||||||||
Property, Plant and Equipment | ||||||||||||
Cost | 477,251 | 477,251 | ||||||||||
Less accumulated depreciation | (123,957 | ) | (123,957 | ) | ||||||||
Net property, plant and equipment | 353,294 | 353,294 | ||||||||||
Note Receivable — Affiliate | 337,625 | (g) | 337,625 | |||||||||
Goodwill | 4,783 | 4,783 | ||||||||||
Total Assets | $ | 360,692 | $ | 347,614 | $ | 708,306 | ||||||
Current Liabilities | ||||||||||||
Accounts payable | $ | 1,197 | $ | 1,197 | ||||||||
Natural gas imbalance payables | 453 | 453 | ||||||||||
Accrued ad valorem taxes | 3,498 | 3,498 | ||||||||||
Income taxes payable | 3,406 | (3,247 | )(d) | 159 | ||||||||
Accrued liabilities | 3,128 | 3,128 | ||||||||||
Total current liabilities | 11,682 | (3,247 | ) | 8,435 | ||||||||
Long-term Liabilities | ||||||||||||
Deferred income taxes | 68,176 | (67,193 | )(d) | 983 | ||||||||
Asset retirement obligations | 7,327 | 7,327 | ||||||||||
Total long-term liabilities | 75,503 | (67,193 | ) | 8,310 | ||||||||
Total Liabilities | 87,185 | (70,440 | ) | 16,745 | ||||||||
Partners’ Capital/Parent Net Equity | ||||||||||||
Parent net investment | 273,507 | 70,429 | (d) | |||||||||
(328,405 | )(i) | |||||||||||
(15,531 | )(h) | |||||||||||
Common unitholders — public | 393,750 | (e) | 363,156 | |||||||||
(30,594 | )(f) | |||||||||||
Common unitholders — affiliate | 45,967 | (i) | 45,967 | |||||||||
Subordinated unitholders — affiliate | 271,362 | (i) | 271,362 | |||||||||
General partner interest | 11,076 | (i) | 11,076 | |||||||||
Total Partners’ Capital/Parent Net Equity | 273,507 | 418,054 | 691,561 | |||||||||
Commitments and Contingencies | — | — | ||||||||||
Total Liabilities and Parent Net Equity | $ | 360,692 | $ | 347,614 | $ | 708,306 | ||||||
F-6
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F-7
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Ø | $45.967 million for 3,823,925 common units; |
Ø | $271.362 million for 22,573,925 subordinated units; and |
Ø | $11.076 million for 921,385 general partner units. |
F-8
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F-9
Table of Contents
F-10
Table of Contents
Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in thousands) | ||||||||||||
Revenues — affiliates | ||||||||||||
Gathering and transportation of natural gas | $ | 65,946 | $ | 58,363 | $ | 54,407 | ||||||
Condensate | 7,440 | 7,006 | 6,407 | |||||||||
Natural gas and other | 1,327 | 789 | 4,526 | |||||||||
Total revenues — affiliates | 74,713 | 66,158 | 65,340 | |||||||||
Revenues — third parties | ||||||||||||
Gathering and transportation of natural gas | 5,022 | 2,420 | 1,458 | |||||||||
Condensate, natural gas and other | 1,417 | 3,072 | 1,251 | |||||||||
Total revenues — third parties | 6,439 | 5,492 | 2,709 | |||||||||
Total Revenues | 81,152 | 71,650 | 68,049 | |||||||||
Operating Expenses — affiliates | ||||||||||||
Cost of product | 3,830 | 5,551 | 4,425 | |||||||||
General and administrative | 3,198 | 2,829 | 2,251 | |||||||||
Total operating expenses — affiliates | 7,028 | 8,380 | 6,676 | |||||||||
Operating Expenses — third parties | ||||||||||||
Cost of product | 714 | 456 | 553 | |||||||||
Operation and maintenance | 27,585 | 23,044 | 20,678 | |||||||||
General and administrative | — | 9 | 48 | |||||||||
Property and other taxes | 4,633 | 3,831 | 3,346 | |||||||||
Total operating expenses — third parties | 32,932 | 27,340 | 24,625 | |||||||||
Depreciation | 18,009 | 15,447 | 14,841 | |||||||||
Total Operating Expenses | 57,969 | 51,167 | 46,142 | |||||||||
Operating Income | 23,183 | 20,483 | 21,907 | |||||||||
Interest expense — affiliates | 9,631 | 8,650 | 7,146 | |||||||||
Other income (expense) | (26 | ) | 66 | — | ||||||||
Income Before Income Taxes | 13,526 | 11,899 | 14,761 | |||||||||
Income Tax Expense | 3,814 | 4,789 | 5,504 | |||||||||
Net Income | $ | 9,712 | $ | 7,110 | $ | 9,257 | ||||||
F-11
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December 31, | ||||||||
2006 | 2005 | |||||||
(in thousands) | ||||||||
Current Assets | ||||||||
Cash | $ | 458 | $ | 4 | ||||
Accounts receivable | 817 | 872 | ||||||
Natural gas imbalance receivables | 673 | 798 | ||||||
Deferred tax asset | 14,569 | 4,248 | ||||||
Total current assets | 16,517 | 5,922 | ||||||
Other assets | 57 | — | ||||||
Property, Plant and Equipment | ||||||||
Cost | 417,951 | 289,936 | ||||||
Less accumulated depreciation | (107,080 | ) | (89,485 | ) | ||||
Net property, plant and equipment | 310,871 | 200,451 | ||||||
Goodwill | 4,783 | — | ||||||
Total Assets | $ | 332,228 | $ | 206,373 | ||||
Current Liabilities | ||||||||
Accounts payable | $ | 4,581 | $ | 5,706 | ||||
Natural gas imbalance payables | 2,365 | 235 | ||||||
Accrued ad valorem taxes | 975 | 770 | ||||||
Accrued liabilities | 3,297 | 1,413 | ||||||
Total current liabilities | 11,218 | 8,124 | ||||||
Long-term Liabilities | ||||||||
Deferred income taxes | 75,665 | 36,741 | ||||||
Asset retirement obligations | 6,814 | 923 | ||||||
Total long-term liabilities | 82,479 | 37,664 | ||||||
Total Liabilities | 93,697 | 45,788 | ||||||
Parent Net Equity | 238,531 | 160,585 | ||||||
Commitments and Contingencies(see Note 11) | — | — | ||||||
Total Liabilities and Parent Net Equity | $ | 332,228 | $ | 206,373 | ||||
F-12
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Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in thousands) | ||||||||||||
Cash Flow from Operating Activities | ||||||||||||
Net income | $ | 9,712 | $ | 7,110 | $ | 9,257 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation | 18,009 | 15,447 | 14,841 | |||||||||
Deferred income taxes | 3,814 | 4,789 | 5,504 | |||||||||
Changes in assets and liabilities: | ||||||||||||
(Increase) decrease in accounts receivable | 374 | (662 | ) | 933 | ||||||||
Increase (decrease) in accounts payable and accrued expenses | (4,556 | ) | 3,373 | (551 | ) | |||||||
Increase (decrease) in other items, net | (30 | ) | 74 | 1,176 | ||||||||
Cash provided by operating activities | 27,323 | 30,131 | 31,160 | |||||||||
Cash Flow from Investing Activities | ||||||||||||
Capital expenditures, net | (42,299 | ) | (20,841 | ) | (16,548 | ) | ||||||
