<PAGE>
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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 SEPTEMBER 30, 1995 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
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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 November 1, 1995, there were 25,762,117 shares of the registrant's Common
Stock outstanding.
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1
<PAGE>
Western Gas Resources, Inc.
Form 10-Q
Table of Contents
<TABLE>
<CAPTION>
PART I - Financial Information Page
- - ------------------------------ ----
<S> <C> <C>
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - September 30, 1995 and December 31, 1994..................... 3
Consolidated Statement of Cash Flows - Nine months ended September 30, 1995
and 1994.................................................................................. 4
Consolidated Statement of Operations - three months and nine months ended
September 30, 1995 and 1994.............................................................. 5
Consolidated Statement of Changes in Stockholders' Equity - Nine months ended
September 30, 1995....................................................................... 6
Notes to Consolidated Financial Statements............................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................... 9
<CAPTION>
PART II - Other Information
- - ---------------------------
<S> <C> <C>
Item 1. Legal Proceedings........................................................................ 17
Item 6. Exhibits and Reports on Form 8-K......................................................... 18
Signatures......................................................................................... 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
WESTERN GAS RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
(000s, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
-------------- -------------
ASSETS (unaudited)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents........................ $ 10,373 $ 8,708
Trade accounts receivable, net................... 122,584 134,444
Product inventory................................ 36,674 51,139
Parts inventory.................................. 2,424 2,291
Other............................................ 2,295 1,367
---------- ----------
Total current assets.......................... 174,350 197,949
---------- ----------
Property and equipment, at cost:
Gas gathering, processing, storage and
transmission.................................... 912,585 881,569
Oil and gas properties and equipment............. 144,064 140,601
Construction in progress......................... 26,900 40,076
---------- ----------
1,083,549 1,062,246
Less: Accumulated depreciation, depletion and
amortization.................................... (223,286) (179,537)
---------- ----------
Total property and equipment, net............. 860,263 882,709
---------- ----------
Other assets:
Gas purchase contracts (net of accumulated
amortization of $18,098 and
$14,872, respectively).......................... 40,973 40,958
Other............................................ 54,226 45,746
---------- ----------
Total other assets............................ 95,199 86,704
---------- ----------
Total assets...................................... $1,129,812 $1,167,362
========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable................................. $ 130,692 $ 145,244
Short-term debt.................................. 75,000 75,000
Accrued expenses................................. 23,790 13,448
Dividends payable................................ 3,898 3,895
Income taxes payable............................. - 843
---------- ----------
Total current liabilities..................... 233,380 238,430
Long-term debt.................................... 440,000 418,000
Deferred income taxes payable..................... 72,421 68,727
Other long-term liabilities....................... 116 5,522
---------- ----------
Total liabilities............................. 745,917 730,679
---------- ----------
Commitments and contingent liabilities............ - -
Stockholders' equity:
Common stock, par value $.10; 100,000,000
shares authorized; 25,787,133 and
25,737,317 shares issued, respectively.......... 2,579 2,574
Treasury stock, at cost, 25,016 shares in
treasury........................................ (788) (788)
Preferred Stock, par value $.10; 10,000,000
shares authorized:
$2.625 cumulative convertible preferred stock;
2,760,000 shares issued and outstanding
($138,000 aggregate liquidation preference)... 276 276
$2.28 cumulative preferred stock; 1,400,000
shares issued and outstanding ($35,000 aggregate
liquidation preference)....................... 140 140
7.25% cumulative senior perpetual convertible
preferred stock; none and 400,000 shares
issued and outstanding, respectively ($40,000
aggregate liquidation preference)............. - 40
Additional paid-in capital....................... 301,185 338,926
Notes receivable from key employees secured by
common stock.................................... (1,851) (1,525)
Retained earnings................................ 82,354 97,040
---------- ----------
Total stockholders' equity.................... 383,895 436,683
---------- ----------
Total liabilities and stockholders' equity........ $1,129,812 $1,167,362
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(000s)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------
1995 1994
-------- --------
<S> <C> <C>
Reconciliation of net income to net cash provided by operating activities:
Net income............................................................................ $ 2,000 $ 3,898
Add income items that do not affect working capital:
Depreciation, depletion and amortization............................................ 50,128 46,823
Deferred income taxes............................................................... 2,677 1,376
Other non-cash items................................................................ (1,561) (790)
-------- --------
53,244 51,307
-------- --------
Adjustments to working capital to arrive at net cash provided by operating activities:
Decrease in trade accounts receivable............................................... 15,502 32,149
Decrease (increase) in product inventory............................................ 14,465 (29,010)
Increase in parts inventory......................................................... (133) (166)
Increase in other current assets.................................................... (928) (1,323)
Increase in other assets and liabilities, net....................................... (1,808) (447)
Decrease in accounts payable........................................................ (14,552) (31,197)
Increase in accrued expenses........................................................ 9,842 1,287
(Decrease) increase in income taxes payable......................................... (843) 854
-------- --------
Total adjustments............................................................ 21,545 (27,853)
-------- --------
Net cash provided by operating activities............................................. 74,789 23,454
-------- --------
Cash flows from investing activities:
Payments for business acquisitions.................................................. (2,286) (3,881)
Payments for additions to property and equipment.................................... (38,092) (58,368)
Dispositions of property and equipment.............................................. 8,737 11,327
Contributions to equity investments................................................. (5,623) 132
Gas purchase contracts acquired..................................................... (3,037) (300)
-------- --------
Net cash used in investing activities................................................. (40,301) (51,090)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of preferred stock........................................... - 132,729
Proceeds from exercise of common stock options...................................... 108 364
Net borrowings (payments) under revolving credit facility........................... 22,000 (153,600)
Proceeds from short-term borrowings................................................. - 75,000
Dividends paid to holders of common stock........................................... (3,862) (3,851)
Dividends paid to holders of preferred stock........................................ (9,037) (7,971)
Redemption of 7.25% Cumulative Senior Perpetual Convertible Preferred Stock......... (42,032) -
-------- --------
Net cash (used in) provided by financing activities................................... (32,823) 42,671
-------- --------
Net increase in cash and cash equivalents............................................. 1,665 15,035
Cash and cash equivalents at beginning of period...................................... 8,708 4,666
-------- --------
Cash and cash equivalents at end of period............................................ $ 10,373 $ 19,701
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(000s, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues:
Sale of residue gas.................................... $ 194,711 $ 173,992 $ 614,711 $ 523,263
Sale of natural gas liquids............................ 79,748 73,920 243,516 222,459
Processing and transportation revenue.................. 8,994 8,861 29,496 24,856
Other, net............................................. 3,252 2,896 7,091 9,265
----------- ----------- ----------- -----------
Total revenues........................................ 286,705 259,669 894,814 779,843
----------- ----------- ----------- -----------
Costs and expenses:
Product purchases...................................... 234,784 208,346 735,040 627,805
Plant operating expense................................ 18,009 16,522 53,013 50,820
Oil and gas exploration and production costs........... 1,181 977 4,000 3,397
Selling and administrative expense..................... 6,645 6,542 20,183 21,722
Depreciation, depletion and amortization............... 16,213 14,239 50,128 46,823
Interest expense....................................... 9,617 8,801 27,708 23,148
Restructuring charges.................................. - - 2,065 -
----------- ----------- ----------- -----------
Total costs and expenses.............................. 286,449 255,427 892,137 773,715
----------- ----------- ----------- -----------
Income before taxes..................................... 256 4,242 2,677 6,128
Provision (benefit) for income taxes:
Current................................................ (2,353) 529 (2,000) 854
Deferred............................................... 2,147 1,007 2,677 1,376
----------- ----------- ----------- -----------
(206) 1,536 677 2,230
----------- ----------- ----------- -----------
Net income.............................................. 462 2,706 2,000 3,898
Preferred stock requirements............................ (2,610) (3,335) (12,821) (8,877)
----------- ----------- ----------- -----------
Loss attributable to common stock....................... $ (2,148) $ (629) $ (10,821) $ (4,979)
=========== =========== =========== ===========
Loss per share of common stock.......................... $ (.08) $ (.02) $ (.42) $ (.19)
=========== =========== =========== ===========
Weighted average shares of common stock outstanding..... 25,760,595 25,699,084 25,750,401 25,692,483
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
WESTERN GAS RESOURCES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(000s, except share amounts)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,1995
-------------------------
Shares Amount
----------- -----------
<S> <C> <C>
COMMON STOCK; Par Value $.10 Per Share; 100,000,000 Shares Authorized:
Balance at December 31, 1994............................................................ 25,712,301 $ 2,574
Common stock options exercised.......................................................... 49,816 5
----------- -----------
Balance at September 30, 1995........................................................... 25,762,117 $ 2,579
=========== ===========
COMMON STOCK IN TREASURY, AT COST;
Balance at December 31, 1994............................................................ 25,016 $ (788)
----------- -----------
Balance at September 30, 1995........................................................... 25,016 $ (788)
=========== ===========
PREFERRED STOCK; Par Value $.10; 10,000,000 Shares Authorized:
$2.625 Cumulative Convertible Preferred Stock;
Balance at December 31, 1994............................................................ 2,760,000 $ 276
----------- -----------
Balance at September 30, 1995........................................................... 2,760,000 $ 276
=========== ===========
$2.28 Cumulative Preferred Stock;
Balance at December 31, 1994............................................................ 1,400,000 $ 140
----------- -----------
Balance at September 30, 1995........................................................... 1,400,000 $ 140
=========== ===========
7.25% Cumulative Senior Perpetual Convertible Preferred Stock;
Balance at December 31, 1994............................................................ 400,000 $ 40
Redemption of Cumulative Senior Perpetual Convertible Preferred Stock................... (400,000) (40)
----------- -----------
Balance at September 30, 1995........................................................... - $ -
=========== ===========
ADDITIONAL PAID-IN CAPITAL;
Balance at December 31, 1994............................................................ $ 338,926
Common stock options exercised.......................................................... 465
Redemption of 7.25% Cumulative Senior Perpetual Convertible Preferred Stock............. (38,206)
-----------
Balance at September 30, 1995........................................................... $ 301,185
===========
NOTES RECEIVABLE FROM KEY EMPLOYEES SECURED BY COMMON STOCK;
Balance at December 31, 1994............................................................ $ (1,525)
Loans related to common stock options exercised......................................... (378)
Loans forgiven related to the restructuring............................................. 52
-----------
Balance at September 30, 1995........................................................... $ (1,851)
===========
RETAINED EARNINGS;
Balance at December 31, 1994............................................................ $ 97,040
Net income for the nine months ended September 30, 1995................................. 2,000
Dividends declared on common stock...................................................... (3,865)
Dividends declared on 7.25% Cumulative Senior Perpetual Convertible
Preferred Stock....................................................................... (1,208)
Dividends declared on $2.28 Cumulative Preferred Stock.................................. (2,395)
Dividends declared on $2.625 Cumulative Convertible
Preferred Stock....................................................................... (5,434)
Reduction related to redemption of 7.25% Cumulative Senior Perpetual Convertible
Stock................................................................................. (3,784)
-----------
Balance at September 30, 1995........................................................... $ 82,354
===========
TOTAL STOCKHOLDERS' EQUITY AT SEPTEMBER 30, 1995......................................... $ 383,895
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
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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, 1994. The
interim consolidated financial statements as of September 30, 1995 and for the
three and nine month periods ended September 30, 1995 and 1994 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 years' amounts in the Consolidated Financial Statements and Notes
have been reclassified to conform to the presentation used in 1995.
