-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CyNwLLv30sPMHQ2f1jUMbBaObRlFXkoZ9cmmqJSKm753fPora9/bPZKKSBNVFJ9X 4gWkyYZvVR3U2Way0iOW5A== 0000927356-96-000714.txt : 19960814 0000927356-96-000714.hdr.sgml : 19960814 ACCESSION NUMBER: 0000927356-96-000714 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN GAS RESOURCES INC CENTRAL INDEX KEY: 0000856716 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS TRANSMISSION [4922] IRS NUMBER: 841127613 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10389 FILM NUMBER: 96609526 BUSINESS ADDRESS: STREET 1: 12200 N PECOS ST CITY: DENVER STATE: CO ZIP: 80234-3439 BUSINESS PHONE: 3034525603 10-Q 1 FORM 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO _________________ Commission file number 1-10389 ------- WESTERN GAS RESOURCES, INC. --------------------------- (Exact name of registrant as specified in its charter) Delaware 84-1127613 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12200 N. Pecos Street, Denver, Colorado 80234-3439 --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (303) 452-5603 -------------- Registrant's telephone number, including area code No Changes ---------- (Former name, former address and former fiscal year, if changed since last report). Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- On August 1, 1996, there were 25,776,187 shares of the registrant's Common Stock outstanding. ================================================================================ 1 WESTERN GAS RESOURCES, INC. FORM 10-Q TABLE OF CONTENTS
PART I - Financial Information Page - ------------------------------ ---- Item 1. Financial Statements (Unaudited) Consolidated Balance Sheet - June 30, 1996 and December 31, 1995............ 3 Consolidated Statement of Cash Flows - Six months ended June 30, 1996 and 1995.................................................................... 4 Consolidated Statement of Operations - Three and Six months ended June 30, 1996 and 1995...................................................... 5 Consolidated Statement of Changes in Stockholders' Equity - Six months ended June 30, 1996............................................................... 6 Notes to Consolidated Financial Statements.................................. 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................. 8 PART II - Other Information - ----------------------------- Item 1. Legal Proceedings........................................................... 16 Item 6. Exhibits and Reports on Form 8-K............................................ 17 Signatures............................................................................. 18
2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements -------------------- WESTERN GAS RESOURCES, INC. CONSOLIDATED BALANCE SHEET (000s)
June 30, December 31, 1996 1995 ----------- ------------- ASSETS (Unaudited) ----------- Current assets: Cash and cash equivalents.................................................... $ 21,221 $ 5,795 Trade accounts receivable, net............................................... 188,849 204,426 Product inventory............................................................ 13,481 28,154 Parts inventory.............................................................. 2,224 2,427 Other........................................................................ 3,098 1,524 ---------- ---------- Total current assets........................................................ 228,873 242,326 ---------- ---------- Property and equipment: Gas gathering, processing, storage and transmission.......................... 901,375 882,801 Oil and gas properties and equipment......................................... 142,919 140,691 Construction in progress..................................................... 25,941 26,314 ---------- ---------- 1,070,235 1,049,806 Less: Accumulated depreciation, depletion and amortization.................. (227,212) (200,203) ---------- ---------- Total property and equipment, net........................................... 843,023 849,603 ---------- ---------- Other assets: Gas purchase contracts (net of accumulated amortization of $21,798 and $19,273, respectively)...................................................... 51,733 54,637 Other........................................................................ 43,623 47,431 ---------- ---------- Total other assets.......................................................... 95,356 102,068 ---------- ---------- Total assets.................................................................. $1,167,252 $1,193,997 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable............................................................. $ 222,067 $ 199,513 Short-term debt.............................................................. 75,000 75,000 Accrued expenses............................................................. 24,182 19,204 Dividends payable............................................................ 3,898 3,898 ---------- ---------- Total current liabilities.................................................. 325,147 297,615 Long-term debt................................................................ 385,000 454,500 Deferred income taxes payable................................................. 77,296 69,973 ---------- ---------- Total liabilities........................................................... 787,443 822,088 ---------- ---------- Commitments and contingent liabilities........................................ - - Stockholders' equity: Preferred Stock, par value $.10; 10,000,000 shares authorized: $2.28 cumulative preferred stock; 1,400,000 shares issued and outstanding ($35,000 aggregate liquidation preference)................................. 140 140 $2.625 cumulative convertible preferred stock; 2,760,000 shares issued and outstanding ($138,000 aggregate liquidation preference).................... 276 276 Common stock, par value $.10; 100,000,000 shares authorized; 25,800,633 and 25,794,728 shares issued, respectively...................................... 2,580 2,580 Additional paid-in capital................................................... 301,271 301,234 Retained earnings............................................................ 78,216 70,348 Treasury stock, at cost, 25,016 shares in treasury........................... (788) (788) Notes receivable from key employees secured by common stock.................. (1,886) (1,881) ---------- ---------- Total stockholders' equity.................................................. 379,809 371,909 ---------- ---------- Total liabilities and stockholders' equity.................................... $1,167,252 $1,193,997 ========== ==========
The accompanying notes are an integral part of the consolidated financial statements. 3 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (000s)
Six Months Ended June 30, ---------------------- 1996 1995 ---------- ---------- Reconciliation of net income to net cash provided by operating activities: Net income.................................................................... $ 15,665 $ 1,538 Add income items that do not affect working capital: Depreciation, depletion and amortization..................................... 31,425 33,915 Deferred income taxes........................................................ 7,323 530 Gain on the sale of property and equipment................................... (2,113) - Distributions in excess of equity income, net................................ 3,224 40 Other non-cash items......................................................... 461 29 --------- --------- 55,985 36,052 Adjustments to working capital to arrive at net cash provided by operating activities: Decrease in trade accounts receivable........................................ 15,577 10,391 Decrease in product inventory................................................ 14,673 12,612 Decrease (increase) in parts inventory....................................... 203 (101) Increase in other current assets............................................. (1,439) (1,723) Decrease in other assets and liabilities, net................................ 71 188 Increase (decrease) in accounts payable...................................... 22,554 (1,798) Increase in accrued expenses................................................. 4,628 9,629 Decrease in income taxes payable............................................. - (520) --------- --------- Total adjustments........................................................... 56,267 28,678 --------- --------- Net cash provided by operating activities..................................... 112,252 64,730 --------- --------- Cash flows from investing activities: Payments for business acquisitions........................................... (159) (39) Payments for additions to property and equipment............................. (22,022) (26,945) Proceeds from the dispositions of property and equipment..................... 3,394 6,260 Contributions to equity investees............................................ (317) (5,847) Gas purchase contracts acquired.............................................. - (2,641) --------- --------- Net cash used in investing activities......................................... (19,104) (29,212) --------- --------- Cash flows from financing activities: Net proceeds from exercise of common stock options........................... 27 90 Debt issue costs paid........................................................ (452) (411) Payments on revolving credit facility........................................ (485,400) (211,300) Borrowings under revolving credit facility................................... 415,900 225,300 Dividends paid to holders of common stock.................................... (2,577) (2,573) Dividends paid to holders of preferred stock................................. (5,220) (6,428) Redemption of 7.25% Cumulative Senior Perpetual Convertible Preferred Stock.. - (42,030) --------- --------- Net cash used in financing activities......................................... (77,722) (37,352) --------- --------- Net increase (decrease) in cash and cash equivalents.......................... 15,426 (1,834) Cash and cash equivalents at beginning of period.............................. 5,795 8,708 --------- --------- Cash and cash equivalents at end of period.................................... $ 21,221 $ 6,874 ========= =========
