Fitch Rates Western Gas Partners' $500MM Senior Unsecured Notes Offering 'BBB-'

NEW YORK--()--Fitch Ratings has assigned a 'BBB-' rating to Western Gas Partners, LP (WES; IDR 'BBB-'; Stable Outlook) offering of senior unsecured notes due 2044 and reopening of notes due 2018. The $100 million of senior notes due 2018 are being offered as additional senior notes under an indenture pursuant to which Western Gas Partners issued 2.60% senior notes due 2018 on Aug. 14, 2013. These additional senior notes due 2018 are identical to, and will be treated as a single class of debt securities with, the previously issued senior notes due 2018 under the indenture governing such notes. Proceeds from the offering are expected to be used to repay borrowings under its credit facility and for general partnership purposes.

On March 3, 2014 WES completed its announced acquisition of a 20% interest in Texas Express Pipeline LLC and Texas Express Gathering LLC, and 33.33% interest in Front Range Pipeline LLC from its ultimate sponsor and owner of its general partner, Anadarko Petroleum Corporation (APC; IDR 'BBB-', Stable Outlook). Consideration paid for the assets consisted of $356.3 million and 308,490 common units.

WES' ratings reflect its conservative financial profile that is supported by fee-based and fixed-priced contracts that limit commodity price exposure, as well as the strong credit linkage with its ultimate sponsor, APC. WES is a growth-oriented MLP formed by APC in 2008 to own, operate, acquire and develop midstream energy assets, including gathering, processing, compressing, treating, and transporting natural gas, condensate, natural gas liquids (NGL) and crude. APC controls WES through its ownership and control of Western Gas Equity Partners, LP (WGP) which owns WES' 2% general partner interest, all of WES' incentive distribution rights and a 46% limited partner interest.

KEY RATINGS DRIVERS:

Close linkage to Anadarko: WES' management and operations are strongly tied to APC, a large and diverse exploration and production company with a significant inventory of midstream assets that are potentially available for future dropdowns. APC volumes represent the majority of WES' throughput and are generally under fee based and/or fixed price contracts. Additionally, Anadarko acts as a hedging counterparty for non-APC volumes under percent of proceeds (POP) and keep-whole contracts with third parties at formerly APC-owned facilities.

Favorable Contract Mix and Managed Commodity Exposure: WES' contract mix is largely fee-based/fixed priced or hedged providing significant gross margin and cash flow stability. Unlike many of its competitors, WES is able to hedge POP and keep-whole exposure with product specific hedges as opposed to proxy hedges that many others use. This limits WES' exposure to breakdowns in the correlations between gas, crude and NGLs. Volume risk is still a concern as lower throughput can be driven by reduced drilling activity by producers in a low commodity price environment and/or due to bypass of NGL processing facilities when natural gas prices are very high.

Strategic Location of Assets: WES' assets are focused primarily within liquids-rich basins which are strategic for APC and other producers given the value of the NGLs in the current low gas price environment. WES' 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), and include gathering, processing, compressing, treating, and transporting natural gas, condensate, NGLs and crude.

Conservative Financial Policies: WES' financial profile is fairly conservative with a targeted 50/50 debt to equity capital structure. Fitch expects debt to operating EBITDA between 3.5 to 4.0 times (x) and distribution coverage between 1.0x to 1.2x for 2014. Should leverage be forecast to exceed 4.5x on a sustained basis Fitch would likely consider a negative ratings action. Similarly, if distribution coverage should fall below 1.0x on a sustained basis Fitch would consider a negative ratings action. Liquidity is adequate with roughly $800 million in availability under WES' $1.2 billion revolving credit facility as March 7, 2014.

RATINGS SENSITIVITIES

Positive: Future developments that may, individually or collectively, lead to positive rating action include:

--Positive ratings action at APC.

Negative: Future developments that may, individually or collectively, lead to negative rating action include:

--Negative ratings action at APC;

--Negative change in sponsor support, contract mix, or in hedging arrangements;

--Debt/EBITDA on a sustained basis above 4.5x; distribution coverage below 1.0x.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology', Aug. 5, 2013;

--'Parent and Subsidiary Rating Linkage', Aug. 5, 2013;

--'2014 Outlook: Midstream Services', Dec. 10, 2013;

--'NGL Pipelines: Northeast Surplus Drives New Projects', Dec. 20, 2013;

--'Credit Considerations for the GP/LP Relationship', Nov. 6, 2013.

Applicable Criteria and Related Research:

NGL Pipelines: Northeast Surplus Drives New Projects

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=727520

Credit Considerations for the GP/LP Relationship

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=721999

Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139

2014 Outlook: Midstream Services

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726064

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=823482

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Contacts

Fitch Ratings
Primary Analyst
Peter Molica
Senior Director
+1-212-908-0288
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Kathleen Connelly
Director
+1-212-908-0290
or
Committee Chairperson
Mark C. Sadeghian, CFA
Senior Director
+1-312-368-2090
or
Media Relations:
Alyssa Castelli, +1-212-908-0540 (New York)
alyssa.castelli@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Peter Molica
Senior Director
+1-212-908-0288
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Kathleen Connelly
Director
+1-212-908-0290
or
Committee Chairperson
Mark C. Sadeghian, CFA
Senior Director
+1-312-368-2090
or
Media Relations:
Alyssa Castelli, +1-212-908-0540 (New York)
alyssa.castelli@fitchratings.com