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TheStreet Open House

MarkWest Energy Partners Reports Record Second Quarter Results And Announces Plans To Form A Joint Venture With Kinder Morgan To Support Northern Ohio Rich-Gas Development And NGL Pipeline To Gulf Coast

Stocks in this article: MWE

The Partnership’s portion of growth capital expenditures for 2013 is unchanged and remains in a range of $1.5 billion to $1.8 billion. These expenditures do not include the Granite Wash Acquisition or the divestiture of the high-pressure gathering system in the Marcellus Shale.

CONFERENCE CALL

The Partnership will host a conference call and webcast on Thursday, August 8, 2013, at 12:00 p.m. Eastern Time to review its second quarter 2013 financial results. Interested parties can participate in the call by dialing (800) 475-0218 (passcode “MarkWest”) approximately ten minutes prior to the scheduled start time. To access the webcast, please visit the Investor Relations section of the Partnership’s website at www.markwest.com. A replay of the conference call will be available on the MarkWest website or by dialing (866) 454-1418 (no passcode required).

MarkWest Energy Partners, L.P. is a master limited partnership engaged in the gathering, processing and transportation of natural gas; the gathering, transportation, fractionation, storage and marketing of natural gas liquids; and the gathering and transportation of crude oil. MarkWest has a leading presence in many unconventional gas plays including the Marcellus Shale, Utica Shale, Huron/Berea Shale, Haynesville Shale, Woodford Shale and Granite Wash formation.

This press release includes “forward-looking statements.” All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. Although MarkWest believes that the expectations reflected in the forward-looking statements are reasonable, MarkWest can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect operations, financial performance, and other factors as discussed in filings with the Securities and Exchange Commission (SEC). Among the factors that could cause results to differ materially are those risks discussed in the periodic reports filed with the SEC, including MarkWest’s Annual Report on Form 10-K for the year ended December 31, 2012 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” MarkWest does not undertake any duty to update any forward-looking statement except as required by law.

       
MarkWest Energy Partners, L.P.
Financial Statistics
(unaudited, in thousands, except per unit data)
 
Three months ended June 30, Six months ended June 30,
Statement of Operations Data 2013 2012 2013 2012
Revenue:
Revenue $ 395,421 $ 306,755 $ 768,879 $ 702,733
Derivative gain   19,699     136,067     19,514     87,352  
Total revenue   415,120     442,822     788,393     790,085  
 
Operating expenses:
Purchased product costs 155,359 112,731 307,916 267,286
Derivative gain related to purchased product costs (20,432 ) (51,579 ) (31,136 ) (32,779 )
Facility expenses 62,797 48,230 122,307 96,555
Derivative loss (gain) related to facility expenses 800 (1,146 ) 468 (2,892 )
Selling, general and administrative expenses 25,499 21,700 50,741 46,748
Depreciation 71,562 41,336 139,579 80,918
Amortization of intangible assets 17,092 12,307 31,922 23,292
(Gain) loss on sale or disposal of property, plant and equipment (37,736 ) 1,342 (37,598 ) 2,328
Accretion of asset retirement obligations   157     160     509     396  
Total operating expenses   275,098     185,081     584,708     481,852  
 
Income from operations 140,022 257,741 203,685 308,233
 
Other income (expense):
Gain from unconsolidated affiliates 430 1,109 665 1,548
Interest income 62 159 211 231
Interest expense (36,955 ) (26,762 ) (75,291 ) (56,234 )
Amortization of deferred financing costs and discount (a component of interest expense) (1,784 ) (1,245 ) (3,614 ) (2,515 )
Loss on redemption of debt - - (38,455 ) -
Miscellaneous income, net   6     4     6     62  
Income before provision for income tax 101,781 231,006 87,207 251,325
 
Provision for income tax (benefit) expense:
Current (2,745 ) 4,809 (8,159 ) 20,150
Deferred   19,028     39,664     30,999     28,868  
Total provision for income tax   16,283     44,473     22,840     49,018  
 
Net income 85,498 186,533 64,367 202,307
 
Net (income) loss attributable to non-controlling interest (1,799 ) 375 3,874 621
       
Net income attributable to the Partnership's unitholders $ 83,699   $ 186,908   $ 68,241   $ 202,928  
 
Net income attributable to the Partnership's common unitholders per common unit:

 

Basic $ 0.63   $ 1.74   $ 0.52   $ 1.98  
Diluted $ 0.55   $ 1.47   $ 0.45   $ 1.66  
 
Weighted average number of outstanding common units:
Basic   131,227     106,825     129,928     101,833  
Diluted   151,866     127,468     150,580     122,531  
 