The accompanying notes are an integral part of the consolidated financial statements. 4 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (000s, except share and per share amounts)
Three Months Ended Six Months Ended June 30, June 30, -------------------------- -------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Revenues: Sale of residue gas................................. $ 316,160 $ 212,011 $ 663,667 $ 420,000 Sale of natural gas liquids......................... 113,897 79,517 233,575 163,768 Processing, transportation and storage revenue...... 10,560 10,869 21,774 21,422 Other, net.......................................... 5,606 2,011 7,921 2,919 ----------- ----------- ----------- ----------- Total revenues..................................... 446,223 304,408 926,937 608,109 ----------- ----------- ----------- ----------- Costs and expenses: Product purchases................................... 388,572 251,943 800,695 500,256 Plant operating expense............................. 16,438 16,825 35,035 35,004 Oil and gas exploration and production expense...... 1,421 1,258 2,530 2,819 Selling and administrative expense.................. 7,412 7,019 15,137 13,538 Depreciation, depletion and amortization............ 15,763 16,711 31,425 33,915 Interest expense.................................... 8,695 9,223 18,149 18,091 Restructuring charges............................... - 2,065 - 2,065 ----------- ----------- ----------- ----------- Total costs and expenses........................... 438,301 305,044 902,971 605,688 ----------- ----------- ----------- ----------- Income (loss) before taxes........................... 7,922 (636) 23,966 2,421 Provision (benefit) for income taxes: Current............................................. (153) (144) 978 353 Deferred............................................ 2,643 (89) 7,323 530 ----------- ----------- ----------- ----------- 2,490 (233) 8,301 883 ----------- ----------- ----------- ----------- Net income (loss).................................... 5,432 (403) 15,665 1,538 Preferred stock requirements......................... (2,610) (6,876) (5,220) (10,210) ----------- ----------- ----------- ----------- Income (loss) attributable to common stock........... $ 2,822 $ (7,279) $ 10,445 $ (8,672) =========== =========== =========== =========== Income (loss) per share of common stock.............. $.11 $(.28) $.41 $(.34) =========== =========== =========== =========== Weighted average shares of common stock outstanding.. 25,774,538 25,752,832 25,773,233 25,745,305 =========== =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. 5 WESTERN GAS RESOURCES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) (000s, except share amounts)
Shares of Shares of $2.625 $2.625 $2.28 Cumulative Shares $2.28 Cumulative Cumulative Convertible Shares of Common Cumulative Convertible Preferred Preferred of Common Stock Preferred Preferred Stock Stock Stock in Treasury Stock Stock ---------- ----------- ---------- ----------- ---------- ----------- Balance at December 31, 1995 1,400,000 2,760,000 25,769,712 25,016 $ 140 $ 276 Net income............................. - - - - - - Stock options exercised................ - - 5,905 - - - Dividends declared on common stock..... - - - - - - Dividends declared on $2.28 cumulative preferred stock...................... - - - - - - Dividends declared on $2.625 cumulative convertible preferred stock.......... - - - - - - --------- --------- ---------- ---------- --------- -------- Balance at June 30, 1996 1,400,000 2,760,000 25,775,617 25,016 $ 140 $ 276 ========= ========= ========== ========== ========= ========
Notes Total Additional Receivable Stock- Common Paid-in Retained Treasury From Key holders' Stock Capital Earnings Stock Employees Equity ---------- ----------- ---------- ----------- ---------- ----------- Balance at December 31, 1995 $ 2,580 $ 301,234 $ 70,348 $ (788) $ (1,881) $371,909 Net income............................. - - 15,665 - - 15,665 Stock options exercised................ - 37 - - (5) 32 Dividends declared on common stock..... - - (2,577) - - (2,577) Dividends declared on $2.28 cumulative preferred stock...................... - - (1,597) - - (1,597) Dividends declared on $2.625 cumulative convertible preferred stock.......... - - (3,623) - - (3,623) --------- --------- ---------- ---------- --------- -------- Balance at June 30, 1996 $ 2,580 $ 301,271 $ 78,216 $ (788) $ (1,886) $379,809 ========= ========= ========== ========== ========= ========
The accompanying notes are an integral part of the consolidated financial statements. WESTERN GAS RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) GENERAL The interim consolidated financial statements presented herein should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in the Company's Form 10-K for the year ended December 31, 1995. The interim consolidated financial statements as of June 30, 1996 and for the three and six month periods ended June 30, 1996 and 1995 included herein are unaudited, but reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly present the results for such periods. Certain prior year amounts in the Consolidated Financial Statements and Notes have been reclassified to conform to the presentation used in 1996. ASSET SALE In May of 1996, the Company sold its Temple facility for $2.3 million which resulted in the recognition of a pre-tax gain of $1.9 million, net of a $400,000 reclamation reserve. The carrying value of the Temple facility had been reduced to zero in connection with the adoption of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of," during the year ended December 31, 1995. RESTRUCTURING CHARGES In May 1995, the Company implemented a cost reduction program to reduce operating and selling and administrative expenses. As a result of this program, a $2.1 million restructuring charge was incurred, primarily related to employee severance costs. This cost reduction program has not affected adversely the overall operations of the Company. EARNINGS PER SHARE OF COMMON STOCK Earnings (loss) per share of common stock is computed by dividing net income (loss) attributable to shares of common stock by the weighted average number of shares of common stock outstanding. Net income (loss) attributable to shares of common stock is net income less preferred stock requirements. The Company declared preferred stock dividends of $2.6 million and $5.2 million for the three and six month periods ended June 30, 1996, respectively, and $3.1 million and $6.4 million for the three and six month periods ended June 30, 1995, respectively. In addition, 1995 net loss attributable to common stock was reduced by the $2.0 million redemption premium and up-front cost of $1.8 million paid on the 7.25% Cumulative Senior Perpetual Convertible Preferred Stock. The computation of fully diluted earnings per share of common stock for the three and six month periods ended June 30, 1996 and 1995 was not dilutive; therefore, only primary earnings per share of common stock is presented. SUPPLEMENTARY CASH FLOW INFORMATION Interest paid was $19.0 million and $18.7 million, respectively, for the six months ended June 30, 1996 and 1995. Income taxes paid were $4.2 million and $1.6 million, respectively, for the six months ended June 30, 1996 and 1995. STOCK COMPENSATION In October 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation," with an effective date for fiscal years beginning after December 15, 1995. As permitted under SFAS No. 123, the Company has elected to continue to measure compensation costs for stock-based employee compensation plans as prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." The Company will comply with the pro forma disclosure requirements of SFAS No. 123 in 1996 as required under the pronouncement. LEGAL PROCEEDINGS Reference is made to Item 1. Legal Proceedings, of Part II, Other Information, of this Form 10-Q. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS ------------- The following discussion and analysis relates to factors which have affected the consolidated financial condition and results of operations of the Company for the three and six month periods ended June 30, 1996 and 1995. Certain prior year amounts have been reclassified to conform to the presentation used in 1996. Reference should also be made to the Company's Consolidated Financial Statements and Notes thereto included elsewhere in this document. RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 (000s, EXCEPT PER SHARE AMOUNTS AND OPERATING DATA).
