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8-K - 8-K - MARKWEST ENERGY PARTNERS L Pa13-23902_18k.htm

Exhibit 99.1

 

GRAPHIC

 

MarkWest Energy Partners, L.P.

 

Contact:

 

Frank Semple, Chairman, President & CEO

1515 Arapahoe Street

 

 

 

Nancy Buese, Executive VP and CFO

Tower 1, Suite 1600

 

 

 

Josh Hallenbeck, VP of Finance & Treasurer

Denver, Colorado 80202

 

Phone:

 

(866) 858-0482

 

 

E-mail:

 

investorrelations@markwest.com

 

MarkWest Energy Partners Reports Third Quarter Financial Results; Places into Service Three Major Facilities; Announces Additional Midstream Infrastructure Project in the Marcellus Shale

 

·                  Placed into service Seneca I, a 200 MMcf/d cryogenic processing facility in the Utica Shale and is the first of three major processing facilities expected to be operational at this complex within the next six months.

·                  Placed into service Majorsville V, a 200 MMcf/d cryogenic processing facility that increases the Partnership’s total processing capacity in the Marcellus Shale to over 1.8 Bcf/d.

·                  Executed agreements with Antero Resources to expand the Sherwood processing complex by 200 MMcf/d, bringing total capacity of the complex to 1 Bcf/d by the third quarter of 2014.

·                  MarkWest Utica EMG and Kinder Morgan Energy Partners announced a binding open season to solicit commitments for the NGL pipeline project from Mercer, PA to Mt. Belvieu, TX.

·                  The Partnership has 22 major processing and fractionation facilities under construction.

·                  Fee-based net operating margin increased from 53 percent to 62 percent when compared to the third quarter of 2012.

 

DENVER—November 12, 2013—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 $117.9 million for the three months ended September 30, 2013, and $356.1 million for the nine months ended September 30, 2013.  DCF for the three months ended September 30, 2013 represents 92 percent coverage of the third quarter distribution of $127.9 million or $0.85 per common unit, which will be paid to unitholders on November 14, 2013. The third quarter 2013 distribution represents an increase of $0.01 per common unit or 1.2 percent over the second quarter 2013 distribution and an increase of $0.04 per common unit or 4.9 percent compared to the third 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 nine months ended September 30, 2013, of $153.9 million and $450.5 million, respectively, as compared to $115.5 million and $390.5 million for the three and nine months ended September 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 (loss) income before provision for income tax for the three and nine months ended September 30, 2013, of $(30.3) million and $56.9 million, respectively.  (Loss) income

 

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before provision for income tax includes non-cash loss associated with the change in fair value of derivative instruments of $47.5 million and $1.2 million for the respective three and nine months ended September 30, 2013, a gain of $0.7 million and $38.9 million related to the divestiture of gathering assets in the Marcellus Shale for the respective three and nine months ended September 30, 2013, and a loss associated with the redemption of debt of $38.5 million for the nine months ended September 30, 2013.  Excluding these items, income before provision for income tax for the three and nine months ended September 30, 2013 would have been $16.5 million and $57.7 million, respectively.

 

“Our results reflect the continued success of our producers’ as they rapidly develop their acreage positions in high-quality unconventional resource plays, as well as several short-term operational constraints that we have recently experienced in the Northeast,” said Frank Semple, Chairman, President and Chief Executive Officer. “Development of the Marcellus and Utica Shales continues to provide us with significant future growth opportunities for the expansion of critical midstream infrastructure. We are committed to providing our producers with exceptional customer service and unique solutions that will support their ongoing success.”

 

BUSINESS HIGHLIGHTS

 

Marcellus:

 

·                  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, an ethane purity products pipeline project being developed by Sunoco Logistics Partners, L.P. (NYSE: SXL) (Sunoco), and in the future, will support the ATEX and Mariner East ethane takeaway projects.

