Fitch Affirms Western Gas Partners at 'BBB-'; Outlook Negative

Fitch Ratings has affirmed its 'BBB-' Issuer Default Rating (IDR) and senior unsecured rating on Western Gas Partners, LP (WES). The Rating Outlook is Negative. Roughly $948 million of debt is affected by today's rating action.

WES' ratings reflect its conservative financial profile which is supported by fee-based and fixed-priced contracts that limit commodity price exposure, as well as the strong credit linkage with its sponsor and general partner, Anadarko Petroleum Corporation (APC, Fitch IDR 'BBB-', Negative Outlook). WES is a growth-oriented MLP formed by APC in 2008 to own, operate, acquire and develop midstream energy assets, including gathering, processing, compressing, treating, and transporting natural gas, condensate, natural gas liquids (NGL) and crude. APC owns approximately 46% of the company through ownership of LP units (44%) and the 2% GP interest.

Key Credit Considerations:

Close linkage to Anadarko: WES' management and operations are strongly tied to APC, a large and diverse exploration and production company with a significant inventory of North American midstream assets that are potentially available for future dropdowns. APC volumes represent the vast majority of WES' throughput at 74% and are generally under fee based and/or fixed price contracts. Additionally, Anadarko acts as a hedging counterparty for non-APC volumes under percent of proceeds (POP) and keep whole contracts with third parties at formerly APC-owned facilities.

Unlike its competitors, WES is able to directly hedge exposures to both natural gas and NGL components by entering into fixed price agreements with APC for actual volumes produced and/or received for longer periods of time than are typically available in the market. The hedging arrangements allow WES to substantially reduce commodity price exposure, thus reducing cash flow volatility and business risk.

The Negative Outlook primarily reflects the potential for Macondo spill-related costs to exceed Fitch estimates and the impact such costs could have on APC's debt levels and overall credit profile. APC reached a settlement with BP in October 2011 which quantifies a portion of the potential claims against the company but does not provide indemnification against other possible fines, penalties, and potential other claims, including punitive damages. Fitch believes APC has the capacity to fund cash requirements of up to approximately $6 billion via the use of existing cash balances and asset sales of largely non-producing properties and still remain investment grade. For its part, Anadarko does not consider the remaining items a significant financial risk to the company.

Favorable Contract Mix and Managed Commodity Exposure: WES' contract mix is largely fee-based/fixed priced or hedged. Unlike many of its competitors, WES is able to hedge POP and Keep Whole exposure with product specific hedges as opposed to proxy hedges that many others use. This limits WES' exposure to breakdowns in the correlation of gas to crude and NGLs. Volume risk is still a concern as lower throughput can be driven by reduced drilling activity by producers in a low commodity price environment and/or due to bypass of NGL processing facilities when natural gas prices are very high. This risk is somewhat mitigated by currently low gas prices in the regions in which WES provides midstream services as well as the presence of cost-of-service adjustments and demand charges at several properties.

Strategic Location of Assets: WES' assets are focused primarily within liquids-rich basins which are strategic for APC and other producers given the value of the NGLs in the current low gas price environment. WES' assets are located in East and West Texas, the Rocky Mountains, and the Mid-Continent, and include gathering, processing, compressing, treating, and transporting natural gas, condensate, NGLs and crude,

Somewhat Limited Size & Scale: While WES has grown since its IPO, scale remains a concern although this risk is offset by the relationship with APC and the availability of asset drops. Through dropdowns from its general partner, WES is able to complete asset acquisitions at reasonable EBITDA multiples.

Conservative Financial Policies: WES' financial profile is fairly conservative with a targeted 50/50 debt to equity capital structure. Fitch expects Debt to Operating EBITDA between 3.0 to 3.25 times (x) and distribution coverage well in excess of 1.25x for 2012.

Catalysts for a positive rating action may include:

--Stabilization or improvement in the credit profile of APC.

Catalysts for a negative rating action may include:

--Negative ratings action at APC;

--Negative change in sponsor support, contract mix, or in hedging arrangements.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology', Aug. 12, 2011;

--'Parent and Subsidiary Rating Linkage', July 14, 2011.

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647229

Parent and Subsidiary Rating Linkage

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=647210

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Contacts:

Fitch Ratings
Primary Analyst
Peter Molica
Director
Fitch, Inc.
[phone],
One State Street Plaza,
New York, NY 10004
or
Secondary Analyst
Ralph Pellecchia
Senior Director
[phone]
or
Committee Chairperson
Mark C. Sadeghian, CFA
Senior Director
[phone]
or
Media Relations
Brian Bertsch
[phone]
[e-mail]