MarkWest Energy Partners Reports Record Second Quarter Results and Announces Plans to form a Joint V
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
- MarkWest Utica EMG announced plans to form a Joint Venture with Kinder Morgan to support northern Ohio rich-gas processing, an NGL pipeline to the Gulf Coast, and additional Gulf Coast fractionation facilities.
- Placed into service three processing facilities with combined capacity of 525 MMcf/d.
- Commenced operations of the first large-scale de-ethanization facility in the Northeast, which is producing purity ethane for delivery initially to Mariner West and ultimately to all planned ethane projects including ATEX and Mariner East.
- Announced expansion of Mobley processing complex by 200 MMcf/d to support EQT and other producers, bringing total expected capacity in the Marcellus Shale to nearly 3.6 billion cubic feet per day.
- Executed agreements with Antero Resources to expand the Seneca processing complex by 200 MMcf/d, bringing total capacity in the Utica Shale to over 900 MMcf/d by the third quarter of 2014.
- Announced four additional fractionation projects, which will increase total fractionation capacity in the Marcellus and Utica Shales by 96,000 to 332,000 barrels per day by the first quarter of 2015.
- The Partnership has 23 major processing and fractionation currently under construction.
- Fee-based net operating margin increased from 50 percent to 61 percent when compared to the second quarter of 2012.
DENVER--(BUSINESS WIRE)-- MarkWest Energy Partners, L.P. (NYS: MWE) (the Partnership) today reported record quarterly cash available for distribution to common unitholders, or distributable cash flow (DCF), of $128.4 million for the three months ended June 30, 2013, and $238.2 million for the six months ended June 30, 2013. DCF for the three months ended June 30, 2013 represents 108 percent coverage of the second quarter distribution of $118.4 million or $0.84 per common unit, which will be paid to unitholders on August 14, 2013. The second quarter 2013 distribution represents an increase of $0.01 per common unit or 1.2 percent over the first quarter 2013 distribution and an increase of $0.04 per common unit or 5.0 percent compared to the second quarter 2012 distribution. As a Master Limited Partnership, cash distributions to common unitholders are largely determined based on DCF. A reconciliation of DCF to net income, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release.
The Partnership reported Adjusted EBITDA for the three and six months ended June 30, 2013, of $156.1 million and $296.5 million, respectively, as compared to $121.9 million and $275.0 million for the three and six months ended June 30, 2012. The Partnership believes the presentation of Adjusted EBITDA provides useful information because it is commonly used by investors in Master Limited Partnerships to assess financial performance and operating results of ongoing business operations. A reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release.
The Partnership reported income before provision for income tax for the three and six months ended June 30, 2013, of $101.8 million and $87.2 million, respectively. Income before provision for income tax includes non-cash gains associated with the change in fair value of derivative instruments of $37.3 million and $46.3 million for the three and six months ended June 30, 2013, a gain of $38.2 million related to the divestiture of gathering assets in the Marcellus Shale for the three months ended June 30, 2013 and a loss associated with the redemption of debt of $38.5 million for the six months ended June 30, 2013. Excluding these items, income before provision for income tax for the three and six months ended June 30, 2013 would have been $26.3 million and $41.2 million, respectively.
"Our full-service midstream model and commitment to delivering exceptional customer service continues to deliver record volumes and financial performance," said Frank Semple, Chairman, President and Chief Executive Officer. "We are excited to announce new strategic opportunities and growth projects throughout our core operating areas, which continue to support the ongoing success of our producer customers."
- In May 2013, the Partnership commenced operations of Majorsville III, a 200 million cubic feet per day (MMcf/d) processing facility in Marshall County, West Virginia. Majorsville III is supported by long-term, fee-based agreements with Consol Energy, Inc. (NYS: CNX) (CNX) and Noble Energy, Inc. (NYS: NBL) . The facility will also provide additional processing capacity to Range Resources Corporation (NYS: RRC) (Range), Chesapeake Energy Corporation (NYS: CHK) (Chesapeake) and other producers prior to the completion of subsequent facilities. The total processing capacity of the Majorsville complex has increased to 470 MMcf/d.