 

·                  In August 2013, the Partnership announced the development of additional fractionation facilities to support producers’ growing rich-gas production in the Marcellus Shale. By the second 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 announced plans to install a 38,000 Bbl/d de-ethanization facility at the Sherwood complex in Doddridge County, West Virginia.

 

·                  In August 2013, the Partnership announced an expansion of the Mobley complex in Wetzel County, West Virginia to support EQT Corporation (NYSE: EQT) and other producers’ rich-gas development in the Marcellus Shale.  The new 200 million cubic feet per day (MMcf/d) processing facility is currently scheduled to begin operations in the fourth quarter of 2014.  Upon completion of this facility, the Mobley complex will have processing capacity of 720 MMcf/d.

 

·                  In November 2013, the Partnership announced an expansion of the Sherwood complex in Doddridge County, West Virginia to support Antero Resources Corporation’s (NYSE: AR) highly prospective rich-gas Marcellus Shale acreage. The Partnership will construct Sherwood V, a new 200 MMcf/d processing facility that is scheduled to begin operations in the third quarter of 2014.  Upon completion of this facility, the Sherwood complex will have processing capacity of 1 billion cubic feet per day (Bcf/d).

 

·                  In November 2013, the Partnership announced the completion of Majorsville V, a new 200 MMcf/d processing plant at the Majorsville complex in Marshall County, West Virginia. Majorsville V supports growing rich-gas production from Chesapeake Energy Corporation

 

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(NYSE: CHK), and Statoil ASA (NYSE: STO) and increases the total processing capacity of the complex to 670 MMcf/d.

 

Utica:

 

·                  In August 2013, MarkWest Utica EMG announced plans to install a 38,000 (Bbl/d) de-ethanization facility at the Seneca complex in Noble County, Ohio.

 

·                  In August 2013, MarkWest Utica EMG announced plans to form a Joint Venture (JV) with Kinder Morgan Energy Partners, LP (NYSE: KMP) (Kinder Morgan) to pursue three critical new projects to support producers in the Utica and Marcellus Shales. The JV would develop a processing complex in Tuscarawas County, Ohio with an initial capacity of 200 MMcf/d and a 150,000 Bbl/d NGL pipeline to transport ethane and heavier natural gas liquids to JV fractionation facilities in Mt. Belvieu.  In November 2013, MarkWest Utica EMG and Kinder Morgan announced a binding open season to solicit commitments for the NGL pipeline project.

 

·                  In November 2013, MarkWest Utica EMG announced it commenced operations of Seneca I, a 200 MMcf/d cryogenic processing facility in Noble County, Ohio. Seneca I is supported by long-term fee-based agreements with Antero Resources Corporation, Gulfport Energy Corporation (NASDAQ: GPOR), Rex Energy Corporation (NASDAQ: REXX), PDC Energy (NASDAQ: PDCE) and others.

 

Southwest:

 

·                  In August 2013, the Partnership announced the connection of gathering assets acquired from a wholly owned subsidiary of Chesapeake Energy to the Partnership’s existing Anadarko Basin gathering system. Connecting these gathering systems has allowed the Partnership to begin processing approximately 50 MMcf/d of additional rich-gas production at its Arapaho processing complex.

 

Capital Markets

 

·                  During the third quarter of 2013, the Partnership offered 10.4 million units and received net proceeds of approximately $691.5 million.

 

·                  During the third quarter of 2013, the Partnership completed the $600 million and $400 million continuous offering programs launched in the fourth quarter of 2012 and third quarter of 2013, respectively.  In addition, during the third quarter of 2013, the Partnership launched a $1 billion continuous offering program under which the Partnership has issued 0.9 million units and received $59.5 million of net proceeds as of the end of the third quarter of 2013.

 

FINANCIAL RESULTS

 

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.

 

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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.

 

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·                  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

 

For 2013, the Partnership forecasts DCF in a range of $475 million to $485 million based on its current forecast of operational volumes, expected impact of short-term operational constraints and prices for crude oil, natural gas, natural gas liquids and derivative instruments currently outstanding.

