WGR Western Gas Res

DENVER, Aug. 8 /PRNewswire-FirstCall/ -- Western Gas Resources, Inc. (NYSE:WGR) today announced that for the quarter ended June 30, 2006, net income increased 13 percent to $42.4 million, or earnings of $0.55 per share of common stock. This compares to net income of $37.6 million, or earnings of $0.50 per share of common stock, for the same period in 2005. For the six months ended June 30, 2006, net income increased 82 percent to $104.2 million, or earnings of $1.37 per share of common stock. This compares to net income of $57.3 million, or earnings of $0.76 per share of common stock, for the same period in 2005. Earnings per share of common stock for all periods are presented on a fully-diluted basis. For the quarter ended June 30, 2006, revenues were $787.2 million, EBITDA (earnings before interest, taxes, depreciation and amortization) was $109.6 million and cash flow before working capital adjustments was $109.0 million. For the six months ended June 30, 2006, revenues were $1.8 billion, EBITDA (earnings before interest, taxes, depreciation and amortization) was $244.3 million and cash flow before working capital adjustments was $224.6 million. See the tables below for a reconciliation of EBITDA and cash flow before working capital adjustments. The financial results for all periods included the effect of non-cash mark-to-market changes in the value of forward transactions related to the Company's marketing activities and basis hedges for sales of the Company's equity natural gas. Pre-tax earnings for the quarter ended June 30, 2006 include a gain of $1.3 million from such non-cash items and pre-tax earnings for the quarter ended June 30, 2005 include a gain of $11.1 million for similar items. Pre-tax earnings for the six months ended June 30, 2006 include a gain of $5.5 million from such non-cash items and pre-tax earnings for the six months ended June 30, 2005 include a loss of $17.6 million for similar items. The impact of non-cash mark-to-market changes will vary depending on the change in the forward price of natural gas related to the anticipated withdrawal of inventory from storage or the changes in the relative prices at various delivery points. Volumes and prices. Net production was 17.7 billion cubic feet equivalent ("Bcfe") and averaged 194 million cubic feet equivalent per day ("MMcfed") in the second quarter of 2006, representing a 17 percent increase compared to the same period in 2005. Gas throughput volumes at the Company's gathering and processing facilities averaged 1.4 billion cubic feet per day ("Bcfd") in the second quarter of 2006, representing a three percent increase compared to the same period in 2005. Total gas sales volumes marketed, including equity gas production, gas purchased under contracts at the Company's plants and gas purchased from third parties for resale, averaged 1.1 Bcfd in the second quarter of 2006. Average gas prices realized for marketed volumes for the quarter decreased six percent to $5.99 per thousand cubic feet ("Mcf") compared to $6.38 per Mcf for the same period in 2005. Total natural gas liquids ("NGLs") sales volumes marketed averaged 1.8 million gallons per day in the second quarter of 2006. Average NGL prices realized for marketed volumes for the quarter increased 30 percent to $1.14 per gallon compared to $0.88 per gallon for the same period in 2005. The Company's equity hedging positions increased operating profit by $12.3 million for the second quarter of 2006 compared to a decrease in operating profit of $657,000 in the second quarter of 2005. Balance sheet. At June 30, 2006, Western had total assets of $2.5 billion, cash and cash equivalents in short-term investments of $3.9 million, total long-term debt outstanding of $572.0 million and a debt to capitalization ratio, net of cash and cash equivalents of 36 percent. Powder River Basin. Net coal bed methane ("CBM") production volumes increased 19 percent to 12.2 Bcf net in the second quarter of 2006 compared to the same period in 2005 and averaged 134 MMcfd. In June 2006, the Company's gross CBM production from the Big George fairway averaged approximately 218 MMcfd, a 123 percent increase from a year ago, from nine development areas. Industry, including Western, was producing over 368 MMcfd in May 2006 from the Big George coal over a 1,800 square-mile area. Greater Green River Basin. Production from the Greater Green River Basin, primarily in the Pinedale Anticline and Jonah Field development areas, increased 13 percent to 4.3 Bcfe net in the second quarter of 2006 compared to the same period of 2005 and averaged 47 MMcfed. Revisions to operational performance guidance for the remainder of 2006. As a result of the Company's proposed merger, with a wholly-owned