Three Months Ended Six Months Ended June 30, June 30, ------------------ Percent ---------------- Percent 1996 1995 Change 1996 1995 Change -------- --------- ------- -------- --------- ------- FINANCIAL RESULTS: Revenues................................. $446,223 $304,408 47 $926,937 $608,109 52 Gross profit............................. 24,029 17,671 36 57,252 36,115 59 Net income (loss)........................ 5,432 (403) - 15,665 1,538 919 Income (loss) per share of common stock.. .11 (.28) - .41 (.34) - Net cash provided by operating activities............................. $ 38,402 $ 25,971 48 $112,252 $ 64,730 73 OPERATING DATA: Average gas sales (MMcf/D)............... 1,698 1,569 8 1,778 1,573 13 Average NGL sales (MGal/D)............... 3,420 2,759 24 3,545 2,885 23 Average gas prices ($/Mcf)............... $ 2.05 $ 1.49 38 $ 2.06 $ 1.47 40 Average NGL prices ($/Gal)............... $ .36 $ .31 16 $ .36 $ .31 16
Net income increased $5.8 million and net cash provided by operating activities increased $12.4 million for the quarter ended June 30, 1996 compared to the same period in 1995. Net income increased $14.1 million and net cash provided by operating activities increased $47.5 million for the six months ended June 30, 1996 compared to the same prior period. The increases in net income for the two periods were primarily due to higher residue gas and NGL volumes and prices. Revenues from the sale of residue gas increased approximately $104.1 million for the quarter ended June 30, 1996 compared to the same period in 1995. Average gas sales volumes increased 129 MMcf per day to 1,698 MMcf per day for the quarter ended June 30, 1996 compared to the same period in 1995, largely as a result of an increase of approximately 160 MMcf per day in the sale of residue gas purchased from third-parties, partially offset by decreased sales at the Company's facilities. Average gas prices increased $.56 per Mcf to $2.05 per Mcf for the quarter ended June 30, 1996 compared to the same period in 1995. Revenues from the sale of residue gas increased approximately $243.7 million for the six months ended June 30, 1996 compared to the same period in 1995. Average gas sales volumes increased 205 MMcf per day to 1,778 MMcf per day for the six months ended June 30, 1996 compared to the same period in 1995, due to an increase of approximately 230 MMcf per day in the sale of residue gas purchased from third-parties, partially offset by decreased sales at the Company's facilities. Average gas prices increased $.59 per Mcf to $2.06 per Mcf for the six months ended June 30, 1996 compared to the same period in 1995. The effect of the increase in residue gas prices on the Company's net margin from equity production was partially offset by approximately $2.4 million and $11.3 million, respectively, of loss recognized in the three and six month periods ended June 30, 1996 related to futures positions. The hedging positions resulted in equity gas being sold at levels in excess of the Company's budget. See further discussion in "Liquidity and Capital Resources - Hedging." Revenues from the sale of NGLs increased approximately $34.4 million for the quarter ended June 30, 1996 compared to 1995. Average NGL sales volumes increased 661 MGal per day to 3,420 MGal per day, primarily due to an approximate 600 MGal per day increase in the sale of NGLs purchased from third- parties and increased production at the Company's facilities mainly resulting from ethane production at the Granger facility. Average NGL prices increased $.05 per gallon to $.36 per gallon for the quarter ended June 30, 1996 compared to 1995. Revenues from the sale of NGLs increased approximately $69.8 million for the six months ended June 30, 1996 compared to 1995. Average NGL sales volumes increased 660 MGal per day to 3,545 MGal per day, primarily due to an approximate 500 MGal per day increase in the sale of NGLs purchased from third- parties for this same period and increased production at the 8 Company's facilities mainly resulting from ethane production at the Granger facility. Average NGL prices increased $.05 per gallon to $.36 per gallon for the six months ended June 30, 1996 compared to 1995. The effect of the increase in NGL prices on the Company's net margin from equity production was partially offset by approximately $2.5 million of loss recognized primarily in the three month period ended June 30, 1996 related to futures positions. The hedging positions resulted in equity NGL production being sold at levels in excess of the Company's budget. See further discussion in "Liquidity and Capital Resources - Hedging." Other net revenue increased $3.6 million and $5.0 million for the three and six months ended June 30, 1996 compared to the same periods in 1995. The increases are primarily due to a $1.9 million gain recognized on the sale of the Temple facility and recognition of $1.2 million of revenue associated with electric power marketing for both periods. Also, partnership income increased $514,000 and $1.4 million, respectively, for the three and six months ended June 30, 1996. The increase in product purchases corresponds to the increase in third-party product sales. Combined product purchases as a percentage of residue gas and NGL sales increased four percentage points to 90% and three percentage points to 89% for the three and six months ended June 30, 1996, respectively, as compared to 1995. The increased product purchase percentage is a continuing trend based upon the growth of third-party sales, which typically have lower margins than sales of the Company's equity production. Until recently, the Company had experienced narrowing margins related to third-party sales due to the increasing availability of pricing information in the natural gas industry. The Company believes, by targeting end-use markets, these margins will continue to stabilize. These sales are highly competitive and there is no assurance that the Company will be able to expand its current end-use business. Selling and administrative expense increased $393,000 and $1.6 million for the three and six months ended June 30, 1996, respectively, primarily as a result of growth in the Company's marketing operations and higher benefit accruals. Depreciation, depletion and amortization decreased $948,000 and $2.5 million for the three and six months ended June 30, 1996 compared to the prior corresponding periods. The decrease was attributable to decreases in production related to the Company's oil and gas properties which resulted in lower depletion expense. In addition, the Company recorded a $17.6 million write-down of certain oil and gas assets and plant facilities in the fourth quarter of 1995 in connection with its adoption of Statement of Financial Accounting Standards No. 121,"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The lower asset values contributed to the reduction in depreciation, depletion and amortization expense for the 1996 three and six month periods. These decreases were partially offset by increases related to property additions, primarily the Northern acquisition in December 1995. The provision for income taxes for the three and six months ended June 30, 1996 increased $2.7 million and $7.4 million, respectively, primarily due to the increases in pre-tax income for the periods. LIQUIDITY AND CAPITAL RESOURCES The Company's sources of liquidity and capital resources historically have been net cash provided by operating activities, funds available under its financing facilities and proceeds from offerings of equity securities. In the past, these sources have been sufficient to meet its needs and finance the growth of the Company's business. The Company can give no assurance that the historical sources of liquidity and capital resources will be available for future development and acquisition projects, and it may be required to investigate alternative financing sources. Net cash provided by operating activities is primarily affected by product prices and sales of inventory, the Company's success in increasing the number and efficiency of its facilities and the volumes of natural gas processed by such facilities, as well as the margin on third-party product purchased for resale. The Company's continued growth will be dependent upon success in the areas of marketing, additions to dedicated plant reserves, acquisitions and new project development. The Company believes that the amounts available to be borrowed under the Revolving Credit Facility, together with cash provided by operating activities, will provide it with sufficient funds to connect new reserves, maintain its existing facilities and complete its current capital improvement projects. The Company also believes that cash provided by operating activities will be sufficient to meet its debt service and preferred stock dividend requirements in 1996. 9 The Company's sources and uses of funds for the six months ended June 30, 1996 are summarized as follows (000s):