- In May 2013, the Partnership commenced operations of Sherwood II, a 200 MMcf/d processing facility in Doddridge County, West Virginia. Sherwood II is supported by long-term, fee-based agreements with Antero Resources (Antero). The total processing capacity at the Sherwood complex has increased to 400 MMcf/d.
- In June 2013, the Partnership closed on the sale of a non-strategic, high-pressure gas gathering system in Doddridge County, West Virginia to Summit Midstream Partners, LP (NYS: SMLP) for $207.9 million in cash, net of fees. Rich-gas gathered by this system is supported by a long-term, fee-based contract with an affiliate of Antero, and is dedicated to the Partnership for processing at the Sherwood complex.
- In July 2013, the Partnership commenced operations of the Houston De-ethanizer, a 38,000 barrel per day (Bbl/d) fractionator that is producing purity ethane from Marcellus rich-gas production. The Houston De-ethanizer will initially support Mariner West, a joint project with Sunoco Logistics Partners, L.P. (NYS: SXL) and in the future will support all the planned ethane takeaway pipeline projects.
- Today, the Partnership is announcing an expansion of the Mobley Complex in Wetzel County, West Virginia to support EQT Corporation (EQT) and other producers' rich-gas development. EQT has requested 145 MMcf/d of additional priority capacity at the Mobley complex. To support the increase in priority capacity, MarkWest will construct Mobley IV, a new 200 MMcf/d processing facility that is scheduled to begin operations by the first quarter of 2015. Upon completion of this facility, Mobley's processing capacity will be 720 MMcf/d.
- The Partnership is also announcing the development of additional fractionation facilities to support producers' growing rich-gas production in the Marcellus Shale. By the first quarter of 2014, the Partnership will install de-ethanization and de-propanization units totaling 20,000 Bbl/d of capacity at the Keystone complex in Butler County, Pennsylvania. In addition, the Partnership will install a 38,000 Bbl/d de-ethanization facility at the Sherwood complex in Doddridge County, West Virginia, which is expected to be operational during the first quarter of 2015.
- In May 2013, MarkWest Utica EMG executed definitive agreements with CNX and two additional producers to provide processing, fractionation, and marketing services in the Utica Shale.
- In May 2013, MarkWest Utica EMG commenced operations of Cadiz I, a 125 MMcf/d cryogenic processing facility in Harrison County, Ohio. Cadiz I is supported by fee-based agreements with Gulfport Energy Corporation (NAS: GPOR) , Antero and other producers.
- In June 2013, MarkWest Utica EMG executed definitive agreements with Antero for the development of Seneca III, a 200 MMcf/d processing facility in Noble County, Ohio. Seneca III is scheduled to be operational during the second quarter of 2014 and will support rich-gas production from Antero and other producers in the southern core area of the Utica Shale.
- Today, MarkWest Utica EMG is announcing installation of a 38,000 Bbl/d de-ethanization facility at the Seneca complex, which is expected to be operational as soon as the fourth quarter of 2014.
- Today, MarkWest Utica EMG announced plans to form a Joint Venture (JV) with Kinder Morgan Energy Partners, LP (NYS: KMP) (Kinder Morgan) to pursue three critical new projects to support producers in the Utica and Marcellus Shales:
- Under the first joint project, Kinder Morgan and MarkWest Utica EMG would develop a processing complex to be constructed on Kinder Morgan's existing 220-acre site in Tuscarawas County, Ohio (JV processing complex) with an initial processing capacity of 200 MMcf/d, expandable to 400 MMcf/d of processing capacity. In addition, Kinder Morgan would convert a 65-mile segment of its existing 26-inch Tennessee Gas Pipeline into rich-gas gathering service. MarkWest Utica EMG would also construct additional rich-gas and NGL pipelines to connect the complex with its large-scale full-service midstream infrastructure. This project would serve new customers in Carroll, Columbiana, Mahoning and Trumbull counties in northern Ohio. The JV would own the processing complex on a 50-50 basis.
