MarkWest Energy Partners, L.P. (NYSE: MWE) (“the Partnership”) today reported quarterly cash available for distribution to common unitholders, or distributable cash flow (DCF), of $161.7 million for the three months ended June 30, 2014, and $310.2 million for the six months ended June 30, 2014. DCF for the three months ended June 30, 2014 represents distribution coverage of 104 percent. The second quarter distribution of $155.8 million, or $0.88 per common unit, will be paid to unitholders on August 14, 2014. The second quarter 2014 distribution represents an increase of $0.01 per common unit or 1.2 percent over the first quarter 2014 distribution and an increase of $0.04 per common unit or 4.8 percent compared to the second quarter 2013 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, 2014, of $208.2 million and $395.8 million, respectively, compared to $155.7 million and $296.5 million for the respective three and six months ended June 30, 2013. 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, 2014 of $10.1 million and $38.6 million, respectively. Income before provision for income tax includes non-cash losses associated with the change in fair value of derivative instruments of $18.8 million and $7.0 million for the respective three and six months ended June 30, 2014. Excluding these items, income before provision for income tax for the three and six months ended June 30, 2014 would have been $28.9 million and $45.6 million, respectively.
“We are excited to announce major capacity expansions and record financial and operational performance for the second quarter of 2014,” stated Frank Semple, Chairman, President, and Chief Executive Officer. “The completion of five major infrastructure projects in the Marcellus and Utica Shales over the past three months has provided our producer customers the ability to continue expanding their rich-gas development programs. Due to their ongoing success, we expect overall system volumes to continue to rapidly expand and provide us with unique opportunities to significantly grow cash flow and achieve future distribution growth targets.”
BUSINESS HIGHLIGHTS
Marcellus:
- In May, the Partnership announced that it will increase total processing capacity at the Mobley complex in Wetzel County, West Virginia to 920 million cubic feet per day (MMcf/d) with the construction of an additional 200 MMcf/d processing plant. The new plant is anchored by a long-term, fee-based contract with EQT Corporation (NYSE: EQT) and is expected to be in service by the second quarter of 2015. The Mobley complex currently consists of three plants with 520 MMcf/d of total processing capacity and during the fourth quarter of this year, the Partnership will begin operations of a fourth plant at the complex, increasing capacity to 720 MMcf/d. The Mobley complex supports growing Marcellus rich-gas production from EQT Corporation, Magnum Hunter Resources Corporation (NYSE: MHR), Stone Energy Corporation (NYSE: SGY), CONSOL Energy Inc. (NYSE: CNX), and Noble Energy, Inc. (NYSE: NBL).
- In May, the Partnership commenced operations of a fifth 200 MMcf/d Majorsville processing plant at the Majorsville complex in Marshall County, West Virginia. The new plant is anchored by Range Resources Corporation (NYSE: RRC) (Range Resources) and has increased the total capacity of the Majorsville Complex to 870 MMcf/d.
- In May, the Partnership completed the 120 MMcf/d Bluestone II processing plant in Butler County, Pennsylvania. The new plant is anchored by a long term, fee-based contract with Rex Energy Corporation (NASDAQ: REXX). In conjunction with new processing, the Partnership began operations of an additional 20,000 barrels per day (Bbl/d) of ethane and heavier fractionation infrastructure to support growing NGL production from the rich-gas areas of the northeast Marcellus Shale and Upper Devonian formation. To facilitate the production of ethane at the Bluestone complex, the Partnership has also completed a 32-mile purity ethane pipeline connecting to the Mariner West project.
- Today, the Partnership is announcing that it will construct a seventh 200 MMcf/d processing plant at the Sherwood complex in Doddridge County, West Virginia, at the request of Antero Resources Corporation (NYSE: AR) (Antero Resources). The new plant is anchored by long-term, fee-based agreements and will expand total capacity at the Sherwood complex to 1.4 billion cubic feet per day (Bcf/d) by the third quarter of 2015. Later this month, the Partnership will begin operations of the Sherwood IV plant. Antero Resources is the anchor producer supporting the Sherwood complex and continues to develop its prolific rich-gas acreage position in northern West Virginia.
- Today, the Partnership is announcing that it will construct a sixth processing complex in the Marcellus Shale. The new Hillman complex will be located in Washington County, Pennsylvania and will support Range Resources’ rapidly growing rich-gas production. The Hillman complex will initially consist of Hillman I, a 200 MMcf/d processing plant, and an associated de-ethanization facility. The Hillman complex is scheduled to become operational during the first quarter of 2016. Propane and heavier natural gas liquids recovered at the Hillman complex will be transported by a new pipeline to the Houston complex for fractionation.