ACQUISITIONS
Effective January 1, 1995, the Company entered into the Redman Smackover Joint
Venture agreement with DDD Energy, Inc., a wholly-owned exploration and
production subsidiary of Seitel, Inc. ("DDD"), Redman Energy Corporation
("Redman"), and DDD 1995 Oil & Gas Partnership ("DDD 1995"). The Joint Venture
acquired working interests in three producing gas fields in East Texas in the
Smackover Formation from Union Oil Company of California for approximately $11.3
million. The Company's contribution to the partnership was approximately $5.9
million through September 30, 1995. The Company is the managing venturer with a
50% ownership interest and DDD, Redman, and DDD 1995 own interests of 38%, 10%,
and 2%, respectively. The Company accounts for this transaction under the
equity method.
In July 1995, the Company entered into an agreement to purchase eight West Texas
gathering systems from Transwestern Gathering Company and Enron Permian
Gathering, Inc. In October 1995, the Company acquired and assumed the
operations of the Transwestern Gathering Company assets being sold pursuant to
the agreement for a purchase price of $3.5 million. The closing on the
remaining assets is expected to occur during the first quarter of 1996 and is
subject to abandonment approval by the Federal Energy Regulatory Commission.
DISPOSITION
In September 1995, the Company sold its 50% interest in the Waha Header, a
pipeline header in West Texas, resulting in an after-tax gain of $596,000.
LONG-TERM DEBT
In July 1995, The Prudential Insurance Company of America and the Company
amended the Master Shelf Agreement to provide for an additional $50 million of
borrowing capacity resulting in a total borrowing capacity of $200 million. On
July 28, 1995, the Company sold $50 million of 7.61% Master Notes due 2007.
Principal payments of $10 million will be due on July 28 of each year from 2003
through 2007. In July 1995, the Master Shelf Agreement, as amended, was fully
utilized.
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 is not expected to affect
adversely the overall operations of the Company.
EARNINGS PER SHARE OF COMMON STOCK
In May 1995, the Company redeemed all of the issued and outstanding shares of
its 7.25% Cumulative Senior Perpetual Convertible Preferred Stock (liquidation
preference of $40 million) pursuant to the provisions of the Certificate of
Designation relating to such preferred stock, at an aggregate redemption price
of approximately $42.0 million including a redemption premium of $2.0 million.
Earnings per share of common stock is computed by dividing net income
attributable to shares of common stock by the weighted average number of shares
of common stock outstanding. Net (loss) income attributable to shares of common
stock is net income
7
<PAGE>
WESTERN GAS RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)-(CONTINUED)
less preferred stock dividends. The Company declared preferred stock dividends
of $2.6 million and $9.0 million for the three and nine month periods ended
September 30, 1995, respectively, and $3.3 million and $8.9 million for the
three and nine month periods ended September 30, 1994, respectively. In
addition, net (loss) income for the nine months ended September 30, 1995
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 nine month periods ended September 30,
1995 was not dilutive; therefore, only primary earnings per share of common
stock is presented.
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid was $26.0 million and $23.2 million, respectively, for the nine
months ended September 30, 1995 and 1994.
Income taxes paid during the nine months ended September 30, 1995 were
approximately $1.6 million. No income taxes were paid during the nine months
ended September 30, 1994.
During July 1990, the Company loaned Bill M. Sanderson, President, Chief
Operating Officer and Director, $748,000 to purchase 294,524 shares of common
stock in the Company. In February 1994, he surrendered 25,016 shares of the
Company's common stock, which were valued at $31.50 per share based upon the
February 22, 1994 closing price, as repayment of the loan and accrued interest
of approximately $788,000.
NEW ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121,"Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121
is effective for financial statements for fiscal years beginning after December
15, 1995. However, the Company anticipates that it will adopt the
pronouncement in the fourth quarter of 1995. The Company has not yet completed
its evaluation of the impact that SFAS No. 121 will have on the Company's
financial statements. However, the Company anticipates that a charge against
earnings will be recorded upon adoption.
LEGAL PROCEEDINGS
Reference is made to Item 1. Legal Proceedings, of Part II, Other Information,
of this Form 10-Q.
8
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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 nine months ended September 30, 1995 and 1994. Certain prior year
amounts have been reclassified to conform to the presentation used in 1995.
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 nine months ended September 30, 1995 compared to the three and nine
months ended September 30, 1994 (000s, except per share amounts and operating
data).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- Percent -------------------- Percent
1995 1994 Change 1995 1994 Change
--------- --------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Financial results:
Revenues........................ $286,705 $259,669 10.4 $894,814 $779,843 14.7
Gross profit.................... 16,518 19,585 (15.7) 52,633 50,998 3.2
Net income...................... 462 2,706 (82.9) 2,000 3,898 (48.7)
Loss per share of common stock.. (.08) (.02) (300.0) (.42) (.19) (121.1)
Net cash provided by operating
activities.................... $ 10,470 $ 2,973 252.2 $ 74,789 $ 23,454 218.9
Operating data:
Average gas sales (MMcf/D)...... 1,512 1,159 30.5 1,553 1,040 49.3
Average NGL sales (MGal/D)...... 2,832 2,773 2.1 2,867 2,923 (1.9)
Average gas prices ($/Mcf)...... $ 1.40 $ 1.63 (14.1) $ 1.45 $ 1.84 (21.2)
Average NGL prices ($/Gal)...... $ .30 $ .29 3.4 $ .31 $ .27 14.8
</TABLE>
Net income decreased $2.2 million and net cash provided by operating activities
increased $7.5 million for the quarter ended September 30, 1995 compared to the
same period in 1994. Net income decreased $1.9 million and net cash provided by
operating activities increased $51.3 million for the nine months ended September
30, 1995 compared to the prior year period. The decrease in net income for the
quarter and nine month period is primarily due to higher product purchase costs
associated with the Company's third party residue gas sales, depreciation,
depletion and amortization expense and interest expense, partially offset by
higher residue gas and NGL volumes sold. In addition, net income for the nine
month period was reduced by the restructuring charge the Company recorded in May
1995 relating to its cost reduction program. On an overall basis, throughput and
sales volumes for the nine month period ended September 30, 1995 at the
Company's facilities have remained comparable to historical levels. However,
throughput during the quarter ended September 30, 1995 compared to the quarter
ended June 30, 1995, decreased by approximately 60 MMcf per day as a result of
temporary well shut-ins and decreased drilling activity primarily in the
southwest Wyoming operating area. Substantially all of the curtailed volumes
were returned to production in October, but new drilling continues to be limited
in this area as a result of significantly lower natural gas prices.
Revenues from the sale of residue gas increased approximately $20.7 million for
the quarter ended September 30, 1995 compared to the same period in 1994.