- The second joint project with Kinder Morgan would involve the development of a 200,000 Bbl/d C2+ NGL pipeline originating at the JV processing complex to Gulf Coast fractionation facilities. This would be accomplished through the conversion of over 900 miles of existing Kinder Morgan pipeline assets and the construction of approximately 200 miles of additional pipeline to connect to Gulf Coast liquids and fractionation infrastructure. The NGL pipeline would be expandable to 400,000 Bbl/d. Subject to sufficient shipper commitments, permitting and all related regulatory approvals, the pipeline would be operational during the fourth quarter of 2015. The Partnership and MarkWest Utica EMG would utilize their extensive NGL pipeline network to deliver NGLs from the Marcellus and Utica to the new NGL pipeline. By converting over 900 miles of existing pipeline and utilizing the Partnership and MarkWest Utica EMG's existing NGL network, the JV's NGL pipeline solution is best positioned to provide a cost effective outlet from the Utica and Marcellus Shale plays to Gulf Coast area markets. Kinder Morgan would own at least 75 percent of the NGL pipeline and MarkWest Utica EMG would have the option to invest up to 25 percent.
- The third joint project with Kinder Morgan would involve the development of new fractionation facilities, as well as utilizing third-party fractionation facilities, throughout the Gulf Coast.
- In May 2013, the Partnership acquired midstream assets in the Texas Panhandle and Western Oklahoma from a wholly owned subsidiary of Chesapeake for consideration of $225.2 million in cash (Granite Wash Acquisition). In conjunction with the acquisition, the Partnership executed long-term, fee-based agreements with Chesapeake for gas gathering and processing services. As part of the fee-based gas processing agreement, Chesapeake has dedicated to the Partnership approximately 130,000 acres throughout the Anadarko Basin.
- In May 2013, the Partnership executed a long-term fee-based agreement with Newfield Exploration (NYS: NFX) (Newfield) to develop rich-gas gathering facilities in the Eagle Ford Shale. The Partnership will construct gathering pipelines, field compression, and liquids storage to support production from Newfield's West Asherton project in Dimmit County, Texas.
- During the second quarter of 2013, the Partnership offered 3.8 million units and received net proceeds of approximately $244.5 million under the continuous offering program that was launched in the fourth quarter of 2012. The Partnership completed the $600 million program in July 2013.
- As of June 30, 2013, the Partnership had $278.9 million of cash and cash equivalents in wholly owned subsidiaries and $1.19 billion remaining capacity under its $1.2 billion revolving credit facility after consideration of $11.3 million of outstanding letters of credit.
- Operating income before items not allocated to segments for the three months ended June 30, 2013, was $177.5 million, an increase of $32.8 million when compared to segment operating income of $144.7 million over the same period in 2012. This increase was primarily attributable to higher processing volumes, offset by lower commodity prices compared to the prior year quarter. Processed volumes continued to remain strong, growing approximately 53 percent when compared to the second quarter of 2012, primarily due to the Partnership's Liberty Segment and East Texas operations.
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 gains (losses) on commodity derivative instruments. Realized gains (losses) on commodity derivative instruments were $2.0 million in the second quarter of 2013 and ($5.0) million in the second quarter of 2012.
- For the three months ended June 30, 2013, the Partnership's portion of capital expenditures was $443.0 million.
2013 DCF AND GROWTH CAPITAL EXPENDITURE FORECAST
For 2013, the Partnership's DCF forecast remains in a range of $500 million to $540 million based on its current forecast of operational volumes and prices for crude oil, natural gas and natural gas liquids; and derivative instruments currently outstanding. A commodity price sensitivity analysis for forecasted 2013 DCF is provided within the tables of this press release.
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.
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.|
|(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|
|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||)|
|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|
|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|
|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:|
|Total provision for income tax||16,283||44,473||22,840||49,018|
|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||$||202,928|
|Net income attributable to the Partnership's common unitholders per common unit:|
|Weighted average number of outstanding common units:|
|Cash Flow Data|
|Net cash flow provided by (used in):|
|Other Financial Data|
|Distributable cash flow||$||128,390||$||91,183||$||238,216||$||200,379|
|Balance Sheet Data||June 30, 2013||December 31, 2012|
|MarkWest Energy Partners, L.P.|
Three months ended June 30,
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