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To acquire 100% ownership interest in Kerr-McGee Gathering LLC & Wattenberg gathering system in Niobrara play, gaining average throughput capacity of 275MMcf/d.

Delaware limited partnership Western Gas Partners LP (NYSE: WES) plans to acquire certain midstream assets centered in the emerging Niobrara play in the Denver-Julesberg Basin of northeastern Colorado from founding company Anadarko Petroleum Corp., Houston, (NYSE: APC) for $498 million.

The assets include a 100% ownership interest in Kerr-McGee Gathering LLC and its 1,734-mile Wattenberg gathering system and related facilities, including the Fort Lupton processing plant, which has capacity of 105 million cubic feet per day. For second-quarter 2010, the average throughput on the gathering system was approximately 275 million cubic feet per day, with Anadarko equity throughput representing approximately 60% of this amount.

Western Gas Partners president and chief executive Don Sinclair says, "We are very excited to move into another liquids-rich basin with the acquisition of the Wattenberg assets, where producers are experiencing strong economic returns. We expect the transaction to be immediately accretive to distributable cash flow. Furthermore, the ongoing developments from horizontal drilling in the basin, as well as the emerging horizontal Niobrara play provide substantial organic growth potential for these assets."

Contracts covering Anadarko-affiliated throughput were recently converted to a 10-year, fee-based agreement. To manage the remaining commodity-price risk associated with these assets, Western Gas Partners and Anadarko will enter five-year, fixed-price commodity swap agreements.

Sinclair says, "Consistent with the swap arrangements put in place with previous transactions, these agreements will cover all non-fee-based system volumes and keep our distributable cash flow largely insulated from changes in commodity prices."

Western Gas will pay $23.1 million in upfront cash and will finance the remainder via a bank-syndicated $250 million unsecured term loan, a $200 million draw on its revolving credit facility, and the issuance of 1,048,196 common units to Anadarko and 21,392 units to its general partner Western Gas Holdings LLC for approximately $23.28 per unit.

Additionally, Western Gas intends to increase total commitments from its senior revolving credit facility from $350 million to $450 million, leaving $140 million in available borrowing capacity.

The deal is expected to close in early August. The effective date is July 1. Tudor, Pickering, Holt & Co. is financial advisor and Bracewell & Giuliani LLP is legal advisor.

Western Gas Partners holds midstream assets in East and West Texas, the Rockies and Midcontinent regions. Anadarko is a large U.S. independent and has oil and gas properties worldwide.