General. Western Gas Equity Partners, LP is a Delaware master limited partnership formed in September 2012 to own partnership interests in Western Gas Partners, LP, a publicly traded partnership. Western Gas Equity Partners, LP was formed by converting WGR Holdings, LLC into a limited partnership and changing its name. Western Gas Partners, LP (together with its subsidiaries, “WES”) is a Delaware master limited partnership formed by Anadarko Petroleum Corporation in 2007 to own, operate, acquire and develop midstream energy assets.

For purposes of these consolidated financial statements, “WGP” refers to Western Gas Equity Partners, LP in its individual capacity or to Western Gas Equity Partners, LP and its subsidiaries, including Western Gas Holdings, LLC and WES, as the context requires. “WES GP” refers to Western Gas Holdings, LLC, individually as the general partner of WES, and excludes WES itself. WGP's general partner, Western Gas Equity Holdings, LLC (“WGP GP”), is a wholly owned subsidiary of Anadarko Petroleum Corporation. “Anadarko” refers to Anadarko Petroleum Corporation and its consolidated subsidiaries, excluding WGP and WGP GP. “WGP and Affiliates” refers to subsidiaries of Anadarko, including WGP in its individual capacity, and “affiliates” refers to subsidiaries of Anadarko, excluding WGP and its consolidated subsidiaries, and includes the interests in Fort Union Gas Gathering, LLC (“Fort Union”), White Cliffs Pipeline, LLC (“White Cliffs”), Rendezvous Gas Services, LLC (“Rendezvous”), and a joint venture, Enterprise EF78 LLC (“Mont Belvieu JV”). See Note 2. “Equity investment throughput” refers to WES's 14.81% share of Fort Union and 22% share of Rendezvous gross volumes.

WGP owns the following types of partnership interests in WES: (i) a 2.0% general partner interest in WES, held through a wholly owned subsidiary, WES GP; (ii) 100% of the incentive distribution rights (“IDRs”) in WES held through WES GP, which entitle WGP to receive increasing percentages, up to the maximum level of 48.0%, of any incremental cash distributed by WES as certain target distribution levels are reached in any quarter; and (iii) a significant limited partner interest in WES. WES GP's 2.0% general partner interest in WES constitutes substantially all of WES GP's business, which primarily is to manage the affairs and operations of WES. Refer to Note 4 for a discussion of WGP's holdings of WES equity.

In December 2012, WGP completed its initial public offering (“IPO”) of 19,758,150 common units representing limited partner interests at a price of $22.00 per common unit, generating net proceeds of $412.0 million. WGP used approximately $409.4 million of the net proceeds from its IPO to purchase common and general partner units of WES.

WES is engaged in the business of gathering, processing, compressing, treating and transporting natural gas, condensate, NGLs and crude oil for Anadarko, as well as third-party producers and customers. As of June 30, 2013, WES's assets, exclusive of interests in Fort Union, White Cliffs, Rendezvous and the Mont Belvieu JV accounted for under the equity method, consisted of the following:


	Owned and	Operated	Non-Operated
	Operated	Interests	Interests
Natural gas gathering systems	13	1	5
Natural gas treating facilities	8	—	—
Natural gas processing facilities	8	3	—
NGL pipelines	3	—	—
Interstate natural gas pipeline	1	—	—
Intrastate natural gas pipeline	1	—	—

These assets are located in South, East and West Texas, the Rocky Mountains (Colorado, Utah and Wyoming), north-central Pennsylvania, and the Mid-Continent (Kansas and Oklahoma). WES completed construction of the Brasada processing facility in South Texas and commenced operations in June 2013. WES was also constructing the Lancaster processing facility in Northeast Colorado at the end of the second quarter of 2013.

Basis of presentation. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The consolidated financial statements include the accounts of WGP and entities in which it holds a controlling financial interest, including WES and WES GP. All significant intercompany transactions have been eliminated. Investments in non-controlled entities over which WES, or WGP through its investment in WES, exercises significant influence are accounted for under the equity method. WGP proportionately consolidates WES's 33.75% share of the assets, liabilities, revenues and expenses attributable to the Non-Operated Marcellus Interest and Anadarko-Operated Marcellus Interest (see Note 2) and WES's 50% share of the assets, liabilities, revenues and expenses attributable to the Newcastle system in the accompanying consolidated financial statements.