SOURCES OF FUNDS: Borrowings under long-term debt agreements..... $415,900 Net cash provided by operating activities...... 112,252 Other.......................................... 3,421 -------- Total sources of funds....................... $531,573 ======== USES OF FUNDS: Payments related to long-term debt agreements.. $485,852 Capital expenditures........................... 22,498 Payment of preferred stock dividends........... 5,220 Payment of common stock dividends.............. 2,577 -------- Total uses of funds.......................... $516,147 ========
Additional sources of liquidity available to the Company are volumes of residue gas and NGLs in storage facilities. The Company stores residue gas and NGLs primarily to ensure an adequate supply for long-term sales contracts and for resale during periods when prices are favorable. The Company held residue gas in storage for such purposes of approximately 4.9 Bcf at an average cost of $1.88 per Mcf at June 30, 1996 as compared to 12.8 Bcf at an average cost of $1.65 per Mcf at December 31, 1995, primarily at the Katy Facility. At June 30, 1996, the Company had hedging contracts in place for anticipated sales of approximately 4.0 Bcf of stored gas at a weighted average price of $2.00 per Mcf. The Company also held NGLs in storage of approximately 14,650 MGal at an average cost of $.29 per gallon and approximately 11,600 MGal at an average cost of $.30 per gallon at June 30, 1996 and December 31, 1995, respectively, at various third-party storage facilities. The Company has effective shelf registration statements filed with the Securities and Exchange Commission for an aggregate of: (i) $200 million of debt securities and preferred stock (along with the shares of common stock, if any, into which such securities are convertible); (ii) four million shares of common stock; and (iii) $100 million of debt securities, preferred stock or common stock. Hedging In order to reduce the impact of commodity price fluctuations on its operating results, the Company enters into futures contracts and basis positions to hedge a portion of its equity production. The Company has entered into weighted average futures positions for approximately 60% of its equity residue gas and 45% of its equity NGL production for the remainder of 1996 at prices chosen by management because they are in excess of the Company's 1996 operating budget. The following table summarize the Company's hedged equity positions at June 30, 1996:
Residue Gas NGLs - ------------------------------------------------- ------------------------------------- MMBtu Weighted Average Volumes Weighted Average Basin Hedged Price (MMBtu)(1) Product Hedged Price(2) - ------------------ ----------- ----------------- ------- ---------- ---------------- Permian 15,000/D $1.84 Ethane 150 MGal/D $ .20/Gal Rocky Mountain 800/D 1.50 Propane 170 MGal/D .34/Gal Gulf Coast 17,400/D 1.91 Butane - - Mid-Continent 5,800/D $1.81 Crude 3,400 Bbl/D $18.35/Bbl
(1) This price represents a net price to the producing area which approximates the Henry Hub price less the basis differential for such basin. (2) This price approximates a Mt. Belview price for NGLs and a West Texas Intermediate price for crude oil. 10 Property and Equipment In May of 1996, the Company sold its Temple facility for $2.3 million which resulted in the recognition of a pre-tax gain of $1.9 million, net of a $400,000 reclamation reserve. The carrying value of the Temple facility had been reduced to zero in connection with the adoption of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of," during the year ended December 31, 1995. The Company has experienced unexpected water production in one of the wells at its Black Lake Field. Management has retained an independent reservoir engineering firm to perform an evaluation of the reserves. The Company is currently unable to determine what impact, if any, the independent evaluation will have upon the estimated reserves of the field. Capital Investment Program Capital expenditures related to existing operations are expected to be approximately $76.1 million during 1996 consisting of the following: capital expenditures related to gathering, processing and pipeline assets are expected to be $63.2 million, of which $47.6 million will be used for new connects, system expansions and asset consolidations and $15.6 million for maintaining existing facilities. The Company expects capital expenditures on the Katy Facility, exploration and production activities and miscellaneous items to be $4.8 million, $3.8 million and $4.3 million, respectively. As of June 30, 1996, the Company had expended $22.0 million consisting of the following: (i) $12.3 million for new connects, system expansions and asset consolidations; (ii) $3.5 million for maintaining existing facilities; (iii) $2.9 million for exploration and production activities; (iv) $450,000 related to the Katy Facility; and (v) $2.9 million of miscellaneous expenditures. In addition to the $76.1 million of anticipated capital expenditures discussed above, the Company's current business plan assumes that it will spend $25 million in 1996 on acquisitions, unbudgeted expansion of existing facilities and projects that complement its current asset base. As of June 30, 1996, no such expenditures had been made. The Company continually monitors the economic performance of each of its operating facilities to ensure that a desired cash flow objective is achieved. If an operating facility is not generating desired cash flows or does not fit in with the Company's strategic plans, the Company will explore various options, such as consolidation with other Company-owned facilities, dismantlement, asset swap or outright sale. Depending on the timing of the Company's future projects, it may be required to seek additional sources of capital. The Company's ability to secure such capital is restricted by its credit facilities, although it may request additional borrowing capacity from the banks, seek waivers from the banks to permit it to borrow funds from third-parties, seek replacement credit facilities from other lenders, use stock as a currency for an acquisition, issue additional equity securities, sell existing assets or a combination of such alternatives. While the Company believes that it would be able to secure additional financing, if required, no assurance can be given that it will be able to do so or as to the terms of any such financing. Financing Facilities Revolving Credit Facility. The Company's variable rate Revolving Credit Facility, as restated on September 2, 1994 and subsequently amended, with a syndicate of eight banks, provides for a maximum borrowing base