WGR Western Gas Res

DENVER, Feb. 23 /PRNewswire-FirstCall/ -- Western Gas Resources, Inc. (NYSE:WGR) today announced that for the year ended December 31, 2005, net income increased 60 percent to $203.8 million, or earnings of $2.67 per share of common stock, compared to net income for 2004 of $127.8 million, or earnings of $1.73 per share of common stock. Earnings per share of common stock for both periods are on a fully diluted basis. Net income for the year ended December 31, 2004 includes the effect of a one-time after-tax benefit for a change in accounting principle of $4.7 million, or $0.06 per diluted share. For the year ended December 31, 2005, revenues were $3.96 billion, adjusted EBITDA (earnings before interest, taxes, and amortization) was $468.9 million and cash flow before working capital adjustments was $417.2 million. For the fourth quarter of 2005, net income increased 125 percent to $135.7 million, or earnings of $1.76 per share of common stock, compared to net income of $60.2 million, or earnings of $0.80 per share of common stock, for the same period in 2004. Earnings per share for both periods are on a fully diluted basis. Net income in the fourth quarter of 2005 reflects a $55.6 million benefit from the non-cash mark-to-market of economic hedges of future sales of gas. For the fourth quarter of 2005, revenues totaled $1.30 billion, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $257.1 million and cash flow before working capital adjustments was $150.4 million. See the tables below for reconciliation of adjusted EBITDA and cash flow before working capital adjustments. Volumes and prices. Net production increased 14 percent to 63 billion cubic feet equivalent ("Bcfe") in 2005 compared to 2004 and averaged 172.6 million cubic feet equivalent per day ("MMcfed"). Natural gas equity production sold was 63.4 Bcfe in 2005, or 173.8 MMcfed. Gas throughput volumes at the Company's gathering and processing facilities increased 4.5 percent in 2005 compared to 2004 and averaged 1.42 billion cubic feet per day ("Bcfd"). Total gas sales volumes marketed, including equity gas production, gas produced at the Company's plants and gas purchased from third parties for resale, averaged 1.17 Bcfd in 2005. Average gas prices increased 33 percent to $7.46 per thousand cubic feet ("Mcf") in 2005 compared to $5.59 per Mcf in 2004. Total natural gas liquids ("NGLs") sales volumes marketed averaged 1.86 million gallons per day ("MMGald") in 2005. Average NGL prices increased 28 percent to $0.96 per gallon in 2005 compared to $0.75 per gallon in 2004. The Company's equity-hedging positions decreased operating profit by $13.7 million in the fourth quarter of 2005 and by $16.6 million for the full year of 2005. This compares to a decrease in operating profit due to equity hedging of $2.6 million in the fourth quarter of 2004 and $9.0 million for the full year of 2004. Operations. The Company's fully integrated operations include exploration, production, gathering, processing, treating, transportation and marketing of natural gas and NGLs. Exploration and production realized segment-operating profit (EBITDA before general and administrative expenses) of $253.6 million for 2005 compared to $156.1 million for 2004. This 62 percent increase was primarily due to substantially higher natural gas prices and the 14 percent production volume growth from the Company's operating areas including the Pinedale Anticline development, the Powder River Basin in Wyoming, and the properties in the San Juan Basin of New Mexico acquired in October 2004. Gathering, processing and treating realized segment-operating profit of $237.6 million for 2005 compared to $168.9 million for 2004. This 41 percent increase is primarily due to higher commodity prices and to the increase in gathering and processing volumes. Gas transportation realized segment-operating profit of $12.2 million for 2005 compared to $11.0 million for 2004. The transportation segment includes the results from the MIGC and MGTC regulated pipelines in the Powder River Basin. Marketing realized segment-operating profit of $25.3 million for 2005 compared to $38.1 million for 2004. The 33 percent decrease in segment- operating profit was primarily due to non-cash mark-to-market losses from economic hedges of future sales of gas utilizing the Company's storage and transportation capacity for the year ended December 31, 2005 compared to a gain for the year ended December 31, 2004. As the stored or transported natural gas is sold and the future sale derivatives are settled, the Company will realize the benefit of the storage and transportation transactions through earnings. Capital Expenditures. Capital expenditures for 2005 totaled $457.3 million and consisted of the following: (i) $245.7 million related to exploration and production and lease acquisition activities; (ii) $194.3 million related to gathering, processing, treating and pipeline assets, including $12.7 million for maintaining existing facilities; and (iii) $17.3 million for miscellaneous items. Balance Sheet. At December 31, 2005, Western had total assets of $2.33 billion, cash and cash equivalents in short-term investments of $27.2 million, total long-term