8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): June 16, 2009

WESTERN GAS PARTNERS, LP

(Exact name of registrant as specified in its charter)

Delaware	001-34046	26-1075808
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation or organization)	File Number)	Identification No.)

1201 Lake Robbins Drive
The Woodlands, Texas 77380-1046
(Address of principal executive office) (Zip Code)

(832) 636-6000
(Registrants’ telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events

Western Gas Partners, LP (the “Partnership”) is filing a registration statement on Form S-3 today which incorporates by reference the contents of this current report on Form 8-K. The securities covered by the registration statement include debt securities of the Partnership that may be guaranteed by certain of its wholly owned subsidiaries. Pursuant to Rule 3-10 of Regulation S-X, the Partnership must disclose certain financial information regarding the guarantor subsidiaries in connection with the registration of the debt securities. This report is being filed to add Note 16 to the Partnership’s consolidated financial statements included in Part II, Item 8 of its annual report on Form 10-K for the year ended December 31, 2008 and to add Note 13 to the Partnership’s unaudited consolidated interim financial statements included in Part I, Item 1 of its quarterly report on Form 10-Q for the quarter ended March 31, 2009. These items, with the addition of Notes 16 and 13, are included in their entirety as Exhibits 99.1 and 99.2 to this current report.

This report is also being filed to provide the balance sheets of Western Gas Holdings, LLC as of December 31, 2008 and March 31, 2009, which are included as Exhibits 99.3 and 99.4 to this current report. Western Gas Holdings, LLC is the general partner of Western Gas Partners, LP.

This Current Report on Form 8-K should be read in conjunction with the Partnership’s annual report on Form 10-K for the year ended December 31, 2008, its quarterly report on Form 10-Q for the quarter ended March 31, 2009 and its other filings with the Securities and Exchange Commission.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

Exhibit
No.	Document Description
23.1	Consent of Independent Registered Public Accounting Firm
23.2	Consent of Independent Registered Public Accounting Firm
99.1	Part II, Item 8, Annual Report on Form 10-K for the year ended December 31, 2008 — Consolidated Financial Statements
99.2	Part I, Item 1, Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 — Unaudited Consolidated Financial Statements
99.3	Audited consolidated balance sheet of Western Gas Holdings, LLC as of December 31, 2008
99.4	Unaudited consolidated balance sheet of Western Gas Holdings, LLC as of March 31, 2009

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	WESTERN GAS PARTNERS, LP
	By:	Western Gas Holdings, LLC, its general partner
Dated: June 16, 2009	By:	/s/ Robert G. Gwin
		Robert G. Gwin
		President and Chief Executive Officer

EXHIBIT INDEX

Exhibit
No.	Document Description
23.1	Consent of Independent Registered Public Accounting Firm
23.2	Consent of Independent Registered Public Accounting Firm
99.1	Part II, Item 8, Annual Report on Form 10-K for the year ended December 31, 2008 — Consolidated Financial Statements
99.2	Part I, Item 1, Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 — Unaudited Consolidated Financial Statements
99.3	Audited consolidated balance sheet of Western Gas Holdings, LLC as of December 31, 2008
99.4	Unaudited consolidated balance sheet of Western Gas Holdings, LLC as of March 31, 2009

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Western Gas Holdings, LLC (as general partner of Western Gas Partners, LP):

We consent to the use of our report dated March 12, 2009, except as to Note 16, which is as of June 11, 2009, with respect to the consolidated balance sheets of Western Gas Partners, LP and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, parent net equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2008, incorporated herein by reference and in the registration statement on Form S-8 (No. 333-151317).

/s/ KPMG LLP

Houston, Texas
June 11, 2009

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors
Western Gas Holdings, LLC (as general partner of Western Gas Partners, LP):

We consent to the use of our report dated June 11, 2009, with respect to the consolidated balance sheet of Western Gas Holdings, LLC and subsidiaries as of December 31, 2008, incorporated herein by reference.

/s/ KPMG LLP

Houston, Texas
June 11, 2009

EX-99.1

Exhibit 99.1

Western Gas Partners, LP

Index to financial statements
Definitions	2
Report of Independent Registered Public Accounting Firm	3
Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006	4
Consolidated Balance Sheets as of December 31, 2008 and 2007	5
Consolidated Statements of Parent Net Equity and Partners’ Capital for the years ended December 31, 2008, 2007 and 2006	6
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006	7
Notes to Consolidated Financial Statements	8

1

DEFINITIONS

As generally used within the energy industry and in this Annual Report on Form 10-K, the identified terms have the following meanings:

Barrel or Bbl: 42 U.S. gallons measured at 60 degrees Fahrenheit.

Btu: British Thermal Unit.

Condensate: A natural gas liquid with a low vapor pressure mainly composed of propane, butane, pentane and heavier hydrocarbon fractions.

Delivery point: The point where gas or natural gas liquids are delivered by a processor or transporter to a producer, shipper or purchaser, typically the inlet at the interconnection between the gathering or processing system and the facilities of a third-party processor or transporter.

End-use markets: The ultimate users/consumers of transported energy products.

Imbalance: Imbalances result from (i) differences between gas volumes nominated by customers and gas volumes received from those customers and (ii) differences between gas volumes received from customers and gas volumes delivered to those customers.

MMBtu: One million British Thermal Units.

Natural gas: Hydrocarbon gas found in the earth composed of methane, ethane, butane, propane and other gases.

Natural gas liquids or NGLs: The combination of ethane, propane, butane and natural gasolines that when removed from natural gas become liquid under various levels of higher pressure and lower temperature.

Residue gas: The natural gas remaining after being processed or treated.

Tailgate: The point at which processed natural gas and/or natural gas liquids leave a processing facility for end-use markets.

2

Western Gas Partners, LP
Report of Independent Registered Public Accounting Firm

The Board of Directors
Western Gas Holdings, LLC (as general partner of Western Gas Partners, LP):

We have audited the accompanying consolidated balance sheets of Western Gas Partners, LP and subsidiaries (the Partnership) as of December 31, 2008 and 2007, and the related consolidated statements of income, parent net equity and partners’ capital, and cash flows for each of the years in the three-year period ended December 31, 2008. These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Western Gas Partners, LP and subsidiaries as of December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Houston, Texas
March 12, 2009, except as to Note 16, which is as of June 11, 2009

3

Western Gas Partners, LP
CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2008		2007(1)			2006(1)
	(in thousands, except per-unit data)
Revenues — affiliates
Gathering, processing and transportation of natural gas	$	107,582	$	93,007		$	66,296
Natural gas, natural gas liquids and condensate sales		154,772		146,151			52,959
Equity income and other		9,289		6,144			2,380
Total revenues — affiliates		271,643		245,302			121,635
Revenues — third parties
Gathering, processing and transportation of natural gas		15,958		11,019			5,783
Natural gas, natural gas liquids and condensate sales		16,119		2,772			3
Other		7,928		2,400			1,189
Total revenues — third parties		40,005		16,191			6,975
Total Revenues		311,648		261,493			128,610
Operating Expenses (2)
Cost of product		134,715		112,283			41,806
Operation and maintenance		44,765		40,756			29,907
General and administrative		14,385		8,364			4,320
Property and other taxes		5,701		5,591			4,719
Depreciation		33,011		30,481			20,230
Impairment		9,354		—			—
Total Operating Expenses		241,931		197,475			100,982
Operating Income		69,717		64,018			27,628
Interest income (expense), net — affiliates		9,191		(7,805	)		(9,574	)
Other income (expense), net		145		(15	)		(26	)
Income Before Income Taxes		79,053		56,198			18,028
Income Tax Expense		13,777		19,540			5,327
Net Income	$	65,276	$	36,658		$	12,701
Calculation of Limited Partner Interest in Net Income:
Net income(3)	$	42,103		n/a	(4)		n/a
Less general partner interest in net income		842		n/a			n/a
Limited partner interest in net income	$	41,261		n/a			n/a
Net income per limited partner unit — basic	$	0.78		n/a			n/a
Net income per limited partner unit — diluted	$	0.77
Limited partner units outstanding — basic		53,216		n/a			n/a
Limited partner units outstanding — diluted		53,246		n/a			n/a

(1)	Financial information for 2007 and 2006 has been revised to include results attributable to the Powder River assets from August 23, 2006. See Note 3—Powder River Acquisition.
(2)	Operating expenses include amounts charged by affiliates to the Partnership for services as well as reimbursement of amounts paid by affiliates to third parties on behalf of the Partnership. Cost of product expenses include product purchases from affiliates of $23.6 million, $18.8 million and $8.7 million for the years ended December 31, 2008, 2007 and 2006, respectively. Operation and maintenance expenses include charges from affiliates of $17.8 million, $11.7 million and $6.5 million for the years ended December 31, 2008, 2007 and 2006, respectively. General and administrative expenses include charges from affiliates of $11.1 million, $8.4 million and $4.3 million for the years ended December 31, 2008, 2007 and 2006, respectively. See Note 6—Transactions with Affiliates.
(3)	Reflective of net income since the Partnership’s initial public offering on May 14, 2008. See Note 5—Net Income per Limited Partner Unit.
(4)	Not applicable

See accompanying notes to the consolidated financial statements.

4

Western Gas Partners, LP
CONSOLIDATED BALANCE SHEETS

	December 31,		December 31,
	2008		2007(1)
	(in thousands, except number of units)
ASSETS
Current Assets
Cash and cash equivalents	$	33,306	$	—
Accounts receivable, net — third parties		5,878		5,066
Accounts receivable — affiliates		3,235		—
Natural gas imbalance receivables — third parties		389		899
Natural gas imbalance receivables — affiliates		1,422		—
Inventory		644		777
Deferred income taxes		14		2,916
Other current assets		491		—
Total current assets		45,379		9,658
Other assets		628		27
Note receivable — Anadarko		260,000		—
Property, Plant and Equipment
Cost		680,591		641,123
Less accumulated depreciation		162,776		129,348
Net property, plant and equipment		517,815		511,775
Goodwill		14,436		12,347
Equity investment		18,183		10,511
Total Assets	$	856,441	$	544,318
LIABILITIES, PARTNERS’ CAPITAL AND PARENT NET EQUITY
Current Liabilities
Accounts payable	$	5,544	$	3,737
Natural gas imbalance payable — third parties		244		2,104
Natural gas imbalance payable — affiliates		1,198		—
Accrued ad valorem taxes		1,330		1,298
Income taxes payable		146		313
Accrued liabilities — third parties		7,726		4,925
Accrued liabilities — affiliates		153		—
Total current liabilities		16,341		12,377
Long-Term Liabilities
Note payable — Anadarko		175,000		—
Deferred income taxes		1,053		129,267
Asset retirement obligations and other		9,093		10,534
Total long-term liabilities		185,146		139,801
Total Liabilities		201,487		152,178
Commitments and Contingencies (Note 13)		—		—
Parent Net Equity and Partners’ Capital
Common units (29,093,197 units issued and outstanding at December 31, 2008)		368,049		—
Subordinated units (26,536,306 units issued and outstanding at December 31, 2008)		275,917		—
General partner units (1,135,296 units issued and outstanding at December 31, 2008)		10,988		—
Parent net investment		—		392,140
Total Parent Net Equity and Partners’ Capital		654,954		392,140
Total Liabilities, Parent Net Equity and Partners’ Capital	$	856,441	$	544,318

⁽¹⁾ Financial information as of December 31, 2007 has been revised to include assets, liabilities and parent net equity attributable to the Powder River assets. See Note 3—Powder River Acquisition.

See accompanying notes to the consolidated financial statements.

5

Western Gas Partners, LP
CONSOLIDATED STATEMENT OF PARENT NET EQUITY AND PARTNERS’ CAPITAL

				Partners’ Capital
	Parent Net			Limited Partners
	Investment			Common			Subordinated			General Partner			Total
	(in thousands)
Balance at December 31, 2005	$	160,585		$	—		$	—		$	—		$	160,585
Net contributions from parent		10,113			—			—			—			10,113
Acquisition of MIGC		52,390			—			—			—			52,390
Powder River acquisition		116,789			—			—			—			116,789
Net income		12,701			—			—			—			12,701
Balance at December 31, 2006(1)	$	352,578		$	—		$	—		$	—		$	352,578
Contribution of property from parent		21,942			—			—			—			21,942
Net distributions to parent		(19,038	)		—			—			—			(19,038	)
Net income		36,658			—			—			—			36,658
Balance at December 31, 2007(1)	$	392,140		$	—		$	—		$	—		$	392,140
Reimbursement to parent from offering proceeds		(45,161	)		—			—			—			(45,161	)
Elimination of net deferred tax liabilities		126,936			—			—			—			126,936
Net income attributable to Predecessor		23,173			—			—			—			23,173
Net distributions to parent		(16,717	)		—			—			—			(16,717	)
Contribution of net assets to Western Gas Partners, LP		(321,609	)		55,221			255,941			10,447			—
Contribution of assets from parent		2,089			2,528			11,715			478			16,810
Issuance of common units to public, net of offering and other costs		—			315,161			—			—			315,161
Contribution of Powder River assets		(160,851	)		(13,866	)		—			(283	)		(175,000	)
Non-cash equity-based compensation		—			323			—			—			323
Net income attributable to Partners		—			20,841			20,420			842			42,103
Distributions to unitholders		—			(12,159	)		(12,159	)		(496	)		(24,814	)
Balance at December 31, 2008	$	—		$	368,049		$	275,917		$	10,988		$	654,954

⁽¹⁾ Financial information for 2007 and 2006 has been revised to include activity attributable to the Powder River assets from August 23, 2006. See Note 3—Powder River Acquisition.

See accompanying notes to the consolidated financial statements.

6

Western Gas Partners, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2008			2007(1)			2006(1)
	(in thousands)
Cash Flows from Operating Activities
Net income	$	65,276		$	36,658		$	12,701
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		33,011			30,481			20,230
Impairment		9,354			—			—
Deferred income taxes		1,624			10,816			3,226
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(4,047	)		(3,466	)		2,037
(Increase) in natural gas imbalance receivable		(912	)		(226	)		—
Increase (decrease) in accounts payable and accrued expenses		4,840			142			(4,312	)
Increase (decrease) in other items, net		650			(1,497	)		(578	)
Net cash provided by operating activities		109,796			72,908			33,304
Cash Flows from Investing Activities
Capital expenditures		(36,864	)		(54,328	)		(42,963	)
Powder River acquisition		(175,000	)		—			—
Investment in equity — affiliate		(8,095	)		—			—
Loan to Anadarko		(260,000	)		—			—
Net cash used in investing activities		(479,959	)		(54,328	)		(42,963	)
Cash Flows from Financing Activities
Proceeds from issuance of common units, net of $5.9 million in offering expenses		315,161			—			—
Issuance of Note Payable to Anadarko		175,000			—			—
Reimbursement to parent from offering proceeds		(45,161	)		—			—
Distributions to unitholders		(24,814	)		—			—
Net (distributions to) contributions from parent		(16,717	)		(19,038	)		10,113
Net cash provided by (used in) financing activities		403,469			(19,038	)		10,113
Net Increase (Decrease) in Cash and Cash Equivalents		33,306			(458	)		454
Cash and Cash Equivalents at Beginning of Period		—			458			4
Cash and Cash Equivalents at End of Period	$	33,306		$	—		$	458
Supplemental Disclosures
Significant non-cash investing and financing transactions:
Contribution of initial assets to Western Gas Partners, LP from parent	$	321,609		$	—		$	—
Value of consideration paid in excess of net carrying value of Powder River assets		14,149			—			—
Elimination of net deferred tax liabilities		126,936			—			—
Property, plant and equipment contributed by parent		14,721			21,942			—
(Increase) decrease in accrued capital expenditures		876			(501	)		(1,876	)

⁽¹⁾ Financial information for 2007 and 2006 has been revised to include activity attributable to the Powder River assets from August 23, 2006. See Note 3—Powder River Acquisition.

See accompanying notes to the consolidated financial statements.

7

Notes to consolidated financial statements of Western Gas Partners, LP

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Western Gas Partners, LP (the Partnership) is a Delaware limited partnership formed in August 2007. The Partnership’s assets consist of nine gathering systems, six natural gas treating facilities, two gas processing facilities and one interstate pipeline. The Partnership’s assets are located in East and West Texas, the Rocky Mountains (Utah and Wyoming) and the Mid-Continent (Kansas and Oklahoma). The Partnership is engaged in the business of gathering, compressing, processing, treating and transporting natural gas for Anadarko Petroleum Corporation and its consolidated subsidiaries (Anadarko) and third-party producers and customers. The Partnership’s general partner is Western Gas Holdings, LLC, a wholly owned subsidiary of Anadarko.

On May 14, 2008, the Partnership closed its initial public offering of 18,750,000 common units at a price of $16.50 per unit. On June 11, 2008, the Partnership issued an additional 2,060,875 common units to the public pursuant to the partial exercise of the underwriters’ over-allotment option. The May 14 and June 11 issuances are referred to collectively as the initial public offering. The common units are listed on the New York Stock Exchange under the symbol “WES.” The Partnership received gross proceeds of $343.4 million from the initial public offering, less $22.3 million for underwriting discounts and structuring fees. The Partnership used the balance of the gross offering proceeds as follows:

• approximately $5.9 million to pay offering expenses;

• approximately $45.2 million to reimburse Anadarko from offering proceeds;

• $260.0 million loaned to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50%; and

• $10.0 million retained for general partnership purposes.

Concurrent with the closing of the initial public offering, Anadarko contributed the assets and liabilities of Anadarko Gathering Company LLC (AGC), Pinnacle Gas Treating LLC (PGT) and MIGC LLC (MIGC) to the Partnership in exchange for 1,083,115 general partner units, representing a 2.0% general partner interest in the Partnership, 100% of the Incentive Distribution Rights (IDRs), 5,725,431 common units and 26,536,306 subordinated units. AGC, PGT and MIGC are referred to collectively as the initial assets. The common units issued to Anadarko include 751,625 common units issued following the expiration of the underwriters’ over-allotment option and represent the portion of the common units which were not exercised by the underwriters under the option. IDRs entitle the holder to specified increasing percentages of cash distributions as the Partnership’s per-unit cash distributions increase. See Note 4—Partnership Equity and Distributions for information related to the distribution rights of the common and subordinated unitholders and to the IDRs held by the general partner.

On December 19, 2008, the Partnership acquired certain midstream assets from Anadarko for consideration consisting of $175.0 million cash, which was financed by borrowing $175.0 million from Anadarko pursuant to the terms of a five-year term loan agreement, 2,556,891 common units and 52,181 general partner units. The acquisition consisted of (i) a 100% ownership interest in the Hilight System, (ii) a 50% interest in the Newcastle System and (iii) a 14.81% limited liability company membership interest in Fort Union Gas Gathering, L.L.C. (Fort Union). These assets are referred to collectively as the Powder River assets and the acquisition is referred to as the Powder River acquisition. Please see Note 3—Powder River Acquisition.

As of December 31, 2008, Anadarko holds 1,135,296 general partner units representing a 2.0% general partner interest in the Partnership, 100% of the Partnership incentive distribution rights, 8,282,322 common units and 26,536,306 subordinated units. Anadarko’s common and subordinated unit ownership represents an aggregate 61.3% limited partner interest in the Partnership. The public holds 20,810,875 common units, representing a 36.7% limited partner interest in the Partnership.

The acquisition of the initial assets and the Powder River assets are considered transfers of net assets between entities under common control. Anadarko acquired MIGC and the Powder River assets in connection with its August 23, 2006 acquisition of Western Gas Resources, Inc. The accompanying consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States. The “Partnership” as used herein refers to the combined financial results and operations of AGC and PGT from their inception through May 14, 2008 and to the Partnership thereafter, combined with the financial results and operations of MIGC and the Powder River assets from August 23, 2006 thereafter. “Western” refers to Western Gas Resources, Inc. and its consolidated subsidiaries prior to Anadarko’s

8

Notes to consolidated financial statements of Western Gas Partners, LP

acquisition of Western and “Parent” refers to Western for periods prior to August 23, 2006 and to Anadarko for periods including and subsequent to August 23, 2006. The consolidated financial statements for periods prior to May 14, 2008 with respect to the initial assets and prior to December 19, 2008 with respect to the Powder River assets have been prepared from Anadarko’s historical cost-basis accounts and may not necessarily be indicative of the actual results of operations that would have occurred if the Partnership had owned the assets and operated as a separate entity during the periods reported. In addition to recasting the Partnership’s financial statements for the years ended December 31, 2007 and 2006 for the Powder River assets, certain amounts in prior periods have been reclassified to conform to the current presentation.

The consolidated financial statements include the accounts of the Partnership and entities in which it holds a controlling financial interest. All significant intercompany transactions have been eliminated. Investments in non-controlled entities over which Anadarko exercises significant influence are accounted for using the equity method. The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of financial position as of December 31, 2008 and 2007 and for the results of operations, changes in partners’ capital and parent net equity and cash flows for each of the years in the three-year period ended December 31, 2008.

Certain costs of doing business incurred by Anadarko on behalf of the Partnership have been reflected in the accompanying financial statements. These costs include general and administrative expenses charged by Anadarko to the Partnership in exchange for:

• business services, such as payroll, accounts payable and facilities management;

• corporate services, such as finance and accounting, marketing, legal, human resources, investor relations and public and regulatory policy;

• executive compensation, but not including share-based compensation for periods ending prior to May 14, 2008; and

• pension and other post-retirement benefit costs.

Transactions between the Partnership and Anadarko have been identified in the consolidated financial statements as transactions between affiliates. Please see Note 6—Transactions with Affiliates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

To conform to accounting principles generally accepted in the United States, management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and the notes thereto. These estimates are evaluated on an ongoing basis, utilizing historical experience and other methods considered reasonable in the particular circumstances. Although these estimates are based on management’s best available knowledge at the time, actual results may differ.

