Western Gas Resources, Inc. Announces Second Quarter 2006 Results

DENVER, Aug. 8  /PRNewswire-FirstCall/ -- Western Gas Resources, Inc. (NYSE:WGR) today announced that for the quarter ended June 30, 2006, net income increased 13 percent to $42.4 million, or earnings of $0.55 per share of common stock.  This compares to net income of $37.6 million, or earnings of $0.50 per share of common stock, for the same period in 2005.

For the six months ended June 30, 2006, net income increased 82 percent to $104.2 million, or earnings of $1.37 per share of common stock.  This compares to net income of $57.3 million, or earnings of $0.76 per share of common stock, for the same period in 2005.  Earnings per share of common stock for all periods are presented on a fully-diluted basis.

For the quarter ended June 30, 2006, revenues were $787.2 million, EBITDA (earnings before interest, taxes, depreciation and amortization) was $109.6 million and cash flow before working capital adjustments was $109.0 million.  For the six months ended June 30, 2006, revenues were $1.8 billion, EBITDA (earnings before interest, taxes, depreciation and amortization) was $244.3 million and cash flow before working capital adjustments was $224.6 million.  See the tables below for a reconciliation of EBITDA and cash flow before working capital adjustments.

The financial results for all periods included the effect of non-cash mark-to-market changes in the value of forward transactions related to the Company's marketing activities and basis hedges for sales of the Company's equity natural gas.  Pre-tax earnings for the quarter ended June 30, 2006 include a gain of $1.3 million from such non-cash items and pre-tax earnings for the quarter ended June 30, 2005 include a gain of $11.1 million for similar items.  Pre-tax earnings for the six months ended June 30, 2006 include a gain of $5.5 million from such non-cash items and pre-tax earnings for the six months ended June 30, 2005 include a loss of $17.6 million for similar items.  The impact of non-cash mark-to-market changes will vary depending on the change in the forward price of natural gas related to the anticipated withdrawal of inventory from storage or the changes in the relative prices at various delivery points.

Volumes and prices.  Net production was 17.7 billion cubic feet equivalent ("Bcfe") and averaged 194 million cubic feet equivalent per day ("MMcfed") in the second quarter of 2006, representing a 17 percent increase compared to the same period in 2005.  Gas throughput volumes at the Company's gathering and processing facilities averaged 1.4 billion cubic feet per day ("Bcfd") in the second quarter of 2006, representing a three percent increase compared to the same period in 2005.

Total gas sales volumes marketed, including equity gas production, gas purchased under contracts at the Company's plants and gas purchased from third parties for resale, averaged 1.1 Bcfd in the second quarter of 2006.  Average gas prices realized for marketed volumes for the quarter decreased six percent to $5.99 per thousand cubic feet ("Mcf") compared to $6.38 per Mcf for the same period in 2005.

Total natural gas liquids ("NGLs") sales volumes marketed averaged 1.8 million gallons per day in the second quarter of 2006.  Average NGL prices realized for marketed volumes for the quarter increased 30 percent to $1.14 per gallon compared to $0.88 per gallon for the same period in 2005.

The Company's equity hedging positions increased operating profit by $12.3 million for the second quarter of 2006 compared to a decrease in operating profit of $657,000 in the second quarter of 2005.

Balance sheet.  At June 30, 2006, Western had total assets of $2.5 billion, cash and cash equivalents in short-term investments of $3.9 million, total long-term debt outstanding of $572.0 million and a debt to capitalization ratio, net of cash and cash equivalents of 36 percent.

Powder River Basin.  Net coal bed methane ("CBM") production volumes increased 19 percent to 12.2 Bcf net in the second quarter of 2006 compared to the same period in 2005 and averaged 134 MMcfd.  In June 2006, the Company's gross CBM production from the Big George fairway averaged approximately 218 MMcfd, a 123 percent increase from a year ago, from nine development areas.  Industry, including Western, was producing over 368 MMcfd in May 2006 from the Big George coal over a 1,800 square-mile area.

Greater Green River Basin.  Production from the Greater Green River Basin, primarily in the Pinedale Anticline and Jonah Field development areas, increased 13 percent to 4.3 Bcfe net in the second quarter of 2006 compared to the same period of 2005 and averaged 47 MMcfed.

Revisions to operational performance guidance for the remainder of 2006. As a result of the Company's proposed merger, with a wholly-owned subsidiary of Anadarko Petroleum Corporation, announced on June 23, 2006, the Company is not providing updates or modifications to the previous guidance at this time.

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

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding drilling activity, production, new well locations, gross operating margin and operating expenses.  Although the Company believes that its expectations are based on reasonable assumptions, Western can give no assurances that its goals will be achieved.  These statements are subject to numerous risks and uncertainties, which may cause actual results to differ materially.  These risks and uncertainties include, among other things, changes in natural gas and NGL prices, the timeliness of federal and state permitting activity, the drilling budgets and schedules of third parties on the Company's non-operated properties, government regulation or action, geological risk, environmental risk, weather, rig availability, transportation capacity and other factors as discussed in the Company's 10-K and 10-Q Reports and other filings with the Securities and Exchange Commission.

