Edgar Filing: Western Gas Partners LP

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WES 09.30.13 10Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013


¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-34046

WESTERN GAS PARTNERS, LP

(Exact name of registrant as specified in its charter)



Delaware		26-1075808
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1201 Lake Robbins Drive The Woodlands, Texas		77380 (Zip Code)
(Address of principal executive offices)

(832) 636-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

There were 112,380,764 common units outstanding as of November 4, 2013.

Table of Contents

TABLE OF CONTENTS



PART I		FINANCIAL INFORMATION	PAGE

	Item 1.	Financial Statements

		Consolidated Statements of Income for the three and nine months ended September 30, 2013 and 2012	4

		Consolidated Balance Sheets as of September 30, 2013, and December 31, 2012	5

		Consolidated Statement of Equity and Partners’ Capital for the nine months ended September 30, 2013	6

		Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012	7

		Notes to Consolidated Financial Statements	8

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

		Cautionary Note Regarding Forward-Looking Statements	24

		Executive Summary	26

		Acquisitions	27

		Equity Offerings	28

		Results of Operations	29

		Operating Results	29

		Key Performance Metrics	37

		Liquidity and Capital Resources	40

		Contractual Obligations	46

		Off-Balance Sheet Arrangements	46

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

	Item 4.	Controls and Procedures	47

PART II		OTHER INFORMATION

	Item 1.	Legal Proceedings	47

	Item 1A.	Risk Factors	47

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

	Item 6.	Exhibits	49

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DEFINITIONS

As generally used within the energy industry and in this quarterly report on Form 10-Q, the identified terms have the following meanings:

Barrel or Bbl: 42 U.S. gallons measured at 60 degrees Fahrenheit.

Btu: British thermal unit; the approximate amount of heat required to raise the temperature of one pound of water by one degree Fahrenheit.

Condensate: A natural gas liquid with a low vapor pressure mainly composed of propane, butane, pentane and heavier hydrocarbon fractions.

Cryogenic: The process in which liquefied gases, such as liquid nitrogen or liquid helium, are used to bring volumes to very low temperatures (below approximately -238 degrees Fahrenheit) to separate natural gas liquids from natural gas. Through cryogenic processing, more natural gas liquids are extracted than when traditional refrigeration methods are used.

Drip condensate: Heavier hydrocarbon liquids that fall out of the natural gas stream and are recovered in the gathering system without processing.

Fractionation: The process of applying various levels of higher pressure and lower temperature to separate a stream of natural gas liquids into ethane, propane, normal butane, isobutane and natural gasoline.

Imbalance: Imbalances result from (i) differences between gas volumes nominated by customers and gas volumes received from those customers and (ii) differences between gas volumes received from customers and gas volumes delivered to those customers.

MBbls/d: One thousand barrels per day.

MMBtu: One million British thermal units.

MMcf/d: One million cubic feet per day.

Natural gas liquid(s) or NGL(s): The combination of ethane, propane, normal butane, isobutane and natural gasolines that, when removed from natural gas, become liquid under various levels of higher pressure and lower temperature.

Residue: The natural gas remaining after being processed or treated.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WESTERN GAS PARTNERS, LP

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



	Three Months Ended September 30,						Nine Months Ended September 30,
thousands except unit and per-unit amounts	2013			2012 ⁽¹⁾			2013			2012 ⁽¹⁾
Revenues – affiliates
Gathering, processing and transportation of natural gas and natural gas liquids	$	83,606		$	61,388		$	218,680		$	182,448
Natural gas, natural gas liquids and condensate sales	129,411			115,132			371,077			324,793
Equity income and other, net	4,607			4,085			13,457			12,219
Total revenues – affiliates	217,624			180,605			603,214			519,460
Revenues – third parties
Gathering, processing and transportation of natural gas and natural gas liquids	47,175			32,545			124,791			96,518
Natural gas, natural gas liquids and condensate sales	11,915			20,974			31,539			62,025
Other, net	1,287			610			3,330			1,717
Total revenues – third parties	60,377			54,129			159,660			160,260
Total revenues	278,001			234,734			762,874			679,720
Operating expenses
Cost of product ⁽²⁾	93,516			89,107			270,059			254,719
Operation and maintenance ⁽²⁾	42,757			35,493			121,165			103,304
General and administrative ⁽²⁾	7,276			15,039			22,228			35,623
Property and other taxes	6,649			5,328			18,520			14,998
Depreciation, amortization and impairments	37,615			28,455			106,551			83,263
Total operating expenses	187,813			173,422			538,523			491,907
Operating income	90,188			61,312			224,351			187,813
Interest income, net – affiliates	4,225			4,225			12,675			12,675
Interest expense ⁽³⁾	(13,018		)	(10,977		)	(37,483		)	(30,118		)
Other income (expense), net	439			522			1,612			(287		)
Income before income taxes	81,834			55,082			201,155			170,083
Income tax expense	58			5,080			4,431			14,588
Net income	81,776			50,002			196,724			155,495
Net income attributable to noncontrolling interests	3,376			3,423			7,467			11,956
Net income attributable to Western Gas Partners, LP	$	78,400		$	46,579		$	189,257		$	143,539
Limited partners’ interest in net income:
Net income attributable to Western Gas Partners, LP	$	78,400		$	46,579		$	189,257		$	143,539
Pre-acquisition net (income) loss allocated to Anadarko	—			(7,062		)	(4,637		)	(19,582		)
General partner interest in net (income) loss ⁽⁴⁾	(18,693		)	(8,042		)	(47,733		)	(18,508		)
Limited partners’ interest in net income ⁽⁴⁾	$	59,707		$	31,475		$	136,887		$	105,449
Net income per common unit – basic and diluted	$	0.53		$	0.33		$	1.26		$	1.14
Weighted average common units outstanding – basic and diluted	112,143			95,883			108,540			92,627


⁽¹⁾	Financial information has been recast to include the financial position and results attributable to the Non-Operated Marcellus Interest. See Note 2.

⁽²⁾

Cost of product includes product purchases from Anadarko (as defined in Note 1) of $33.8 million and $97.8 million for the three and nine months ended September 30, 2013, respectively, and $42.8 million and $115.6 million for the three and nine months ended September 30, 2012, respectively. Operation and maintenance includes charges from Anadarko of $13.5 million and $41.0 million for the three and nine months ended September 30, 2013, respectively, and $12.6 million and $38.0 million for the three and nine months ended September 30, 2012, respectively. General and administrative includes charges from Anadarko of $5.9 million and $17.3 million for the three and nine months ended September 30, 2013, respectively, and $14.2 million and $30.8 million for the three and nine months ended September 30, 2012, respectively. See Note 5.


⁽³⁾	Includes affiliate (as defined in Note 1) interest expense of zero for the three and nine months ended September 30, 2013, and $0.1 million and $2.7 million for the three and nine months ended September 30, 2012, respectively. See Note 8.


⁽⁴⁾	Represents net income for periods including and subsequent to the acquisition of the Partnership assets (as defined in Note 1). See Note 4.

See accompanying Notes to Consolidated Financial Statements.

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WESTERN GAS PARTNERS, LP

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



thousands except number of units	September 30, 2013		December 31, 2012 ⁽¹⁾
ASSETS
Current assets
Cash and cash equivalents	$	38,364	$	419,981
Accounts receivable, net ⁽²⁾	75,788		50,233
Other current assets ⁽³⁾	8,763		6,998
Total current assets	122,915		477,212
Note receivable – Anadarko	260,000		260,000
Property, plant and equipment
Cost	4,061,389		3,432,392
Less accumulated depreciation	817,489		714,436
Net property, plant and equipment	3,243,900		2,717,956
Goodwill	105,336		105,336
Other intangible assets	54,436		55,490
Equity investments	227,566		106,130
Other assets	28,078		27,798
Total assets	$	4,042,231	$	3,749,922
LIABILITIES, EQUITY AND PARTNERS’ CAPITAL
Current liabilities
Accounts and natural gas imbalance payables ⁽⁴⁾	$	19,131	$	25,154
Accrued ad valorem taxes	18,472		11,949
Income taxes payable	190		552
Accrued liabilities ⁽⁵⁾	140,166		147,651
Total current liabilities	177,959		185,306
Long-term debt – third parties	1,518,110		1,168,278
Deferred income taxes	1,830		47,153
Asset retirement obligations and other	76,336		68,749
Total long-term liabilities	1,596,276		1,284,180
Total liabilities	1,774,235		1,469,486
Equity and partners’ capital
Common units (112,174,911 and 104,660,553 units issued and outstanding at September 30, 2013, and December 31, 2012, respectively)	2,127,040		1,957,066
General partner units (2,288,573 and 2,135,930 units issued and outstanding at September 30, 2013, and December 31, 2012, respectively)	68,585		52,752
Net investment by Anadarko	—		199,960
Total partners’ capital	2,195,625		2,209,778
Noncontrolling interests	72,371		70,658
Total equity and partners’ capital	2,267,996		2,280,436
Total liabilities, equity and partners’ capital	$	4,042,231	$	3,749,922


⁽¹⁾	Financial information has been recast to include the financial position and results attributable to the Non-Operated Marcellus Interest. See Note 2.