Other investing activities | (414 | ) | (235 | ) | — | |||||||
Cash used in investing activities | (42,713 | ) | (21,076 | ) | (16,548 | ) | ||||||
Cash Flow from Financing Activities | ||||||||||||
Increase (decrease) in parent net equity (see Note 5) | 15,844 | (9,067 | ) | (14,596 | ) | |||||||
Cash provided by (used in) financing activities | 15,844 | (9,067 | ) | (14,596 | ) | |||||||
Net Increase (Decrease) in Cash | 454 | (12 | ) | 16 | ||||||||
Cash at Beginning of Year | 4 | 16 | — | |||||||||
Cash at End of Year | $ | 458 | $ | 4 | $ | 16 | ||||||
Supplemental Disclosures | ||||||||||||
Significant non-cash investing and financing transactions: | ||||||||||||
Acquisition, net of cash received | $ | 52,390 | $ | — | $ | — |
F-13
Table of Contents
Parent net | ||||
equity | ||||
(in thousands) | ||||
Balance, January 1, 2004 | $ | 167,881 | ||
Net income | 9,257 | |||
Net advance to parent | (14,596 | ) | ||
Balance, December 31, 2004 | 162,542 | |||
Net income | 7,110 | |||
Net advance to parent | (9,067 | ) | ||
Balance, December 31, 2005 | 160,585 | |||
Net income | 9,712 | |||
Net advance from parent | 15,844 | |||
Investment by parent | 52,390 | |||
Balance, December 31, 2006 | $ | 238,531 | ||
F-14
Table of Contents
1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
Ø | business services, such as payroll, accounts payable and facilities management; |
Ø | corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; |
Ø | executive compensation, but not including share-based compensation; and |
Ø | pension and other post-retirement benefit costs. |
F-15
Table of Contents
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-16
Table of Contents
F-17
Table of Contents
F-18
Table of Contents
3. | ACQUISITION |
Allocation of | ||||
purchase price | ||||
(in thousands) | ||||
Current assets | $ | 193 | ||
Other assets | 27 | |||
Property, plant, and equipment | 79,273 | |||
Goodwill | 4,783 | |||
Current liabilities | (5,813 | ) | ||
Deferred income taxes | (24,790 | ) | ||
Asset retirement obligations | (1,283 | ) | ||
Total purchase price | $ | 52,390 | ||
F-19
Table of Contents
Years ended December 31, | ||||||
2006 | 2005 | |||||
(in thousands) | ||||||
Revenues | $ | 93,304 | $ | 88,809 | ||
Operating income | $ | 29,737 | $ | 27,533 | ||
Net income | $ | 14,087 | $ | 11,497 |
4. | GOODWILL |
5. | TRANSACTIONS WITH AFFILIATES |
F-20
Table of Contents
Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in thousands) | ||||||||||||
Revenues — affiliates | $ | (74,713 | ) | $ | (66,158 | ) | $ | (65,340 | ) | |||
Operating expense — affiliates | 7,028 | 8,380 | 6,676 | |||||||||
Interest expense — affiliates | 9,631 | 8,650 | 7,146 | |||||||||
Affiliate transactions | (58,054 | ) | (49,128 | ) | (51,518 | ) | ||||||
�� | ||||||||||||
Cash used in investing activities | 42,713 | 21,076 | 16,548 | |||||||||
Other third-party payments | 31,185 | 18,985 | 20,374 | |||||||||
Third-party transactions | 73,898 | 40,061 | 36,922 | |||||||||
Net advance from (to) parent | $ | 15,844 | $ | (9,067 | ) | $ | (14,596 | ) | ||||
6. | INCOME TAXES |
Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in thousands) | ||||||||||||
Current income taxes | ||||||||||||
Federal | $ | — | $ | — | $ | — | ||||||
State | — | — | — | |||||||||
Total current income taxes | — | — | — | |||||||||
Deferred income taxes | ||||||||||||
Federal | 5,237 | 3,823 | 4,985 | |||||||||
State | (1,423 | ) | 966 | 519 | ||||||||
Total deferred income taxes | 3,814 | 4,789 | 5,504 | |||||||||
Total income tax expense | $ | 3,814 | $ | 4,789 | $ | 5,504 | ||||||
F-21
Table of Contents
Years ended December 31, | ||||||||||||
2006 | 2005 | 2004 | ||||||||||
(in thousands) | ||||||||||||
Income before income taxes | $ | 13,526 | $ | 11,899 | $ | 14,761 | ||||||
Income tax expense, computed at the statutory rate of 35% | 4,734 | 4,165 | 5,166 | |||||||||
Adjustments resulting from: | ||||||||||||
State income tax, net of federal income tax effect | 179 | 628 | 337 | |||||||||
Texas law change, net of federal income tax effect | (1,104 | ) | — | — | ||||||||
Other items | 5 | (4 | ) | 1 | ||||||||
Total income tax expense | $ | 3,814 | $ | 4,789 | $ | 5,504 | ||||||
Effective tax rate | 28.20 | % | 40.25 | % | 37.29 | % | ||||||
December 31, | ||||||||
2006 | 2005 | |||||||
(in thousands) | ||||||||
Net operating loss and credit carryforwards | $ | 14,569 | $ | 4,248 | ||||
Net current deferred income tax assets | 14,569 | 4,248 | ||||||
Depreciable properties | (75,887 | ) | (53,055 | ) | ||||
Net operating loss carryforward | 222 | 16,314 | ||||||
Net long-term deferred income tax liabilities | (75,665 | ) | (36,741 | ) | ||||
Total net deferred income tax liabilities | $ | (61,096 | ) | $ | (32,493 | ) | ||
Net operating loss — federal | $ | 40,527 statutory expiration 2022-2024 | ||||||
Net operating loss — state | $ | 22,602 statutory expiration 2013-2014 | ||||||
State credit | $ | 14 statutory expiration 2027 |
F-22
Table of Contents
7. | CONCENTRATION OF CREDIT RISK |
Years ended December 31, | ||||||||||||
Customer | 2006 | 2005 | 2004 | |||||||||
Anadarko | 92 | % | 92 | % | 96 | % | ||||||
Other | 8 | % | 8 | % | 4 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
8. | PROPERTY, PLANT AND EQUIPMENT |
Estimated | December 31, | |||||||||
useful life | 2006 | 2005 | ||||||||
(in thousands, except for estimated useful life) | ||||||||||
Land | n/a | $ | 229 | $ | 229 | |||||
Gathering systems | 15 to 25 years | 312,514 | 277,495 | |||||||
Pipeline and equipment | 30 years | 79,956 | — | |||||||
Compressor improvements | 7 years | 9,615 | 9,615 | |||||||
Assets under construction | n/a | 12,613 | — | |||||||
Other | 5 to 25 years | 3,024 | 2,597 | |||||||
Total property, plant and equipment | 417,951 | 289,936 | ||||||||
Accumulated depreciation | (107,080 | ) | (89,485 | ) | ||||||
Total net property, plant and equipment | $ | 310,871 | $ | 200,451 | ||||||
F-23
Table of Contents
9. | ASSET RETIREMENT OBLIGATIONS |
2006 | 2005 | |||||||
(in thousands) | ||||||||
Carrying amount of asset retirement obligations at beginning of year | �� | $ | 923 | $ | 970 | |||
Additions | 55 | 2 | ||||||