Cash Flow Data
Net cash flow provided by (used in):
Operating activities $ 92,553 $ 45,708 $ 177,596 $ 253,621
Investing activities $ (825,660 ) $ (834,145 ) $ (1,435,021 ) $ (1,087,114 )
Financing activities $ 435,634 $ 562,860 $ 1,266,223 $ 841,534
 
Other Financial Data
Distributable cash flow $ 128,390 $ 91,183 $ 238,216 $ 200,379
Adjusted EBITDA $ 156,110 $ 121,853 $ 296,541 $ 274,991
 
 
Balance Sheet Data June 30, 2013 December 31, 2012
Working capital $ (116,922 ) $ (84,512 )
Total assets 8,200,883 6,728,362
Total debt 3,022,704 2,523,051
Total equity 3,482,316 3,111,398
 
       
MarkWest Energy Partners, L.P.
Operating Statistics
 

Three months ended June 30,

Six months ended June 30,

2013 2012 2013 2012
Liberty
Gathering system throughput (Mcf/d) 683,600 367,400 644,700 337,800
Natural gas processed (Mcf/d) 1,033,700 400,600 931,400 396,400
NGLs fractionated (Bbl/d) 48,900 19,800 43,000 19,900
NGL sales (gallons, in thousands) (1) 160,300 75,900 306,200 173,400
 
Utica (2)
Gathering system throughput (Mcf/d) 46,300 - 27,800 -
Natural gas processed (Mcf/d) 46,300 - 27,200 -
 
Northeast
Natural gas processed (Mcf/d) 296,400 328,200 299,500 324,900
NGLs fractionated (Bbl/d) 18,100 17,200 17,600 16,900
 
Keep-whole sales (gallons, in thousands) 27,100 23,700 60,000 73,300
Percent-of-proceeds sales (gallons, in thousands) 32,200 36,800 67,100 69,800
Total NGL sales (gallons, in thousands) 59,300 60,500 127,100 143,100
 
Crude oil transported for a fee (Bbl/d) 9,700 8,300 10,000 9,400
 
Southwest
East Texas gathering systems throughput (Mcf/d) 521,700 440,400 510,500 425,200
East Texas natural gas processed (Mcf/d) 377,600 268,300 358,600 255,400
East Texas NGL sales (gallons, in thousands) 90,200 68,000 170,700 131,400
 
Western Oklahoma gathering system throughput (Mcf/d) (3) 220,000 252,200 211,400 257,100
Western Oklahoma natural gas processed (Mcf/d) 189,900 218,900 188,100 211,400
Western Oklahoma NGL sales (gallons, in thousands) 42,900 61,700 97,700 119,000
 
Southeast Oklahoma gathering system throughput (Mcf/d) 473,300 503,300 467,300 502,200
Southeast Oklahoma natural gas processed (Mcf/d) (4) 160,400 119,600 155,800 110,700
Southeast Oklahoma NGL sales (gallons, in thousands) 54,000 41,300 93,300 74,300
 
Other Southwest gathering system throughput (Mcf/d) (5) 39,900 26,700 30,300 25,600
 
Gulf Coast refinery off-gas processed (Mcf/d) 117,700 115,800 106,600 118,000
Gulf Coast liquids fractionated (Bbl/d) 22,100 21,700 19,700 22,500
Gulf Coast NGL sales (gallons excluding hydrogen, in thousands) 84,600 83,000 149,700 172,300
 
(1)   Includes sale of all purity products fractionated at the Liberty facilities and the sale of all unfractionated NGLs.
(2) Utica operations began in August 2012.
(3) Includes natural gas gathered in Western Oklahoma and from the Granite Wash formation in the Texas Panhandle as management considers this one integrated area of operations.
(4) The natural gas processing in Southeast Oklahoma is outsourced to Centrahoma or other third party processors.
(5) Excludes lateral pipelines where revenue is not based on throughput.
 
