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8-K - 8-K - MARKWEST ENERGY PARTNERS L Pa15-16920_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 Second Quarter 2015 Financial Results

 

·                  Reported DCF of $165.9 million and Adjusted EBITDA of $218.9 million for the second quarter 2015

·                  Increased quarterly distribution to 92 cents per common unit with a 94 percent distribution coverage

·                  Placed into service 1.0 Bcf/d of new processing capacity, with the addition of Majorsville VI, Houston IV, and Sherwood VI in the Marcellus; and Cadiz III and Seneca IV in the Utica

·                  Announced entry into the Permian Basin, with the development of a new 200 MMcf/d processing plant in West Texas to support Cimarex Energy and Chevron Corporation

·                  Reported record total gas volumes of 5.5 Bcf/d for the second quarter 2015, an increase of 40 percent from the second quarter 2014

·                  Processing capacity utilization averaged 81 percent during the second quarter 2015

·                  Reported NGL fractionated volumes from the Marcellus and Utica of over 226,000 Bbl/d during the second quarter 2015, an increase of 60 percent from the second quarter 2014

·                  Announced strategic combination with MPLX that would create a large-cap, diversified MLP with strong sponsor support

 

DENVER—August 5, 2015—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 $165.9 million for the three months ended June 30, 2015, and $346.2 million for the six months ended June 30, 2015. DCF for the three months ended June 30, 2015 represents distribution coverage of 94 percent. The second quarter distribution of $176.1 million, or $0.92 per common unit, will be paid to unitholders on August 14, 2015. The second quarter 2015 distribution represents an increase of $0.01 per common unit or 1.1 percent over the first quarter 2015 distribution and an increase of $0.04 per common unit or 4.5 percent compared to the second quarter 2014 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, 2015 of $218.9 million and $448.5 million, respectively, compared to $208.2 million and $395.8 million for the respective three and six months ended June 30, 2014. 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

 

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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 before provision for income tax for the three and six months ended June 30, 2015 of $97.8 million and $96.4 million respectively. Income before provision for income tax includes non-cash losses associated with the change in fair value of derivative instruments of $7.4 million and $15.5 million for the respective three and six months ended June 30, 2015. Income before provision for income tax includes non-cash impairments associated with our Southwest segment of $25.5 million for the six months ended June 30, 2015. Income before provision for income tax includes non-cash write offs of unamortized discount and deferred financing costs related to the redemption of debt of $14.7 million for the three and six months ended June 30, 2015. Excluding these items, loss before provision for income tax for the three and six months ended June 30, 2015 would have been $75.7 million and $40.7 million, respectively.

 

“We are pleased with the solid second quarter performance, which included record total volumes and the completion of five major projects that are critical to the continued support of our producer customer drilling programs,” said Frank Semple, Chairman, President and Chief Executive Officer of MarkWest. “The recently announced  transformative merger with MPLX is the next step in our growth, and will allow us to continue to develop and invest in the strategic NGL projects which are critical for producers in the Marcellus and Utica shales.  This merger will create the fourth largest MLP in the industry, with the unique combination of MarkWest’s best-of-class organic growth and MPLX’s long-term inventory of drop down EBITDA from Marathon Petroleum Corporation.  The combined company with the strong parental support and the investment grade balance sheet will support an ongoing inventory of high-quality, fee-based midstream projects for the business. As mentioned on the MPLX earnings call last week, the combined partnership provided proforma distribution growth guidance that results in a mid-twenty percent compound annual growth rate for the next five years, with a platform that supports an attractive distribution growth profile over an extended period of time.”

 

BUSINESS HIGHLIGHTS

 

On July 13, 2015, the Partnership announced that it has entered into a definitive merger agreement, whereby it would become a wholly owned subsidiary of MPLX LP (NYSE: MPLX). The Partnership’s common unitholders would receive 1.09 MPLX common units and a one-time cash payment of approximately $3.37 per Partnership common unit. The transaction is expected to close during the fourth quarter of 2015 and is subject to approval by the Partnership’s unitholders, as well as customary closing conditions and regulatory approvals.

 

Marcellus:

 

·                  In June, the Partnership commenced operations of Majorsville VI, a 200 million cubic feet per day (MMcf/d) processing plant at the Majorsville complex in Marshall County, West Virginia, increasing the total processing capacity of the complex to 1.1 Bcf/d. The Partnership expects to place a seventh 200 MMcf/d plant into service during the second quarter of 2016 to support Southwestern Energy Company (NYSE: SWN) and other producers.

 

·                  In June, the Partnership commenced operations of Houston IV, a 200 MMcf/d processing plant at the Houston complex in Washington County, Pennsylvania. The Houston complex supports Range Resources (NYSE: RRC) (Range) with total processing capacity of 555 MMcf/d. To support Range’s growing rich-gas volume, the Partnership is constructing the Fox complex in northern Washington County. Initial development of the Fox complex will consist of a 200 MMcf/d processing plant and 20,000 barrel per day (Bbl/d) de-ethanization facility, which are expected to be placed into service during the fourth quarter of 2016.