Utica:
- In June, the Partnership and The Energy & Minerals Group (EMG) announced an expansion of the Hopedale fractionation and marketing complex (Hopedale complex) in Harrison County, Ohio to support growing NGL production from the Marcellus and Utica Shales. The expansion will double the propane and heavier fractionation capacity at the Hopedale complex to 120,000 Bbl/d and is expected to be operational in the first quarter of 2015.
- In June, Summit Midstream Partners, LLC (Summit), the privately held company that owns and controls the general partner of Summit Midstream Partners, LP (NYSE: SMLP), exercised the option it acquired from a subsidiary of Gulfport Energy Corporation (NASDAQ: GPOR) (Gulfport Energy) to purchase a 40% equity interest in two of the Partnership’s and EMG’s unconsolidated affiliates, Ohio Gathering Company, L.L.C. and Ohio Condensate Company, L.L.C., through a cash investment of approximately $324.7 million and $7.3 million, respectively, that was received in May 2014 and true-up payments of $16.5 million and $1.3 million, respectively, that were received in July 2014.
- In July, MarkWest Utica EMG completed the 200 MMcf/d Seneca III processing plant in Noble County, Ohio. The new plant is anchored by Antero Resources under a long-term, fee-based contract and has expanded the total processing capacity of the Seneca complex to 600 MMcf/d. In order to support the continued growth of Antero Resources and other producers, the Partnership expects to complete a fourth 200 MMcf/d processing plant in the second quarter of 2015.
- In July, MarkWest Utica EMG completed a 40,000 Bbl/d de-ethanization facility at the Cadiz complex in Harrison County, Ohio. This new fractionation facility will provide MarkWest Utica EMG’s producer customers with the ability to meet residue gas quality specifications and downstream ethane pipeline commitments. Purity ethane produced at the new Cadiz facility will be delivered to the ATEX pipeline.
- Today, MarkWest Utica EMG is announcing the development of Cadiz III, a 200 MMcf/d processing plant at the Cadiz complex in Harrison County, Ohio. The new facility is expected to begin operations during the first quarter of 2015 and will increase total processing capacity of the Cadiz complex to 525 MMcf/d. The Cadiz complex currently consists of a 125 MMcf/d cryogenic processing plant and during September 2014, MarkWest Utica EMG will begin operations of the 200 MMcf/d Cadiz II plant to support rich-gas production from Gulfport Energy and other producers.
Southwest:
- In April, the Partnership’s Centrahoma Joint Venture (Centrahoma) commenced operations of the Stonewall processing facility, a 120 MMcf/d plant in the Woodford Shale in Southwest Oklahoma. The completion of the Stonewall plant increases Centrahoma’s total processing capacity to 220 MMcf/d.
- Today, the Partnership is announcing that it will construct a fourth processing plant at its Carthage facilities in Panola County, Texas to support growing rich-gas production from the Haynesville Shale and Cotton Valley formation. The new plant will have an initial capacity of 120 MMcf/d and is scheduled to begin operations in the first quarter of 2015. Once completed, total processing capacity at the Partnership’s East Texas operations will increase to 520 MMcf/d.
Capital Markets
- Year-to-date, the Partnership has issued 15.1 million new units and received net proceeds of approximately $976.9 million.
- Achieved investment grade rating by Standard & Poor’s on the Partnership’s Senior Secured Credit Facility.
FINANCIAL RESULTS
Balance Sheet
- As of June 30, 2014, the Partnership had $74.0 million of cash and cash equivalents in wholly owned subsidiaries and $847.5 million of remaining capacity under its $1.3 billion Senior Secured Credit Facility after consideration of $11.3 million of outstanding letters of credit and $441.2 million of outstanding borrowings.
Operating Results
-
Operating income before items not allocated to segments for the three
months ended June 30, 2014, was $220.1 million, an increase of $42.6
million when compared to $177.5 million over the same period in 2013.
This increase was primarily attributable to higher processing volumes.
Processed volumes continued to increase in the second quarter of 2014,
growing approximately 53 percent when compared to the second quarter
of 2013, primarily due to the Partnership’s Marcellus and Utica
segments.
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) gains on commodity derivative instruments. Realized (losses) gains on commodity derivative instruments were ($1.9) million in the second quarter of 2014 and $2.0 million in the second quarter of 2013.
Capital Expenditures
- For the three months ended June 30, 2014, the Partnership’s portion of capital expenditures was $608.1 million.
ADJUSTED EBITDA, DCF AND CAPITAL EXPENDITURE FORECAST
The Partnership forecasts its 2014 Adjusted EBITDA in a range of $810 million to $870 million and has narrowed its 2014 DCF forecast to a range of $630 million to $670 million based on its current forecast. The Partnership has become less sensitive to changes in commodity prices as a result of significant increases in fee-based income. An updated sensitivity analysis for forecasted 2014 DCF based on changes in composite NGL prices and changes in volume assumptions is provided within the tables of this press release.