         
MarkWest Energy Partners, L.P.
Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure
Operating Income before Items not Allocated to Segments
(unaudited, in thousands)
 
Three months ended June 30, 2013 Liberty Utica Northeast Southwest Total
Segment revenue $ 120,057 $ 3,594 $ 45,365 $ 227,842 $ 396,858
 
Operating expenses:
Purchased product costs 16,993 - 15,126 123,240 155,359
Facility expenses   22,272     6,412     6,655   29,778   65,117  
Total operating expenses before items not allocated to segments 39,265 6,412 21,781 153,018 220,476
 
Portion of operating (loss) income attributable to non-controlling interests   -     (1,143 )   -   53   (1,090 )
Operating income (loss) before items not allocated to segments $ 80,792   $ (1,675 ) $ 23,584 $ 74,771 $ 177,472  
 
 
Three months ended June 30, 2012 Liberty Utica Northeast Southwest Total
Segment revenue $ 59,477 $ - $ 42,051 $ 206,551 $ 308,079
 
Operating expenses:
Purchased product costs 8,018 - 12,921 91,792 112,731
Facility expenses   13,364     283     4,932   32,156   50,735  
Total operating expenses before items not allocated to segments 21,382 283 17,853 123,948 163,466
 
Portion of operating (loss) income attributable to non-controlling interests   -     (113 )   -   28   (85 )
Operating income (loss) before items not allocated to segments $ 38,095   $ (170 ) $ 24,198 $ 82,575 $ 144,698  
 
 

Three months ended June 30,

2013 2012
 
Operating income before items not allocated to segments $ 177,472 $ 144,698
Portion of operating (loss) income attributable to non-controlling interests (1,090 ) (85 )
Derivative gain not allocated to segments 39,331 188,792
Revenue deferral adjustment and other (1,437 ) (1,324 )
Compensation expense included in facility expenses not allocated to segments (368 ) (183 )
Facility expenses adjustments 2,688 2,688
Selling, general and administrative expenses (25,499 ) (21,700 )
Depreciation (71,562 ) (41,336 )
Amortization of intangible assets (17,092 ) (12,307 )
Gain (loss) on disposal of property, plant and equipment 37,736 (1,342 )
Accretion of asset retirement obligations   (157 )   (160 )
Income from operations 140,022 257,741
Other income (expense):
Earnings from unconsolidated affiliate 430 1,109
Interest income 62 159
Interest expense (36,955 ) (26,762 )
Amortization of deferred financing costs and discount (a component of interest expense) (1,784 ) (1,245 )
Miscellaneous income, net   6     4  
Income before provision for income tax $ 101,781   $ 231,006  
 
 
MarkWest Energy Partners, L.P.
Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure
Operating Income before Items not Allocated to Segments
(unaudited, in thousands)
 
Six months ended June 30, 2013 Liberty Utica Northeast Southwest Total
Segment revenue $ 228,554 $ 4,217 $ 102,701 $ 436,208 $ 771,680
 
Operating expenses:
Purchased product costs 35,786 - 34,788 237,342 307,916
Facility expenses   44,908     10,374     13,179   58,468   126,929  
Total operating expenses before items not allocated to segments 80,694 10,374 47,967 295,810 434,845
 
Portion of operating (loss) income attributable to non-controlling interests   -     (2,482 )   -   117   (2,365 )
Operating income (loss) before items not allocated to segments $ 147,860   $ (3,675 ) $ 54,734 $ 140,281 $ 339,200  
 
 
Six months ended June 30, 2012 Liberty Utica Northeast Southwest Total
Segment revenue $ 135,054 $ - $ 128,969 $ 441,927 $ 705,950
 
Operating expenses:
Purchased product costs 32,653 - 38,608 196,025 267,286
Facility expenses   25,611     283     11,310   64,094   101,298  
Total operating expenses before items not allocated to segments 58,264 283 49,918 260,119 368,584
 
Portion of operating (loss) income attributable to non-controlling interests   -     (113 )   -   31   (82 )
Operating income (loss) before items not allocated to segments $ 76,790   $ (170 ) $ 79,051 $ 181,777 $ 337,448  
 
 

Six months ended June 30,

2013 2012
 
Operating income before items not allocated to segments $ 339,200 $ 337,448
Portion of operating (loss) income attributable to non-controlling interests (2,365 ) (82 )
Derivative gain not allocated to segments 50,182 123,023
Revenue deferral adjustment and other (2,801 ) (3,217 )
Compensation expense included in facility expenses not allocated to segments (754 ) (633 )
Facility expenses adjustments 5,376 5,376
Selling, general and administrative expenses (50,741 ) (46,748 )
Depreciation (139,579 ) (80,918 )
Amortization of intangible assets (31,922 ) (23,292 )
Gain (loss) on disposal of property, plant and equipment 37,598 (2,328 )
Accretion of asset retirement obligations   (509 )   (396 )
Income from operations 203,685 308,233
Other income (expense):
Earnings from unconsolidated affiliate 665 1,548
Interest income 211 231
Interest expense (75,291 ) (56,234 )
Amortization of deferred financing costs and discount (a component of interest expense) (3,614 ) (2,515 )
Loss on redemption of debt (38,455 ) -
Miscellaneous income, net   6     62  
Income before provision for income tax $ 87,207   $ 251,325  
 

