WESTERN GAS RESOURCES INC, DEF 14A, 1999-04-20

WESTERN GAS RESOURCES INC
DEF 14A, 1999-04-20
NATURAL GAS TRANSMISSION

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<PAGE>

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<S> <C> <C>
Check the appropriate box:

[ ] Preliminary Proxy Statement [ ]Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement

[ ] Definitive Additional Materials

[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>

WESTERN GAS RESOURCES, INC.
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(Name of Registrant as Specified in Its Charter)

- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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Notes:
<PAGE>

WESTERN GAS RESOURCES, INC.
12200 North Pecos Street
Denver, Colorado 80234

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held on May 21, 1999

To the Stockholders of
WESTERN GAS RESOURCES, INC.:

The Annual Meeting of Stockholders of Western Gas Resources, Inc., a Delaware
corporation (the "Company"), will be held at the Embassy Suites Hotel, Remington
III Ballroom, 1881 Curtis Street, Denver, Colorado 80202 on Friday, May 21, 1999
at 10:00 A.M. local time for the following purposes:

1. To elect two Class One Directors to serve until their terms expire in 2002
and until their successors have been elected and qualified;

2. To vote on the Company's proposed 1999 Stock Option Plan;

3. To transact such other business as may properly come before the meeting or
any postponement or adjournment thereof.

Accompanying this Notice of Annual Meeting of Stockholders is a Proxy, a Proxy
Statement and a copy of the Company's 1998 Annual Report to Stockholders.

Only holders of record of shares of the Company's Common Stock at the close of
business on March 26, 1999 are entitled to receive notice of, and to vote at,
the Annual Meeting or any postponement or adjournment thereof.

Stockholders are cordially invited to attend the Annual Meeting. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE. IF YOU DO
ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.

By Order of the Board of Directors,

BRION G. WISE
Chairman of the Board and
Chief Executive Officer

Denver, Colorado
April 21, 1999
<PAGE>

WESTERN GAS RESOURCES, INC.
12200 North Pecos Street
Denver, Colorado 80234

PROXY STATEMENT

for

ANNUAL MEETING OF STOCKHOLDERS

To be held on May 21, 1999

This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Western Gas Resources, Inc. (the "Company") of proxies for
use at the Annual Meeting of Stockholders of the Company to be held at 10:00
A.M. local time on Friday, May 21, 1999 at the Embassy Suites Hotel, Remington
III Ballroom, 1881 Curtis Street, Denver, Colorado 80202 and at any postponement
or adjournment thereof. This Proxy Statement and the enclosed Proxy are being
mailed to stockholders on or about April 21, 1999.

The only outstanding voting securities of the Company are its Common Stock, par
value $0.10 (the "Common Stock"). On March 26, 1999, the record date for the
Annual Meeting, there were 32,147,993 shares of Common Stock entitled to vote at
the Annual Meeting. Each holder of record of Common Stock at the close of
business on the record date will be entitled to one vote for each share so held.

The presence at the Annual Meeting in person or by proxy of the holders of a
majority of the outstanding shares entitled to vote is necessary to constitute a
quorum for the transaction of business. If a Proxy in the accompanying form is
duly executed, dated and returned, the shares represented thereby will be voted
in accordance with instructions set forth thereon unless revoked. Stockholders
attending the Annual Meeting may vote their shares in person whether or not a
Proxy has been previously executed and returned. Unless contrary instructions
are given, the persons designated as Proxy holders on the Proxy card will vote
FOR election of the nominees named therein as directors. If any other matter is
properly presented at the meeting, which is not currently anticipated, the Proxy
holders will vote the Proxies in accordance with their best judgment in such
matters. The cost of soliciting the Proxies will be borne by the Company.

Votes cast by proxy or in person at the Annual Meeting will be counted by a
person appointed by the Company to act, as the election inspector for the
meeting. The election inspector will treat shares represented by proxies that
reflect abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum.

Any stockholder returning a Proxy may revoke it at any time before it has been
exercised by giving written notice of such revocation to the Company addressed
to John C. Walter, Secretary, 12200 North Pecos Street, Denver, Colorado 80234.
No such revocation shall be effective unless it has been received by the Company
at or prior to the Annual Meeting.
<PAGE>

PROPOSAL ONE
ELECTION OF DIRECTORS

The Company's Certificate of Incorporation establishes three classes of
directors, each serving a three-year term ending in successive years. There are
two Class One Directors whose terms expire this year: Brion G. Wise and Richard
B. Robinson.

The Board of Directors (the "Board") has nominated Messrs. Wise and Robinson for
re-election as Class One Directors. The terms of these Class One Directors, if
elected, will expire on the date of the Company's Annual Meeting of Stockholders
in 2002, and at such time as their successors are elected and qualified.

If any of the nominees is not elected or is unable to serve (although such a
contingency is not expected), the remaining Board members may elect a substitute
or, alternatively, may reduce the size of the Board, all in accordance with the
Company's Bylaws.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR PROPOSAL ONE, THE ELECTION
OF CLASS ONE DIRECTORS.

The holders of a majority of the shares of Common Stock present in person or by
proxy shall constitute a quorum. Abstentions will be treated as shares that are
present for purposes of determining the presence of a quorum. Directors shall
be elected by a plurality of the votes cast in the election of directors. Under
applicable Delaware law, in tabulating the vote, abstentions and broker non-
votes will be disregarded and will have no effect on the outcome of the vote.

The current directors, including the nominees for re-election, are described
under the caption "Directors and Officers."

PROPOSAL TWO
1999 STOCK OPTION PLAN

The Company's Board approved the proposal of the 1999 Stock Option Plan ("1999
Plan") on March 12, 1999, for a vote by the Company's stockholders. The 1999
Plan is intended to be an incentive stock option plan in accordance with the
provision of Section 422 of the Internal Revenue Code of 1986, as amended. The
Company has reserved 750,000 shares of the Company's common stock for issuance
under the 1999 Plan. The 1999 Plan provides for three different vesting
schedules, either in a three, four, or five-year period. Under the 1999 Plan,
the Board of the Company determines and designates from time to time those
employees of the Company to whom options are to be granted. If any option
terminates or expires prior to being exercised, the shares relating to such
option are released and may be subject to reissuance pursuant to a new option.
The Board has the right to, among other things, fix the price, terms and
conditions for the grant or exercise of any option. The purchase price of the
stock under each option shall be the Fair Market Value of the stock at the time
such option is granted. For purposes of the 1999 Plan, Fair Market Value of
stock shall mean the New York Stock Exchange Composite Transactions average
closing price for the stock reflected in The Wall Street Journal or another
-----------------------
publication selected by the Board for the ten (10) days preceding the day the
Option is granted to each eligible employee. Under the 1999 Plan, the Board has
the authority to set the vesting schedule from 20% per year to 33 1/3% per year.
Under the 1999 Plan, the employee must exercise the option within the three,
four, or five years of the date each portion vests. The employee's right to
exercise options under the 1999 Plan is subject to continuous employment since
the grant was made. If the employee dies or becomes disabled (within the
meaning of the 1999 Plan) then all of the options granted to the employee shall
become 100% exercisable.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR PROPOSAL TWO, THE 1999 STOCK
OPTION PLAN.

2
<PAGE>

SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS
AND MANAGEMENT

The following table sets forth as of March 26, 1999 (except as otherwise
indicated) information with respect to: (i) stockholders who were known to the
Company to own more than 5% of the Common Stock of the Company ("Significant
Stockholder") and (ii) information regarding ownership by the Company's
directors and the four most highly compensated Executive Officers and by all
directors and officers as a group, of the Company's Common Stock, $2.28
Cumulative Preferred Stock and $2.625 Cumulative Convertible Preferred Stock.
<TABLE>
<CAPTION>

$2.625 Cumulative
$2.28 Cumulative Convertible
Common Stock Preferred Stock Preferred Stock
--------------------------------------- ------------------------ --------------------
Number
of Shares Exercisable
(excluding Stock % of Number % of Number % of
Name of Beneficial Owner options) Options (1)(13) Class of Shares Class of Shares Class
- --------------------------- -------------- --------------- ----- --------- ----------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
State Street Research
One Financial Center
Boston, MA 02111........... 4,127,800 (2) - 12.8 - (2) - - (2) -

The Prudential Insurance
Company of America
751 Broad Street
Newark, NJ 07102-3777...... 3,325,900 (2) - 10.3 - (2) - - (2) -

Metropolitan Life
Insurance Company
One Madison Avenue
New York, NY 10010-3690.... 1,643,600 (2) - 5.1 - (2) - - (2) -

Brion G. Wise.............. 3,814,930 - 11.9 1,600 * - -
12200 N. Pecos Street
Denver, CO 80234

Ward Sauvage............... 3,057,076 (3) - 9.5 - - - -
Box 132
Oberlin, KS 67749

Walter L. Stonehocker...... 2,803,141 (4) - 8.7 14,000 1.0 31,800 1.2
15600 Holly
Brighton, CO 80601

Dean Phillips.............. 1,834,825 (5) - 5.7 - - - -
524 N. 30th Street
Quincy, IL 62301

Bill M. Sanderson.......... 592,275 (6) 56,000 1.8 - - - -
Richard B. Robinson........ 7,800 (7) 3,500 * 1,000 (12) * - -
James A. Senty............. 4,320 (8) 5,000 * - - - -
Joseph E. Reid............. - 5,000 - - - - -
Lanny F. Outlaw............ 81,333 (9) 60,000 * - - - -
John C. Walter............. 29,625 (10) 19,200 * - - - -
John F. Chandler........... 15,339 18,350 * - - - -
Edward A. Aabak............ 20,287 (11) 12,000 * - - - -
Directors and officers.....
as a group (17 persons). 12,298,195 219,850 38.9 16,800 1.3 31,800 1.2

</TABLE>

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Footnotes on following page.