Average gas sales volumes increased 353 MMcf per day to 1,512 MMcf per day for
the quarter ended September 30, 1995 compared to the same period in 1994, as a
result of an increase of approximately 361 MMcf per day in the sale of residue
gas purchased from third parties. Average gas prices decreased $.23 per Mcf to
$1.40 per Mcf for the quarter ended September 30, 1995 compared to the same
period in 1994. Revenues from the sale of residue gas increased approximately
$91.4 million for the nine months ended September 30, 1995 compared to the same
period in 1994. Average gas sales volumes increased 513 MMcf per day to 1,553
MMcf per day for the nine months ended September 30, 1995 compared to the same
period in 1994, largely due to an increase of approximately 480 MMcf per day in
the sale of residue gas purchased from third parties. Average gas prices
decreased $.39 per Mcf to $1.45 per Mcf for the nine months ended September 30,
1995 compared to the same period in 1994. The effect of the decrease in residue
gas prices on the Company's net margin from equity production was partially
offset by the Company's futures positions, as the Company realized approximately
$2.02 per Mcf from the forward sales of approximately 70 MMcf per day of its
equity gas. Similar forward sales of equity gas are in place for the remainder
of 1995.
Revenues from the sale of NGLs increased approximately $5.8 million for the
quarter ended September 30, 1995 compared to the same period in 1994. Average
NGL sales volumes increased 59 MGal per day to 2,832 MGal per day and average
NGL prices increased $.01 per gallon to $.30 per gallon for the quarter ended
September 30, 1995 compared to the same period in 1994. The increase in sales
volumes is primarily due to improved liquid recovery at various facilities.
Revenues from the sale of NGLs increased approximately $21.1 million for the
nine months ended September 30, 1995 compared to the same period in 1994.
Average NGL sales volumes decreased 56 MGal per day to 2,867 MGal per day and
average NGL prices increased $.04 per gallon to $.31
9
<PAGE>
per gallon for the nine months ended September 30, 1995 compared to the same
period in 1994. The decrease in sales volumes for the nine month period is
primarily attributable to a decrease in the sale of third party NGLs.
Processing and transportation revenues were comparable for the three month
period and increased $4.6 million for the nine month period ended September 30,
1995, as compared to the corresponding periods in 1994. The increase for the
nine month period is due to growth in liquids revenues from the Company's
Giddings system, increased treating revenue primarily from gathering systems
acquired in December 1994 and the recognition of demand fees associated with a
winter-peaking gas purchase and sales contract at the Katy Storage facility.
Other net revenue remained relatively constant for the three month period ended
September 30, 1995 and decreased $2.2 million for the nine months ended
September 30, 1995 compared to the respective periods in 1994. The difference
for the nine month period is primarily attributable to approximately $3.6
million recovered by the Company under its business interruption insurance
policy in the third quarter of 1994 for business losses associated with the
December 1993 fire at the Company's Granger facility. This difference is
partially offset by an increase of $1.7 million of revenues earned in 1995
related to the Company's Katy Storage facility.
The increase in product purchases corresponds to the increases in third party
residue gas sales. Combined product purchases as a percentage of residue gas
and NGL sales increased 2% to 86% for the three and nine month period ended
September 30, 1995 compared to the respective periods in 1994. The rising gas
purchase percentage has been a continuing trend based upon the growth of third
party sales which have lower margins.
Plant operating expense increased $1.5 million and $2.2 million for the three
and nine month periods ended September 30, 1995. The increases are attributable
to assets purchased in the Oasis acquisition in December 1994, primarily
property taxes, and taxes on higher levels of inventory held at the Katy Storage
facility.
Depreciation, depletion and amortization increased $2.0 million and $3.3 million
for the three and nine month periods ended September 30, 1995, respectively,
compared to the prior year periods. These increases are primarily attributable
to assets purchased in the Oasis acquisition in December 1994, depletion related
to the Company's oil and gas production and various plant upgrades and equipment
additions.
Interest expense increased $816,000 and $4.6 million for the three and nine
month periods ended September 30, 1995, respectively, as compared to the same
periods in 1994. The increase is due to an increase in the Company's average
borrowing rate which increased from 6.5% to 7.5% per annum and an increase in
the total average debt outstanding for the two periods.
The provision for income taxes for the three months ended September 30, 1995
includes an adjustment to the current provision to reflect actual 1994 taxes
paid. An adjustment has also been made of approximately $300,000 to reflect
management's estimated effective rate to provide for deferred taxes.
Acquisitions
Effective January 1, 1995 the Company entered into the Redman Smackover Joint
Venture agreement with DDD Energy, Inc., a wholly-owned exploration and
production subsidiary of Seitel, Inc. ("DDD"), Redman Energy Corporation
("Redman"), and DDD 1995 Oil & Gas Partnership ("DDD 1995"). The Joint Venture
acquired working interests in three producing gas fields in East Texas in the
Smackover Formation with an estimated 25 Bcf of proved reserves from Union Oil
Company of California for approximately $11.3 million. The Company's
contribution to the partnership was approximately $5.9 million through September
30, 1995. The Company is the managing venturer with a 50% ownership interest
and DDD, Redman, and DDD 1995 own interests of 38%, 10%, and 2%, respectively.
In July 1995, the Company entered into an agreement to purchase eight West Texas
gathering systems from Transwestern Gathering Company and Enron Permian
Gathering, Inc. In October 1995, the Company acquired and assumed the
operations of the Transwestern Gathering Company assets being sold pursuant to
the agreement for a purchase price of $3.5 million. The closing on the
remaining assets is expected to occur during the first quarter of 1996 and is
subject to abandonment approval by the Federal Energy Regulatory Commission.
The acquisition consists of approximately 231 miles of pipeline in the Permian
Basin. Current gas throughput on the systems totals approximately 156 MMcf per
day from approximately 170 wells under fee-based contracts.
Dispositions
In September 1995, the Company sold its 50% interest in the Waha Header, a
pipeline header in West Texas, resulting in an after-tax gain of $596,000.
10
<PAGE>
Business Outlook
Hydrocarbon prices have historically been volatile and thus the Company cannot
predict future hydrocarbon prices. In order to reduce the impact of price
fluctuations on the Company's operating results, the Company has entered into
futures contracts for a majority of the Company's equity natural gas production
for the remainder of 1995 totaling approximately 70 MMcf per day, at an average
price of approximately $2.02 per Mcf. The Company has also entered into futures
contracts totaling approximately 120,000 barrels of crude oil at an average
price of $18.04 per barrel to hedge a portion of its share of the remainder of
1995 condensate and crude oil production. In addition, approximately 20 MMcf
per day of equity production is hedged for all of 1996 at approximately $2.16
per Mcf. The Company will continue to enter into futures contracts for both
purchase and sales of residue gas and crude oil as it deems appropriate.
The Company continually monitors the economic performance of each operating
facility to ensure that it meets a desired cash flow objective. 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. In 1994, the Company sold its Sligo plant, swapped its Pyote
treating facilities for gathering assets in Kansas which were subsequently
disposed of during the second quarter of 1995, consolidated assets in the Powder
River Basin and sold its Walnut Bend gathering system. In 1995 the Company sold
the Waha Header and certain assets acquired in the recent Oasis acquisition. The
Company anticipates that the salvage of the Walnut Bend processing plant will be
substantially completed by the end of 1995. As of November 1995, the Company
has completed the consolidation of its Lamont gathering system with the Chaney
Dell system. The Company anticipates completing the salvage of the Lamont
processing plant by the end of the first quarter of 1996.
In May 1995, the Company implemented a cost reduction program that is expected
to reduce operating and selling and administrative expenses by approximately
$5.1 million on an annualized after-tax basis. During 1995, the benefit of
these reductions, net of a one-time pre-tax charge of approximately $2.1 million
in the second quarter of 1995 related largely to employee severance costs, will
be approximately $1.7 million on an after-tax basis. This cost reduction
program is not expected to affect adversely the Company's overall operations or
the Company's goals of increasing the volumes of natural gas and NGLs marketed
by the Company.
The oil and gas industry has experienced an increasing incidence of mergers,
acquisitions and combinations in recent years. The Company has evaluated, and
will continue to evaluate, such transactions, including smaller consolidating
acquisitions, that it identifies as offering an opportunity to enhance the
Company's operational efficiencies and profitability.
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 the 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 may require the Company to investigate
alternative financing sources or other options, including the sale of non-
strategic assets. Net cash provided by operating activities has been primarily
affected by product prices, the Company's success in increasing the number and
efficiency of its facilities and the volumes of natural gas processed by such
facilities, and the margin on third-party residue gas purchased for resale. The
Company's continued growth will be dependent upon success in the areas of
additions to dedicated plant reserves, acquisitions, new project development and
marketing.
For the nine months ended September 30, 1995, the Company's total sources of
funds aggregated $105.6 million and were primarily comprised of net cash
provided by operating activities of $74.8 million and borrowings under
revolving credit facilities of $22.0 million. During the same period, the
Company's use of such funds aggregated $104.0 million, which were used primarily
to redeem the 7.25% Cumulative Senior Perpetual Convertible Preferred Stock for
$42.0 million, including a redemption premium of 2.0 million, to make capital
investments of $49.0 million and to pay dividends of $9.0 million and $3.9
million to holders of the Company's preferred and common stock, respectively.