 

       
Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure
Distributable Cash Flow
(unaudited, in thousands)
 
Three months ended June 30, Six months ended June 30,
2013 2012 2013 2012
 
Net income $ 85,498 $ 186,533 $ 64,367 $ 202,307
Depreciation, amortization and other non-cash operating expenses 88,889 53,881 172,166 104,762
(Gain) loss on sale and or disposal of assets, net of tax benefit (34,689 ) 1,342 (34,551 ) 2,328
Loss on redemption of debt, net of tax benefit - - 36,178 -
Amortization of deferred financing costs and discount 1,784 1,245 3,614 2,515
Non-cash earnings from unconsolidated affiliate (430 ) (1,109 ) (665 ) (1,548 )
Distributions from unconsolidated affiliate 1,962 1,774 2,728 4,566
Non-cash compensation expense 1,157 2,580 3,541 5,290
Non-cash derivative activity (37,287 ) (193,744 ) (46,320 ) (145,527 )
Provision for income tax - deferred 19,028 39,664 30,999 28,868
Cash adjustment for non-controlling interest of consolidated subsidiaries 1,720 364 3,489 604
Revenue deferral adjustment 1,645 1,700 3,410 3,968
Other 2,827 647 4,865 2,235
Maintenance capital expenditures, net of joint venture partner contributions   (3,714 )   (3,694 )   (5,605 )   (9,989 )
Distributable cash flow $ 128,390   $ 91,183   $ 238,216   $ 200,379  
 
Maintenance capital expenditures $ 3,714 $ 3,694 $ 5,605 $ 9,989
Growth capital expenditures   799,812     323,745     1,429,479     570,991  
Total capital expenditures 803,526 327,439 1,435,084 580,980
Acquisitions, net of cash acquired   225,210     506,797     225,210     506,797  
Total capital expenditures and acquisitions 1,028,736 834,236 1,660,294 1,087,777
Joint venture partner contributions   (360,499 )   -     (625,819 )   -  
Total capital expenditures and acquisitions, net $ 668,237   $ 834,236   $ 1,034,475   $ 1,087,777  
 
Distributable cash flow $ 128,390 $ 91,183 $ 238,216 $ 200,379
Maintenance capital expenditures, net of joint venture partner contributions 3,714 3,694 5,605 9,989
Changes in receivables and other assets (68,610 ) 54,300 (67,501 ) 111,955
Changes in accounts payable, accrued liabilities and other long-term liabilities 37,661 (100,434 ) 10,053 (65,190 )
Cash adjustment for non-controlling interest of consolidated subsidiaries (1,720 ) (364 ) (3,489 ) (604 )
Other   (6,882 )   (2,671 )   (5,288 )   (2,908 )
Net cash provided by operating activities $ 92,553   $ 45,708   $ 177,596   $ 253,621  
 
       
MarkWest Energy Partners, L.P.
Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure
Adjusted EBITDA
(unaudited, in thousands)
 
Three months ended June 30, Six months ended June 30,
2013 2012 2013 2012
 
Net income $ 85,498 $ 186,533 $ 64,367 $ 202,307
Non-cash compensation expense 1,157 2,580 3,541 5,290
Non-cash derivative activity (37,287 ) (193,744 ) (46,320 ) (145,527 )
Interest expense (1) 36,610 25,826 74,632 54,378
Depreciation, amortization and other non-cash operating expenses 88,889 53,881 172,166 104,762
(Gain) loss on sale and or disposal of assets (37,736 ) 1,342 (37,598 ) 2,328
Loss on redemption of debt - - 38,455 -
Provision for income tax 16,283 44,473 22,840 49,018
Adjustment for cash flow from unconsolidated affiliate 1,532 665 2,063 3,018
Other   1,164     297     2,395     (583 )
Adjusted EBITDA $ 156,110   $ 121,853   $ 296,541   $ 274,991  
 
(1)   Includes amortization of deferred financing costs and discount, and excludes interest expense related to the Steam Methane Reformer.
 

MarkWest Energy Partners, L.P. Distributable Cash Flow Sensitivity Analysis( unaudited, in millions)

MarkWest periodically estimates the effect on DCF resulting from its commodity risk management program, changes in crude oil and natural gas prices, and the ratio of NGL prices to crude oil. The table below reflects MarkWest’s estimate of the range of DCF for 2013 and forecasted crude oil and natural gas prices for 2013. The analysis assumes various combinations of crude oil and natural gas prices as well as three NGL-to-crude oil ratio scenarios, including:

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