subsidiary of Anadarko Petroleum Corporation, announced on June 23, 2006, the Company is not providing updates or modifications to the previous guidance at this time. Company description. Western is an independent natural gas explorer, producer, gatherer, processor, transporter and energy marketer. The Company's producing properties are located primarily in Wyoming, including the developing Powder River Basin coal bed methane play, where Western is a leading acreage holder and producer, and the rapidly growing Pinedale Anticline. The Company also owns and operates natural gas gathering, processing and treating facilities in major gas-producing basins in the Rocky Mountain, Mid-Continent and West Texas regions of the United States. For additional Company information, visit Western's web site at http://www.westerngas.com/. This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding drilling activity, production, new well locations, gross operating margin and operating expenses. Although the Company believes that its expectations are based on reasonable assumptions, Western can give no assurances that its goals will be achieved. These statements are subject to numerous risks and uncertainties, which may cause actual results to differ materially. These risks and uncertainties include, among other things, changes in natural gas and NGL prices, the timeliness of federal and state permitting activity, the drilling budgets and schedules of third parties on the Company's non-operated properties, government regulation or action, geological risk, environmental risk, weather, rig availability, transportation capacity and other factors as discussed in the Company's 10-K and 10-Q Reports and other filings with the Securities and Exchange Commission. Financial Results: (Dollars in thousands except share and per share amounts) Quarter Six Months Ended June 30, Ended June 30, 2006 2005 2006 2005 Revenues: Sale of gas $576,716 $678,087 $1,348,377 $1,374,306 Sale of natural gas liquids 171,986 149,481 339,402 282,450 Gathering, processing and transportation 27,573 27,823 54,273 51,703 Price risk management activities 9,233 11,205 30,213 (9,043) Other 1,666 1,430 3,990 2,717 Total Revenues 787,174 868,026 1,776,255 1,702,133 Costs and Expenses: Product purchases $592,861 $707,516 $1,368,993 $1,414,870 Plant and transportation operating expense 29,963 26,831 62,179 54,530 Oil and gas exploration and production expense 35,909 24,059 64,427 48,955 Depreciation, depletion and amortization 35,924 30,799 71,286 59,877 Selling and administrative expense 21,296 17,536 41,144 30,096 (Earnings) from equity investments (2,440) (2,246) (4,814) (4,380) Interest expense 5,419 4,033 8,604 7,553 Total costs and expenses 718,932 808,528 1,611,819 1,611,501 Income before taxes 68,242 59,498 164,436 90,632 Provision for income taxes 25,873 21,869 60,205 33,297 Net Income $42,369 $37,629 $104,231 $57,335 Weighted average shares of common stock outstanding 75,459,422 74,234,424 75,269,376 74,191,346 Earnings per share of common stock $0.56 $0.51 $1.38 $0.77 Weighted average shares of common stock outstanding - assuming dilution 76,718,838 75,678,389 76,509,330 75,603,310 Earnings per share of common stock - assuming dilution $0.55(1) $0.50(2) $1.37(3) $0.76(4) (1) Fully-diluted earnings per share for the quarter ended June 30, 2006 include, as potential common shares, the issuance of 1.3 million common shares from the possible exercise of stock options. (2) Fully-diluted earnings per share for the quarter ended June 30, 2005 include, as potential common shares, the issuance of 1.4 million common shares from the possible exercise of stock options. (3) Fully-diluted earnings per share for the six months ended June 30, 2006 include, as potential common shares, the issuance of 1.2 million common shares from the possible exercise of stock options and restricted stock. (4) Fully-diluted earnings per share for the six months ended June 30, 2005 include, as potential common shares, the issuance of 1.4 million common shares from the possible exercise of stock options. Condensed Consolidated Balance Sheet: (Dollars in thousands) June 30, December 31, Assets: 2006 2005 Current assets $492,955 $676,193 Property and equipment, net 1,890,203 1,558,321 Other assets 104,445 100,120 Total assets $2,487,603 $2,334,634 Liabilities and Stockholders' Equity: Liabilities: Current liabilities $ 461,885 $609,658 Long-term debt 572,000 430,000 Other liabilities 427,364 391,517 Total liabilities 1,461,249 1,431,175 Stockholders' equity 1,026,354 903,459 Total liabilities and stockholders' equity $2,487,603 $2,334,634 Reconciliation of Net Income to EBITDA: (Dollars in thousands) Quarter Six Months Ended June 30, Ended June 30, 2006 2005 2006 2005 