Liabilities assumed with MIGC acquisition | 1,283 | — | ||||||
Accretion expense | 197 | 62 | ||||||
Revisions in estimated liabilities: | ||||||||
Increase in cost escalation assumption | 2,331 | — | ||||||
Change in other estimates | 2,025 | (111 | ) | |||||
Carrying amount of asset retirement obligations at end of year | $ | 6,814 | $ | 923 | ||||
10. | SEGMENT INFORMATION |
11. | COMMITMENTS AND CONTINGENCIES |
F-24
Table of Contents
Minimum | |||
rental | |||
payments | |||
(in thousands) | |||
2007 | $ | 3,123 | |
2008 | 2,050 | ||
2009 | 2,127 | ||
2010 | 2,132 | ||
2011 | 2,145 | ||
Thereafter | 1,782 | ||
Total | $ | 13,359 | |
12. | PENSION PLANS, OTHER POSTRETIREMENT AND EMPLOYEE SAVINGS PLANS |
F-25
Table of Contents
Nine months ended September 30, | ||||||||
2007 | 2006 | |||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
Revenues — affiliates | ||||||||
Gathering and transportation of natural gas | $ | 69,311 | $ | 46,546 | ||||
Condensate | 6,266 | 5,374 | ||||||
Natural gas and other | 918 | 324 | ||||||
Total revenues—affiliates | 76,495 | 52,244 | ||||||
Revenues — third parties | ||||||||
Gathering and transportation of natural gas | 6,067 | 3,660 | ||||||
Condensate, natural gas and other | 2,951 | 1,577 | ||||||
Total revenues — third parties | 9,018 | 5,237 | ||||||
Total Revenues | 85,513 | 57,481 | ||||||
Operating Expenses — affiliates | ||||||||
Cost of product | 4,439 | 4,196 | ||||||
General and administrative | 2,370 | 2,394 | ||||||
Total operating expenses — affiliates | 6,809 | 6,590 | ||||||
Operating Expenses — third parties | ||||||||
Operation and maintenance | 21,840 | 18,598 | ||||||
General and administrative | 751 | 204 | ||||||
Property and other taxes | 3,784 | 3,665 | ||||||
Total operating expenses — third parties | 26,375 | 22,467 | ||||||
Depreciation | 17,104 | 12,635 | ||||||
Total Operating Expenses | 50,288 | 41,692 | ||||||
Operating Income | 35,225 | 15,789 | ||||||
Interest expense — affiliates | 6,643 | 7,943 | ||||||
Other expense | — | 25 | ||||||
Income Before Income Taxes | 28,582 | 7,821 | ||||||
Income Tax Expense (Benefit) | 10,469 | 1,740 | ||||||
Net Income | $ | 18,113 | $ | 6,081 | ||||
F-26
Table of Contents
September 30, | December 31, | |||||||
2007 | 2006 | |||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
Current Assets | ||||||||
Cash | $ | — | $ | 458 | ||||
Accounts receivable | 1,732 | 817 | ||||||
Natural gas imbalance receivables | 820 | 673 | ||||||
Deferred tax asset | 16 | 14,569 | ||||||
Total current assets | 2,568 | 16,517 | ||||||
Other assets | 47 | 57 | ||||||
Property, Plant and Equipment | ||||||||
Cost | 477,251 | 417,951 | ||||||
Less accumulated depreciation | (123,957 | ) | (107,080 | ) | ||||
Net property, plant and equipment | 353,294 | 310,871 | ||||||
Goodwill | 4,783 | 4,783 | ||||||
Total Assets | $ | 360,692 | $ | 332,228 | ||||
Current Liabilities | ||||||||
Accounts payable | $ | 1,197 | $ | 4,581 | ||||
Natural gas imbalance payables | 453 | 2,365 | ||||||
Accrued ad valorem taxes | 3,498 | 975 | ||||||
Income taxes payable | 3,406 | — | ||||||
Accrued liabilities | 3,128 | 3,297 | ||||||
Total current liabilities | 11,682 | 11,218 | ||||||
Long-term Liabilities | ||||||||
Deferred income taxes | 68,176 | 75,665 | ||||||
Asset retirement obligations | 7,327 | 6,814 | ||||||
Total long-term liabilities | 75,503 | 82,479 | ||||||
Total Liabilities | 87,185 | 93,697 | ||||||
Parent Net Equity | 273,507 | 238,531 | ||||||
Commitments and Contingencies (see Note 6) | — | — | ||||||
Total Liabilities and Parent Net Equity | $ | 360,692 | $ | 332,228 | ||||
F-27
Table of Contents
Nine months ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
(unaudited) | ||||||||
(in thousands) | ||||||||
Cash Flow from Operating Activities | ||||||||
Net income | $ | 18,113 | $ | 6,081 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 17,104 | 12,635 | ||||||
Deferred income taxes | 7,063 | 1,740 | ||||||
Changes in assets and liabilities: | ||||||||
(Increase) in accounts receivable | (915 | ) | (1,160 | ) | ||||
(Increase) in natural gas imbalance receivable | (147 | ) | (250 | ) | ||||
Increase (decrease) in accounts payable and accrued expenses | 580 | (6,015 | ) | |||||
(Increase) decrease in other items, net | 12 | (90 | ) | |||||
Cash provided by operating activities | 41,810 | 12,941 | ||||||
Cash Flow used in Investing Activities | ||||||||
Capital expenditures, net | (37,020 | ) | (27,709 | ) | ||||
Other investing activities | (227 | ) | (243 | ) | ||||
Cash used in investing activities | (37,247 | ) | (27,952 | ) | ||||
Cash Flow from Financing Activities | ||||||||
Increase (decrease) in parent investment | (5,021 | ) | 15,007 | |||||
Cash flow provided by (used in) financing activities | (5,021 | ) | 15,007 | |||||
Net Decrease in Cash | (458 | ) | (4 | ) | ||||
Cash at Beginning of Year | 458 | 4 | ||||||
Cash at End of Period | $ | — | $ | — | ||||
Supplemental Disclosures: | ||||||||
Significant non-cash investing and financing transactions: | ||||||||
Property, plant and equipment contributed by parent | $ | 21,884 | $ | — | ||||
Acquisition, net of cash received | $ | — | $ | 52,390 |
F-28
Table of Contents
Parent net | ||||
equity | ||||
(unaudited) | ||||
(in thousands) | ||||
Balance, December 31, 2005 | $ | 160,585 | ||
Net income | 6,081 | |||
Net advance from parent | 15,007 | |||
Investment by parent | 52,390 | |||
Balance, September 30, 2006 | $ | 234,063 | ||
Balance, December 31, 2006 | $ | 238,531 | ||
Net income | 18,113 | |||
Net advance from parent | (5,021 | ) | ||
Investment by parent | 21,884 | |||
Balance, September 30, 2007 | $ | 273,507 | ||
F-29
Table of Contents
1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
Ø | business services, such as payroll, accounts payable and facilities management; |
Ø | corporate services, such as finance and accounting, legal, human resources, investor relations and public and regulatory policy; |
Ø | allocation of executive compensation, but not including share-based compensation; and |
Ø | pension and other post-retirement benefit costs. |
F-30
Table of Contents
