Western Gas Partners to increase earnings, distribution, and capex

Market Realist

Must-know: Analyzing Western Gas Partners' 1Q14 earnings (Part 3 of 6)

(Continued from Part 2)

Outlook for 2014: A surge in organic growth capital and EBITDA

Western Gas Partners (WES) has increased its organic growth capital significantly in the past two years. In 2014, the company expects to increase capital expenditure to between $650 million and $700 million. Also in 2014, it expects to increase its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) to between $600 million and $650 million. The forecast for 2014 includes the construction of a second train at WES’s Lancaster facility and well connections in the DJ Basin and Marcellus Shale. The company also expects to achieve a minimum distribution growth of 15%.

In its 10-K for 2013, WES wrote, “We estimate our total capital expenditures for the year ended December 31, 2014, including our 75% share of Chipeta’s capital expenditures and excluding acquisitions, to be $614 million to $664 million and our maintenance capital expenditures to be 9% to 11% of total capital expenditures. Expected 2014 projects include the construction of a second train at our Lancaster plant and continued well connections in the Denver-Julesburg basin and the Marcellus shale. Our future expansion capital expenditures may vary significantly from period to period based on the investment opportunities available to us, which are dependent, in part, on the drilling activities of Anadarko and third-party producers. We expect to fund future capital expenditures from cash flows generated from our operations, interest income from our note receivable from Anadarko, borrowings under our RCF, the issuance of additional partnership units or debt offerings.”

WES kept its guidance for 2014 results unchanged in 1Q14 from what it had last disclosed with the 2013 annual earnings in February 2014. The company maintained distribution growth of no less than 15% in WES. However, the outlook didn’t include the effect of any future acquisition. The outlook would depend on and could be updated in the event of an acquisition.

The stock price of WES has gone up 3.8%, from $68.90 since the day of its latest earnings on May 6, 2014, to $71.96 on May 20, 2014. In the past year, the company’s stock price has gone up ~21%.

Western Gas Partners (WES) is a master limited partnership operating in the midstream energy space. WES’s general partner is owned by Anadarko Petroleum Corporation (APC). WES is a component of the Alerian MLP ETF (AMLP). APC is part of the Energy Select Sector SPDR (XLE) and SPDR S&P Oil & Gas Exploration & Production (XOP) ETFs.

Continue to Part 4

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