debt outstanding of $430 million and a debt to capitalization ratio, net of cash and cash equivalents of 31 percent. CEO comments. Peter Dea, President and Chief Executive Officer, commented, "Fourteen percent production volume growth, five percent processing volume growth, high commodity prices and our low-cost structure delivered our shareholders a record year in 2005 for earnings and cash flow. We expect this momentum to carry into 2006 with even higher production and throughput growth as we plan to participate in a record number of new wells in the Pinedale Anticline, while Big George coal continues to ramp up and our new 200 MMcfd Oklahoma processing plant commences operations in the second quarter." Other Information. Information about the Company's significant projects, anticipated capital expenditures, equity production, proven reserves and operational guidance was provided in press releases issued by the Company on January 26, 2006, February 17, 2006 and February 23, 2006. Earnings conference call. Western invites you to participate in its fourth quarter and year-end 2005 earnings conference call today February 23, 2006 at 9:30 a.m. (Mountain Time) by dialing (913) 981-4905. Please dial in five to ten minutes before the start of the call. A replay of the conference call will be available through midnight, March 1, 2006 by dialing (719) 457-0820, pass code 8124566. The live conference call may also be accessed on the Internet by logging onto Western's Web site at http://www.westerngas.com/. Select Investor Relations, then the Webcasts and Presentations option on the menu. Log on at least ten minutes prior to the start of the call to register, download and install any necessary audio software. An audio replay of the call will also be available on the Web site through March 31, 2006. 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 production and gathering volumes, number of wells to be drilled, the performance of the Big George coal and the start-up of the new Oklahoma plant. 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 a number of 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, government regulation or action, geological risk, environmental risk, weather, rig availability 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 Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Revenues: Sale of gas $1,005,095 $696,107 $3,200,886 $2,518,281 Sale of natural gas liquids 180,833 131,361 654,842 450,761 Gathering, processing and transportation 27,732 24,555 106,366 90,874 Price risk management activities 79,448 31,490 (9,445) 20,051 Other 2,007 458 6,009 3,201 Total Revenues 1,295,115 883,971 3,958,658 3,083,168 Costs and Expenses: Product purchases 960,419 695,517 3,210,200 2,540,799 Plant and transportation operating expense 29,963 27,703 115,524 95,868 Oil and gas exploration and production costs 36,350 22,176 113,594 77,608 Depreciation, depletion and amortization 36,444 28,523 128,783 95,536 Selling and administrative expense 14,083 14,740 60,113 52,246 (Gain) loss on sale of assets 296 (121) 510 1,288 Loss from early extinguishment of debt -- -- -- 10,662 (Earnings) from equity investments (3,115) (1,880) (10,133) (7,124) Interest expense 5,280 4,497 17,597 19,562 Total costs and expenses 1,079,720 791,155 3,636,188 2,886,445 Income before taxes 215,395 92,816 322,470 196,723 Provision for income taxes 79,656 32,605 118,661 73,678 Net income before cumulative effect of change in accounting principle 135,739 60,211 203,809 123,045 Cumulative effect of change in accounting principle, net of tax -- -- -- 4,714 Net Income 135,739 60,211 203,809 127,759 Preferred stock requirements -- -- -- (835) Income attributable to common stock $135,739 $60,211 $203,809 $126,924 Weighted average shares of common stock outstanding 74,883,010 74,001,545 74,409,704 72,419,980 Earnings per share of common stock $1.81 $0.81 $2.74 $1.75 Weighted average shares of common stock outstanding - assuming dilution 76,974,049 75,243,839 76,200,131 73,494,747 Earnings per share of common stock - assuming dilution $1.76(1) $0.80(2) $2.67(3) $1.73(4) (1) Fully-diluted earnings per share for the quarter ended December 31, 2005 include, as potential common shares, the issuance of 2.1 million common shares from the possible exercise of stock options. (2) Fully-diluted earnings per share for the quarter ended December 31, 2004 include, as potential common shares, the issuance of 1.2 million common shares from the possible exercise of stock options. (3) Fully-diluted earnings per share for the year ended December 31, 2005 include, as potential common shares, the issuance of 1.8 million common shares from the possible exercise of stock options. (4) Fully-diluted earnings per share for the year ended December 31, 2004 include, as potential common shares, the issuance of 1.1 million common shares from the possible exercise of stock options. Condensed Consolidated Balance Sheet: (Dollars in thousands) December 31, 2005 2004 Assets: Current assets $674,426 $521,131 Property and equipment, net 1,558,321 1,225,909 Other assets 100,120 90,358 Total assets $2,332,867 $1,837,398 Liabilities and Stockholders' Equity: Liabilities: Current liabilities $609,658 $474,787 