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-31
Table of Contents
3. | ACQUISITION |
Allocation of | ||||
purchase price | ||||
(in thousands) | ||||
Current assets | 193 | |||
Other assets | 27 | |||
Property and equipment | 79,273 | |||
Goodwill | 4,783 | |||
Current liabilities | (5,813 | ) | ||
Deferred income taxes | (24,790 | ) | ||
Asset retirement obligations | (1,283 | ) | ||
Total purchase price | $ | 52,390 | ||
Nine months | |||
ended | |||
September 30, | |||
2006 | |||
(in thousands) | |||
Revenues | $ | 69,633 | |
Operating income | $ | 22,343 | |
Net income | $ | 10,456 |
F-32
Table of Contents
4. | GOODWILL |
5. | TRANSACTIONS WITH AFFILIATES |
F-33
Table of Contents
Nine months ended | ||||||||
September 30, | ||||||||
2007 | 2006 | |||||||
(in thousands) | ||||||||
Revenues — affiliates | $ | (76,495 | ) | $ | (52,244 | ) | ||
Operating expense — affiliates | 6,809 | 6,590 | ||||||
Interest expense — affiliates | 6,643 | 7,943 | ||||||
Affiliate transactions | (63,043 | ) | (37,711 | ) | ||||
Cash used in investing activities | 37,247 | 27,952 | ||||||
Other third-party payments | 20,775 | 24,766 | ||||||
Third-party transactions | 58,022 | 52,718 | ||||||
Net advance from (to) parent | $ | (5,021 | ) | $ | 15,007 | |||
6. | COMMITMENTS AND CONTINGENCIES |
F-34
Table of Contents
F-35
Table of Contents
January 1, | ||||||||
2006 | For the | |||||||
through | year ended | |||||||
August 23, | December 31, | |||||||
2006 | 2005 | |||||||
(in thousands) | ||||||||
Revenues | ||||||||
Transportation of natural gas — affiliates | $ | 7,583 | $ | 11,887 | ||||
Transportation of natural gas — third parties | 3,427 | 5,111 | ||||||
Sale of natural gas — third parties | 1,039 | — | ||||||
Other — affiliates | 103 | 161 | ||||||
Total revenues | 12,152 | 17,159 | ||||||
Operating expenses — third parties | ||||||||
Cost of product | — | 703 | ||||||
Operation and maintenance | 2,592 | 5,517 | ||||||
General and administrative | 1,305 | 1,247 | ||||||
Depreciation | 918 | 631 | ||||||
Total operating expenses | 4,815 | 8,098 | ||||||
Operating Income | 7,337 | 9,061 | ||||||
Interest (income) — affiliates | (574 | ) | (526 | ) | ||||
Other expense | 351 | 986 | ||||||
Income Before Income Taxes | 7,560 | 8,601 | ||||||
Income Tax Expense | 2,647 | 3,011 | ||||||
Net Income | $ | 4,913 | $ | 5,590 | ||||
F-36
Table of Contents
December 31, | ||||
2005 | ||||
(in thousands) | ||||
Current Assets | ||||
Cash | $ | — | ||
Accounts receivable | 523 | |||
Accounts receivable — affiliates | 42,659 | |||
Total current assets | 43,182 | |||
Other assets | 81 | |||
Property, Plant and Equipment | ||||
Cost | 46,121 | |||
Less accumulated depreciation | (17,389 | ) | ||
Net property, plant and equipment | 28,732 | |||
Total Assets | $ | 71,995 | ||
Current Liabilities | ||||
Accounts payable | $ | 58 | ||
Natural gas imbalance payables | 1,944 | |||
Natural gas imbalance payable — affiliates | 846 | |||
Accrued ad valorem taxes | 318 | |||
Income taxes payable | 3,118 | |||
Accrued expenses — other | 61 | |||
Total current liabilities | 6,345 | |||
Long-term Liabilities | ||||
Deferred income taxes | 3,643 | |||
Asset retirement obligations | 1,233 | |||
Total long-term liabilities | 4,876 | |||
Total Liabilities | 11,221 | |||
Parent Net Equity | 60,774 | |||
Commitments and Contingencies(see Note 8) | — | |||
Total Liabilities and Parent Net Equity | $ | 71,995 | ||
F-37
Table of Contents
January 1, | ||||||||
2006 | For the year | |||||||
through | ended | |||||||
August 23, | December 31, | |||||||
2006 | 2005 | |||||||
(in thousands) | ||||||||
Cash Flow from Operating Activities | ||||||||
Net income | $ | 4,913 | $ | 5,590 | ||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
Depreciation | 918 | 631 | ||||||
Deferred income taxes | (67 | ) | (107 | ) | ||||
Changes in assets and liabilities: | ||||||||
Decrease in accounts receivable | 329 | 354 | ||||||
Increase in accounts receivable — affiliates | (6,206 | ) | (14,749 | ) | ||||
Increase in accounts payable and accrued expenses | 252 | 1,824 | ||||||
Increase (decrease) in natural gas imbalances — affiliates | (784 | ) | 846 | |||||
Increase in other items, net | 104 | 17 | ||||||
Net cash used in operating activities | (541 | ) | (5,594 | ) | ||||
Cash Flow from Investing Activities | ||||||||
Retirements of property, plant and equipment, net | 541 | 5,594 | ||||||
Cash provided by investing activities | 541 | 5,594 | ||||||
Cash Flow from Financing Activities | — | — | ||||||
Net Change in Cash | — | — | ||||||
Cash at Beginning of Period | — | — | ||||||
Cash at End of Period | $ | — | $ | — | ||||
F-38
Table of Contents
Parent net | |||
equity | |||
(in thousands) | |||
Balance, January 1, 2005 | $ | 55,184 | |
Net income | 5,590 | ||
Balance, December 31, 2005 | 60,774 | ||
Net income | 4,913 | ||
Balance, August 23, 2006 | $ | 65,687 | |
F-39
Table of Contents
1. | DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION |
Ø | business services, such as payroll, accounts payable and facilities management; and |
Ø | corporate services, such as finance and accounting, legal, human resources, investor relations, public and regulatory policy and senior executives. |
F-40
Table of Contents
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
F-41
Table of Contents
F-42
Table of Contents
3. | TRANSACTIONS WITH AFFILIATES |
4. | INCOME TAXES |
January 1, | ||||||||
2006 | ||||||||
through | Year ended | |||||||
August 23, | December 31, | |||||||
2006 | 2005 | |||||||
(in thousands) | ||||||||
Current income taxes | ||||||||
Federal | $ | 2,714 | $ | 3,118 | ||||
Total current income taxes | 2,714 | 3,118 | ||||||
Deferred income taxes | ||||||||
Federal | (67 | ) | (107 | ) | ||||
Total deferred income taxes | (67 | ) | (107 | ) | ||||
Total income tax expense | $ | 2,647 | $ | 3,011 | ||||
F-43
Table of Contents
January 1, | ||||||||
2006 | ||||||||
through | Year ended | |||||||
August 23, | December 31, | |||||||
2006 | 2005 | |||||||
(in thousands) | ||||||||
Income before income taxes | $ | 7,560 | $ | 8,601 | ||||
Income tax expense, computed at the statutory rate of 35% | 2,646 | 3,010 | ||||||