Effects on the Partnership’s business, financial position and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revision become known. Changes in facts and circumstances or discovery of new facts or circumstances may result in revised estimates and actual results may differ from these estimates.

Property, plant and equipment

Property, plant and equipment are stated at the lower of historical cost less accumulated depreciation or fair value, if impaired. The Partnership capitalizes all construction-related direct labor and material costs. The cost of renewals and betterments that extend the useful life of property, plant and equipment is also capitalized. The cost of repairs, replacements and major maintenance projects which do not extend the useful life or increase the expected output of property, plant and equipment is expensed as incurred.

Depreciation is computed over the asset’s estimated useful life using the straight-line method or half-year convention method, based on estimated useful lives and salvage values of assets. Uncertainties that may impact these estimates include, among others, changes in laws and regulations relating to restoration and abandonment requirements, economic conditions and supply and demand in the area. When assets are placed into service, the Partnership makes estimates with respect to useful lives and salvage values that the Partnership believes are reasonable. However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts.

9

Notes to consolidated financial statements of Western Gas Partners, LP

The Partnership evaluates its ability to recover the carrying amount of its long-lived assets and determines whether its long-lived assets have been impaired. Impairment exists when the carrying amount of an asset exceeds estimates of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. When alternative courses of action to recover the carrying amount of a long-lived asset are under consideration, estimates of future undiscounted cash flows take into account possible outcomes and probabilities of their occurrence. If the carrying amount of the long-lived asset is not recoverable, based on the estimated future undiscounted cash flows, the impairment loss is measured as the excess of the asset’s carrying amount over its estimated fair value, such that the asset’s carrying amount is adjusted to its estimated fair value with an offsetting charge to operating expense.

Fair value represents the estimated price between market participants to sell an asset in the principal or most advantageous market for the asset, based on assumptions a market participant would make. When warranted, management assesses the fair value of long-lived assets using commonly accepted techniques and may use more than one source in making such assessments. Sources used to determine fair value include, but are not limited to, recent third-party comparable sales, internally developed discounted cash flow analyses and analyses from outside advisors. Significant changes, such as changes in contract rates or terms, the condition of an asset, or management’s intent to utilize the asset generally require management to reassess the cash flows related to long-lived assets.

During the year ended December 31, 2008, an impairment charge was recorded in connection with the shut-in of a plant at the Hilight System prior to its contribution to the Partnership.

Equity-Method Investment

Fort Union is a partnership among Copano Pipelines/Rocky Mountains, LLC (37.04%), Crestone Powder River L.L.C. (37.04%), Bargath, Inc. (11.11%) and the Partnership (14.81%). Fort Union owns a gathering pipeline and treating facilities in the Powder River Basin. The Parent is the construction manager and physical operator of the Fort Union facilities.

The Partnership’s investment in Fort Union is accounted for under the equity method of accounting. Certain business decisions, including, but not limited to, decisions with respect to significant expenditures or contractual commitments, annual budgets, material financings, dispositions of assets or amending the owners’ firm gathering agreements, require 65% or unanimous approval of the owners.

Management evaluates its equity-method investment for impairment whenever events or changes in circumstances indicate that the carrying value of such investment may have experienced a decline in value that is other than temporary. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether the investment has been impaired. Management assesses the fair value of equity-method investments using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If the estimated fair value is less than the carrying value, the excess of the carrying value over the estimated fair value is recognized as an impairment loss.

The investment balance at December 31, 2008 includes $3.0 million for the purchase price allocated to the investment in Fort Union in excess of Western’s historic cost basis. This balance was attributed to the difference between the fair value and book value of Fort Union’s gathering and treating facilities and is being amortized over the remaining life of those facilities. Investment earnings from Fort Union, net of investment amortization, are reported in equity income and other revenues — affiliates in the statements of income.

At December 31, 2008, Fort Union had expansion projects under construction and had project financing debt of $117.1 million outstanding, which is not guaranteed by the members. Fort Union’s lender has a lien on the Partnership’s interest in Fort Union.

Goodwill

Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the identifiable assets acquired and liabilities assumed. During 2006, the Partnership recognized $4.8 million of goodwill in connection with the acquisition of MIGC and attributed this amount to the Partnership’s transportation reporting unit and recognized $9.6 million of goodwill in connection with the Powder River acquisition and attributed this amount to the Partnership’s gathering and processing reporting unit. None of this goodwill is deductible for income tax purposes.

10

Notes to consolidated financial statements of Western Gas Partners, LP

The Partnership evaluates whether goodwill has been impaired. Impairment testing is performed annually as of October 1, unless facts and circumstances make it necessary to test more frequently. The Partnership has determined that it has one operating segment and two reporting units and, accordingly, goodwill is assessed for impairment at the reporting unit level. Goodwill impairment assessment is a two-step process. Step one focuses on identifying a potential impairment by comparing the fair value of the reporting unit with the carrying amount of the reporting unit. If the fair value of the reporting unit exceeds its carrying amount, no further action is required. However, if the carrying amount of the reporting unit exceeds its fair value, goodwill is written down to the implied fair value of the goodwill through a charge to operating expense based on a hypothetical purchase price allocation.

No goodwill impairment has been recognized in these consolidated financial statements.

Asset retirement obligations

Management recognizes a liability based on the estimated costs of retiring tangible long-lived assets. The liability is recognized at its fair value measured using expected discounted future cash outflows of the asset retirement obligation when the obligation originates, which generally is when an asset is acquired or constructed. The carrying amount of the associated asset is increased commensurate with the liability recognized. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. Subsequent to the initial recognition, the liability is adjusted for any changes in the expected value of the retirement obligation (with a corresponding adjustment to property, plant and equipment) and for accretion of the liability due to the passage of time, until the obligation is settled. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded for both the asset retirement obligation and the associated asset carrying amount. Revisions in estimated asset retirement obligations may result from changes in estimated inflation rates, discount rates, retirement costs and the estimated timing of settling asset retirement obligations.

Revenue recognition

Under its fee-based arrangements, the Partnership is paid a fixed fee based on the volume and thermal content of the natural gas it gathers or treats and recognizes gathering and treating revenues for its services at the time the service is performed.

Producers’ wells are connected to the Partnership’s gathering systems for delivery of natural gas to the Partnership’s processing or treating plants, where the natural gas is processed to extract NGLs or treated in order to satisfy pipeline specifications. In some areas, where no processing is required, the producers’ gas is gathered, compressed and delivered to pipelines for market delivery. Except for volumes taken in-kind by certain producers, an affiliate of Anadarko sells the natural gas and extracted NGLs attributable to processing activities at the Hilight System and the Newcastle System. Under percent-of-proceeds contracts, revenue is recognized when the natural gas or NGLs are sold and the related product purchases are recorded as a percentage of the product sale.

Under keep-whole contracts, NGLs recovered by the processing facility are retained and sold. Producers are kept whole through the receipt of a thermally equivalent volume of residue gas at the tailgate of the plant. The keep-whole contract conveys an economic benefit to the Partnership when the individual values of the NGLs are greater as liquids than as a component of the natural gas stream; however, the Partnership is adversely impacted when the value of the NGLs are lower as liquids than as a component of the natural gas stream. Revenue is recognized from the NGLs upon transfer of title.

Condensate recovered in the field and during processing is retained and sold. Depending upon contract terms, proceeds from condensate sales are either retained by the gatherer or processor or is credited to the producer. Revenue is recognized from the sale of condensate upon transfer of title.

The Partnership earns transportation revenues through firm contracts that obligate each of its customers to pay a monthly reservation or demand charge regardless of the pipeline capacity used by that customer. An additional commodity usage fee is charged to the customer based on the actual volume of natural gas transported. Revenues are also generated from interruptible contracts pursuant to which a fee is charged to the customer based on volumes transported through the pipeline. Revenues for transportation of natural gas are recognized over the period of firm transportation contracts or, in the case of usage fees and interruptible contracts, when the volumes are received into the pipeline. From time to time, certain revenues may be subject to refund pending the outcome of rate matters before the Federal Energy Regulatory Commission and reserves are established where appropriate. During the periods presented herein, there were no pending rate cases and no related reserves have been established.

11

Notes to consolidated financial statements of Western Gas Partners, LP

Proceeds from the sale of residue gas, NGLs and condensate are recorded in natural gas, natural gas liquids and condensate revenues in the statements of income. Revenues attributable to the fixed-fee component of gathering and processing contracts as well as demand charges and commodity usage fees on transportation contracts are reported in gathering, processing and transportation of natural gas revenues in the statements of income.

Natural gas imbalances

The consolidated balance sheets include natural gas imbalance receivables and payables resulting from differences in gas volumes received into the Partnership’s systems and gas volumes delivered by the Partnership to customers. Natural gas volumes owed to or by the Partnership that are subject to monthly cash settlement are valued according to the terms of the contract as of the balance sheet dates, and generally reflect market index prices. Other natural gas volumes owed to or by the Partnership are valued at the Partnership’s weighted average cost of natural gas as of the balance sheet dates and are settled in-kind. As of December 31, 2008, natural gas imbalance receivables and payables were approximately $1.8 million and $1.4 million, respectively. As of December 31, 2007, natural gas imbalance receivables and payables were approximately $0.9 million and $2.1 million, respectively. Changes in natural gas imbalances are reported in other revenues or cost of product expense in the statements of income.

Inventory

The cost of natural gas and NGLs inventories are determined by the weighted average cost method on a location-by-location basis. Inventory is accounted for at the lower of weighted average cost or market value.

Environmental expenditures

The Partnership expenses environmental expenditures related to conditions caused by past operations that do not generate current or future revenues. Environmental expenditures related to operations that generate current or future revenues are expensed or capitalized, as appropriate. Liabilities are recorded when the necessity for environmental remediation becomes probable and the costs can be reasonably estimated, or when other potential environmental liabilities are probable and can be reasonably estimated.

Cash equivalents

The Partnership considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. The Partnership had approximately $33.3 million of cash and cash equivalents as of December 31, 2008 and no cash or cash equivalents as of December 31, 2007.

Bad-debt reserve

The Partnership revenues are primarily from Anadarko, for which no credit limit is maintained. The Partnership analyzes its exposure to bad debt on a customer-by-customer basis for its third-party accounts receivable and may establish credit limits for significant third-party customers. For third-party accounts receivable, the amount of bad-debt reserve at December 31, 2008 and December 31, 2007 was approximately $53,000 and $41,000, respectively.

Equity-based compensation

Concurrent with the closing of the initial public offering, phantom unit awards were granted to independent directors of the general partner under the Western Gas Partners, LP 2008 Long-Term Incentive Plan (LTIP), which permits the issuance of up to 2,250,000 units. Upon vesting of each phantom unit, the holder will receive common units of the Partnership or, at the discretion of the general partner’s board of directors, cash in an amount equal to the market value of common units of the Partnership on the vesting date. Share-based compensation expense attributable to grants made pursuant to the LTIP will impact the Partnership’s cash flow from operating activities only to the extent the general partner’s board of directors elects to make a cash payment to a participant in lieu of the issuance of common units upon the lapse of the vesting period.

Statement of Financial Accounting Standards (SFAS) No. 123(R), Share-Based Payment (revised 2004) (SFAS 123(R)), requires companies to recognize stock-based compensation as an operating expense. The Partnership amortizes stock-based compensation expense attributable to awards granted under the LTIP over the vesting periods applicable to the awards.

12

Notes to consolidated financial statements of Western Gas Partners, LP

Additionally, the Partnership’s general and administrative expenses include equity-based compensation costs allocated by Anadarko to the Partnership for grants made pursuant to the Western Gas Holdings, LLC Equity Incentive Plan as amended and restated (Incentive Plan) as well as the Anadarko Petroleum Corporation 1999 Stock Incentive Plan and the Anadarko Petroleum Corporation 2008 Omnibus Incentive Compensation Plan (Anadarko’s plans are referred to collectively as the Anadarko Incentive Plans). Under the Incentive Plan, participants are granted Unit Value Rights (UVRs), Unit Appreciation Rights (UARs) and Dividend Equivalent Rights (DERs). UVRs granted under the Incentive Plan are valued at $50 per UVR, vest ratably over three years, or earlier in connection with certain other events, and become payable in cash by the general partner no later than 30 days subsequent to vesting. UARs granted under the Incentive Plan vest ratably over three years or earlier in connection with certain other events, become payable no later than 30 days subsequent to exercise by the participant and expire upon the earlier of the 90th day subsequent to the participant’s voluntary termination or 10 years from the date of grant. DERs granted under the Incentive Plan vest upon the occurrence of certain events, become payable no later than 30 days subsequent to vesting and expire 10 years from the date of grant. Equity-based compensation expense attributable to grants made pursuant to the Incentive Plan will impact the Partnership’s cash flow from operating activities only to the extent cash payments are made to Incentive Plan participants and such cash payments do not cause total annual reimbursements made by the Partnership to Anadarko pursuant to the omnibus agreement to exceed the general and administrative expense limit set forth therein for the periods to which such expense limit applies. See Note 6—Transactions with Affiliates.

Income taxes

The Partnership generally is not subject to federal or state income tax. The Partnership is subject to a Texas margin tax and recognizes this tax expense in its consolidated financial statements. Prior to closing of the initial public offering, tax expense was recorded for income generated by the initial assets and, prior to closing of the Powder River acquisition, tax expense was recorded for income generated by the Powder River assets. For periods prior to May 14, 2008 with respect to the initial assets and for periods prior to December 19, 2008 with respect to the Powder River assets, deferred federal and state income taxes were provided on temporary differences between the financial statement carrying amounts of recognized assets and liabilities and their respective tax bases as if the Partnership filed tax returns as a stand-alone entity. For periods subsequent to May 14, 2008, the Partnership will make payments to Anadarko pursuant to the tax sharing arrangement entered into between Anadarko and the Partnership for its share of Texas margin tax that are included in any combined or consolidated returns filed by Anadarko. The aggregate difference in the basis of our assets for financial and tax reporting purposes cannot be readily determined as we do not have access to information about each partner’s tax attributes in us.

Financial Accounting Standards Board (FASB) Financial Interpretation No. 48, Accounting for uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48), became effective January 1, 2007. FIN 48 defines the criteria an individual tax position must meet for any part of the benefit of that position to be recognized in the financial statements. The Partnership has no material uncertain tax positions at December 31, 2008 or 2007.

Net income per limited partner unit

Emerging Issues Task Force (EITF) Issue 03-6, Participating Securities and the Two-Class Method Under FASB Statement No. 128 (EITF 03-6), addresses the computation of earnings per share by entities that have issued securities other than common stock that contractually entitle the holder to participate in dividends and undistributed earnings of the entity when, and if, it declares dividends on its securities. EITF 03-6 requires securities that satisfy the definition of a “participating security” to be considered for inclusion in the computation of basic earnings per unit using the two-class method. Under the two-class method, earnings per unit is calculated as if all of the earnings for the period were distributed pursuant to the terms of the relevant contractual arrangement. For the Partnership, earnings per unit is calculated based on the assumption that the Partnership distributes to its unitholders an amount of cash equal to the net income of the Partnership, notwithstanding the general partner’s ultimate discretion over the amount of cash to be distributed for the period, the existence of other legal or contractual limitations that would prevent distributions of all of the net income for the period or any other economic or practical limitation on the ability to make a full distribution of all of the net income for the period. Earnings per unit is calculated by applying the provisions of the partnership agreement that govern actual cash distributions to the notional cash distribution amount, including giving effect to incentive distributions.

13

Notes to consolidated financial statements of Western Gas Partners, LP

New accounting standards

The following new accounting standards were adopted by the Partnership during the three-year period ended December 31, 2008:

SFAS No. 157, Fair Value Measurements (SFAS 157). In September 2006, the FASB issued SFAS 157, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. However, in some cases, the application of SFAS 157 changed the Partnership’s historical practice for measuring fair values under other accounting pronouncements that require or permit fair value measurements. As originally issued, SFAS 157 was effective as of January 1, 2008 and must be applied prospectively, except in certain cases, to the Partnership. The FASB issued FSP FAS 157-2, which delayed the effective date of SFAS 157 to January 1, 2009 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Partnership adopted SFAS 157 effective January 1, 2008. Adoption of SFAS 157 did not have a material impact on the Partnership’s consolidated results of operations, cash flows or financial position.

Recently issued accounting standards not yet adopted

The following new accounting standards have been issued, but had not been adopted by the Partnership as of December 31, 2008:

SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). In December 2007, the FASB issued SFAS 141(R) which applies fair value measurement in accounting for business combinations, expands financial disclosures, defines an acquirer and modifies the accounting for some business combinations items. Under SFAS 141(R), an acquirer will be required to record 100% of assets and liabilities, including goodwill, contingent assets and contingent liabilities, at their fair value. This replaces the cost allocation process applied under SFAS No. 141, Business Combinations (SFAS 141). In addition, contingent consideration must also be recognized at fair value at the acquisition date. Acquisition-related costs will be expensed rather than treated as an addition to the assets being acquired and restructuring costs will be recognized separately from the business combination. SFAS 141(R) will apply to the Partnership prospectively for business combinations with an acquisition date on or after January 1, 2009.

EITF Issue No. 07-4, Application of the Two-Class Method under FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships (EITF 07-4), and FASB Staff Position EITF Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). In March 2008, the EITF issued EITF 07-4 addressing the application of the two-class method under SFAS No. 128, Earnings per Share (SFAS 128), in determining income per unit for master limited partnerships having multiple classes of securities including limited partnership units, general partnership units and, when applicable, IDRs of the general partner. EITF 07-4 clarifies that the two-class method would apply. Further, EITF 07-4 states that undistributed earnings should be allocated to the general partner, limited partners and IDR holders as if undistributed earnings were available cash. In June 2008, the FASB issued FSP EITF 03-6-1 addressing whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore required to be accounted for in calculating earnings per unit under the two-class method described in SFAS 128. FSP EITF 03-6-1 requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividend or dividend equivalents as a separate class of securities in calculating earnings per unit. The Partnership is evaluating the impact of EITF 07-4 and FSP EITF 03-6-1 on the Partnership’s reported earnings per unit. EITF 07-4 and FSP EITF 03-6-1 are effective for the Partnership on January 1, 2009 and will be applied with respect to all periods in which earnings per unit is presented.

EITF Issue No. 08-6, Accounting for Equity Method Investments Considerations (EITF 08-6). In November 2008, the EITF issued EITF 08-6, which clarifies that an equity method investor is required to continue to recognize an other-than-temporary impairment of its investment in accordance with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. Also, an equity method investor should not separately test an investee’s underlying assets for impairment. However, an equity method investor should recognize its share of an impairment charge recorded by an investee. EITF 08-6 will be effective for the Partnership on a prospective basis on January 1, 2009 and for interim periods beginning with the first quarter of 2009.

14

Notes to consolidated financial statements of Western Gas Partners, LP

3. POWDER RIVER ACQUISITION

In December 2008, the Partnership acquired the Powder River assets from Anadarko for consideration consisting of $175.0 million cash, which was financed by borrowing $175.0 million from Anadarko pursuant to the terms of a five-year term loan agreement, 2,556,891 common units and 52,181 general partner units. These assets provide a combination of gathering, treating and processing services in the Powder River Basin.

The Partnership accounted for the Powder River acquisition as a transfer of net assets between entities under common control pursuant to the provisions of SFAS 141, Appendix D. The Powder River assets were recorded at the amounts reflected in Anadarko’s historical consolidated financial statements, including an allocation of goodwill. The difference between the purchase price and Anadarko’s carrying value of the combined net assets acquired and liabilities assumed was recorded as an adjustment to partners’ capital. SFAS 141 also requires that all income statements be revised to include the results of the acquired assets as of the date of common control. Accordingly, the Partnership’s historical financial statements have been recast for periods including and subsequent to August 23, 2006, the date Anadarko acquired the Powder River assets through its acquisition of Western.

4. PARTNERSHIP EQUITY AND DISTRIBUTIONS

The partnership agreement requires that, within 45 days subsequent to the end of each quarter, beginning with the quarter ended June 30, 2008, the Partnership distribute all of its available cash (described below) to unitholders of record on the applicable record date. The Partnership paid cash distributions to its unitholders of $0.4582 per unit during the year ended December 31, 2008. This amount consists of a $0.30 per unit quarterly distribution prorated for the 48-day period beginning on May 14, 2008 and ending on June 30, 2008, or $0.1582 per unit, and a $0.30 per unit distribution for the quarter ended on September 30, 2008. See also Note 15—Subsequent Event concerning distributions approved in January 2009.

Available cash

The amount of available cash (as defined in the partnership agreement) generally is all cash on hand at the end of the quarter, less the amount of cash reserves established by our general partner to provide for the proper conduct of our business, including reserves to fund future capital expenditures, to comply with applicable laws, our debt instruments or other agreements, or to provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters. Working capital borrowings generally include borrowings made under a credit facility or similar financing arrangement. It is intended that working capital borrowings be repaid within 12 months. In all cases, working capital borrowings are used solely for working capital purposes or to fund distributions to partners.

Minimum quarterly distributions

The partnership agreement provides that, during a period of time referred to as the “subordination period,” the common units are entitled to distributions of available cash each quarter in an amount equal to the “minimum quarterly distribution,” which is $0.30 per common unit, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash are permitted on the subordinated units. Furthermore, arrearages do not apply to subordinated units and therefore will not be paid on the subordinated units. The effect of the subordinated units is to increase the likelihood that, during the subordination period, available cash is sufficient to fully fund cash distributions on the common units in an amount equal to the minimum quarterly distribution.