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 assure 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 17.7 Bcf at an average cost of $1.75
per Mcf ($1.59 per MMBtu) at September 30, 1995 as compared to 21.9 Bcf at an
average cost of $2.16 per Mcf ($1.94 per MMBtu) at December 31, 1994, primarily
at the Katy Storage facility. The Company also held NGLs in storage of 18,900
MGals
11
<PAGE>
at an average cost of $.30 per gallon and 11,600 MGals at an average cost of
$.30 per gallon at September 30, 1995 and December 31, 1994, respectively, at
various third party storage facilities.
In May 1995, the Company redeemed all of the issued and outstanding shares of
its 7.25% Cumulative Senior Perpetual Convertible Preferred Stock (liquidation
preference of $40 million) pursuant to the provisions of the Certificate of
Designation relating to such preferred stock, at an aggregate redemption price
of approximately $42.0 million.
The Company has Shelf Registrations with the Securities and Exchange Commission
available which provide for the sale of up to $200 million of debt securities
and preferred stock and up to four million shares of common stock.
Capital Investment Program
In order to increase the volumes of natural gas dedicated to or processed by the
Company's existing facilities, future capital expenditures for gathering systems
needed to connect new reserves and acquire consolidating assets are anticipated
to be approximately $56.7 million for 1995 and capital expenditures to maintain
existing facilities are expected to approximate $16.5 million for 1995. For the
nine months ended September 30, 1995, the Company expended approximately $49.0
million on expansion and maintenance capital.
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 or issue additional equity securities. 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 $165 million was outstanding at September 30, 1995. The Commitment
Period terminates on October 1, 1996 and any outstanding balance thereunder at
such time converts to a four-year term loan, which shall be repaid in sixteen
equal quarterly installments commencing January 1, 1997. The Revolving Credit
Facility bears interest, at the Company's option, at certain spreads over the
Eurodollar rate, 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 September 30, 1995, the spread was 1.25% for the
Eurodollar rate, resulting in an interest rate of 7.13% at September 30, 1995.
The Company pays a commitment fee on the unused commitment ranging from .15% to
.375% based on the debt to capitalization ratio. At September 30, 1995, the
commitment fee rate was .375%.
Term Loan Facility. The Company also has a Term Loan Facility with four banks,
with an aggregate principal amount outstanding at September 30, 1995 of $25
million, bearing interest at 9.87%. The Company made a scheduled principal
payment of $25 million in September 1995, that was funded by drawing on the
Revolving Credit Facility. Additional principal payments of $12.5 million are
due in each of September 1996 and September 1997.
The agreements governing the Company's Revolving Credit and Term Loan Facilities
(the "Credit Facilities Agreement") contain certain mandatory prepayment
provisions. If funded debt of the Company which has a final maturity on or
prior to October 1, 2000 exceeds four times 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 equal monthly payments commencing 90 days from notification.
This mandatory prepayment threshold will be reduced to 3.50 to 1.0 at September
1, 1998.
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 net income earned after June 30, 1995
plus 75% of the net proceeds from the sale of equity securities after June 30,
1995, 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 March 31, 1994 that in
the aggregate exceed the sum of $35 million plus 50% of consolidated net income
earned after March 31, 1994 plus 50% of the cumulative net proceeds (in excess
of the amount paid by the Company to redeem its 7.25% Cumulative Senior
Perpetual Convertible Preferred Stock) received by the Company from the sale of
any equity securities sold after March 31, 1994. At September 30, 1995,
approximately $8.7 million was available under this limitation. The Company
generally utilizes excess daily
12
<PAGE>
funds to reduce any outstanding revolving credit balances to minimize interest
expense and intends to continue such practice. The $10.4 million cash balance at
September 30, 1995 is an overnight investment necessitated by the timing of cash
receipts.
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 must mature in no more than 12 years,
with an average life not in excess of 10 years, and will be unsecured. On
October 27, 1992, the Company sold $25 million of 7.51% Master Notes due 2000
and $25 million of 7.99% Master Notes due 2003. Principal payments on the $50
million of Master Notes of $8.3 million will be due on October 27 of each year
from 1998 through 2003. On September 22, 1993, the Company sold $25 million of
6.77% Master Notes due in a single payment on September 22, 2003 and on December
27, 1993, the Company sold $25 million of 7.23% Master Notes due in a single
payment on December 27, 2003. The Master Shelf contains certain financial
covenants which conform with those contained in the Credit Facilities Agreement,
as restated and amended. In July 1993, Prudential and the Company amended the
Master Shelf to provide for an additional $50 million of borrowing capacity (for
a total borrowing capacity of $150 million) and to extend the term of the Master
Shelf to October 31, 1995. On October 27, 1994, the Company sold $25 million of
9.05% Master Notes due in a single payment on October 27, 2001 and $25 million
of 9.24% Senior Notes due in a single payment on October 27, 2004. In July
1995, Prudential and the Company amended the Master Shelf to provide for an
additional $50 million of borrowing capacity (for a total borrowing capacity of
$200 million). On July 28, 1995, the Company sold $50 million of 7.61% Master
Notes due 2007. Principal payments of $10 million will be due on July 28 of each
year from 2003 through 2007. As of July 28, 1995, the Master Shelf Agreement,
as amended, was fully utilized.
Senior Notes. On April 28, 1993 the Company sold $50 million of 7.65% Senior
Notes due 2003 to a group of insurance companies. Principal payments on the $50
million of Senior Notes of $7.1 million will be due on April 30 of each year
from 1997 through 2002, with any remaining principal and interest outstanding
due on April 30, 2003. The Senior Notes contain certain financial covenants
which conform with those contained in the Credit Facilities Agreement, as
restated and amended.
The Company anticipates issuing an additional $42 million of Senior Notes to a
different group of insurance companies in the fourth quarter of 1995, with an
expected interest rate of 8.10% per annum and principal due in a single payment
in November 2005. The new Senior Notes will contain certain financial covenants
which conform with those contained in the Credit Facilities Agreement, as
restated and amended. The Company will use the net proceeds of the sale to
reduce borrowing under the Revolving Credit Facility.
Additional Borrowings. In April 1995, the Company entered into a Receivables
Purchase Agreement (the "Receivables Facility") with Receivables Capital
Corporation, as purchaser ("RCC"), 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 has 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 $60 million was funded at a
rate of 6.45% at June 30, 1995. The Company funded the remaining $15 million
available under the Receivables Facility in July 1995. 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.
On September 2, 1994, in anticipation of entering into the Receivables Facility,
BA entered into a Master Note Agreement (the "Short-Term Note") with the Company
and advanced the Company $75 million at the Eurodollar rate plus .50%, which
resulted in an interest rate of 6.56% per annum at June 30, 1995. The Company
used the $60 million drawn on the Receivables Facility to pay down a portion of
the Short-Term Note. In July 1995, the Company used the additional $15 million
drawn on the Receivables Facility to pay down the remaining $15 million on the
Short-Term Note, which was then canceled.
Covenant Compliance. At September 30, 1995, the Company was in compliance with
all covenants in its loan agreements.
Interest Rate Swap Agreements. The Company had entered into various interest
rate swap agreements to manage exposure to changes in interest rates. The
transactions generally involved the exchange of fixed and floating interest
payment obligations, without the exchange of the underlying principal amounts.
The net effect of interest rate swap activity is reflected as an increase or
decrease in interest expense. For the nine months ended September 30, 1995 the
net decrease to interest expense was approximately $358,000. The remaining
interest rate swap agreement expired in April 1995. The Company has not entered
into any new agreements as of September 30, 1995; however, the Company will
continue to evaluate such agreements and, when appropriate, enter into
contracts.
13
<PAGE>
The Company believes that the amounts available to be borrowed under the
Revolving Credit Facility together with cash provided from operations, will
provide it with sufficient financing to connect new reserves, maintain its
existing facilities and complete its current capital improvement projects. The
Company also believes that cash provided from operations will be sufficient to
meet its debt service and preferred stock dividend requirements.
14
<PAGE>
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.
<TABLE>
<CAPTION>
Average for the nine months ended
September 30, 1995
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)
- - ------------------------------------------- ---------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Southern Region:
Texas
Midkiff /Benedum/Middle Concho...... 1955 2,037 149 134.0 85.4 840.8
Giddings Gathering System........... 1979 648 80 72.6 63.7 103.8
Edgewood(5)......................... 1964 85 65 29.1 11.3 77.6
Perkins............................. 1975 2,557 55 21.6 12.1 147.5
Pecos System(6)..................... 1973 443 430 88.2 82.5 -
Crockett Gathering System(6)........ 1973 136 164 30.5 30.4 .3
Katy(7)............................. 1994 17 - - - -
Louisiana
Black Lake.......................... 1966 55 180 56.1 38.0 127.1
Toca(8)(9).......................... 1958 - 160 72.0 - 48.8
Northern Region:
Oklahoma
Chaney Dell......................... 1966 2,000 158 82.5 62.6 267.3
Westana System(10).................. 1986 244 37 54.2 47.6 49.5
Wyoming
Granger(9).......................... 1987 233 230 132.3 121.1 194.5
Red Desert.......................... 1979 109 40 31.1 27.9 45.3
Lincoln Road........................ 1988 146 50 39.0 35.9 43.6
Hilight Complex(9).................. 1969 619 80 33.6 28.6 86.4
Kitty and Amos Draw(9).............. 1969 304 17 11.6 8.6 47.0
Newcastle(9)........................ 1981 144 5 2.5 1.6 19.1
Reno Junction(11)................... 1991 - - - - 50.4
New Mexico
San Juan River(5)................... 1955 125 60 33.2 30.1 1.0
North Dakota
Williston(12)....................... 1981 381 - 8.6 6.4 29.7
Temple(5)........................... 1984 65 7 2.6 1.6 8.7
Teddy Roosevelt(12)................. 1979 332 - 3.0 2.0 13.8
Utah
Four Corners........................ 1988 95 15 4.5 3.7 10.8
Montana
Baker(5)(9)......................... 1981 8 3 1.5 .6 11.2
------ ----- ----- ----- -------
Total............................ 10,783 1,985 944.3 701.7 2,224.2
====== ===== ===== ===== =======
</TABLE>
- - -----------------------------
Footnotes on following page
15
<PAGE>
(1) The Company's interest in all facilities is 100% except for Midkiff and
Benedum (74%); Black Lake (69%); Lincoln Road (72%); Williston (50%);
Westana (Chester) (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 September
30, 1995.