The Partnership’s portion of growth capital expenditures for 2014 is forecasted in a range of $2.0 billion to $2.3 billion and for 2015 is forecasted at approximately $2.0 billion. Maintenance capital for 2014 is forecasted at approximately $25 million.
CONFERENCE CALL
The Partnership will host a conference call and webcast on Thursday, August 7, 2014, at 12:00 p.m. Eastern Time to review its second quarter 2014 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 and associated second quarter 2014 earnings call presentation, 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 Partnership’s website or by dialing (800) 839-1248 (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, 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. | ||||||||||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| Statement of Operations Data | 2014 | 2013 | 2014 | 2013 | ||||||||||||
| Revenue: | ||||||||||||||||
| Revenue | $ | 525,119 | $ | 395,421 | $ | 1,041,562 | $ | 768,879 | ||||||||
| Derivative (loss) gain | (6,753 | ) | 19,699 | (10,720 | ) | 19,514 | ||||||||||
| Total revenue | 518,366 | 415,120 | 1,030,842 | 788,393 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Purchased product costs | 215,824 | 155,359 | 427,388 | 307,916 | ||||||||||||
| Derivative loss (gain) related to purchased product costs | 11,964 | (20,432 | ) | 4,166 | (31,136 | ) | ||||||||||
| Facility expenses | 83,545 | 62,797 | 167,250 | 122,307 | ||||||||||||
| Derivative loss related to facility expenses | 2,045 | 800 | 1,777 | 468 | ||||||||||||
| Selling, general and administrative expenses | 27,701 | 25,499 | 62,991 | 50,741 | ||||||||||||
| Depreciation | 104,078 | 71,562 | 206,007 | 139,579 | ||||||||||||
| Amortization of intangible assets | 15,965 | 17,092 | 31,943 | 31,922 | ||||||||||||
| Loss (gain) on sale or disposal of property, plant and equipment | 1,450 | (37,736 | ) | 1,357 | (37,598 | ) | ||||||||||
| Accretion of asset retirement obligations | 168 | 157 | 336 | 509 | ||||||||||||
| Total operating expenses | 462,740 | 275,098 | 903,215 | 584,708 | ||||||||||||
| Income from operations | 55,626 | 140,022 | 127,627 | 203,685 | ||||||||||||
| Other (expense) income: | ||||||||||||||||
| Equity in (loss) earnings from unconsolidated affiliates | (721 | ) | 430 | (471 | ) | 665 | ||||||||||
| Interest income | 10 | 62 | 19 | 211 | ||||||||||||
| Interest expense | (43,391 | ) | (36,955 | ) | (84,375 | ) | (75,291 | ) | ||||||||
| Amortization of deferred financing costs and debt discount (a component of interest expense) | (1,449 | ) | (1,784 | ) | (4,273 | ) | (3,614 | ) | ||||||||
| Loss on redemption of debt | - | - | - | (38,455 | ) | |||||||||||
| Miscellaneous income, net | 33 | 6 | 43 | 6 | ||||||||||||
| Income before provision for income tax | 10,108 | 101,781 | 38,570 | 87,207 | ||||||||||||
| Provision for income tax (benefit) expense: | ||||||||||||||||
| Current | (19 | ) | (2,745 | ) | 326 | (8,159 | ) | |||||||||
| Deferred | (2,921 | ) | 19,028 | 9,280 | 30,999 | |||||||||||
| Total provision for income tax | (2,940 | ) | 16,283 | 9,606 | 22,840 | |||||||||||
| Net income | 13,048 | 85,498 | 28,964 | 64,367 | ||||||||||||
| Net (income) loss attributable to non-controlling interest | (4,071 | ) | (1,799 | ) | (7,495 | ) | 3,874 | |||||||||
| Net income attributable to the Partnership's unitholders | $ | 8,977 | $ | 83,699 | $ | 21,469 | $ | 68,241 | ||||||||
| Net income attributable to the Partnership's common unitholders per common unit: | ||||||||||||||||
| Basic | $ | 0.05 | $ | 0.63 | $ | 0.13 | $ | 0.52 | ||||||||
| Diluted | $ | 0.05 | $ | 0.55 | $ | 0.12 | $ | 0.45 | ||||||||
| Weighted average number of outstanding common units: | ||||||||||||||||
| Basic | 164,613 | 131,227 | 161,727 | 129,928 | ||||||||||||
| Diluted | 181,237 | 151,866 | 178,378 | 150,580 | ||||||||||||
| Cash Flow Data | ||||||||||||||||
| Net cash flow provided by (used in): | ||||||||||||||||
| Operating activities | $ | 244,450 | $ | 93,838 | $ | 356,823 | $ | 177,596 | ||||||||