The subordination period will lapse at such time when the Partnership has paid at least $0.30 per quarter on each common unit, subordinated unit and general partner unit for any three consecutive, non-overlapping four-quarter periods ending on or after June 30, 2011. Also, if the Partnership has paid at least $0.45 per quarter (150% of the minimum quarterly distribution) on each outstanding common unit, subordinated unit and general partner unit for each calendar quarter in a four-quarter period, the subordination period will terminate automatically. The subordination period will also terminate automatically if the general partner is removed without cause and the units held by the general partner and its affiliates are not voted in favor of such removal. When the subordination period lapses or otherwise terminates, all remaining subordinated units will convert into common units on a one-for-one basis and the common units will no longer be entitled to preferred distributions on prior-quarter distribution arrearages. All subordinated units are held indirectly by Anadarko.

15

Notes to consolidated financial statements of Western Gas Partners, LP

General partner interest and incentive distribution rights

The general partner is currently entitled to 2.0% of all quarterly distributions that the Partnership makes prior to its liquidation. After distributing amounts equal to the minimum quarterly distribution to common and subordinated unitholders and distributing amounts to eliminate any arrearages to common unitholders, the Partnership’s general partner is entitled to incentive distributions if the amount the Partnership distributes with respect to any quarter exceeds specified target levels shown below:

		Marginal Percentage
	Total Quarterly Distribution	Interest in Distributions
	Target Amount	Unitholders			General Partner
Minimum Quarterly Distribution	$0.300		98	%		2	%
First Target Distribution	up to $0.345		98	%		2	%
Second Target Distribution	above $0.345 up to $0.375		85	%		15	%
Third Target distribution	above $0.375 up to $0.450		75	%		25	%
Thereafter	above $0.45		50	%		50	%

The table above assumes that the Partnership’s general partner maintains its 2% general partner interest, that there are no arrearages on common units and the general partner continues to own the IDRs. The maximum distribution sharing percentage of 50.0% includes distributions paid to the general partner on its 2.0% general partner interest and does not include any distributions that the general partner may receive on limited partner units that it owns or may acquire.

5. NET INCOME PER LIMITED PARTNER UNIT

The Partnership’s net income attributable to the initial assets for periods including and subsequent to May 14, 2008 and its net income attributable to the Powder River assets for periods including and subsequent to December 19, 2008 is allocated to the general partner and the limited partners, including any subordinated unitholders, in accordance with their respective ownership percentages, and giving effect to incentive distributions allocable to the general partner. The Partnership’s net income allocable to the limited partners is allocated between the common and subordinated unitholders by applying the provisions of the partnership agreement that govern actual cash distributions as if all earnings for the period had been distributed. Accordingly, if current net income allocable to the limited partners is less than the minimum quarterly distribution, or if cumulative net income allocable to the limited partners since May 14, 2008 is less than the cumulative minimum quarterly distributions, more income is allocated to the common unitholders than the subordinated unitholders for that quarterly period.

Basic and diluted net income per limited partner unit is calculated by dividing limited partners’ interest in net income by the weighted average number of limited partner units outstanding during the period. However, because the initial public offering was completed on May 14, 2008, the number of units issued in connection with the initial public offering, including shares issued in connection with the partial exercise of the underwriters’ over-allotment option, is utilized for purposes of calculating basic earnings per unit for the 2008 periods that include May 14, 2008 as if the shares were outstanding from May 14, 2008. The common units and general partner units issued in connection with the Powder River acquisition are included on a weighted-average basis for the 13 days they were outstanding during 2008. Diluted net income per unit reflects the potential dilution of common-equivalent units that could occur if units granted under the LTIP were settled in common units.

16

Notes to consolidated financial statements of Western Gas Partners, LP

The following table illustrates the Partnership’s calculation of net income per unit for common and subordinated partner units (in thousands, except per-unit information):

	Twelve Months Ended
	December 31, 2008
Net income	$	65,276
Less Predecessor interest in net income(1)		23,173
Less general partner interest in net income		842
Limited partner interest in net income	$	41,261
Net income allocable to common units	$	20,841
Net income allocable to subordinated units		20,420
Limited partner interest in net income	$	41,261
Net income per limited partner unit — basic
Common units	$	0.78
Subordinated units	$	0.77
Total	$	0.78
Net income per limited partner unit — diluted
Common units	$	0.78
Subordinated units	$	0.77
Total	$	0.77
Weighted average limited partner units outstanding — basic
Common units		26,680
Subordinated units		26,536
Total		53,216
Weighted average limited partner units outstanding — diluted
Common units		26,710
Subordinated units		26,536
Total		53,246

⁽¹⁾ Includes net income attributable to the initial assets up to May 14, 2008 and net income attributable to the Powder River assets up to December 19, 2008.

6. TRANSACTIONS WITH AFFILIATES

Affiliate transactions

The Partnership provides natural gas gathering, compression, treating and transportation services to Anadarko, which results in affiliate transactions. A portion of the Partnership’s expenditures were paid by or to Anadarko, which also resulted in affiliate transactions. In addition, contributions to and distributions from Fort Union were paid or received by the Parent, resulting in affiliate transactions. Prior to May 14, 2008 with respect to the initial assets and prior to December 19, 2008 with respect to the Powder River assets, balances arising from affiliate transactions were net-settled on a non-cash basis by way of an adjustment to parent net equity. Anadarko charged the Partnership interest at a variable rate (6.04% for November 2008) on outstanding affiliate balances owed by the Partnership to Anadarko for the periods these balances remained outstanding. Affiliate-based interest expense on intercompany balances was not charged subsequent to May 14, 2008 with respect to the initial assets or subsequent to December 19, 2008 with respect to the Powder River assets as the outstanding affiliate balances were entirely settled through an adjustment to parent equity in connection with the initial public offering and the Powder River acquisition. The Partnership will incur interest expense on its $175.0 million term loan payable to Anadarko. See Term Loan Agreement with Anadarko below.

17

Notes to consolidated financial statements of Western Gas Partners, LP

Contribution of AGC, PGT, MIGC and the Powder River assets to the Partnership

Concurrent with the closing of the initial public offering in May 2008, Anadarko contributed the assets and liabilities of AGC, PGT and MIGC to the Partnership in exchange for a 2.0% general partner interest, 100% of the IDRs, 5,725,431 common units and 26,536,306 subordinated units. In connection with the Powder River acquisition in December 2008, Anadarko contributed the Powder River assets to the Partnership for consideration consisting of $175.0 million cash, 2,556,891 common units and 52,181 general partner units. See Note 1—Description of Business and Basis of Presentation.

Note receivable from Anadarko

Concurrent with the closing of the initial public offering, the Partnership loaned $260.0 million to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50%. Interest on the note is payable quarterly.

Term Loan Agreement with Anadarko

Concurrent with the closing of the Powder River acquisition, the Partnership entered into a five-year, $175.0 million term loan agreement with Anadarko which calls for interest at a fixed rate of 4.0% for the first two years and a floating rate of interest at three-month LIBOR plus 150 basis points for the final three years. The Partnership has the option to repay the amount due in whole or in part commencing upon the second anniversary of the term loan agreement. The provisions of the term loan agreement are non-recourse to our general partner and our limited partners and contain customary events of default, including (i) nonpayment of principal when due or nonpayment of interest or other amounts within three business days of when due; (ii) certain events of bankruptcy or insolvency with respect to the Partnership; or (iii) a change of control.

Commodity Price Swap Agreements

The Partnership entered into commodity price swap agreements with Anadarko in December 2008 to mitigate exposure to commodity price volatility that would otherwise be present as a result of the Partnership’s acquisition of the Hilight and Newcastle Systems. Specifically, the commodity price swap agreements fix the margin the Partnership will realize under percent-of-proceeds contracts applicable to natural gas processing activities at the Hilight and Newcastle Systems. In this regard, the Partnership’s notional volumes for each of the swap agreements are not specifically defined; instead, the commodity price swap agreements apply to volumes equal in amount to the Partnership’s share of actual volumes processed at the Hilight and Newcastle Systems. Because the notional volumes are not fixed, the commodity price swap agreements do not satisfy the definition of a derivative financial instrument. The Partnership will recognize gains and losses on the commodity price swap agreements in the period in which the associated revenues are recognized.

Below is a summary of the fixed prices on the Partnership’s commodity price swap agreements outstanding as of December 31, 2008. The commodity price swap arrangements are for two years and the Partnership can extend the agreements, at its option, annually for three additional years.

	Year Ended December 31,
	2009		2010
	(per barrel)
Natural Gasoline	$	55.60	$	63.20
Condensate	$	62.27	$	70.72
Propane	$	35.56	$	40.63
Butane	$	42.24	$	48.15
	(per MMBtu)
Natural Gas	$	4.85	$	5.61

Cash management

Anadarko operates a cash management system whereby excess cash from most of its subsidiaries, held in separate bank accounts, is swept to a centralized account. Prior to May 14, 2008 with respect to the initial assets and prior to December 19, 2008 with respect to the Powder River assets, sales and purchases related to third-party transactions were received or paid in cash by Anadarko within the centralized cash management system and were settled with the Partnership through an adjustment to parent net equity. Subsequent to May 14, 2008 with respect to the initial assets and subsequent to December 19, 2008 with respect to the Powder River assets, the Partnership cash-settles transactions directly with third parties and with Anadarko affiliates.

18

Notes to consolidated financial statements of Western Gas Partners, LP

Credit facilities

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million. Concurrent with the closing of the initial public offering, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. See Note 11—Debt for more information on these credit facilities.

Omnibus agreement

Concurrent with the closing of the initial public offering, the Partnership entered into an omnibus agreement with the general partner and Anadarko that addresses the following:

• Anadarko’s obligation to indemnify the Partnership for certain liabilities and the Partnership’s obligation to indemnify Anadarko for certain liabilities;

• the Partnership’s obligation to reimburse Anadarko for all expenses incurred or payments made on the Partnership’s behalf in conjunction with Anadarko’s provision of general and administrative services to the Partnership, including salary and benefits of the general partner’s executive management and other Anadarko personnel and general and administrative expenses which are attributable to the Partnership’s status as a separate publicly traded entity;

• the Partnership’s obligation to reimburse Anadarko for all insurance coverage expenses it incurs or payments it makes with respect to the Partnership’s assets; and

• the Partnership’s obligation to reimburse Anadarko for the Partnership’s allocable portion of commitment fees that Anadarko incurs under its $1.3 billion credit facility.

Pursuant to the omnibus agreement, Anadarko performs centralized corporate functions for the Partnership, such as legal, accounting, treasury, cash management, investor relations, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, tax, marketing and midstream administration. The Partnership’s reimbursement to Anadarko for certain general and administrative expenses allocated to the Partnership is capped at $6.65 million annually through December 31, 2009, subject to adjustment to reflect changes in the Consumer Price Index and to reflect expansions of the Partnership’s operations through the acquisition or construction of new assets or businesses. The cap contained in the omnibus agreement does not apply to incremental general and administrative expenses allocated to or incurred by the Partnership as a result of being a publicly traded partnership. The consolidated financial statements of the Partnership include costs allocated by Anadarko pursuant to the omnibus agreement for periods including and subsequent to May 14, 2008.

Services and secondment agreement

Concurrent with the closing of the initial public offering, the general partner and Anadarko entered into a services and secondment agreement pursuant to which specified employees of Anadarko are seconded to the general partner to provide operating, routine maintenance and other services with respect to the assets owned and operated by the Partnership under the direction, supervision and control of the general partner. Pursuant to the services and secondment agreement, the Partnership will reimburse Anadarko for services provided by the seconded employees. The initial term of the services and secondment agreement is 10 years and the term will automatically extend for additional twelve-month periods unless either party provides 180 days written notice otherwise before the applicable twelve-month period expires. The consolidated financial statements of the Partnership include costs allocated by Anadarko pursuant to the services and secondment agreement for periods including and subsequent to May 14, 2008 with respect to the initial assets and periods including and subsequent to December 1, 2008 with respect to the Powder River assets.

19

Notes to consolidated financial statements of Western Gas Partners, LP

Tax sharing agreement

Concurrent with the closing of the initial public offering, the Partnership and Anadarko entered into a tax sharing agreement pursuant to which the Partnership reimburses Anadarko for the Partnership’s share of Texas margin tax borne by Anadarko as a result of the Partnership’s results being included in a combined or consolidated tax return filed by Anadarko with respect to periods subsequent to May 14, 2008. Anadarko may use its tax attributes to cause its combined or consolidated group, of which the Partnership may be a member for this purpose, to owe no tax. However, the Partnership is nevertheless required to reimburse Anadarko for the tax the Partnership would have owed had the attributes not been available or used for the Partnership’s benefit, irrespective of whether Anadarko pays taxes for the period.

Allocation of costs

The consolidated financial statements of the Partnership include costs allocated by Anadarko in the form of a management services fee for periods prior to May 14, 2008 with respect to the initial assets and prior to December 1, 2008 with respect to the Powder River assets. General, administrative and management costs were allocated to the Partnership based on its proportionate share of Anadarko’s assets and revenues. Management believes these allocation methodologies are reasonable.

The employees supporting the Partnership’s operations are employees of Anadarko. Anadarko charges the Partnership its allocated share of personnel costs, including costs associated with Anadarko’s non-contributory defined pension and postretirement plans and defined contribution savings plan, through the management services fee or pursuant to the omnibus agreement and services and secondment agreement described above.

Equity-based compensation

Pursuant to SFAS 123(R), grants made under equity-based compensation plans result in equity-based compensation expense which is determined, in part, by reference to the fair value of equity compensation as of the date of the relevant equity grant.

Long-term incentive plan

The general partner awarded 30,304 phantom units valued at $16.50 each to the general partner’s independent directors in May 2008. These phantom units were granted under the LTIP and will vest in May 2009. Total compensation expense attributable to the phantom units granted under the LTIP is expensed entirely by the Partnership and, during the year ended December 31, 2008, was approximately $323,000. The Partnership expects to recognize approximately $177,000 of additional compensation expense over the next five months related to the phantom units granted under the LTIP.

Equity incentive plan and Anadarko incentive plans

In April 2008, the general partner awarded to its executive officers an aggregate of 50,000 UVRs, UARs and DERs under its Incentive Plan. Equity-based compensation expense for grants made pursuant to the Incentive Plan as well as the Anadarko Incentive Plans is included in general and administrative expenses as a component of the compensation expense allocated to the Partnership by Anadarko and reflected in the Partnership’s financial statements for the year ended December 31, 2008. The Partnership’s general and administrative expense for the year ended December 31, 2008 included approximately $1.9 million of equity-based compensation expense for grants made pursuant to the Incentive Plan and Anadarko Incentive Plans. No such expense was included in the Partnership’s general and administrative expense for the years ended December 31, 2007 or 2006. These expenses are allocated to the Partnership by Anadarko as a component of compensation expense for the executive officers of the Partnership’s general partner and employees who provide services to the Partnership pursuant to the omnibus agreement and the services and secondment agreement. The above amount excludes compensation expense associated with the LTIP.

Summary of affiliate transactions

The following table summarizes affiliate transactions (in thousands). Affiliate expenses do not bear a direct relationship to affiliate revenues and third-party expenses do not bear a direct relationship to third-party revenues. Accordingly, the Partnership’s affiliate expenses are not those expenses necessary for generating affiliate revenues. Operating expenses include all amounts accrued for or paid to affiliates for the operation of the Partnership’s systems, whether in providing

20

Notes to consolidated financial statements of Western Gas Partners, LP

services to affiliates or to third parties, including field labor, measurement and analysis and other disbursements. Changes in parent net equity, including affiliate transactions and other payments made to or received from Anadarko, were settled through an adjustment to parent net equity prior to May 14, 2008 with respect to the initial assets and prior to December 19, 2008 with respect to the Powder River assets. Thereafter, affiliate transactions are cash-settled.

	Year Ended December 31,
	2008			2007			2006
	(in thousands)
Affiliate transactions
Revenues — affiliates	$	(271,643	)	$	(245,302	)	$	(121,635	)
Operating expenses — affiliates		52,548			38,867			19,492
Interest income — affiliates		(11,883	)		—			—
Interest expense — affiliates		2,692			7,805			9,574
Loan receivable from Anadarko	$	260,000		$	—		$	—
Loan payable to Anadarko		175,000			—			—
Reimbursement to parent from offering proceeds		45,161			—			—
Distribution to unitholders — affiliates		15,279			—			—

	As of December 31,
	2008		2007
Receivables from and payables to affiliates
Accounts receivable	$	3,235	$	—
Natural gas imbalance receivables		1,422		—
Note receivable from Anadarko		260,000		—
Natural gas imbalance payable		1,198		—
Accrued liabilities		153		—
Note payable to Anadarko		175,000		—
Parent net investment		—		392,140

7. INCOME TAXES

The components of the Partnership’s income tax expense are as follows:

	Year Ended December 31,
	2008		2007			2006
	(in thousands)
Current income tax expense
Federal income tax expense	$	11,758	$	8,411		$	2,101
State income tax expense		395		313			—
Total current income tax expense	$	12,153	$	8,724		$	2,101
Deferred income tax expense
Federal income tax expense		609		11,345			4,650
State income tax expense (benefit)		1,015		(529	)		(1,424	)
Total deferred income tax expense		1,624		10,816			3,226
Total income tax expense	$	13,777	$	19,540		$	5,327

21

Notes to consolidated financial statements of Western Gas Partners, LP

Total income taxes differed from the amounts computed by applying the statutory income tax rate to income before income taxes. The sources of these differences are as follows:

	Year Ended December 31,
	2008			2007			2006
	(in thousands)
Income before income taxes	$	79,053		$	56,198		$	18,028
Statutory tax rate		35	%		35	%		35	%
Tax computed at statutory rate		27,669			19,669			6,310
Adjustments resulting from:
Partnership income not subject to federal taxes		(15,011	)		—			—
Federal taxes at lower graduated rate		—			—			(62	)
State income taxes, net of federal tax benefit		1,115			268			178
Texas law change		—			(408	)		(1,104	)
Other		4			11			5
Income tax expense	$	13,777		$	19,540		$	5,327
Effective tax rate		17	%		35	%		30	%

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

	Year Ended December 31,
	2008			2007
	(in thousands)
Net operating loss and credit carryforwards	$	14		$	2,916
Net current deferred income tax assets		14			2,916
Depreciable property		(1,652	)		(126,184	)
Equity investment		—			(3,083	)
Net operating loss and credit carryforwards		599			—
Net long-term deferred income tax liabilities		(1,053	)		(129,267	)
Total net deferred income tax liabilities	$	(1,039	)	$	(126,351	)

Credit carryforwards, which are available for utilization on future income tax returns, are as follows:

	December 31,		Statutory
	2008		Expiration
	(in thousands)
State credit	$	613		2027

8. CONCENTRATION OF CREDIT RISK

Anadarko was the only customer from whom revenues exceeded 10% of the Partnership’s consolidated revenues for the years ended December 31, 2008, 2007 and 2006. The percentage of revenues from Anadarko and the Partnership’s other customers are as follows:

	Year Ended December 31,
Customer	2008			2007			2006
Anadarko		86	%		92	%		94	%
Other		14	%		8	%		6	%
Total		100	%		100	%		100	%

22

Notes to consolidated financial statements of Western Gas Partners, LP

9. PROPERTY, PLANT AND EQUIPMENT

A summary of the historical cost of the Partnership’s property, plant and equipment is as follows:

	Estimated
	useful life		December 31, 2008		December 31, 2007
	(dollars in thousands)
Land		n/a	$	354	$	354
Gathering systems		15 to 25 years		585,304		532,312
Pipeline and equipment		30 to 34.5 years		85,598		84,651
Assets under construction		n/a		7,690		22,904
Other		3 to 25 years		1,645		902
Total property, plant and equipment				680,591		641,123
Accumulated depreciation				162,776		129,348
Total net property, plant and equipment			$	517,815	$	511,775

The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. This amount represents property elements that are works-in-progress and not yet suitable to be placed into productive service as of the balance sheet date.

10. ASSET RETIREMENT OBLIGATIONS

The following table provides a summary of changes in asset retirement obligations. Revisions in estimates for the periods presented relate primarily to revisions of current cost estimates, inflation rates and/or discount rates.

	Year Ended December 31,
	2008			2007			2006
	(in thousands)
Carrying amount of asset retirement obligations at beginning of period	$	10,534		$	9,968		$	3,491
Additions		1,327			102			1,338
Accretion expense		775			604			367
Revisions in estimates		(3,543	)		(140	)		4,772
Carrying amount of asset retirement obligations at end of period	$	9,093		$	10,534		$	9,968

11. DEBT

In December 2008, the Partnership entered into a five-year $175.0 million term loan agreement with Anadarko in order to finance the Powder River acquisition. See Note 6—Transactions with Affiliates.

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million to the extent that sufficient amounts remain unborrowed by Anadarko and its subsidiaries. As of December 31 2008, the full $100.0 million was available for borrowing by the Partnership. Interest on borrowings under the credit facility is calculated based on the election by the borrower of either: (i) a floating rate equal to the federal funds effective rate plus 0.50% or (ii) a periodic fixed rate equal to LIBOR plus an applicable margin. The applicable margin, which was 0.44% at December 31, 2008, and the commitment fees on the facility are based on Anadarko’s senior unsecured long-term debt rating. Pursuant to the omnibus agreement, as a co-borrower under Anadarko’s credit facility, the Partnership is required to reimburse Anadarko for its allocable portion of commitment fees (currently 0.11% of the Partnership’s committed and available borrowing capacity, including the Partnership’s outstanding balances) that Anadarko incurs under its credit facility, or up to $110,000 annually. Under the credit facility, the Partnership and Anadarko are required to comply with certain covenants, including a financial covenant that requires Anadarko to maintain a debt-to-capitalization ratio of 65% or less. As of December 31, 2008, Anadarko was in compliance with all covenants. Should the Partnership or Anadarko fail to comply with any covenant in Anadarko’s credit facility, the Partnership may not be permitted to borrow under the credit facility. Anadarko is a guarantor of all borrowings under the credit facility, including the Partnership’s borrowings. The Partnership is not a guarantor of Anadarko’s borrowings under the credit facility.

