8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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):  November 16, 2005

WESTERN GAS RESOURCES, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	1-10389	84-1127613
(State of Other Jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification No.)
1099 18th Street, Suite 1200, Denver, Colorado		80202
(Address of Principal Executive Offices)		(Zip Code)

(303) 452-5603

(Registrant’s telephone number, including area code)

N.A.

(Former Name or Former Address, if Changed Since Last Report)

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 (see General Instruction A.2. below):

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 2.02.  Results of Operations and Financial Condition.

On November 21, 2005, Western Gas Resources, Inc. (“Western” or the “Company”) issued a press release announcing that Western’s management and its Audit Committee have completed the previously announced review of the accounting treatment of the Company’s gas storage and gas transportation contracts and have determined that these contracts do not meet the definition of a derivative under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”).

Accordingly, the Company will restate its audited financial statements for the years from 2001 through 2004 and its unaudited financial statements for the first three quarters of 2004 and the first two quarters of 2005 (the “Restatements”) and will revise the financial results as previously announced for the quarter ended September 30, 2005.  The Company included in its press release the expected unaudited impact of the Restatements on Total revenues, Income before taxes, Net income, Earnings per share – assuming dilution, Cash flow before working capital adjustments, Current assets, Total assets, Current liabilities, Total liabilities, and Total equity for each of the restated periods and for the quarter ended September 30, 2005.  A copy of that press release is furnished as Exhibit 99.1 to this Form 8-K.

As a result of the Restatements, the Company will amend its Annual Report on Form 10-K for the year ended December 31, 2004 and its Quarterly Reports on Form 10-Q for the periods ended March 31, 2005 and June 30, 2005.  The Company intends to file the amended reports, together with its Quarterly Report on Form 10-Q for the period ended September 30, 2005, as soon as practicable.

Item 4.02(a).Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

Upon adoption of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”) in 2001, the Company analyzed its storage and transportation contracts in detail, and determined that these contracts had the characteristics of a derivative as described in FAS 133.  The treatment of these contracts as derivatives has been consistently applied to these contracts since adoption as reflected in our audited and unaudited financial statements.  On November 8, 2005, after the release of the Company’s third quarter 2005 results and prior to the filing of the Form 10-Q for the quarter ended September 30, 2005, it came to the Company’s attention that these contracts may not meet the definition of a derivative. After a detailed review of the contracts and the market for those contracts, the Company determined that these contracts do not meet the definition of

2

a derivative as required under FAS 133, specifically as it relates to the net settlement provisions.

As a result, on November 16, 2005, Western’s Audit Committee determined that the previously filed financial statements included in the Annual Reports on Form 10-K for years ended December 31, 2001 through 2004 and the Quarterly Reports on Form 10-Q for the periods ended March 31, 2004, June 30, 2004, September 30, 2004, March 31, 2005 and June 30, 2005 and the information provided in the November 8, 2005 earnings release for the third quarter of 2005, should not be relied upon and the financial statements should be restated. The audit committee has discussed this conclusion and the proposed Restatements with the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PWC”).

The guidance set forth in Auditing Standard No. 2 (“AS2”) of the Public Company Accounting Oversight Board states that restatement of previously issued financial statements to reflect the correction of a misstatement should be regarded as a strong indicator that a material weakness in internal control over financial reporting exists.  In the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 14, 2005, the Company concluded that the Company’s internal controls over financial reporting were effective as of December 31, 2004.  Subsequently, the Company identified a material weakness in internal control over financial reporting with respect to the correct application of FAS 133 as it applies to the net settlement provision in relation to storage and transportation contracts. As a result, the Company has concluded that Management’s Report on Internal Control Over Financial Reporting set forth on page 73 of the Company’s 2004 Annual Report should be restated and should no longer be relied upon. The Company has not yet completed its analysis of the impact, if any, of the aforementioned issue with these derivatives on the Company’s other internal controls over financial reporting.  The Company will provide the plan of remediation in its restated Form 10-K for the year ended December 31, 2004.  Management has discussed its conclusion that Management’s Report on Internal Control Over Financial Reporting as of December 31, 2004 should be restated and should no longer be relied upon with its Audit Committee and PWC.