| Investing activities | $ | (429,684 | ) | $ | (825,660 | ) | $ | (1,005,158 | ) | $ | (1,435,021 | ) | ||||
| Financing activities | $ | 361,165 | $ | 434,867 | $ | 862,442 | $ | 1,266,223 | ||||||||
| Other Financial Data | ||||||||||||||||
| Distributable cash flow | $ | 161,734 | $ | 128,391 | $ | 310,180 | $ | 238,216 | ||||||||
| Adjusted EBITDA | $ | 208,231 | $ | 155,741 | $ | 395,798 | $ | 296,542 | ||||||||
| Balance Sheet Data | June 30, 2014 | December 31, 2013 | ||||||||||||||
| Total assets | $ | 10,183,390 | $ | 9,396,423 | ||||||||||||
| Total debt | $ | 3,464,637 | $ | 3,023,071 | ||||||||||||
| Total equity | $ | 5,401,550 | $ | 4,798,133 | ||||||||||||
| MarkWest Energy Partners, L.P. Operating Statistics | ||||||||
| Three months ended June 30, | Six months ended June 30, | |||||||
| 2014 | 2013 | 2014 | 2013 | |||||
| Marcellus | ||||||||
| Gathering system throughput (Mcf/d) (1) | 599,500 | 544,000 | 600,500 | 526,700 | ||||
| Natural gas processed (Mcf/d) | 1,823,200 | 1,033,700 | 1,732,500 | 931,400 | ||||
| C2 (purity ethane) produced (Bbl/d) | 45,900 | - | 47,400 | - | ||||
| C3+ fractionated (Bbl/d) (2) | 82,200 | 48,900 | 76,200 | 43,000 | ||||
| Total NGLs fractionated (Bbl/d) | 128,100 | 48,900 | 123,600 | 43,000 | ||||
| Utica | ||||||||
| Gathering system throughput (Mcf/d) | 188,700 | 46,300 | 184,700 | 27,800 | ||||
| Natural gas processed (Mcf/d) (3) | 293,800 | 46,300 | 272,700 | 27,200 | ||||
| C3+ fractionated (Bbl/d) (2) | 13,500 | - | 12,900 | - | ||||
| Northeast | ||||||||
| Natural gas processed (Mcf/d) | 281,500 | 296,400 | 268,600 | 299,500 | ||||
| NGLs fractionated (Bbl/d) (4) | 17,500 | 18,100 | 17,500 | 17,600 | ||||
| Keep-whole sales (gallons, in thousands) | 24,800 | 27,100 | 57,000 | 64,500 | ||||
| Percent-of-proceeds sales (gallons, in thousands) | 29,900 | 32,200 | 56,000 | 67,100 | ||||
| Total NGL sales (gallons, in thousands) (5) | 54,700 | 59,300 | 113,000 | 131,600 | ||||
| Crude oil transported for a fee (Bbl/d) | 10,600 | 9,700 | 10,200 | 10,000 | ||||
| Southwest | ||||||||
| East Texas gathering systems throughput (Mcf/d) | 549,500 | 521,700 | 522,800 | 510,500 | ||||
| East Texas natural gas processed (Mcf/d) | 398,500 | 377,600 | 383,400 | 358,600 | ||||
| East Texas NGL sales (gallons, in thousands) (6) | 109,500 | 86,200 | 203,400 | 158,400 | ||||
| Western Oklahoma gathering system throughput (Mcf/d) (7) | 348,200 | 220,000 | 322,700 | 211,400 | ||||
| Western Oklahoma natural gas processed (Mcf/d) | 296,300 | 189,900 | 269,800 | 188,100 | ||||
| Western Oklahoma NGL sales (gallons, in thousands) (8) | 56,900 | 42,900 | 111,300 | 97,700 | ||||
| Southeast Oklahoma gathering system throughput (Mcf/d) | 414,500 | 473,300 | 398,200 | 467,300 | ||||
| Southeast Oklahoma natural gas processed (Mcf/d) (9) | 186,600 | 160,400 | 167,000 | 155,800 | ||||
| Southeast Oklahoma NGL sales (gallons, in thousands) | 29,200 | 54,000 | 50,200 | 93,300 | ||||
| Other Southwest gathering system throughput (Mcf/d) (10) | 48,900 | 39,900 | 47,900 | 30,300 | ||||
| Gulf Coast refinery off-gas processed (Mcf/d) | 112,000 | 117,700 | 111,300 | 106,600 | ||||
| Gulf Coast liquids fractionated (Bbl/d) (11) | 21,000 | 22,100 | 20,200 | 19,700 | ||||
| Gulf Coast NGL sales (gallons, in thousands) (11) | 80,300 | 84,600 | 153,300 | 149,700 | ||||
| (1) | The 2013 volumes exclude Sherwood gathering for comparability as this system was sold to Summit in June 2013. | |
| (2) | The Marcellus segment includes both the Houston Fractionation Facility and Marcellus’ portion utilized of the jointly owned Hopedale Fractionation Facility. Hopedale is currently jointly owned 60% and 40% by MarkWest Liberty Midstream and MarkWest Utica EMG, respectively. The Utica segment includes only the portion it utilized of the jointly owned Hopedale Fractionation Facility. Operations began in January 2014. The volumes reported for 2014 are the average daily rate for the days of operation. | |
| (3) | Utica operations began in August 2013. | |
| (4) | Includes NGLs fractionated for Utica and Marcellus segments. | |