 

The Partnership’s portion of growth capital expenditures for 2013 has increased to a range of $2.0 billion to $2.3 billion primarily due to the addition of announced expansion projects and an acceleration of spending on other projects in the Marcellus and Utica segments.  These expenditures do not include the Granite Wash Acquisition or the divestiture of the high-pressure gathering system in the Marcellus Shale during the second quarter 2013.  Maintenance capital is forecasted at approximately $20 million.

 

2014 DCF AND GROWTH CAPITAL EXPENDITURE FORECAST

 

For 2014, the Partnership forecasts DCF in a range of $600 million to $690 million based on its current forecast of operational volumes and prices for crude oil, natural gas, natural gas liquids and derivative instruments currently outstanding.  A commodity price sensitivity analysis for forecasted 2014 DCF 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 $1.8 billion to $2.3 billion.  Maintenance capital is forecasted at approximately $25 million.

 

CONFERENCE CALL

 

The Partnership will host a conference call and webcast on Wednesday, November 13, 2013, at 12:00 p.m. Eastern Time to review its third 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 (800) 926-7934 (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

 

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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 September 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.

 

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MarkWest Energy Partners, L.P.

Financial Statistics

(unaudited, in thousands, except per unit data)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Statement of Operations Data

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

Revenue

 

$

450,834

 

$

316,976

 

$

1,219,713

 

$

1,019,709

 

Derivative (loss) gain

 

(30,318

)

(36,400

)

(10,804

)

50,952

 

Total revenue

 

420,516

 

280,576

 

1,208,909

 

1,070,661

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Purchased product costs

 

191,672

 

119,369

 

499,588

 

386,655

 

Derivative loss (gain) related to purchased product costs

 

20,234

 

11,643

 

(10,902

)

(21,136

)

Facility expenses

 

77,542

 

52,883

 

199,849

 

149,438

 

Derivative loss related to facility expenses

 

2,332

 

4,028

 

2,800

 

1,136

 

Selling, general and administrative expenses

 

26,647

 

21,723

 

77,388

 

68,471

 

Depreciation

 

76,323

 

46,554

 

215,902

 

127,472

 

Amortization of intangible assets

 

16,003

 

14,988

 

47,925

 

38,280

 

Loss (gain) on sale or disposal of property, plant and equipment

 

1,840

 

655

 

(35,758

)

2,983

 

Accretion of asset retirement obligations

 

160

 

140

 

669

 

536

 

Total operating expenses

 

412,753

 

271,983

 

997,461

 

753,835

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

7,763

 

8,593

 

211,448

 

316,826

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Equity in earnings from unconsolidated affiliates

 

896

 

706

 

1,561

 

2,254

 

Interest income

 

27

 

64

 

238

 

295

 

Interest expense

 

(38,889

)

(30,621

)

(114,180

)

(86,855

)

Amortization of deferred financing costs and discount (a component of interest expense)

 

(1,584

)

(1,428

)

(5,198

)

(3,943

)

Loss on redemption of debt

 

 

 

(38,455

)

 

Miscellaneous income, net

 

1,504

 

1

 

1,510

 

63

 

(Loss) income before provision for income tax

 

(30,283

)

(22,685

)

56,924

 

228,640

 

 

 

 

 

 

 

 

 

 

 

Provision for income tax (benefit) expense:

 

 

 

 

 

 

 

 

 

Current

 

(2,344

)

(17,948

)

(10,503

)

2,202

 

Deferred

 

(7,912

)

10,528

 

23,087

 

39,396

 

Total provision for income tax

 

(10,256

)

(7,420

)

12,584

 

41,598

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

(20,027

)

(15,265

)

44,340

 

187,042

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to non-controlling interest

 

(3,577

)

925

 

297

 

1,546

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to the Partnership’s unitholders

 

$

(23,604

)