⁽²⁾	Accounts receivable, net includes amounts receivable from affiliates (as defined in Note 1) of $40.1 million and $19.1 million as of September 30, 2013, and December 31, 2012, respectively.


⁽³⁾	Other current assets includes natural gas imbalance receivables from affiliates of $0.1 million and $0.4 million as of September 30, 2013, and December 31, 2012, respectively.


⁽⁴⁾	Accounts and natural gas imbalance payables includes amounts payable to affiliates of $2.8 million and $2.5 million as of September 30, 2013, and December 31, 2012, respectively.


⁽⁵⁾	Accrued liabilities include amounts payable to affiliates of $0.1 million as of September 30, 2013 and December 31, 2012.

See accompanying Notes to Consolidated Financial Statements.

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WESTERN GAS PARTNERS, LP

CONSOLIDATED STATEMENT OF EQUITY AND PARTNERS’ CAPITAL

(UNAUDITED)



	Partners’ Capital
thousands	Net Investment by Anadarko			Common Units			General Partner Units			Noncontrolling Interests			Total
Balance at December 31, 2012 ⁽¹⁾	$	199,960		$	1,957,066		$	52,752		$	70,658		$	2,280,436
Net income	4,637			136,887			47,733			7,467			196,724
Issuance of common and general partner units, net of offering expenses	—			418,517			9,278			—			427,795
Contributions from noncontrolling interest owners	—			—			—			2,247			2,247
Distributions to noncontrolling interest owners	—			—			—			(8,001		)	(8,001		)
Distributions to unitholders	—			(173,976		)	(41,139		)	—			(215,115		)
Acquisitions from affiliates	(255,635		)	(209,865		)	—			—			(465,500		)
Contributions of equity-based compensation from Anadarko	—			2,101			43			—			2,144
Net pre-acquisition contributions from (distributions to) Anadarko	4,508			—			—			—			4,508
Net distributions of other assets to Anadarko	—			(3,998		)	(82		)				(4,080		)
Elimination of net deferred tax liabilities	46,530			—			—			—			46,530
Other	—			308			—			—			308
Balance at September 30, 2013	$	—		$	2,127,040		$	68,585		$	72,371		$	2,267,996


⁽¹⁾	Financial information has been recast to include the financial position and results attributable to the Non-Operated Marcellus Interest. See Note 2.

See accompanying Notes to Consolidated Financial Statements.

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WESTERN GAS PARTNERS, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Nine Months Ended September 30,
thousands	2013			2012 ⁽¹⁾
Cash flows from operating activities
Net income	$	196,724		$	155,495
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairments	106,551			83,263
Non-cash equity-based compensation expense	2,564			2,769
Deferred income taxes	1,207			21,565
Debt-related amortization and other items, net	1,756			1,728
Changes in assets and liabilities:
(Increase) decrease in accounts receivable, net	(27,387		)	47,272
Increase (decrease) in accounts and natural gas imbalance payables and accrued liabilities, net	6,818			29,261
Change in other items, net	836			2,234
Net cash provided by operating activities	289,069			343,587
Cash flows from investing activities
Capital expenditures	(469,678		)	(403,949		)
Acquisitions from affiliates	(469,884		)	(605,960		)
Acquisitions from third parties	(240,274		)	—
Investments in equity affiliates	(45,126		)	(147		)
Proceeds from the sale of assets to affiliates	82			760
Other	(1,524		)	—
Net cash used in investing activities	(1,226,404		)	(1,009,296		)
Cash flows from financing activities
Borrowings, net of debt issuance costs	842,566			885,291
Repayments of debt	(495,000		)	(549,000		)
Increase (decrease) in outstanding checks	(3,335		)	2,534
Proceeds from the issuance of common and general partner units, net of offering expenses	427,848			216,462
Distributions to unitholders	(215,115		)	(141,505		)
Contributions from noncontrolling interest owners	2,247			26,888
Distributions to noncontrolling interest owners	(8,001		)	(14,303		)
Net contributions from (distributions to) Anadarko	4,508			60,277
Net cash provided by financing activities	555,718			486,644
Net increase (decrease) in cash and cash equivalents	(381,617		)	(179,065		)
Cash and cash equivalents at beginning of period	419,981			226,559
Cash and cash equivalents at end of period	$	38,364		$	47,494

Supplemental disclosures
Net distributions to (contributions from) Anadarko of other assets	$	4,080		$	10,790
Interest paid, net of capitalized interest	$	34,974		$	16,460
Taxes paid	$	—		$	495


⁽¹⁾	Financial information has been recast to include the financial position and results attributable to the Non-Operated Marcellus Interest. See Note 2.

See accompanying Notes to Consolidated Financial Statements.

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WESTERN GAS PARTNERS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

General. Western Gas Partners, LP is a growth-oriented Delaware master limited partnership formed by Anadarko Petroleum Corporation in 2007 to own, operate, acquire and develop midstream energy assets.

For purposes of these consolidated financial statements, the “Partnership” refers to Western Gas Partners, LP and its subsidiaries. The Partnership’s general partner, Western Gas Holdings, LLC (the “general partner” or “GP”), is owned by Western Gas Equity Partners, LP (“WGP”), a Delaware master limited partnership formed by Anadarko Petroleum Corporation in September 2012 to own the Partnership’s general partner, as well as a significant limited partner interest in the Partnership (see Western Gas Equity Partners, LP below). Western Gas Equity Holdings, LLC is WGP’s general partner and is a wholly owned subsidiary of Anadarko Petroleum Corporation. “Anadarko” refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding the Partnership and the general partner, and “affiliates” refers to wholly owned and partially owned subsidiaries of Anadarko, excluding the Partnership, and includes the interests in Fort Union Gas Gathering, LLC (“Fort Union”), White Cliffs Pipeline, LLC (“White Cliffs”), Rendezvous Gas Services, LLC (“Rendezvous”), and a joint venture, Enterprise EF78 LLC (“Mont Belvieu JV”). See Note 2. “Equity investment throughput” refers to the Partnership’s 14.81% share of Fort Union and 22% share of Rendezvous gross volumes.

The Partnership is engaged in the business of gathering, processing, compressing, treating and transporting natural gas, condensate, NGLs and crude oil for Anadarko, as well as third-party producers and customers. As of September 30, 2013, the Partnership’s assets, exclusive of interests in Fort Union, White Cliffs, Rendezvous and the Mont Belvieu JV accounted for under the equity method, consisted of the following:



	Owned and Operated	Operated Interests	Non-Operated Interests
Natural gas gathering systems	13	1	5
Natural gas treating facilities	8	—	—
Natural gas processing facilities	8	3	—
NGL pipelines	3	—	—
Natural gas pipelines	3	—	—

These assets are located in South, East and West Texas, the Rocky Mountains (Colorado, Utah and Wyoming), north-central Pennsylvania, and the Mid-Continent (Kansas and Oklahoma). The Partnership was also constructing the Lancaster processing facility in Northeast Colorado at the end of the third quarter of 2013.

Western Gas Equity Partners, LP. In December 2012, WGP completed its initial public offering (“IPO”) of 19,758,150 common units representing limited partner interests in WGP at a price of $22.00 per common unit. WGP used the net proceeds from the offering to purchase common and general partner units of the Partnership resulting in aggregate proceeds to the Partnership of approximately $409.4 million, which was used by the Partnership for general partnership purposes, including the funding of capital expenditures.

WGP owns the following types of interests in the Partnership: (i) the 2.0% general partner interest and all of the incentive distribution rights (“IDRs”) in the Partnership, both owned through WGP’s 100% ownership of the Partnership’s general partner and (ii) a significant limited partner interest (see Holdings of Partnership equity in Note 4). WGP has no independent operations or material assets other than its partnership interests in WES.

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WESTERN GAS PARTNERS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

Basis of presentation. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements include the accounts of the Partnership and entities in which it holds a controlling financial interest. All significant intercompany transactions have been eliminated. Investments in noncontrolled entities over which the Partnership exercises significant influence are accounted for under the equity method. The Partnership proportionately consolidates its 33.75% share of the assets, liabilities, revenues and expenses attributable to the Non-Operated Marcellus Interest and Anadarko-Operated Marcellus Interest (see Note 2) and its 50% share of the assets, liabilities, revenues and expenses attributable to the Newcastle system in the accompanying consolidated financial statements.

In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, utilizing historical experience and other methods considered reasonable under the particular circumstances. Changes in facts and circumstances or additional information may result in revised estimates and actual results may differ from these estimates. Effects on the business, financial condition and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information furnished herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements, and certain prior-period amounts have been reclassified to conform to the current-year presentation.

For the nine months ended September 30, 2012, operating cash inflows and investing cash outflows in the Partnership’s unaudited consolidated statements of cash flows include a reduction of $35.7 million attributable to the correction of an error discovered during analysis of accounts payable balances. This analysis revealed that certain 2012 invoices received, but not yet paid, were properly attributable to ongoing capital projects rather than to operating expenses. Management concluded that this misstatement was not material relative to the nine months ended September 30, 2012, and has corrected the error within the unaudited statement of cash flows for the nine months ended September 30, 2012, as included in this report.