Adjustments resulting from: | ||||||||
Other items | 1 | 1 | ||||||
Total income tax expense | $ | 2,647 | $ | 3,011 | ||||
Effective tax rate | 35.01 | % | 35.01 | % | ||||
December 31, | ||||
2005 | ||||
(in thousands) | ||||
Depreciable properties | $ | (3,643 | ) | |
Total deferred income tax liability | $ | (3,643 | ) | |
5. | CONCENTRATION OF CREDIT RISK |
Percent of revenues | ||||||
January 1, | ||||||
2006 | ||||||
through | Year ended | |||||
August 23, | December 31, | |||||
Customer | 2006 | 2005 | ||||
Western | 63% | 70% | ||||
Williams Production RMT Company | 27% | 30% | ||||
Other | 10% | —% | ||||
Total | 100% | 100% | ||||
F-44
Table of Contents
6. | PROPERTY, PLANT AND EQUIPMENT |
Estimated | |||||||
useful life | December 31, | ||||||
(years) | 2005 | ||||||
(in thousands, except for estimated useful life) | |||||||
Pipeline and equipment | 33 to 49 | $ | 45,651 | ||||
General plant and other | 3 to 10 | 470 | |||||
Total property, plant and equipment | 46,121 | ||||||
Total accumulated depreciation | (17,389 | ) | |||||
Total net property, plant and equipment | $ | 28,732 | |||||
7. | ASSET RETIREMENT OBLIGATIONS |
Year ended | ||||
December 31, | ||||
2005 | ||||
(in thousands) | ||||
Carrying amount of asset retirement obligations at beginning of year | $ | 1,204 | ||
Liabilities transferred | (45 | ) | ||
Accretion expense | 74 | |||
Carrying amount of asset retirement obligations at end of year | $ | 1,233 | ||
F-45
Table of Contents
8. | COMMITMENTS AND CONTINGENCIES |
Obligations by Period | |||||||||||||||
2-3 | 4-5 | Later | |||||||||||||
1 Year | Years | Years | Years | Total | |||||||||||
(in thousands) | |||||||||||||||
Operating leases | $ | 170 | $ | 120 | $ | — | $ | — | $ | 290 | |||||
Transportation agreements | 5,678 | 3,782 | — | — | 9,460 | ||||||||||
$ | 5,848 | $ | 3,902 | $ | — | $ | — | $ | 9,750 | ||||||
F-46
Table of Contents
F-47
Table of Contents
August 21, 2007 | ||||
Assets | ||||
Total Assets | $ | — | ||
Partners’ Equity | ||||
Limited partner equity | $ | 2,940 | ||
General partner equity | 60 | |||
Less receivables from WGR Asset Holding Company, LLC and Western Gas Holdings, LLC | (3,000 | ) | ||
Total Partners’ Equity | $ | — | ||
F-48
Table of Contents
1. | NATURE OF OPERATIONS |
F-49
Table of Contents
F-50
Table of Contents
August 21, 2007 | ||||
Assets | ||||
Investment in Western Gas Partners, LP | $ | 60 | ||
Total Assets | $ | 60 | ||
Liabilities and Member’s Equity | ||||
Payable to Western Gas Partners, LP | $ | 60 | ||
Member’s Equity | ||||
Member equity | 1,000 | |||
Less receivable from WGR Asset Holding Company, LLC | (1,000 | ) | ||
Total member equity | — | |||
Total Liabilities and Member’s Equity | $ | 60 | ||
F-51
Table of Contents
1. | NATURE OF OPERATIONS |
F-52
Table of Contents
A-1
Table of Contents
ARTICLE I | ||||||||
DEFINITIONS | ||||||||
Section 1.1 | Definitions | A- 5 | ||||||
Section 1.2 | Construction | A-24 | ||||||
ARTICLE II | ||||||||
ORGANIZATION | ||||||||
Section 2.1 | Formation | A-25 | ||||||
Section 2.2 | Name | A-25 | ||||||
Section 2.3 | Registered office; registered agent; Principal office; other offices | A-25 | ||||||
Section 2.4 | Purpose and business | A-25 | ||||||
Section 2.5 | Powers | A-26 | ||||||
Section 2.6 | Power of attorney | A-26 | ||||||
Section 2.7 | Term | A-27 | ||||||
Section 2.8 | Title to partnership assets | A-27 | ||||||
ARTICLE III | ||||||||
RIGHTS OF LIMITED PARTNERS | ||||||||
Section 3.1 | Limitation of liability | A-28 | ||||||
Section 3.2 | management of business | A-28 | ||||||
Section 3.3 | Outside activities of the limited partners | A-28 | ||||||
Section 3.4 | Rights of limited partners | A-28 | ||||||
ARTICLE IV | ||||||||
CERTIFICATES; RECORD HOLDERS; TRANSFER OF PARTNERSHIP INTERESTS; REDEMPTION OF PARTNERSHIP INTERESTS | ||||||||
Section 4.1 | Certificates | A-29 | ||||||
Section 4.2 | Mutilated, destroyed, lost or stolen certificates | A-29 | ||||||
Section 4.3 | Record holders | A-30 | ||||||
Section 4.4 | Transfer generally | A-31 | ||||||
Section 4.5 | Registration and transfer of limited partner interests | A-31 | ||||||
Section 4.6 | Transfer of the general partner’s general partner interest | A-32 | ||||||
Section 4.7 | Transfer of incentive distribution rights | A-32 | ||||||
Section 4.8 | Restrictions on transfers | A-33 | ||||||
Section 4.9 | Citizenship certificates; non-citizen assignees | A-34 | ||||||
Section 4.10 | Redemption of partnership interests of non-citizen assignees | A-34 | ||||||
Section 4.11 | Taxation certifications; ineligible assignees | A-35 | ||||||
Section 4.12 | Redemption of partnership interests of ineligible assignees | A-36 | ||||||
ARTICLE V | ||||||||
CAPITAL CONTRIBUTIONS AND ISSUANCE OF PARTNERSHIP INTERESTS | ||||||||
Section 5.1 | Organizational contributions | A-37 | ||||||
Section 5.2 | Contributions by the | A-37 | ||||||
Section 5.3 | Contributions by initial limited partners | A-38 | ||||||
Section 5.4 | Interest and withdrawal | A-38 | ||||||
Section 5.5 | Capital accounts | A-39 | ||||||
Section 5.6 | Issuances of additional partnership securities | A-41 | ||||||
Section 5.7 | Conversion of subordinated units | A-42 | ||||||
Section 5.8 | Limited preemptive right | A-43 | ||||||
Section 5.9 | Splits and combinations | A-43 | ||||||
Section 5.10 | Fully paid and non-assessable nature of limited partner interests | A-44 | ||||||
Section 5.11 | Issuance of class b units in connection with reset of incentive distribution rights | A-44 | ||||||
ARTICLE VI | ||||||||
ALLOCATIONS AND DISTRIBUTIONS | ||||||||
Section 6.1 | Allocations for capital Account purposes | A-45 | ||||||
Section 6.2 | Allocations for tax purposes | A-52 | ||||||
Section 6.3 | Requirement and characterization of distributions; distributions to record holders | A-54 | ||||||
Section 6.4 | Distributions of available cash from operating surplus | A-55 |
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Section 6.5 | Distributions of available cash from capital surplus | A-56 | ||||||
Section 6.6 | Adjustment of minimum quarterly distribution and target distribution levels | A-57 | ||||||