$

(14,340

)

$

44,637

 

$

188,588

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to the Partnership’s common unitholders per common unit:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.17

)

$

(0.13

)

$

0.32

 

$

1.77

 

Diluted

 

$

(0.17

)

$

(0.13

)

$

0.29

 

$

1.49

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of outstanding common units:

 

 

 

 

 

 

 

 

 

Basic

 

142,352

 

113,994

 

134,115

 

105,916

 

Diluted

 

142,352

 

113,994

 

153,455

 

126,595

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Data

 

 

 

 

 

 

 

 

 

Net cash flow provided by (used in):

 

 

 

 

 

 

 

 

 

Operating activities

 

$

153,063

 

$

132,163

 

$

330,659

 

$

385,784

 

Investing activities

 

$

(751,286

)

$

(658,635

)

$

(2,186,307

)

$

(1,745,749

)

Financing activities

 

$

571,822

 

$

816,452

 

$

1,838,045

 

$

1,657,986

 

 

 

 

 

 

 

 

 

 

 

Other Financial Data

 

 

 

 

 

 

 

 

 

Distributable cash flow

 

$

117,897

 

$

104,289

 

$

356,113

 

$

304,950

 

Adjusted EBITDA

 

$

153,936

 

$

115,531

 

$

450,477

 

$

390,515

 

 

 

 

September 30, 2013

 

December 31, 2012

 

Balance Sheet Data

 

 

 

 

 

 

 

Working capital

 

$

(263,896

)

$

(84,512

)

Total assets

 

8,917,716

 

6,728,362

 

Total debt

 

3,022,887

 

2,523,051

 

Total equity

 

4,150,443

 

3,111,398

 

 

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MarkWest Energy Partners, L.P.

Operating Statistics

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

Marcellus

 

 

 

 

 

 

 

 

 

Gathering system throughput (Mcf/d) (1)

 

563,200

 

444,700

 

617,200

 

373,700

 

Natural gas processed (Mcf/d)

 

1,137,400

 

479,400

 

1,000,900

 

424,300

 

NGLs fractionated (Bbl/d)

 

48,200

 

22,300

 

44,500

 

20,700

 

NGL sales (gallons, in thousands) (2)

 

229,900

 

90,800

 

536,100

 

264,200

 

 

 

 

 

 

 

 

 

 

 

Utica (3)

 

 

 

 

 

 

 

 

 

Gathering system throughput (Mcf/d)

 

85,100

 

N/A

 

47,100

 

N/A

 

Natural gas processed (Mcf/d)

 

131,100

 

N/A

 

62,200

 

N/A

 

 

 

 

 

 

 

 

 

 

 

Northeast

 

 

 

 

 

 

 

 

 

Natural gas processed (Mcf/d)

 

297,800

 

318,500

 

298,900

 

322,800

 

NGLs fractionated (Bbl/d)

 

21,500

 

16,500

 

18,900

 

16,800

 

 

 

 

 

 

 

 

 

 

 

Keep-whole sales (gallons, in thousands)

 

28,200

 

23,200

 

92,600

 

96,500

 

Percent-of-proceeds sales (gallons, in thousands)

 

34,700

 

33,700

 

101,800

 

103,500

 

Total NGL sales (gallons, in thousands) (4)

 

62,900

 

56,900

 

194,400

 

200,000

 

 

 

 

 

 

 

 

 

 

 

Crude oil transported for a fee (Bbl/d)

 

9,400

 

8,700

 

9,800

 

9,100

 

 

 

 

 

 

 

 

 

 

 

Southwest

 

 

 

 

 

 

 

 

 

East Texas gathering systems throughput (Mcf/d)

 

494,300

 

471,200

 

505,000

 

440,700

 

East Texas natural gas processed (Mcf/d)

 

345,400

 

270,200

 

354,200

 

260,400

 

East Texas NGL sales (gallons, in thousands) (5)

 