The consolidated financial results of WES are included in WGP's consolidated financial statements due to WGP's 100% ownership interest in WES GP and WES GP's control of WES. Throughout these notes to the consolidated financial statements, and to the extent material, any differences between the consolidated financial results of WGP and WES are discussed separately. WGP has no independent operations or material assets other than its partnership interests in WES. WGP's consolidated financial statements differ from those of WES primarily as a result of (i) the presentation of noncontrolling interest ownership (attributable to the limited partner interests in WES held by the public and Anadarko Marcellus Midstream, L.L.C. (“AMM”) (see Note 2)), (ii) the elimination of WES GP's investment in WES with WES GP's underlying capital account, and (iii) income tax expense and liabilities incurred by WGR Holdings, LLC, computed on a separate-return basis prior to its conversion into a limited partnership.

In preparing financial statements in accordance with GAAP, management makes informed judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses. Management evaluates its estimates and related assumptions regularly, utilizing historical experience and other methods considered reasonable under the particular circumstances. Changes in facts and circumstances or additional information may result in revised estimates and actual results may differ from these estimates. Effects on the business, financial condition and results of operations resulting from revisions to estimates are recognized when the facts that give rise to the revisions become known. The information furnished herein reflects all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the consolidated financial statements, and certain prior-period amounts have been reclassified to conform to the current-year presentation.

For the six months ended June 30, 2012, operating cash inflows and investing cash outflows in the unaudited consolidated statements of cash flows include a reduction of $16.4 million attributable to the correction of an error discovered during an analysis of accounts payable balances. This analysis revealed that certain 2012 invoices received, but not yet paid, were properly attributable to WES's ongoing capital projects rather than to operating expenses. Management concluded that this misstatement was not material relative to the six months ended June 30, 2012, and has corrected the error within the unaudited statement of cash flows for the six months ended June 30, 2012, as included in this report.

Certain information and note disclosures commonly included in annual financial statements have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, the accompanying consolidated financial statements and notes should be read in conjunction with WGP's 2012 Form 10-K, as filed with the SEC on March 28, 2013. Management believes that the disclosures made are adequate to make the information not misleading.

Noncontrolling interests. The interests in Chipeta Processing LLC (“Chipeta”) held by a third-party member and the limited partner interests in WES held by AMM and the public are reflected as noncontrolling interests in the consolidated financial statements for all periods presented.

Chipeta. In July 2009, WES acquired a 51% interest in Chipeta and became party to Chipeta's limited liability company agreement. On August 1, 2012, WES acquired Anadarko's then remaining 24% membership interest in Chipeta (the “additional Chipeta interest”). Prior to this transaction, the interests in Chipeta held by Anadarko and a third-party member were reflected as noncontrolling interests in the consolidated financial statements. The acquisition of Anadarko's then remaining 24% interest was accounted for on a prospective basis as WES acquired an additional interest in an already-consolidated entity. As such, effective August 1, 2012, noncontrolling interest excludes the financial results and operations of the additional Chipeta interest. The remaining 25% membership interest held by the third-party member is reflected within noncontrolling interests in the consolidated financial statements for all periods presented. See Note 2.

WES. The publicly held limited partner interests in WES are reflected as noncontrolling interests in the consolidated financial statements for all periods presented. In addition, in March 2013, WES acquired a 33.75% interest in both the Liberty and Rome gas gathering systems from AMM, a wholly owned subsidiary of Anadarko Petroleum Corporation. As part of the consideration paid, WES issued 449,129 WES common units to AMM. The limited partner interest in WES held by AMM is reflected within noncontrolling interests in the consolidated financial statements as of and for the three and six months ended June 30, 2013. See Note 2.

Presentation of WES assets. References to “WES assets” refer collectively to the assets indirectly owned by WGP, through its partnership interests in WES, as of June 30, 2013. Because Anadarko controls WES through its ownership and control of WGP, which owns WES GP, each of WES's acquisitions of assets from Anadarko has been considered a transfer of net assets between entities under common control. As such, WES assets acquired from Anadarko were initially recorded at Anadarko's historic carrying value, which did not correlate to the total acquisition price paid by WES. Further, after an acquisition of assets from Anadarko, WES and WGP (by virtue of its consolidation of WES) may be required to recast their financial statements to include the activities of such assets as of the date of common control. See Note 2.

For those periods requiring recast, the consolidated financial statements for periods prior to the acquisition of WES assets from Anadarko, including the Non-Operated Marcellus Interest, 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 WES had owned the assets during the periods reported. Net income attributable to WES assets for periods prior to WES's acquisition of such assets is not allocated to the limited partners for purposes of calculating net income per common unit.