Item 1.01 Entry into a Material Definitive Agreement.
On May 22, 2017, Western Gas Partners, LP (“WES”), which is controlled by Western Gas Equity Partners, LP (“WGP”) through WGP’s ownership of WES’s general partner, and Anadarko Petroleum Corporation (“Anadarko”) agreed to settle WES’s deferred purchase price obligation for Delaware Basin JV Gathering LLC (“DBJV”) for $37.3 million (the “Accelerated Payment”).
Delaware Basin Midstream, LLC, a wholly owned subsidiary of WES (“DBM”), acquired DBJV in March 2015 pursuant to that certain Purchase and Sale Agreement, dated March 2, 2015 (the “PSA”), by and among WES, Anadarko, WGR Asset Holding Company LLC, and DBM. At that time, DBJV held a 50% interest in a 403-mile gathering system and related facilities (the “DBJV Gathering System”) located in the Delaware Basin in Loving, Ward, Winkler and Reeves Counties, Texas.
Pursuant to the PSA, the consideration to be paid by WES for DBJV (the “Deferred Payment”) consisted of a one-time cash payment on March 31, 2020, equal to (a) eight (8) multiplied by the average of a 50% share in the Net Earnings (as defined in the PSA) of the DBJV Gathering System for the calendar years 2018 and 2019, less (b) 50% of all capital expenditures incurred for the DBJV Gathering System between March 1, 2015, and February 29, 2020. The parties to the PSA agreed to replace the Deferred Payment with the Accelerated Payment pursuant to Amendment No. 1 to the PSA, dated May 22, 2017 (the “Amendment”).
The above summary is qualified in its entirety by reference to the Amendment, a copy of which is filed as Exhibit 2.1 hereto.
Relationships
The terms of the Amendment were approved by the board of directors (the “Board”) of WES’s general partner. The terms of the Amendment were also approved by the Board’s independent special committee.
Anadarko indirectly owns 100% of the general partner of WGP and 81.6% of WGP’s limited partner interests. WGP owns WES’s general partner, which holds (x) all of the outstanding general partner units of WES, representing a 1.5% general partner interest in WES, and (y) all of the incentive distribution rights in WES, which entitle WES’s general partner to specified increasing percentages of cash distributions as WES’s per-unit cash distributions increase. WGP and other Anadarko subsidiaries, in aggregate, own 52,143,426 WES common units, representing an aggregate 31.1% limited partner interest in WES, and 12,743,318 WES Class C units, representing an aggregate 7.6% limited partner interest in WES, based on the number of common, general partner and Class C units outstanding as of May 22, 2017.