“Our mid-year results reflect the continued solid performance of our core assets despite the significant decrease in processing margins and natural gas liquids prices during the second quarter,” said Frank Semple, Chairman, President and Chief Executive Officer. “Our year-over-year processed volumes have increased by 18% as a result of our operational performance and ongoing growth projects located in some of the best resource plays in the United States. During the second quarter, we also improved our liquidity position and capital flexibility with a $300 million increase to our credit facility and an equity offering with net proceeds over $427 million. The combination of MarkWest’s high-quality assets, significant fee-based growth opportunities, and balance sheet strength supports our objective of providing long term sustainable top-quartile returns for our unitholders.”BUSINESS HIGHLIGHTS
- Keystone Midstream Services Acquisition: In May 2012, the Partnership completed the acquisition of 100% of the ownership interests of Keystone Midstream Services, LLC (Keystone), for consideration of $509.6 million, adjusted for working capital. Keystone was owned by Stonehenge Energy Resources, LP, and affiliates of Rex Energy Corporation (Rex Energy), and Sumitomo Corporation (Sumitomo). Keystone’s existing assets are located in Butler County, Pennsylvania and include two cryogenic gas processing plants totaling 90 million cubic feet per day (MMcf/d) of capacity, a gas gathering system and associated field compression. Rex Energy and Sumitomo have dedicated approximately 900 square miles to the Partnership. The parties have jointly leased 68,400 highly prospective acres in Butler County. The Partnership will gather and process the rich gas and fractionate the natural gas liquids (NGLs) under long-term fee-based agreements.Pursuant to a letter agreement signed at the time of the Keystone acquisition, MarkWest Utica EMG, LLC (MarkWest Utica) is evaluating gathering, processing, and NGL fractionation opportunities for portions of Rex Energy’s Ohio Utica acreage.
- Liberty: In May 2012, the Partnership announced additional major expansion projects to serve producer customers in the hydrocarbon-rich area of the Marcellus Shale in northern West Virginia and southwest Pennsylvania area, including another 400 MMcf/d expansion of its Majorsville processing complex which includes two, 200 MMcf/d processing plants that are expected to be completed in late 2013 and mid 2014 and are supported by long-term agreements with Chesapeake Energy. Considering the expansions announced in January and May 2012, the Partnership will have 1.1 billion cubic feet per day of cryogenic processing capacity at its Majorsville processing complex.In May 2012, the Partnership announced a long-term fee-based agreement with Antero Resources Appalachian Corporation (Antero) to install gathering facilities in support of Antero’s rapidly growing rich natural gas production in Doddridge and Harrison Counties in northern West Virginia. The new gathering system will have the capacity to initially deliver more than 300 MMcf/d of Antero’s rich gas to the Partnership’s Sherwood gas processing complex. The first phase of the gathering system will be completed in the third quarter of 2012 in conjunction with the completion of the 200 MMcf/d Sherwood I processing facility.In May 2012, the Partnership also announced that it is extending its existing NGL gathering pipeline from its Houston, Pennsylvania fractionation complex into Beaver, Butler and Lawrence Counties to gather NGLs from the Keystone processing facilities and other planned processing projects in Northwest Pennsylvania. The NGL pipeline expansion will allow Rex Energy and other producers to access all of the anticipated ethane pipeline projects.In July 2012, the Partnership announced a new long-term, fee-based agreement with XTO Energy (XTO) to transport, fractionate and market NGLs from their 125 MMcf/d processing plant located in Butler County, Pennsylvania, which is expected to be operational in late 2012. NGLs will initially be transported by truck from XTO’s plant to the Houston fractionation complex. By the end of 2013, an extension of the Partnership’s NGL gathering pipeline is expected to be complete and will connect the Keystone processing facilities to the XTO facility.In late June, the Partnership began delivering propane to Sunoco Inc.’s (Sunoco) Marcus Hook facility located outside Philadelphia, Pennsylvania. Propane is currently being transported by truck from the Houston fractionation complex to Marcus Hook, with rail deliveries expected to be added in the next several months. In addition, the Partnership is purchasing propane produced at Sunoco’s local-area facilities and the combined stream is being loaded onto ships for marketing by the Partnership to international customers. The delivery of propane from the northeast U.S. to global markets is critical to ensure northeast propane markets remain in balance and that northeast propane continues to achieve premium pricing. This milestone is part of the Partnership’s ongoing commitment to provide multiple marketing options that will maximize the value of its producer customers’ NGLs.
- Utica: In June 2012, MarkWest Utica announced the completion of definitive agreements with Gulfport Energy Corporation to provide gathering, processing, fractionation, and marketing services primarily in Harrison, Guernsey, Belmont and Noble counties of Ohio in the liquids-rich window of the Utica Shale. MarkWest Utica expects the first phase to be operational beginning in the third quarter of 2012. It is anticipated MarkWest Utica will have approximately 60 miles of gas gathering pipelines and associated compression to move Gulfport volumes by the end of 2012 and up to 140 miles of gathering pipelines by the first quarter of 2014. MarkWest Utica anticipates refrigeration processing capacity of 105 MMcf/d by the end of 2012 and 125 MMcf/d of cryogenic processing capacity in early 2013, increasing to 325 MMcf/d of total cryogenic processing capacity by the end of 2013. The NGLs from these processing plants, as well as from our Marcellus operations, will ultimately be fractionated at the previously announced 100,000 Bbl/d Harrison County fractionation complex.
- On May 14, 2012, the Partnership completed a common unit equity offering of 8.0 million common units. The net proceeds of approximately $427.2 million were used to partially fund the acquisition of Keystone Midstream.
- On June 29, 2012, the Partnership executed an amendment to its senior secured revolving credit facility, which increased total borrowing capacity by $300.0 million to $1.2 billion and extended the maturity by one year to September 2017.