Good day and welcome to the Western Gas First Quarter 2016 Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. Benjamin Fink. Please go ahead, sir.

Thank you. I am glad you could join us today to discuss Western Gas’ first quarter 2016 results. I would like to remind you that today’s presentation includes forward-looking statements and certain non-GAAP financial measures. Be aware that actual results could differ materially from what we discussed today and I would encourage you to read our full disclosure on forward-looking statements and the non-GAAP reconciliations attached to last night’s earnings release and to the slides that we will reference on this call. With that, I will turn the call over to Don Sinclair. And following his remarks, we will open it up for Q&A with Don and the rest of our executive team. Don?

Thanks, Ben and happy birthday. Good morning, everyone and thank you for joining us today. Last night, we announced our first quarter results for 2016. Our quarter was highlighted by continued strong performance in DJ Basin closing the Springfield acquisition that we discussed on our last call and the resumption of operations at our DBM Complex. Ramsey III came back online at the beginning of April and we have made significant progress towards the completion of Ramsey IV and V. Last month, we also closed the over-allotment option related to our convertible preferred offering, which brought in additional $248 million of net proceeds. As previously announced, we raised the WES quarterly distribution to $0.815 per unit, which is a 12% increase over the first quarter of last year. We also raised the WGP quarterly distribution to $0.42375 per unit, which is a 24% increase over Q1 of 2015. Turning to our quarterly results, reported adjusted EBITDA of $231.1 million and distributable cash flow of $191.9 million demonstrating yet another quarter of strong performance. As you saw in our earnings release, we are now providing supplemental information related to our distribution coverage ratio and I will have Ben walk you through that later in the call. The drivers behind Western’s first quarter results were sequential natural gas throughput growth in the DJ Basin and an uptick in Marcellus volumes due to flush production related to wells coming back online. Delaware Basin gathering volumes were up sequentially, while Delaware processing volumes were significantly lower due to Ramsey being offline for the entire quarter. Both our gross margin per Mcf and gross margin per barrel were higher than what we reported the previous quarter due to the inclusion of the Springfield assets. Now, I will ask Ben to talk about distribution coverage.

Thanks, Don. We will continue to report distribution coverage as we always have. Using the traditional calculation, our first quarter coverage ratio was 1.21x. Note that due to recasting, Q1 included a full quarter of Springfield earnings, but only 18 days of financing cost associated with the convertible preferred offering, which closed on March 14. This quarter we have also provided our estimate of distribution coverage if we include expected reimbursements under our business interruption insurance policy. Our estimate of potential recoveries for the quarter is $11 million to $15 million. We then took the midpoint of this range and added it to distributable cash flow and divided that sum by total distributions. Using this methodology, the resulting ratio was 1.29 times. We believe the supplemental ratio approximates what coverage would be if we were able to record accruals for our estimated recoveries. We will continue to provide the supplemental information every quarter until our business interruption claim is settled. Now, I will hand it back to Don.

Thanks, Ben. Our 2016 outlook is unchanged from what we provide in February, including all guidance related to the timing of our major capital projects. Note this outlook does not include the effect of any potential future acquisitions. Any acquisitions we pursue would be additive to this outlook, we would update guidance consistent with our past practice. With that operator, I would like to open up the line for questions.

[Operator Instructions] And our first question comes from Kristina Kazarian of Deutsche Bank. Please go ahead.

Hey, guys and happy birthday, Ben. I know that given pricing is really volatile, it’s hard to have an outlook on volumes for this year and next. But can you guys kind of talk regionally, DJ, Eagle Ford and then EZ or Delaware, but what you guys are watching for and what’s placed inflection points where you guys kind of see or get more comfort for around volume growth go forward?

Kristina, this is Don. If you kind of looked at the portfolio, there is really only three places of having a significant activity in recent past, that being South Texas, West Texas and the DJ. Everything is driven by commodity prices and rig counts. So, that’s what we focused on. And I don’t think we are going to see a whole lot of activity anywhere until you see an uptick in commodity prices from here with the exception of West Texas.

Got it. And then is there like a crude price inflection point is it’s like I mean effort we will generally talk more like $50 range? Could you just tell me what your thoughts are on where you guys are thinking volumes get stronger?