23

Notes to consolidated financial statements of Western Gas Partners, LP

Concurrent with the closing of the initial public offering, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. At December 31, 2008, no borrowings were outstanding under the working capital facility. The facility is available exclusively to fund working capital borrowings. Borrowings under the facility will bear interest at the same rate as would apply to borrowings under the Anadarko credit facility described above. Pursuant to the omnibus agreement, the Partnership will pay a commitment fee of 0.11% annually to Anadarko on the unused portion of the working capital facility, or up to $33,000 annually. The Partnership is required to reduce all borrowings under the working capital facility to zero for a period of at least 15 consecutive days at least once during each of the twelve-month periods prior to the maturity date of the facility.

In December 2007, Anadarko and an entity organized by a group of unrelated investors formed Trinity Associates, LLC (Trinity). Trinity extended a $2.2 billion loan to WGR Asset Holding Company, LLC (WGR Asset Holdings), a subsidiary of Anadarko. Western Gas Wyoming, L.L.C. (WG Wyoming), which owns the 14.81% membership interest in Fort Union and that was contributed to the Partnership in connection with its Powder River acquisition on December 19, 2008, was a subsidiary of WGR Asset Holdings. On February 16, 2008, the Partnership and WG Wyoming, along with other Anadarko subsidiaries, became joint and several guarantors of the $2.2 billion loan. The principal amount due from WGR Asset Holdings to Trinity under the loan was $1.8 billion as of December 31, 2008. Pursuant to the loan agreement, all guarantees with respect to the Partnership’s assets were automatically released immediately prior to the closing of the initial public offering. Similarly, WG Wyoming’s obligations related to this guarantee were released on December 19, 2008 in connection with the closing of the Powder River acquisition.

12. SEGMENT INFORMATION

The Partnership’s operations are organized into a single business segment, the assets of which consist of natural gas gathering and processing systems, treating facilities, a pipeline and related plant and equipment. To assess the operating results of the Partnership’s segment, management uses Adjusted EBITDA, which it defines as net income (loss) plus distributions from equity investee, interest expense, income tax expense and depreciation, less income from equity investee, interest income, income tax benefit and other income (expense).

Adjusted EBITDA is a supplemental financial measure that management and external users of the Partnership’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:

• the Partnership’s operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to financing methods, capital structure or historical cost basis;

• the ability of the Partnership’s assets to generate cash flow to make distributions; and

• the viability of acquisitions and capital expenditure projects and the returns on investment of various investment opportunities.

Management believes that the presentation of Adjusted EBITDA provides information useful in assessing the Partnership’s financial condition and results of operations and that Adjusted EBITDA is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures and make distributions. Adjusted EBITDA, as defined by the Partnership, may not be comparable to similarly titled measures used by other companies. Therefore, the Partnership’s consolidated Adjusted EBITDA should be considered in conjunction with net income and other performance measures, such as operating income or cash flow from operating activities.

24

Notes to consolidated financial statements of Western Gas Partners, LP

Below is a reconciliation of Adjusted EBITDA to net income.

	Year Ended December 31,
	2008		2007		2006
	(in thousands)
Reconciliation of Adjusted EBITDA to net income
Adjusted EBITDA	$	112,474	$	91,830	$	47,239
Less:
Distributions from equity investee		5,128		1,348		741
Interest expense, net — affiliates		1,259		7,805		9,574
Interest expense from note — affiliate		253		—		—
Income tax expense		13,777		19,540		5,327
Depreciation and impairment		42,365		30,481		20,230
Other expense		—		15		26
Add:
Equity income, net		4,736		4,017		1,360
Interest income from note — affiliate		10,703		—		—
Other income		145		—		—
Net Income	$	65,276	$	36,658	$	12,701

13. COMMITMENTS AND CONTINGENCIES

Environmental

The Partnership is subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. Management believes there are no such matters that will have a material adverse effect on the Partnership’s results of operations, cash flows or financial position.

Litigation and legal proceedings

From time to time, the Partnership is involved in legal, tax, regulatory and other proceedings in various forums regarding performance, contracts and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which a final disposition could have a material adverse effect on the Partnership’s results of operations, cash flows or financial position.

Lease commitments

Anadarko, on behalf of the Partnership, has entered into leases for compression equipment. During 2007, Anadarko restructured certain third-party lease commitments, resulting in a new lease and the purchase of previously leased equipment. Compression equipment purchased by Anadarko was contributed to the Partnership. In October 2008, Anadarko modified certain lease arrangements including leased compression equipment used exclusively by the Partnership. As a result of the lease modifications, Anadarko became the owner of the compression equipment, effectively terminating the lease. Pursuant to the Contribution, Conveyance and Assumption Agreement signed in connection with the initial public offering, Anadarko contributed the compression equipment to the Partnership. The carrying value of the compression equipment was approximately $14.1 million.

25

Notes to consolidated financial statements of Western Gas Partners, LP

During 2008, Anadarko entered into a new third-party lease for office space used by the Partnership. The office lease will expire in January 2010 and there is no purchase option at the termination of the lease. The amounts in the table below represent existing contractual lease obligations for the office lease as of December 31, 2008 that may be assigned or otherwise charged to the Partnership (in thousands).

	Minimum rental
	payments
2009	$	149
2010		9
Total	$	158

Rent expense associated with the compressor leases and the office lease was approximately $1.2 million, $1.2 million and $3.0 million for the years ended December 31, 2008, 2007 and 2006, respectively.

14. QUARTERLY FINANCIAL DATA (unaudited)

The following table presents a summary of the Partnership’s operating results by quarter for the years ended December 31, 2008 and 2007. Financial information for 2007 and the first three quarters of 2008 has been revised to include results attributable to the Powder River assets. See Note 3 — Powder River Acquisition.

	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
	(in thousands, except per unit amounts)
2008
Revenues	$	82,034	$	89,996	$	82,206	$	57,412
Operating income	$	25,985	$	17,047	$	8,198	$	18,487
Net income	$	15,762	$	15,976	$	13,425	$	20,113
Net income per limited partner unit(1)		n/a	$	0.15	$	0.32	$	0.30
2007
Revenues	$	61,761	$	63,779	$	65,489	$	70,464
Operating income	$	15,763	$	16,294	$	12,908	$	19,053
Net income	$	8,837	$	8,123	$	7,798	$	11,900

⁽¹⁾ Net income per limited partner unit is calculated as net income attributable to the limited partners, which excludes income attributable to the initial assets up to May 14, 2008 and excludes income attributable to the Powder River assets up to December 19, 2008. See Note 5 — Net Income Per Limited Partner Unit.

15. SUBSEQUENT EVENT

On January 29, 2009, the board of directors of the Partnership’s general partner declared a cash distribution to the Partnership’s unitholders of $0.30 per unit, or $17.0 million in aggregate. The cash distribution was paid on February 13, 2009 to unitholders of record at the close of business on January 30, 2009.

16. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The Partnership anticipates filing a shelf registration statement on Form S-3 in June 2009 under which the Partnership may issue and sell up to $1.25 billion of debt and equity securities. Debt securities issued under the shelf may be guaranteed by WGR Operating, LP (WGR Operating), AGC, PGT, MIGC, Western Gas Wyoming, L.L.C. (WG Wyoming) and Western Gas Operating, LLC, each of which is a wholly owned subsidiary of the Partnership. WG Wyoming holds the Partnership’s 14.81% interest in Fort Union. The guarantees, if issued, will be full, unconditional, joint and several. The following condensed consolidating financial information reflects the Partnership’s stand-alone accounts, the consolidated accounts of the guarantor subsidiaries, consolidating adjustments and eliminations, and the Partnership’s consolidated accounts as of December 31, 2008 and for the year ended December 31, 2008. Western Gas Partners, LP did not hold an interest in WGR Operating and its subsidiaries prior to the Partnership’s initial public offering in May 2008; thus financial information for the years ended December 31, 2007 and 2006 is not presented. The condensed consolidating financial information should be read in conjunction with the Partnership’s accompanying consolidated financial statements and related notes.

26

Notes to consolidated financial statements of Western Gas Partners, LP

WGR Operating acquired the initial assets in connection with the Partnership’s initial public offering in May 2008 and acquired the Powder River assets in connection with the December 2008 Powder River acquisition (see Note 1). Anadarko acquired MIGC and the Powder River assets in connection with its August 23, 2006 acquisition of Western. Therefore, WGR Operating’s accounts include the results of operations of the initial assets and the Powder River assets for the full year ended December 31, 2008. The Partnership’s investments in its subsidiaries are presented in accordance with the equity method of accounting.

Statement of Income	Year Ended December 31, 2008
	(in thousands)
	Western Gas			Guarantor
	Partners, LP			Subsidiaries			Eliminations			Consolidated
Revenues
Gathering, processing and transportation of natural gas	$	—		$	123,540		$	—		$	123,540
Natural gas, natural gas liquids and condensate sales		—			170,891			—			170,891
Equity income and other		—			17,217			—			17,217
Total Revenues	$	—		$	311,648		$	—		$	311,648
Operating Expenses
Cost of product	$	—		$	134,715		$	—		$	134,715
Operation and maintenance		—			44,774			(9	)		44,765
General and administrative		9,085			5,291			9			14,385
Property and other taxes		—			5,701			—			5,701
Depreciation and impairment		39			42,326			—			42,365
Total Operating Expenses	$	9,124		$	232,807		$	—		$	241,931
Operating Income (Loss)	$	(9,124	)	$	78,841		$	—		$	69,717
Interest income (expense), net — affiliates		10,323			(1,132	)		—			9,191
Other income, net		139			6			—			145
Equity income from subsidiaries		27,774			—			(27,774	)		—
Income Before Income Taxes	$	29,112		$	77,715		$	(27,774	)	$	79,053
Income Tax Expense		—			13,777			—			13,777
Net Income	$	29,112		$	63,938		$	(27,774	)	$	65,276

27

Notes to consolidated financial statements of Western Gas Partners, LP

Balance Sheet	As of December 31, 2008
	(in thousands)
	Western Gas		Guarantor
	Partners, LP		Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	33,306	$	—	$	—		$	33,306
Other current assets		459		50,430		(38,816	)		12,073
Note receivable — Anadarko		260,000		—		—			260,000
Investment in subsidiaries		574,442		—		(574,442	)		—
Net property, plant and equipment		273		517,542		—			517,815
Goodwill		—		14,436		—			14,436
Equity investment		—		18,183		—			18,183
Other assets		628		—		—			628
Total Assets	$	869,108	$	600,591	$	(613,258	)	$	856,441
Accounts payable	$	38,816	$	5,544	$	(38,816	)	$	5,544
Other current liabilities		338		10,459		—			10,797
Note payable — Anadarko		175,000		—		—			175,000
Other long-term liabilities		—		10,146		—			10,146
Total Liabilities	$	214,154	$	26,149	$	(38,816	)	$	201,487
Partners’ Capital	$	654,954	$	574,442	$	(574,442	)	$	654,954
Total Liabilities and Partners’ Capital	$	869,108	$	600,591	$	(613,258	)	$	856,441

28

Notes to consolidated financial statements of Western Gas Partners, LP

Statement of Cash Flows	Year Ended December 31, 2008
	(in thousands)
	Western Gas			Guarantor
	Partners, LP			Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net income	$	29,112		$	63,938		$	(27,774	)	$	65,276
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		39			32,972			—			33,011
Impairment		—			9,354			—			9,354
Deferred income taxes		—			1,624			—			1,624
Changes in assets and liabilities:
Increase in accounts receivable and natural gas imbalance receivable		—			(43,775	)		38,816			(4,959	)
Increase in accounts payable and accrued expenses		39,154			4,502			(38,816	)		4,840
Increase (decrease) in other items, net		(135	)		785			—			650
Net cash provided by operating activities	$	68,170		$	69,400		$	(27,774	)	$	109,796
Cash Flows from Investing Activities
Capital expenditures	$	(312	)	$	(36,552	)	$	—		$	(36,864	)
Powder River acquisition		(175,000	)		—			—			(175,000	)
Loan to Anadarko		(260,000	)		—			—			(260,000	)
Investment in affiliate		(574,442	)		(8,095	)		574,442			(8,095	)
Net cash used in investing activities	$	(1,009,754	)	$	(44,647	)	$	574,442		$	(479,959	)
Cash Flows from Financing Activities
Proceeds from issuance of common units, net of offering expenses	$	315,161		$	—		$	—		$	315,161
Issuance of Note Payable to Anadarko		175,000			—			—			175,000
Reimbursement to parent from offering proceeds		(45,161	)		—			—			(45,161	)
Distributions to unitholders		(24,814	)		—			—			(24,814	)
Net contributions to subsidiary (distributions to parent)		554,704			(24,753	)		(546,668	)		(16,717	)
Net cash provided by (used in) financing activities	$	974,890		$	(24,753	)	$	(546,668	)	$	403,469
Net Increase in Cash and Cash Equivalents	$	33,306		$	—		$	—		$	33,306
Cash and Cash Equivalents at Beginning of Period		—			—			—			—
Cash and Cash Equivalents at End of Period	$	33,306		$	—		$	—		$	33,306

29

EX-99.2

Exhibit 99.2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Western Gas Partners, LP
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands, except per-unit amounts)

	Three Months Ended March 31,
	2009			2008 (1)
Revenues — affiliates
Gathering, processing and transportation of natural gas	$	26,911		$	27,195
Natural gas, natural gas liquids and condensate sales		16,509			42,607
Equity income and other		1,730			650
Total revenues — affiliates		45,150			70,452
Revenues — third parties
Gathering, processing and transportation of natural gas		3,806			4,110
Natural gas, natural gas liquids and condensate sales		1,470			5,327
Other		462			1,533
Total revenues — third parties		5,738			10,970
Total Revenues		50,888			81,422
Operating Expenses(2)
Cost of product		12,528			33,728
Operation and maintenance		9,236			10,946
General and administrative		4,723			1,960
Property and other taxes		1,757			1,633
Depreciation and amortization		8,621			7,782
Total Operating Expenses		36,865			56,049
Operating Income		14,023			25,373
Interest income (expense), net — affiliates		2,440			(1,789	)
Other income, net		5			4
Income Before Income Taxes		16,468			23,588
Income Tax (Benefit) Expense		(490	)		8,467
Net Income	$	16,958		$	15,121
Calculation of Limited Partner Interest in Net Income:
Net income	$	16,958			n/a	(3)
Less general partner interest in net income		339			n/a
Limited partner interest in net income	$	16,619			n/a
Net income per limited partner unit — basic and diluted	$	0.30			n/a
Limited partner units outstanding — basic and diluted		55,629			n/a

(1)	Financial information for 2008 has been revised to include results attributable to the Powder River assets. See Note 1—Description of Business and Basis of Presentation—Powder River acquisition.
(2)	Operating expenses include amounts charged by Anadarko and its affiliates to the Partnership for services as well as reimbursement of amounts paid by Anadarko and its affiliates to third parties on behalf of the Partnership. Cost of product expenses include product purchases from Anadarko and its affiliates of $1.7 million and $7.1 million for the three months ended March 31, 2009 and 2008, respectively. Operation and maintenance expenses include charges from affiliates of $3.7 million and $4.1 million for the three months ended March 31, 2009 and 2008, respectively. General and administrative expenses include charges from affiliates of $3.4 million and $1.9 million for the three months ended March 31, 2009 and 2008, respectively. See Note 5—Transactions with Affiliates.
(3)	Not applicable because the Partnership did not complete its initial public offering until May 2008.

See accompanying notes to the unaudited consolidated financial statements.

1

Western Gas Partners, LP
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except number of units)

	March 31,		December 31,
	2009		2008
ASSETS
Current Assets
Cash and cash equivalents	$	27,296	$	33,306
Accounts receivable, net — third parties		5,758		5,878
Accounts receivable — affiliates		7,759		3,235
Natural gas imbalance receivables — third parties		379		389
Natural gas imbalance receivables — affiliates		2,022		1,422
Other current assets		815		1,149
Total current assets		44,029		45,379
Note receivable — Anadarko		260,000		260,000
Property, Plant and Equipment
Cost		685,677		680,591
Less accumulated depreciation		171,096		162,776
Net property, plant and equipment		514,581		517,815
Goodwill		14,436		14,436
Equity investment		18,622		18,183
Other assets		596		628
Total Assets	$	852,264	$	856,441
LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities
Accounts payable	$	4,252	$	5,544
Natural gas imbalance payable — third parties		162		244
Natural gas imbalance payable — affiliates		1,844		1,198
Accrued ad valorem taxes		3,075		1,330
Income taxes payable		211		146
Accrued liabilities — third parties		4,349		7,726
Accrued liabilities — affiliates		162		153
Total current liabilities		14,055		16,341
Long-Term Liabilities
Note payable — Anadarko		175,000		175,000
Deferred income taxes		498		1,053
Asset retirement obligations and other		9,240		9,093
Total long-term liabilities		184,738		185,146
Total Liabilities		198,793		201,487
Commitments and Contingencies (Note 11)
Partners’ Capital
Common units (29,093,197 units issued and outstanding at March 31, 2009 and December 31, 2008)		366,638		368,049
Subordinated units (26,536,306 units issued and outstanding at March 31, 2009 and December 31, 2008)		275,847		275,917
General partner units (1,135,296 units issued and outstanding at March 31, 2009 and December 31, 2008)		10,986		10,988
Partners’ Capital		653,471		654,954
Total Liabilities and Partners’ Capital	$	852,264	$	856,441

See accompanying notes to the unaudited consolidated financial statements.

2

Western Gas Partners, LP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

	Three Months Ended March 31,
	2009			2008(1)
Cash Flows from Operating Activities
Net income	$	16,958		$	15,121
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		8,621			7,782
Deferred income taxes		(555	)		2,103
Changes in assets and liabilities:
(Increase) decrease in accounts receivable		(5,940	)		1,698
(Increase) in natural gas imbalance receivable		(590	)		(327	)
Increase (decrease) in accounts payable and accrued expenses		(817	)		604
Increase (decrease) in other items, net		(112	)		343
Net cash provided by operating activities		17,565			27,324
Cash Flows from Investing Activities
Capital expenditures		(6,546	)		(6,707	)
Net cash used in investing activities		(6,546	)		(6,707	)
Cash Flows from Financing Activities
Distributions to unitholders		(17,029	)		—
Net distributions to Anadarko		—			(20,617	)
Net cash (used in) financing activities		(17,029	)		(20,617	)
Net Increase (Decrease) in Cash and Cash Equivalents		(6,010	)		—
Cash and Cash Equivalents at Beginning of Period		33,306			—
Cash and Cash Equivalents at End of Period	$	27,296		$	—
Supplemental Disclosures
Decrease in accrued capital expenditures	$	1,469		$	1,016
Interest paid		1,454			—

⁽¹⁾ Financial information for 2008 has been revised to include activity attributable to the Powder River assets. See Note 1—Description of Business and Basis of Presentation—Powder River acquisition.

See accompanying notes to the unaudited consolidated financial statements.

3

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Basis of presentation

Western Gas Partners, LP (the Partnership) is a Delaware limited partnership formed in August 2007. The Partnership’s assets consist of nine gathering systems, six natural gas treating facilities, two gas processing facilities and one interstate pipeline. The Partnership’s assets are located in East and West Texas, the Rocky Mountains (Utah and Wyoming) and the Mid-Continent (Kansas and Oklahoma). The Partnership is engaged in the business of gathering, compressing, processing, treating and transporting natural gas for Anadarko Petroleum Corporation and its consolidated subsidiaries and third-party producers and customers. For purposes of these financial statements, “Anadarko” refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding the Partnership and “affiliates” refers to wholly owned and partially owned subsidiaries of Anadarko, excluding the Partnership. The Partnership’s general partner is Western Gas Holdings, LLC, a wholly owned subsidiary of Anadarko.

The consolidated financial statements include the accounts of the Partnership and entities in which it holds a controlling financial interest. All significant intercompany transactions have been eliminated. Investments in non-controlled entities over which the Partnership exercises significant influence are accounted for under the equity method. The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of financial position as of March 31, 2009 and December 31, 2008 and for the results of operations, changes in partners’ capital and cash flows for the three months ended March 31, 2009 and 2008. The Partnership’s financial results for the three months ended March 31, 2009 are not necessarily indicative of the results for the full year ending December 31, 2009.

The accompanying consolidated financial statements of the Partnership have been prepared in accordance with accounting principles generally accepted in the United States. To conform to these accounting principles, management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and the notes thereto. These estimates are evaluated on an ongoing basis, utilizing historical experience and other methods considered reasonable under the particular circumstances. Although these estimates are based on management’s best available knowledge at the time, actual results may differ. Effects on the Partnership’s business, financial position and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revision become known. Changes in facts and circumstances or discovery of new facts or circumstances may result in revised estimates and actual results may differ from these estimates.

The accompanying consolidated financial statements and notes should be read in conjunction with the Partnership’s annual report on Form 10-K, as filed with the Securities and Exchange Commission on March 13, 2009.

Initial public offering

On May 14, 2008, the Partnership closed its initial public offering of 18,750,000 common units at a price of $16.50 per unit. On June 11, 2008, the Partnership issued an additional 2,060,875 common units to the public pursuant to the partial exercise of the underwriters’ over-allotment option. The May 14 and June 11 issuances are referred to collectively as the initial public offering. The common units are listed on the New York Stock Exchange under the symbol “WES.”