3
<PAGE>

* Less than 1%.
(1) The directors and officers have the right to acquire the shares of Common
Stock reflected in this column either currently or within 60 days after
March 26, 1999 through the exercise of stock options. However, not all
stock options contained in this table are in-the-money as of March 26,
1999.
(2) Amount and nature of beneficial ownership is at December 31, 1998 as
reported in the applicable Schedule 13G and includes shares held by
subsidiaries and affiliates. The percent of class was calculated using
total shares outstanding at December 31, 1998. The Company's only voting
security is its Common Stock. As the applicable rules require presentation
only of ownership in excess of 5% of the Company's voting securities and as
the Company has no knowledge of ownership of any preferred securities, no
information regarding preferred securities is presented for this beneficial
owner.
(3) Includes 2,102,576 shares of Common Stock held by Sauvage Gas Company
(owned 100% by ALS Enterprise) and 954,500 shares of Common Stock held by
Sauvage Gas Service Corporation (owned 100% by ALS Enterprise). ALS
Enterprise is owned as follows: Ward Sauvage Trust No. 1 - 21.6475%, Janice
Sauvage Trust No. 1 - 21.6475%, Marquis W. Sauvage Trust - 27.1044%, Alan
Sauvage Trust -27.1055% and Nolan C. Rucker - 2.4950%.
(4) Includes 1,257,759 shares of Common Stock owned directly by Mr.
Stonehocker, 1,384,379 shares of Common Stock held by Mr. Stonehocker's
wife, 30,000 shares of Common Stock held by Mr. and Mrs. Stonehocker as
tenants-in-common, 127,820 shares of Common Stock held by the WGP Trust, of
which Mrs. Stonehocker is the trustee, 3,183 shares of Common Stock held by
a son directly and through 10% or more ownership in a partnership.
(5) Includes 1,815,725 shares of Common Stock owned directly by Mr. Phillips
and 19,100 shares of Common Stock held by Mr. Phillips' wife.
(6) Includes 60,090 shares of Common Stock held as joint tenants by Mr.
Sanderson and his wife, 491,139 shares of Common Stock held by Cedar Assets
L.L.L.P. for which Mr. Sanderson and his wife are the general partners,
39,982 shares of Common Stock held by the Sanderson Stock Trust, of which
Mr. Sanderson's wife is the trustee, 200 shares held by the Sanderson
Family Foundation for which Mr. Sanderson and his wife are the directors
and 864 shares of Common Stock held by Mr. Sanderson's wife.
(7) Includes 6,000 shares of Common Stock held by the Lentz, Evans & King
Pension Fund, for the benefit of Mr. Robinson, 1,000 shares owned directly
by Mr. Robinson's wife and 800 shares of Common Stock held by Mr. Robinson
and his wife as custodians for their minor children.
(8) Includes 2,200 shares of Common Stock owned directly by Mr. Senty and 2,120
shares of Common Stock owned directly by Mr. Senty's wife.
(9) Includes 70,000 shares of Common Stock held as joint tenants by Mr. Outlaw
and his wife, 11,333 shares owned by Western Gas Resources Profit Sharing
plan for the benefit of Mr. Outlaw.
(10) All of Mr. Walter's shares are held as joint tenants with his wife.
(11) Includes 11,100 shares of Common Stock held by Mr. Aabak directly, 1,200
shares of Common Stock held as joint tenants by Mr. Aabak and his wife and
7,987 shares owned by Western Gas Resources Profit Sharing plan for the
benefit of Mr. Aabak.
(12) All shares held by the Lentz, Evans & King Profit Sharing plan.
(13) Amounts include forfeiture of options related to the Stock Option Exchange
Program, see further discussion at "Stock Option, Retirement and Bonus
Plans-Option Repricing".

4
<PAGE>

DIRECTORS AND OFFICERS

Set forth below is certain information concerning the directors and officers of
the Company.
<TABLE>
<CAPTION>

NAME AGE POSITION
- ----------------------- --- ------------------------------------------------------------------------
<S> <C> <C>
Brion G. Wise.......... 53 Chairman of the Board and Chief Executive Officer (1)
Walter L. Stonehocker.. 74 Vice Chairman of the Board (3)
Dean Phillips.......... 67 Director (3)(5)
Joseph E. Reid......... 70 Director (2)(4)(5)
Richard B. Robinson.... 50 Director (1)(4)(5)
Bill M. Sanderson...... 69 Director (3)
Ward Sauvage........... 73 Director (2)
James A. Senty......... 63 Director (3)(4)(5)
Lanny F. Outlaw........ 63 President and Chief Operating Officer
John C. Walter......... 53 Executive Vice President, General Counsel and Secretary
Edward A. Aabak........ 47 Senior Vice President - Operations
John F. Chandler....... 42 Senior Vice President - Marketing and Business Development and Assistant
Secretary
Vance S. Blalock....... 45 Treasurer and Assistant Secretary
Brian E. Jeffries...... 41 Vice President - Gas Marketing
J. Burton Jones........ 39 Vice President - Business Development
Jeffery E. Jones....... 46 Vice President - Production
William J. Krysiak..... 38 Vice President - Finance
- -------------------------
</TABLE>
(1) Class One Director; term expires in 1999.
(2) Class Two Director; term expires in 2000.
(3) Class Three Director; term expires in 2001.
(4) Member of the Audit Committee.
(5) Member of the Compensation and Nominating Committee.

Brion G. Wise, has served as Chairman of the Board since July 1987, Chief
Executive Officer since December 31, 1986 and as President from 1971 through
1986. Mr. Wise received his Bachelor of Science Degree in Chemical Engineering
from Washington State University.

Walter L. Stonehocker, has served as Vice Chairman of the Board since July 1992,
a director since July 1987, Senior Vice President from January 1985 to July 1992
and Vice President from 1971 to 1985. In addition, he has been active as a
lobbyist for the oil and gas industry in various western states.

Dean Phillips, has served as a director of the Company since July 1987 and as a
member of the Compensation and Nominating Committee since May 1995. Mr.
Phillips has been engaged in the wholesale and retail distribution of natural
gas liquids since 1956. Mr. Phillips also serves as an officer and director of
several banking institutions in Missouri and Illinois.

Joseph E. Reid, has served as a director of the Company since May 1994, a member
of the Audit Committee since May 1995 and as a member of the Compensation and
Nominating Committee since May 1994. Mr. Reid has been involved in the oil and
gas business since 1956, and since 1987 has been an independent oil and gas
consultant. From 1984 to 1986 he served as President and Chief Executive
Officer of Meridian Oil, Inc., from 1982 to 1984 as an independent oil and gas
consultant and from 1978 to 1982 as President and Chief Executive Officer of
Superior Oil Company. Mr. Reid also serves as a director for Riverway Bank. He
received his M.B.A. from the Harvard Graduate School of Business and his
Bachelor of Science Degree from Louisiana State University.

5
<PAGE>

Richard B. Robinson, has served as a director of the Company since July 1987, a
member of the Audit Committee since May 1988 and as a member of the Compensation
and Nominating Committee since September 1993. Mr. Robinson has been a
shareholder of the law firm of Lentz, Evans and King P.C. since 1980. He has
also been an adjunct professor at the University of Denver College of Law since
1980. He has represented the Company since 1977 with respect to tax, corporate
and partnership law matters. Mr. Robinson received his Juris Doctor Degree from
the University of Denver and his L.L.M. in Taxation from New York University.

Bill M. Sanderson, has served as a director of the Company since July 1987,
President from December 1986 through March 1996, Chief Operating Officer from
May 1986 through March 1996 and Senior Vice President from 1981 through 1986.
Mr. Sanderson received his Bachelor of Science Degree, cum laude, in Chemical
Engineering from Texas Tech University.

Ward Sauvage, has served as a director of the Company since July 1987. Mr.
Sauvage was engaged in the wholesale and retail distribution of natural gas
liquids from 1949 through 1993. He owns certain interests in several banking
institutions in Nebraska and serves as a director of such institutions. Mr.
Sauvage is Chairman of the Board and President of Sauvage Gas Company, a
diversified private investment company formed in 1958.

James A. Senty, has served as a director of the Company since July 1987, a
member of the Audit Committee since May 1988 and as a member of the Compensation
and Nominating Committee since September 1993. Mr. Senty has been engaged in
the wholesale and retail distribution of natural gas liquids since 1960. He has
owned certain banking interests since 1976 and currently serves as Chairman of
the Board of The Park Bank. He is also Chairman of the Board and President of
Midwest Bottle Gas Co., a company which directly and through subsidiaries is
engaged in the retail and wholesale marketing of natural gas, natural gas
liquids and other related items in several states. He is a director and Senior
Vice President of MNIC Companies, the parent organization of several insurance
companies in Wisconsin.

Lanny F. Outlaw, has served as President and Chief Operating Officer since April
1996, Executive Vice President from September 1994 through March 1996, Vice
President-Business Development and Rocky Mountain Region from October 1993 to
September 1994 and Vice President-Business Development from August 1987 to
October 1993. Mr. Outlaw was employed by Shell Oil Company from 1958 to 1987 in
various management positions within the Exploration and Production Department.
Mr. Outlaw received his Bachelor of Science Degree in Engineering from the South
Dakota School of Mines and Technology.

John C. Walter, has served as Executive Vice President, General Counsel and
Secretary since September 1994, served as Vice President-General Counsel from
May 1988 to August 1994, Corporate Counsel from May 1986 to April 1988 and Land
Manager from March 1983 to April 1986. Mr. Walter received his Bachelor of Arts
Degree in Economics and Juris Doctor Degree from the University of Colorado.