(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) West Texas gathering and treating assets of Oasis Pipe Line Company
("Oasis") acquired effective December 1, 1994.
(7) Hub and gas storage facility.
(8) Straddle plant (a plant located near a transmission pipeline which
processes gas dedicated to or gathered by the pipeline company or another
third-party).
(9) Fractionation facility (capable of fractionating raw NGLs).
(10) Gas throughput in excess of gas throughput capacity is unprocessed gas
transported directly to an unaffiliated pipeline.
(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.
16
<PAGE>
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.
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, as well as the
specific claims discussed above, will not, individually or in the aggregate,
have a material adverse effect on the Company's financial position or results of
operations.
17
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10.45 Third Amendment to First Restated Loan Agreement (Revolver) dated July
19, 1995.
10.46 Letter Amendment No. 4 to Amended and Restated Master Shelf Agreement
dated July 28, 1995.
10.47 Fifth Amendment to Third Restated Loan Agreement (Term) dated July 19,
1995.
(b) Reports on Form 8-K:
None.
18
<PAGE>
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: November 14, 1995 By: /s/BILL M. SANDERSON
-------------------------------------------
Bill M. Sanderson
President, Chief Operating Officer and
Director
Date: November 14, 1995 By: /s/WILLIAM J. KRYSIAK
-------------------------------------------
William J. Krysiak
Vice President - Finance
(Principal Financial and Accounting Officer)
19
<PAGE>
THIRD AMENDMENT TO FIRST RESTATED LOAN AGREEMENT (REVOLVER)
THIS THIRD AMENDMENT TO FIRST RESTATED LOAN AGREEMENT (REVOLVER)
(herein called the "Amendment") made as of the 19th day of July, 1995, by and
among Western Gas Resources, Inc., a Delaware corporation ("Borrower"),
NationsBank of Texas, N.A., a national banking association, as Agent ("Agent"),
and NationsBank of Texas, N.A., Bank of Montreal, CIBC Inc., Societe Generale,
Southwest Agency, The First National Bank of Boston, Colorado National Bank,
Bank of America National Trust and Savings Association and Credit Lyonnais
Cayman Island Branch, (herein, collectively referred to as "Lenders").
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain
First Restated Loan Agreement (Revolver) dated as of September 2, 1994, as
amended by that certain First Amendment to First Restated Loan Agreement
(Revolver) dated as of December 2, 1994 and that certain Second Amendment to
First Restated Loan Agreement (Revolver) dated as of February 23, 1995 (as
amended to the date hereof, the "Original Agreement") for the purpose and
consideration therein expressed, whereby Lenders became obligated to make loans
to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original
Agreement as expressly set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Original Agreement and in
consideration of the loans which may hereafter be made by Lenders to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
--------------------------
Section 1.1. Terms Defined in the Original Agreement. Unless the
---------------------------------------
context otherwise requires or unless otherwise expressly defined herein, the
terms defined in the Original Agreement shall have the same meanings whenever
used in this Amendment.
- 1 -
<PAGE>
Section 1.2. Other Defined Terms. Unless the context otherwise
-------------------
requires, the following terms when used in this Amendment shall have the
meanings assigned to them in this Section 1.2.
"Loan Agreement" shall mean the Original Agreement as amended
hereby.
ARTICLE II.
Amendments
----------
Section 2.1. Definitions. The definition of "Debt Securities"
-----------
contained in Section 1.1 of the Original Agreement is hereby amended in its
entirety to read as follows:
"'Debt Securities' means collectively, (i) those senior notes dated
---------------
October 27, 1992, September 22, 1993, December 27, 1993 and October 27, 1994
issued by Borrower pursuant to that certain Master Shelf Agreement dated as of
December 19, 1991 between Borrower and the Prudential Insurance Company of
America (as amended and restated from time to time, the "Shelf Agreement") and
any additional notes issued pursuant to the Shelf Agreement (ii) the 7.65%
senior notes due April 30, 2003 in the aggregate principal amount of $50,000,000
issued by Borrower pursuant to various note purchase agreements among Borrower,
MIGC, MGTC, WGRS, WGRT and each member of the CIGNA Group, as amended and
restated from time to time and (iii) all other notes issued pursuant to note
purchase agreements among any Related Person and any member of the CIGNA Group,
Prudential Insurance Company of America, or any other institutional investor."
Section 2.2. Tangible Net Worth.
------------------
The definition of "Tangible Net Worth Minimum" contained in the last
sentence of Section 6.2(j) of the Original Agreement is hereby amended in its
entirety to read as follows:
"As used in this subsection the term 'Tangible Net Worth Minimum'
means the sum of (i) $345,000,000; plus (ii) fifty percent (50.0%) of
----
Borrower's Consolidated cumulative net income earned after June 30,
1995, if such figure is positive (zero percent, if negative); plus
----
(iii) seventy-five percent (75.0%) of the cumulative net proceeds
received by Borrower at any time after June 30, 1995 from the sale of
any equity securities issued by Borrower or any of its Subsidiaries."
Section 2.3. Debt to Capitalization Ratio.
----------------------------
Section 6.2(m) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(m) Debt to Capitalization Ratio. Borrower's Debt to
----------------------------
Capitalization Ratio will, commencing June 30, 1995, never
- 2 -
<PAGE>
be greater than (i) 0.60 to 1.0 at any time until and including
October 31, 1996 and (ii) 0.55 to 1.0 at any time thereafter."
Section 2.4. EBITDA/Interest Ratio.
---------------------
Section 6.2(p) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(p) EBITDA/Interest Ratio. As of the end of each Fiscal
---------------------
Quarter, the ratio of Borrower's Consolidated EBITDA for the four
immediately preceding consecutive Fiscal Quarters to Borrower's
Consolidated Interest Charges for such period shall never, commencing
June 30, 1995, be less than (i) 3.00 to 1.0 at any time until and
including October 31, 1996, (ii) 3.25 to 1.0 at any time after October
31, 1996 until and including October 31, 1997, and (iii) 3.75 to 1.0
at any time after October 31, 1997. For purposes of this subsection,
the term "Borrower's Consolidated EBITDA" means the sum of (I)
Borrower's Consolidated earnings (or loss), after deduction of all
expenses and other charges other than interest, income tax and that
certain $2,000,000 restructuring charge in the second Fiscal Quarter
of 1995 as a result of Borrower's general and administrative
reductions plus (II) amounts deducted in the computation of such
Consolidated earnings (or loss) for depreciation, amortization and
other non-cash items. For purposes of this subsection the term
"Borrower's Consolidated Interest Charges" means the aggregate amount
of interest treated as an expense or capitalized on Borrower's
consolidated financial statements.
ARTICLE III.
Conditions of Effectiveness
---------------------------
Section 3.1. Effective Date. This Amendment shall become effective
--------------
as of the date first above written when, and only when, Agent shall have
received, at Agent's office, (i) a counterpart of this Amendment executed and
delivered by Borrower and Majority Lenders (ii) an amendment fee equal to ten-
one hundredths of one percent (0.10%) of the Commitment (as of the date hereof)
of each Lender payable to Agent for the account of each Lender and (iii) each of
the following, each document (unless otherwise indicated) being dated the date
of receipt thereof by Agent, duly authorized, executed and delivered, and in
form and substance satisfactory to Agent:
(a) a certificate of the Secretary of Borrower dated the date of
this Amendment certifying that: (A) the resolutions adopted by the
Board of Directors of Borrower attached as Exhibit 1 to the Omnibus
Certificate of Borrower dated September 2, 1994 (the "Original
Certificate") have not been amended or revoked, and continue in full
force and effect, (B) the incumbency and authorization of the officers
- 3 -
<PAGE>
of Borrower authorized to sign Loan Documents, with signature
specimens of such officers, contained in the Original Certificate has
not been amended and continues in full force and effect, (C) copies of
the certified charter documents of Borrower (including by-laws),
attached as Exhibits H and O to the Original Certificate have not been
amended or revoked since the date of the Original Certificate, and
continue in full force and effect, (D) no Default that has not been
expressly waived by Lenders exists on and as of the date hereof and
(E) all of the representations and warranties set forth in Article IV
hereof and Article V of the Original Agreement are true and correct at
and as of their respective times of effectiveness;
(b) a favorable opinion from Messr. John Walter, Esq., counsel
for Borrower in a form acceptable to Lender; and
(c) such supporting documents as Agent may reasonably request.
