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Where Does Western Gas Stand Compared to Its Peers?

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Western Gas’s enterprise value

Western Gas Partners (WES) has the highest enterprise value among its select peers, at $10.4 billion. WES is followed by EQT Midstream Partners (EQM).

Enterprise value is approximately equal to the market equity value plus net debt (debt less cash). It’s an important metric for the valuation of the entire business. Equity value alone just gives the value to equity holders.

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Western Gas’s EV-to-EBITDA multiple

WES’s forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple of 10.1x is below the group average of 11.0x. Antero Midstream Partners (AM) has the highest forward EV-to-EBITDA of 12.4x. For an in-depth analysis of AM’s recent financial and market performance, read What Lies ahead for Antero Midstream Partners?

Western Gas’s leverage

Western Gas Partners has the second-highest debt-to-equity ratio among the select peers after Crestwood Equity Partners (CEQP). This might indicate WES’s high leverage. However, it’s low compared to most other midstream MLPs.

Western Gas’s distribution yield

Western Gas’s distribution yield of 7.1% is higher than the group average of 6.6%. This might reflect Western Gas’s slightly higher leverage and lower distribution growth targets compared to Antero Midstream Partners, EQT Midstream Partners, and Rice Midstream Partners (RMP). High distribution yield most likely indicates high risk and a high cost of equity capital.

In the next part, we’ll analyze Western Gas’s exposure to commodity prices.

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