Western will file the amended reports, together with its Quarterly Report on Form 10-Q for the period ended September 30, 2005 as soon as practicable.

Item 8.01.  Other Events.

Pursuant to certain terms of its revolving credit facility and its master shelf agreement, the Company is required to deliver its unaudited financial statements and related compliance certificate within 45 days of quarter end.  The Company has

3

received waivers from the lenders under its revolving credit facility and its master shelf agreement to extend the date of delivery of its unaudited financial statements and related compliance certificate for the third quarter of 2005 to December 14, 2005.

Item 9.01.  Financial Statements and Exhibits.

(c)Exhibits.

A list of exhibits furnished herewith is contained on the Exhibit Index which immediately precedes such exhibits and is incorporated herein by reference.

4

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 hereunto duly authorized.

		WESTERN GAS RESOURCES, INC.
		(Registrant)
Date:	November 21, 2005	By:	/s/ William J. Krysiak
				Name: William J. Krysiak
				Title: Executive Vice President and Chief Financial Officer

5

EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release issued on November 21, 2005, announcing Western Gas Resources, Inc.’s intent to restate Form 10-K for the year ended December 31, 2004 and Form 10-Q for the first and second quarters of 2005.

6

EX-99.1

Exhibit 99.1

WESTERN GAS RESOURCES, INC.
ANNOUNCES ITS INTENT TO RESTATE ITS FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004
AND ITS FORM 10-Q FOR THE FIRST AND SECOND QUARTERS OF 2005

DENVER, November 21, 2005.  Western Gas Resources, Inc. (“Western” or the “Company”) (NYSE:WGR) today announced that its management and its audit committee have completed the previously announced review of the accounting treatment of the Company’s gas storage and gas transportation contracts and determined that these contracts do not meet the definition of a derivative under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”). Accordingly, the Company will restate its audited financial statements for the years from 2001 through 2004 and its unaudited financial statements for the first two quarters of 2005 as well as all three quarters of 2004.

The adjustments arising from the change in treatment of the gas storage and gas transportation contracts are non-cash changes in mark-to-market valuations and will not affect cash flow before working capital adjustments or cash flow from operating activities. While the impact of this change on a quarterly or annual period may be material; over time, the total earnings from the transactions utilizing storage and transportation capacity will not change. Accordingly, while the earnings in individual periods change, Total equity at December 31, 2004 after the restatements is expected to be $684.8 million as compared to the originally reported amount of $682.0 million.  Further, Total equity at September 30, 2005 after the restatements is expected to be $720.1 million as compared to the originally reported amount of $783.4 million; this difference will be eliminated through earnings in future quarters.

Upon adoption of FAS 133 in 2001, the Company analyzed its storage and transportation contracts in detail, and determined that these contracts had the characteristics of a derivative as described in FAS 133.  The treatment of these contracts as derivatives has been consistently applied to these contracts since adoption as reflected in our audited and unaudited financial statements.  On November 8, 2005, after the release of the Company’s third quarter 2005 results and prior to the filing of the Form 10-Q for the quarter ended September 30, 2005, it came to the Company’s attention that these contracts may not meet the definition of a derivative. After a detailed review of the contracts and the market for those contracts, the Company determined that these contracts do not meet the definition of a derivative as required under FAS 133, specifically as it relates to the net settlement provisions.

Historically, the non-cash mark-to-market valuation by the Company of these contracts as derivatives effectively offset non-cash mark-to-market changes to the future sale derivatives for stored or transported natural gas.  Without this offsetting valuation, the non-cash mark-to-market of these economic hedges of the sale of gas will fluctuate through earnings with changes in market prices. As the stored or transported natural gas is sold and the future sale derivatives are settled, the Company will realize the benefit of the storage and transportation transactions through earnings.  For future transactions, the Company will consider various alternatives to minimize the earnings volatility from these economic hedges including utilizing hedge accounting.