of $300 million, of which $68 million was outstanding at June 30, 1996. If the facility is not renewed, its commitment period will terminate on October 1, 1997. Any outstanding balance thereunder at such time will convert to a three-year term loan, which will be payable in 12 equal quarterly installments, commencing January 1, 1998. The Revolving Credit Facility bears interest, at the Company's option, at certain spreads over the Eurodollar rate, at the Federal Funds rate plus .50%, or at the agent bank's prime rate. The interest rate spreads are adjusted based on the Company's debt to capitalization ratio. At June 30, 1996, the spread was 1.25% over the Eurodollar rate, resulting in an interest rate of 6.69%. The Company pays a commitment fee on the unused commitment ranging from .15% to .375% based on the debt to capitalization ratio. At June 30, 1996, the Company's debt to capitalization ratio was .56 to 1 resulting in a commitment fee rate of .375%. Term Loan Facility. The Company also has a Term Loan Facility with four banks for $25 million which bears interest at 9.87%. Payments on the Term Loan Facility of $12.5 million are due in each of September 1996 and September 1997. The Company intends to finance the $12.5 million payment due in 1996 through amounts available under the Revolving Credit Facility. 11 The agreements governing the Company's Revolving Credit and Term Loan Facilities (the "Credit Facilities Agreement") contain certain mandatory prepayment terms. If funded debt of the Company, which has a final maturity on or before October 1, 2000, exceeds four times (4.0 to 1.0) the sum of the Company's last four quarters' cash flow (as defined in the agreement) less preferred stock dividends projected to be paid during the next four quarters, the overage must be repaid in no more than six monthly payments, commencing 90 days from notification. This mandatory prepayment threshold will be reduced to 3.5 to 1.0 at September 1, 1998. At June 30, 1996, taking into account all the covenants contained in the Credit Facilities Agreement and expected maturities of long-term debt during 1996, the Company had approximately $90 million of available borrowing capacity. The Term Loan and Revolving Credit Facilities are unsecured. Pursuant to the Credit Facilities Agreement, the Company is required to maintain a current ratio (as defined therein) of at least 1.0 to 1.0, a minimum tangible net worth equal to the sum of $345.0 million plus 50% of consolidated net income earned after June 30, 1995 plus 75% of the net proceeds received after June 30, 1995 from the sale of equity securities, a debt to capitalization ratio (as defined therein) of no more than 60% through October 31, 1996 and 55% thereafter, and an EBITDA to interest ratio of not less than 3.00 to 1.0 through October 31, 1996, 3.25 to 1.0 from November 1, 1996 through October 31, 1997 and 3.75 to 1.0 thereafter. The Company is prohibited from declaring or paying dividends on or after December 31, 1995, that in the aggregate exceed the sum of $10 million plus 50% of consolidated net income earned after December 31, 1995 plus 50% of the cumulative net proceeds received by the Company after December 31, 1995 from the sale of any equity securities. The dividends declared in the fourth quarter of 1995, paid in 1996, are excluded from this calculation. At June 30, 1996, $10 million was available under this limitation, which is sufficient to pay required preferred stock dividends in 1996. The Company generally utilizes excess daily funds to reduce any outstanding revolving credit balances and associated interest expense and it intends to continue such practice. The $21 million cash balance at June 30, 1996 is due to the timing of cash receipts and the balance is considered temporary. Master Shelf Agreement. In December 1991, the Company entered into a Master Shelf Agreement (the "Master Shelf") with The Prudential Insurance Company of America ("Prudential") pursuant to which Prudential agreed to quote, from time- to-time, an interest rate at which Prudential or its nominee would be willing to purchase up to $100 million of the Company's senior promissory notes (the "Master Notes"). Any such Master Notes will mature in no more than 12 years, with an average life not in excess of 10 years, and are unsecured. The Master Shelf contains certain financial covenants which substantially conform with those contained in the Revolving Credit Facility, as restated and amended. In July 1993 and July 1995, Prudential and the Company amended the Master Shelf to provide for additional borrowing capacity (for a total borrowing capacity of $200 million) and to extend the term of the Master Shelf to October 31, 1995. The Master Shelf Agreement, as restated and amended, is fully utilized, as indicated in the following table (000s):
Interest Final Issue Date Amount Rate Maturity Principal Payments Due - -------------------- -------- --------- ------------------ ----------------------------------------------- October 27, 1992 $ 25,000 7.51% October 27, 2000 $8,333 on each of October 27, 1998 through 2000 October 27, 1992 25,000 7.99% October 27, 2003 $8,333 on each of October 27, 2001 through 2003 September 22, 1993 25,000 6.77% September 22, 2003 single payment at maturity December 27, 1993 25,000 7.23% December 27, 2003 single payment at maturity October 27, 1994 25,000 9.05% October 27, 2001 single payment at maturity October 27, 1994 25,000 9.24% October 27, 2004 single payment at maturity July 28, 1995 50,000 7.61% July 28, 2007 $10,000 on each of July 28, 2003 through 2007 -------- $200,000 ========
1993 Senior Notes. On April 28, 1993 the Company sold $50 million of 7.65% Senior Notes ("1993 Senior Notes") due 2003 to a group of insurance companies. Annual principal payments of $7.1 million on the 1993 Senior Notes are due on April 30 of each year from 1997 through 2002, with any remaining principal and interest outstanding due on April 30, 2003. The 1993 Senior Notes contain certain financial covenants that substantially conform with those contained in the Master Shelf Agreement, as restated and amended. 1995 Senior Notes. The Company sold $42 million of 1995 Senior Notes to a group of insurance companies in the fourth quarter of 1995, with an interest rate of 8.16% per annum and principal due in a single payment in December 2005. The 1995 Senior Notes contain certain financial covenants that conform with those contained in the Master Shelf Agreement, as restated and amended. Receivables Facility. In April 1995, the Company entered into an agreement with Receivables Capital Corporation ("RCC"), as purchaser, and Bank of America National Trust and Savings Association ("BA"), as agent, pursuant to which the Company will sell to RCC at face value on a revolving basis an undivided interest in certain of the Company's trade receivables. As part of the sale, the Company granted to RCC a security interest in such receivables. The Company may sell up to $75 million of trade receivables under the Receivables Facility, at a rate equal to RCC's commercial paper rate plus .375%, of which $75 million was funded at a 12 rate of 5.78% as of June 30, 1996. The Receivables Facility has a 364-day term and contains financial covenants similar to those in the Credit Facilities Agreement, as restated and amended, along with certain covenants regarding the quality of the trade receivables pool. The parties have renewed the facility through May 29, 1997. COVENANT COMPLIANCE. At June 30, 1996, the Company was in compliance with all covenants in its loan agreements. 13 PRINCIPAL FACILITIES The following table provides information concerning the Company's principal facilities. The Company also owns and operates several smaller treating and processing facilities located in the same areas as its other facilities.