ARTICLE IV.
Representations and Warranties
------------------------------
Section 4.1. Representations and Warranties of Borrower. In order to
------------------------------------------
induce each Lender to enter into this Amendment, Borrower represents and
warrants to each Lender that:
(a) The representations and warranties contained in each
subsection of Section 5.1 of the Original Agreement are true and
correct at and as of the time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this
Amendment and is and will continue to be duly authorized to borrow
monies and to perform its obligations under the Loan Agreement.
Borrower has duly taken all corporate action necessary to authorize
the execution and delivery of this Amendment and to authorize the
performance of the obligations of Borrower hereunder and thereunder.
(c) The execution and delivery by Borrower of this Amendment, the
performance by Borrower of its obligations hereunder and the
consummation of the transactions contemplated hereby do not and will
not conflict with any provision of law, statute, rule or regulation or
of the articles of incorporation and bylaws of Borrower, or of any
material agreement, judgment, license, order or permit applicable to
or binding upon Borrower, or result in the creation of any lien,
charge or encumbrance upon any assets or properties of Borrower.
Except for those which have been obtained, no consent, approval,
authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by
- 4 -
<PAGE>
Borrower of this Amendment or to consummate the transactions
contemplated hereby.
(d) When duly executed and delivered, this Amendment and the Loan
Agreement will be a legal and binding obligation of Borrower,
enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or similar laws of general application relating
to the enforcement of creditors' rights and by equitable principles of
general application.
(e) The audited annual Consolidated financial statements of
Borrower dated as of December 31, 1994 and the unaudited quarterly
Consolidated financial statements of Borrower dated as of March 31,
1995 fairly present Borrower's Consolidated financial position at such
dates and the Consolidated results of Borrower's operations and
changes in Borrower's Consolidated cash flow for the respective
periods thereof. Copies of such financial statements have heretofore
been delivered to each Lender. Since March 31, 1995, no material
adverse change has occurred in the financial condition or businesses
or in the Consolidated financial condition or businesses of Borrower.
ARTICLE V.
Miscellaneous
-------------
Section 5.1. Ratification of Agreements. The Original Agreement as
--------------------------
hereby amended and each other Loan Document affected hereby are ratified and
confirmed in all respects. Any reference to the Loan Agreement in any Loan
Document shall be deemed to be a reference to the Original Agreement as hereby
amended. The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Agent or Lenders under the Loan Agreement or any other Loan Document
nor constitute a waiver of any provision of the Loan Agreement or any other Loan
Document.
Section 5.2. Survival of Agreements. All representations,
----------------------
warranties, covenants and agreements of Borrower herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the making or granting of the Loans, and shall further
survive until all of the Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by Borrower or
any Related Person hereunder or under the Loan Agreement to any Lender shall be
deemed to constitute representations and warranties by, and/or agreements and
covenants of, Borrower under this Amendment and under the Loan Agreement.
Section 5.3. Loan Documents. This Amendment is a Loan Document, and
--------------
all provisions in the Loan Agreement pertaining to Loan Documents apply hereto.
- 5 -
<PAGE>
Section 5.4. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of Texas and any applicable
laws of the United States of America in all respects, including construction,
validity and performance.
Section 5.5. Counterparts. This Amendment may be separately executed
------------
in counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment.
- 6 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first written above by their duly authorized
officers.
WESTERN GAS RESOURCES, INC.
By:/S/ John C. Walter
------------------
Name: John C. Walter
Title:
NATIONSBANK OF TEXAS, N.A., as
Agent, Issuing Bank and Lender
By:/S/ Michele L. Jones
--------------------
Name: Michele L. Jones
Title:
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By:/S/ Gary M. Tauyuki
----------------------
Name: Gary M.Tauyuki
Title:
BANK OF MONTREAL
By:/S/ Michael P. Stuckey
--------------------------
Name: Michael P. Stuckey
Title:
THE FIRST NATIONAL BANK OF
BOSTON
By:/S/ Michael Kane
--------------------------
Name: Michael Kane
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:/S/ R.A. Touis
--------------------------
Name: R.A. Touis
Title:
- 7 -
<PAGE>
CIBC INC.
By:/S/ Gary C. Gaskill
--------------------------
Name: Gary C. Gaskill
Title:
COLORADO NATIONAL BANK
By:/S/ Monte E. Deckerd
--------------------------
Name: Monte E. Deckerd
Title:
SOCIETE GENERALE, SOUTHWEST
AGENCY
By:/S/ Mark A. Cox
--------------------------
Name: Mark A. Cox
Title:
- 8 -
<PAGE>
CONFIRMATION, ACKNOWLEDGEMENT AND CONSENT OF GUARANTORS
Each of the undersigned (collectively "Guarantors") hereby (i)
acknowledges and consents to the foregoing Third Amendment to First Restated
Loan Agreement (Revolver); (ii) confirms the Restated Guaranty dated as of
September 2, 1994 executed by such Guarantor in favor of Agent and the Lenders
pursuant to the Original Agreement; and (iii) agrees that each of such
Guarantor's obligations and covenants with respect to such Restated Guaranty
shall remain in full force and effect after the execution of such Amendment.
William J. Krysiak, Vice President-Finance of Western Gas Resources
Oklahoma, Inc., Western Gas Resources Texas, Inc., Western Gas Resources
Storage, Inc., Mountain Gas Resources, Inc., MGTC, Inc. and MIGC, Inc., is
executing this Confirmation, Acknowledgment and Consent of Guarantors in his
capacity of officer of each such corporation.
Dated as of the 19th day of July, 1995.
WESTERN GAS RESOURCES OKLAHOMA, INC.
WESTERN GAS RESOURCES TEXAS, INC.
WESTERN GAS RESOURCES STORAGE, INC.
MOUNTAIN GAS RESOURCES, INC.
MGTC, INC.
MIGC, INC.
By:/S/ William J. Krysiak
-------------------------------
William J. Krysiak,
Vice President-Finance
- 9 -
<PAGE>
[Execution Copy]
LETTER AMENDMENT NO. 4
to
AMENDED AND RESTATED MASTER SHELF AGREEMENT
July 28, 1995
The Prudential Insurance Company
of America
Pruco Life Insurance Company
c/o Prudential Capital Group
1201 Elm Street, Suite 4900
Dallas, Texas 75270
Ladies and Gentlemen:
We refer to the Amended and Restated Master Shelf Agreement dated as of
December 19, 1991 among the undersigned and The Prudential Insurance Company of
America, as amended by Letter Amendment No. 1, dated October 22, 1992, Letter
Amendment No. 2, dated August 31, 1994 and Letter Amendment No. 3, dated April
1, 1995 (such agreement, as amended, being referred to as the "Agreement").
Unless otherwise defined herein, the terms defined in the Agreement shall be
used herein as therein defined.
The Company desires to increase its capacity to issue Notes under the
Agreement from $150,000,000 to $200,000,000. In addition, the Company desires
to issue $50,000,000 of Notes on the effective date of this Letter Amendment No.
4. The Company has requested that you amend the Agreement to reflect such
increase in issuance capacity and to amend certain other covenants contained in
the Agreement. You have indicated your willingness to so agree. Accordingly, it
is hereby agreed by you and us as follows:
The Agreement is, effective the date first above written, hereby amended as
follows:
1. Paragraph 1B. Authorization of Issue of Notes. Paragraph 1B is
amended by deleting the amount "$150,000,000" and substituting therefor the
amount "$200,000,000."
<PAGE>
2. Paragraph 2I(1). Facility Fee. Paragraph 2I(1) is amended in its
entirety to read as follows:
"2I(1). Facility Fee. The Company will pay to Prudential in immediately
available funds a fee (the "Facility Fee") on each Closing Day, in an amount
equal to (i) .30% of the aggregate principal amount of Notes issued on such
Closing Day for the first $150,000,000 of Notes issued pursuant to this
Agreement and (ii) .10% of the aggregate principal amount of Notes sold on
such Closing Day with respect to the remaining $50,000,000 of Notes to be
issued pursuant to this Agreement."
3. Paragraph 6A(1). Consolidated Tangible Net Worth. Paragraph 6A(1) is
amended in its entirety to read as follows:
"6A(1). Consolidated Tangible Net Worth. Consolidated Tangible Net Worth
at any time on or after June 30, 1995 to be less than the sum of (i)
$345,000,000 plus (ii) an amount equal to 50% of Consolidated Net Earnings
----
earned from June 30, 1995 (to the extent such amount is a positive number)
plus (iii) an amount equal to 75% of the net proceeds of any equity offerings
----
after June 30, 1995;"
4. Paragraph 6A(3). Debt Maintenance. Paragraph 6A(3) is amended in its
entirety to read as follows:
"6A(3). Debt Maintenance. Adjusted Consolidated Debt to exceed (i) from
August 31, 1994 through October 31, 1996, 60% of Consolidated Net Tangible
Assets and (ii) at any time after October 31, 1996, 55% of Consolidated Net
Tangible Assets; and"
For purposes of determining compliance with this paragraph 6A(3), Adjusted
Consolidated Debt shall not include Debt secured by Liens described in paragraph
6C(1)(i), (ii), (iii) or (viii) unless such obligations would be considered Debt
under clause (i) of the definition of Debt and, in any event, Adjusted
Consolidated Debt shall include all indebtedness included in determining
compliance with the similar covenant in the NCNB Agreement.