The expected unaudited impact of the restatement for each of the years ended December 31, 2001 through 2004 is as follows (amounts in thousands, except per share calculations):

	Year Ended December 31,
	2001				2002				2003				2004
	As		As		As		As		As		As		As		As
	Reported		Restated		Reported		Restated		Reported		Restated		Reported		Restated
Total revenues	$	3,353,162	$	3,363,659	$	2,489,698	$	2,464,105	$	2,874,010	$	2,879,951	$	3,069,713	$	3,083,168
Income before taxes	152,126		162,623		80,703		55,110		144,536		150,477		183,268		196,723
Net income	95,637		102,249		50,589		34,330		84,219		88,061		119,215		127,759
Earnings per share-assuming dilution	1.24		1.33		0.62		0.37		1.13		1.18		1.61		1.73
Cash flow before working capital adjustments	$	173,506	$	173,506	$	161,071	$	161,071	$	215,666	$	215,666	$	278,927	$	278,927
Current assets	365,963		364,563		370,940		354,420		387,303		377,010		523,476		521,130
Total assets	1,267,942		1,264,139		1,302,144		1,285,540		1,460,524		1,450,231		1,840,112		1,837,397
Current liabilities	305,173		291,114		332,771		331,263		358,981		357,843		475,947		469,169
Total liabilities	794,590		784,174		819,076		812,119		898,015		893,527		1,158,084		1,152,630
Total equity	$	473,352	$	479,965	$	483,068	$	473,421	$	562,509	$	556,704	$	682,028	$	684,767

The expected unaudited impact of the restatement for each of the quarters ended March 31, June 30 and September 30, 2004 and 2005 is as follows (amounts in thousands, except per share calculations):

	Quarter Ended,
	March 31, 2004				June 30, 2004				September 30, 2004
	As		As		As		As		As		As
	Reported		Restated		Reported		Restated		Reported		Restated
Total revenues	$	771,216	$	779,680	$	726,303	$	725,838	$	718,255	$	693,679
Income before taxes	38,382		46,846		26,591		26,126		55,511		30,935
Net income	29,088		34,434		13,975		13,649		35,118		19,465
Earnings per share-assuming dilution	0.39		0.48		0.19		0.18		0.47		0.26
Cash flow before working capital adjustments	$	60,925	$	60,925	$	55,113	$	55,113	$	68,689	$	68,689
Current assets	329,552		327,853		389,047		386,571		397,184		372,157
Total assets	1,425,393		1,423,694		1,499,837		1,497,361		1,553,926		1,528,899
Current liabilities	378,811		377,808		388,937		387,910		361,503		362,542
Total liabilities	837,029		835,789		901,749		900,058		922,633		914,044
Total equity	$	588,364	$	587,905	$	598,088	$	597,303	$	631,293	$	614,855

2

	Quarter Ended,
	March 31, 2005				June 30, 2005				September 30, 2005
	As		As		As		As		As		As
	Reported		Restated		Reported		Restated		Reported *		Revised *
Total revenues	$	854,315	$	834,107	$	861,196	$	868,026	$	1,052,123	$	962,317
Income before taxes	51,342		31,134		52,668		59,498		105,531		15,725
Net income	32,628		19,706		33,318		37,629		67,678		10,278
Earnings per share-assuming dilution	0.43		0.26		0.44		0.50		0.88		0.14
Cash flow before working capital adjustments	$	80,620	$	80,620	$	73,402	$	73,402	$	111,110	$	111,110
Current assets	473,357		455,334		458,331		447,169		851,165		746,648
Total assets	1,875,677		1,857,542		1,918,055		1,906,894		2,393,383		2,288,867
Current liabilities	480,818		478,591		436,308		434,225		746,651		741,018
Total liabilities	1,171,952		1,163,999		1,179,825		1,174,535		1,610,009		1,568,763
Total equity	$	703,725	$	693,543	$	738,230	$	732,359	$	783,374	$	720,104

* Information for the quarter ended September 30, 2005 is as reported in the earnings release dated November 8, 2005.  Until the Form 10-Q for the quarter ended September 30, 2005 is filed, the results for the third quarter of 2005 may also be adjusted for any revisions to estimates used in preparing the earnings release or for new information that affects the third quarter results.

