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TheStreet Open House

MarkWest Energy Partners Reports Third Quarter Financial Results; Places Into Service Three Major Facilities; Announces Additional Midstream Infrastructure Project In The Marcellus Shale

Balance Sheet

  • As of September 30, 2013, the Partnership had $326.6 million of cash and cash equivalents in wholly owned subsidiaries and $1.19 billion of remaining capacity under its $1.2 billion revolving credit facility after consideration of $11.3 million of outstanding letters of credit.

Operating Results

  • Operating income before items not allocated to segments for the three months ended September 30, 2013, was $181.9 million, an increase of $37.9 million when compared to segment operating income of $144.0 million over the same period in 2012. This increase was primarily attributable to higher processing volumes. Processed volumes continued to increase in the third quarter of 2013, growing approximately 57 percent when compared to the third quarter of 2012, primarily due to the Partnership’s Marcellus and Southwest segments. While the Partnership continued to increase its operating income and volumes, it experienced several operational constraints during the third quarter of 2013. Due to these considerations, operating income was lower than expected by approximately $14 million.
  • The Partnership’s producer customers’ highly successful drilling programs throughout the Marcellus and Utica have resulted in a dramatic increase in natural gas liquids (NGLs) production. As a result, liquids production throughout the region has surpassed the capacity of the Partnership’s 60,000 Bbl/d Houston fractionator in Washington County, Pennsylvania and its 24,000 Bbl/d Siloam fractionator in South Shore, Kentucky. In January 2014, the Partnership and MarkWest Utica EMG, a joint venture between the Partnership and the Energy & Minerals Group, expect to commence operations of the Hopedale fractionation and marketing complex in Harrison County, Ohio. The complex will be connected via an NGL pipeline to the Partnership’s Marcellus infrastructure and will alleviate the current constraints associated with the production of purity products. However, in the interim the Partnership has made arrangements for continued fractionation services for its producer customer’s excess volumes through third-party facilities. As part of these arrangements, the Partnership has incurred, and until the end of the year, will continue to incur additional transportation costs and realize lower fractionation income.
  • In July, the Partnership placed into operation its first large-scale de-ethanization facility in the Northeast capable of producing purity ethane. Since startup, the facility has provided line-fill for Mariner West, an ethane purity products pipeline project being developed by Sunoco, which will deliver Marcellus purity ethane to Sarnia, Ontario, Canada. Delays of the Sunoco project have occurred, and as a result, the Partnership has realized lower income during this period. The Mariner West pipeline is expected to become operational during the fourth quarter of 2013. Together with the completion of the ATEX pipeline project and Mariner East project, the Partnership anticipates growing utilization of its de-ethanization facilities.
  • A landslide in August impacted a portion of the Partnership’s NGL pipeline in a remote area of Wetzel County, West Virginia causing a line break. As a result of this incident, the Mobley complex was offline for approximately two months as necessary repairs and remediation were completed. During this period the Partnership’s Sherwood complex in Doddridge County, West Virginia also experienced partially curtailed processing volumes; however, NGLs produced at the Sherwood complex were delivered by truck for fractionation. During mid-October, the Partnership safely resumed operations of the pipeline and the Mobley and Sherwood complexes have returned to full operation.

The Partnership has changed the Liberty segment name. Starting with the third quarter of 2013 financial and operating results, the Liberty segment will now be reported as the Marcellus segment. A reconciliation of operating income before items not allocated to segments to income before provision for income tax, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release.

  • Operating income before items not allocated to segments does not include losses on commodity derivative instruments. Realized losses on commodity derivative instruments were $5.3 million in the third quarter of 2013 and $8.4 million in the third quarter of 2012.

Capital Expenditures

  • For the three months ended September 30, 2013, the Partnership’s portion of capital expenditures was $650.5 million.

2013 DCF AND GROWTH CAPITAL EXPENDITURE FORECAST

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