78,500

 

67,800

 

249,300

 

199,300

 

 

 

 

 

 

 

 

 

 

 

Western Oklahoma gathering system throughput (Mcf/d) (6)

 

262,000

 

227,900

 

228,400

 

247,300

 

Western Oklahoma natural gas processed (Mcf/d)

 

218,500

 

209,600

 

198,400

 

210,800

 

Western Oklahoma NGL sales (gallons, in thousands)

 

64,400

 

50,900

 

162,200

 

169,900

 

 

 

 

 

 

 

 

 

 

 

Southeast Oklahoma gathering system throughput (Mcf/d)

 

444,200

 

484,400

 

459,500

 

496,200

 

Southeast Oklahoma natural gas processed (Mcf/d) (7)

 

156,700

 

128,600

 

156,100

 

116,700

 

Southeast Oklahoma NGL sales (gallons, in thousands)

 

44,000

 

46,700

 

137,300

 

121,000

 

 

 

 

 

 

 

 

 

 

 

Other Southwest gathering system throughput (Mcf/d) (8)

 

33,000

 

23,600

 

31,200

 

25,000

 

 

 

 

 

 

 

 

 

 

 

Gulf Coast refinery off-gas processed (Mcf/d)

 

117,100

 

123,800

 

110,100

 

120,000

 

Gulf Coast liquids fractionated (Bbl/d)

 

21,400

 

23,800

 

20,300

 

23,000

 

Gulf Coast NGL sales (gallons excluding hydrogen, in thousands)

 

82,800

 

92,100

 

232,500

 

264,400

 

 


(1)              Gathered volumes reflect the first full quarter following the sale of the Sherwood gathering assets in the 2nd quarter of 2013.

(2)              Includes sale of all purity products fractionated at the Marcellus facilities and the sale of all unfractionated NGLs.

(3)              Utica operations began in August 2012.

(4)              Represents sales at the Siloam fractionator. The total sales exclude approximately 21,000,000 gallons, 595,000 gallons, 27,900,000 gallons, and 975,000 gallons sold by the Northeast on behalf of Marcellus for the three months and nine months ended September 30, 2013 and 2012, respectively. These volumes are included as part of NGLs sold at Marcellus.

(5)              Includes approximately 1,390,000 gallons and 13,700,000 gallons processed in conjunction with take in kind contracts for the three and nine months ended September 30, 2013, respectively.

(6)              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.

(7)              The natural gas processing in Southeast Oklahoma is outsourced to Centrahoma or other third-party processors.             

(8)              Excludes lateral pipelines where revenue is not based on throughput.

 

8



 

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)

 

 

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Total

 

Three months ended September 30, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment revenue

 

$

147,290

 

$

8,373

 

$

48,829

 

$

247,885

 

$

452,377

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased product costs

 

36,995

 

 

15,330

 

139,347

 

191,672

 

Facility expenses

 

29,621

 

9,858

 

7,359

 

32,559

 

79,397

 

Total operating expenses before items not allocated to segments

 

66,616

 

9,858

 

22,689

 

171,906

 

271,069

 

 

 

 

 

 

 

 

 

 

 

 

 

Portion of operating (loss) income attributable to non-controlling interests

 

 

(599

)

 

40

 

(559

)

Operating income (loss) before items not allocated to segments

 

$

80,674

 

$

(886

)

$

26,140

 

$

75,939

 

$

181,867

 

 

 

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Total

 

Three months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Segment revenue

 

$

78,707

 

$

145

 

$

39,987

 

$

199,394

 

$

318,233

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased product costs

 

16,203

 

 

11,054

 

92,112

 

119,369

 

Facility expenses

 

18,933

 

1,308

 

6,267

 

28,870

 

55,378

 

Total operating expenses before items not allocated to segments

 

35,136

 

1,308

 

17,321

 

120,982

 

174,747

 

 

 

 

 

 

 

 

 

 

 

 