  Financial Results:
  (Dollars in thousands except share and per share amounts)

                               Quarter                    Six Months
                            Ended June 30,              Ended June 30,
                         2006          2005          2006          2005

  Revenues:
   Sale of gas          $576,716     $678,087    $1,348,377    $1,374,306
   Sale of natural
    gas liquids          171,986      149,481       339,402       282,450
   Gathering,
    processing
    and transportation    27,573       27,823        54,273        51,703
   Price risk
    management
    activities             9,233       11,205        30,213        (9,043)
  Other                    1,666        1,430         3,990         2,717
  Total Revenues         787,174      868,026     1,776,255     1,702,133
  Costs and Expenses:
   Product purchases    $592,861     $707,516    $1,368,993    $1,414,870
   Plant and
    transportation
   operating expense      29,963       26,831        62,179        54,530
   Oil and gas
    exploration
    and production
    expense               35,909       24,059        64,427        48,955
   Depreciation,
    depletion and
    amortization          35,924       30,799        71,286        59,877
   Selling and
    administrative
    expense               21,296       17,536        41,144        30,096
   (Earnings) from
    equity investments    (2,440)      (2,246)       (4,814)       (4,380)
   Interest expense        5,419        4,033         8,604         7,553
  Total costs and
   expenses              718,932      808,528     1,611,819     1,611,501
  Income before taxes     68,242       59,498       164,436        90,632
  Provision for
   income taxes           25,873       21,869        60,205        33,297
  Net Income             $42,369      $37,629      $104,231       $57,335
  Weighted average
   shares of common
   stock outstanding  75,459,422   74,234,424    75,269,376    74,191,346
  Earnings per share
   of common stock         $0.56        $0.51         $1.38         $0.77
  Weighted average
   shares of common
   stock outstanding
    - assuming
   dilution           76,718,838   75,678,389    76,509,330    75,603,310
  Earnings per share
   of common stock
   - assuming dilution     $0.55(1)     $0.50(2)      $1.37(3)      $0.76(4)


  (1)  Fully-diluted earnings per share for the quarter ended June 30, 2006
       include, as potential common shares, the issuance of 1.3 million
       common shares from the possible exercise of stock options.

  (2)  Fully-diluted earnings per share for the quarter ended June 30, 2005
       include, as potential common shares, the issuance of 1.4 million
       common shares from the possible exercise of stock options.

  (3)  Fully-diluted earnings per share for the six months ended June 30,
       2006 include, as potential common shares, the issuance of 1.2 million
       common shares from the possible exercise of stock options and
       restricted stock.

  (4)  Fully-diluted earnings per share for the six months ended June 30,
       2005 include, as potential common shares, the issuance of 1.4 million
       common shares from the possible exercise of stock options.



  Condensed Consolidated Balance Sheet:
  (Dollars in thousands)

                                                  June 30,      December 31,
  Assets:                                           2006           2005
    Current assets                                $492,955       $676,193
    Property and equipment, net                  1,890,203      1,558,321
    Other assets                                   104,445        100,120
  Total assets                                  $2,487,603     $2,334,634
  Liabilities and Stockholders' Equity:
  Liabilities:
    Current liabilities                          $ 461,885       $609,658
    Long-term debt                                 572,000        430,000
    Other liabilities                              427,364        391,517
  Total liabilities                              1,461,249      1,431,175
  Stockholders' equity                           1,026,354        903,459
  Total liabilities and
   stockholders' equity                         $2,487,603     $2,334,634



  Reconciliation of Net Income to EBITDA:
  (Dollars in thousands)

                                  Quarter                 Six Months
                              Ended June 30,           Ended June 30,
                          2006         2005          2006         2005
  Net Income             $42,369      $37,629     $104,231      $57,335
  Add:
    Depreciation,
     depletion and
     amortization         35,924       30,799       71,286       59,877
    Interest expense       5,419        4,033        8,604        7,553
    Income taxes          25,873       21,869       60,205       33,297
  EBITDA                $109,585      $94,330     $244,326     $158,062

  EBITDA is not a measure determined pursuant to generally accepted
  accounting principles, or GAAP, nor is it an alternative to GAAP income.
  The Company is presenting this information, as it is a measure of
  financial performance used in the Company's credit facilities to monitor
  the Company's ability to perform under these facilities.