Edward A. Aabak, has served as Senior Vice President - Operations since
September 1997, Vice President - Rocky Mountain and Northern Region from June
1995 to August 1997, Vice President - Rocky Mountain Region from September 1994
to May 1995, and Operations Manager of the Rocky Mountain Region from February
1993 to August 1994. From 1982 to 1992, Mr. Aabak was employed by DEKALB Energy
Company in various management, engineering and operations functions. From 1976
to 1982, Mr. Aabak was employed by Dome Petroleum Limited. Mr. Aabak holds a
Bachelor of Science Degree in Chemical Engineering from the University of
Alberta.

John F. Chandler, has served as Senior Vice President - Marketing and Business
Development since April 1996, Vice President - Marketing and Pipelines from
September 1993 through March 1996, Manager of Business Development from January
1991 through August 1993 and from July 1984 through August 1993 in various
positions in engineering and business development. Mr. Chandler received his
Bachelor of Science Degree in Engineering from the South Dakota School of Mines
and Technology.

Vance S. Blalock, has served as Treasurer since November 1994, Controller of
Systems Development and Acquisitions from January 1993 through November 1994, as
Controller of Operational Accounting from May 1990 through December 1992 and in
various other positions in the accounting area from September 1981 through April
1990. Ms. Blalock received her Bachelor of Science Degree in Commerce from the
University of Louisville and is a Certified Public Accountant.

6
<PAGE>

Brian E. Jeffries, has served as Vice President - Gas Marketing since April 1996
and has been employed by the Company since November 1992 as Director of
Marketing and Transportation. Mr. Jeffries was employed by United Gas Pipe Line
Company from 1991 to 1992 and for LaSER Marketing Company from 1988 through 1991
in various marketing management positions. Mr. Jeffries received his Bachelor of
Science Degree in Civil Engineering from the University of Colorado.

J. Burton Jones, has served as Vice President - Business Development since
September 1997 and has been employed by the Company since August 1996 as
Director of Strategic Planning. Mr. Jones was employed by Burlington Resources
Inc. from July 1988 to August 1996 in various gas supply and business
development positions, most recently as Director, Gas Supply. Mr. Jones received
his Bachelor of Science Degree in Petroleum Engineering from Texas Tech
University.

Jeffery E. Jones, has served as Vice President - Production since October 1993
and has been employed by the Company since 1989, previously as Production
Manager. From 1987 to 1989, Mr. Jones was an independent oil and gas consultant.
Mr. Jones received his Bachelor of Science Degree in Psychology from Colorado
College and his Bachelor of Science Degree in Mechanical Engineering from the
University of Colorado.

William J. Krysiak, has served as Vice President - Finance since September 1993,
Corporate Controller from June 1993 to August 1993, Controller - Financial
Accounting from June 1990 to May 1993, Director of Tax Accounting and Reporting
from May 1987 to May 1990 and in various other positions in the accounting area
since August 1985. Mr. Krysiak is the principal financial and accounting officer
of the Company. He received his Bachelor of Science Degree in Business
Administration from Colorado State University and is a Certified Public
Accountant.

Meetings and Committees of the Board of Directors

The Company's Board held 10 meetings during 1998. Each director attended at
least 75% of the total number of meetings of the Board and its committees on
which such director served during his tenure. The Board has a standing Audit
Committee and a standing Compensation and Nominating Committee ("Compensation
Committee"), as well as other committees. The Audit Committee and the
Compensation Committee are composed solely of non-employee directors.

Messrs. Reid, Robinson and Senty are members of the Audit Committee. The Audit
Committee recommends the appointment of independent auditors and reviews the
plan, scope, and results of the audit, monitors the fees for the audit and other
services and reviews the findings and recommendations of the independent
accountants concerning internal accounting procedures and controls. The Audit
Committee also recommends accounting and internal auditing policies which, in
the Audit Committee's judgment, should receive the attention of the Board. The
Audit Committee met once in 1998.

Messrs. Phillips, Reid, Robinson and Senty are members of the Compensation
Committee. The Compensation Committee makes recommendations to the Board
regarding: (i) employee compensation, including compensation of the Company's
Executive Officers; and (ii) individuals to nominate for election to the Board
and Board committee assignments. The Compensation Committee does not consider
nominees for the Board recommended by stockholders. The Compensation Committee
met twice in 1998.

Remuneration of Directors

Directors who are also full-time employees of the Company receive no fees or
remuneration for services as members of the Board. For the year ended December
31, 1998, non-employee directors of the Company received annual fees of $25,000
each, payable in quarterly installments, and annual fees of $5,000 for each
committee on which such director served. Each director also has the option of
obtaining health insurance through the Company under similar terms as the
Executive Officers. The Company has entered into Indemnification Agreements
with each of the Company's directors (each, a "Director Indemnification
Agreement"), which, among other things, places the burden of proof upon the
Company to prove in any particular instance that a director was not entitled to
indemnification and which allows a director to seek the appointment of an
independent legal counsel to determine whether indemnification is appropriate
following certain types of changes of control of the Company. See also "Stock
Option, Retirement and Bonus Plans - Key Employees' Incentive Stock Option Plan
and Non-Employee Directors Stock Option Plan" included elsewhere in this Proxy
Statement.

7
<PAGE>

Compliance with the Reporting Requirements of Section 16(a) of the Securities
Act of 1934

Section 16(a) of the Securities Exchange Act of 1934 and the related regulations
require the Company's directors, Executive Officers and persons who own more
than 10% of the Company's Common Stock to file with the Securities and Exchange
Commission and the New York Stock Exchange initial reports of their beneficial
ownership and reports of any changes in their beneficial ownership of the
Company's Common Stock and other equity securities of the Company. In addition,
such persons are required to furnish the Company with copies of all such
filings. To the Company's knowledge, based solely upon a review of the copies
of such reports furnished to the Company and written representations from its
directors and Executive Officers, all reports which were required during the
fiscal year ended 1998, of its directors, Executive Officers and 10% beneficial
owners complied with Section 16(a) filing requirements, except as follows: two
reports relating to a change in beneficial ownership were filed late, one by
Bill M. Sanderson and one by James A. Senty. Both of the reports related to
the divestiture of common stock. Mr. and Mrs. Sanderson transferred 41,980
shares of common stock, which was held as joint tenants to the Cedar Assets,
L.L.L.P., for which both are general partners. Mr. Senty transferred 300 shares
of common stock into his son's account.

Transactions with Affiliates

The Company has entered into agreements with key employees, including each of
its officers, other than Mr. Wise, that commit the Company to loan an amount
sufficient to exercise certain of their respective stock options. The Company
will forgive the loan and accrued interest if the employee has been continuously
employed by the Company for periods specified under the agreements or Board
resolutions. The loans bear interest at the applicable federal rate, as
specified in Section 1274(d) of the Internal Revenue Code of 1986, as amended,
in effect upon the date of the loan. At December 31, 1998, loans and accrued
interest to certain officers totaling $725,626 relating to 50,000 options were
outstanding. Amounts outstanding were as follows: Lanny F. Outlaw, $363,039
related to 25,000 options and John C. Walter, $362,587 related to 25,000
options. During the year ended December 31, 1998, the Company forgave loans and
accrued interest to certain key employees, including its officers, totaling
approximately $173,000 relating to 12,500 options. The entire amount forgiven
was related to Gary W. Davis.

During the year ended December 31, 1998, the Company purchased and sold natural
gas liquids to affiliates of James A. Senty, a director of the Company, for
total payments and receipts of approximately $5.3 million. During the year
ended December 31, 1998, the Company leased rail cars from an affiliate of Ward
Sauvage, a director of the Company, for total payments of approximately $94,000.
During the year ended December 31, 1998, the Company leased rail cars from an
affiliate of Dean Phillips, a director of the Company, for total payments of
approximately $79,000. Mr. Robinson is a stockholder of the law firm of Lentz,
Evans and King P.C., which has represented the Company in certain tax, corporate
and partnership law matters since 1977. For the year ended December 31, 1998,
the total amount of legal fees paid to Lentz, Evans and King P.C. was
approximately $123,500. As of December 31, 1998, the Company had borrowed $200
million from The Prudential Insurance Company of America, a Significant
Stockholder, and for the year ended December 31, 1998, paid interest of
approximately $15.7 million related to such borrowings. During the year ended
December 31, 1998, the Company also paid The Prudential Insurance Company of
America approximately $447,000 related to medical insurance and related fees.
During the year ended December 31, 1998, the Company paid to Metropolitan Life
Insurance Company, a Significant Stockholder, approximately $582,000 related to
long term disability insurance and life insurance. These transactions were all
entered into by the Company in the ordinary course of its business, on a basis
the Company believes approximates arm's length.