Average for the six months ended June 30, 1996 Gas Gas ----------------------------------------------- Gathering Throughput Gas Gas NGL Year Placed Systems Capacity Throughput Production Production Facility (1) In Service Miles(2) (MMcf/D)(2) (MMcf/D)(3) (MMcf/D)(4) (MGal/D)(4) - ---------------------------- ----------- ------------ -------------- -------------- ----------------- -------------- SOUTHERN REGION: Texas Midkiff /Benedum........... 1955 2,074 135 140 94 843 Giddings Gathering System.. 1979 652 80 68 57 92 Edgewood(5)(8)............. 1964 93 65 30 11 79 Perkins.................... 1975 2,565 40 21 12 144 MiVida (5)................. 1972 287 150 55 52 - Gomez...................... 1971 302 280 164 160 - Mitchell Puckett........... 1972 86 140 80 79 - Crockett Gathering System.. 1973 3 - 13 13 - Rosita Treating System..... 1973 - 60 53 53 - Katy(6).................... 1994 17 - - - - Louisiana Black Lake................. 1966 56 75 37 24 86 Toca(7)(8)................. 1958 - 160 106 - 65 NORTHERN REGION: Oklahoma Chaney Dell/Lamont......... 1966 2,008 180 81 62 232 Arkoma..................... 1985 38 8 3 2 - Westana System(9).......... 1986 252 45 58 53 57 Wyoming Granger(8)................. 1987 240 210 119 102 309 Red Desert(8).............. 1979 111 42 25 22 41 Lincoln Road(10)........... 1988 146 50 30 28 37 Hilight Complex(5)(8)...... 1969 616 80 35 29 85 Kitty/Amos Draw(8)......... 1969 304 17 11 8 46 Newcastle(8)............... 1981 144 5 2 1 17 Reno Junction(11).......... 1991 - - - - 51 New Mexico San Juan River(5).......... 1955 126 60 31 28 1 North Dakota Williston(12).............. 1981 381 - 7 5 25 Temple(13)................. 1984 - - 2 2 7 Teddy Roosevelt(12)........ 1979 332 - 2 2 12 Utah Four Corners............... 1988 97 15 4 3 8 Montana Baker(5)(8)................ 1981 8 3 1 1 10 ------ ----- ----- --- ----- Total..................... 10,938 1,900 1,178 903 2,247 ====== ===== ===== === =====
- --------------------------- Footnotes on following page 14 (1) The Company's interest in all facilities is 100% except for Midkiff/Benedum (72%); Black Lake (69%); Lincoln Road (72%); Williston (50%); Westana (50%) and Newcastle (50%). All facilities are operated by the Company and all data include interests of the Company, other joint interest owners and producers of gas volumes dedicated to the facility. (2) Gas gathering systems miles and gas throughput capacity are as of June 30, 1996. (3) Aggregate wellhead natural gas volumes collected by a gathering system. (4) Volumes of residue gas and NGLs are allocated to a facility when a well is dedicated to that facility; volumes exclude NGLs fractionated for third parties. (5) Sour gas facility (capable of processing gas containing hydrogen sulfide). (6) Hub and gas storage facility. (7) Straddle plant (a plant located near a transmission pipeline which processes gas dedicated to or gathered by the pipeline company or another third-party). (8) Fractionation facility (capable of fractionating raw NGLs into end-use products). (9) Gas throughput and gas production in excess of gas throughput capacity is unprocessed gas delivered directly to an unaffiliated pipeline. (10) Commencing in March 1996, the Company and its joint venture partner at the Lincoln Road gas plant temporarily suspended processing operations at the Lincoln Road plant and began processing the related gas at the Company's Granger facility. If volumes increase substantially beyond Granger's capacity, the Lincoln Road plant might be re-started. The Company anticipates that this consolidation will result in lower overall plant operating expenses for the combined systems. (11) NGL production represents conversion of third-party feedstock to iso- butane. (12) Processing facility has been shut-in since August 1993. The gas dedicated to these facilities is processed by a third-party under a contractual arrangement. In January 1996, Koch Hydorcarbon Company, which operates the Teddy Roosevelt and Williston Gas Company's assets under a lease agreement, exercised its option to purchase certain gas gathering assets located in North Dakota from the Company and Williston. The closing of the sale is expected to occur on or before January 1, 1997. (13) The Temple facility was sold effective May 1, 1996. 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings ----------------- Katy Condemnation Commencing in March 1993 and continuing through July 1993, Western Gas Resources Storage, Inc. ("Storage"), a wholly-owned subsidiary of the Company, filed a total of 165 condemnation actions in the County Court at Law No. 1 and No. 2 of Fort Bend County, Texas, to obtain certain storage rights and rights-of-way relating to its Katy Gas Storage Facility and the related underground reservoir ("Katy"). The County Court appointed panels of Special Commissioners which awarded compensation to the owners whose rights were condemned. Condemnation awards are a capital cost of the Katy project. A majority of the land and mineral owners involved in the condemnation proceedings appealed to County Court, seeking a declaration that Storage did not possess the right to condemn or, in the alternative, that they should be awarded more compensation than previously awarded by the Special Commissioners. In all of those appeals, the right to condemn issue has now been resolved in favor of Storage, although factual issues in individual cases remain as to whether that right was exercised properly. Trials in four of the appeals to County Court have now been concluded. The first trial involved a parcel adjacent to the 82 acre site where the compression facilities are located, the second trial involved a parcel within 1,000 feet of the 82 acre site, and the third and fourth trials involved parcels further than one mile from the 82 acre site. The jury verdicts compared with the awards of the Special Commissioners were, respectively, as follows: $214,000 versus $2,000; $38,000 versus $600; $553 versus $553; and $1,000 versus $500. The Company believes that several reversible errors were committed in the first two trials and appeals of those cases are now pending in the Texas Court of Appeals. JN Exploration and Production Litigation JN Exploration and Production ("JN") is a producer of oil and natural gas that sold unprocessed natural gas to the Company on a percentage-of-proceeds basis. The Company processed the gas at its Teddy Roosevelt plant, which is no longer in operation. In JN Exploration and Production v. Western Gas Resources, Inc. ------------------------------------------------------------ United States District Court for the District of North Dakota, Southwestern Division, Civil Action Nos. A1-93-53 and 903-CV-60, JN sued the Company, alleging that JN was entitled to a portion of a $15 million amendment fee the Company received in the years 1987 through 1989 from Williston Basin Interstate Pipeline Company ("WBI"), which had an agreement with the Company to purchase natural gas. On April 15, 1996, the Court issued a Memorandum and Order granting JN's summary judgment motion on the issue of liability. On July 11, 1996, the Court issued a Memorandum and Order setting forth the manner in which damages are to be calculated. The Court has not entered a final judgment in this matter. The Company intends to appeal the decision after final judgment is entered. If JN were to prevail on appeal, other producers who sold natural gas which was processed at the Teddy Roosevelt Plant during the time period in question may be able to assert similar claims. At the present time, it is not possible to predict the outcome of this litigation or any other producer litigation which might raise similar issues or to estimate the amount of potential damages. Other The Company is involved in various other litigation and administrative proceedings arising in the normal course of business. In the opinion of management, any liabilities that may result from these claims, will not, individually or in the aggregate, have a material adverse effect on the Company's financial position or results of operations. 