5. Paragraph 6A(4). Fixed Charge Coverage Ratio. Paragraph 6A(4) is
amended in its entirety to read as follows:
"6A(4). Fixed Charge Coverage Ratio. For each fiscal quarter of the
Company, the ratio of (i) the sum of (a) the consolidated earnings of the
Company for the four immediately preceding fiscal quarters of the Company plus
----
(b) the Company's consolidated interest expense, provision for income taxes,
depreciation and amortization for the four immediately preceding
<PAGE>
fiscal quarters of the Company that were taken into account in determining
such consolidated earnings plus (c) for each calculation that includes the
----
Company's fiscal quarter ending June 30, 1995, that certain $2,000,000
restructuring charge taken by the Company in its fiscal quarter ending June
30, 1995 as a result of the Company's general and administrative reductions to
--
(ii) the Company's consolidated accrued interest expense for the four
immediately preceding fiscal quarters to be less than (x) 3.00 to 1.00 for the
period commencing August 31, 1994 and ending October 31, 1996, (y) 3.25 to
1.00 for the period commencing November 1, 1996 and ending October 31, 1997
and (z) 3.75 to 1.00 at any time after October 31, 1997."
6. Negative Covenants. Paragraph 6 is amended by adding a new covenant 6G
to read as follows:
"6G. Conforming Debt Agreement Changes. The Company will not become or be
a party to any agreement relating to the contemplated issuance of at least
$20,000,000 of senior notes of the Company to be offered through NationsBanc
Capital Markets or another intermediary on or before July 31, 1996 (the
"NationsBanc Notes"), or to any amendment of or supplement to any agreement
relating to the NationsBanc Notes, if, in any such case, the Company is
agreeing therein to any financial covenants of a type specified in paragraphs
6A, 6B, 6C, or 6D which are more restrictive than the covenants set forth
herein, or to other financial covenants expressly requiring the Company to
comply with similar computable standards of financial condition or
performance, unless the Company shall offer to amend this Agreement so as to
provide the benefit of similar covenants for the benefit of the holders of the
Notes. Any such offer shall be made in writing to the holders of the Notes
prior to being effected in any such agreement, amendment or supplement and,
absent such offer, shall be deemed to be incorporated herein mutatis mutandis
for the benefit of the holders of the Notes unless and until the Required
Holder(s) of the Notes of each Series shall otherwise consent thereto."
7. Issuance of 7.61% Senior Notes due 2007; Payments. The Company has
agreed to issue to Prudential $48,566,400 of its 7.61% Senior Notes due 2007 and
to Pruco Life Insurance Company ("Pruco") $1,433,600 of its 7.61% Senior Notes
due 2007. Subject to receiving approval of the Finance Committee of the Board of
Directors of Prudential and to the other conditions contained in paragraph 3 of
the Agreement, Prudential and Pruco agree to purchase such Notes. The scheduled
Closing Day for the issuance of such Notes is July 28, 1995. Payments and
notices with respect to the 7.61% Senior Notes due 2007 shall be made as set
forth in the Purchaser Schedule attached hereto as Exhibit A.
8. Amendment Fee. Promptly upon the execution and delivery of this Letter
Amendment by the Required Holders, the Company shall pay to Prudential a fee
(the "Amendment Fee") of $150,000.
<PAGE>
On and after the effective date of this letter amendment, each reference in
the Agreement to "this Agreement", "hereunder", "hereof", or words of like
import referring to the Agreement, and each reference in the Notes to "the
Agreement", "thereunder", "thereof", or words of like import referring to the
Agreement, shall mean the Agreement as amended by this letter amendment. The
Agreement, as amended by this letter amendment, is and shall continue to be in
full force and effect and is hereby in all respects ratified and confirmed. The
execution, delivery and effectiveness of this letter amendment shall not, except
as expressly provided herein, operate as a waiver of any right, power or remedy
under the Agreement nor constitute a waiver of any provision of the Agreement.
This letter amendment may be executed in any number of counterparts and by
any combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same letter amendment.
If you agree to the terms and provisions hereof, please evidence your
agreement by executing and returning at least a counterpart of this letter
amendment to the Company at its address at 12200 N. Pecos Street, Suite 230,
Denver, CO 80234, Attention of John C. Walter, Vice President-General Counsel.
This letter amendment shall become effective as of the date first above written
when and if (i) counterparts of this letter amendment shall have been executed
by us and you, (ii) the consent attached hereto shall have been executed by each
Guarantor, (iii) the NCNB Agreement shall been amended in a manner similar to
Sections 3, 4 and 5 of this letter amendment, (iv) the Note Purchase Agreements
between the Company and the purchasers relating to the Company's 7.65% Senior
Notes due April 30, 2003 shall have been amended in a manner similar to Sections
3, 4 and 5 of this letter amendment to the extent applicable, (v) each of the
lenders under the NCNB Agreement and each of the holders of the Company's 7.65%
Senior Notes due April 30, 2003 shall have executed a consent under the
Intercreditor Agreement and (vi) the Company shall have paid the Amendment Fee
to Prudential.
Very truly yours,
WESTERN GAS RESOURCES, INC.
By: /S/ John C. Walter
------------------
Title:
Agreed as of the date
first above written:
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /S/ Randy Cobb
------------------
Vice President
<PAGE>
PRUCO LIFE INSURANCE COMPANY
By:_____________________________
Vice President
<PAGE>
FIFTH AMENDMENT TO THIRD RESTATED LOAN AGREEMENT (TERM)
THIS FIFTH AMENDMENT TO THIRD RESTATED LOAN AGREEMENT (TERM) (herein
called the "Amendment") made as of the 19th day of July 1995, by and among
Western Gas Resources, Inc., a Delaware corporation ("Borrower"), NationsBank of
Texas, N.A., a national banking association, as Agent ("Agent"), and NationsBank
of Texas, N.A., Bankers Trust Company, Bank of Montreal and CIBC Inc. (herein,
collectively referred to as "Lenders"),
W I T N E S S E T H:
WHEREAS, Borrower, Agent and Lenders have entered into that certain
Third Restated Loan Agreement (Term) dated as of August 31, 1993, as amended by
that certain First Amendment to Third Restated Loan Agreement (Term) dated as of
December 31, 1993, that certain Second Amendment to Third Restated Loan
Agreement (Term) dated as of September 2, 1994, that certain Third Amendment to
Third Restated Loan Agreement (Term) dated as of December 2, 1994, and that
certain Fourth Amendment to Third Restated Loan Agreement (Term) dated as of
February 23, 1995, among Borrower, Agent and Lenders (as amended to the date
hereof, the "Original Agreement") for the purpose and consideration therein
expressed, whereby Lenders made loans to Borrower as therein provided; and
WHEREAS, Borrower, Agent and Lenders desire to amend the Original
Agreement as expressly set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Original Agreement and in
consideration of the loans which may hereafter be made by Lenders to Borrower,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I.
Definitions and References
--------------------------
Section 1.1. Terms Defined in the Original Agreement. Unless the
---------------------------------------
context otherwise requires or unless otherwise expressly defined herein, the
terms defined in the Original Agreement shall have the same meanings whenever
used in this Amendment.
Section 1.2. Other Defined Terms. Unless the context otherwise
-------------------
requires, the following terms when used in this Amendment shall have the
meanings assigned to them in this Section 1.2.
- 1 -
<PAGE>
"Loan Agreement" shall mean the Original Agreement as amended hereby.
ARTICLE II.
Amendments
----------
Section 2.1. Definitions. The definition of "Debt Securities"
-----------
contained in Section 1.1 of the Original Agreement is hereby amended in its
entirety to read as follows:
"'Debt Securities' means collectively, (i) those senior notes dated
---------------
October 27, 1992, September 22, 1993, December 27, 1993 and October 27, 1994
issued by Borrower pursuant to that certain Master Shelf Agreement dated as of
December 19, 1991 between Borrower and the Prudential Insurance Company of
America (as amended and restated from time to time, the "Shelf Agreement") and
any additional notes issued pursuant to the Shelf Agreement (ii) the 7.65%
senior notes due April 30, 2003 in the aggregate principal amount of $50,000,000
issued by Borrower pursuant to various note purchase agreements among Borrower,
MIGC, MGTC, WGRS, WGRT and each member of the CIGNA Group, as amended and
restated from time to time and (iii) all other notes issued pursuant to note
purchase agreements among any Related Person and any member of the CIGNA Group,
Prudential Insurance Company of America, or any other institutional investor."
Section 2.2. Tangible Net Worth.
------------------
The definition of "Tangible Net Worth Minimum" contained in the last
sentence of Section 5.2(j) of the Original Agreement is hereby amended in its
entirety to read as follows:
"As used in this subsection the term 'Tangible Net Worth Minimum'
means the sum of (i) $345,000,000; plus (ii) fifty percent (50.0%) of
-----
Borrower's Consolidated cumulative net income earned after June 30,
1995, if such figure is positive (zero percent, if negative); plus
----
(iii) seventy-five percent (75.0%) of the cumulative net proceeds
received by Borrower at any time after June 30, 1995 from the sale of
any equity securities issued by Borrower or any of its Subsidiaries."