Concurrent with the closing of the initial public offering, Anadarko contributed the assets and liabilities of Anadarko Gathering Company LLC (AGC), Pinnacle Gas Treating LLC (PGT) and MIGC LLC (MIGC) to the Partnership in exchange for 1,083,115 general partner units, representing a 2.0% general partner interest in the Partnership, 100% of the incentive distribution rights (IDRs), 5,725,431 common units and 26,536,306 subordinated units. AGC, PGT and MIGC are referred to collectively as the initial assets. The common units issued to Anadarko include 751,625 common units issued following the expiration of the underwriters’ over-allotment option and represent the portion of the common units for which the underwriters did not exercise their over-allotment option. See Note 4—Partnership Equity and Distributions in Item 8 of our annual report on Form 10-K for information related to the distribution rights of the common and subordinated unitholders and to the IDRs held by the general partner.

4

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

Powder River acquisition

On December 19, 2008, the Partnership acquired certain midstream assets from Anadarko for consideration consisting of $175.0 million cash, which was financed by borrowing $175.0 million from Anadarko pursuant to the terms of a five-year term loan agreement, 2,556,891 common units and 52,181 general partner units. The acquisition consisted of (i) a 100% ownership interest in the Hilight system, (ii) a 50% interest in the Newcastle system and (iii) a 14.81% limited liability company membership interest in Fort Union Gas Gathering, L.L.C. (Fort Union). These assets are referred to collectively as the Powder River assets and the acquisition is referred to as the Powder River acquisition.

General information

As of March 31, 2009 and December 31, 2008, Anadarko held 1,135,296 general partner units representing a 2.0% general partner interest in the Partnership, 100% of the Partnership incentive distribution rights, 8,282,322 common units and 26,536,306 subordinated units. Anadarko’s common and subordinated unit ownership represents an aggregate 61.3% limited partner interest in the Partnership. The public held 20,810,875 common units, representing a 36.7% limited partner interest in the Partnership.

Anadarko acquired MIGC and the Powder River assets in connection with its August 23, 2006 acquisition of Western Gas Resources, Inc. The acquisition of the initial assets and the Powder River assets were considered transfers of net assets between entities under common control pursuant to the provisions of Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, (SFAS 141) Appendix D. SFAS 141 requires that all income statements be revised to include the results of the acquired assets as of the date of common control. Accordingly, the Partnership’s historical financial statements for the three months ended March 31, 2008 have been recast to reflect the results attributable to the Powder River assets for this period.

The “Partnership” as used herein refers to the combined financial results and operations of AGC, PGT and MIGC from January 1, 2008 through May 14, 2008 and to the Partnership thereafter, combined with the financial results and operations of the Powder River assets for all periods presented herein. The consolidated financial statements for periods prior to May 14, 2008 with respect to the initial assets and prior to December 19, 2008 with respect to the Powder River assets have been prepared from Anadarko’s historical cost-basis accounts and may not necessarily be indicative of the actual results of operations that would have occurred if the Partnership had owned the assets and operated as a separate entity during the periods reported.

2. NEW ACCOUNTING STANDARDS

SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). SFAS 141(R) applies fair value measurement in accounting for business combinations, expands financial disclosures, defines an acquirer and modifies the accounting for some business combinations items. Under SFAS 141(R), an acquirer is required to record 100% of assets and liabilities, including goodwill, contingent assets and contingent liabilities, at fair value. This replaces the cost allocation process applied under SFAS No. 141. In addition, contingent consideration must be recognized at fair value at the acquisition date, acquisition-related costs must be expensed rather than treated as an addition to the assets being acquired and restructuring costs are required to be recognized separately from the business combination. SFAS 141 (R) did not change the accounting for transfers of assets between entities under common control. SFAS 141(R) became effective on January 1, 2009 for the Partnership.

Emerging Issues Task Force (EITF) Issue No. 07-4, Application of the Two-Class Method under FASB Statement No. 128, Earnings per Share, to Master Limited Partnerships (EITF 07-4), and Financial Accounting Standards Board (FASB) Staff Position EITF Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). EITF 07-4 addresses the application of the two-class method under SFAS No. 128, Earnings per Share (SFAS 128), in determining income per unit for master limited partnerships having multiple classes of securities including limited partnership units, general partnership units and, when applicable, IDRs of the general partner. EITF 07-4 clarifies that the two-class method would apply, and provides the methodology for and circumstances under which undistributed earnings are allocated to the general partner, limited partners and IDR holders. In June 2008, the FASB issued FSP EITF 03-6-1 addressing whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore required to be accounted for in calculating earnings per unit under the two-class method described in SFAS 128. FSP EITF 03-6-1 requires companies to treat unvested share-based payment awards that have non-forfeitable rights to dividend or dividend equivalents as a separate class of securities in calculating earnings per unit. The Partnership adopted EITF 07-4 and FSP EITF 03-6-1 effective January 1, 2009 and has applied these provisions with respect to all periods in which earnings per unit is presented. EITF 07-4 did not impact earnings per unit for the periods presented herein and FSP EITF 03-6-1 did not have a significant impact on earnings per unit for the periods presented herein.

5

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

3. PARTNERSHIP DISTRIBUTIONS

The partnership agreement requires that, within 45 days subsequent to the end of each quarter, beginning with the quarter ended June 30, 2008, the Partnership distribute all of its available cash (as defined in the partnership agreement) to unitholders of record on the applicable record date. On February 13, 2009, the Partnership paid cash distributions to its unitholders of $0.30 per unit, representing the distribution for the quarter ended on December 31, 2008. See also Note 12—Subsequent Event concerning distributions approved in April 2009.

4. NET INCOME PER LIMITED PARTNER UNIT

The Partnership’s net income attributable to the initial assets for periods including and subsequent to May 14, 2008 and its net income attributable to the Powder River assets for periods including and subsequent to December 19, 2008 is allocated to the general partner and the limited partners, including any subordinated unitholders, in accordance with their respective ownership percentages, and where applicable, giving effect to unvested units granted under the Western Gas Partners, LP 2008 Long-Term Incentive Plan (LTIP) and incentive distributions allocable to the general partner. The allocation of undistributed earnings, or net income in excess of distributions, to the incentive distribution rights is limited to available cash (as defined by the Partnership Agreement) for the period. The Partnership’s net income allocable to the limited partners is allocated between the common and subordinated unitholders by applying the provisions of the partnership agreement that govern actual cash distributions as if all earnings for the period had been distributed. Accordingly, if current net income allocable to the limited partners is less than the minimum quarterly distribution, or if cumulative net income allocable to the limited partners since May 14, 2008 is less than the cumulative minimum quarterly distributions, more income is allocated to the common unitholders than the subordinated unitholders for that quarterly period.

Basic and diluted net income per limited partner unit is calculated by dividing limited partners’ interest in net income by the weighted average number of limited partner units outstanding during the period.

The following table illustrates the Partnership’s calculation of net income per unit for common and subordinated limited partner units (in thousands, except per-unit information):

	Three Months Ended
	March 31, 2009
Net income	$	16,958
Less general partner interest in net income		339
Limited partner interest in net income	$	16,619
Net income allocable to common units	$	8,728
Net income allocable to subordinated units		7,891
Limited partner interest in net income	$	16,619
Net income per limited partner unit — basic and diluted
Common units	$	0.30
Subordinated units	$	0.30
Total	$	0.30
Weighted average limited partner units outstanding — basic and diluted
Common units		29,093
Subordinated units		26,536
Total		55,629

6

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

5. TRANSACTIONS WITH AFFILIATES

Affiliate transactions

The Partnership provides natural gas gathering, compression, treating and transportation services to Anadarko and a portion of the Partnership’s expenditures were paid by or to Anadarko, which results in affiliate transactions. In addition, contributions to and distributions from Fort Union were paid or received by Anadarko. Prior to May 14, 2008 with respect to the initial assets and prior to December 19, 2008 with respect to the Powder River assets, balances arising from affiliate transactions were net-settled on a non-cash basis by way of an adjustment to parent net equity. Anadarko charged the Partnership interest at a variable rate (6.42% for March 2008) on outstanding affiliate balances owed by the Partnership to Anadarko for the periods these balances remained outstanding. The outstanding affiliate balances were entirely settled through an adjustment to parent net equity in connection with the initial public offering and the Powder River acquisition. Subsequent to May 14, 2008 with respect to the initial assets and subsequent to December 19, 2008 with respect to the Powder River assets, affiliate transactions are cash-settled and affiliate-based interest expense on intercompany balances is not charged.

Note receivable from Anadarko

Concurrent with the closing of the initial public offering, the Partnership loaned $260.0 million to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50%. Interest on the note is payable quarterly.

Term Loan Agreement with Anadarko

Concurrent with the closing of the Powder River acquisition, the Partnership entered into a five-year, $175.0 million term loan agreement with Anadarko under which the Partnership pays Anadarko interest at a fixed rate of 4.0% for the first two years and a floating rate of interest at three-month LIBOR plus 150 basis points for the final three years. See Note 9—Debt.

Commodity Price Swap Agreements

The Partnership entered into commodity price swap agreements with Anadarko in December 2008 to mitigate exposure to commodity price volatility that would otherwise be present as a result of the Partnership’s acquisition of the Hilight and Newcastle systems. Beginning on January 1, 2009, the commodity price swap agreements fix the margin the Partnership will realize on its share of revenues under percent-of-proceeds contracts applicable to natural gas processing activities at the Hilight and Newcastle systems. In this regard, the Partnership’s notional volumes for each of the swap agreements are not specifically defined; instead, the commodity price swap agreements apply to volumes equal in amount to the Partnership’s share of actual volumes processed at the Hilight and Newcastle systems. Because the notional volumes are not fixed, the commodity price swap agreements do not satisfy the definition of a derivative financial instrument. The Partnership reports realized gains and losses on the commodity price swap agreements in natural gas, natural gas liquids and condensate sales—affiliates in the consolidated statements of income in the period in which the associated revenues are recognized. During the three months ended March 31, 2009, the Partnership recorded realized gains of $1.8 million attributable to the commodity price swap agreements.

Below is a summary of the fixed prices on the Partnership’s commodity price swap agreements outstanding as of March 31, 2009. The commodity price swap arrangements expire in December 2010 and the Partnership at its option may extend the agreements annually for three additional years.

	Year Ended December 31,
	2009		2010
	(per barrel)
Natural Gasoline	$	55.60	$	63.20
Condensate	$	62.27	$	70.72
Propane	$	35.56	$	40.63
Butane	$	42.24	$	48.15
	(per MMBtu)
Natural Gas	$	4.85	$	5.61

Cash management

Anadarko operates a cash management system whereby excess cash from most of its subsidiaries, held in separate bank accounts, is swept to a centralized account. Prior to May 14, 2008 with respect to the initial assets and prior to December 19, 2008 with respect to the Powder River assets, sales and purchases related to third-party transactions were received or paid in cash by Anadarko within the centralized cash management system and were settled with the Partnership through an adjustment to parent net equity. Subsequent to May 14, 2008 with respect to the initial assets and subsequent to

7

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

December 19, 2008 with respect to the Powder River assets, the Partnership cash-settles transactions directly with third parties and with Anadarko affiliates.

Credit facilities

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million. Concurrent with the closing of the initial public offering, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. See Note 9—Debt for more information on these credit facilities.

Omnibus agreement

Concurrent with the closing of the initial public offering, the Partnership entered into an omnibus agreement with the general partner and Anadarko that addresses the following:

• Anadarko’s obligation to indemnify the Partnership for certain liabilities and the Partnership’s obligation to indemnify Anadarko for certain liabilities with respect to the initial assets;

• the Partnership’s obligation to reimburse Anadarko for all expenses incurred or payments made on the Partnership’s behalf in conjunction with Anadarko’s provision of general and administrative services to the Partnership, including salary and benefits of the general partner’s executive management and other Anadarko personnel and general and administrative expenses which are attributable to the Partnership’s status as a separate publicly traded entity;

• the Partnership’s obligation to reimburse Anadarko for all insurance coverage expenses it incurs or payments it makes with respect to the Partnership’s assets; and

• the Partnership’s obligation to reimburse Anadarko for the Partnership’s allocable portion of commitment fees that Anadarko incurs under its $1.3 billion credit facility.

Pursuant to the omnibus agreement, Anadarko performs centralized corporate functions for the Partnership, such as legal, accounting, treasury, cash management, investor relations, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, tax, marketing and midstream administration. The Partnership’s reimbursement to Anadarko for certain general and administrative expenses allocated to the Partnership is currently capped at $6.65 million annually through December 31, 2009, subject to adjustment to reflect expansions of the Partnership’s operations through the acquisition or construction of new assets or businesses and with the concurrence of the special committee of our general partner’s board of directors. The cap contained in the omnibus agreement does not apply to incremental general and administrative expenses allocated to or incurred by the Partnership as a result of being a publicly traded partnership. The consolidated financial statements of the Partnership include costs allocated by Anadarko pursuant to the omnibus agreement for periods including and subsequent to May 14, 2008.

Services and secondment agreement

Concurrent with the closing of the initial public offering, the general partner and Anadarko entered into a services and secondment agreement pursuant to which specified employees of Anadarko are seconded to the general partner to provide operating, routine maintenance and other services with respect to the assets owned and operated by the Partnership under the direction, supervision and control of the general partner. Pursuant to the services and secondment agreement, the Partnership will reimburse Anadarko for services provided by the seconded employees. The initial term of the services and secondment agreement is 10 years and the term will automatically extend for additional twelve-month periods unless either party provides 180 days written notice otherwise before the applicable twelve-month period expires. The consolidated financial statements of the Partnership include costs allocated by Anadarko pursuant to the services and secondment agreement for periods including and subsequent to May 14, 2008 with respect to the initial assets and periods including and subsequent to December 1, 2008 with respect to the Powder River assets.

Tax sharing agreement

Concurrent with the closing of the initial public offering, the Partnership and Anadarko entered into a tax sharing agreement pursuant to which the Partnership reimburses Anadarko for the Partnership’s share of Texas margin tax borne by Anadarko as a result of the Partnership’s results being included in a combined or consolidated tax return filed by Anadarko with respect to periods subsequent to May 14, 2008. Anadarko may use its tax attributes to cause its combined or consolidated group, of which the Partnership may be a member for this purpose, to owe no tax. However, the Partnership is nevertheless required to reimburse Anadarko for the tax the Partnership would have owed had the attributes not been available or used for the Partnership’s benefit, regardless of whether Anadarko pays taxes for the period.

8

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

Allocation of costs

The consolidated financial statements of the Partnership include costs allocated by Anadarko in the form of a management services fee for periods prior to May 14, 2008 with respect to the initial assets and prior to December 1, 2008 with respect to the Powder River assets. General, administrative and management costs were allocated to the Partnership based on its proportionate share of Anadarko’s assets and revenues. Management believes these allocation methodologies are reasonable.

The employees supporting the Partnership’s operations are employees of Anadarko. Anadarko charges the Partnership its allocated share of personnel costs, including costs associated with Anadarko’s non-contributory defined pension and postretirement plans and defined contribution savings plan, through the management services fee or pursuant to the omnibus agreement and services and secondment agreement described above.

Equity-based compensation

Pursuant to SFAS No. 123 (revised 2004), Shared-Based Payment, (SFAS 123(R)), grants made under equity-based compensation plans result in equity-based compensation expense which is determined by reference to the fair value of equity compensation as of the date of the relevant equity grant.

Long-term incentive plan

The general partner awarded 30,304 phantom units valued at $16.50 each to the general partner’s independent directors in May 2008. These phantom units were granted under the LTIP and will vest in May 2009. Compensation expense attributable to the phantom units granted under the LTIP is recognized entirely by the Partnership and, during the three months ended March 31, 2009, was approximately $123,000. The Partnership expects to recognize approximately $53,000 of additional compensation expense during the three months ending June 30, 2009 related to the phantom units currently granted under the LTIP.

Equity incentive plan and Anadarko incentive plans

The Partnership’s general and administrative expenses include equity-based compensation costs allocated by Anadarko to the Partnership for grants made pursuant to the Western Gas Holdings, LLC Amended and Restated Equity Incentive Plan (Incentive Plan), as well as the Anadarko Petroleum Corporation 1999 Stock Incentive Plan and the Anadarko Petroleum Corporation 2008 Omnibus Incentive Compensation Plan (Anadarko’s plans are referred to collectively as the Anadarko Incentive Plans). Under the Incentive Plan, participants are granted Unit Value Rights (UVRs), Unit Appreciation Rights (UARs) and Dividend Equivalent Rights (DERs). In April 2008, the general partner awarded to its executive officers an aggregate of 50,000 UVRs, UARs and DERs under its Incentive Plan. The Partnership’s general and administrative expense for the three months ended March 31, 2009 included approximately $878,000 of equity-based compensation expense for grants made pursuant to the Incentive Plan and Anadarko Incentive Plans. This amount excludes compensation expense associated with the LTIP. No such expense was included in the Partnership’s general and administrative expense for the three months ended March 31, 2008. These expenses are allocated to the Partnership by Anadarko as a component of compensation expense for the executive officers of the Partnership’s general partner and other employees pursuant to the omnibus agreement and employees who provide services to the Partnership pursuant to the services and secondment agreement.

9

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

Summary of affiliate transactions

Affiliate expenses do not bear a direct relationship to affiliate revenues and third-party expenses do not bear a direct relationship to third-party revenues. Accordingly, the Partnership’s affiliate expenses are not those expenses necessary for generating affiliate revenues. Operating expenses include all amounts accrued or paid to affiliates for the operation of the Partnership’s systems, whether in providing services to affiliates or to third parties, including field labor, measurement and analysis, and other disbursements. The following table summarizes affiliate transactions.

	Three Months Ended
	March 31,
	2009		2008
	(in thousands)
Affiliate transactions
Revenues — affiliates	$	45,150	$	70,452
Operating expenses — affiliates		8,825		13,118
Interest income — affiliates		4,225		—
Interest expense — affiliates		1,785		1,789
Distributions to unitholders — affiliates	$	10,786	$	—

6. INCOME TAXES

The following table summarizes the Partnership’s effective tax rate:

	Three Months Ended
	March 31,
	2009			2008
	(in thousands,
	except effective tax rate)
Income before income taxes	$	16,468		$	23,588
Income tax (benefit) expense	$	(490	)	$	8,467
Effective tax rate		(3	)%		36	%

The decrease in income tax expense for the three months ended March 31, 2009 is primarily due to the Partnership’s U.S. federal income tax status as a non-taxable entity. Income earned by the Partnership for the three months ended March 31, 2009, was subject only to Texas margin tax while income earned by the Partnership for the three months ended March 31, 2008 was subject to federal and state tax. In addition, the estimated income attributed to Texas relative to total income decreased in 2009 compared to the prior year, which resulted in a reduction of previously recognized deferred taxes of $560,000, offset by the recognition of $70,000 of current year Texas margin tax expense, resulting in a net tax benefit for the period. For 2008, the Partnership’s variance from the federal statutory rate is primarily attributable to state income taxes.

7. CONCENTRATION OF CREDIT RISK

Anadarko was the only customer from whom revenues exceeded 10% of the Partnership’s consolidated revenues for the three months ended March 31, 2009 and 2008. The percentage of revenues from Anadarko and the Partnership’s other customers are as follows:

	Three Months Ended
	March 31,
Customer	2009			2008
Anadarko		86	%		86	%
Other		14	%		14	%
Total		100	%		100	%

10

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

8. PROPERTY, PLANT AND EQUIPMENT

A summary of the historical cost of the Partnership’s property, plant and equipment is as follows:

	Estimated
	useful life		March 31, 2009		December 31, 2008
			(dollars in thousands)
Land		n/a	$	354	$	354
Gathering systems		15 to 25 years		589,527		585,304
Pipeline and equipment		30 to 34.5 years		85,821		85,598
Assets under construction		n/a		8,315		7,690
Other		3 to 25 years		1,660		1,645
Total property, plant and equipment				685,677		680,591
Accumulated depreciation				171,096		162,776
Total net property, plant and equipment			$	514,581	$	517,815

The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. This amount represents property elements that are works-in-progress and not yet suitable to be placed into productive service as of the balance sheet date.

9. DEBT

In December 2008, the Partnership entered into a five-year $175.0 million term loan agreement with Anadarko in order to finance the cash portion of the purchase price for the Powder River acquisition. The interest rate is fixed at 4.0% for the first two years and is a floating rate equal to three-month LIBOR plus 150 basis points for the final three years. The Partnership has the option to repay the outstanding principal amount in whole or in part commencing upon the second anniversary of the term loan agreement. The provisions of the term loan agreement are non-recourse to our general partner and our limited partners and contain customary events of default, including (i) nonpayment of principal when due or nonpayment of interest or other amounts within three business days of when due; (ii) certain events of bankruptcy or insolvency with respect to the Partnership; or (iii) a change of control. At March 31, 2009, the Partnership was in compliance with all covenants.

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million to the extent that sufficient amounts remain available to Anadarko and its subsidiaries. As of March 31, 2009, the full $100.0 million was available for borrowing by the Partnership. Interest on borrowings under the credit facility is calculated based on the election by the borrower of either: (i) a floating rate equal to the federal funds effective rate plus 0.50% or (ii) a periodic fixed rate equal to LIBOR plus an applicable margin. The applicable margin, which was 0.44% at March 31, 2009, and the commitment fees on the facility, are based on Anadarko’s senior unsecured long-term debt rating. Pursuant to the omnibus agreement, as a co-borrower under Anadarko’s credit facility, the Partnership is required to reimburse Anadarko for its allocable portion of commitment fees (currently 0.11% of the Partnership’s committed and available borrowing capacity, including the Partnership’s outstanding balances) that Anadarko incurs under its credit facility, or up to $110,000 annually. Under Anadarko’s credit agreements, the Partnership and Anadarko are required to comply with certain covenants, including a financial covenant that requires Anadarko to maintain a debt-to-capitalization ratio of 60% or less. As of March 31, 2009, Anadarko and the Partnership were in compliance with all covenants. Should the Partnership or Anadarko fail to comply with any covenant in Anadarko’s credit facility, the Partnership may not be permitted to borrow under the credit facility. Anadarko is a guarantor of all borrowings, including the Partnership’s borrowings, under the credit facility. The Partnership is not a guarantor of Anadarko’s borrowings under the credit facility. The $1.3 billion credit facility expires in March 2013.