Certain information and note disclosures commonly included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying consolidated financial statements and notes should be read in conjunction with the Partnership’s 2012 Form 10-K, as filed with the SEC on February 28, 2013, certain sections of which were recast in the Partnership’s Current Report on Form 8-K, as filed with the SEC on May 13, 2013, to reflect the results of the Non-Operated Marcellus Interest acquisition (as defined in Note 2). Management believes that the disclosures made are adequate to make the information not misleading.

In July 2009, the Partnership acquired a 51% interest in Chipeta Processing LLC (“Chipeta”) and became party to Chipeta’s limited liability company agreement. On August 1, 2012, the Partnership acquired Anadarko’s then remaining 24% membership interest in Chipeta (the “additional Chipeta interest”). Prior to this transaction, the interests in Chipeta held by Anadarko and a third-party member were reflected as noncontrolling interests in the consolidated financial statements. The acquisition of Anadarko’s then remaining 24% interest was accounted for on a prospective basis as the Partnership acquired an additional interest in an already-consolidated entity. As such, effective August 1, 2012, noncontrolling interest excludes the financial results and operations of the additional Chipeta interest. The remaining 25% membership interest held by the third-party member is reflected within noncontrolling interests in the consolidated financial statements for all periods presented. See Note 2.

Presentation of Partnership assets. References to the “Partnership assets” refer collectively to the assets owned by the Partnership as of September 30, 2013. Because Anadarko controls the Partnership through its ownership and control of WGP, which owns the Partnership’s general partner, each of the Partnership’s acquisitions of assets from Anadarko has been considered a transfer of net assets between entities under common control. As such, the Partnership assets acquired from Anadarko were initially recorded at Anadarko’s historic carrying value, which did not correlate to the total acquisition price paid by the Partnership. Further, after an acquisition of assets from Anadarko, the Partnership may be required to recast its financial statements to include the activities of such assets as of the date of common control. See Note 2.

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WESTERN GAS PARTNERS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (CONTINUED)

For those periods requiring recast, the consolidated financial statements for periods prior to the Partnership’s acquisition of Partnership assets from Anadarko, including the Non-Operated Marcellus Interest, have been prepared from Anadarko’s historical cost-basis accounts and may not necessarily be indicative of the actual results of operations that would have occurred if the Partnership had owned the assets during the periods reported. Net income attributable to the Partnership assets for periods prior to the Partnership’s acquisition of such assets is not allocated to the limited partners for purposes of calculating net income per common unit.

2. ACQUISITIONS

The following table presents the acquisitions completed by the Partnership during 2012 and 2013, and identifies the funding sources for such acquisitions:



thousands except unit and percent amounts	Acquisition Date	Percentage Acquired		Borrowings		Cash On Hand		Common Units Issued	GP Units Issued
MGR ⁽¹⁾	01/13/2012	100	%	$	299,000	$	159,587	632,783	12,914
Chipeta ⁽²⁾	08/01/2012	24	%	—		128,250		151,235	3,086
Non-Operated Marcellus Interest ⁽³⁾	03/01/2013	33.75	%	250,000		215,500		449,129	—
Anadarko-Operated Marcellus Interest ⁽⁴⁾	03/08/2013	33.75	%	133,500		—		—	—
Mont Belvieu JV ⁽⁵⁾	06/05/2013	25	%	—		78,129		—	—
OTTCO ⁽⁶⁾	09/03/2013	100	%	27,500		—		—	—

⁽¹⁾

The assets acquired from Anadarko consist of (i) the Red Desert complex, which is located in the greater Green River Basin in southwestern Wyoming, and includes the Patrick Draw processing plant, the Red Desert processing plant, gathering lines, and related facilities, (ii) a 22% interest in Rendezvous, which owns a gathering system serving the Jonah and Pinedale Anticline fields in southwestern Wyoming, and (iii) certain additional midstream assets and equipment. These assets are collectively referred to as the “MGR assets” and the acquisition as the “MGR acquisition.”

⁽²⁾

The Partnership acquired Anadarko’s then remaining 24% membership interest in Chipeta (as described in Note 1). The Partnership received distributions related to the additional interest beginning July 1, 2012. This transaction brought the Partnership’s total membership interest in Chipeta to 75%. The remaining 25% membership interest in Chipeta held by a third-party member is reflected as noncontrolling interests in the consolidated financial statements for all periods presented.

⁽³⁾

The Partnership acquired Anadarko’s 33.75% interest (non-operated) in the Liberty and Rome gas gathering systems, serving production from the Marcellus shale in north-central Pennsylvania. The interest acquired is referred to as the “Non-Operated Marcellus Interest” and the acquisition as the “Non-Operated Marcellus Interest acquisition.” In connection with the issuance of the common units, the Partnership’s general partner purchased 9,166 general partner units for consideration of $0.5 million in order to maintain its 2.0% general partner interest in the Partnership. See Non-Operated Marcellus Interest acquisition below for further information.

⁽⁴⁾

The interest acquired from a third party consisted of a 33.75% interest in each of the Larry’s Creek, Seely and Warrensville gas gathering systems, which are operated by Anadarko and serve production from the Marcellus shale in north-central Pennsylvania. The interest acquired is referred to as the “Anadarko-Operated Marcellus Interest” and the acquisition as the “Anadarko-Operated Marcellus Interest acquisition.” See Anadarko-Operated Marcellus Interest acquisition below for further information, including the final allocation of the purchase price as of September 30, 2013.

⁽⁵⁾

The acquisition from a third party consisted of a 25% interest in Enterprise EF78 LLC, an entity formed to design, construct, and own two fractionators located in Mont Belvieu, Texas. The interest acquired is accounted for under the equity method of accounting and is referred to as the “Mont Belvieu JV” and the acquisition as the “Mont Belvieu JV acquisition.” See Mont Belvieu JV acquisition below for further information.


⁽⁶⁾	The Partnership acquired Overland Trail Transmission, LLC (“OTTCO”), a Delaware limited liability company, from a third party. OTTCO owns and operates an intrastate pipeline which connects the Partnership’s Red Desert and Granger complexes in southwestern Wyoming. The assets acquired are referred to as the “OTTCO pipeline” and the acquisition as the “OTTCO acquisition.”

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(UNAUDITED)

2. ACQUISITIONS (CONTINUED)

Non-Operated Marcellus Interest acquisition. Because the Non-Operated Marcellus Interest acquisition was a transfer of net assets between entities under common control, the Partnership’s historical financial statements previously filed with the SEC have been recast in this Form 10-Q to include the results attributable to the Non-Operated Marcellus Interest as if the Partnership owned such assets for all periods presented. The consolidated financial statements for periods prior to the Partnership’s acquisition of the Partnership assets from Anadarko, including the Non-Operated Marcellus Interest, have been prepared from Anadarko’s historical cost-basis accounts and may not necessarily be indicative of the actual results of operations that would have occurred if the Partnership had owned the assets during the periods reported.

The following table presents the revenue and net income impact of the Non-Operated Marcellus Interest on revenue and net income as presented in the Partnership’s historical consolidated statements of income:



	Three Months Ended September 30, 2012
thousands	Partnership Historical		Non-Operated Marcellus Interest		Combined
Revenues	$	219,020	$	15,714	$	234,734
Net income	42,940		7,062		50,002



	Nine Months Ended September 30, 2012
thousands	Partnership Historical		Non-Operated Marcellus Interest		Combined
Revenues	$	636,603	$	43,117	$	679,720
Net income	135,913		19,582		155,495

Anadarko-Operated Marcellus Interest acquisition. The Anadarko-Operated Marcellus Interest acquisition has been accounted for under the acquisition method of accounting. The assets acquired and liabilities assumed in the Anadarko-Operated Marcellus Interest acquisition were recorded in the consolidated balance sheet at their estimated fair values as of the acquisition date. Results of operations attributable to the Anadarko-Operated Marcellus Interest were included in the Partnership’s consolidated statements of income beginning on the acquisition date in the first quarter of 2013.

The following is the final allocation of the purchase price as of September 30, 2013, including $1.1 million of post-closing purchase price adjustments, to the assets acquired and liabilities assumed in the Anadarko-Operated Marcellus Interest acquisition as of the acquisition date:



thousands
Property, plant and equipment	$	134,819
Asset retirement obligations	(174		)
Total purchase price	$	134,645

The purchase price allocation is based on an assessment of the fair value of the assets acquired and liabilities assumed in the Anadarko-Operated Marcellus Interest acquisition. The fair values of the interests in the land, right-of-way contracts, and gathering systems were based on the market and income approaches. All fair-value measurements of assets acquired and liabilities assumed are based on inputs that are not observable in the market and thus represent Level 3 inputs.