  Reconciliation of Net Income to
  Cash Flow before Working Capital Adjustments:
  (Dollars in thousands)

                                Quarter                   Six Months
                            Ended June 30,              Ended June 30,
                           2006         2005        2006          2005
  Net Income             $42,369      $37,629     $104,231      $57,335
  Add income items that
   do not affect
   operating cash flows:
    Depreciation,
     depletion and
     amortization         35,925       30,799       71,286       59,877
    Deferred income
     taxes                22,855       15,697       44,900       19,775
    Excess tax benefits
     from share-based
     payment awards         (895)          --       (2,379)          --
    (Gain) loss on
     sale of assets          (20)          (1)       1,024           27
    Non-cash change in
     fair value of
     derivatives          (1,283)     (11,063)      (5,465)      17,614
    Compensation expense
     from common
     stock options
     and restricted
     stock                 6,986          653       11,637          926
    Other non-cash
     items, net            3,043         (312)        (587)      (1,532)
  Cash flow before
   working capital
   adjustments         $ 108,980      $73,402     $224,647     $154,022
  Net working capital
    adjustments          (31,326)     (30,696)      41,017        6,080
  Net cash provided
   by operating
   activities            $77,654      $42,706     $265,664     $160,102

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



  Operating Results:
  (Dollars in thousands except per MMcfed, per MMcfd and per Mgal amounts)

                                Quarter                     Six Months
                              Ended June 30,             Ended June 30,
                           2006          2005          2006          2005
  Exploration and
   Production:
  Average gas production
    - net volumes
    sold (MMcfed)            197          167          193          165
  Average gas
   price ($/Mcfe) (1)      $4.92        $5.37       $ 5.53        $5.17
  Gathering and
   transportation
   expense ($/Mcfe)        $0.83        $0.76       $ 0.84        $0.79
  Average wellhead
   gas price ($/Mcfe) (2)  $4.09        $4.61       $ 4.69        $4.38
  Production
   taxes ($/Mcfe)          $0.78        $0.59       $ 0.72        $0.53
  LOE ($/Mcfe) (3)         $0.93        $0.80       $ 0.85        $0.83
  Other expense
   ($/Mcfe) (4)            $0.19        $0.12       $ 0.16        $0.18
  Effect of
   equity hedges
   and other
   basis swaps           $11,844         $378      $21,483       $1,604
  Non-cash change in
   fair value
   of derivatives           $362          $--      $(5,316)         $--
  Segment - operating
   profit               $ 51,806      $47,513     $119,943      $86,462
  Depreciation,
   depletion and
   amortization         $ 19,745      $16,899      $38,881      $32,528

  Gas Gathering
   and Processing:
  Gas throughput
   volumes (MMcfd)         1,436        1,394        1,410        1,375
  Gross operating
   margin ($/Mcf) (5)      $0.75        $0.60        $0.71        $0.62
  Plant operating
   expense ($/Mcf) (5)     $0.22        $0.20       $ 0.24        $0.21
  Effect of
   equity hedges            $952      $(1,035)      $2,053      $(1,774)
  Income from
   equity investments     $2,440       $2,246       $4,814       $4,380
  Non-cash change in
   fair value
   of derivatives        $(1,630)        $(37)     $(1,755)       $(125)
  Segment -
   operating profit      $70,700     $ 50,944     $126,933     $103,232
  Depreciation,
   depletion and
   amortization          $13,472     $ 11,594      $27,076      $22,872

  Gas Transportation:
  Gas transportation
   volumes (MMcfd)           126          139          131          148
  Transportation
   and sales revenue      $5,505       $5,431      $11,687      $11,368
  Operating and
   product purchase
   expense                $1,794       $2,429       $3,930       $5,098
  Segment -
   operating profit       $3,711       $3,002       $7,757       $6,270
  Depreciation,
   depletion and
   amortization             $454         $436         $917         $839

  Marketing:
  Average gas
   sales (MMcfd)           1,082        1,162        1,094        1,231
  Average NGL
   sales (Mgald)           1,790        1,876        1,813        1,819
  Average gas
   price ($/Mcf)           $5.99        $6.38        $6.86        $6.13
  Average NGL
   price ($/Gal)           $1.14        $0.88        $1.07        $0.86
  Average gas
   sales margin
   ($/Mcf) (6)          $ (0.008)    $ (0.025)      $0.060       $0.030
  Average NGL
   sales margin
   ($/Gal)                $0.016       $0.010       $0.016       $0.008
  Non-cash change
   in fair value
   of derivatives         $2,551      $11,099      $12,536     $(17,488)
  Segment -
   operating profit       $4,252      $10,239      $29,510      $(8,164)
  Depreciation,
   depletion and
   amortization               $2          $35           $3          $71

  (1) Net of fuel and shrink.
  (2) Net of fuel, shrink, gathering and transportation.  Excludes the
      effect of hedging.
  (3) Includes production overhead.
  (4) Includes delay rentals, geological and geophysical expense, impairment
      and unsuccessful well expense.
  (5) Per Mcf of throughput.  Gross operating margin is gross revenues less
      product purchases and joint interest and excludes effect of hedging.
  (6) Excludes non-cash change in fair value of derivatives.


DATASOURCE: Western Gas Resources, Inc.



CONTACT:  Investors, Ron Wirth, Director of Investor Relations of Western

Gas Resources, Inc., [phone], 



Web site:  http://www.westerngas.com/

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