8
<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth information regarding compensation paid by the
Company in each of the last three years ended December 31, 1998 to the Chief
Executive Officer and the four most highly compensated Executive Officers other
than the Chief Executive Officer (collectively, the "Named Officers") and Gary
W. Davis*, for whom disclosure would have been required but for the fact that
Mr. Davis left the Company in December 1998.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation (1)(2) Awards
---------------------- ------------------
Securities
Underlying All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) (3) Compensation ($)(4)
- ---------------------------- ---- ----------- ---------- ------------------ -------------------
<S> <C> <C> <C> <C> <C>

Brion G. Wise 1998 $ 90,000 $ - - $ 5,940
Chairman of the Board and 1997 93,462 - - 5,989
Chief Executive Officer 1996 90,000 - - 5,767

Lanny F. Outlaw 1998 378,612 - - 31,585
President and 1997 378,000 - - 123,140
Chief Operating Officer 1996 305,586 64,438 100,000 27,426

John C. Walter 1998 243,300 - - 20,634
Executive Vice President 1997 243,000 - - 52,700
1996 211,539 45,813 32,000 16,060

John F. Chandler 1998 243,300 - - 15,783
Senior Vice President -
Marketing 1997 243,000 - - 29,466
and Business Development 1996 202,115 46,250 32,000 13,262

Edward A. Aabak 1998 185,000 - - 13,556
Senior Vice President- 1997 184,742 - - 10,481
Operations 1996 159,961 10,250 20,000 11,075

Gary W. Davis* 1998 209,016 - - 332,636
Former Senior Vice President- 1997 228,981 - - 263,461
Engineering and Production 1996 197,327 45,269 20,000 12,934
- ------------------------
</TABLE>
(1) The column for Other Annual Compensation has been omitted (in accordance
with the applicable rules) because perquisites and other personal benefits
awarded, earned or paid to the Named Officers were not in excess of the
lesser of either $50,000 or 10% of the total annual salary and bonus for
each Named Officer.
(2) Amounts shown set forth all cash compensation earned by each of the Named
Officers in the years shown.
(3) The columns for Long-Term Compensation - Restricted Stock Awards and Long-
Term Compensation - Payouts have been omitted (in accordance with the
applicable rules) because no such compensation has been awarded, earned or
paid to any of the Named Officers.
(4) Amounts shown consist of the following: (i) the Company's annual
contribution to each of the Named Officers' Retirement Plan accounts; (ii)
the Company's Retirement Plan match; (iii) group term life insurance
premiums paid by the Company; (iv) principal and interest associated with
loans to the Named Officer to exercise options to purchase the Company's
Common Stock; and (v) severance costs paid to Gary W. Davis. See further
discussion at "Directors and Officers - Transactions with Affiliates" and
"Stock Option, Retirement and Bonus Plans - $5.40 Stock Option Plan and Key
Employees' Incentive Stock Option Plan."

9
<PAGE>

Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values

The following table provides information with respect to the stock options
exercised during the year ended December 31, 1998 and the value as of December
31, 1998 of unexercised in-the-money options held by the Named Officers. The
value realized on the exercise of options is calculated using the difference
between the option exercise price and the fair market value of the Company's
Common Stock on the date of exercise. The value of unexercised in-the-money
options at year end is calculated using the difference between the option
exercise price and the fair market value of the Company's Common Stock at
December 31, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Shares Options/SARs at FY-End(#) Options/SARs at FY-End($)
Acquired on Value -------------- ----------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------- -------------- ------------- ------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Brion G. Wise - $ - - - $ - $ -
Lanny F. Outlaw - - 64,000 66,000 - -
John C. Walter - - 36,800 25,200 - -
John F. Chandler 850 2,122 56,950 22,500 - -
Edward A. Aabak - - 24,100 15,000 - -
</TABLE>

Ten-Year Option/SAR Repricings

In March 1999, the Executive Officers were granted a total of 300,000 options,
which vest ratably over the next three years, under the 1997 Plan. The exercise
price of $5.51 was determined by using the average stock price for the ten
trading days prior to the grant date. The shares were issued as follows: Lanny
F. Outlaw 42,000, John F. Chandler 36,000, John C. Walter 36,000, Edward A.
Aabak 36,000, J. Burton Jones 30,000, Jeffery E. Jones 30,000, Brian E. Jeffries
30,000, William J. Krysiak 30,000 and Vance S. Blalock 30,000. In exchange, the
Executive Officers were required to relinquish a total of 246,200 vested and
unvested options at prices ranging from $18.63 to $34.00 per share (see table
below). The Compensation and Nominating Committee believes that the granting of
these options is a necessary incentive to induce the Executive Officers to
remain with the Company and provide the additional efforts needed during this
critical time in the Company's history.

The following table provides information concerning all repricings of stock
options of all Executive Officers since the fiscal year ended December 31, 1988.
See "Stock Option, Retirement and Bonus Plans - Option Repricings."
<TABLE>
<CAPTION>
Market
Number of Price of Length of
Securities Stock at Exercise Original Option
Underlying Time of Price at Time Term Remaining
Options/SARs Repricing or of Repricing New at Date of
Repriced or Amend- or Amend- Exercise Repricing or
Name Date Amended (#) ment ment($) Price Amendment
- ----------------- ------- ------------ -------------- ------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Lanny F. Outlaw 3/12/99 30,000 7.063 18.63 5.51 4 years
John C. Walter 3/12/99 30,000 7.063 18.63 5.51 4 years
John F. Chandler 3/12/99 25,000 7.063 34.00 5.51 11 months
3/12/99 25,000 7.063 18.63 5.51 4 years
Edward A. Aabak 3/12/99 4,100 7.063 32.38 5.51 4 years
3/12/99 15,000 7.063 18.63 5.51 4 years
Vance S. Blalock 3/12/99 3,000 7.063 18.63 5.51 4 years
J. Burton Jones 3/12/99 10,000 7.063 19.65 5.51 5 years, 3 months
3/12/99 4,100 7.063 19.00 5.51 5 years, 6 months
Jeffery E. Jones 3/12/99 25,000 7.063 26.50 5.51 11 months
3/12/99 25,000 7.063 18.63 5.51 4 years
William J. Krysiak 3/12/99 25,000 7.063 30.19 5.51 11 months
3/12/99 25,000 7.063 18.63 5.51 4 years
</TABLE>

10
<PAGE>

Report of the Compensation Committee

In 1993, the Board created the "Compensation Committee" and directed it to make
recommendations to the Board regarding employee compensation, including the
compensation of the Company's Executive Officers. In 1995, the Compensation
Committee's duties were expanded to include the nomination of directors. The
Compensation Committee currently consists of Dean Phillips, Joseph E. Reid,
Richard B. Robinson and James A. Senty, none of whom is or has been an officer
or employee of the Company. The Compensation Committee met twice in 1998.

Compensation of Executive Officers

The annual compensation of each of the Executive Officers of the Company
consists primarily of a base salary, a discretionary bonus and stock options.
In addition, the Executive Officers participate in the Company-wide Retirement
Plan, which consists of elective employee salary reduction contributions, a
Company match equal to 50% of employee contributions on the first 4% of employee
compensation contributed and, as determined by the Board in its sole discretion,
an annual Company contribution for all employees equal to a specified percentage
of base compensation.

The Company granted no options in 1998 to the Executive Officers to purchase
shares of the Company's Common Stock. One executive officer exercised an
aggregate of 850 previously granted options in 1998 and, at December 31, 1998,
the Executive Officers, as a group, have been granted options to purchase an
aggregate of 497,350 shares of the Company's Common Stock. The Compensation
Committee continues to believe that options for the Company's Common Stock are
an important element of the Executive Officers' compensation package because
options aid in the objectives of aligning the Executive Officers' interests with
those of the stockholders and giving the Executive Officers a direct stake in
the performance of the Company.

As a result of the financial performance of the Company in 1998, the Executive
Officers recommended to the Compensation and Nominating committee, that the
Executive Officers as a group receive no pay increases for 1999. The exception
to the recommendation was an adjustment to the compensation of Edward A. Aabak
to reflect his job responsibilities as a Senior Vice President - Operations.

Finally, the Compensation Committee recommended to the Board that the Company
make a contribution to the Company's Retirement Plan of 5% of 1998 base salaries
for all eligible employees, including each of the Executive Officers. In making
this recommendation, the Compensation Committee considered, among other things,
the financial performance of the Company, as measured by net income and cash
flow from operations and the total compensation packages that employees in the
oil and gas industry receive.

Subject to certain exceptions, Section 162(m) of the Internal Revenue Code
limits to $1,000,000 the amount of executive compensation that a company may
deduct as an expense for federal income tax purposes in any one year for any one
executive. Although none of the Company's Executive Officers received in excess
of $1,000,000 in compensation for any year, the Compensation Committee intends
to structure future executive officer compensation in a manner that will
preserve the tax deductibility of executive compensation.

11
<PAGE>

Compensation of the Chief Executive Officer

The annual compensation of Brion G. Wise, the Company's Chief Executive Officer,
consists primarily of base salary. Mr. Wise's annual compensation is
significantly lower than compensation paid by comparable companies for
comparable positions. In preparing their recommendation regarding Mr. Wise's
compensation, the Compensation Committee considered certain subjective factors
unrelated to the Company's financial performance, principally Mr. Wise's belief
that it was not necessary to pay him a market rate because he received
substantial dividends from the shares of the Company's Common Stock that he
owns. Mr. Wise is not eligible for awards under the Company's various stock
option plans because the Compensation Committee and the Board believe his
interests are already strongly tied to those of its stockholders. He is,
however, entitled to participate in the Company's Retirement Plan. Mr. Wise did
not receive a bonus for the fiscal year ended December 31, 1998.

March 31, 1999
Compensation Committee
Dean Phillips
Joseph E. Reid
Richard B. Robinson
James A. Senty

Compensation Committee Inter-lock and Insider Participation

The Compensation Committee consists of Dean Phillips, Joseph E. Reid, Richard B.
Robinson and James A. Senty, none of whom is or was an officer or employee of
the Company. During the year ended December 31, 1998, the Company purchased and
sold natural gas liquids to affiliates of James A. Senty for total payments and
receipts of approximately $5.3 million. During the year ended December 31,
1998, the Company leased rail cars from an affiliate of Dean Phillips for total
payments of approximately $79,000. Mr. Robinson is a stockholder of the law
firm of Lentz, Evans and King P.C., which has represented the Company in certain
tax, corporate and partnership law matters since 1977. For the year ended
December 31, 1998, the total amount of legal fees paid to Lentz, Evans and King
P.C. was approximately $123,500. All such transactions were entered into by the
Company in its ordinary course of business, on a basis the Company believes
approximates arm's length.