It’s just – it’s hard to tell, because it always plays and I think Anadarko talked about it yesterday. These plays aren’t uniform. Some portions of the plays, specifically the West Texas, they are a lot gassier than they are crude impacts. So, it really does depend on where they stand up the rigs and where people have acreage. And for us, for us, to forecast commodity prices then seem like something that seems to be in a wheelhouse or we are just waiting to see where capital gets deployed and where rigs are stood up.

Kristina, the only thing I will add to that is some of our largest producers have said it’s not only a price decision, they will need to see price plus stability on the demand side.

They need to see, yes, not just a tick in the 12-month contract.

Okay. And then a follow-up for me, I know you guys reiterated guidance in the press release, you still have two plants that are coming online in the near term that are going to drive positive cash flow. Should I think about the reiteration of guidance as you guys just being prudent? I am waiting for one of these assets to come online or am I missing something here?

Hey, Kristina, it’s Ben again. You are not missing anything. I think that’s exactly how we are thinking about it. It’s just in the spirit of prudence. We didn’t do anything after the first quarter.

Perfect. Thanks, guys. I appreciate the updates.

Thank you.

And our next question comes from Brandon Blossman of Tudor, Pickering, Holt & Company. Please go ahead.

Good morning, gentlemen.

Good morning.

Good morning, Brandon.

I am going to ask both of those questions in a slightly different way. One, looking at the volume question, but specifically for Ramsey III and then IV and V, how do you see those ramping over time? And then for Ramsey III online now but partial service, just mechanically, what does that mean?

Basically, Brandon, it’s Ramsey III is running about 125 million a day through it todayas driven by the amount of gas that we can aggregate in the field that fits the plant without us having our front-end operational. So that really is a driver Ram IV is mechanically complete and dried out. We are just waiting for the completion. Our slug-catcher and the startup of diamine plant, which we expect that to happen around the end of this month. We will start commissioning from there. So that gives you a pretty clear line of sight to Ramsey III and IV, because you will be able to bring more volumes back into III as the front-end goes into service. And then you are really down to the stabilizer and Ram V being complete and startup of that in the third quarter.

Okay, perfect. That’s what I was looking for. And then relative to where you were full year or where you are full year ‘16 guidance, was Q1 an upside surprise and was that driven by DJ and Marcellus volumes or something else?

No, I wouldn’t say it was a material surprise from our own internal expectations.

Okay. That’s it for me then. Thank you.

Thank you, Brandon.

And our next question comes from Jeremy Tonet of JPMorgan. Please go ahead.

Happy birthday, Ben. I think the good questions have been asked so far. So, I am going to try something a little bit different more of a generic as far as what you are seeing in the industry out there. In M&A opportunities and how you think about those these days and if the bid ask spread has come in or it’s still a matter of, you have a great opportunity set in front of you as far as organic growth and dropdowns from APC, so not really much of a need to look into that market right now. Thanks.

Jeremy, our past discipline hadn’t changed. We look at – we try to look at all transactions that we think that makes sense at WES. What you have seen is probably more focused in the industry, I think it recognizes around restructuring. The M&A you have seen has been driven a lot by balance sheet cleanup and where we struggle with some of those assets is not necessarily the value, but the quality of the customer you ended up with after the transaction. So I think you will see increased M&A like you will see in the back half of this year, thing seemed to be setting up that way. So that’s how we see we will continue to be engaged in the process and look for the assets that we think that are model. And then, you are right, we have organic growth. We are very fortunate to have organic growth in West Texas and good sustainable growth long-term in the DJ as well and still inventory at APC, so that’s how we see the market today.

Jeremy, the one thing I will remind you is that the market continues to be awash in private capital and we use that to our advantage with the convertible preferred last quarter. But that’s also bidding up asset prices for the assets that have been clearing.

That makes sense. Thanks for the color.

Thanks Jeremy.

And our next question comes from John Edwards of Credit Suisse. Please go ahead.

Happy birthday, Ben.

Thanks.