16 ITEM 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: 10.57 Amendment No. 2 to Receivables Purchase Agreement dated as of February 28, 1995, by and among Western Gas Resources, Inc., as Seller, Receivable Capital Corporation, as Purchaser, and Bank of America National Trust and Savings Association, as Agent. (b) Reports on Form 8-K: None. 17 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 RESOURCES, INC. --------------------------- (Registrant) Date: August 12, 1996 By: /s/ LANNY F. OUTLAW -------------------------------------------- Lanny F. Outlaw President and Chief Operating Officer Date: August 12, 1996 By: /s/ WILLIAM J. KRYSIAK -------------------------------------------- William J. Krysiak Vice President - Finance (Principal Financial and Accounting Officer) 18 EX-10 2 AMENDMENT 2 TO RECEIVABLES & PURCHASES AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT THIS AMENDMENT NO. 2 TO RECEIVABLES PURCHASE AGREEMENT, dated as of May 31, 1996 (herein called this "Amendment"), is by and among RECEIVABLES CAPITAL --------- CORPORATION, a Delaware corporation (herein called the "Purchaser"), WESTERN GAS --------- RESOURCES, INC., a Delaware corporation (the "Seller"), and Bank of America ------ National Trust and Savings Association, a national banking association, as Agent for the Purchaser (the "Agent"). ----- W I T N E S S E T H: ------------------- WHEREAS, the Purchaser, the Seller and the Agent have heretofore entered into a certain Receivables Purchase Agreement, dated as of February 28, 1995, as amended by that certain Amendment No. 1 to Receivables Purchase Agreement dated as of July 1, 1995 and as extended by that certain letter agreement dated April 17, 1996 by and among the Purchaser, the Seller and the Agent (collectively, the "Original Purchase Agreement"); and --------------------------- WHEREAS, the Purchaser, the Seller and the Agent now desire to further amend the Original Purchase Agreement in certain respects, as hereinafter provided, NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Purchaser, the Seller and the Agent hereby agree as follows: SECTION 1. Defined Terms. Terms defined in the Original Purchase ------------- Agreement are used herein with the meanings given them therein, unless otherwise defined or the context otherwise requires. SECTION 2. Amendment to Section 1.05. Section 1.05 of the Original ------------------------- Purchase Agreement is hereby amended by deleting clause (a) thereof and substituting the following in lieu thereof: "(a) The "Commitment Termination Date" shall be the earlier to --------------------------- occur of (i) May 29, 1997 (herein, as the same may be extended, called the "Scheduled Commitment Termination Date"), and (ii) the date of termination ------------------------------------- of the Commitment pursuant to Sections 1.07 or 10.02." ------------- ----- SECTION 3. Amendment to Section 2.04. Section 2.04 of the Original ------------------------- Purchase Agreement is hereby amended by deleting clause (c) thereof and substituting the following in lieu thereof: Exhibit 10.57 "(c) "Special Concentration Limit" (i) as the Seller may from time to --------------------------- time designate, either (a) means 5% of the Unpaid Balance of all Receivables of the Investment Grade Obligors (Group A) or (b) means 10% of the Unpaid Balance of all Receivables of the Investment Grade Obligor (Group B) and (ii) for any other Obligor means the amount designated as such by the Agent in a writing delivered to Seller; it being understood and agreed that the Agent, in setting any Special Concentration Limit for any Obligor, shall be entitled to consider, among other things, the credit exposure of the Purchaser and any Program Support Provider to such Obligor arising in connection with this Agreement and other agreements to which Purchaser is a party." SECTION 4. Amendments of Section 7.03. Section 7.03 of the Original -------------------------- Purchase Agreement is further amended by deleting clause (j) thereof and substituting the following in lieu thereof: "(j) Restricted Payments. Except for payments by Seller to its ------------------- stockholders which are permitted under the following sentences of this subsection and do not otherwise violate any provisions of this Agreement and except for dividends paid to Seller by its Subsidiaries or to MIGC, Inc., a Delaware corporation, by MGTC, Inc., a Wyoming corporation, none of the Seller and its Subsidiaries will declare or pay any dividends on, or make any other distribution in respect of, any class of its capital stock or any partnership or other interest in it, other than the distribution of common stock pursuant to the conversion or exchange of Preferred Stock, nor will any of Seller and its Subsidiaries directly or indirectly make any capital contribution to or purchase, redeem, acquire or retire any shares of the capital stock of or partnership interest in any of Seller and its Subsidiaries (whether such interests are now or hereafter issued, outstanding or created), or cause or permit any reduction or retirement of the capital stock of or partnership interest in any of Seller and its Subsidiaries. Seller may make any of the payments, distributions, capital contributions or purchases described above in this Section 7.03(j) so long --------------- as (i) no Unmatured Termination Event or Termination Event has occurred and is continuing at the time such dividends are declared and paid and (ii) such repurchases and dividends declared or paid by Seller since December 31, 1995, together with all investments Seller has made in accordance with the provisions of Section 6.2(f)(v) of the Revolving Loan Agreement as in effect on the date hereof, do not, in the aggregate, exceed the sum of (A) $50,000,000; plus (B) fifty percent (50.0%) of Seller's Consolidated ---- cumulative net income earned after December 31, 1995 if such figure is positive (zero percent, if negative); plus (C) fifty percent (50.0%) of the ---- cumulative net proceeds received by Seller and its Subsidiaries at any time after December 31, 1995 from the sale of any equity securities issued by Seller or any of its Subsidiaries. All dividends declared in the fourth fiscal quarter of 1995, payable in 1996 with respect to any class of stock of Seller, shall be permitted and excluded from the preceding calculation." 2 SECTION 5. Amendment of Section 14.05. Section 14.05 of the Original -------------------------- Purchase Agreement is hereby amended by deleting clause (a) thereof and substituting the following in lieu thereof: "(a) all costs and expenses incurred by the Agent, Purchaser, Bank of America, each Program Support Provider and their respective Affiliates in connection with the negotiation, preparation, execution and delivery, the administration (including periodic auditing, one collateral audit to have been completed within three months after February 28, 1995 (or such other date as the Agent shall determine) and semi-annual collateral audits of Seller and including the syndication of this Agreement as set forth in that certain letter from the Agent to the Seller dated as of February 28, 1996) or the enforcement of, or any actual or claimed breach of, this Agreement, the Certificate of Assignments and the other Agreement Documents, including, without limitation (i) the reasonable fees and expenses of counsel (including allocated costs of staff counsel) to any of such Persons incurred in connection with any of the foregoing or in advising such Persons as to their respective rights and remedies under any of the Agreement Documents, and (ii) all reasonable out-of-pocket expenses (including reasonable fees and expenses of independent accountants) incurred in connection with any review of Seller's books and records either prior to the execution and delivery hereof or pursuant to Section 7.01(c); --------------- and" SECTION 6. Amendments of Appendix A. Appendix A to the Original Purchase ------------------------ Agreement is hereby amended by deleting the definition of the term "Redemption Amount" in its entirety. Appendix A to the Original Purchase Agreement is hereby further amended by deleting the