The unaudited, expected amounts presented in the tables above may be adjusted until the restated financial statements are filed. The audit committee has discussed the proposed restatements with the Company’s independent registered public accounting firm, PricewaterhouseCoopers LLP (“PWC”).  Western will file the amended reports, together with its Quarterly Report on Form 10-Q for the period ended September 30, 2005 as soon as practicable.  The audit committee has determined that the previously filed financial statements should not be relied upon.

The guidance set forth in Auditing Standard No. 2 (“AS2”) of the Public Company Accounting Oversight Board states that restatement of previously issued financial statements to reflect the correction of a misstatement should be regarded as a strong indicator that a material weakness in internal control over financial reporting exists.  In the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March 14, 2005, the Company concluded that the Company’s internal controls over financial reporting were effective as of December 31, 2004.  As described herein, the Company identified a material weakness in internal control over financial reporting with respect to the correct application of FAS 133 as it applies to the net settlement provision in relation to storage and transportation contracts. As a result, the Company has concluded that Management’s Report on Internal Control Over Financial Reporting set forth on page 73 of the Company’s 2004 Annual Report should be restated and should no longer be relied upon. The Company has not yet completed its analysis of the impact, if any, of the aforementioned issue with these derivatives on the Company’s other internal controls over financial reporting.  The Company has discussed this conclusion with its audit committee and PWC. The Company will provide the plan of remediation in its restated Form 10-K for the year ended December 31, 2004.

Western has received waivers from lenders under its revolving credit facility and master shelf agreement to extend the date of delivery of its unaudited financial statements and compliance certificates for the third quarter of 2005 to December 14, 2005.  The Company does not anticipate any violations of financial covenants as a result of these adjustments.

3

Update to Operational Guidance.  The results of operations for the quarters ended March 31, June 30 and September 30, 2005 were affected by fluctuations in commodity prices.  The price fluctuations in the third quarter were more significant primarily as a consequence of hurricane damage in the Gulf of Mexico.  Assuming the prices on November 18, 2005 and the settlement date of the economic hedges of the future sales of stored or transported natural gas, the Company anticipates that of the $57.4 million decrease in net income in the third quarter of 2005 as shown above, approximately $37.4 million of the non-cash reduction in Net income for the quarter ended September 30, 2005 will be reported as an increase in Net income in the fourth quarter of 2005, and approximately $19.0 million will be reflected as an increase in Net income in the first quarter of 2006.  These amounts, however, are estimates and will fluctuate as commodity prices change.

Company Description.  Western is an independent natural gas explorer, producer, gatherer, processor, transporter and energy marketer.  The Company’s producing properties are located primarily in Wyoming, including the developing Powder River Basin coal bed methane play, where Western is a leading acreage holder and producer, and the rapidly growing Pinedale Anticline.  The Company also owns and operates natural gas gathering, processing and treating facilities in major gas-producing basins in the Rocky Mountain, Mid-Continent and West Texas regions of the United States.  For additional Company information, visit Western’s web site at www.westerngas.com.

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding financial results, absence of changes in commodity prices, compliance with financial covenants to the Company’s lenders and the timing of filing of the above referenced amended reports and the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2005.  Although the Company believes that its expectations are based on reasonable assumptions, Western can give no assurances that its projections are accurate.  These statements are subject to a number of risks and uncertainties, which may cause actual results to differ materially.  These risks and uncertainties include, among other things, the nature of the Company’s derivative contracts, commodity prices, the finalization of the financial statements for the indicated periods, the time required to restate financial information and complete amended and as yet unfiled required reports and other factors as discussed in the Company’s 10-K and 10-Q Reports and other filings with the Securities and Exchange Commission.

Investor Contact:	Ron Wirth, Director of Investor Relations
	(800) 933-5603 or (303) 252-6090
	e-mail: rwirth@westerngas.com

4

Reconciliation of Net Income to Cash Flow before Working Capital Adjustments:

(Dollars in thousands)