Section 2.3. Debt to Capitalization Ratio.
----------------------------
Section 5.2(m) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(m) Debt to Capitalization Ratio. Borrower's Debt to Capitalization
----------------------------
Ratio will, commencing June 30, 1995, never be greater than (i) 0.60 to 1.0 at
any time until and including October 31, 1996 and (ii) 0.55 to 1.0 at any time
thereafter."
- 2 -
<PAGE>
Section 2.4. EBITDA/Interest Ratio.
---------------------
Section 5.2(p) of the Original Agreement is hereby amended in its
entirety to read as follows:
"(p) EBITDA/Interest Ratio. As of the end of each Fiscal Quarter,
---------------------
the ratio of Borrower's Consolidated EBITDA for the four immediately preceding
consecutive Fiscal Quarters to Borrower's Consolidated Interest Charges for such
period shall, commencing June 30, 1995, never be less than (i) 3.00 to 1.0 at
any time until and including October 31, 1996, (ii) 3.25 to 1.0 at any time
after October 31, 1996 until and including October 31, 1997, and (iii) 3.75 to
1.0 at any time after October 31, 1997. For purposes of this subsection, the
term "Borrower's Consolidated EBITDA" means the sum of (I) Borrower's
Consolidated earnings (or loss), after deduction of all expenses and other
charges other than interest, income tax and that certain $2,000,000
restructuring charge in the second Fiscal Quarter of 1995 as a result of
Borrower's general and administrative reductions plus (II) amounts deducted in
the computation of such Consolidated earnings (or loss) for depreciation,
amortization and other non-cash items. For purposes of this subsection the term
"Borrower's Consolidated Interest Charges" means the aggregate amount of
interest treated as an expense or capitalized on Borrower's consolidated
financial statements.
ARTICLE III.
Conditions of Effectiveness
---------------------------
Section 3.1. Effective Date. This Amendment shall become effective
--------------
as of the date first above written when, and only when, Agent shall have
received, at Agent's office, (i) a counterpart of this Amendment executed and
delivered by Borrower and Majority Lenders (ii) an amendment fee equal to ten-
one hundredths of one percent (0.10%) of the outstanding principal balance of
each Lender's Loans (as of the date hereof) payable to Agent for the account of
each Lender and (iii) each of the following, each document (unless otherwise
indicated) being dated the date of receipt thereof by Agent, duly authorized,
executed and delivered, and in form and substance satisfactory to Agent:
(a) a certificate of the Secretary of Borrower dated the date of
this Amendment certifying that: (A) the resolutions adopted by the
Board of Directors of Borrower attached as Exhibit 1 to the Omnibus
Certificate of Borrower dated September 2, 1994 (the "Original
Certificate") have not been amended or revoked, and continue in full
force and effect, (B) the incumbency and authorization of the officers
of Borrower authorized to sign Loan Documents, with signature
specimens of such officers, contained in the Original Certificate has
not been amended and continues in
- 3 -
<PAGE>
full force and effect, (C) copies of the certified charter documents
of Borrower (including by-laws), attached as Exhibits H and O to the
Original Certificate have not been amended or revoked since the date
of the Original Certificate, and continue in full force and effect,
(D) no Default that has not been expressly waived by Lenders exists on
and as of the date hereof and (E) all of the representations and
warranties set forth in Article IV hereof and Article IV of the
Original Agreement are true and correct at and as of their respective
times of effectiveness;
(b) a favorable opinion from Messr. John Walter, Esq., counsel
for Borrower in a form acceptable to Lender; and
(c) such supporting documents as Agent may reasonably request.
ARTICLE IV.
Representations and Warranties
------------------------------
Section 4.1. Representations and Warranties of Borrower. In order to
------------------------------------------
induce each Lender to enter into this Amendment, Borrower represents and
warrants to each Lender that:
(a) The representations and warranties contained in each
subsection of Section 4.1 of the Original Agreement are true and
correct at and as of the time of the effectiveness hereof.
(b) Borrower is duly authorized to execute and deliver this
Amendment and is and will continue to be duly authorized to borrow
monies and to perform its obligations under the Loan Agreement.
Borrower has duly taken all corporate action necessary to authorize
the execution and delivery of this Amendment and to authorize the
performance of the obligations of Borrower hereunder and thereunder.
(c) The execution and delivery by Borrower of this Amendment, the
performance by Borrower of its obligations hereunder and the
consummation of the transactions contemplated hereby do not and will
not conflict with any provision of law, statute, rule or regulation or
of the articles of incorporation and bylaws of Borrower, or of any
material agreement, judgment, license, order or permit applicable to
or binding upon Borrower, or result in the creation of any lien,
charge or encumbrance upon any assets or properties of Borrower.
Except for those which have been obtained, no consent, approval,
authorization or order of any court or governmental authority or third
party is required in connection with the execution and delivery by
Borrower of this Amendment or to consummate the transactions
contemplated hereby.
- 4 -
<PAGE>
(d) When duly executed and delivered, this Amendment and the Loan
Agreement will be a legal and binding obligation of Borrower,
enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or similar laws of general application relating
to the enforcement of creditors' rights and by equitable principles of
general application.
(e) The audited annual Consolidated financial statements of
Borrower dated as of December 31, 1994 and the unaudited quarterly
Consolidated financial statements of Borrower dated as of March 31,
1995 fairly present Borrower's Consolidated financial position at such
dates and the Consolidated results of Borrower's operations and
changes in Borrower's Consolidated cash flow for the respective
periods thereof. Copies of such financial statements have heretofore
been delivered to each Lender. Since March 31, 1995, no material
adverse change has occurred in the financial condition or businesses
or in the Consolidated financial condition or businesses of Borrower.
ARTICLE V.
Miscellaneous
-------------
Section 5.1. Ratification of Agreements. The Original Agreement as
--------------------------
hereby amended and each other Loan Document affected hereby are ratified and
confirmed in all respects. Any reference to the Loan Agreement in any Loan
Document shall be deemed to be a reference to the Original Agreement as hereby
amended. The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of Agent or Lenders under the Loan Agreement or any other Loan Document
nor constitute a waiver of any provision of the Loan Agreement or any other Loan
Document.
Section 5.2. Survival of Agreements. All representations,
----------------------
warranties, covenants and agreements of Borrower herein shall survive the
execution and delivery of this Amendment and the performance hereof, including
without limitation the making or granting of the Loans, and shall further
survive until all of the Obligations are paid in full. All statements and
agreements contained in any certificate or instrument delivered by Borrower or
any Related Person hereunder or under the Loan Agreement to any Lender shall be
deemed to constitute representations and warranties by, and/or agreements and
covenants of, Borrower under this Amendment and under the Loan Agreement.
Section 5.3. Loan Documents. This Amendment is a Loan Document, and
--------------
all provisions in the Loan Agreement pertaining to Loan Documents apply hereto.
Section 5.4. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the laws of the State of Texas and any applicable
laws of the United States of
- 5 -
<PAGE>
America in all respects, including construction, validity and performance.
Section 5.5. Counterparts. This Amendment may be separately executed
------------
in counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to constitute one and the same
Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the date first written above by their duly authorized
officers.
WESTERN GAS RESOURCES, INC.
By:/S/ John C. Walter
-------------------
Name: John C. Walter
Title:
NATIONSBANK OF TEXAS, N.A.
By: /S/ Michele L. Jones
---------------------------
Name: Michele L. Jones
Title:
BANKERS TRUST COMPANY
By:/S/ Mary Jo Jolly
--------------------------
Name: Mary Jo Jolly
Title:
BANK OF MONTREAL
By:/S/ Michael P. Stuckey
--------------------------
Name: Michael P. Stuckey
Title:
CIBC INC.
By:/S/ Gary C. Gaskill
--------------------------
Name: Gary C. Gaskill
Title:
- 6 -
<PAGE>
CONFIRMATION, ACKNOWLEDGEMENT AND CONSENT OF GUARANTORS
Each of the undersigned (collectively "Guarantors") hereby (i)
acknowledges and consents to the foregoing Fifth Amendment to Third Restated
Loan Agreement (Term); (ii) confirms the Restated Guaranty dated as of August
31, 1993 executed by such Guarantor in favor of Agent and the Lenders pursuant
to the Original Agreement; and (iii) agrees that each of such Guarantor's
obligations and covenants with respect to such Restated Guaranty shall remain in
full force and effect after the execution of such Amendment.
William J. Krysiak, Vice President-Finance of Western Gas Resources
Oklahoma, Inc., Western Gas Resources Texas, Inc., Western Gas Resources
Storage, Inc., Mountain Gas Resources, Inc., MGTC, Inc. and MIGC, Inc., is
executing this Confirmation, Acknowledgment and Consent of Guarantors in his
capacity of officer of each such corporation.
Dated as of the 19th day of July, 1995.
WESTERN GAS RESOURCES OKLAHOMA, INC.
WESTERN GAS RESOURCES TEXAS, INC.
WESTERN GAS RESOURCES STORAGE, INC.
MOUNTAIN GAS RESOURCES, INC.
MGTC, INC.
MIGC, INC.
By:/S/ William J. Krysiak
-------------------------------
William J. Krysiak,
Vice President-Finance
- 7 -
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
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0
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