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2. ACQUISITIONS (CONTINUED)

The following table presents the pro forma condensed financial information of the Partnership as if the Anadarko-Operated Marcellus Interest acquisition had occurred on January 1, 2012:



	Nine Months Ended September 30,
thousands except per-unit amounts	2013		2012
Revenues	$	764,128	$	682,820
Net income	196,872		153,423
Net income attributable to Western Gas Partners, LP	189,405		141,467
Net income per common unit - basic and diluted	$	1.26	$	1.12

The pro forma information is presented for illustration purposes only and is not necessarily indicative of the operating results that would have occurred had the Anadarko-Operated Marcellus Interest acquisition been completed at the assumed date, nor is it necessarily indicative of future operating results of the combined entity. The Partnership’s pro forma information in the table above includes $8.1 million of revenues and $0.5 million of operating expenses, excluding depreciation, amortization and impairments, attributable to the Anadarko-Operated Marcellus Interest that are included in the Partnership’s consolidated statement of income for the nine months ended September 30, 2013. The pro forma adjustments reflect pre-acquisition results of the Anadarko-Operated Marcellus Interest including (a) estimated revenues and expenses; (b) estimated depreciation and amortization based on the purchase price allocated to property, plant and equipment and estimated useful lives; and (c) interest on the Partnership’s borrowings under its revolving credit facility to finance the Anadarko-Operated Marcellus Interest acquisition. The pro forma adjustments include estimates and assumptions based on currently available information. Management believes the estimates and assumptions are reasonable, and the relative effects of the transaction are properly reflected. The pro forma information does not reflect any cost savings or other synergies anticipated as a result of the Anadarko-Operated Marcellus Interest acquisition, nor any future acquisition related expenses.

Mont Belvieu JV acquisition. The acquisition purchase price represented the Partnership’s 25% share of construction costs incurred by the joint venture partner and 25% of the capitalized interest charged to the financial statements of the Mont Belvieu JV up to the date of acquisition. The allocated capitalized interest is reflected as a component of the equity investment balance recorded upon acquisition. Based on the total estimated net project cost, the construction of the fractionation facilities owned by the Mont Belvieu JV is considered a significant project and satisfies criteria for capitalization of interest. Capitalization of interest subsequent to the acquisition is treated as a basis difference between the cost of the investment and the underlying equity in the net assets of the Mont Belvieu JV. The Partnership will begin to amortize the capitalized interest recognized subsequent to the acquisition upon completion of the facilities, and will reflect the amortization as an adjustment to equity earnings from the Mont Belvieu JV.

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3. PARTNERSHIP DISTRIBUTIONS

The partnership agreement of Western Gas Partners, LP requires the Partnership to distribute all of its available cash (as defined in the partnership agreement) to unitholders of record on the applicable record date within 45 days of the end of each quarter. The board of directors of the general partner declared the following cash distributions to the Partnership’s unitholders for the periods presented:



thousands except per-unit amounts Quarters Ended	Total Quarterly Distribution per Unit		Total Quarterly Cash Distribution		Date of Distribution
2012
March 31	$	0.460	$	46,053	May 2012
June 30	$	0.480	$	52,425	August 2012
September 30	$	0.500	$	56,346	November 2012
2013
March 31	$	0.540	$	70,143	May 2013
June 30	$	0.560	$	79,315	August 2013
September 30 ⁽¹⁾	$	0.580	$	83,986	November 2013


⁽¹⁾	On October 16, 2013, the board of directors of the Partnership’s general partner declared a cash distribution to the Partnership’s unitholders of $0.58 per unit, or $84.0 million in aggregate, including incentive distributions. The cash distribution is payable on November 12, 2013, to unitholders of record at the close of business on October 31, 2013.

4. EQUITY AND PARTNERS’ CAPITAL

Equity offerings. The Partnership completed the following public offerings of its common units during 2012 and 2013:



thousands except unit and per-unit amounts	Common Units Issued ⁽¹⁾	GP Units Issued ⁽²⁾	Price Per Unit		Underwriting Discount and Other Offering Expenses		Net Proceeds
June 2012 equity offering	5,000,000	102,041	$	43.88	$	7,468	$	216,409
May 2013 equity offering	7,015,000	143,163	61.18		13,203		424,733


⁽¹⁾	Includes the issuance of 915,000 common units pursuant to the full exercise of the underwriters’ over-allotment option granted in connection with the May 2013 equity offering.


⁽²⁾	Represents general partner units issued to the general partner in exchange for the general partner’s proportionate capital contribution to maintain its 2.0% general partner interest.

In addition, pursuant to the Partnership’s registration statement filed with the SEC in August 2012 authorizing the issuance of up to an aggregate of $125.0 million of common units (the “Continuous Offering Program”), the Partnership initiated trades totaling 218,750 common units during the three and nine months ended September 30, 2013, at an average price per unit of $58.22, generating gross proceeds of $12.7 million (including the general partner’s proportionate capital contribution and before $0.1 million of invoiced offering expenses), of which $2.7 million had been received as of September 30, 2013.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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4. EQUITY AND PARTNERS’ CAPITAL (CONTINUED)

Common and general partner units. The Partnership’s common units are listed on the New York Stock Exchange under the symbol “WES.”

The following table summarizes common and general partner units issued during the nine months ended September 30, 2013:



	Common Units	General Partner Units	Total
Balance at December 31, 2012	104,660,553	2,135,930	106,796,483
Non-Operated Marcellus Interest acquisition	449,129	9,166	458,295
Long-Term Incentive Plan awards	6,879	140	7,019
May 2013 equity offering	7,015,000	143,163	7,158,163
Continuous Offering Program	43,350	174	43,524
Balance at September 30, 2013	112,174,911	2,288,573	114,463,484

Holdings of Partnership equity. As of September 30, 2013, WGP held 49,296,205 common units, representing a 43.1% limited partner interest in the Partnership, and, through its ownership of the general partner, WGP indirectly held 2,288,573 general partner units, representing a 2.0% general partner interest in the Partnership, and 100% of the Partnership’s IDRs. As of September 30, 2013, Anadarko Marcellus Midstream, L.L.C. (“AMM”), a subsidiary of Anadarko, separately held 449,129 common units, representing a 0.4% limited partner interest in the Partnership. As of September 30, 2013, the public held 62,429,577 common units, representing a 54.5% limited partner interest in the Partnership.

The Partnership’s net income for periods including and subsequent to the acquisition of the Partnership assets (as defined in Note 1) is allocated to the general partner and the limited partners consistent with actual cash distributions, including incentive distributions allocable to the general partner. Undistributed earnings (net income in excess of distributions) or undistributed losses (available cash in excess of net income) are then allocated to the general partner and the limited partners in accordance with their respective ownership percentages.

Basic and diluted net income per common unit are calculated by dividing the limited partners’ interest in net income by the weighted average number of common units outstanding during the period. The common units issued in connection with acquisitions and equity offerings are included on a weighted-average basis for periods they were outstanding.

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5. TRANSACTIONS WITH AFFILIATES

Affiliate transactions. Revenues from affiliates include amounts earned by the Partnership from services provided to Anadarko as well as from the sale of residue, condensate and NGLs to Anadarko. In addition, the Partnership purchases natural gas from an affiliate of Anadarko pursuant to gas purchase agreements. Operating and maintenance expense includes amounts accrued for or paid to affiliates for the operation of the Partnership assets, whether in providing services to affiliates or to third parties, including field labor, measurement and analysis, and other disbursements. A portion of the Partnership’s general and administrative expenses is paid by Anadarko, which results in affiliate transactions pursuant to the reimbursement provisions of the Partnership’s omnibus agreement. Affiliate expenses do not bear a direct relationship to affiliate revenues, and third-party expenses do not bear a direct relationship to third-party revenues. See Note 2 for further information related to contributions of assets to the Partnership by Anadarko.

Cash management. Anadarko operates a cash management system whereby excess cash from most of its subsidiaries’ separate bank accounts is generally swept to centralized accounts. Prior to the Partnership’s acquisition of the Partnership assets, third-party sales and purchases related to such assets were received or paid in cash by Anadarko within its centralized cash management system. Anadarko charged or credited the Partnership interest at a variable rate on outstanding affiliate balances for the periods these balances remained outstanding. The outstanding affiliate balances were entirely settled through an adjustment to net investment by Anadarko in connection with the acquisition of the Partnership assets. Subsequent to the acquisition of Partnership assets from Anadarko, transactions related to such assets are cash-settled directly with third parties and with Anadarko affiliates, and affiliate-based interest expense on current intercompany balances is not charged. Chipeta cash settles its transactions directly with third parties and Anadarko, as well as with the other subsidiaries of the Partnership.

Note receivable from and amounts payable to Anadarko. Concurrently with the closing of the Partnership’s May 2008 IPO, the Partnership loaned $260.0 million to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50%, payable quarterly. The fair value of the note receivable from Anadarko was approximately $301.5 million and $334.8 million at September 30, 2013, and December 31, 2012, respectively. The fair value of the note reflects consideration of credit risk and any premium or discount for the differential between the stated interest rate and quarter-end market interest rate, based on quoted market prices of similar debt instruments. Accordingly, the fair value of the note receivable from Anadarko is measured using Level 2 inputs.