Employment Agreements

Effective November 15, 1994, the Company entered into an Employment Agreement
(an "Executive Employment Agreement") with each of the Company's then existing
Executive Officers, other than Mr. Wise. Pursuant to the Executive Employment
Agreement, as amended through 1997, the Company has agreed to pay each executive
officer a minimum annual compensation based upon such executive officer's 1997
base salary, plus a bonus determined by the Board in its sole and absolute
discretion. The employment of the executive officer continues until it is
terminated in accordance with the Executive Employment Agreement. The Company
may terminate an executive officer "for cause" at any time and the executive
officer may terminate employment upon 90 days prior notice. If the Company
terminates the executive officer without "cause", the executive officer is
entitled to severance equal to one year's base salary, which increases to two
years' base salary if the termination without cause occurs within one year after
certain changes in control of the Company. In all cases, the executive officer
is subject to certain covenants relating to confidentiality, non-competition and
non-solicitation of customers and employees following termination.

12
<PAGE>

STOCK OPTION, RETIREMENT AND BONUS PLANS

Retirement Plan

The Company's Retirement Plan (a defined contribution plan) is administered by
the Board. All employees of the Company are eligible to participate in the
Retirement Plan. For the year ended December 31, 1999, subject to certain
restrictions, each participant may elect to reduce his or her salary and have
contributed biweekly to the Retirement Plan on his or her behalf an amount which
on an annual basis may not exceed the lesser of 15% of his or her base
compensation or $10,000. The Company contributes to the accounts of
participating employees a match of 50% of employee contributions on the first 4%
of employee compensation contributed. The Company may make annual contributions
to the accounts of each participant, as determined by the Board in its sole
discretion, in amounts up to 10% of the base compensation of such participants.
The Company's contributions and matching contributions under the Retirement Plan
become vested at the rate of 20% after completion of two years of service with
an additional 20% vesting each year thereafter until fully vested.

Incentive Bonus Plans

In 1998, the Board approved the 1998 Incentive Bonus Plan for the Executive
Officers of the Company. The Executive Officers' bonuses were tied to the
Company's 1998 earnings attributable to Common Stock. If the earnings target
(which could be adjusted by the Board to reflect non-recurring, unusual items)
was met or exceeded, the Executive Officers would receive a bonus ranging from
5% to 20% of their adjusted base pay. As the Company's 1998 earnings
attributable to Common Stock were less than targeted, no bonuses were paid to
such officers. No such plan has been approved by the Board for 1999.

$5.40 Stock Option Plan

In April 1987 and as further amended in February 1994, the Company adopted an
Employee Stock Option Plan ("$5.40 Plan") that authorized granting options to
employees to purchase 483,000 shares of the Company's Common Stock. The Company
entered into agreements committing the Company to loan to certain employees an
amount sufficient to exercise their options, provided that the Company will not
loan in excess of 25% of the total amount available to the employee in any one
year. Pursuant to the agreements, the Company was required to forgive any such
loan and associated accrued interest on July 2, 1997 or December 31, 1997, if
the employee was then employed on such dates by the Company. See further
discussion at "Directors and Officers - Transactions with Affiliates."

Key Employees' Incentive Stock Option Plan and Non-employee Director Stock
Option Plan

Effective April 1987, the Board of the Company adopted a Key Employees'
Incentive Stock Option Plan ("Key Employee Plan") and a Non-Employee Director
Stock Option Plan ("Directors' Plan") that authorize the granting of options to
purchase 250,000 and 20,000 shares of the Company's Common Stock, respectively.
Under the plans, each of these options became exercisable as to 25% of the
shares covered by such plans on the later of January 1, 1992 or one year from
the date of grant, subject to the continuation of the optionee's relationship
with the Company, and became exercisable as to an additional 25% of the covered
shares on the later of each subsequent January 1 through 1995 or on each
subsequent date of grant anniversary, subject to the same condition. Each of
these plans will terminate on the earlier of February 6, 2000 or, assuming the
grant of the maximum number of options available for grant under the plans, the
date on which all options granted under each of the plans have been exercised in
full. The Company has entered into agreements committing the Company to loan
certain employees an amount sufficient to exercise their options as each portion
of their options vests. The Company will forgive such loans and associated
accrued interest if the employee has been continuously employed by the Company
for four years after the date of each loan increment. In January 1999, for two
of the Company's officers, the Board voted to extend the maturity for each of
the loan increments by two years for all of the maturities. See further
discussion at "Directors and Officers -Transactions with Affiliates."

13
<PAGE>

1993 and 1997 Stock Option Plans

The 1993 Stock Option Plan ("1993 Plan") became effective on May 24, 1993 and
the 1997 Stock Option Plan ("1997 Plan") became effective on May 21, 1997 after
approvals by the Company's stockholders. Each plan is intended to be an
incentive stock option plan in accordance with the provisions of Section 422 of
the Internal Revenue Code of 1986, as amended. The Company has reserved
1,000,000 shares of Common Stock for issuance upon exercise of options under
each of the 1993 Plan and the 1997 Plan. The 1993 Plan and the 1997 Plan will
terminate on the earlier of March 28, 2003 and May 20, 2007, respectively, or,
assuming the grant of the maximum number of options available for grant under
the plans, the date on which all options granted under each of the plans have
been exercised in full.

Under both of the plans, the Board of the Company determines and designates from
time to time those employees of the Company to whom options are to be granted.
If any option terminates or expires prior to being exercised, the shares
relating to such option are released and may be subject to reissuance pursuant
to a new option. The Board has the right to, among other things, fix the price,
terms and conditions for the grant or exercise of any option. The purchase
price of the stock under each option shall be the fair market value of the stock
at the time such option is granted. Under the 1993 Plan, options granted vest
20% each year on the anniversary of the date of grant commencing with the first
anniversary. Under the 1997 Plan, the Board has the authority to set the
vesting schedule from 20% per year to 33 1/3% per year. Under both plans, the
employee must exercise the option within five years of the date each portion
vests.

Option Repricings

In March 1999, the Executive Officers were granted a total of 300,000 options,
which vest ratably over the next three years, under the 1997 Plan. The exercise
price of $5.51 was determined by using the average stock price for the ten
trading days prior to the grant date. The shares were issued as follows: Lanny
F. Outlaw 42,000, John F. Chandler 36,000, John C. Walter 36,000, Edward A.
Aabak 36,000, J. Burton Jones 30,000, Jeffery E. Jones 30,000, Brian E. Jeffries
30,000, William J. Krysiak 30,000 and Vance S. Blalock 30,000. In exchange, the
Executive Officers were required to relinquish a total of 246,200 vested and
unvested options at prices ranging from $18.63 to $34.00 per share (see table
under Ten-Year Option/SAR Repricings). The Compensation and Nominating Committee
believes that the granting of these options is a necessary incentive to induce
the Executive Officers to remain with the Company and provide the additional
efforts needed during this critical time in the Company's history.

1999 Stock Option Plan

14
<PAGE>

The following indexed graph indicates the Company's total return to its
stockholders from December 31, 1993 to December 31, 1998 as compared to total
return for the Standard & Poor's 500 Index and a Peer Group Index selected by
the Company, assuming a common starting point of $100 and that all dividends
were reinvested. The information contained in this graph is not necessarily
indicative of future Company performance.

COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG WESTERN GAS RESOURCES, INC., THE S&P 500INDEX AND A PEER GROUP**

[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>

Western Gas
Measurement Period Resources, S&P Peer Group
(Fiscal Year Covered) Inc. 500 Index (WGR)
- ------------------------------ ----------- --------- -----------
<S> <C> <C> <C>

Measurement Point - 12/31/93 $100.00 $100.00 $100.00
FYE December 31, 1994 59.00 101.00 89.00
FYE December 31, 1995 50.00 139.00 110.00
FYE December 31, 1996 61.00 171.00 145.00
FYE December 31, 1997 71.00 229.00 145.00
FYE December 31, 1998 19.00 294.00 95.00

</TABLE>
* $100 invested on 12/31/93 in stock or index. Total return includes
reinvestment of dividends (if applicable). Dates are for fiscal years ending
on December 31 in each of the years indicated.

** Peer (WGR) consists of 20 companies, including the Company. The other 19
companies in the Peer Group are as follows: Anadarko Petroleum Corp., Apache
Corp., Berry Petroleum Co., Cabot Oil & Gas Corp., Devon Energy Corp., KN
Energy Inc., Mitchell Energy and Development Corp., Murphy Oil Corp., Noble
Affiliates Inc., Oryx Energy Co., Pioneer Natural Resources Co., Pogo
Producing Co., Questar Corp., Ranger Oil Ltd., Santa Fe Energy Resources Inc.,
Seagull Energy Corp., Snyder Oil Corp., Triton Energy Corp. and Valero Energy
Corp. The total return for each company in the Peer Group has been weighted
for stock market capitalization. These companies are independent oil and
natural gas producers, gatherers, transporters and marketers of natural gas
and natural gas liquids and certain natural gas pipelines.

15
<PAGE>

INDEPENDENT ACCOUNTANTS

PricewaterhouseCoopers LLP served as the Company's independent accountants for
1998. A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting and will have an opportunity to make a statement if he desires to
do so and to respond to appropriate questions.

STOCKHOLDER PROPOSALS

Any stockholder proposals to be considered for inclusion in the Company's
solicitation of Proxies for the 2000 Annual Meeting of Stockholders must be
received by the Secretary of the Company (at 12200 North Pecos Street, Denver,
Colorado 80234) no later than January 15, 2000.

