8. DEBT AND INTEREST EXPENSE

The following table presents outstanding debt as of September 30, 2013, and December 31, 2012:



	September 30, 2013						December 31, 2012
thousands	Principal		Carrying Value		Fair Value ⁽¹⁾		Principal		Carrying Value		Fair Value ⁽¹⁾
4.000% Senior Notes due 2022	$	670,000	$	673,363	$	651,580	$	670,000	$	673,617	$	669,928
5.375% Senior Notes due 2021	500,000		495,042		531,210		500,000		494,661		499,946
WES revolving credit facility	100,000		100,000		100,000		—		—		—
2.600% Senior Notes due 2018	250,000		249,705		249,134		—		—		—
Total debt outstanding	$	1,520,000	$	1,518,110	$	1,531,924	$	1,170,000	$	1,168,278	$	1,169,874


⁽¹⁾	Fair value is measured using Level 2 inputs.

Debt activity. The following table presents the debt activity for the nine months ended September 30, 2013:



thousands	Carrying Value
Balance as of December 31, 2012	$	1,168,278
WES revolving credit facility borrowings	595,000
Repayments of WES revolving credit facility	(495,000		)
Issuance of 2.600% Senior Notes due 2018	250,000
Other	(168		)
Balance as of September 30, 2013	$	1,518,110

WES Senior Notes. In August 2013, WES completed the offering of $250.0 million aggregate principal amount of 2.600% Senior Notes due 2018 (the “2018 Notes”) at a price to the public of 99.879% of the face amount. Including the effects of the issuance and underwriting discounts, the effective interest rate of the 2018 Notes is 2.806%. Interest will be paid semi-annually on February 15 and August 15 of each year, commencing on February 15, 2014. The 2018 Notes will mature on August 15, 2018, unless redeemed, in whole or in part, prior to maturity. Proceeds (net of underwriting discount of $1.5 million, original issue discount and debt issuance costs) were used to repay amounts then outstanding under WES’s $800.0 million senior unsecured revolving credit facility (“WES RCF”).

In June 2012, WES completed the offering of $520.0 million aggregate principal amount of 4.000% Senior Notes due 2022 at a price to the public of 99.194% of the face amount. In October 2012, WES issued an additional $150.0 million in aggregate principal amount of 4.000% Senior Notes due 2022 at a price to the public of 105.178% of the face amount. The October 2012 notes and the June 2012 notes were issued under the same indenture and are considered a single class of securities, collectively referred to as the “2022 Notes.”

In May 2011, WES completed the offering of $500.0 million aggregate principal amount of 5.375% Senior Notes due 2021 (the “2021 Notes”) at a price to the public of 98.778% of the face amount.

At September 30, 2013, WES was in compliance with all covenants under the indentures governing the 2021 Notes, 2022 Notes and the 2018 Notes.

8. DEBT AND INTEREST EXPENSE (CONTINUED)

Interest rate agreements. In May 2012, WES entered into U.S. Treasury Rate lock agreements to mitigate the risk of rising interest rates prior to the issuance of the 2022 Notes. WES settled the rate lock agreements simultaneously with the June 2012 offering of the 2022 Notes, realizing a loss of $1.7 million, which is included in other income (expense), net in the consolidated statements of income.

WES note payable to Anadarko. In 2008, WES entered into a five-year $175.0 million term loan agreement with Anadarko. The interest rate was fixed at 2.82% prior to June 2012 when the WES note payable to Anadarko was repaid in full with proceeds from the June 2012 offering of the 2022 Notes.

WES revolving credit facility. At September 30, 2013, and December 31, 2012, the interest rate on the WES RCF was 1.68% and 1.71%, respectively. WES is required to pay a quarterly facility fee currently ranging from 0.20% to 0.35% of the commitment amount (whether used or unused), based upon its senior unsecured debt rating. The facility fee rate was 0.25% at September 30, 2013, and December 31, 2012.