Section 6.7 | Special provisions relating to the holders of subordinated units and class b units | A-57 | ||||||
Section 6.8 | Special provisions relating to the holders of incentive distribution rights | A-58 | ||||||
Section 6.9 | Entity-Level taxation | A-58 | ||||||
ARTICLE VII | ||||||||
MANAGEMENT AND OPERATION OF BUSINESS | ||||||||
Section 7.1 | Management | A-59 | ||||||
Section 7.2 | Certificate of limited partnership | A-61 | ||||||
Section 7.3 | Restrictions on the | A-61 | ||||||
Section 7.4 | Reimbursement of the general partner | A-61 | ||||||
Section 7.5 | Outside activities | A-62 | ||||||
Section 7.6 | Loans from the general partner; loans or contributions from the partnership or group members | A-63 | ||||||
Section 7.7 | Indemnification | A-64 | ||||||
Section 7.8 | Liability of indemnitees | A-65 | ||||||
Section 7.9 | Resolution of conflicts of interest; standards of conduct and modification of duties | A-66 | ||||||
Section 7.10 | Other matters concerning the general partner | A-67 | ||||||
Section 7.11 | Purchase or sale of partnership securities | A-68 | ||||||
Section 7.12 | Registration rights of the general partner and its affiliates | A-68 | ||||||
Section 7.13 | Reliance by third parties | A-71 | ||||||
ARTICLE VIII | ||||||||
BOOKS, RECORDS, ACCOUNTING AND REPORTS | ||||||||
Section 8.1 | Records and accounting | A-71 | ||||||
Section 8.2 | Fiscal year | A-71 | ||||||
Section 8.3 | Reports | A-72 | ||||||
ARTICLE IX | ||||||||
TAX MATTERS | ||||||||
Section 9.1 | Tax returns and information | A-72 | ||||||
Section 9.2 | Tax elections | A-72 | ||||||
Section 9.3 | Tax controversies | A-73 | ||||||
Section 9.4 | Withholding | A-73 | ||||||
ARTICLE X | ||||||||
ADMISSION OF PARTNERS | ||||||||
Section 10.1 | Admission of limited partners | A-73 | ||||||
Section 10.2 | Admission of successor general partner | A-74 | ||||||
Section 10.3 | Amendment of agreement and certificate of limited partnership | A-74 | ||||||
ARTICLE XI | ||||||||
WITHDRAWAL OR REMOVAL OF PARTNERS | ||||||||
Section 11.1 | Withdrawal of the general partner | A-74 | ||||||
Section 11.2 | Removal of the general partner | A-76 | ||||||
Section 11.3 | Interest of departing general partner and successor general partner | A-76 | ||||||
Section 11.4 | Termination of subordination period, conversion of subordinated units and extinguishment of cumulative common unit arrearages. | A-78 | ||||||
Section 11.5 | Withdrawal of limited partners | A-78 | ||||||
ARTICLE XII | ||||||||
DISSOLUTION AND LIQUIDATION | ||||||||
Section 12.1 | Dissolution | A-78 | ||||||
Section 12.2 | Continuation of the business of the partnership after dissolution | A-78 | ||||||
Section 12.3 | Liquidator | A-79 | ||||||
Section 12.4 | Liquidation | A-80 | ||||||
Section 12.5 | Cancellation of certificate of limited partnership | A-80 | ||||||
Section 12.6 | Return of contributions | A-80 |
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Section 12.7 | Waiver of partition | A-80 | ||||||
Section 12.8 | Capital account restoration | A-81 | ||||||
ARTICLE XIII | ||||||||
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS; RECORD DATE | ||||||||
Section 13.1 | Amendments to be adopted solely by the general partner | A-81 | ||||||
Section 13.2 | Amendment procedures | A-82 | ||||||
Section 13.3 | Amendment requirements | A-82 | ||||||
Section 13.4 | Special meetings | A-83 | ||||||
Section 13.5 | Notice of a meeting | A-83 | ||||||
Section 13.6 | Record date | A-84 | ||||||
Section 13.7 | adjournment | A-84 | ||||||
Section 13.8 | Waiver of notice; approval of meeting; approval of minutes | A-84 | ||||||
Section 13.9 | Quorum and voting | A-84 | ||||||
Section 13.10 | Conduct of a meeting | A-85 | ||||||
Section 13.11 | Action without a meeting | A-85 | ||||||
Section 13.12 | Right to vote and related matters | A-86 | ||||||
ARTICLE XIV | ||||||||
MERGER, CONSOLIDATION OR CONVERSION | ||||||||
Section 14.1 | Authority | A-86 | ||||||
Section 14.2 | Procedure for merger, consolidation or conversion | A-86 | ||||||
Section 14.3 | Approval by limited partners | A-88 | ||||||
Section 14.4 | Certificate of merger | A-89 | ||||||
Section 14.5 | Effect of merger, consolidation or conversion | A-89 | ||||||
ARTICLE XV | ||||||||
RIGHT TO ACQUIRE LIMITED PARTNER INTERESTS | ||||||||
Section 15.1 | Right to acquire limited partner interests | A-90 | ||||||
ARTICLE XVI | ||||||||
GENERAL PROVISIONS | ||||||||
Section 16.1 | Addresses and notices; written communications | A-91 | ||||||
Section 16.2 | Further action | A-92 | ||||||
Section 16.3 | Binding effect | A-92 | ||||||
Section 16.4 | Integration | A-92 | ||||||
Section 16.5 | Creditors | A-92 | ||||||
Section 16.6 | Waiver | A-92 | ||||||
Section 16.7 | Third-Party beneficiaries | A-93 | ||||||
Section 16.8 | Counterparts | A-93 | ||||||
Section 16.9 | Applicable law | A-93 | ||||||
Section 16.10 | Invalidity of provisions | A-93 | ||||||
Section 16.11 | Consent of partners | A-93 | ||||||
Section 16.12 | Facsimile signatures | A-93 |
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Section 7.6 | Loans from the General Partner; Loans or Contributions from the Partnership or Group Members. |
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Western Gas Partners, LP
Dated: | Western Gas Partners, LP | |
Countersigned and Registered by: | By: Western Gas Holdings, LLC | |
Mellon Investor Services LLC, | By: | |
As Transfer Agent and Registrar | Name: | |
By: | ||
Secretary |
TEN COM—as tenants in common | UNIF GIFT/TRANSFERS MIN ACT | |
TEN ENT—as tenants by the entireties | Custodian | |
(Cust) (Minor) | ||
JT TEN—as joint tenants with right of survivorship and not as tenants in common | Under Uniform Gifts/Transfers to CD Minors Act (State) |
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Western Gas Partners, LP
(Please print or typewrite name and address of assignee) | (Please insert Social Security or other identifying number of assignee) | |
Common Units representing limited partner interests evidenced by this Certificate, subject to the Partnership Agreement, and does hereby irrevocably constitute and appoint as its attorney-in-fact with full power of substitution to transfer the same on the books of Western Gas Partners, LP. | ||
