Western Gas Resources Inc. plans to hang onto its natural-gas gathering-and-processing unit in the face of criticism from one of its largest shareholders.
In an operational update issued Thursday, the Denver-based energy firm said its board of directors had consulted with independent financial advisers and concluded that the gathering-and-processing business gives substantial value to the company.
New York City hedge fund Third Point LLC acquired a large stake in Western Gas Resources earlier this year, and publicly had urged the company to spin off or sell its network of gas pipelines and processing plants.
Western Gas Resources is unusual in the energy business because it operates in two distinct segments of the energy business.
It drills for and produces natural gas, a function known in the industry as “upstream,” and also gathers and processes gas from its own production and on behalf of other producers. That segment is known as “midstream.” About 57 percent of Western’s $360 million operating profit last year came from midstream operations.
“Our integrated strategy has delivered excellent returns to our shareholders, averaging an annual shareholder return of approximately 44 percent over the last five years,” said chief executive Peter Dea.
The firm’s share price may be hurt temporarily by the decision not to sell midstream assets, said analyst David Tameron of Jefferies & Co.
“While a near-term negative, longer term we believe this is a positive outcome,” Tameron said in a research report. “We still believe the midstream provides numerous strategic benefits.”
Shares of the firm fell nearly $2 in midday trading Thursday before recovering to close at $39.82, down 18 cents.
Third Point LLC owns 7.1 percent of Western Gas’ outstanding shares, making it the firm’s second-largest shareholder, according to recent regulatory filings.
Staff writer Steve Raabe can be reached at 303-820-1948 or sraabe@denverpost.com.