Long-term debt 430,000 382,000 Other liabilities 393,415 295,842 Total liabilities 1,433,073 1,152,629 Stockholders' equity 899,794 684,769 Total liabilities and stockholders' equity $2,332,867 $1,837,398 Reconciliation of Net Income to Adjusted EBITDA: (Dollars in thousands) Quarter Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Net Income $135,739 $60,211 $203,809 $127,759 Add: Cumulative effect of change in accounting principle, net of tax -- -- -- (4,714) Depreciation, depletion and amortization 36,444 28,523 128,783 95,536 Interest expense 5,280 4,497 17,597 19,562 Loss from early extinguishment of debt -- -- -- 10,662 Income taxes 79,656 32,605 118,661 73,678 Adjusted EBITDA $257,119 $125,836 $468,850 $322,483 These data do not purport to reflect any measure of operations or cash flow. Adjusted 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 Ended Year Ended December 31, December 31, 2005 2004 2005 2004 Net Income $135,739 $60,211 $203,809 $127,759 Add income items that do not affect operating cash flows: Depreciation, depletion and amortization 36,444 28,523 128,783 95,536 Deferred income taxes 70,642 34,611 82,311 71,200 Distributions (less than) equity income, net 1,580 868 (1,081) 127 (Gain) loss on sale of assets 296 (121) 510 1,288 Non-cash change in fair value of derivatives (95,073) (29,441) (1,808) (15,027) Compensation expense from common stock options and restricted stock 1,106 164 3,786 646 Cumulative effect of changes in accounting principles -- -- -- (4,714) Other non-cash items, net (308) (616) 873 2,112 Cash flow before working capital adjustments 150,426 94,199 417,183 278,927 Net working capital adjustments 96,003 (10,055) (21,086) (69,768) Net cash provided by operating activities $246,429 $84,144 $396,097 $209,159 Cash Flow before Working Capital Adjustments is not a measure determined pursuant to generally accepted accounting principles, or GAAP, nor is it an alternative to GAAP income. The Company is presenting this information as it is an important measure of financial performance used by equity analysts. Operating Results: (Dollars in thousands except per MMcfed, per MMcfd and per Mgal amounts) Quarter Year Ended December 31, Ended December 31, 2005 2004 2005 2004 Exploration and Production: Average gas production - net volumes sold (MMcfed) 187 163 174 153 Average gas price ($/Mcfe) (1) $8.50 $5.16 $6.41 $4.69 Gathering and transportation expense ($/Mcfe) $0.92 $0.68 $0.83 $0.72 Average wellhead gas price ($/Mcfe) (2) $7.58 $4.48 $5.58 $3.97 Production taxes ($/Mcfe) $0.96 $0.55 $0.70 $0.50 LOE ($/Mcfe) (3) $0.80 $0.80 $0.82 $0.68 Other expense ($/Mcfe) (4) $0.11 $0.07 $0.13 $0.12 Effect of equity hedges $(9,651) $3,279 $(7,375) $6,720 Non-cash change in fair value of derivatives $6,663 -- $11,103 -- Segment-operating profit $95,479 $49,324 $253,557 $156,141 Depreciation, depletion and amortization $21,689 $15,800 $72,574 $47,911 Gas Gathering and Processing: Gas throughput volumes (MMcfd) 1,448 1,360 1,422 1,361 Gross operating margin ($/Mcf) (5) $0.72 $0.61 $0.67 $0.54 Plant operating expense ($/Mcf) (5) $0.22 $0.22 $0.22 $0.19 Effect of equity hedges $(4,012) $(5,869) $(9,223) $(15,688) Income from equity investments $3,115 $1,880 $10,133 $7,124 Non-cash change in fair value of derivatives $104 $44 $23 $(12) Segment-operating profit $64,631 $46,002 $237,609 $168,877 Depreciation, depletion and amortization $12,204 $10,604 $46,722 $38,585 Gas Transportation: Gas transportation volumes (MMcfd) 145 154 144 155 Transportation and sales revenue $6,175 $5,773 $22,980 $22,683 Operating and product purchase expense $3,252 $2,467 $10,791 $11,709 Segment-operating profit $2,920 $3,306 $12,189 $10,974 Depreciation, depletion and amortization $493 $416 $1,829 $1,655 Marketing: Average gas sales (MMcfd) 1,071 1,213 1,171 1,225 Average gas price ($/Mcf) $10.17 $6.19 $7.46 $5.59 Average gas sales margin ($/Mcf) (8) $0.184 $0.094 $0.066 $0.037 Average NGL sales (Mgald) 1,801 1,569 1,862 1,641 Average NGL price ($/Gal) $1.09 $0.91 $0.96 $0.75 Average NGL sales margin ($/Gal) $0.011 $0.013 $0.009 $0.011 Non-cash change in fair value of derivatives $88,306 $29,397 $(9,318) $15,039 Segment-operating profit $108,340 $41,649 $25,311 $38,077 Depreciation, depletion and amortization $35 $36 $141 $123 (1) Net of fuel and shrink. (2) Net of fuel, shrink, gathering and transportation. Excludes effect of hedging. (3) Includes production overhead. (4) Includes exploratory expense, delay rentals, impairment and unsuccessful well expense. (5) Represents average gas sales price adjusted for appropriate regional differential. (6) Represents average NGL sales price adjusted for appropriate transportation and fractionation charges. (7) Per Mcf of throughput. Gross operating margin is gross revenues less product purchases and joint interest and excludes effect of hedging. (8) Excludes non-cash change in fair value of derivatives. First Call Analyst: FCMN Contact: rwirth@westerngas.com DATASOURCE: Western Gas Resources, Inc. CONTACT: Investors, Ron Wirth, Director of Investor Relations, Western Gas Resources, Inc., +1-800-933-5603 or +1-303-252-6090, Web site: http://www.westerngas.com/

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