Date: | NOTE: The signature to any endorsement hereon must correspond with the name as written upon the face of this Certificate in every particular. without alteration, enlargement or change. | |
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C.RULE 17d-15 | (Signature) (Signature) | |
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• | repayment of working capital borrowings deducted from operating surplus pursuant to the last bullet point of the definition of operating surplus below when such repayment actually occurs; | |
• | payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness, other than working capital borrowings; | |
• | expansion capital expenditures; | |
• | actual maintenance capital expenditures; | |
• | investment capital expenditures; | |
• | payment of transaction expenses relating to interim capital transactions; | |
• | distributions to our partners (including distributions in respect of Class B units and our incentive distribution rights); or | |
• | non-pro rata purchases of units of any class made with the proceeds of a substantially concurrent equity issuance. |
• | $27.1 million (as described below);plus | |
• | all of our cash receipts after the closing of this offering, excluding cash from the following: |
• | borrowings that are not working capital borrowings and sales of debt securities, | |
• | sales of equity securities, | |
• | sales or other dispositions of assets outside the ordinary course of business, | |
• | the termination of interest rate swap agreements or commodity hedge contracts prior to the termination date specified herein, | |
• | capital contributions received, and | |
• | corporate reorganizations or restructurings;plus |
• | working capital borrowings made after the end of a quarter but before the date of determination of operating surplus for the quarter;plus |
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• | cash distributions paid on equity issued to finance all or a portion of the construction, improvement or replacement of a capital improvement or capital asset (such as equipment or facilities) during the period beginning on the date that we enter into a binding obligation to commence the construction, acquisition or improvement of a capital improvement or replacement of a capital asset and ending on the earlier to occur of the date the capital improvement or capital asset commences commercial service or the date that it is abandoned or disposed of;less | |
• | our operating expenditures (as defined above) after the closing of this offering;less | |
• | the amount of cash reserves established by our general partner to provide funds for future operating expenditures;less | |
• | all working capital borrowings not repaid within twelve months after having been incurred. |
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ITEM 13. | OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. |
SEC registration fee | $ | 13,920 | ||
FINRA filing fee | 45,781 | |||
Printing and engraving expenses | 750,000 | |||
Accounting fees and expenses | 1,500,000 | |||
Fees and expenses of legal counsel | 2,000,000 | |||
Transfer agent and registrar fees | 5,000 | |||
New York Stock Exchange listing fee | 250,000 | |||
Miscellaneous | 435,299 | |||
Total | $ | 5,000,000 | ||
ITEM 14. | INDEMNIFICATION OF OFFICERS AND MEMBERS OF OUR BOARD OF DIRECTORS. |
ITEM 15. | RECENT SALES OF UNREGISTERED SECURITIES. |
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ITEM 16. | EXHIBITS. |
Exhibit | ||||||||
number | Description | |||||||
1 | .1* | — | Form of Underwriting Agreement | |||||
3 | .1** | — | Certificate of Limited Partnership of Western Gas Partners, LP | |||||
3 | .2 | — | First Amended and Restated Agreement of Limited Partnership of Western Gas Partners, LP (included as Appendix A in the prospectus included in this Registration Statement) | |||||
3 | .3** | — | Certificate of Formation of Western Gas Holdings, LLC | |||||
3 | .4* | — | Amended and Restated Limited Liability Company Agreement of Western Gas Holdings, LLC | |||||
5 | .1 | — | Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered | |||||
8 | .1* | — | Opinion of Vinson & Elkins L.L.P. relating to tax matters | |||||
10 | .1 | — | Form of Anadarko Petroleum Corporation Fixed Rate Note due 2038 | |||||
10 | .2 | — | Form of Omnibus Agreement | |||||
10 | .3 | — | Form of Services and Secondment Agreement | |||||
10 | .4† | — | Dew Gas Gathering Agreement between Anadarko Gathering Company LLC and Anadarko Petroleum Corporation | |||||
10 | .5† | — | Haley Gas Gathering Agreement between Anadarko Gathering Company LLC and Anadarko Petroleum Corporation | |||||
10 | .6† | — | Hugoton Gas Gathering Agreement between Anadarko Gathering Company LLC and Anadarko Petroleum Corporation | |||||
10 | .7† | — | Pinnacle Gas Gathering Agreement between Pinnacle Gas Treating LLC and Anadarko Petroleum Corporation | |||||
10 | .8* | — | Form of Working Capital Facility | |||||
10 | .9 | — | Form of Contribution, Conveyance and Assumption Agreement | |||||
10 | .10 | — | Form of Indemnification Agreement by and between Western Gas Holdings, LLC, its Officers and Directors | |||||
10 | .11 | — | Form of Western Gas Partners, LP 2008 Long-Term Incentive Plan | |||||
10 | .12 | — | Form of Tax Sharing Agreement | |||||
10 | .13** | — | Revolving Credit Agreement, dated as of September 1, 2004, by and among Anadarko Petroleum Corporation, Anadarko Canada Corporation, JPMorgan Chase Bank, JPMorgan Chase Bank, Toronto Branch, ABN AMRO Bank N.V. and Deutsche Bank AG New York Branch, Harris Nesbitt Financing, Inc. and Credit Suisse First Boston, and each of the Lenders named therein. | |||||
10 | .14** | — | First Amendment to Revolving Credit Agreement, dated as of August 31, 2006, by and among Anadarko Petroleum Corporation, Anadarko Canada Corporation, JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A., Toronto Branch, ABN AMRO Bank N.V. and Deutsche Bank AG New York Branch, BMO Capital Markets Financing, Inc. and Credit Suisse, Cayman Islands Branch, and each of the Lenders named therein. | |||||