OTHER BUSINESS

All items of business expected to be brought before the meeting by management of
the Company are set forth in this Proxy Statement. Management knows of no other
business to be presented. If other matters of business not presently known to
management properly come before the meeting, it is intended that the persons
named in the Proxies will have discretionary authority to vote the shares
thereby represented in accordance with their best judgment.

THE ENCLOSED PROXY SHOULD BE COMPLETED, DATED, SIGNED AND RETURNED IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. PROMPT MAILING OF THE PROXY WILL BE APPRECIATED.

By Order of the Board of Directors,

WESTERN GAS RESOURCES, INC.

BRION G. WISE
Chairman of the Board and
Chief Executive Officer

Denver, Colorado
April 21,1999

16
<PAGE>
DETACH HERE

PROXY

WESTERN GAS RESOURCES, INC.

Annual Meeting of Stockholders - May 21, 1999

This Proxy is Solicited on Behalf of the Board of Directors

The undersigned hereby appoints Lanny F. Outlaw and John C. Walter, and each
of them, as Proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and to vote as designated below, all the shares of
common stock of Western Gas Resources, Inc. held of record by the undersigned on
the close of business on March 26, 1999, at the Annual Meeting of Stockholders
of Western Gas Resources, Inc., to be held on Friday, May 21, 1999 at 10:00
A.M., local time at the Embassy Suites Hotel, Remington III Ballroom, 1881
Curtis Street, Denver, Colorado 80202 and at any postponement or adjournment
thereof.

This proxy when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED IN ITEM 1 AND FOR THE APPROVAL
OF THE COMPANY'S 1999 STOCK OPTION PLAN IN PROPOSAL 2.

- ------------- -------------
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
- ------------- -------------

<PAGE>
WESTERN GAS RESOURCES

c/o EquiServe
P.O. Box 8040
Boston, MA 02266-8040

DETACH HERE

[X] Please mark
vote as in
this example.

1. ELECTION OF TWO CLASS ONE DIRECTORS.

Nominees: Richard B. Robinson and Brion G. Wise

FOR WITHHELD
[ ] [ ]

[ ]
---------------------------------------
For both nominees except as noted above

FOR AGAINST ABSTAIN
2. Proposal to approve the Company's [ ] [ ] [ ]
1999 Stock Plan

3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any postponement or
adjournments thereof.

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]

Please sign exactly as name appears on the left. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee or guardian please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.

Signature:___________________________ Date:__________

<PAGE>
Exhibit 10

WESTERN GAS RESOURCES, INC.

1999 STOCK OPTION PLAN

This Plan is established by Western Gas Resources, Inc., a Delaware
corporation, for certain employees of the Corporation who qualify as
participants, and shall be known as the Western Gas Resources, Inc. 1999 Stock
Option Plan. The Plan provides stock options for employees of the Corporation.
It is intended that options granted under the Plan constitute "incentive stock
options" within the meaning of (S) 422 of the Code and the Plan and any options
granted hereunder shall be construed accordingly.

1. Purpose. The purpose of the Plan is to enable certain of the Corporation's
-------
employees to participate in the growth and profitability of the Corporation by
providing a method whereby such employees may be encouraged to invest in the
Corporation's common stock on reasonable terms, to increase incentives to
contribute to the Corporation's future success and prosperity, and to allow them
to acquire a proprietary interest in the Corporation's business. Further, the
availability and offering of stock options under the Plan supports and
encourages employees to remain in the employ of the Corporation.

2. Definitions. The terms used herein shall have the following meanings:
-----------

(a) "Board" shall mean the Board of Directors of the Corporation.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(c) "Common Stock" shall mean the $0.10 par value common stock of
the Corporation which shall be authorized and unissued stock or treasury stock.

(d) "Corporation" shall mean Western Gas Resources, Inc., a Delaware
corporation, and any subsidiary thereof.

(e) "Disabled" shall mean an employee of the Corporation found to be
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death, or which has lasted, or can be expected to last, for a continuous period
of not less than twelve (12) months.

(f) "Disqualified Employee" shall mean an employee of the
Corporation who, either directly or indirectly at the time an option is granted,
owns more than ten percent (10%) of the total combined voting power of all
classes of stock of the Corporation or any subsidiary or parent of the
Corporation. For purposes of this determination, the employee shall be
considered as owning the stock owned, directly or

1
<PAGE>

indirectly, by or for his spouse, brothers and sisters (whether by whole or
half-blood), ancestors, and lineal descendants; and stock owned, directly or
indirectly, by or for a corporation, partnership, estate, or trust shall be
considered as being owned proportionally by or for a shareholder.

(g) "Fair Market Value" of stock shall mean the New York Stock
Exchange Composite Transactions average closing price for the Common Stock
reflected in The Wall Street Journal or another publication selected by the
Board for the ten (10) days preceding the day the Option is granted to each
eligible employee. If Shares of Common Stock have not been traded on the New
York Stock Exchange for more than 10 days immediately preceding the granting of
an Option, or if deemed appropriate by the Board for any other reason, the fair
market value of shares of Common Stock shall be as determined by the Board in
such other manner as it may deem appropriate.

(h) "Incentive Stock Option" shall mean any option which is intended
to meet and comply with the term "incentive stock option" as set forth in (S)
422 of the Code.

(i) "Option" shall mean an incentive stock option granted by the
Corporation under this Plan.

(j) "Optionee" shall mean an eligible employee of the Corporation
who has been granted an Option under this Plan.

(k) "Plan" shall mean the 1999 Stock Option Plan set forth in and by
this document and all subsequent amendments thereto.

(l) "Regulations" or "Regs." shall mean the Treasury Regulations
promulgated under the Code.

(m) "Stock Option Agreement" shall mean an agreement between an
Optionee and the Corporation which evidences the Optionee's right to acquire
Common Stock under the Plan and which contains terms and conditions consistent
with this Plan as approved by the Board.

3. Eligibility. Employees of the Corporation who have been employed by
-----------
the Corporation for at least one (1) year shall be eligible for selection to
participate in the Plan as determined from time to time by the Board. No Option
shall be granted to a Disqualified Employee.

4. Administration of Plan.
----------------------

(a) The Board of Directors of the Corporation shall administer the
Plan. The Board shall have the authority to: (i) construe and interpret the
Plan; (ii) define the terms used herein; (iii) determine the duration and
purpose of leaves of absence which may be granted to Optionees without
constituting a termination of their employment for the purposes of the Plan;
(iv) make all other determinations necessary or advisable for the administration
of the Plan; and (v) appoint a Committee to administer the Plan and to delegate
to that Committee all of the authority

2
<PAGE>

to administer the Plan in accordance with the provisions of this Agreement. The
determination of the Board in the matters referred to in this paragraph shall be
conclusive.

(b) The Board shall have power, subject to the limitations contained
herein, to fix the price, terms, and conditions for the grant or exercise of any
Option under the Plan.

(c) The Board may at any time cancel any unexercised stock options
awarded under the Plan, whether or not vested, if an Optionee engages in conduct
which the Board determines to be detrimental to the best interests of the
Corporation.

(d) The Board may at any time and from time to time amend, suspend,
or terminate the Plan and may amend the form of the Stock Option Agreement, in
such respects as it shall deem advisable; provided that such modification shall
not change: (1) the maximum number of shares for which Options may be granted;
(2) the Option price; (3) the period during which Options may be granted or
exercised; (4) the provisions relating to the class of persons eligible to
receive Options granted under the Plan; or (5) the provisions relating to
adjustments to be made upon changes in capitalization of the Corporation. Such
modification in the Plan shall not, without the consent of an Optionee, affect
such Optionee's rights under an Option previously granted to him.

(e) If the provisions of the Code or Regulations relating to
Incentive Stock Options are changed during the term of the Plan, the Board shall
have the power to alter the Plan to conform to such changes. The Board shall
have such authority without the necessity of obtaining further stockholder
approval unless such changes in the Code or Regulations require such approval.

5. Participants and Allotments. The Board may, from time to time, select
---------------------------
Optionees from the eligible class of employees and determine the terms and
provisions of the respective Stock Option Agreements (which need not be
identical), the times at which such Options shall be granted, and the number of
shares subject to each Option.

6. Shares Subject to Plan. The maximum number of shares from which
----------------------
Options may be granted under the Plan are Seven Hundred Fifty Thousand (750,000)
shares of the Corporation's authorized and unissued Common Stock. If any Option
granted under the Plan shall terminate or expire prior to exercise, in whole or
in part, the shares so released from the Option may be made the subject of
additional options granted under the Plan. The Corporation shall reserve and
keep available such number of shares of stock as will satisfy the requirements
of all outstanding options and grants under this Plan.

7. Option Price. The purchase price of the stock under each Option shall
------------
be the Fair Market Value of the stock subject to the Option at the time the
Option is granted.

8. Conditions for Exercise of Option.
---------------------------------

3
<PAGE>

(a) Notwithstanding anything to the contrary, no Option or portion
thereof granted under this Plan may be exercised after the earlier of (1) five
(5) years from the date the Optionee has the right to exercise such Option or
portion thereof as provided in Paragraph 8(b), below; or (2) ten (10) years from
the date the Option is granted.

(b) Except as expressly provided in Section 8(e) below, an Optionee
shall become entitled to exercise that portion of the Option to purchase the
percentage of the Common Stock subject to the Option in accordance with one of
the following vesting schedules which will be set forth in the Optionee's Stock
Option Agreement:

Five-Year Vesting Schedule:
--------------------------

(1) Commencing one year from the date of the grant, the
Optionee shall have the right to exercise twenty percent (20%) of the Option and
to purchase twenty percent (20%) of the Common Stock subject to the Option.

(2) Commencing two years from the date of the grant, the
Optionee shall have the right to exercise an additional twenty percent (20%) of
the Option and to purchase an additional twenty percent (20%) of the Common
Stock subject to the Option.