In 2008, the Partnership entered into a five-year $175.0 million term loan agreement with Anadarko, which was repaid in full in June 2012 using the proceeds from the issuance of 4.000% Senior Notes due 2022. See Note 8.

Commodity price swap agreements. The Partnership has commodity price swap agreements with Anadarko to mitigate exposure to commodity price volatility that would otherwise be present as a result of the purchase and sale of natural gas, condensate or NGLs. Notional volumes for each of the commodity price swap agreements are not specifically defined; instead, the commodity price swap agreements apply to the actual volume of natural gas, condensate and NGLs purchased and sold at the Granger, Hilight, Hugoton, Newcastle, MGR and Wattenberg assets, with various expiration dates through December 2016. The commodity price swap agreements do not satisfy the definition of a derivative financial instrument and, therefore, are not required to be measured at fair value. The Partnership has not entered into any new commodity price swap agreements since the fourth quarter of 2011.

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5. TRANSACTIONS WITH AFFILIATES (CONTINUED)

Below is a summary of the fixed price ranges on the Partnership’s outstanding commodity price swap agreements as of September 30, 2013:



per barrel except natural gas	2013				2014				2015				2016
Ethane	$	18.32	−	30.10	$	18.36	−	30.53	$	18.41	−	23.41	$	23.11
Propane	$	45.90	−	55.84	$	46.47	−	53.78	$	47.08	−	52.99	$	52.90
Isobutane	$	60.44	−	77.66	$	61.24	−	75.13	$	62.09	−	74.02	$	73.89
Normal butane	$	53.20	−	68.24	$	53.89	−	66.01	$	54.62	−	65.04	$	64.93
Natural gasoline	$	70.89	−	92.23	$	71.85	−	83.04	$	72.88	−	81.82	$	81.68
Condensate	$	74.04	−	85.84	$	75.22	−	83.04	$	76.47	−	81.82	$	81.68
Natural gas (per MMbtu)	$	3.75	−	6.09	$	4.45	−	6.20	$	4.66	−	5.96	$	4.87

The following table summarizes realized gains and losses on commodity price swap agreements:



	Three Months Ended September 30,						Nine Months Ended September 30,
thousands	2013			2012			2013			2012
Gains (losses) on commodity price swap agreements related to sales:⁽¹⁾
Natural gas sales	$	6,923		$	9,132		$	14,707		$	30,728
Natural gas liquids sales	27,541			25,986			83,049			46,020
Total	34,464			35,118			97,756			76,748
Losses on commodity price swap agreements related to purchases ⁽²⁾	(23,902		)	(25,803		)	(66,613		)	(70,342		)
Net gains (losses) on commodity price swap agreements	$	10,562		$	9,315		$	31,143		$	6,406


⁽¹⁾	Reported in affiliate natural gas, NGLs and condensate sales in the consolidated statements of income in the period in which the related sale is recorded.


⁽²⁾	Reported in cost of product in the consolidated statements of income in the period in which the related purchase is recorded.

Gas gathering and processing agreements. The Partnership has significant gas gathering and processing arrangements with affiliates of Anadarko on a majority of its systems. Approximately 56% and 63% of the Partnership’s gathering, transportation and treating throughput (excluding equity investment throughput and volumes measured in barrels) for the three months ended September 30, 2013 and 2012, respectively, and 58% and 64% for the nine months ended September 30, 2013 and 2012, respectively, was attributable to natural gas production owned or controlled by Anadarko. Approximately 58% and 61% of the Partnership’s processing throughput (excluding equity investment throughput and volumes measured in barrels) for the three months ended September 30, 2013 and 2012, respectively, and 56% and 59% for the nine months ended September 30, 2013 and 2012, respectively, was attributable to natural gas production owned or controlled by Anadarko.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5. TRANSACTIONS WITH AFFILIATES (CONTINUED)

Equipment purchases and sales. The following table summarizes the Partnership’s purchases from and sales to Anadarko of pipe and equipment:



	Nine Months Ended September 30,
	2013		2012		2013		2012
thousands	Purchases				Sales
Consideration ⁽¹⁾	$	6,167	$	18,946	$	82	$	760
Net carrying value	2,039		6,765		34		392
Partners’ capital adjustment	$	4,128	$	12,181	$	48	$	368


⁽¹⁾	Includes a payable of $1.8 million for pipe and equipment purchased in September 2013.

Long-term incentive plan. The general partner awards phantom units under the Western Gas Partners, LP 2008 Long-Term Incentive Plan (“LTIP”), primarily to its independent directors and its Chief Executive Officer. The phantom units awarded to the independent directors vest one year from the grant date, while all other awards are subject to graded vesting over a three-year service period. Compensation expense is recognized over the vesting period and was $0.1 million and $0.4 million for the three and nine months ended September 30, 2013, respectively, and $0.1 million and $0.3 million for the three and nine months ended September 30, 2012, respectively.

Equity incentive plan and Anadarko incentive plans. The Partnership’s general and administrative expenses include equity-based compensation costs allocated by Anadarko to the Partnership for grants made pursuant to (i) the Western Gas Holdings, LLC Equity Incentive Plan, as amended and restated (the “Incentive Plan”) and (ii) the Anadarko Petroleum Corporation 2008 and 2012 Omnibus Incentive Compensation Plans (“Anadarko Incentive Plans”).

The Partnership’s general and administrative expenses included $0.8 million and $2.2 million for the three and nine months ended September 30, 2013, respectively, and $0.8 million and $2.4 million for the three and nine months ended September 30, 2012, respectively, of equity-based compensation expense for awards granted to the executive officers of the general partner and other employees under the Anadarko Incentive Plans, which was allocated to the Partnership by Anadarko.

For the three and nine months ended September 30, 2012, the Partnership’s general and administrative expenses included $8.6 million and $13.9 million, respectively, of compensation expense for grants of Unit Value Rights, Unit Appreciation Rights (“UARs”) and Distribution Equivalent Rights under the Incentive Plan to certain executive officers of the general partner as a component of their compensation, which was allocated to the Partnership by Anadarko. Awards outstanding under the Incentive Plan at September 30, 2012, were valued at $1,053 per UAR. WGP’s IPO in December 2012 resulted in the vesting of all then unvested Incentive Plan awards and the effective termination of the Incentive Plan.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

5. TRANSACTIONS WITH AFFILIATES (CONTINUED)

Summary of affiliate transactions. The following table summarizes affiliate transactions, which include revenue from affiliates, reimbursement of operating expenses and purchases of natural gas:



	Three Months Ended September 30,				Nine Months Ended September 30,
thousands	2013		2012		2013		2012
Revenues ⁽¹⁾	$	217,624	$	180,605	$	603,214	$	519,460
Cost of product ⁽¹⁾	33,753		42,839		97,801		115,603
Operation and maintenance ⁽²⁾	13,469		12,638		41,021		38,040
General and administrative ⁽³⁾	5,867		14,227		17,325		30,811
Operating expenses	53,089		69,704		156,147		184,454
Interest income, net ⁽⁴⁾	4,225		4,225		12,675		12,675
Interest expense ⁽⁵⁾	—		81		—		2,684
Distributions to unitholders ⁽⁶⁾	44,378		25,852		121,493		69,615
Contributions from noncontrolling interest owners ⁽⁷⁾	—		2,148		—		12,588
Distributions to noncontrolling interest owners ⁽⁷⁾	—		1,464		—		6,528


⁽¹⁾	Represents amounts recognized under gathering, treating or processing agreements, and purchase and sale agreements.


⁽²⁾	Represents expenses incurred on and subsequent to the date of the acquisition of the Partnership assets, as well as expenses incurred by Anadarko on a historical basis related to the Partnership assets prior to the acquisition of such assets by the Partnership.

⁽³⁾

Represents general and administrative expense incurred on and subsequent to the date of the Partnership’s acquisition of the Partnership assets, as well as a management services fee for reimbursement of expenses incurred by Anadarko for periods prior to the acquisition of the Partnership assets by the Partnership. These amounts include equity-based compensation expense allocated to the Partnership by Anadarko (see Equity incentive plan and Anadarko incentive plans within this Note 5).


⁽⁴⁾	Represents interest income recognized on the note receivable from Anadarko.

⁽⁵⁾

For the three and nine months ended September 30, 2012, includes interest expense recognized on the note payable to Anadarko (see Note 8) and interest imputed on the reimbursement payable to Anadarko for certain expenditures Anadarko incurred in 2011 related to the construction of the Brasada and Lancaster plants. The Partnership repaid the note payable to Anadarko in June 2012, and repaid the reimbursement payable to Anadarko related to the construction of the Brasada and Lancaster plants in the fourth quarter of 2012. See Note receivable from and amounts payable to Anadarko within this Note 5.


⁽⁶⁾	Represents distributions paid under the partnership agreement.

⁽⁷⁾

As described in Note 2, the Partnership acquired Anadarko’s then remaining 24% membership interest in Chipeta on August 1, 2012, and accounted for the acquisition on a prospective basis. As such, contributions from noncontrolling interest owners and distributions to noncontrolling interest owners subsequent to the acquisition date no longer reflect contributions from or distributions to Anadarko.