In May 2008, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. At March 31, 2009, no borrowings were outstanding under the working capital facility. The facility is available exclusively to fund working capital expenditures. Borrowings under the facility will bear interest at the same rate that would apply to borrowings under the Anadarko credit facility described above. Pursuant to the omnibus agreement, the Partnership will pay a commitment fee of 0.11% annually to Anadarko on the unused portion of the working capital facility, or up to $33,000 annually. The Partnership is required to reduce all borrowings under the working capital facility to zero for a period of at least 15 consecutive days at least once during each of the twelve-month periods prior to the maturity date of the facility.

10. SEGMENT INFORMATION

The Partnership’s operations are organized into a single business segment, the assets of which consist of natural gas gathering and processing systems, treating facilities, a pipeline and related plant and equipment. To assess the operating results of the Partnership’s segment, management uses Adjusted EBITDA, which it defines as net income (loss) plus distributions from equity investee, non-cash share-based compensation expense, interest expense, income tax expense, depreciation and

11

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

amortization, less income from equity investee, interest income, income tax benefit and other income (expense). The Partnership changed its definition of Adjusted EBITDA from the definition used in prior periods. Adjusted EBITDA has been calculated using the revised definition for all periods presented.

Adjusted EBITDA is a supplemental financial measure that management and external users of the Partnership’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, use to assess, among other measures:

• the Partnership’s operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to financing methods, capital structure or historical cost basis;

• the ability of the Partnership’s assets to generate cash flow to make distributions; and

• the viability of acquisitions and capital expenditure projects and the returns on investment of various investment opportunities.

Management believes that the presentation of Adjusted EBITDA provides information useful in assessing the Partnership’s financial condition and results of operations and that Adjusted EBITDA is a widely accepted financial indicator of a company’s ability to incur and service debt, fund capital expenditures and make distributions. Adjusted EBITDA, as defined by the Partnership, may not be comparable to similarly titled measures used by other companies. Therefore, the Partnership’s consolidated Adjusted EBITDA should be considered in conjunction with net income and other performance measures, such as operating income or cash flow from operating activities.

Below is a reconciliation of Adjusted EBITDA to net income.

	Three Months Ended March 31,
	2009		2008
	(in thousands)
Reconciliation of Adjusted EBITDA to net income
Adjusted EBITDA	$	23,051	$	34,220
Less:
Distributions from equity investee		1,111		1,407
Non-cash share-based compensation expense		846		—
Interest expense, net — affiliates		35		1,789
Interest expense from note — affiliate		1,750		—
Income tax expense		—		8,467
Depreciation and amortization		8,621		7,782
Add:
Equity income, net		1,550		342
Interest income from note — affiliate		4,225		—
Other income		5		4
Income tax benefit		490		—
Net Income	$	16,958	$	15,121

12

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

11. COMMITMENTS AND CONTINGENCIES

Environmental

The Partnership is subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. Management believes there are no such matters that could have a material adverse effect on the Partnership’s results of operations, cash flows or financial position.

Litigation and legal proceedings

From time to time, the Partnership is involved in legal, tax, regulatory and other proceedings in various forums regarding performance, contracts and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which a final disposition could have a material adverse effect on the Partnership’s results of operations, cash flows or financial position.

Lease commitments

Anadarko, on behalf of the Partnership, formerly leased compression equipment used exclusively by the Partnership. As a result of lease modifications in October 2008, Anadarko became the owner of the compression equipment, effectively terminating the lease. Pursuant to the Contribution, Conveyance and Assumption Agreement signed in connection with the initial public offering, Anadarko contributed the compression equipment to the Partnership in November 2008. The carrying value of the compression equipment at the contribution date was approximately $14.1 million. Rent expense associated with the compression equipment was approximately $372,000 for the three months ended March 31, 2008. As of March 31, 2009, the Partnership does not have significant non-cancelable lease commitments.

12. SUBSEQUENT EVENT

On April 21, 2009, the board of directors of the Partnership’s general partner declared a cash distribution to the Partnership’s unitholders of $0.30 per unit, or $17.0 million in aggregate. The cash distribution is payable on May 15, 2009 to unitholders of record at the close of business on May 1, 2009.

13. CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The Partnership anticipates filing a shelf registration statement on Form S-3 in June 2009 under which the Partnership may issue and sell up to $1.25 billion of debt and equity securities. Debt securities issued under the shelf may be guaranteed by WGR Operating, LP (WGR Operating), AGC, PGT, MIGC, Western Gas Wyoming, L.L.C. (WG Wyoming) and Western Gas Operating, LLC, each of which is wholly owned subsidiary of the Partnership. WG Wyoming holds the Partnership’s 14.81% interest in Fort Union. The guarantees, if issued, will be full, unconditional, joint and several. The following condensed consolidating financial information reflects the Partnership’s stand-alone accounts, the consolidated accounts of the guarantor subsidiaries, consolidating adjustments and eliminations, and the Partnership’s consolidated accounts for the three months ended March 31, 2009 and as of March 31, 2009 and December 31, 2008. The condensed consolidating financial information should be read in conjunction with the Partnership’s accompanying unaudited consolidated financial statements and related notes.

WGR Operating acquired the initial assets in connection with the Partnership’s initial public offering in May 2008 and acquired the Powder River assets in connection with the December 2008 Powder River acquisition (see Note 1). Anadarko acquired MIGC and the Powder River assets in connection with its August 23, 2006 acquisition of Western Gas Resources, Inc. Therefore, WGR Operating’s accounts include the results of operations of the initial assets and the Powder River assets for all periods presented. Western Gas Partners, LP did not hold an interest in WGR Operating and its subsidiaries prior to the Partnership’s initial public offering in May 2008; thus financial information for the three months ended March 31, 2008 is not presented. The Partnership’s investments in its subsidiaries are presented in accordance with the equity method of accounting.

13

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

Statement of Income	Three Months Ended March 31, 2009
	(in thousands)
	Western Gas			Guarantor
	Partners, LP			Subsidiaries			Eliminations			Consolidated
Revenues
Gathering, processing and transportation of natural gas	$	—		$	30,717		$	—		$	30,717
Natural gas, natural gas liquids and condensate sales		1,774			16,205			—			17,979
Equity income and other		—			2,192			—			2,192
Total Revenues	$	1,774		$	49,114		$	—		$	50,888
Operating Expenses
Cost of product	$	—		$	12,528		$	—		$	12,528
Operation and maintenance		—			9,272			(36	)		9,236
General and administrative		4,386			301			36			4,723
Property and other taxes		—			1,757			—			1,757
Depreciation and amortization		14			8,607			—			8,621
Total Operating Expenses	$	4,400		$	32,465		$	—		$	36,865
Operating Income (Loss)	$	(2,626	)	$	16,649		$	—		$	14,023
Interest income, net — affiliates		2,438			2			—			2,440
Other income		5			—			—			5
Equity income from subsidiaries		17,141			—			(17,141	)		—
Income Before Income Taxes	$	16,958		$	16,651		$	(17,141	)	$	16,468
Income Tax (Benefit)		—			(490	)		—			(490	)
Net Income	$	16,958		$	17,141		$	(17,141	)	$	16,958

14

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

Balance Sheet	As of March 31, 2009
	(in thousands)
	Western Gas		Guarantor
	Partners, LP		Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	27,296	$	—	$	—		$	27,296
Other current assets		408		66,290		(49,965	)		16,733
Note receivable — Anadarko		260,000		—		—			260,000
Investment in subsidiaries		590,039		—		(590,039	)		—
Net property, plant and equipment		259		514,322		—			514,581
Goodwill		—		14,436		—			14,436
Equity investment		—		18,622		—			18,622
Other assets		596		—		—			596
Total Assets	$	878,598	$	613,670	$	(640,004	)	$	852,264
Accounts payable	$	49,965	$	4,252	$	(49,965	)	$	4,252
Other current liabilities		162		9,641		—			9,803
Note payable — Anadarko		175,000		—		—			175,000
Other long-term liabilities		—		9,738		—			9,738
Total Liabilities		225,127		23,631		(49,965	)		198,793
Partners’ Capital		653,471		590,039		(590,039	)		653,471
Total Liabilities and Partners’ Capital	$	878,598	$	613,670	$	(640,004	)	$	852,264

Balance Sheet	As of December 31, 2008
	(in thousands)
	Western Gas		Guarantor
	Partners, LP		Subsidiaries		Eliminations			Consolidated
Cash and cash equivalents	$	33,306	$	—	$	—		$	33,306
Other current assets		459		50,430		(38,816	)		12,073
Note receivable — Anadarko		260,000		—		—			260,000
Investment in subsidiaries		574,442		—		(574,442	)		—
Net property, plant and equipment		273		517,542		—			517,815
Goodwill		—		14,436		—			14,436
Equity investment		—		18,183		—			18,183
Other assets		628		—		—			628
Total Assets	$	869,108	$	600,591	$	(613,258	)	$	856,441
Accounts payable	$	38,816	$	5,544	$	(38,816	)	$	5,544
Other current liabilities		338		10,459		—			10,797
Note payable — Anadarko		175,000		—		—			175,000
Other long-term liabilities		—		10,146		—			10,146
Total Liabilities	$	214,154	$	26,149	$	(38,816	)	$	201,487
Partners’ Capital	$	654,954	$	574,442	$	(574,442	)	$	654,954
Total Liabilities and Partners’ Capital	$	869,108	$	600,591	$	(613,258	)	$	856,441

15

Notes to unaudited consolidated financial statements of Western Gas Partners, LP

Statement of Cash Flows	Three Months Ended March 31, 2009
	(in thousands)
	Western Gas			Guarantor
	Partners, LP			Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net income	$	16,958		$	17,141		$	(17,141	)	$	16,958
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14			8,607			—			8,621
Deferred income taxes		—			(555	)		—			(555	)
Changes in assets and liabilities:
(Increase) in accounts receivable and natural gas imbalance receivable		—			(17,680	)		11,150			(6,530	)
Increase (decrease) in accounts payable and accrued expenses		10,973			(640	)		(11,150	)		(817	)
Increase (decrease) in other items, net		215			(327	)		—			(112	)
Net cash provided by operating activities	$	28,160		$	6,546		$	(17,141	)	$	17,565
Cash Flows from Investing Activities
Capital expenditures	$	—		$	(6,546	)	$	—		$	(6,546	)
Investment in subsidiary		(15,597	)		—			15,597			—
Net cash used in investing activities	$	(15,597	)	$	(6,546	)	$	15,597		$	(6,546	)
Cash Flows from Financing Activities
Distribution to unitholders	$	(17,029	)	$	—		$	—		$	(17,029	)
Net distributions to parent		(1,544	)		—			1,544			—
Net cash used in financing activities	$	(18,573	)	$	—		$	1,544		$	(17,029	)
Net Decrease in Cash and Cash Equivalents	$	(6,010	)	$	—		$	—		$	(6,010	)
Cash and Cash Equivalents at Beginning of Period		33,306			—			—			33,306
Cash and Cash Equivalents at End of Period	$	27,296		$	—		$	—		$	27,296

16

EX-99.3

Exhibit 99.3

Western Gas Holdings, LLC

Index to financial statements
Report of Independent Registered Public Accounting Firm	2
Consolidated balance sheet as of December 31, 2008	3
Notes to the consolidated balance sheet	4

Western Gas Holdings, LLC
Report of Independent Registered Public Accounting Firm

The Board of Directors
Western Gas Holdings, LLC (as general partner of Western Gas Partners, LP):

We have audited the accompanying consolidated balance sheet of Western Gas Holdings, LLC and subsidiaries (the Company) as of December 31, 2008. This financial statement is the responsibility of the Company’s management. Our responsibility is to express an opinion on this consolidated financial statement based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit of a balance sheet includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet. An audit of a balance sheet also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall balance sheet presentation. We believe that our audit of the consolidated balance sheet provides a reasonable basis for our opinion.

In our opinion, the consolidated balance sheet referred to above presents fairly, in all material respects, the financial position of Western Gas Holdings, LLC and subsidiaries as of December 31, 2008, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Houston, Texas
June 11, 2009

2

Western Gas Holdings, LLC
CONSOLIDATED BALANCE SHEET

	December 31,
	2008
	(in thousands)
ASSETS
Current Assets
Cash and cash equivalents	$	33,802
Accounts receivable, net — third parties		5,878
Accounts receivable — affiliates		3,235
Natural gas imbalance receivables — third parties		389
Natural gas imbalance receivables — affiliates		1,422
Inventory		644
Deferred income taxes		14
Other current assets		491
Total current assets		45,875
Other assets		628
Note receivable — Anadarko		260,000
Property, Plant and Equipment
Cost		680,591
Less accumulated depreciation		162,776
Net property, plant and equipment		517,815
Goodwill		14,436
Equity investment		18,183
Total Assets	$	856,937
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	5,544
Natural gas imbalance payable — third parties		244
Natural gas imbalance payable — affiliates		1,198
Accrued ad valorem taxes		1,330
Income taxes payable		146
Accrued liabilities — third parties		7,726
Accrued liabilities — affiliates		153
Equity-based compensation		833
Total current liabilities		17,174
Long-Term Liabilities
Note payable — Anadarko		175,000
Deferred income taxes		1,053
Equity-based compensation		1,667
Asset retirement obligations and other		9,093
Total long-term liabilities		186,813
Total Liabilities		203,987
Commitments and Contingencies (Note 10)
Equity
Member’s equity		8,984
Noncontrolling interests		643,966
Equity		652,950
Total Liabilities and Equity	$	856,937

See the accompanying notes to the consolidated balance sheet.

3

Notes to consolidated balance sheet of Western Gas Holdings, LLC

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Basis of presentation

Western Gas Holdings, LLC, is a Delaware limited liability company formed on August 21, 2007 to become the general partner of Western Gas Partners, LP (the Partnership), a Delaware limited partnership also formed in August 2007. Western Gas Holdings, LLC is a direct wholly owned subsidiary of WGR Holdings, LLC (WGR Holdings), an indirect wholly owned subsidiary of Anadarko Petroleum Corporation.

The “Partnership” as used herein refers to Western Gas Partners, LP and its consolidated subsidiaries. The “Company” as used herein refers to Western Gas Holdings, LLC and its consolidated subsidiaries, including the Partnership. The “General Partner” as used herein refers to Western Gas Holdings, LLC, individually as the general partner of the Partnership and excluding the Partnership itself. “Anadarko” as used herein refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding the General Partner and the Partnership and “affiliates” refers to wholly owned and partially owned subsidiaries of Anadarko, excluding the General Partner and the Partnership.

Description of business

The General Partner owns a 2.0% general partner interest in the Partnership and its primary business purpose is to manage the affairs and operations of the Partnership. The Partnership’s assets consist of nine gathering systems, six natural gas treating facilities, two gas processing facilities and one interstate pipeline. The Partnership’s assets are located in East and West Texas, the Rocky Mountains (Utah and Wyoming) and the Mid-Continent (Kansas and Oklahoma). The Partnership is engaged in the business of gathering, compressing, processing, treating and transporting natural gas for Anadarko and third-party producers and customers.

Initial public offering of the Partnership’s common units

On May 14, 2008, the Partnership closed its initial public offering of 18,750,000 common units at a price of $16.50 per unit. On June 11, 2008, the Partnership issued an additional 2,060,875 common units to the public pursuant to the partial exercise of the underwriters’ over-allotment option. The May 14 and June 11 issuances are referred to collectively as the initial public offering. The common units are listed on the New York Stock Exchange under the symbol “WES.” The Partnership received gross proceeds of $343.4 million from the initial public offering, less $22.3 million for underwriting discounts and structuring fees.

Concurrent with the closing of the initial public offering, Anadarko contributed the assets and liabilities of Anadarko Gathering Company LLC (AGC), Pinnacle Gas Treating LLC (PGT) and MIGC LLC (MIGC) to the Partnership in exchange for 1,083,115 general partner units, representing a 2.0% general partner interest in the Partnership, 100% of the incentive distribution rights (IDRs), 5,725,431 common units and 26,536,306 subordinated units. The general partner units and IDRs are held by the General Partner. AGC, PGT and MIGC are referred to collectively as the initial assets. The common units issued to Anadarko include 751,625 common units issued following the expiration of the underwriters’ over-allotment option and represent the portion of the common units for which the underwriters did not exercise their over-allotment option. See Note 3—Partnership Distributions for information related to the distribution rights of the common and subordinated unitholders and to the IDRs held by the General Partner.

Powder River acquisition

On December 19, 2008, the Partnership acquired certain midstream assets from Anadarko for consideration consisting of $175.0 million cash, which was financed by borrowing $175.0 million from Anadarko pursuant to the terms of a five-year term loan agreement, 2,556,891 common units, which were issued to WGR Holdings, and 52,181 general partner units, which were issued to the General Partner. The acquisition consisted of (i) a 100% ownership interest in the Hilight system, (ii) a 50% interest in the Newcastle system and (iii) a 14.81% limited liability company membership interest in Fort Union Gas Gathering, L.L.C. (Fort Union). These assets are referred to collectively as the Powder River assets and the acquisition is referred to as the Powder River acquisition.

Anadarko acquired MIGC and the Powder River assets in connection with its August 23, 2006 acquisition of Western Gas Resources, Inc. (Western). The acquisition of the initial assets and the Powder River assets were considered transfers of net assets between entities under common control pursuant to the provisions of Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, (SFAS 141) Appendix D.

4

Notes to consolidated balance sheet of Western Gas Holdings, LLC

Principles of consolidation

The accompanying consolidated balance sheet of the Company has been prepared in accordance with accounting principles generally accepted in the United States. The consolidated balance sheet includes the accounts of the Company and entities in which it holds a controlling financial interest. The Company consolidates the accounts of the Partnership in accordance with Emerging Issues Task Force (EITF) Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (EITF 04-5). Notwithstanding the General Partner’s consolidation of the Partnership into its consolidated balance sheet pursuant to EITF 04-5, the General Partner is not liable for, and its assets are not available to satisfy, the obligations of the Partnership. All significant intercompany transactions have been eliminated. Investments in non-controlled entities over which the Company exercises significant influence are accounted for using the equity method. The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of financial position as of December 31, 2008.

Receivables and payables between the Company and Anadarko have been identified in the consolidated balance sheet as balances with affiliates. Please see Note 4—Transactions with Affiliates.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of estimates

To conform to accounting principles generally accepted in the United States, management makes estimates and assumptions that affect the amounts reported in the consolidated balance sheet and the notes thereto. These estimates are evaluated on an ongoing basis, utilizing historical experience and other methods considered reasonable in the particular circumstances. Although these estimates are based on management’s best available knowledge at the time, actual results may differ.

Effects on the Company’s business and financial position resulting from revisions to estimates are recognized when the facts that give rise to the revision become known. Changes in facts and circumstances or discovery of new facts or circumstances may result in revised estimates and actual results may differ from these estimates.

Property, plant and equipment

Property, plant and equipment are stated at the lower of historical cost less accumulated depreciation or fair value, if impaired. The Company capitalizes all construction-related direct labor and material costs. The cost of renewals and betterments that extend the useful life of property, plant and equipment is also capitalized. The cost of repairs, replacements and major maintenance projects which do not extend the useful life or increase the expected output of property, plant and equipment is expensed as incurred.

Depreciation is computed over the asset’s estimated useful life using the straight-line method or half-year convention method, based on estimated useful lives and salvage values of assets. Uncertainties that may impact these estimates include, among others, changes in laws and regulations relating to restoration and abandonment requirements, economic conditions and supply and demand in the area. When assets are placed into service, the Company makes estimates with respect to useful lives and salvage values that the Company believes are reasonable. However, subsequent events could cause a change in estimates, thereby impacting future depreciation amounts.

The Company evaluates its ability to recover the carrying amount of its long-lived assets and determines whether its long-lived assets have been impaired. Impairment exists when the carrying amount of an asset exceeds estimates of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. When alternative courses of action to recover the carrying amount of a long-lived asset are under consideration, estimates of future undiscounted cash flows take into account possible outcomes and probabilities of their occurrence. If the carrying amount of the long-lived asset is not recoverable, based on the estimated future undiscounted cash flows, the impairment loss is measured as the excess of the asset’s carrying amount over its estimated fair value, such that the asset’s carrying amount is adjusted to its estimated fair value with an offsetting charge to operating expense.

Fair value represents the estimated price between market participants to sell an asset in the principal or most advantageous market for the asset, based on assumptions a market participant would make. When warranted, management assesses the fair value of long-lived assets using commonly accepted techniques and may use more than one source in making such assessments. Sources used to determine fair value include, but are not limited to, recent third-party comparable sales, internally developed discounted cash flow analyses and analyses from outside advisors. Significant changes, such as changes in contract rates or terms, the condition of an asset, or management’s intent to utilize the asset generally require management to reassess the cash flows related to long-lived assets.

5

Notes to consolidated balance sheet of Western Gas Holdings, LLC

Equity-method investment

Fort Union is a partnership among Copano Pipelines/Rocky Mountains, LLC (37.04%), Crestone Powder River L.L.C. (37.04%), Bargath, Inc. (11.11%) and the Partnership (14.81%). Fort Union owns a gathering pipeline and treating facilities in the Powder River Basin. Anadarko is the construction manager and physical operator of the Fort Union facilities.