| (5) | Represents sales at the Siloam fractionator. The total sales exclude approximately 8,757,000 gallons and 6,611,000 gallons sold by the Northeast on behalf of Marcellus for the three months ended June 30, 2014 and 2013, respectively. The total sales exclude approximately 22,010,000 gallons and 6,818,000 gallons sold by the Northeast on behalf of Marcellus for the six months ended June 30, 2014 and 2013, respectively. | |
| (6) | Excludes zero and 318,000 gallons processed in conjunction with take in kind contracts for the respective three and six months ended June 30, 2014 and 3,989,000 and 12,351,000 gallons processed in conjunction with take in kind contracts for the respective three and six months ended June 30, 2013. | |
| (7) | 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. | |
| (8) | Excludes 41,969,000 and 53,685,000 gallons processed in conjunction with take in kind contracts for the respective three and six months ended June 30, 2014. | |
| (9) | The natural gas processing in Southeast Oklahoma is outsourced to our joint venture Centrahoma or other third-party processors. | |
| (10) | Excludes lateral pipelines where revenue is not based on throughput. | |
| (11) | Excludes Hydrogen volumes. | |
| 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, 2014 | Marcellus | Utica | Northeast | Southwest | Eliminations (1) | Total | |||||||||||||||
| Segment revenue | $ | 183,734 | $ | 30,826 | $ | 43,777 | $ | 271,140 | $ | (900 | ) | $ | 528,577 | ||||||||
| Operating expenses: | |||||||||||||||||||||
| Purchased product costs | 39,710 | 7,353 | 15,169 | 153,628 | - | 215,860 | |||||||||||||||
| Facility expenses | 33,755 | 12,174 | 8,509 | 34,354 | (900 | ) | 87,892 | ||||||||||||||
| Total operating expenses before items not allocated to segments | 73,465 | 19,527 | 23,678 | 187,982 | (900 | ) | 303,752 | ||||||||||||||
| Portion of operating income attributable to non-controlling interests | - | 4,687 | - | 6 | - | 4,693 | |||||||||||||||
| Operating income before items not allocated to segments | $ | 110,269 | $ | 6,612 | $ | 20,099 | $ | 83,152 | $ | - | $ | 220,132 | |||||||||
| Three months ended June 30, 2013 | Marcellus | 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 | ||||||||||
| (1) Amounts represent revenues and expenses associated with the Northeast segment fractionation completed on behalf of the Marcellus segment, which occurs when NGL volumes in the Marcellus exceed its fractionation capacity. | |||||||||||||||||||||
Three months ended June 30, | |||||||||||||||||||||
| 2014 | 2013 | ||||||||||||||||||||
| Operating income before items not allocated to segments | $ | 220,132 | $ | 177,472 | |||||||||||||||||
| Portion of operating income (loss) attributable to non-controlling interests | 4,184 | (1,090 | ) | ||||||||||||||||||
| Derivative (loss) gain not allocated to segments | (20,762 | ) | 39,331 | ||||||||||||||||||
| Revenue adjustment for unconsolidated affiliate | (3,833 | ) | - | ||||||||||||||||||
| Revenue deferral adjustment and other | 375 | (1,437 | ) | ||||||||||||||||||
| Compensation expense included in facility expenses not allocated to segments | (903 | ) | (368 | ) | |||||||||||||||||
| Facility expense and purchase product cost adjustments for unconsolidated affiliate | 2,598 | - | |||||||||||||||||||
| Portion of operating loss attributable to non-controlling interests of an unconsolidated affiliate | 509 | - | |||||||||||||||||||
| Facility expenses adjustments | 2,688 | 2,688 | |||||||||||||||||||
| Selling, general and administrative expenses | (27,701 | ) | (25,499 | ) | |||||||||||||||||
| Depreciation | (104,078 | ) | (71,562 | ) | |||||||||||||||||
| Amortization of intangible assets | (15,965 | ) | (17,092 | ) | |||||||||||||||||
| (Loss) gain on disposal of property, plant and equipment | (1,450 | ) | 37,736 | ||||||||||||||||||
| Accretion of asset retirement obligations | (168 | ) | (157 | ) | |||||||||||||||||
| Income from operations | 55,626 | 140,022 | |||||||||||||||||||
Other (expense) income: | |||||||||||||||||||||