	2001						2002						2003						2004
	As			As			As			As			As			As			As			As
	Reported			Restated			Reported			Restated			Reported			Restated			Reported			Restated
Net Income	$	95,637		$	102,249		$	50,589		$	34,330		$	84,219		$	88,061		$	119,215		$	127,759
Add income items that do not affect operating cash flows:
Depreciation, depletion and amortization	64,162			64,162			77,005			77,005			73,906			73,906			95,536			95,536
Deferred income taxes	42,815			46,700			19,614			10,280			49,326			51,425			66,289			71,200
Distributions (less than) equity income, net	(29		)	(29		)	(2,906		)	(2,906		)	1,076			1,076			127			127
(Gain) loss on sale of assets	(10,748		)	(10,748		)	948			948			(156		)	(156		)	1,288			1,288
Non-cash change in fair value of derivatives	(19,906		)	(30,403		)	13,788			39,381			(1,235		)	(7,176		)	(1,572		)	(15,027		)
Compensation expense from common stock options and restricted stock	170			170			224			224			376			376			646			646
Foreign currency translation adjustments	476			476			283			283			1,238			1,238			816			816
Cumulative effect of changes inaccounting principles	—			—			—			—			6,724			6,724			(4,714		)	(4,714		)
Other non-cash items, net	929			929			1,526			1,526			192			192			1,296			1,296
Cash flow before working capital adjustments	$	173,506		$	173,506		$	161,071		$	161,071		$	215,666		$	215,666		$	278,927		$	278,927

Reconciliation of Net Income to Cash Flow before Working Capital Adjustments:

(Dollars in thousands)

	Quarter ended
	March 31, 2005						June 30, 2005						September 30, 2005
	As			As			As			As			As			As
	Reported			Restated			Reported			Restated			Reported			Revised
Net Income	$	32,628		$	19,706		$	33,318		$	37,629		$	67,678		$	10,278
Add income items that do not affect operating cash flows:
Depreciation, depletion and amortization	29,078			29,078			30,799			30,799			32,462			32,462
Deferred income taxes	11,364			4,078			13,178			15,697			24,039			(8,367		)
Distributions (less than) equity income, net	(279		)	(279		)	(264		)	(264		)	(2,118		)	(2,118		)
(Gain) loss on sale of assets	28			28			(1		)	(1		)	187			187
Non-cash change in fair value of derivatives	8,469			28,677			(4,233		)	(11,063		)	(15,062		)	74,744
Compensation expense from common stock options and restricted stock	273			273			653			653			1,754			1,754
Foreign currency translation adjustments	(2,271		)	(2,271		)	(239		)	(239		)	1,303			1,303
Cumulative effect of changes in accounting principles
Other non-cash items, net	1,330			1,330			191			191			867			867
Cash flow before working capital adjustments	$	80,620		$	80,620		$	73,402		$	73,402		$	111,110		$	111,110

5

Reconciliation of Net Income to Cash Flow before Working Capital Adjustments:

(Dollars in thousands)

	Quarter ended
	March 31, 2004						June 30, 2004						September 30, 2004
	As			As			As			As			As			As
	Reported			Restated			Reported			Restated			Reported			Restated
Net Income	$	29,088		$	34,434		$	13,975		$	13,649		$	35,118		$	19,465
Add income items that do not affect operating cash flows:
Depreciation, depletion and amortization	22,626			22,626			22,348			22,348			22,039			22,039
Deferred income taxes	10,465			13,583			13,624			13,485			18,444			9,521
Distributions (less than) equity income, net	(1,460		)	(1,460		)	1,795			1,795			(1,077		)	(1,077		)
(Gain) loss on sale of assets	—			—			1,639			1,639			(230		)	(230		)
Non-cash change in fair value of derivatives	6,219			(2,245		)	(1,523		)	(1,058		)	(6,859		)	17,717
Compensation expense from common stock options and restricted stock	181			181			295			295			6			6
Foreign currency translation adjustments	(1,528		)	(1,528		)	424			424			1,248			1,248
Cumulative effect of changes in accounting principles	(4,714		)	(4,714		)	—			—			—			—
Other non-cash items, net	48			48			2,536			2,536			—			—
Cash flow before working capital adjustments	$	60,925		$	60,925		$	55,113		$	55,113		$	68,689		$	68,689

Cash Flow before Working Capital Adjustments is not a measure determined pursuant to generally accepted accounting principles, or GAAP, nor is it an alternative to GAAP income.  The Company is presenting this information, as it is an important measure of financial performance used by equity analysts.

6