10 | .15** | — | Second Amendment to Revolving Credit Agreement, dated as of December 14, 2007, by and among Anadarko Petroleum Corporation, Western Gas Partners, LP, JPMorgan Chase Bank, N.A., ABN AMRO Bank N.V. and Deutsche Bank AG New York Branch, BMO Capital Markets Financing, Inc., and Credit Suisse, Cayman Islands Branch, and each of the Lenders named therein. | |||||
10 | .16* | — | Form of Western Gas Holdings, LLC Equity Incentive Plan | |||||
21 | .1 | — | List of Subsidiaries of Western Gas Partners, LP |
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Exhibit | ||||||||
number | Description | |||||||
23 | .1 | — | Consent of KPMG LLP | |||||
23 | .2 | — | Consent of KPMG LLP | |||||
23 | .3 | — | Consent of KPMG LLP | |||||
23 | .4 | — | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1) | |||||
23 | .5* | — | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1) | |||||
23 | .6 | — | Consent of Director Nominee | |||||
23 | .7 | — | Consent of Director Nominee | |||||
23 | .8 | — | Consent of Director Nominee | |||||
23 | .9 | — | Consent of Director Nominee | |||||
24 | .1** | — | Powers of Attorney |
* | To be filed by amendment. | |
** | Previously filed. |
† | Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Securities and Exchange Commission. |
ITEM 17. | UNDERTAKINGS. |
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By: | Western Gas Holdings, LLC, its general partner |
By: | /s/ Robert G. Gwin |
Title: | President, Chief Executive Officer and Director |
Signature | Title | Date | ||||
/s/ Robert G. Gwin Robert G. Gwin | President, Chief Executive Officer and Director | January 21, 2008 | ||||
* Danny J. Rea | Senior Vice President, Chief Operating Officer and Director | January 21, 2008 | ||||
/s/ Michael C. Pearl Michael C. Pearl | Senior Vice President, Chief Financial Officer and Chief Accounting Officer | January 21, 2008 | ||||
* R. A. Walker | Chairman of the Board and Director | January 21, 2008 | ||||
* Karl F. Kurz | Director | January 21, 2008 | ||||
* Robert K. Reeves | Director | January 21, 2008 | ||||
*By: | /s/ Robert G. Gwin Robert G. GwinAttorney-in-fact |
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Exhibit | ||||||
number | Description | |||||
1 | .1* | — | Form of Underwriting Agreement | |||
3 | .1** | — | Certificate of Limited Partnership of Western Gas Partners, LP | |||
3 | .2 | — | First Amended and Restated Agreement of Limited Partnership of Western Gas Partners, LP (included as Appendix A in the prospectus included in this Registration Statement) | |||
3 | .3** | — | Certificate of Formation of Western Gas Holdings, LLC | |||
3 | .4* | — | Amended and Restated Limited Liability Company Agreement of Western Gas Holdings, LLC | |||
5 | .1 | — | Opinion of Vinson & Elkins L.L.P. as to the legality of the securities being registered | |||
8 | .1* | — | Opinion of Vinson & Elkins L.L.P. relating to tax matters | |||
10 | .1 | — | Form of Anadarko Petroleum Corporation Fixed Rate Note due 2038 | |||
10 | .2 | — | Form of Omnibus Agreement | |||
10 | .3 | — | Form of Services and Secondment Agreement | |||
10 | .4† | — | Dew Gas Gathering Agreement between Anadarko Gathering Company LLC and Anadarko Petroleum Corporation | |||
10 | .5† | — | Haley Gas Gathering Agreement between Anadarko Gathering Company LLC and Anadarko Petroleum Corporation | |||
10 | .6† | — | Hugoton Gas Gathering Agreement between Anadarko Gathering Company LLC and Anadarko Petroleum Corporation | |||
10 | .7† | — | Pinnacle Gas Gathering Agreement between Pinnacle Gas Treating LLC and Anadarko Petroleum Corporation | |||
10 | .8* | — | Form of Working Capital Facility | |||
10 | .9 | — | Form of Contribution, Conveyance and Assumption Agreement | |||
10 | .10 | — | Form of Indemnification Agreement by and between Western Gas Holdings, LLC, its Officers and Directors | |||
10 | .11 | — | Form of Western Gas Partners, LP 2008 Long-Term Incentive Plan | |||
10 | .12 | — | Form of Tax Sharing Agreement | |||
10 | .13** | — | Revolving Credit Agreement, dated as of September 1, 2004, by and among Anadarko Petroleum Corporation, Anadarko Canada Corporation, JPMorgan Chase Bank, JPMorgan Chase Bank, Toronto Branch, ABN AMRO Bank N.V. and Deutsche Bank AG New York Branch, Harris Nesbitt Financing, Inc. and Credit Suisse First Boston, and each of the Lenders named therein. | |||
10 | .14** | — | First Amendment to Revolving Credit Agreement, dated as of August 31, 2006, by and among Anadarko Petroleum Corporation, Anadarko Canada Corporation, JPMorgan Chase Bank, N.A., JPMorgan Chase Bank, N.A., Toronto Branch, ABN AMRO Bank N.V. and Deutsche Bank AG New York Branch, BMO Capital Markets Financing, Inc. and Credit Suisse, Cayman Islands Branch, and each of the Lenders named therein. | |||
10 | .15** | — | Second Amendment to Revolving Credit Agreement, dated as of December 14, 2007, by and among Anadarko Petroleum Corporation, Western Gas Partners, LP, JPMorgan Chase Bank, N.A., ABN AMRO Bank N.V. and Deutsche Bank AG New York Branch, BMO Capital Markets Financing, Inc., and Credit Suisse, Cayman Islands Branch, and each of the Lenders named therein. | |||
10 | .16* | — | Form of Western Gas Holdings, LLC Equity Incentive Plan | |||
21 | .1 | — | List of Subsidiaries of Western Gas Partners, LP | |||
23 | .1 | — | Consent of KPMG LLP | |||
23 | .2 | — | Consent of KPMG LLP | |||
23 | .3 | — | Consent of KPMG LLP | |||
23 | .4 | — | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 5.1) | |||
23 | .5* | — | Consent of Vinson & Elkins L.L.P. (contained in Exhibit 8.1) | |||
23 | .6 | — | Consent of Director Nominee | |||
23 | .7 | — | Consent of Director Nominee | |||
23 | .8 | — | Consent of Director Nominee | |||
23 | .9 | — | Consent of Director Nominee | |||
24 | .1** | — | Powers of Attorney |
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* | To be filed by amendment. | |
** | Previously filed. |
† | Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions have been filed separately with the Securities and Exchange Commission. |
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