Equity in (loss) earnings from unconsolidated affiliates | (721 | ) | 430 | ||||||||||||||||||
| Interest income | 10 | 62 | |||||||||||||||||||
| Interest expense | (43,391 | ) | (36,955 | ) | |||||||||||||||||
Amortization of deferred financing costs and debt discount (a
component of interest | (1,449 | ) | (1,784 | ) | |||||||||||||||||
| Miscellaneous income, net | 33 | 6 | |||||||||||||||||||
| Income before provision for income tax | $ | 10,108 | $ | 101,781 | |||||||||||||||||
| 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, 2014 | Marcellus | Utica | Northeast | Southwest | Eliminations (1) | Total | |||||||||||||||
| Segment revenue | $ | 358,893 | $ | 54,592 | $ | 105,030 | $ | 530,470 | $ | (2,471 | ) | $ | 1,046,514 | ||||||||
| Operating expenses: | |||||||||||||||||||||
| Purchased product costs | 74,000 | 11,488 | 35,624 | 306,312 | - | 427,424 | |||||||||||||||
| Facility expenses | 69,228 | 24,026 | 15,623 | 66,876 | (2,471 | ) | 173,282 | ||||||||||||||
| Total operating expenses before items not allocated to segments | 143,228 | 35,514 | 51,247 | 373,188 | (2,471 | ) | 600,706 | ||||||||||||||
| Portion of operating income attributable to non-controlling interests | - | 7,823 | - | 5 | - | 7,828 | |||||||||||||||
| Operating income before items not allocated to segments | $ | 215,665 | $ | 11,255 | $ | 53,783 | $ | 157,277 | $ | - | $ | 437,980 | |||||||||
| Six months ended June 30, 2013 | Marcellus | 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 | ||||||||||
| (1) Amounts represent revenues and expenses associated with the Northeast segment fractionation completed on behalf of the Marcellus segment, which occurs when NGL volumes in the Marcellus exceed its fractionation capacity. | |||||||||||||||||||||
| Six months ended June 30, | |||||||||||||||||||||
| 2014 | 2013 | ||||||||||||||||||||
| Operating income before items not allocated to segments | $ | 437,980 | $ | 339,200 | |||||||||||||||||
| Portion of operating income (loss) attributable to non-controlling interests | 7,319 | (2,365 | ) | ||||||||||||||||||
| Derivative (loss) gain not allocated to segments | (16,663 | ) | 50,182 | ||||||||||||||||||
| Revenue adjustment for unconsolidated affiliate | (3,833 | ) | - | ||||||||||||||||||
| Revenue deferral adjustment and other | (1,119 | ) | (2,801 | ) | |||||||||||||||||
| Compensation expense included in facility expenses not allocated to segments | (1,906 | ) | (754 | ) | |||||||||||||||||
| Facility expense and purchase product cost adjustments for unconsolidated affiliate | 2,598 | - | |||||||||||||||||||
| Portion of operating loss attributable to non-controlling interests of an unconsolidated affiliate | 509 | - | |||||||||||||||||||
| Facility expenses adjustments | 5,376 | 5,376 | |||||||||||||||||||
| Selling, general and administrative expenses | (62,991 | ) | (50,741 | ) | |||||||||||||||||
| Depreciation | (206,007 | ) | (139,579 | ) | |||||||||||||||||
| Amortization of intangible assets | (31,943 | ) | (31,922 | ) | |||||||||||||||||
| (Loss) gain on disposal of property, plant and equipment | (1,357 | ) | 37,598 | ||||||||||||||||||
| Accretion of asset retirement obligations | (336 | ) | (509 | ) | |||||||||||||||||
| Income from operations | 127,627 | 203,685 | |||||||||||||||||||
Other (expense) income: | |||||||||||||||||||||
Equity in (loss) earnings from unconsolidated affiliates | (471 | ) | 665 | ||||||||||||||||||
| Interest income | 19 | 211 | |||||||||||||||||||
| Interest expense | (84,375 | ) | (75,291 | ) | |||||||||||||||||
Amortization of deferred financing costs and debt discount (a
component of interest | (4,273 | ) | (3,614 | ) | |||||||||||||||||
| Loss on redemption of debt | - | (38,455 | ) | ||||||||||||||||||
| Miscellaneous income, net | 43 | 6 | |||||||||||||||||||
| Income before provision for income tax | $ | 38,570 | $ | 87,207 | |||||||||||||||||
| 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, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Net income | $ | 13,048 | $ | 85,498 | $ | 28,964 | $ | 64,367 | ||||||||