Just maybe you have mentioned this and I just missed it, my brain zoned off, did you say what the ramp up expectation was for the Ramsey plants coming on, you may have said and I just missed it and if you don’t mind repeating that?

John, let me walk you through the stack, Ramsey III is a 200 million a day plant, so it’s running 125, obviously it will move up to 200 with the completion of our front end facilities. Ramsey IV is a 200 million a day plant, so that adds another 200 to it as well, so that gets you to 400. Ramsey V is another 200 that we have schedule to go into service end of the third quarter gets you to another 600. And then it takes you back to Ramsey II, which was the plant that had the most damage too with the incident in December. And so it will be the last train we bring on in the fourth quarter this year.

Okay, alright. And then you mentioned in your opening comments about margin being strong, I mean is it stronger in one area over another or just any granularity? And that’s all I had.

Yes. John, this is Ben. The key driver for gross margin in the quarter is the addition of Springfield. Springfield is both the gas system and an oil system. And for both of those systems, the margin on each is higher than our portfolio average. So it’s bringing both the gas assets and the crude NGL asset gross margin up.

Okay, great. Thank you.

Thank you.

And our next question comes from Selman Akyol of Stifel. Please go ahead.

Thank you. Good morning and congratulations. I just want to follow-up on the margin question there. So with Springfield being located down in the Eagle Ford and not a lot of additional drilling going on there, should we expect to see these margins taper through the rest of the year, as there is non-additional rigs and additional volumes down there or should we look at this now as a low for the year?

Well, I think you are on something with, one of the things that changes gross margin over time if there is non-acquisition is the throughput mix and so Springfield is a higher than average gross margin asset. And as we have said in last quarter is expected to decline into ‘17. So that’s going to impact the throughput mix. I would also ask that you keep in mind that you know we had no Ramsey this quarter. And Ramsey is also higher than portfolio average, so as that comes back that’s going to offset that impact a little bit.

Alright. And then, longer term as you think about your coverage and certainly on an adjusted basis of 1.3 times, what’s the right coverage ratio for WES longer term?

Certainly if it were to go below 1.1 on a full year basis, we get nervous and feel the need to inform people if that ever should happen. I don’t believe it ever has for a full year. And that’s – our guidance is unchanged, 10% growth at WES with no less than 1.1 coverage.

Alright. Thank you very much.

And our next question comes from Heejung Ryoo of Barclays. Please go ahead.

Thank you. Good morning. Just wanted to get an update on the dropdown asset, could you maybe talk about – I mean, you still have quite a bit of discrete assets at the Anadarko level. And could you maybe talk a little bit about how those assets are performing, where you are still seeing growth in this environment versus maybe some of the assets may be declining. And then just in terms of what – your updated thoughts on what would dictate the timing and the order of what to expect as these assets come down to Western Gas?

Sure. And nice try on the order question, but again on the rest. Run rate, EBITDA, we have said is in the 150 to 200 range on a full year run rate basis right now, that’s post Springfield. A subset of that is pretty immature, right. You have Saddlehorn pipeline that hasn’t come online yet. You have Panola pipeline that hasn’t come online yet. I would say the highest growth in what’s left are on the crude systems. You still have all the crude system in the West Texas and the DJ still sitting at Anadarko. You have an additional plant still sitting in Anadarko. And so there is definitely – because of the immaturity of some of that portfolio, there is a segment of that portfolio that’s growing faster than WES is just because it’s so young.

Helen another way, just to cut the information is, if you think about what Ben mentioned, a lot of your assets are still in the DJ and the Delaware Basin, you have the Wattenberg plant, you have the equity plants in West Texas. So if you look at it by region, you still have a portion of that portfolio that’s in West Texas and DJ. And we think that’s a good place to be as well.

That’s very helpful. And then just order of magnitude, how much is Anadarko spending this year to – on these midstream assets that are sort of being developed at this point?

Yes. If you look at their capital program from their investor book, they have this midstream and other wedge, which looks like it’s around $200 million.

Okay, great. Thank you very much.

Thank you.

And ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

And thank you. I would like to thank everyone for joining us today and for your interest in Western Gas. And we look forward to speaking with you again soon. Have a good day.

And ladies and gentlemen, the conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.