 

Portion of operating (loss) income attributable to non-controlling interests

 

 

(627

)

 

67

 

(560

)

Operating income (loss) before items not allocated to segments

 

$

43,571

 

$

(536

)

$

22,666

 

$

78,345

 

$

144,046

 

 

 

 

Three months ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Operating income before items not allocated to segments

 

$

181,867

 

$

144,046

 

Portion of operating loss attributable to non-controlling interests

 

(559

)

(560

)

Derivative loss not allocated to segments

 

(52,884

)

(52,071

)

Revenue deferral adjustment and other

 

(1,543

)

(1,257

)

Compensation expense included in facility expenses not allocated to segments

 

(833

)

(193

)

Facility expenses adjustments

 

2,688

 

2,688

 

Selling, general and administrative expenses

 

(26,647

)

(21,723

)

Depreciation

 

(76,323

)

(46,554

)

Amortization of intangible assets

 

(16,003

)

(14,988

)

Loss on disposal of property, plant and equipment

 

(1,840

)

(655

)

Accretion of asset retirement obligations

 

(160

)

(140

)

Income from operations

 

7,763

 

8,593

 

Other income (expense):

 

 

 

 

 

Earnings from unconsolidated affiliates

 

896

 

706

 

Interest income

 

27

 

64

 

Interest expense

 

(38,889

)

(30,621

)

Amortization of deferred financing costs and discount (a component of interest expense)

 

(1,584

)

(1,428

)

Miscellaneous income, net

 

1,504

 

1

 

Income before provision for income tax

 

$

(30,283

)

$

(22,685

)

 

9



 

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)

 

 

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Total

 

Nine months ended September 30, 2013

 

 

 

 

 

 

 

 

 

 

 

Segment revenue

 

$

375,844

 

$

12,590

 

$

151,530

 

$

684,093

 

$

1,224,057

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased product costs

 

72,781

 

 

50,118

 

376,689

 

499,588

 

Facility expenses

 

74,529

 

20,232

 

20,538

 

91,027

 

206,326

 

Total operating expenses before items not allocated to segments

 

147,310

 

20,232

 

70,656

 

467,716

 

705,914

 

 

 

 

 

 

 

 

 

 

 

 

 

Portion of operating (loss) income attributable to non-controlling interests

 

 

(3,081

)

 

157

 

(2,924

)

Operating income (loss) before items not allocated to segments

 

$

228,534

 

$

(4,561

)

$

80,874

 

$

216,220

 

$

521,067

 

 

 

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Total

 

Nine months ended September 30, 2012

 

 

 

 

 

 

 

 

 

 

 

Segment revenue

 

$

213,761

 

$

145

 

$

168,956

 

$

641,321

 

$

1,024,183

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

Purchased product costs

 

48,856

 

 

49,662

 

288,137

 

386,655

 

Facility expenses

 

44,544

 

1,591

 

17,577

 

92,964

 

156,676

 

Total operating expenses before items not allocated to segments

 

93,400

 

1,591

 

67,239

 

381,101

 

543,331

 

 

 

 

 

 

 

 

 

 

 

 

 

Portion of operating (loss) income attributable to non-controlling interests

 

 

(740

)

 

98

 

(642

)

Operating income (loss) before items not allocated to segments

 

$

120,361

 

$

(706

)

$

101,717

 

$

260,122

 

$

481,494

 

 

 

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Operating income before items not allocated to segments

 

$

521,067

 

$

481,494

 

Portion of operating loss attributable to non-controlling interests

 

(2,924

)

(642

)

Derivative (loss) gain not allocated to segments

 

(2,702

)

70,952

 

Revenue deferral adjustment and other

 

(4,344

)

(4,474

)

Compensation expense included in facility expenses not allocated to segments

 

(1,587

)

(826

)

Facility expenses adjustments

 

8,064

 

8,064

 

Selling, general and administrative expenses

 

(77,388

)