Net Income $42,369 $37,629 $104,231 $57,335 Add: Depreciation, depletion and amortization 35,924 30,799 71,286 59,877 Interest expense 5,419 4,033 8,604 7,553 Income taxes 25,873 21,869 60,205 33,297 EBITDA $109,585 $94,330 $244,326 $158,062 EBITDA is not a measure determined pursuant to generally accepted accounting principles, or GAAP, nor is it an alternative to GAAP income. The Company is presenting this information, as it is a measure of financial performance used in the Company's credit facilities to monitor the Company's ability to perform under these facilities. Reconciliation of Net Income to Cash Flow before Working Capital Adjustments: (Dollars in thousands) Quarter Six Months Ended June 30, Ended June 30, 2006 2005 2006 2005 Net Income $42,369 $37,629 $104,231 $57,335 Add income items that do not affect operating cash flows: Depreciation, depletion and amortization 35,925 30,799 71,286 59,877 Deferred income taxes 22,855 15,697 44,900 19,775 Excess tax benefits from share-based payment awards (895) -- (2,379) -- (Gain) loss on sale of assets (20) (1) 1,024 27 Non-cash change in fair value of derivatives (1,283) (11,063) (5,465) 17,614 Compensation expense from common stock options and restricted stock 6,986 653 11,637 926 Other non-cash items, net 3,043 (312) (587) (1,532) Cash flow before working capital adjustments $ 108,980 $73,402 $224,647 $154,022 Net working capital adjustments (31,326) (30,696) 41,017 6,080 Net cash provided by operating activities $77,654 $42,706 $265,664 $160,102 Cash Flow before Working Capital Adjustments is not a measure determined pursuant to generally accepted accounting principles, or GAAP, nor is it an alternative to GAAP income. The Company is presenting this information, as it is an important measure of financial performance used by equity analysts. Operating Results: (Dollars in thousands except per MMcfed, per MMcfd and per Mgal amounts) Quarter Six Months Ended June 30, Ended June 30, 2006 2005 2006 2005 Exploration and Production: Average gas production - net volumes sold (MMcfed) 197 167 193 165 Average gas price ($/Mcfe) (1) $4.92 $5.37 $ 5.53 $5.17 Gathering and transportation expense ($/Mcfe) $0.83 $0.76 $ 0.84 $0.79 Average wellhead gas price ($/Mcfe) (2) $4.09 $4.61 $ 4.69 $4.38 Production taxes ($/Mcfe) $0.78 $0.59 $ 0.72 $0.53 LOE ($/Mcfe) (3) $0.93 $0.80 $ 0.85 $0.83 Other expense ($/Mcfe) (4) $0.19 $0.12 $ 0.16 $0.18 Effect of equity hedges and other basis swaps $11,844 $378 $21,483 $1,604 Non-cash change in fair value of derivatives $362 $-- $(5,316) $-- Segment - operating profit $ 51,806 $47,513 $119,943 $86,462 Depreciation, depletion and amortization $ 19,745 $16,899 $38,881 $32,528 Gas Gathering and Processing: Gas throughput volumes (MMcfd) 1,436 1,394 1,410 1,375 Gross operating margin ($/Mcf) (5) $0.75 $0.60 $0.71 $0.62 Plant operating expense ($/Mcf) (5) $0.22 $0.20 $ 0.24 $0.21 Effect of equity hedges $952 $(1,035) $2,053 $(1,774) Income from equity investments $2,440 $2,246 $4,814 $4,380 Non-cash change in fair value of derivatives $(1,630) $(37) $(1,755) $(125) Segment - operating profit $70,700 $ 50,944 $126,933 $103,232 Depreciation, depletion and amortization $13,472 $ 11,594 $27,076 $22,872 Gas Transportation: Gas transportation volumes (MMcfd) 126 139 131 148 Transportation and sales revenue $5,505 $5,431 $11,687 $11,368 Operating and product purchase expense $1,794 $2,429 $3,930 $5,098 Segment - operating profit $3,711 $3,002 $7,757 $6,270 Depreciation, depletion and amortization $454 $436 $917 $839 Marketing: Average gas sales (MMcfd) 1,082 1,162 1,094 1,231 Average NGL sales (Mgald) 1,790 1,876 1,813 1,819 Average gas price ($/Mcf) $5.99 $6.38 $6.86 $6.13 Average NGL price ($/Gal) $1.14 $0.88 $1.07 $0.86 Average gas sales margin ($/Mcf) (6) $ (0.008) $ (0.025) $0.060 $0.030 Average NGL sales margin ($/Gal) $0.016 $0.010 $0.016 $0.008 Non-cash change in fair value of derivatives $2,551 $11,099 $12,536 $(17,488) Segment - operating profit $4,252 $10,239 $29,510 $(8,164) Depreciation, depletion and amortization $2 $35 $3 $71 (1) Net of fuel and shrink. (2) Net of fuel, shrink, gathering and transportation. Excludes the effect of hedging. (3) Includes production overhead. (4) Includes delay rentals, geological and geophysical expense, impairment and unsuccessful well expense. (5) Per Mcf of throughput. Gross operating margin is gross revenues less product purchases and joint interest and excludes effect of hedging. (6) Excludes non-cash change in fair value of derivatives. DATASOURCE: Western Gas Resources, Inc. CONTACT: Investors, Ron Wirth, Director of Investor Relations of Western Gas Resources, Inc., +1-800-933-5603, Web site: http://www.westerngas.com/

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