definitions of "Change of Control," "Investment Grade Obligor" and "Preferred Stock" and substituting the following in lieu thereof: ""Change of Control" means any of the following: (i) the occurrence of ----------------- a Founders Ownership Change; or (ii) Brion G. Wise ceases to be a director of Seller for reasons other than death or disability. For purposes of this definition, a "Founders Ownership Change" shall be deemed to have occurred at any point in time at which a Person or Persons acting in concert (such Person or Persons herein referred to as an "Acquiring Person") obtain legal or beneficial ownership (within the meaning of Rule 13d-3, promulgated by the Securities and Exchange Commission and now in effect under the Securities Exchange Act of 1934, as amended) of a number of Voting Shares greater than or equal to the Voting Shares owned by the Founders at the time of calculation. For purposes of calculating the number of Voting Shares of any Founder for purposes of this definition, the Voting Shares owned legally or beneficially by such Founder shall be included in the Voting Shares of an Acquiring Person (and excluded from the Voting Shares of the remaining Founders) if such Founder votes his Voting Shares in concert with an Acquiring Person against the remaining Founders in (A) an election for the Board of Directors or (B) the modification of the Seller's certificate of incorporation or by-laws. 3 "Investment Grade Obligor (Class A)" means any two Obligors from time ---------------------------------- to time designated by the Seller and not disapproved by the Agent the long term senior debt of which (or of whose Parent Company) is rated BBB or better by Standard & Poor's Corporation or Baa2 or better by Moody's Investors Service, Inc.; provided that the Agent may at any time upon three (3) days prior written notice declare any Obligor previously accepted as an Investment Grade Obligor (Class A) not to be an Investment Grade Obligor (Class A). "Investment Grade Obligor (Class B)" means any one Obligor from time ---------------------------------- to time designated by the Seller and not disapproved by the Agent the long term senior debt of which (or of whose Parent Company) is rated A or better by Standard & Poor's Corporation or A2 or better by Moody's Investors Service, Inc.; provided that the Agent may at any time upon three (3) days prior written notice declare any Obligor previously accepted as an Investment Grade Obligor (Group B) not to be an Investment Grade Obligor (Group B). "Preferred Stock" means all issued and outstanding preferred stock of --------------- Seller, including but not limited to (i) the 1,400,000 shares of $2.28 Cumulative Preferred Stock of Seller and (ii) 2,760,000 shares of $2.625 Cumulative Convertible Preferred Stock of Seller." SECTION 7. Amendment of Credit and Collection Policy. Schedule 6.01(p)-2 ----------------------------------------- to the Original Purchase Agreement is hereby amended in its entirety to read as Annex I hereto. SECTION 8. Certain Representations and Warranties of Seller. The Seller ------------------------------------------------ hereby represents and warrants as follows: a. The representations and warranties contained in Section 6.01 of the Original Purchase Agreement are correct on and as of the date hereof as though made on and as of the date hereof and shall be deemed to have been made on the date hereof; b. No event has occurred and is continuing that constitutes a Termination Event or an Unmatured Termination Event; c. Seller (i) has all necessary power, authority and legal right to execute, deliver and perform this Amendment and (ii) has duly authorized by all necessary corporate action the execution, delivery and performance of this Amendment. d. This Amendment and the Original Purchase Agreement, as amended hereby, when duly executed and delivered by Purchaser and the Agent, constitute the legal, valid and binding obligations of Seller enforceable in accordance with their terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or 4 other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. e. The consummation of the transaction contemplated by this Amendment and the fulfillment of the terms hereof will not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time or both) a default under, the certificate of incorporation or by-laws of Seller, or any indenture, loan agreement, receivables purchase agreement, mortgage, deed of trust, or other agreement or instrument to which Seller is a party or by which it or any of its properties is bound, (ii) result in the creation or imposition of any Adverse Claim upon any of Seller's properties pursuant to the terms of any such indenture, loan agreement, receivables purchase agreement, mortgage, deed of trust, or other agreement or instrument, or (iii) violate any law or any order, rule, or regulation applicable to Seller of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over Seller or any of its properties. f. There are no proceedings pending or to the best of Seller's knowledge threatened and to the best of Seller's knowledge there are no investigations pending, or threatened, before any court, regulatory body, administrative agency, or other tribunal or governmental instrumentality asserting the invalidity of this Amendment or seeking any determination or ruling that might materially and adversely affect the performance by Seller of its obligations under this Amendment or the validity or enforceability of this Amendment. g. No authorization or approval or other action by, and no notices to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by Seller of this Amendment. SECTION 9. References. All references to the "Receivables Purchase ---------- Agreement" or to the "Agreement" in the Original Purchase Agreement or any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Original Purchase Agreement as amended hereby. SECTION 10. Effectiveness. This Amendment shall be effective as of the ------------- date hereof; provided, however, that its effectiveness is conditioned upon: (i) -------- ------- Seller having paid to Agent for its own account the renewal fee contemplated by that certain letter from the Agent to the Seller dated as of February 28, 1996; (ii) the General Counsel for the Seller having delivered an opinion to the Agent in form and substance satisfactory to the Agent; and (iii) receipt by the Agent of duly executed Financing Statement Amendments (Form UCC-3), in form and substance satisfactory to the Agent amending the financing statements delivered pursuant to the Original Purchase Agreement. 5 SECTION 11. GOVERNING LAW; COUNTERPARTS. THIS AMENDMENT SHALL BE GOVERNED --------------------------- BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Amendment by signing one or more counterparts. SECTION 12. Ratification. Except as expressly amended hereby, the Original ------------ Purchase Amendment shall remain in full force and effect as heretofore entered into. The parties hereby ratify and confirm the Original Purchase Agreement as hereby amended. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. PURCHASER: --------- RECEIVABLES CAPITAL CORPORATION By: /S/ George Roller -------------------------------------- Name: George Roller ------------------------------------ Title: ----------------------------------- SELLER: ------ WESTERN GAS RESOURCES, INC. By: /S/ Vance S. Blalock -------------------------------------- Name: Vance S. Blalock ------------------------------------ Title: Treasurer ----------------------------------- AGENT: ----- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: /S/ Mark A. Wegner --------------------------------------- Name: Mark A. Wegner ------------------------------------- Title: Attorney-in-fact ----------------------------------- 6 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1996 JUN-30-1996 21,221 0 188,849 0 15,705 228,873 1,070,235 (227,212) 1,167,252 325,147 385,000 0 416 2,580 376,813 1,167,252 919,016 926,937 803,225 803,225 81,597 0 18,149 23,966 8,301 15,665 0 0 0 15,665 .41 .41
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