(68,471

)

Depreciation

 

(215,902

)

(127,472

)

Amortization of intangible assets

 

(47,925

)

(38,280

)

Gain (loss) on disposal of property, plant and equipment

 

35,758

 

(2,983

)

Accretion of asset retirement obligations

 

(669

)

(536

)

Income from operations

 

211,448

 

316,826

 

Other income (expense):

 

 

 

 

 

Earnings from unconsolidated affiliates

 

1,561

 

2,254

 

Interest income

 

238

 

295

 

Interest expense

 

(114,180

)

(86,855

)

Amortization of deferred financing costs and discount (a component of interest expense)

 

(5,198

)

(3,943

)

Loss on redemption of debt

 

(38,455

)

 

Miscellaneous income, net

 

1,510

 

63

 

Income before provision for income tax

 

$

56,924

 

$

228,640

 

 

10



 

Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure

Distributable Cash Flow

(unaudited, in thousands)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

(20,027

)

$

(15,265

)

$

44,340

 

$

187,042

 

Depreciation, amortization and other non-cash operating expenses

 

92,564

 

61,761

 

264,730

 

166,522

 

Loss (gain) on sale and or disposal of assets, net of tax benefit

 

1,840

 

655

 

(32,711

)

2,983

 

Loss on redemption of debt, net of tax benefit

 

 

 

36,178

 

 

Amortization of deferred financing costs and discount

 

1,584

 

1,428

 

5,198

 

3,943

 

Non-cash earnings from unconsolidated affiliates

 

(896

)

(706

)

(1,561

)

(2,254

)

Distributions from unconsolidated affiliates

 

2,224

 

2,058

 

4,952

 

6,624

 

Non-cash compensation expense

 

1,924

 

981

 

5,464

 

6,271

 

Non-cash derivative activity

 

47,542

 

43,712

 

1,222

 

(101,815

)

Provision for income tax - deferred

 

(7,912

)

10,528

 

23,087

 

39,396

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

1,183

 

787

 

4,672

 

1,391

 

Revenue deferral adjustment

 

1,754

 

1,635

 

5,164

 

5,604

 

Other

 

2,887

 

549

 

7,753

 

3,067

 

Maintenance capital expenditures, net of joint venture partner contributions

 

(6,770

)

(3,834

)

(12,375

)

(13,824

)

Distributable cash flow

 

$

117,897

 

$

104,289

 

$

356,113

 

$

304,950

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital expenditures

 

$

6,770

 

$

3,834

 

$

12,375

 

$

13,824

 

Growth capital expenditures

 

734,865

 

654,891

 

2,164,344

 

1,225,881

 

Total capital expenditures

 

741,635

 

658,725

 

2,176,719

 

1,239,705

 

Acquisitions, net of cash acquired

 

 

 

225,210

 

506,797

 

Total capital expenditures and acquisitions

 

741,635

 

658,725

 

2,401,929

 

1,746,502

 

Joint venture partner contributions

 

(91,163

)

(55,000

)

(716,982

)

(55,000

)

Total capital expenditures and acquisitions, net

 

$

650,472

 

$

603,725

 

$

1,684,947

 

$

1,691,502

 

 

 

 

 

 

 

 

 

 

 

Distributable cash flow

 

$

117,897

 

$

104,289

 

$

356,113

 

$

304,950

 

Maintenance capital expenditures, net of joint venture partner contributions

 

6,770

 

3,834

 

12,375

 

13,824

 

Changes in receivables and other assets

 

(6,969

)

(85,658

)

(74,470

)

26,296

 

Changes in accounts payable, accrued liabilities and other long-term liabilities

 

38,504

 

110,658

 

48,557

 

45,468

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

(1,183

)

(787

)

(4,672

)

(1,391

)

Other

 

(1,956

)

(173

)

(7,244

)

(3,363

)

Net cash provided by operating activities

 

$

153,063

 

$

132,163

 

$

330,659

 

$

385,784

 

 

11



 

MarkWest Energy Partners, L.P.

Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure

Adjusted EBITDA

(unaudited, in thousands)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

(20,027

)

$

(15,265

)

$

44,340

 

$

187,042

 

Non-cash compensation expense

 

1,924

 

981

 

5,464

 

6,271

 

Non-cash derivative activity

 

47,542

 

43,712

 

1,222

 

(101,815

)

Interest expense (1)

 

38,356

 

29,882

 

112,988

 

84,260

 

Depreciation, amortization and other non-cash operating expenses

 

92,564

 

61,761

 

264,730

 

166,522

 

Loss (gain) on sale and or disposal of assets

 

1,840

 

655

 

(35,758

)

2,983

 

Loss on redemption of debt

 

 

 

38,455

 

 

Provision for income tax

 

(10,256

)

(7,420

)

12,584

 

41,598

 

Adjustment for cash flow from unconsolidated affiliate

 

1,328

 

1,352

 

3,391

 

4,370

 

Other

 

665

 

(127

)

3,061

 

(716

)

Adjusted EBITDA

 

$

153,936

 

$

115,531

 

$

450,477

 

$

390,515

 

 


(1) Includes amortization of deferred financing costs and discount, and excludes interest expense related to the Steam Methane Reformer.

 

12



 

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 2014 and forecasted crude oil and natural gas prices for 2014.  The analysis assumes various combinations of crude oil and natural gas prices as well as three NGL-to-crude oil ratio scenarios, including:

 

a.              NGL-to-crude oil ratio at 50% for 2014.

b.              NGL-to-crude oil ratio at 40% for 2014.

c.               NGL-to-crude oil ratio at 30% for 2014.

 

The analysis further assumes derivative instruments outstanding as of November 5, 2013, 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

 

Crude Oil Price

 

NGL-to-Crude

 

Natural Gas Price (Henry Hub)

 

(WTI)

 

Oil ratio (1)

 

$3.00

 

$3.50

 

$4.00

 

$4.50

 

$

110

 

50% of WTI

 

$

740

 

$

737

 

$

733

 

$

730

 

 

40% of WTI

 

$

684

 

$

681

 

$

677

 

$

674

 

 

30% of WTI

 

$

634

 

$

630

 

$

627

 

$

623

 

$

100

 

50% of WTI

 

$

710

 

$

706

 

$

703

 

$

699

 

 

40% of WTI

 

$

661

 

$

658

 

$

654

 

$

650

 

 

30% of WTI

 

$

609

 

$

605

 

$

602

 

$

598

 

$

90

 

50% of WTI

 

$

678

 

$

675

 

$

671

 

$

668

 

 

40% of WTI

 

$

644

 

$

641

 

$

637

 

$

634

 

 

30% of WTI

 

$

589

 

$

585

 

$

582

 

$

578

 

$

80

 

50% of WTI

 

$

649

 

$

645

 

$

642

 

$

638

 

 

40% of WTI

 

$

613

 

$

609

 

$

606

 

$

602

 

 

30% of WTI

 

$

572

 

$

569

 

$

565

 

$

560

 

 


(1)         The composition is based on MarkWest’s average projected barrel of approximately: Ethane: 35%, Propane: 35%, Iso-Butane: 6%, Normal Butane: 12%, Natural Gasoline: 12%.

 

The table is based on current information, expectations, and beliefs concerning future developments and their potential effects, and does not consider actions MarkWest management may take to mitigate exposure to changes.  Nor does the table consider the effects that such hypothetical adverse changes may have on overall economic activity.  Historical prices and ratios of NGL-to-crude oil do not guarantee future results.

 

Although MarkWest believes the expectations reflected in this analysis are reasonable, MarkWest 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, and the ratio between crude oil and NGL 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 MarkWest’s periodic reports filed with the SEC, specifically those under the heading “Risk Factors.”

 

13