(3) Commencing three years from the date of the grant, the
Optionee shall have the right to exercise an additional twenty percent (20%) of
the Option and to purchase an additional twenty percent (20%) of the Common
Stock subject to the Option.

(4) Commencing four years from the date of the grant, the
Optionee shall have the right to exercise an additional twenty percent (20%) of
the Option and to purchase an additional twenty percent (20%) of the Common
Stock subject to the Option.

(5) Commencing five years from the date of the grant, the
Optionee shall have the right to exercise an additional twenty percent (20%) of
the Option and to purchase an additional twenty percent (20%) of the Common
Stock subject to the Option.

Four-Year Vesting Schedule:
--------------------------

(1) Commencing one year from the date of the grant, the
Optionee shall have the right to exercise twenty-five percent (25%) of the
Option and to purchase twenty-five percent (25%) of the Common Stock subject to
the Option.

(2) Commencing two years from the date of the grant, the
Optionee shall have the right to exercise an additional twenty-five percent
(25%) of the Option and to purchase an additional twenty-five percent (25%) of
the Common Stock subject to the Option.

(3) Commencing three years from the date of the grant, the
Optionee shall have the right to exercise an additional twenty-five percent
(25%) of the Option and to purchase an additional twenty-five percent (25%) of
the Common Stock subject to the Option.

4
<PAGE>

(4) Commencing four years from the date of the grant, the
Optionee shall have the right to exercise an additional twenty-five percent
(25%) of the Option and to purchase an additional twenty-five percent (25%) of
the Common Stock subject to the Option.

Three-Year Vesting Schedule:
---------------------------

(1) Commencing one year from the date of the grant, the
Optionee shall have the right to exercise thirty-three and one-third percent (33
1/3%) of the Option and to purchase thirty-three and one-third percent (33 1/3%)
of the Common Stock subject to the Option.

(2) Commencing two years from the date of the grant, the
Optionee shall have the right to exercise an additional thirty-three and one-
third percent (33 1/3%) of the Option and to purchase an additional thirty-three
and one-third percent (33 1/3%) of the Common Stock subject to the Option.

(3) Commencing three years from the date of the grant, the
Optionee shall have the right to exercise an additional thirty-three and one-
third percent (33 1/3%) of the Option and to purchase an additional thirty-three
and one-third percent (33 1/3%) of the Common Stock subject to the Option.

The Optionee's right to purchase the Common Stock subject to the Option, shall
be cumulative, so that as of the end of the vesting period, the Optionee shall
be entitled to exercise one hundred percent (100%) of the Option and to purchase
all of the Common Stock covered by the Option, subject to all of the provisions
of this Plan.

(c) Except as provided in Sections 8(d) and (e), an Optionee may
exercise an Option only if, at the time such Option is exercised, such Optionee
is an employee of and has continuously since the grant of the Option been an
employee of the Corporation.

(d) If an Optionee's employment with the Corporation is terminated
for any reason other than (i) his or her death or disability or (ii) his or her
discharge for dishonesty or commission of a crime, the Optionee may, within
sixty (60) days thereafter and subject to the provisions of Sections 8(a), (b)
and (c), exercise the Option or portion thereof to the extent it was exercisable
as of the date of termination of his or her employment. All unexercised Options,
or portions thereof, shall terminate, be forfeited, and shall lapse upon
expiration of said sixty (60) day period, or immediately if the Optionee's
employment is terminated for any of the reasons set forth in (ii) above.

(e) If an Optionee dies or becomes Disabled while employed by the
Corporation, all of the Options granted to such employee shall become one
hundred percent (100%) exercisable, without regard to the provisions of Section
8(b), above. In such event, the Options may be exercised by the Disabled
employee, or the person or persons to whom the deceased employee's rights under
the Option shall pass by will, or by the applicable laws of descent and
distribution; provided, however, that no such Option may be exercised after one
hundred eighty days (180) days from such employee's date of death, or
termination of employment

5
<PAGE>

as a result of Disability, whichever is applicable. Upon expiration of said
period, all unexercised Options, or portions thereof, shall terminate, be
forfeited, and shall lapse.

9. Method of Exercise.
------------------

(a) To exercise an Option, the Optionee, or his or her successors,
shall give written notice to the Corporation's Treasurer at the Corporation's
principal office accompanied by full payment of the Common Stock being purchased
and a written statement that the shares are purchased for investment and not
with a view to distribution. However, this statement shall not be required in
the event the Common Stock subject to the Option is registered with the
Securities and Exchange Commission. If the Option is exercised by the successor
of the Optionee, following his or her death, proof shall be submitted,
satisfactory to the Board, of the right of the successor to exercise the Option.

(b) Common Stock issued pursuant to this Plan which has not been
registered with the Securities and Exchange Commission shall bear the following
legend:

"The securities represented by this Stock Certificate have not been
registered under the Securities act of 1933 (the "Act") or applicable state
securities laws (the "State Acts"), and shall not be sold, pledged,
hypothecated, donated or otherwise transferred (whether or not for
consideration) by the holder, except upon the issuance to the Corporation
of a favorable opinion of its counsel and submission to the Corporation of
such other evidence as may be satisfactory to the Corporation to the effect
that any such transfer shall not be in violation of the Act and the State
Acts."

(c) The Corporation shall not be required to transfer and deliver
any stock certificate or certificates for shares purchased upon exercise of said
Options until after compliance with all then applicable requirements of law. In
no event shall the Corporation be required to issue fractional shares to the
Optionee.

(d) If the Corporation shall be advised by counsel that shares of
stock deliverable upon exercise of an Option are required to be registered under
the Securities Act of 1933, or that the consent of any other authority is
required for the issuance of same, the Corporation may effect registration or
obtain consent, and delivery of shares by the Corporation may be deferred until
registration is effected or consent obtained.

10. Rights To Terminate Employment. Nothing in this Plan or in any Stock
------------------------------
Option Agreement shall confer upon any participant the right to continue in the
employment of the Corporation or affect any right which the Corporation may have
to terminate the employment of such participant.

11. Amendments and Termination. The Board of Directors may amend,
--------------------------
suspend, discontinue or terminate the Plan, but no such action may, without the
consent of the Optionee, alter or impair his or her Option, except as provided
in Paragraph 8.

6
<PAGE>

12. Rights As Stockholders. No stock shall be issued until full payment
----------------------
for such stock has been made. The Optionee shall have no rights as a
stockholder with respect to optioned shares until the date of the issuance of
the stock certificate to him or her for such shares. No adjustments shall be
made for dividends (ordinary or extraordinary, whether in cash, securities, or
other properties) or distributions or other rights for which the record date is
prior to the date such certificate is issued.

13. Adjustments of and Change In Stock. No adjustment shall be made to
----------------------------------
the number of shares of Common Stock for which options are granted by the Plan
or the exercise price thereof as a result of any change in the number of issued
and outstanding shares of Common Stock. Provided, however, the number of shares
of Common Stock covered by outstanding Options, as well as the exercise price,
shall be adjusted proportionately for any increase or decrease in the number of
outstanding shares of Common Stock resulting from a stock split, the payment of
a stock dividend with respect to the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. In addition, in the event of a dissolution or
liquidation of the Corporation, a merger of the Corporation, or sale of all or
substantially all of the assets of the Corporation, the Corporation shall take
such action as may be necessary to enable the Optionee to receive, in lieu of
shares of Common Stock, securities or other assets that were issued or payable
upon such event in receipt of or in exchange for such shares of Common Stock.

14. Stock Option Agreement. The granting of an Option under this
----------------------
Agreement occurs only by a written Stock Option Agreement, effective on the date
set forth therein, substantially in the form attached hereto and marked Exhibit
1, executed by and on behalf of the Corporation and the employee to whom the
Option is granted, and such executed Agreement is delivered to the Corporation.

15. Nonassignability. No Option granted under this Plan shall be
----------------
assignable or transferable in any manner voluntarily, involuntarily, or by
operation of law, except by will or by the laws of descent and distribution.
During the life of such recipient, an Option shall be exercisable only by such
person or by such person's guardian or legal representative.

16. Period of Plan. No Options shall be granted on or after _______ ____,
--------------
2009. The Plan shall terminate on the later of (1) ________ ____, 2009; (2) the
date on which all Options

7
<PAGE>

granted under the Plan have expired; or (3) the date on which all Options
granted under the Plan have been exercised in full.

ADOPTED BY THE BOARD OF DIRECTORS
OF WESTERN GAS RESOURCES, INC.

By:
- ------------------ ------------------------------------
Date [Name] [Title]

ATTEST:

- -------------------------------

<PAGE>
Exhibit 10.1

WESTERN GAS RESOURCES, INC.
1999 STOCK OPTION PLAN AGREEMENT
(Five Year Vesting Schedule)

THIS AGREEMENT, made effective the ____ day of __________, 1999, by and
between Western Gas Resources, Inc. (hereinafter called the "Company"), a
Delaware corporation, and ________________________, an employee of the Company
(hereinafter called the "Optionee").

R E C I T A L S:

I. The Optionee is eligible as an employee of the Company to participate in
the Western Gas Resources, Inc. 1999 Stock Option Plan (the "Plan").

A. The Board of Directors of the Company considers it desirable and in
the Company's best interests that the Optionee be given an opportunity to
purchase shares of its Common Stock in furtherance of the Plan to provide
incentive for the Optionee to remain in the employ of the Company and to promote
the success of the Company.

NOW, THEREFORE, in consideration of the premises, it is agreed as follows:

1. Grant of Option. The Company hereby grants to the Optionee the right,
---------------
privilege and option to purchase _______ shares of the Common Stock of the
Company, at a purchase price of ____ Dollars and __ cents ($_____) per share in
the manner and subject to the conditions hereafter provided. Said purchase
price is not less than the fair market value of the shares of Common Stock of
the Company at the time this option was granted.

