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Why Western Gas’s Strong Balance Sheet Position Is a Major Plus

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Dec. 4 2020, Updated 10:53 a.m. ET

Western Gas’s outstanding debt

Western Gas Partners (WES) ended 2Q17 with a total outstanding debt of $3.2 billion, which was 5.2% higher than its debt at the end of 2016. The slight increase in the partnership’s outstanding debt could be attributed to a recent increase in capital spending and acquisitions.

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How Western Gas’s debt compares

Western Gas had a net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) multiple of 2.8x at the end of 2Q17, below its historical average of 3.1x, though within industry standards. MLPs generally target a ratio of 4.0x–4.5x. Moreover, Western Gas’s leverage situation is better than that of peers DCP Midstream Partners (DCP), EnLink Midstream Partners (ENLK), and Energy Transfer Partners (ETP).

Western Gas’s strong balance sheet position is a major plus considering the uncertainty in the energy sector. A growing number of midstream companies have been looking towards joint ventures and asset sales to strengthen their balance sheets, resulting in lower-than-expected cash flow.

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