Concentration of credit risk. Anadarko was the only customer from whom revenues exceeded 10% of the Partnership’s consolidated revenues for all periods presented on the consolidated statements of income.

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6. PROPERTY, PLANT AND EQUIPMENT

A summary of the historical cost of the Partnership’s property, plant and equipment is as follows:



thousands	Estimated Useful Life	September 30, 2013		December 31, 2012
Land	n/a	$	2,584	$	501
Gathering systems	3 to 47 years	3,610,879		2,911,572
Pipelines and equipment	15 to 45 years	119,278		91,126
Assets under construction	n/a	318,107		422,002
Other	3 to 25 years	10,541		7,191
Total property, plant and equipment		4,061,389		3,432,392
Accumulated depreciation		817,489		714,436
Net property, plant and equipment		$	3,243,900	$	2,717,956

The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. These amounts represent property that is not yet suitable to be placed into productive service as of the respective balance sheet date. See Note 7.

During the second quarter of 2013, the Partnership recognized a $1.0 million impairment primarily related to the cancellation of various capital projects by the third-party operator of the Non-Operated Marcellus Interest.

7. COMPONENTS OF WORKING CAPITAL

A summary of other current assets is as follows:



thousands	September 30, 2013		December 31, 2012
Natural gas liquids inventory	$	2,438	$	1,678
Natural gas imbalance receivables	2,729		1,663
Prepaid insurance	1,934		1,897
Other	1,662		1,760
Total other current assets	$	8,763	$	6,998

A summary of accrued liabilities is as follows:



thousands	September 30, 2013		December 31, 2012
Accrued capital expenditures	$	100,876	$	112,311
Accrued plant purchases	20,738		16,350
Accrued interest expense	16,620		15,868
Short-term asset retirement obligations	1,187		1,711
Short-term remediation and reclamation obligations	609		799
Other	136		612
Total accrued liabilities	$	140,166	$	147,651

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(UNAUDITED)

8. DEBT AND INTEREST EXPENSE

The following table presents the Partnership’s outstanding debt as of September 30, 2013, and December 31, 2012:



	September 30, 2013						December 31, 2012
thousands	Principal		Carrying Value		Fair Value ⁽¹⁾		Principal		Carrying Value		Fair Value ⁽¹⁾
4.000% Senior Notes due 2022	$	670,000	$	673,363	$	651,580	$	670,000	$	673,617	$	669,928
5.375% Senior Notes due 2021	500,000		495,042		531,210		500,000		494,661		499,946
Revolving credit facility	100,000		100,000		100,000		—		—		—
2.600% Senior Notes due 2018	250,000		249,705		249,134		—		—		—
Total debt outstanding	$	1,520,000	$	1,518,110	$	1,531,924	$	1,170,000	$	1,168,278	$	1,169,874


⁽¹⁾	Fair value is measured using Level 2 inputs.

Debt activity. The following table presents the debt activity of the Partnership for the nine months ended September 30, 2013:



thousands	Carrying Value
Balance as of December 31, 2012	$	1,168,278
Revolving credit facility borrowings	595,000
Repayments of revolving credit facility	(495,000		)
Issuance of 2.600% Senior Notes due 2018	250,000
Other	(168		)
Balance as of September 30, 2013	$	1,518,110

Senior Notes. In August 2013, the Partnership completed the offering of $250.0 million aggregate principal amount of 2.600% Senior Notes due 2018 (the “2018 Notes”) at a price to the public of 99.879% of the face amount. Including the effects of the issuance and underwriting discounts, the effective interest rate of the 2018 Notes is 2.806%. Interest will be paid semi-annually on February 15 and August 15 of each year, commencing on February 15, 2014. The 2018 Notes will mature on August 15, 2018, unless redeemed, in whole or in part, prior to maturity. Proceeds (net of underwriting discount of $1.5 million, original issue discount and debt issuance costs) were used to repay amounts then outstanding under the Partnership’s $800.0 million senior unsecured revolving credit facility (“RCF”).

In June 2012, the Partnership completed the offering of $520.0 million aggregate principal amount of 4.000% Senior Notes due 2022 at a price to the public of 99.194% of the face amount. In October 2012, the Partnership issued an additional $150.0 million in aggregate principal amount of 4.000% Senior Notes due 2022 at a price to the public of 105.178% of the face amount. The October 2012 notes and the June 2012 notes were issued under the same indenture and are considered a single class of securities, collectively referred to as the “2022 Notes.”

In May 2011, the Partnership completed the offering of $500.0 million aggregate principal amount of 5.375% Senior Notes due 2021 (the “2021 Notes”) at a price to the public of 98.778% of the face amount.

At September 30, 2013, the Partnership was in compliance with all covenants under the indentures governing the 2021 Notes, 2022 Notes and the 2018 Notes.

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8. DEBT AND INTEREST EXPENSE (CONTINUED)

Interest rate agreements. In May 2012, the Partnership entered into U.S. Treasury Rate lock agreements to mitigate the risk of rising interest rates prior to the issuance of the 2022 Notes. The Partnership settled the rate lock agreements simultaneously with the June 2012 offering of the 2022 Notes, realizing a loss of $1.7 million, which is included in other income (expense), net in the consolidated statements of income.

Note payable to Anadarko. In 2008, the Partnership entered into a five-year $175.0 million term loan agreement with Anadarko. The interest rate was fixed at 2.82% prior to June 2012 when the note payable to Anadarko was repaid in full with proceeds from the June 2012 offering of the 2022 Notes.

Revolving credit facility. At September 30, 2013, and December 31, 2012, the interest rate on the RCF was 1.68% and 1.71%, respectively. The Partnership is required to pay a quarterly facility fee currently ranging from 0.20% to 0.35% of the commitment amount (whether used or unused), based upon the Partnership’s senior unsecured debt rating. The facility fee rate was 0.25% at September 30, 2013, and December 31, 2012.

At September 30, 2013, the Partnership had $100.0 million of outstanding borrowings, $12.8 million in outstanding letters of credit issued and $687.2 million available for borrowing under the RCF. At September 30, 2013, the Partnership was in compliance with all covenants under the RCF.

The 2021 Notes, the 2022 Notes, the 2018 Notes and obligations under the RCF are recourse to the Partnership’s general partner, and as of December 31, 2012, the Partnership’s general partner was indemnified by a wholly owned subsidiary of Anadarko, Western Gas Resources, Inc. (“WGRI”), against any claims made against the general partner under the 2022 Notes, the 2021 Notes and/or the RCF.

In connection with the acquisition of the Non-Operated Marcellus Interest in March 2013, the general partner and another wholly owned subsidiary of Anadarko entered into an indemnification agreement (the “2013 Indemnification Agreement”) whereby such subsidiary agreed to indemnify the Partnership’s general partner for any recourse liability it may have for RCF borrowings, or other debt financing, attributable to the acquisitions of the Non-Operated Marcellus Interest or the Anadarko-Operated Marcellus Interest. As of September 30, 2013, the 2013 Indemnification Agreement applied to the $250.0 million of 2018 Notes. The Partnership’s general partner and WGRI also amended and restated the existing indemnity agreement between them to reduce the amount for which WGRI would indemnify the Partnership’s general partner by an amount equal to any amounts payable to the Partnership’s general partner under the 2013 Indemnification Agreement.

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WESTERN GAS PARTNERS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

8. DEBT AND INTEREST EXPENSE (CONTINUED)

Interest expense. The following table summarizes the amounts included in interest expense:



	Three Months Ended September 30,						Nine Months Ended September 30,
thousands	2013			2012			2013			2012
Third parties
Interest expense on long-term debt	$	14,994		$	11,919		$	43,783		$	28,036
Amortization of debt issuance costs and commitment fees ⁽¹⁾	1,135			1,201			3,252			3,225
Capitalized interest	(3,111		)	(2,224		)	(9,552		)	(3,827		)
Total interest expense – third parties	13,018			10,896			37,483			27,434
Affiliates
Interest expense on note payable to Anadarko ⁽²⁾	—			—			—			2,440
Interest expense on affiliate balances ⁽³⁾	—			81			—			244
Total interest expense – affiliates	—			81			—			2,684
Interest expense	$	13,018		$	10,977		$	37,483		$	30,118

⁽¹⁾

For the three and nine months ended September 30, 2013, includes $0.3 million and $0.8 million, respectively, of amortization of (i) the original issue discount for the June 2012 offering of the 2022 Notes, partially offset by the original issue premium for the October 2012 offering of the 2022 Notes, (ii) original issue discount for the 2021 Notes and 2018 Notes and (iii) underwriters’ fees. For the three and nine months ended September 30, 2012, includes $0.4 million and $0.8 million, respectively, of amortization of the original issue discount and underwriters’ fees for the 2022 Notes issued in June 2012 and the 2021 Notes.


⁽²⁾	In June 2012, the note payable to Anadarko was repaid in full. See Note payable to Anadarko within this Note 8.


⁽³⁾	Imputed interest expense on the reimbursement payable to Anadarko for certain expenditures Anadarko incurred in 2011 related to the construction of the Brasada and Lancaster plants. In the fourth quarter of 2012, the Partnership repaid the reimbursement payable to Anadarko associated with the construction of the Brasada and Lancaster plants.