The Company’s investment in Fort Union is accounted for under the equity method of accounting. Certain business decisions, including, but not limited to, decisions with respect to significant expenditures or contractual commitments, annual budgets, material financings, dispositions of assets or amending the owners’ firm gathering agreements, require either 65% or unanimous approval of the owners.

Management evaluates its equity-method investment for impairment whenever events or changes in circumstances indicate that the carrying value of such investment may have experienced a decline in value that is other than temporary. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether the investment has been impaired. Management assesses the fair value of equity-method investments using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If the estimated fair value is less than the carrying value, the excess of the carrying value over the estimated fair value is recognized as an impairment loss.

The investment balance at December 31, 2008 includes $3.0 million for the purchase price allocated to the investment in Fort Union in excess of Western’s historic cost basis. This balance was attributed to the difference between the fair value and book value of Fort Union’s gathering and treating facilities and is being amortized over the remaining life of those facilities.

At December 31, 2008, Fort Union had expansion projects under construction and had project financing debt of $117.1 million outstanding, which is not guaranteed by the members. Fort Union’s lender has a lien on the Company’s interest in Fort Union.

Operating segments

The Company’s operations are organized into a single business segment, the assets of which consist of natural gas gathering and processing systems, treating facilities, a pipeline and related plant and equipment.

Goodwill

Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the identifiable assets acquired and liabilities assumed. As of December 31, 2008, $4.8 million of goodwill is attributed to the Company’s transportation reporting unit and $9.6 million of goodwill is attributed to the Company’s gathering and processing reporting unit. None of this goodwill is deductible for income tax purposes.

The Company evaluates whether goodwill has been impaired. Impairment testing is performed annually as of October 1, unless facts and circumstances make it necessary to test more frequently. The Company has determined that it has one operating segment and two reporting units and, accordingly, goodwill is assessed for impairment at the reporting unit level. Goodwill impairment assessment is a two-step process. Step one focuses on identifying a potential impairment by comparing the fair value of the reporting unit with the carrying amount of the reporting unit. If the fair value of the reporting unit exceeds its carrying amount, no further action is required. However, if the carrying amount of the reporting unit exceeds its fair value, goodwill is written down to the implied fair value of the goodwill through a charge to operating expense based on a hypothetical purchase price allocation.

Asset retirement obligations

Management recognizes a liability based on the estimated costs of retiring tangible long-lived assets. The liability is recognized at its fair value measured using expected discounted future cash outflows of the asset retirement obligation when the obligation originates, which generally is when an asset is acquired or constructed. The carrying amount of the associated asset is increased commensurate with the liability recognized. Accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. Subsequent to the initial recognition, the liability is adjusted for any changes in the expected value of the retirement obligation (with a corresponding adjustment to property, plant and equipment) and for accretion of the liability due to the passage of time, until the obligation is settled. If the fair value of the estimated asset retirement obligation changes, an adjustment is recorded for both the asset retirement obligation and the associated asset carrying amount. Revisions in estimated asset retirement obligations may result from changes in estimated inflation rates, discount rates, retirement costs and the estimated timing of settling asset retirement obligations.

6

Notes to consolidated balance sheet of Western Gas Holdings, LLC

Natural gas imbalances

The consolidated balance sheet includes natural gas imbalance receivables and payables resulting from differences in gas volumes received into the Partnership’s systems and gas volumes delivered by the Partnership to customers. Natural gas volumes owed to or by the Partnership that are subject to monthly cash settlement are valued according to the terms of the contract as of the balance sheet date, and generally reflect market index prices. Other natural gas volumes owed to or by the Partnership are valued at the Partnership’s weighted average cost of natural gas as of the balance sheet date and are settled in-kind.

Inventory

The cost of natural gas and natural gas liquids (NGLs) inventories are determined by the weighted average cost method on a location-by-location basis. Inventory is accounted for at the lower of weighted average cost or market value.

Environmental expenditures

Environmental expenditures related to operations that generate current or future revenues are expensed or capitalized, as appropriate. Liabilities are recorded when the necessity for environmental remediation becomes probable and the costs can be reasonably estimated, or when other potential environmental liabilities are probable and can be reasonably estimated.

Cash equivalents

The Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. The Company had approximately $33.8 million of cash and cash equivalents as of December 31, 2008.

Bad-debt reserve

The Company’s revenues are primarily from Anadarko, for which no credit limit is maintained. The Company analyzes its exposure to bad debt on a customer-by-customer basis for its third-party accounts receivable and may establish credit limits for significant third-party customers. For third-party accounts receivable, the amount of bad-debt reserve at December 31, 2008 was approximately $53,000.

Equity-based compensation

Concurrent with the closing of the initial public offering, phantom unit awards were granted to independent directors of the General Partner under the Western Gas Partners, LP 2008 Long-Term Incentive Plan (LTIP), which permits the issuance of up to 2,250,000 units. Upon vesting of each phantom unit, the holder will receive common units of the Partnership or, at the discretion of the General Partner’s board of directors, cash in an amount equal to the market value of common units of the Partnership on the vesting date. SFAS No. 123(R), Share-Based Payment (revised 2004) (SFAS 123(R)), requires companies to recognize stock-based compensation as an operating expense. The Partnership amortizes stock-based compensation expense attributable to awards granted under the LTIP over the vesting periods applicable to the awards.

Under the Western Gas Holdings, LLC Equity Incentive Plan as amended and restated (Incentive Plan), participants are granted Unit Value Rights (UVRs), Unit Appreciation Rights (UARs) and Dividend Equivalent Rights (DERs). UVRs granted under the Incentive Plan are valued at $50 per UVR, vest ratably over three years, or earlier in connection with certain other events, and become payable in cash by the General Partner no later than 30 days subsequent to vesting. UARs granted under the Incentive Plan vest ratably over three years or earlier in connection with certain other events, become payable no later than 30 days subsequent to exercise by the participant and expire upon the earlier of the 90th day subsequent to the participant’s voluntary termination or 10 years from the date of grant. DERs granted under the Incentive Plan vest upon the occurrence of certain events, become payable no later than 30 days subsequent to vesting and expire 10 years from the date of grant. See Note 5—Equity-Based Compensation.

Income taxes

The General Partner and the Partnership generally are not subject to federal or state income tax. The Partnership is subject to a Texas margin tax and the Partnership makes payments to Anadarko pursuant to the tax sharing agreement entered into between Anadarko and the Partnership for its share of Texas margin tax that are included in any combined or consolidated returns filed by Anadarko. Accordingly, the Company’s consolidated deferred tax liability consists of the Partnership’s estimated liability for this tax. The aggregate difference in the basis of the Company’s assets for financial and tax reporting purposes cannot be readily determined as we do not have access to information about each partner’s tax attributes.

Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48), became effective January 1, 2007. FIN 48 defines the criteria an

7

Notes to consolidated balance sheet of Western Gas Holdings, LLC

individual tax position must meet for any part of the benefit of that position to be recognized in the financial statements. The Company has no material uncertain tax positions at December 31, 2008.

Noncontrolling interests in the Partnership

Noncontrolling interests on the Company’s consolidated balance sheet represents affiliate and public ownership interests in the Partnership’s net assets through (1) the Partnership’s publicly traded common units owned by the public and (2) the Partnership’s common and subordinated units owned by Anadarko. The noncontrolling interests in the Company’s consolidated balance sheet reflects the sum of the allocation of the Partnership’s net income to the limited partners and contributions to the Partnership from the limited partners, partially offset by distributions paid to the limited partners.

As of December 31, 2008, the Partnership had 29,093,197 common units and 26,536,306 subordinated units outstanding. Anadarko indirectly held 8,282,322 common units and 26,536,306 subordinated units, representing an aggregate 61.3% limited partner interest in the Partnership. The public held 20,810,875 common units, representing a 36.7% limited partner interest in the Partnership.

New accounting standards

The following new accounting standards were recently adopted by the Company:

SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (SFAS 160). The Company adopted SFAS 160 effective January 1, 2009 with respect to transactions involving noncontrolling financial interests that occur on or after January 1, 2009. SFAS 160 establishes new accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of subsidiaries. Specifically, this statement requires the recognition of noncontrolling interests (formerly referred to as minority interests) as a component of consolidated equity. SFAS 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation. Dispositions of subsidiary stock are now required to be accounted for as equity transactions. The presentation and disclosure provisions of SFAS 160 must be applied retrospectively. Accordingly, the Company’s balance sheet as of December 31, 2008 reflects the adoption of SFAS 160.

SFAS No. 157, Fair Value Measurements (SFAS 157). In September 2006, the FASB issued SFAS 157, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. However, in some cases, the application of SFAS 157 changed the Company’s historical practice for measuring fair values under other accounting pronouncements that require or permit fair value measurements. As originally issued, SFAS 157 was effective as of January 1, 2008 and must be applied prospectively, except in certain cases, to the Company. The FASB issued FSP FAS 157-2, which delayed the effective date of SFAS 157 to January 1, 2009 for nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Company adopted SFAS 157 effective January 1, 2008. Adoption of SFAS 157 did not have a material impact on the Company’s consolidated financial position.

Recently issued accounting standards not yet adopted

The following new accounting standards have been issued, but had not been adopted by the Company as of December 31, 2008:

SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). In December 2007, the FASB issued SFAS 141(R) which applies fair value measurement in accounting for business combinations, expands financial disclosures, defines an acquirer and modifies the accounting for some business combinations items. Under SFAS 141(R), an acquirer will be required to record 100% of assets and liabilities, including goodwill, contingent assets and contingent liabilities, at their fair value. This replaces the cost allocation process applied under SFAS 141. In addition, contingent consideration must also be recognized at fair value at the acquisition date. Acquisition-related costs will be expensed rather than treated as an addition to the assets being acquired and restructuring costs will be recognized separately from the business combination. SFAS 141(R) did not change the accounting for transfers of assets between entities under common control. SFAS 141(R) applies to the Company prospectively for business combinations with an acquisition date on or after January 1, 2009.

EITF Issue No. 08-6, Accounting for Equity Method Investments Considerations (EITF 08-6). In November 2008, the EITF issued EITF 08-6, which clarifies that an equity method investor is required to continue to recognize an other-than-temporary impairment of its investment in accordance with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. Also, an equity method investor should not separately test an investee’s underlying assets for impairment. However, an equity method investor should recognize its share of an impairment charge recorded by an investee. EITF 08-6 is effective for the Company on a prospective basis on January 1, 2009 and for interim periods beginning with the first quarter of 2009.

8

Notes to consolidated balance sheet of Western Gas Holdings, LLC

3. PARTNERSHIP DISTRIBUTIONS

The partnership agreement requires that, within 45 days subsequent to the end of each quarter, beginning with the quarter ended June 30, 2008, the Partnership distribute all of its available cash (described below) to unitholders of record on the applicable record date. The Partnership paid cash distributions to its unitholders of $0.4582 per unit during the year ended December 31, 2008, or $24.8 million in aggregate including approximately $496,000 of distributions paid to the General Partner. This amount consists of a $0.30 per unit quarterly distribution prorated for the 48-day period beginning on May 14, 2008 and ending on June 30, 2008, or $0.1582 per unit, and a $0.30 per unit distribution for the quarter ended on September 30, 2008. See also Note 11—Subsequent Events concerning distributions paid in February and May of 2009.

Available cash

The amount of available cash (as defined in the partnership agreement) generally is all cash on hand at the end of the quarter, less the amount of cash reserves established by the General Partner to provide for the proper conduct of the Partnership’s business, including reserves to fund future capital expenditures, to comply with applicable laws, the Partnership’s debt instruments or other agreements, or to provide funds for distributions to the Partnership’s unitholders and to the General Partner for any one or more of the next four quarters. Working capital borrowings generally include borrowings made under a credit facility or similar financing arrangement. It is intended that working capital borrowings be repaid within 12 months. In all cases, working capital borrowings are used solely for working capital purposes or to fund distributions to partners.

Minimum quarterly distributions

The partnership agreement provides that, during a period of time referred to as the “subordination period,” the common units are entitled to distributions of available cash each quarter in an amount equal to the “minimum quarterly distribution,” which is $0.30 per common unit, plus any arrearages in the payment of the minimum quarterly distribution on the common units from prior quarters, before any distributions of available cash are permitted on the subordinated units. Furthermore, arrearages do not apply to subordinated units and therefore will not be paid on the subordinated units. The effect of the subordinated units is to increase the likelihood that, during the subordination period, available cash is sufficient to fully fund cash distributions on the common units in an amount equal to the minimum quarterly distribution.

The subordination period will lapse at such time when the Partnership has paid at least $0.30 per quarter on each common unit, subordinated unit and general partner unit for any three consecutive, non-overlapping four-quarter periods ending on or after June 30, 2011. Also, if the Partnership has paid at least $0.45 per quarter (150% of the minimum quarterly distribution) on each outstanding common unit, subordinated unit and general partner unit for each calendar quarter in a four-quarter period, the subordination period will terminate automatically. The subordination period will also terminate automatically if the General Partner is removed without cause and the units held by the General Partner and its affiliates are not voted in favor of such removal. When the subordination period lapses or otherwise terminates, all remaining subordinated units will convert into common units on a one-for-one basis and the common units will no longer be entitled to preferred distributions on prior-quarter distribution arrearages. All subordinated units are held indirectly by Anadarko.

General partner interest and incentive distribution rights

The General Partner is currently entitled to 2.0% of all quarterly distributions that the Partnership makes prior to its liquidation. After distributing amounts equal to the minimum quarterly distribution to common and subordinated unitholders and distributing amounts to eliminate any arrearages to common unitholders, the General Partner is entitled to incentive distributions if the amount the Partnership distributes with respect to any quarter exceeds specified target levels shown below:

		Marginal Percentage
	Total Quarterly Distribution	Interest in Distributions
	Target Amount	Unitholders			General Partner
Minimum Quarterly Distribution	$0.300		98	%		2	%
First Target Distribution	up to $0.345		98	%		2	%
Second Target Distribution	above $0.345 up to $0.375		85	%		15	%
Third Target distribution	above $0.375 up to $0.450		75	%		25	%
Thereafter	above $0.45		50	%		50	%

The table above assumes that the General Partner maintains its 2% general partner interest, that there are no arrearages on common units and the general partner continues to own the IDRs. The maximum distribution sharing percentage of 50.0% includes distributions paid to the General Partner on its 2.0% general partner interest and does not include any distributions that the General Partner may receive on limited partner units that it owns or may acquire.

9

Notes to consolidated balance sheet of Western Gas Holdings, LLC

4. TRANSACTIONS WITH AFFILIATES

Affiliate transactions

The Partnership provides natural gas gathering, compression, treating and transportation services to Anadarko, which results in affiliate transactions. A portion of the General Partner’s and the Partnership’s expenditures were paid by or to Anadarko, which also resulted in affiliate transactions. In addition, contributions to and distributions from Fort Union were paid or received by Anadarko, resulting in affiliate transactions.

Contribution of the initial assets and the Powder River assets to the Partnership

Concurrent with the closing of the initial public offering in May 2008, Anadarko contributed the assets and liabilities of the initial assets to the Partnership in exchange for general partner and limited partner interests. In connection with the Powder River acquisition in December 2008, Anadarko contributed the Powder River assets to the Partnership for consideration consisting of $175.0 million cash and additional common units and general partner units. See Note 1—Description of Business and Basis of Presentation.

Note receivable from Anadarko

Concurrent with the closing of the initial public offering, the Partnership loaned $260.0 million to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50%. Interest on the note is payable quarterly.

Term Loan Agreement with Anadarko

Concurrent with the closing of the Powder River acquisition, the Partnership entered into a five-year, $175.0 million term loan agreement with Anadarko which calls for interest at a fixed rate of 4.0% for the first two years and a floating rate of interest at three-month LIBOR plus 150 basis points for the final three years. The Partnership has the option to repay the amount due in whole or in part commencing upon the second anniversary of the term loan agreement. The provisions of the term loan agreement are non-recourse to the General Partner and the Partnership’s limited partners and contain customary events of default, including (i) nonpayment of principal when due or nonpayment of interest or other amounts within three business days of when due; (ii) certain events of bankruptcy or insolvency with respect to the Partnership; or (iii) a change of control.

Credit facilities

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million. Concurrent with the closing of the initial public offering, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. See Note 9—Debt for more information on these credit facilities.

Omnibus agreement

Concurrent with the closing of the initial public offering, the General Partner and the Partnership entered into an omnibus agreement with Anadarko that addresses the following:

• Anadarko’s obligation to indemnify the Partnership for certain liabilities and the Partnership’s obligation to indemnify Anadarko for certain liabilities;

• the Partnership’s obligation to reimburse Anadarko for all expenses incurred or payments made on the Partnership’s behalf in conjunction with Anadarko’s provision of general and administrative services to the Partnership, including salary and benefits of the General Partner’s executive management and other Anadarko personnel and general and administrative expenses which are attributable to the Partnership’s status as a separate publicly traded entity;

• the Partnership’s obligation to reimburse Anadarko for all insurance coverage expenses it incurs or payments it makes with respect to the Partnership’s assets; and

• the Partnership’s obligation to reimburse Anadarko for the Partnership’s allocable portion of commitment fees that Anadarko incurs under its $1.3 billion credit facility.

Pursuant to the omnibus agreement, Anadarko performs centralized corporate functions for the Partnership, such as legal, accounting, treasury, cash management, investor relations, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, tax, marketing and midstream administration. The Partnership’s reimbursement to Anadarko for certain general and administrative expenses allocated to the Partnership is capped at $6.65 million annually through December 31, 2009, subject to adjustment to reflect changes in the Consumer Price Index and to reflect expansions of the Partnership’s operations through the acquisition or

10

Notes to consolidated balance sheet of Western Gas Holdings, LLC

construction of new assets or businesses. The cap contained in the omnibus agreement does not apply to incremental general and administrative expenses allocated to or incurred by the Partnership as a result of being a publicly traded partnership.

Services and secondment agreement

Concurrent with the closing of the initial public offering, the General Partner and Anadarko entered into a services and secondment agreement pursuant to which specified employees of Anadarko are seconded to the General Partner to provide operating, routine maintenance and other services with respect to the assets owned and operated by the Partnership under the direction, supervision and control of the General Partner. Pursuant to the services and secondment agreement, the Partnership will reimburse Anadarko for services provided by the seconded employees. The initial term of the services and secondment agreement is 10 years and the term will automatically extend for additional twelve-month periods unless either party provides 180 days written notice otherwise before the applicable twelve-month period expires.

Tax sharing agreement

Concurrent with the closing of the initial public offering, the Partnership and Anadarko entered into a tax sharing agreement pursuant to which the Partnership reimburses Anadarko for the Partnership’s share of Texas margin tax borne by Anadarko as a result of the Partnership’s results being included in a combined or consolidated tax return filed by Anadarko with respect to periods subsequent to May 14, 2008. Anadarko may use its tax attributes to cause its combined or consolidated group, of which the Partnership may be a member for this purpose, to owe no tax. However, the Partnership is nevertheless required to reimburse Anadarko for the tax the Partnership would have owed had the attributes not been available or used for the Partnership’s benefit, irrespective of whether Anadarko pays taxes for the period.

Allocation of costs

The employees supporting the Partnership’s operations are employees of Anadarko. Anadarko charges the Partnership its allocated share of personnel costs, including costs associated with Anadarko’s non-contributory defined pension and postretirement plans and defined contribution savings plan, through the management services fee or pursuant to the omnibus agreement and services and secondment agreement described above.

Summary of affiliate transactions

The following table summarizes affiliate balances (in thousands).

	As of
	December 31, 2008
Receivables from and payables to affiliates
Accounts receivable	$	3,235
Natural gas imbalance receivables		1,422
Note receivable from Anadarko		260,000
Natural gas imbalance payable		1,198
Accrued liabilities		153
Note payable to Anadarko		175,000

5. EQUITY-BASED COMPENSATION

Pursuant to SFAS 123(R), grants made under equity-based compensation plans result in equity-based compensation expense which is determined, in part, by reference to the fair value of equity compensation as of the date of the relevant equity grant.

In April 2008, the General Partner awarded to its executive officers an aggregate of 50,000 UVRs, UARs and DERs under its Incentive Plan. The units will vest over three years. The following table summarizes information regarding the Incentive Plan awards for the year ended December 31, 2008:

Units outstanding at beginning of period		—
Granted		50,000
Vested		(—	)
Units outstanding at end of period		50,000
Weighted average grant date fair value per unit	$	50.00

The Incentive Plan awards were valued by multiplying the number of units awarded by the current per-unit valuation on the date of grant of $50.00, assuming no forfeitures. The value per unit was based on the estimated fair value of the General Partner using a hybrid discounted cash flow and multiples valuation approach.

11

Notes to consolidated balance sheet of Western Gas Holdings, LLC

6. INCOME TAXES

The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are as follows:

	Year Ended
	December 31, 2008
	(in thousands)
Net operating loss and credit carryforwards	$	14
Net current deferred income tax assets		14
Depreciable property		(1,652	)
Equity investment		—
Net operating loss and credit carryforwards		599
Net long-term deferred income tax liabilities		(1,053	)
Total net deferred income tax liabilities	$	(1,039	)

Credit carryforwards, which are available for utilization on future income tax returns, are as follows:

	December 31,		Statutory
	2008		Expiration
	(in thousands)
State credit	$	613		2027

7. PROPERTY, PLANT AND EQUIPMENT

A summary of the historical cost of the Company’s property, plant and equipment is as follows:

	Estimated
	useful life		December 31, 2008
			(dollars in thousands)
Land		n/a	$	354
Gathering systems		15 to 25 years		585,304
Pipeline and equipment		30 to 34.5 years		85,598
Assets under construction		n/a		7,690
Other		3 to 25 years		1,645
Total property, plant and equipment				680,591
Accumulated depreciation				162,776
Total net property, plant and equipment			$	517,815

The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. This amount represents property elements that are works-in-progress and not yet suitable to be placed into productive service as of the balance sheet date.