| Depreciation, amortization and other non-cash operating expenses | 120,361 | 88,889 | 239,311 | 172,166 | ||||||||||||
| Loss (gain) on sale or disposal of property, plant and equipment | 1,450 | (34,689 | ) | 1,357 | (34,551 | ) | ||||||||||
| Loss on redemption of debt, net of tax benefit | - | - | - | 36,178 | ||||||||||||
| Amortization of deferred financing costs and debt discount | 1,449 | 1,784 | 4,273 | 3,614 | ||||||||||||
Equity in loss (earnings) from unconsolidated affiliates | 721 | (430 | ) | 471 | (665 | ) | ||||||||||
| Distributions from unconsolidated affiliates | 2,541 | 1,962 | 3,910 | 2,728 | ||||||||||||
| Non-cash compensation expense | 1,835 | 1,157 | 5,802 | 3,541 | ||||||||||||
| Unrealized loss (gain) on derivative instruments | 18,844 | (37,287 | ) | 7,024 | (46,320 | ) | ||||||||||
| Deferred income tax (benefit) expense | (2,921 | ) | 19,028 | 9,280 | 30,999 | |||||||||||
| Cash adjustment for non-controlling interest of consolidated subsidiaries | (3,178 | ) | 1,720 | (5,296 | ) | 3,489 | ||||||||||
| Revenue deferral adjustment | 1,722 | 1,645 | 3,813 | 3,410 | ||||||||||||
| Other (1) | 12,867 | 3,318 | 21,022 | 5,355 | ||||||||||||
| Maintenance capital expenditures (2) | (7,005 | ) | (4,204 | ) | (9,751 | ) | (6,095 | ) | ||||||||
| Distributable cash flow | $ | 161,734 | $ | 128,391 | $ | 310,180 | $ | 238,216 | ||||||||
| Maintenance capital expenditures (2) | $ | 7,005 | $ | 4,204 | $ | 9,751 | $ | 6,095 | ||||||||
| Growth capital expenditures of consolidated subsidiaries | 681,198 | 799,322 | 1,265,572 | 1,428,989 | ||||||||||||
| Growth capital expenditures of unconsolidated subsidiaries (3) | 40,013 | - | 40,013 | - | ||||||||||||
| Total capital expenditures | 728,216 | 803,526 | 1,315,336 | 1,435,084 | ||||||||||||
| Acquisitions, net of cash acquired | - | 225,210 | - | 225,210 | ||||||||||||
| Total capital expenditures and acquisitions | 728,216 | 1,028,736 | 1,315,336 | 1,660,294 | ||||||||||||
| Joint venture partner contributions | (120,106 | ) | (360,499 | ) | (120,106 | ) | (625,819 | ) | ||||||||
| Total capital expenditures and acquisitions, net | $ | 608,110 | $ | 668,237 | $ | 1,195,230 | $ | 1,034,475 | ||||||||
| Distributable cash flow | $ | 161,734 | $ | 128,391 | $ | 310,180 | $ | 238,216 | ||||||||
| Maintenance capital expenditures (2) | 7,005 | 4,204 | 9,751 | 6,095 | ||||||||||||
| Changes in receivables, inventories and other assets | (35,710 | ) | (68,767 | ) | (42,763 | ) | (67,501 | ) | ||||||||
| Changes in accounts payable, accrued liabilities and other long-term liabilities | 120,755 | 37,601 | 95,041 | 10,053 | ||||||||||||
| Cash adjustment for non-controlling interest of consolidated subsidiaries | 3,178 | (1,720 | ) | 5,296 | (3,489 | ) | ||||||||||
| Other | (12,512 | ) | (5,871 | ) | (20,682 | ) | (5,778 | ) | ||||||||
| Net cash provided by operating activities | $ | 244,450 | $ | 93,838 | $ | 356,823 | $ | 177,596 | ||||||||
(1) | Other includes amounts related to capitalized interest associated with joint venture capital expenditures and fees earned related to development of joint venture capital projects. | |
(2) | Net of joint venture partner contributions. | |
(3) | Growth capital expenditures for Ohio Gathering, L.L.C. | |
| 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, | ||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||
| Net income | $ | 13,048 | $ | 85,498 | $ | 28,964 | $ | 64,367 | |||||||
| Non-cash compensation expense | 1,835 | 1,157 | 5,802 | 3,541 | |||||||||||
| Unrealized loss (gain) on derivative instruments | 18,844 | (37,287 | ) | 7,024 | (46,320 | ) | |||||||||
| Interest expense (1) | 42,765 | 36,610 | 84,483 | 74,632 | |||||||||||
| Depreciation, amortization and other non-cash operating expenses | 120,361 | 88,889 | 239,311 | 172,166 | |||||||||||
| Loss (gain) on sale or disposal of property, plant and equipment | 1,450 | (37,736 | ) | 1,357 | (37,598 | ) | |||||||||
| Loss on redemption of debt | - | - | - | 38,455 | |||||||||||
Provision for income tax (benefit) expense | (2,940 | ) | 16,283 | 9,606 | 22,840 | ||||||||||