9. COMMITMENTS AND CONTINGENCIES

Litigation and legal proceedings. In March 2011, DCP Midstream LP (“DCP”) filed a lawsuit against Anadarko and others, including a Partnership subsidiary, Kerr-McGee Gathering LLC, in Weld County District Court (the “Court”) in Colorado, alleging that Anadarko and its affiliates diverted gas from DCP’s gathering and processing facilities in breach of certain dedication agreements. In addition to various claims against Anadarko, DCP is claiming unjust enrichment and other damages against Kerr-McGee Gathering LLC, the entity which holds the Wattenberg assets. Anadarko countersued DCP asserting that DCP has not properly allocated values and charges to Anadarko for the gas that DCP gathers and/or processes, and seeks a judgment that DCP has no valid gathering or processing rights to much of the gas production it is claiming, in addition to other claims.

In July 2011, the Court denied the defendants’ motion to dismiss without ruling on the merits and the case is in the discovery phase. Trial is set for April 2014. Management does not believe the outcome of this proceeding will have a material effect on the Partnership’s financial condition, results of operations or cash flows. The Partnership intends to vigorously defend this litigation. Furthermore, without regard to the merit of DCP’s claims, management believes that the Partnership has adequate contractual indemnities covering the claims against it in this lawsuit.

In addition, from time to time, the Partnership is involved in legal, tax, regulatory and other proceedings in various forums regarding performance, contracts and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which a final disposition could have a material adverse effect on the Partnership’s financial condition, results of operations or cash flows.

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WESTERN GAS PARTNERS, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

9. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Other commitments. The Partnership has short-term payment obligations, or commitments, related to its capital spending programs, as well as those of its unconsolidated affiliates. As of September 30, 2013, the Partnership had unconditional payment obligations for services to be rendered or products to be delivered in connection with its capital projects of approximately $61.3 million, the majority of which is expected to be paid in the next twelve months. These commitments relate primarily to the continued construction of the Lancaster plant and an expansion project at the Fort Lupton compressor station in the Wattenberg system. In addition, as of September 30, 2013, and in conjunction with the Mont Belvieu JV acquisition, the Partnership is committed to fund 25%, or approximately $13.6 million, of the total remaining estimated net project cost to complete the construction of the fractionation facilities over the next six months (see Note 2).

Lease commitments. Anadarko, on behalf of the Partnership, has entered into lease agreements for corporate offices, shared field offices and a warehouse supporting the Partnership’s operations. The leases for the corporate offices and shared field offices extend through 2017 and 2018, respectively, and the lease for the warehouse extends through February 2014 and includes an early termination clause.

Rent expense associated with the office, warehouse and equipment leases was $0.6 million and $2.0 million for the three and nine months ended September 30, 2013, respectively, and $0.8 million and $2.3 million for the three and nine months ended September 30, 2012, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion analyzes our financial condition and results of operations and should be read in conjunction with the consolidated financial statements and notes to consolidated financial statements, which are included under Part I, Item 1 of this quarterly report, as well as our historical consolidated financial statements, and the notes thereto, included in our 2012 Form 10-K (which were recast in our Current Report on Form 8-K, as filed with the Securities and Exchange Commission, or “SEC,” on May 13, 2013, to reflect the results of the acquisition of the Non-Operated Marcellus Interest), and our other public filings and press releases. Unless the context otherwise requires, references to “we,” “us,” “our,” the “Partnership” or “Western Gas Partners” refer to Western Gas Partners, LP and its subsidiaries. Our general partner, Western Gas Holdings, LLC (the “general partner” or “GP”), is owned by Western Gas Equity Partners, LP (“WGP”), a consolidated subsidiary of Anadarko Petroleum Corporation. Western Gas Equity Holdings, LLC is WGP’s general partner and a wholly owned subsidiary of Anadarko Petroleum Corporation. “Anadarko” refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding the Partnership and our general partner, and “affiliates” refers to wholly owned and partially owned subsidiaries of Anadarko excluding the Partnership, and includes the interests in Fort Union Gas Gathering, LLC, (“Fort Union”), White Cliffs Pipeline, LLC (“White Cliffs”), Rendezvous Gas Services, LLC (“Rendezvous”), and a joint venture, Enterprise EF78 LLC (“Mont Belvieu JV”). “Equity investment throughput” refers to our 14.81% share of Fort Union and 22% share of Rendezvous gross volumes.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made in this report, and may from time to time otherwise make in other public filings, press releases and discussions by management, forward-looking statements concerning our operations, economic performance and financial condition. These statements can be identified by the use of forward-looking terminology including “may,” “will,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” or other similar words. These statements discuss future expectations, contain projections of results of operations or financial condition or include other “forward-looking” information. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will be realized.

These forward-looking statements involve risks and uncertainties. Important factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following risks and uncertainties:


•	our ability to pay distributions to our unitholders;


•	our assumptions about the energy market;


•	future throughput, including Anadarko’s production, which is gathered or processed by or transported through our assets;


•	operating results;


•	competitive conditions;


•	technology;


•	availability of capital resources to fund acquisitions, capital expenditures and other contractual obligations, and our ability to access those resources from Anadarko or through the debt or equity capital markets;


•	supply of, demand for, and the price of, oil, natural gas, NGLs and related products or services;


•	weather;


•	inflation;


•	availability of goods and services;

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•	general economic conditions, either internationally or domestically or in the jurisdictions in which we are doing business;


•	changes in regulations at the federal, state and local level or the inability to timely obtain or maintain permits that could affect our and our customers’ activities; environmental risks; regulations by the Federal Energy Regulatory Commission (“FERC”); and liability under federal and state laws and regulations;


•	legislative or regulatory changes affecting our status as a partnership for federal income tax purposes;


•	changes in the financial or operational condition of Anadarko;


•	changes in Anadarko’s capital program, strategy or desired areas of focus;


•	our commitments to capital projects;


•	ability to utilize our revolving credit facility (“RCF”);


•	creditworthiness of Anadarko or our other counterparties, including financial institutions, operating partners, and other parties;


•	our ability to repay debt;


•	our ability to mitigate commodity price risks inherent in our percent-of-proceeds and keep-whole contracts;


•	conflicts of interest among us, our general partner, WGP and its general partner, and affiliates, including Anadarko;


•	our ability to maintain and/or obtain rights to operate our assets on land owned by third parties;


•	our ability to acquire assets on acceptable terms;


•	non-payment or non-performance of Anadarko or other significant customers, including under our gathering, processing and transportation agreements and our $260.0 million note receivable from Anadarko;


•	timing, amount and terms of future issuances of equity and debt securities; and


•	other factors discussed below, in “Risk Factors” included in our 2012 Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates,” in our quarterly reports on Form 10-Q and elsewhere in our other public filings and press releases.

The risk factors and other factors noted throughout or incorporated by reference in this report could cause our actual results to differ materially from those contained in any forward-looking statement. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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EXECUTIVE SUMMARY

We are a growth-oriented Delaware master limited partnership organized by Anadarko to own, operate, acquire and develop midstream energy assets. We currently own assets located in East, West and South Texas, the Rocky Mountains (Colorado, Utah and Wyoming), north-central Pennsylvania, and the Mid-Continent (Kansas and Oklahoma) and are engaged in the business of gathering, processing, compressing, treating and transporting natural gas, condensate, NGLs and crude oil for Anadarko and its consolidated subsidiaries, as well as for third-party producers and customers. As of September 30, 2013, we owned and operated thirteen natural gas gathering systems, eight natural gas treating facilities, eight natural gas processing facilities, three NGL pipelines and three natural gas pipelines. In addition, we had interests in five non-operated natural gas gathering systems, one operated natural gas gathering system and three operated natural gas processing facilities, with separate interests accounted for under the equity method in two natural gas gathering systems, a crude oil pipeline and two NGL fractionators currently under construction. We also had the Lancaster processing facility under construction in Northeast Colorado at the end of the third quarter of 2013.

Significant financial highlights during the first nine months of 2013 included the following:


•	We issued $250.0 million aggregate principal amount of 2.600% Senior Notes due 2018. Net proceeds were used to repay amounts then outstanding under our revolving credit facility. See Liquidity and Capital Resources within this Item 2 for additional information.


•	We completed construction and commenced operations in June 2013 of the 200 MMcf/d Brasada gas processing plant and related facilities in the Eagleford shale area of South Texas.


•	We announced a project to expand the processing capacity at our Lancaster plant, which is currently under construction, by another 300 MMcf/d with a second cryogenic processing train.


•	We completed the acquisition of a 25% interest in the Mont Belvieu JV, which is constructing NGL fractionators located in Mont Belvieu, Texas, and the acquisition of Overland Trail Transmission, LLC, which owns and operates an intrastate pipeline connecting our Red Desert and Granger complexes in southwestern Wyoming. See Acquisitions below.