8. ASSET RETIREMENT OBLIGATIONS

The following table provides a summary of changes in asset retirement obligations. Revisions in estimates for the period presented relate primarily to revisions of current cost estimates, inflation rates and discount rates.

	Year Ended
	December 31, 2008
	(in thousands)
Carrying amount of asset retirement obligations at beginning of period	$	10,534
Additions		1,327
Accretion expense		775
Revisions in estimates		(3,543	)
Carrying amount of asset retirement obligations at end of period	$	9,093

12

Notes to consolidated balance sheet of Western Gas Holdings, LLC

9. DEBT

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million to the extent that sufficient amounts remain unborrowed by Anadarko. As of December 31 2008, the full $100.0 million was available for borrowing by the Partnership. Interest on borrowings under the credit facility is calculated based on the election by the borrower of either: (i) a floating rate equal to the federal funds effective rate plus 0.50% or (ii) a periodic fixed rate equal to LIBOR plus an applicable margin. The applicable margin, which was 0.44% at December 31, 2008, and the commitment fees on the facility are based on Anadarko’s senior unsecured long-term debt rating. Under the credit facility, the Partnership and Anadarko are required to comply with certain covenants, including a financial covenant that requires Anadarko to maintain a debt-to-capitalization ratio of 65% or less. As of December 31, 2008, Anadarko and the Partnership were in compliance with all covenants. Should the Partnership or Anadarko fail to comply with any covenant in Anadarko’s credit facility, the Partnership may not be permitted to borrow under the credit facility. Anadarko is a guarantor of all borrowings under the credit facility, including the Partnership’s borrowings. The Partnership is not a guarantor of Anadarko’s borrowings under the credit facility.

Concurrent with the closing of the initial public offering, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. At December 31, 2008, no borrowings were outstanding under the working capital facility. The facility is available exclusively to fund working capital borrowings. Borrowings under the facility will bear interest at the same rate as would apply to borrowings under the Anadarko credit facility described above. The Partnership is required to reduce all borrowings under the working capital facility to zero for a period of at least 15 consecutive days at least once during each of the twelve-month periods prior to the maturity date of the facility.

In December 2008, the Partnership entered into a five-year $175.0 million term loan agreement with Anadarko in order to finance the Powder River acquisition. See Note 4—Transactions with Affiliates.

10. COMMITMENTS AND CONTINGENCIES

Environmental

The Partnership is subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. Management believes there are no such matters that will have a material adverse effect on the Partnership’s financial position.

Litigation and legal proceedings

From time to time, the Partnership is involved in legal, tax, regulatory and other proceedings in various forums regarding performance, contracts and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which a final disposition could have a material adverse effect on the Partnership’s financial position.

Lease commitments

During 2008, Anadarko entered into a new third-party lease for office space used by the Company. The office lease expires in January 2010 and there is no purchase option at the termination of the lease. Future minimum rental payments under the office lease are approximately $149,000 and $9,000 for the years ended December 31, 2009 and 2010, respectively.

11. SUBSEQUENT EVENTS

A cash distribution of $0.30 per unit, or $17.0 million in aggregate including approximately $341,000 of distributions to the General Partner, was paid to the Partnership’s unitholders on February 13, 2009. A cash distribution of $0.30 per unit, or $17.0 million in aggregate including approximately $341,000 of distributions to the General Partner, was paid to the Partnership’s unitholders on May 15, 2009.

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EX-99.4

Exhibit 99.4

Western Gas Holdings, LLC

Index to financial statements
Consolidated balance sheet as of March 31, 2009	2
Notes to the unaudited consolidated balance sheet	3

1

Western Gas Holdings, LLC
CONSOLIDATED BALANCE SHEET
(Unaudited, in thousands)

	March 31,
	2009
ASSETS
Current Assets
Cash and cash equivalents	$	28,133
Accounts receivable, net — third parties		5,758
Accounts receivable — affiliates		7,759
Natural gas imbalance receivables — third parties		379
Natural gas imbalance receivables — affiliates		2,022
Other current assets		815
Total current assets		44,866
Note receivable — Anadarko		260,000
Property, Plant and Equipment
Cost		685,677
Less accumulated depreciation		171,096
Net property, plant and equipment		514,581
Goodwill		14,436
Equity investment		18,622
Other assets		596
Total Assets	$	853,101
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable	$	4,252
Natural gas imbalance payable — third parties		162
Natural gas imbalance payable — affiliates		1,844
Accrued ad valorem taxes		3,075
Income taxes payable		211
Accrued liabilities — third parties		4,349
Accrued liabilities — affiliates		162
Equity-based compensation		833
Total current liabilities		14,888
Long-Term Liabilities
Note payable — Anadarko		175,000
Deferred income taxes		498
Equity-based compensation		1,667
Asset retirement obligations and other		9,240
Total long-term liabilities		186,405
Total Liabilities		201,293
Commitments and Contingencies (Note 8)		—
Equity
Member’s equity		9,323
Noncontrolling interests		642,485
Equity		651,808
Total Liabilities and Equity	$	853,101

See the accompanying notes to the unaudited consolidated balance sheet.

2

Notes to unaudited consolidated balance sheet of Western Gas Holdings, LLC

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Basis of presentation

Western Gas Holdings, LLC, is a Delaware limited liability company formed in August 2007 to become the general partner of Western Gas Partners, LP (the Partnership), a Delaware limited partnership also formed in August 2007. Western Gas Holdings, LLC is a direct wholly owned subsidiary of WGR Holdings, LLC (WGR Holdings), an indirect wholly owned subsidiary of Anadarko Petroleum Corporation.

The “Partnership” as used herein refers to Western Gas Partners, LP and its consolidated subsidiaries. The “Company” as used herein refers to Western Gas Holdings, LLC and its consolidated subsidiaries, including the Partnership. The “General Partner” as used herein refers to Western Gas Holdings, LLC, individually as the general partner of the Partnership and excluding the Partnership itself. “Anadarko” as used herein refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding the General Partner and the Partnership and “affiliates” refers to wholly owned and partially owned subsidiaries of Anadarko, excluding the General Partner and the Partnership.

Description of business

The General Partner owns a 2.0% general partner interest in the Partnership and its primary business purpose is to manage the affairs and operations of the Partnership. The Partnership’s assets consist of nine gathering systems, six natural gas treating facilities, two gas processing facilities and one interstate pipeline. The Partnership’s assets are located in East and West Texas, the Rocky Mountains (Utah and Wyoming) and the Mid-Continent (Kansas and Oklahoma). The Partnership is engaged in the business of gathering, compressing, processing, treating and transporting natural gas for Anadarko and third-party producers and customers.

Principles of consolidation and use of estimates

The Company’s consolidated balance sheet has been prepared in accordance with accounting principles generally accepted in the United States. To conform to these accounting principles, management makes estimates and assumptions that affect the amounts reported in the consolidated financial statements and the notes thereto. These estimates are evaluated on an ongoing basis, utilizing historical experience and other methods considered reasonable under the particular circumstances. Although these estimates are based on management’s best available knowledge at the time, actual results may differ. Effects on the Company’s business and financial position resulting from revisions to estimates are recognized when the facts that give rise to the revision become known. Changes in facts and circumstances or discovery of new facts or circumstances may result in revised estimates and actual results may differ from these estimates.

The consolidated balance sheet includes the accounts of the Company and entities in which it holds a controlling financial interest. The Company consolidates the accounts of the Partnership in accordance with Emerging Issues Task Force (EITF) Issue No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (EITF 04-5). All significant intercompany transactions have been eliminated. Investments in non-controlled entities over which the Company exercises significant influence are accounted for using the equity method. The information furnished herein reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair statement of financial position as of March 31, 2009.

Receivables and payables between the Company and Anadarko have been identified in the consolidated balance sheet as balances with affiliates. Please see Note 4—Transactions with Affiliates.

The accompanying consolidated balance sheet and notes should be read in conjunction with the Company’s consolidated balance sheet as of December 31, 2008 and related notes, included in Exhibit 99.3 of this Form 8-K.

Initial public offering

On May 14, 2008, the Partnership closed its initial public offering of 18,750,000 common units at a price of $16.50 per unit. On June 11, 2008, the Partnership issued an additional 2,060,875 common units to the public pursuant to the partial exercise of the underwriters’ over-allotment option. The May 14 and June 11 issuances are referred to collectively as the initial public offering. The common units are listed on the New York Stock Exchange under the symbol “WES.”

Concurrent with the closing of the initial public offering, Anadarko contributed the assets and liabilities of Anadarko Gathering Company LLC (AGC), Pinnacle Gas Treating LLC (PGT) and MIGC LLC (MIGC) to the Partnership in exchange for 1,083,115 general partner units, representing a 2.0% general partner interest in the Partnership, 100% of the incentive distribution rights (IDRs), 5,725,431 common units and 26,536,306 subordinated units. The general partner units and IDRs are held by the General Partner. AGC, PGT and MIGC are referred to collectively as the initial assets. The common units issued to Anadarko include 751,625 common units issued following the expiration of the underwriters’ over-allotment option and represent the portion of the common units for which the underwriters did not exercise their over-allotment option.

3

Notes to unaudited consolidated balance sheet of Western Gas Holdings, LLC

Powder River acquisition

On December 19, 2008, the Partnership acquired certain midstream assets from Anadarko for consideration consisting of $175.0 million cash, which was financed by borrowing $175.0 million from Anadarko pursuant to the terms of a five-year term loan agreement, 2,556,891 common units, which were issued to WGR Holdings, and 52,181 general partner units, which were issued to the General Partner. The acquisition consisted of (i) a 100% ownership interest in the Hilight system, (ii) a 50% interest in the Newcastle system and (iii) a 14.81% limited liability company membership interest in Fort Union Gas Gathering, L.L.C. (Fort Union). These assets are referred to collectively as the Powder River assets and the acquisition is referred to as the Powder River acquisition.

Anadarko acquired MIGC and the Powder River assets in connection with its August 23, 2006 acquisition of Western Gas Resources, Inc. The acquisition of the initial assets and the Powder River assets were considered transfers of net assets between entities under common control pursuant to the provisions of Statement of Financial Accounting Standards (SFAS) No. 141, Business Combinations, (SFAS 141) Appendix D.

Noncontrolling interests in the Partnership

Noncontrolling interests on the Company’s consolidated balance sheet represents affiliate and public ownership interests in the Partnership’s net assets through (1) the Partnership’s publicly traded common units owned by the public and (2) the Partnership’s common and subordinated units owned by Anadarko. As of March 31, 2009, the Partnership had 29,093,197 common units and 26,536,306 subordinated units outstanding. Anadarko held 8,282,322 common units and 26,536,306 subordinated units, representing an aggregate 61.3% limited partner interest in the Partnership. The public held 20,810,875 common units, representing a 36.7% limited partner interest in the Partnership.

2. NEW ACCOUNTING STANDARDS

SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (SFAS 160). The Company adopted SFAS 160 effective January 1, 2009 with respect to transactions involving noncontrolling financial interests that occur on or after January 1, 2009. SFAS 160 establishes new accounting and reporting standards for noncontrolling interests in a subsidiary and for the deconsolidation of subsidiaries. Specifically, this statement requires the recognition of noncontrolling interests (formerly referred to as minority interests) as a component of consolidated equity. SFAS 160 establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation. Dispositions of subsidiary stock are now required to be accounted for as equity transactions. The presentation and disclosure provisions of SFAS 160 must be applied retrospectively.

SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). SFAS 141(R) applies fair value measurement in accounting for business combinations, expands financial disclosures, defines an acquirer and modifies the accounting for some business combinations items. Under SFAS 141(R), an acquirer is required to record 100% of assets and liabilities, including goodwill, contingent assets and contingent liabilities, at fair value. This replaces the cost allocation process applied under SFAS 141. In addition, contingent consideration must be recognized at fair value at the acquisition date, acquisition-related costs must be expensed rather than treated as an addition to the assets being acquired and restructuring costs are required to be recognized separately from the business combination. SFAS 141(R) did not change the accounting for transfers of assets between entities under common control. SFAS 141(R) became effective on January 1, 2009 for the Company.

3. PARTNERSHIP DISTRIBUTIONS

The partnership agreement requires that, within 45 days subsequent to the end of each quarter, the Partnership distribute all of its available cash (as defined in the partnership agreement) to unitholders of record on the applicable record date. On February 13, 2009, the Partnership paid cash distributions to its unitholders of $0.30 per unit, or $17.0 million in aggregate including approximately $341,000 of distributions to the General Partner. See also Note 9—Subsequent Event concerning distributions paid in May 2009.

4

Notes to unaudited consolidated balance sheet of Western Gas Holdings, LLC

4. TRANSACTIONS WITH AFFILIATES

Affiliate transactions

The Partnership provides natural gas gathering, compression, treating and transportation services to Anadarko and a portion of the General Partner’s and the Partnership’s expenditures were paid by or to Anadarko, which results in affiliate transactions. In addition, contributions to and distributions from Fort Union were paid or received by Anadarko.

Note receivable from Anadarko

Concurrent with the closing of the initial public offering, the Partnership loaned $260.0 million to Anadarko in exchange for a 30-year note bearing interest at a fixed annual rate of 6.50%. Interest on the note is payable quarterly.

Term Loan Agreement with Anadarko

Concurrent with the closing of the Powder River acquisition, the Partnership entered into a five-year, $175.0 million term loan agreement with Anadarko under which the Partnership pays Anadarko interest at a fixed rate of 4.0% for the first two years and a floating rate of interest at three-month LIBOR plus 150 basis points for the final three years. See Note 7—Debt.

Credit facilities

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million. Concurrent with the closing of the initial public offering, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. See Note 7—Debt for more information on these credit facilities.

Omnibus agreement

Concurrent with the closing of the initial public offering, the General Partner and the Partnership entered into an omnibus agreement with Anadarko that addresses the following:

• Anadarko’s obligation to indemnify the Partnership for certain liabilities and the Partnership’s obligation to indemnify Anadarko for certain liabilities with respect to the initial assets;

• the Partnership’s obligation to reimburse Anadarko for all expenses incurred or payments made on the Partnership’s behalf in conjunction with Anadarko’s provision of general and administrative services to the Partnership, including salary and benefits of the General Partner’s executive management and other Anadarko personnel and general and administrative expenses which are attributable to the Partnership’s status as a separate publicly traded entity;

• the Partnership’s obligation to reimburse Anadarko for all insurance coverage expenses it incurs or payments it makes with respect to the Partnership’s assets; and

• the Partnership’s obligation to reimburse Anadarko for the Partnership’s allocable portion of commitment fees that Anadarko incurs under its $1.3 billion credit facility.

Pursuant to the omnibus agreement, Anadarko performs centralized corporate functions for the Partnership, such as legal, accounting, treasury, cash management, investor relations, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, credit, payroll, internal audit, tax, marketing and midstream administration. The Partnership’s reimbursement to Anadarko for certain general and administrative expenses allocated to the Partnership is currently capped at $6.65 million annually through December 31, 2009, subject to adjustment to reflect expansions of the Partnership’s operations through the acquisition or construction of new assets or businesses and with the concurrence of the special committee of the General Partner’s board of directors. The cap contained in the omnibus agreement does not apply to incremental general and administrative expenses allocated to or incurred by the Partnership as a result of being a publicly traded partnership.

Services and secondment agreement

Concurrent with the closing of the initial public offering, the General Partner and Anadarko entered into a services and secondment agreement pursuant to which specified employees of Anadarko are seconded to the General Partner to provide operating, routine maintenance and other services with respect to the assets owned and operated by the Partnership under the direction, supervision and control of the General Partner. Pursuant to the services and secondment agreement, the Partnership will reimburse Anadarko for services provided by the seconded employees. The initial term of the services and secondment agreement is 10 years and the term will automatically extend for additional twelve-month periods unless either party provides 180 days written notice otherwise before the applicable twelve-month period expires.

5

Notes to unaudited consolidated balance sheet of Western Gas Holdings, LLC

Tax sharing agreement

Concurrent with the closing of the initial public offering, the Partnership and Anadarko entered into a tax sharing agreement pursuant to which the Partnership reimburses Anadarko for the Partnership’s share of Texas margin tax borne by Anadarko as a result of the Partnership’s results being included in a combined or consolidated tax return filed by Anadarko with respect to periods subsequent to May 14, 2008. Anadarko may use its tax attributes to cause its combined or consolidated group, of which the Partnership may be a member for this purpose, to owe no tax. However, the Partnership is nevertheless required to reimburse Anadarko for the tax the Partnership would have owed had the attributes not been available or used for the Partnership’s benefit, regardless of whether Anadarko pays taxes for the period.

Allocation of costs

The employees supporting the Partnership’s operations are employees of Anadarko. Anadarko charges the Partnership its allocated share of personnel costs, including costs associated with Anadarko’s non-contributory defined pension and postretirement plans and defined contribution savings plan, through the management services fee or pursuant to the omnibus agreement and services and secondment agreement described above.

5. EQUITY-BASED COMPENSATION

Pursuant to SFAS 123(R), grants made under equity-based compensation plans result in equity-based compensation expense which is determined, in part, by reference to the fair value of equity compensation as of the date of the relevant equity grant. No Incentive Plan awards were granted, vested or forfeited during the three months ended March 31, 2009.

6. PROPERTY, PLANT AND EQUIPMENT

A summary of the historical cost of the Company’s property, plant and equipment is as follows:

	Estimated
	useful life		March 31, 2009
			(dollars in thousands)
Land		n/a	$	354
Gathering systems		15 to 25 years		589,527
Pipeline and equipment		30 to 34.5 years		85,821
Assets under construction		n/a		8,315
Other		3 to 25 years		1,660
Total property, plant and equipment				685,677
Accumulated depreciation				171,096
Total net property, plant and equipment			$	514,581

The cost of property classified as “Assets under construction” is excluded from capitalized costs being depreciated. This amount represents property elements that are works-in-progress and not yet suitable to be placed into productive service as of the balance sheet date.

7. DEBT

In March 2008, Anadarko entered into a five-year $1.3 billion credit facility under which the Partnership may borrow up to $100.0 million to the extent that sufficient amounts remain available to Anadarko and its subsidiaries. As of March 31, 2009, the full $100.0 million was available for borrowing by the Partnership. Interest on borrowings under the credit facility is calculated based on the election by the borrower of either: (i) a floating rate equal to the federal funds effective rate plus 0.50% or (ii) a periodic fixed rate equal to LIBOR plus an applicable margin. The applicable margin, which was 0.44% at March 31, 2009, and the commitment fees on the facility, are based on Anadarko’s senior unsecured long-term debt rating. Under Anadarko’s credit agreements, the Partnership and Anadarko are required to comply with certain covenants, including a financial covenant that requires Anadarko to maintain a debt-to-capitalization ratio of 60% or less. As of March 31, 2009, Anadarko and the Partnership were in compliance with all covenants. Should the Partnership or Anadarko fail to comply with any covenant in Anadarko’s credit facility, the Partnership may not be permitted to borrow under the credit facility. Anadarko is a guarantor of all borrowings, including the Partnership’s borrowings, under the credit facility. The Partnership is not a guarantor of Anadarko’s borrowings under the credit facility. The $1.3 billion credit facility expires in March 2013.

6

Notes to unaudited consolidated balance sheet of Western Gas Holdings, LLC

In May 2008, the Partnership entered into a two-year $30.0 million working capital facility with Anadarko as the lender. At March 31, 2009, no borrowings were outstanding under the working capital facility. The facility is available exclusively to fund working capital expenditures. Borrowings under the facility will bear interest at the same rate that would apply to borrowings under the Anadarko credit facility described above. The Partnership is required to reduce all borrowings under the working capital facility to zero for a period of at least 15 consecutive days at least once during each of the twelve-month periods prior to the maturity date of the facility.

In December 2008, the Partnership entered into a five-year $175.0 million term loan agreement with Anadarko in order to finance the cash portion of the purchase price for the Powder River acquisition. The interest rate is fixed at 4.0% for the first two years and is a floating rate equal to three-month LIBOR plus 150 basis points for the final three years. The Partnership has the option to repay the outstanding principal amount in whole or in part commencing upon the second anniversary of the term loan agreement. The provisions of the term loan agreement are non-recourse to the General Partner and the Partnership’s limited partners and contain customary events of default, including (i) nonpayment of principal when due or nonpayment of interest or other amounts within three business days of when due; (ii) certain events of bankruptcy or insolvency with respect to the Partnership; or (iii) a change of control. At March 31, 2009, the Partnership was in compliance with all covenants.

8. COMMITMENTS AND CONTINGENCIES

Environmental

The Partnership is subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. Management believes there are no such matters that could have a material adverse effect on the Partnership’s financial position.

Litigation and legal proceedings

From time to time, the Partnership is involved in legal, tax, regulatory and other proceedings in various forums regarding performance, contracts and other matters that arise in the ordinary course of business. Management is not aware of any such proceeding for which a final disposition could have a material adverse effect on the Partnership’s financial position.

Lease commitments

During 2008, Anadarko entered into a new third-party lease for office space used by the Company. The office lease expires in January 2010 and there is no purchase option at the termination of the lease. Future minimum rental payments under the office lease as of March 31, 2009 are not significant.

9. SUBSEQUENT EVENT

On May 15, 2009 the Partnership paid its unitholders a cash distribution of $0.30 per unit, or $17.0 million in aggregate, including approximately $341,000 of distributions to the General Partner.

7