| Adjustment for cash flow from unconsolidated affiliates | 3,262 | 1,532 | 4,381 | 2,063 | |||||||||||
| Other (2) | 9,606 | 795 | 14,870 | 2,396 | |||||||||||
| Adjusted EBITDA | $ | 208,231 | $ | 155,741 | $ | 395,798 | $ | 296,542 | |||||||
(1) | Includes amortization of deferred financing costs and debt discount, and excludes interest expense related to the Steam Methane Reformer. | |
(2) | For the three and six months ended June 30, 2014, Other includes amounts related to capitalized interest associated with joint venture capital expenditures and fees earned related to development of joint venture capital projects. | |
MarkWest Energy Partners, L.P.
Distributable Cash Flow
Sensitivity Analysis
(unaudited, in millions)
The Partnership periodically estimates the effect on DCF resulting from changes in its volume forecast and NGL prices. The Partnership has become less sensitive to changes in commodity prices as a result of significant increases in fee-based income. For the full year 2014, the Partnership estimates that net operating margin will be over 70 percent fee-based. In addition, the Partnership has hedged approximately 60 percent of its forecasted 2014 NGL exposure on a volumetric basis, over 90 percent of these with direct product hedges.
The analysis further assumes derivative instruments outstanding as of August 6, 2014, and production volumes estimated through December 31, 2014. The range of stated hypothetical changes in commodity prices considers current and historic market performance.
Estimated Range of 2014 DCF | ||||||||||||||||
| Volume Forecast (1) | ||||||||||||||||
| Low Case | Base Case | High Case | ||||||||||||||
NGL $/Gal | $1.05 | $ | 635 | $ | 659 | $ | 680 | |||||||||
| $1.00 | $ | 631 | $ | 654 | $ | 676 | ||||||||||
| $0.95 | $ | 627 | $ | 650 | $ | 671 | ||||||||||
| $0.90 | $ | 623 | $ | 646 | $ | 667 | ||||||||||
| $0.85 | $ | 619 | $ | 641 | $ | 662 | ||||||||||
| (1) | Volume Forecast is increased/decreased by 10% in the Marcellus and Utica segments for the High and Low Cases. | |
| (2) | The composition is based on the Partnership’s projected barrel of approximately: Ethane: 35%, Propane: 35%, Iso-Butane: 6%, Normal Butane: 12%, Natural Gasoline: 12%. | |
| (3) | Composite NGL prices are based on the Partnership’s average forecasted price. |
The table is based on current information, expectations, and beliefs concerning future developments and their potential effects, and does not consider actions the Partnership’s management may take to mitigate exposure to changes. Further, the table does not consider the effects that such hypothetical adverse changes may have on overall economic activity. Historical volumes, prices and correlations do not guarantee future results.
Although the Partnership believes the expectations reflected in this analysis are reasonable, the Partnership can give no assurance that such expectations will prove to be correct and readers are cautioned that projected performance, results, or distributions may not be achieved. Actual changes in market prices, market conditions and constraints, production, NGL composition, infrastructure availability, market participants, and ratios between product prices may differ from the assumptions utilized in the analysis. Actual results, performance, distributions, volumes, events, or transactions could vary significantly from those expressed, considered or implied in this analysis. All results, performance, distributions, volumes, events or transactions are subject to a number of uncertainties and risks. Those uncertainties and risks may not be factored into or accounted for in this analysis. Readers are urged to carefully review and consider the cautionary statements and disclosures made in the Partnership’s periodic reports filed with the SEC, specifically those under the heading “Risk Factors.”
Contacts:
Frank Semple, Chairman,
President & CEO
Nancy Buese, Executive VP and CFO
Josh
Hallenbeck, VP of Finance & Treasurer
866-858-0482
investorrelations@markwest.com