•

We issued 7,058,350 common units to the public, generating net proceeds of $427.3 million, including the general partner’s proportionate capital contribution to maintain its 2.0% general partner interest. Net proceeds were used to repay a portion of the amount outstanding under our revolving credit facility, with the remaining net proceeds used for general partnership purposes, including the funding of capital expenditures.


•	We completed the acquisition of Anadarko’s 33.75% interest (non-operated) in the Liberty and Rome gas gathering systems in north-central Pennsylvania and the acquisition from a third party of a 33.75% interest (operated by Anadarko) in each of the Larry’s Creek, Seely and Warrensville gas gathering systems, also in north-central Pennsylvania. See Acquisitions below.


•	We raised our distribution to $0.58 per unit for the third quarter of 2013, representing a 4% increase over the distribution for the second quarter of 2013, a 16% increase over the distribution for the third quarter of 2012, and our eighteenth consecutive quarterly increase.

Significant operational highlights during the first nine months of 2013 included the following:


•	Throughput attributable to Western Gas Partners, LP totaled 3,285 MMcf/d and 3,111 MMcf/d for the three and nine months ended September 30, 2013, respectively, representing a 16% and a 13% increase, respectively, compared to the same periods in 2012.


•	Gross margin (total revenues less cost of product) attributable to Western Gas Partners, LP averaged $0.59 per Mcf and $0.57 per Mcf for the three and nine months ended September 30, 2013, respectively, representing a 9% and 6% increase, respectively, compared to the same periods in 2012.

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ACQUISITIONS

Acquisitions. The following table presents our acquisitions during 2012 and 2013, and identifies the funding sources for such acquisitions.



thousands except unit and percent amounts	Acquisition Date	Percentage Acquired		Borrowings		Cash On Hand		Common Units Issued	GP Units Issued
MGR ⁽¹⁾	01/13/2012	100	%	$	299,000	$	159,587	632,783	12,914
Chipeta ⁽²⁾	08/01/2012	24	%	—		128,250		151,235	3,086
Non-Operated Marcellus Interest ⁽³⁾	03/01/2013	33.75	%	250,000		215,500		449,129	—
Anadarko-Operated Marcellus Interest ⁽⁴⁾	03/08/2013	33.75	%	133,500		—		—	—
Mont Belvieu JV ⁽⁵⁾	06/05/2013	25	%	—		78,129		—	—
OTTCO ⁽⁶⁾	09/03/2013	100	%	27,500		—		—	—

⁽¹⁾

The assets acquired from Anadarko consist of (i) the Red Desert complex, which is located in the greater Green River Basin in southwestern Wyoming, and includes the Patrick Draw processing plant with a capacity of 125 MMcf/d, the Red Desert processing plant with a capacity of 48 MMcf/d, 1,295 miles of gathering lines, and related facilities, (ii) a 22% interest in Rendezvous, which owns a 338-mile mainline gathering system serving the Jonah and Pinedale Anticline fields in southwestern Wyoming, and (iii) certain additional midstream assets and equipment. These assets are collectively referred to as the “MGR assets” and the acquisition as the “MGR acquisition.”

⁽²⁾

We acquired Anadarko’s then remaining 24% membership interest in Chipeta (as described in Note 1—Description of Business and Basis of Presentation in the Notes to Consolidated Financial Statements under Item 1 of this Form 10-Q). We received distributions related to the additional interest beginning July 1, 2012. This transaction brought our total membership interest in Chipeta to 75%. The remaining 25% membership interest in Chipeta held by a third-party member is reflected as noncontrolling interests in our consolidated financial statements for all periods presented.

⁽³⁾

We acquired Anadarko’s 33.75% interest (non-operated) in the Liberty and Rome gas gathering systems, serving production from the Marcellus shale in north-central Pennsylvania. The interest acquired is referred to as the “Non-Operated Marcellus Interest” and the acquisition as the “Non-Operated Marcellus Interest acquisition.” In connection with the issuance of the common units, our general partner purchased 9,166 general partner units for consideration of $0.5 million in order to maintain its 2.0% general partner interest in us.

⁽⁴⁾

The interest acquired from a third party consisted of a 33.75% interest in each of the Larry’s Creek, Seely and Warrensville gas gathering systems, which are operated by Anadarko and serve production from the Marcellus shale in north-central Pennsylvania. The interest acquired is referred to as the “Anadarko-Operated Marcellus Interest” and the acquisition as the “Anadarko-Operated Marcellus Interest acquisition.” See Note 2—Acquisitions in the Notes to Consolidated Financial Statements under Item 1 of this Form 10-Q.

⁽⁵⁾

The acquisition from a third party consisted of a 25% interest in Enterprise EF78 LLC, an entity formed to design, construct, and own two fractionators located in Mont Belvieu, Texas. The interest acquired is accounted for under the equity method of accounting and is referred to as the “Mont Belvieu JV” and the acquisition as the “Mont Belvieu JV acquisition.” See Note 2—Acquisitions in the Notes to Consolidated Financial Statements under Item 1 of this Form 10-Q.

⁽⁶⁾

We acquired Overland Trail Transmission, LLC (“OTTCO”), a Delaware limited liability company, from a third party. OTTCO owns and operates an intrastate pipeline which connects our Red Desert and Granger complexes in southwestern Wyoming. The assets acquired are referred to as the “OTTCO pipeline” and the acquisition as the “OTTCO acquisition.” See Note 2—Acquisitions in the Notes to Consolidated Financial Statements under Item 1 of this Form 10-Q.

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Presentation of Partnership assets. References to the “Partnership assets” refer collectively to the assets owned by us, as of September 30, 2013. Because Anadarko controls us through its ownership and control of WGP, which owns our general partner, each of our acquisitions of assets from Anadarko has been considered a transfer of net assets between entities under common control. As such, the Partnership assets we acquired from Anadarko were initially recorded at Anadarko’s historic carrying value, which did not correlate to the total acquisition price paid by us (see Note 2—Acquisitions in the Notes to Consolidated Financial Statements under Item 1 of this Form 10-Q). Further, after an acquisition of assets from Anadarko, we may be required to recast our financial statements to include the activities of such assets as of the date of common control.

The historical financial statements previously filed with the SEC have been recast in this Form 10-Q to include the results attributable to the Non-Operated Marcellus Interest as if we owned such assets for all periods presented. The consolidated financial statements for periods prior to our acquisition of the Partnership assets from Anadarko, including the Non-Operated Marcellus Interest, have been prepared from Anadarko’s historical cost-basis accounts and may not necessarily be indicative of the actual results of operations that would have occurred if we had owned the assets during the periods reported.

EQUITY OFFERINGS

Equity offerings. We completed the following public equity offerings during 2012 and 2013:



thousands except unit and per-unit amounts	Common Units Issued ⁽¹⁾	GP Units Issued ⁽²⁾	Price Per Unit		Underwriting Discount and Other Offering Expenses		Net Proceeds
June 2012 equity offering	5,000,000	102,041	$	43.88	$	7,468	$	216,409
May 2013 equity offering	7,015,000	143,163	61.18		13,203		424,733


⁽¹⁾	Includes the issuance of 915,000 common units pursuant to the full exercise of the underwriters’ over-allotment option granted in connection with the May 2013 equity offering.


⁽²⁾	Represents general partner units issued to the general partner in exchange for the general partner’s proportionate capital contribution to maintain its 2.0% general partner interest.

Other equity offerings. Pursuant to our registration statement filed with the SEC in August 2012 authorizing the issuance of up to an aggregate of $125.0 million of common units (the “Continuous Offering Program”), we initiated trades totaling 218,750 common units during the three and nine months ended September 30, 2013, at an average price per unit of $58.22, generating gross proceeds of $12.7 million (including our general partner’s proportionate capital contribution and before $0.1 million of invoiced offering expenses), of which $2.7 million had been received as of September 30, 2013.

On December 12, 2012, in connection with the closing of the WGP initial public offering (“IPO”), we sold 8,722,966 common units to WGP and 178,019 general partner units to our general partner, in each case at a price of $46.00 per unit, pursuant to a unit purchase agreement among us, our general partner and WGP. The sale of common units and general partner units resulted in aggregate proceeds to us of $409.4 million. We used the net proceeds from this offering for general partnership purposes, including the funding of capital expenditures.

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RESULTS OF OPERATIONS

OPERATING RESULTS

The following tables and discussion present a summary of our results of operations:



	Three Months Ended September 30,						Nine Months Ended September 30,
thousands	2013			2012			2013			2012
Gathering, processing and transportation of natural gas and natural gas liquids	$	130,781		$	93,933		$	343,471		$	278,966
Natural gas, natural gas liquids and condensate sales	141,326			136,106			402,616			386,818
Equity income and other, net	5,894			4,695			16,787			13,936
Total revenues ⁽¹⁾	278,001			234,734			762,874			679,720
Total operating expenses ⁽¹⁾	187,813			173,422			538,523			491,907
Operating income	90,188			61,312			224,351			187,813
Interest income, net – affiliates	4,225			4,225			12,675			12,675
Interest expense	(13,018		)	(10,977		)	(37,483		)	(30,118		)
Other income (expense), net	439			522			1,612			(287		)
Income before income taxes	81,834			55,082