2. Period of Exercise of Option. This Option may be exercised in whole
----------------------------
or in part, or in installments, from time to time, with respect to the shares
covered hereby, in the amounts and at the times specified below. The Option or
any portion thereof, once it becomes exercisable as specified below, shall
remain exercisable until it shall expire in accordance with the provisions of
this Agreement.

(a) Notwithstanding anything to the contrary, no Option or portion thereof
granted under this Agreement may be exercised after the earlier of (i) five
years after the date the Optionee has the right to exercise such Option or
portion thereof, in accordance with paragraph 2(b), below; or (ii) ten years
after the date the Option is granted.

(b) Options granted under this Agreement may be exercised following the
date each such Option or portion thereof becomes vested, pursuant to the
following vesting schedule:

1
<PAGE>

The Optionee's right to purchase Shares subject to the Option shall be
cumulative, so that five (5) years from the date of the grant, the Optionee
shall be entitled to exercise one hundred percent (100%) of the Option, and to
purchase all of the Common Stock subject to the Option, subject to all of the
provisions of this Agreement.

(c) Except as provided in Sections 2(d) and 2(e), an Optionee may exercise
an Option only if, at the time such Option is exercised, such Optionee is an
employee of, and has continuously since the grant of the Option, been an
employee of the Corporation.

(d) If an Optionee's employment is terminated for any reason other than
(i) his or her death or disability; or (ii) his or her discharge for dishonesty
or commission of a crime, the Optionee may, within sixty (60) days thereafter,
and subject to provisions of Sections 2(a), (b) and (c), exercise the Option to
the extent that the Option was exercisable as of the date of termination of his
or her employment. All unexercised Options, or portions thereof, shall
terminate, be forfeited, and shall lapse upon expiration of said sixty (60) day
period, or immediately if the employment of the Optionee is terminated by the
Corporation for any of the reasons set forth in (ii), above.

(e) If an Optionee dies or becomes disabled while he is an employee of the
Corporation, or ceases to be employed as a result of disability, all of the
Options granted to such employee shall become one hundred percent (100%)
exercisable, without regard to the provisions of Section 2(b), above. In such
event, the Options may be exercised by the disabled employee, or the person or
persons to whom his or her rights under the Option shall pass by will, or by the
applicable laws of descent and distribution; provided, however, that no such
Option may be exercised after 180 days from such employee's date of death, or
termination of employment as a

2
<PAGE>

result of disability, whichever is applicable. Upon expiration of said period,
all unexercised Options, or portions thereof, shall terminate, be forfeited, and
shall lapse.

3. Method of Exercise.
------------------

(a) To exercise an Option, the Optionee, or his or her successors, shall
give written notice to the Corporation's Treasurer at the Corporation's
principal office accompanied by full payment of the Common Stock being purchased
and a written statement that the shares are purchased for investment and not
with a view to distribution. However, this statement shall not be required in
the event the Common Stock subject to the Option is registered with the
Securities and Exchange Commission. If the Option is exercised by the successor
of the Optionee, following his or her death, proof shall be submitted,
satisfactory to the Board, of the right of the successor to exercise the Option.

(b) Common Stock issued pursuant to this Plan which has not been
registered with the Securities and Exchange Commission shall bear the following
legend:

(c) The Corporation shall not be required to transfer and deliver any
stock certificate or certificates for shares purchased upon exercise of said
Options until after compliance with all then applicable requirements of law. In
no event shall the Corporation be required to issue fractional shares to the
Optionee.

(d) If the Corporation shall be advised by counsel that shares of stock
deliverable upon exercise of an Option are required to be registered under the
Securities Act of 1933, or that the consent of any other authority is required
for the issuance of same, the Corporation may effect registration or obtain
consent, and delivery of shares by the Corporation may be deferred until
registration is effected or consent obtained.

4. Treatment as Incentive Stock Options. It is intended that the Options
------------------------------------
granted hereunder constitute "incentive stock options" within the meaning of
(S)422 of the Internal Revenue Code of 1986, as amended, provided, however, that
to the extent that the aggregate fair market value of the stock with respect to
which Options are exercisable for the first time by Optionee during any calendar
year under all of the Company's plans exceeds $100,000, such Options shall be
treated as options which are not incentive stock options.

3
<PAGE>

5. Limitation Upon Transfer. Except as otherwise provided herein, the
------------------------
option and all rights granted hereunder shall not be transferred by the
Optionee, and may not be assigned, pledged, or hypothecated in any way and shall
not be subject to execution, attachment or similar process. Upon any attempt to
transfer the option, or to assign, pledge, hypothecate or otherwise dispose of
such Option or of any rights granted hereunder, contrary to the provisions
hereof, or upon the levy of any attachment or similar process upon such option
or such rights, such option and such rights shall immediately become null and
void.

6. Adjustments of and Change In Stock. No adjustment shall be made to
----------------------------------
the number of shares of Common Stock for which Options are granted by the Plan
or the exercise price thereof as a result of any change in the number of issued
and outstanding shares of Common Stock; except that the number of shares of
Common Stock covered by outstanding Options, as well as the exercise price,
shall be adjusted proportionately for any increase or decrease in the number of
outstanding shares of Common Stock resulting from a stock split, the payment of
a stock dividend with respect to the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. In addition, in the event of a dissolution or
liquidation of the Corporation, a merger of the Corporation, sale of all or
substantially all of the assets of the Corporation, the Corporation shall take
such action as may be necessary to enable the Optionee to receive, in lieu of
shares of Common Stock, securities or other assets that were issued or payable
upon such event in receipt of or in exchange for such shares of Common Stock.

7. Rights of Stockholder. Neither the Optionee, his or her legal
---------------------
representative, nor other persons entitled to exercise the option shall be or
have any rights of a stockholder in the Company in respect of the shares
issuable upon exercise of the option granted hereunder, unless and until
certificates representing such shares shall have been delivered pursuant to the
terms hereof.

8. Rights of Employees. Nothing contained in this Agreement shall confer
-------------------
upon Optionee any right to continued employment by the Company or limit, in any
way, the right of the Company or any subsidiary or parent of the Company to
terminate an Optionee's employment at any time.

9. Stock Reserved. The Company shall at all times during the term of
--------------
this Agreement reserve and keep available such number of shares of its Common
Stock as will be sufficient to satisfy the terms of this Agreement.

10. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of any successor or successors of the Company.

11. Incorporation of Plan by Reference. The Option is granted pursuant to
----------------------------------
the terms of the Plan, the terms of which are incorporated herein by reference,
and the Option shall, in all respects, be interpreted in accordance with the
Plan. The Company shall interpret and construe the Plan and this instrument,
and its interpretations and determinations shall be conclusive and

4
<PAGE>

binding on the parties hereto and any other person claiming an interest
hereunder, with respect to an issue arising hereunder or thereunder.

12. Governing Law. The validity, construction, interpretation, and effect
-------------
of this document shall be exclusively governed by and determined in accordance
with the laws of the State of Colorado, except to the extent preempted by
federal law which shall to the extent govern.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.

ATTEST:

____________________________________ ____________________________________
Secretary President

WITNESS:

____________________________________ ____________________________________
Optionee

5
<PAGE>

EXHIBIT (i)

Western Gas Resources, Inc.
12200 North Pecos,
Denver, Colorado 80234-3439

Ladies and Gentlemen:

This will confirm my understanding with respect to the shares to be issued
(or reissued) to me by reason of my exercise this date of certain stock option
rights granted to me by Western Gas Resources, Inc. for the purchase of ______
shares of Common Stock (the "Shares") as follows:

a. I am acquiring the Shares for my own account for investment with no
present intention of dividing my interest with others or of reselling or
otherwise disposing of any of the Shares.

b. The Shares are being issued without registration under the Securities
Act of 1933 (the "Act") in reliance upon the private offering exemption
contained in Section 4(2) of the Act, and such reliance is based, in part, on
the above representation.

c. The certificate for the shares of stock to be issued will bear the
following legend:

"The securities represented by this stock certificate have not been
registered under the Securities Act of 1933 (the "Act") or applicable state
securities laws (the "State Acts") and shall not be sold, pledged,
hypothecated, donated, or otherwise transferred (whether or not for
consideration) by the holder except upon the issuance to the Corporation of
a favorable opinion of its counsel or submission to the Corporation of such
other evidence as may be satisfactory to counsel for the Corporation, to
the effect that any such transfer shall not be in violation of the Act and
the State Acts."

Appropriate stop-transfer instructions will be issued by the Company to its
transfer agent.

d. Since the shares have not been registered under the Act, they must be
held indefinitely until an exemption from the registration requirements of the
Act is available or they are subsequently registered, in which event the
representation in Paragraph (a) hereof shall terminate.

e. These understandings shall not preclude a sale in compliance with
Rule 144 under the Act, as such rule may be amended and in effect at the time.
Sales of the shares made in reliance upon Rule 144 may only be made if the Rule
is then available and then only in limited amounts in accordance with the terms
and conditions of the Rule as in effect at the time of said sales. I agree to
furnish you, prior to such sale, an executed copy of the related Form 144,
written

1
<PAGE>

confirmation of compliance with the Rule by myself and the broker executing the
sale, an opinion of counsel satisfactory to you that the sale does not require
registration under the Act, and such other evidence as you shall request of
compliance under the Rule.

f. Western Gas Resources, Inc. is not obligated to comply with the
registration requirements of the Act or with the requirements for an exemption
under Regulation A under the Act for my benefit.

Date:
________________ _____________________________________