At September 30, 2013, WES had $100.0 million of outstanding borrowings, $12.8 million in outstanding letters of credit issued and $687.2 million available for borrowing under the WES RCF. At September 30, 2013, WES was in compliance with all covenants under the WES RCF.

The 2021 Notes, the 2022 Notes, the 2018 Notes and obligations under the WES RCF are recourse to WES GP, and as of December 31, 2012, WES GP was indemnified by a wholly owned subsidiary of Anadarko, Western Gas Resources, Inc. (“WGRI”), against any claims made against WES GP under the 2022 Notes, the 2021 Notes and/or the WES RCF.

In connection with the acquisition of the Non-Operated Marcellus Interest in March 2013, WES GP and another wholly owned subsidiary of Anadarko entered into an indemnification agreement (the “2013 Indemnification Agreement”) whereby such subsidiary agreed to indemnify WES GP for any recourse liability it may have for WES RCF borrowings, or other debt financing, attributable to the acquisitions of the Non-Operated Marcellus Interest or the Anadarko-Operated Marcellus Interest. As of September 30, 2013, the 2013 Indemnification Agreement applied to the $250.0 million of 2018 Notes. WES GP and WGRI also amended and restated the existing indemnity agreement between them to reduce the amount for which WGRI would indemnify WES GP by an amount equal to any amounts payable to WES GP under the 2013 Indemnification Agreement.

WGP working capital facility. On November 1, 2012, WGP entered into a $30.0 million working capital facility (the “WGP WCF”) with Anadarko as the lender. The facility is available exclusively to fund WGP’s working capital borrowings. Borrowings under the facility will mature on November 1, 2017, and will bear interest at London Interbank Offered Rate (“LIBOR”) plus 1.50%. The interest rate was 1.68% and 1.71% at September 30, 2013, and December 31, 2012, respectively.

WGP is required to reduce all borrowings under the WGP WCF to zero for a period of at least 15 consecutive days during the twelve month period commencing on November 1, 2012, and during the twelve month period commencing on each anniversary thereof. As of September 30, 2013, WGP had no outstanding borrowings under the WGP WCF, and WGP was in compliance with all covenants under the WGP WCF.

8. DEBT AND INTEREST EXPENSE (CONTINUED)

Interest expense. The following table summarizes the amounts included in interest expense:



	Three Months Ended September 30,						Nine Months Ended September 30,
thousands	2013			2012			2013			2012
Third parties
Interest expense on long-term debt	$	14,994		$	11,919		$	43,783		$	28,036
Amortization of debt issuance costs and commitment fees ⁽¹⁾	1,135			1,201			3,252			3,225
Capitalized interest	(3,111		)	(2,224		)	(9,552		)	(3,827		)
Total interest expense – third parties	13,018			10,896			37,483			27,434
Affiliates
Interest expense on WES note payable to Anadarko ⁽²⁾	—			—			—			2,440
Interest expense on affiliate balances ⁽³⁾	—			81			—			244
Total interest expense – affiliates	—			81			—			2,684
Interest expense	$	13,018		$	10,977		$	37,483		$	30,118

⁽¹⁾

For the three and nine months ended September 30, 2013, includes $0.3 million and $0.8 million, respectively, of amortization of (i) the original issue discount for the June 2012 offering of the 2022 Notes, partially offset by the original issue premium for the October 2012 offering of the 2022 Notes, (ii) original issue discount for the 2021 Notes and 2018 Notes and (iii) underwriters’ fees. For the three and nine months ended September 30, 2012, includes $0.4 million and $0.8 million, respectively, of amortization of the original issue discount and underwriters’ fees for the 2022 Notes issued in June 2012 and the 2021 Notes.


⁽²⁾	In June 2012, the WES note payable to Anadarko was repaid in full. See WES note payable to Anadarko within this Note 8.


⁽³⁾	Imputed interest expense on the reimbursement payable to Anadarko for certain expenditures Anadarko incurred in 2011 related to the construction of the Brasada and Lancaster plants. In the fourth quarter of 2012, WES repaid the reimbursement payable to Anadarko associated with the construction of the Brasada and Lancaster plants.