 

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·                  In July, the Partnership completed Sherwood VI, a 200 MMcf/d processing plant at the Sherwood complex in Doddridge County, West Virginia. The new plant is anchored by Antero Resources Corporation (NYSE: AR) (Antero) and increases the total capacity of the Sherwood complex to 1.2 Bcf/d. The Partnership expects to complete a seventh 200 MMcf/d processing plant at the Sherwood complex in the second quarter of 2016.

 

Utica:

 

·                  In May, MarkWest Utica EMG, a joint venture between the Partnership and The Energy & Minerals Group, announced the execution of definitive agreements with Rice Energy (NYSE: RICE) to support the development of their acreage in eastern Ohio.

 

·                  In June, MarkWest Utica EMG completed Seneca IV, a 200 MMcf/d processing plant at the Seneca complex in Noble County, Ohio. The plant is anchored by Antero under a long-term, fee-based contract, and expands the total processing capacity of the Seneca complex to 800 MMcf/d.

 

·                  In June, MarkWest Utica EMG placed into service Cadiz III, a 200 MMcf/d processing plant at the Cadiz complex in Harrison County, Ohio, increasing the total processing capacity of the complex to 525 MMcf/d. The complex supports growing production from Ascent Resources, LLC, Gulfport Energy Corporation (NASDAQ: GPOR), and other producers. MarkWest Utica EMG is constructing a fourth 200 MMcf/d plant at the Cadiz complex that is expected to be in service by the second quarter of 2016. Once completed, MarkWest Utica EMG will operate over 1.5 Bcf/d in the core rich-gas area of the Utica Shale.

 

Southwest:

 

·                  In May, the Partnership announced an 80 MMcf/d expansion of its Carthage IV plant in Panola County, Texas. The expansion is expected to be completed in the fourth quarter 2015.

 

·                  In June, the Partnership announced the development of Hidalgo, a 200 MMcf/d processing plant in Culbertson County, Texas. The new facility is scheduled to begin operations during the second quarter of 2016 and will support Cimarex Energy Co. (NYSE: XEC) and Chevron Corporation (NYSE: CVX) in the Delaware Basin of West Texas.

 

·                  In June, the Partnership placed into service a 60-mile trunk line to the Partnership’s Arapaho processing plant in Custer County, OK, to support Newfield Exploration’s (NYSE: NFX) development of their STACK acreage in the Cana-Woodford Shale.

 

Capital Markets

 

·                  Year-to-date, the Partnership has issued 636,000 common units and received net proceeds of $39.6 million.

 

·                  In May, the Partnership completed a public offering of $1.2 billion of 4.875% senior unsecured notes due in 2025, and in June, the Partnership utilized proceeds from this transaction along with draws from the Credit Facility to redeem its 6.75% Senior Notes due 2020, 6.5% Senior Notes due 2021 and 6.25% Senior Notes due 2022.

 

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FINANCIAL RESULTS

 

Balance Sheet

 

·                  As of June 30, 2015, the Partnership had $25.6 million of cash and cash equivalents in wholly owned subsidiaries and $841.2 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 $447.5 million of outstanding borrowings.

 

Operating Results

 

·                  Operating income before items not allocated to segments for the three months ended June 30, 2015, was $239.6 million, an increase of $19.5 million when compared to $220.1 million over the same period in 2014. This increase was primarily attributable to higher processing volumes, partially offset by the decline in commodity pricing. Processed volumes continued to increase in the second quarter of 2015, growing approximately 47 percent when compared to the second quarter of 2014, 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 gains (losses) on commodity derivative instruments. Realized gains (losses) on commodity derivative instruments were $5.2 million in the second quarter of 2015 and ($1.9) million in the second quarter of 2014.

 

Capital Expenditures

 

·                  For the three months ended June 30, 2015, the Partnership’s portion of capital expenditures was $419.1 million.

 

2015 ADJUSTED EBITDA, DCF AND CAPITAL EXPENDITURE FORECAST

 

For 2015, the Partnership’s Adjusted EBITDA forecast has been narrowed to a range of $925 million to $975 million and DCF has been narrowed to a range of $700 million to $750 million based on its current forecast of operational volumes and prices for natural gas liquids, crude oil, natural gas, and derivative instruments currently outstanding. A sensitivity analysis for forecasted 2015 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 2015 remains forecasted in a range of $1.5 billion to $1.9 billion. The Partnership’s forecasted maintenance capital for 2015 remains unchanged at approximately $30 million.

 

CONFERENCE CALL

 

The Partnership will host a conference call and webcast on Wednesday, August 5, at 12:00 p.m. Eastern Time to review its second quarter 2015 financial results. Interested parties can participate in the call by dialing (800) 475-0218 (passcode “MarkWest”) approximately ten minutes

 

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prior to the scheduled start time. To access the webcast and associated second quarter 2015 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) 456-0470 (no passcode required).

 

###

 

MarkWest Energy Partners, L.P. is a master limited partnership that owns and operates midstream service businesses. We have a leading presence in many natural gas resource plays including the Marcellus Shale, Utica Shale, Huron/Berea Shale, Haynesville Shale, Woodford Shale and Granite Wash formation.

 

Cautionary Statement Regarding Forward-Looking Statements

 

This communication includes “forward-looking statements.” All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements that involve a number of risks and uncertainties.  These statements may include statements regarding the proposed acquisition of MarkWest by MPLX LP, the expected timetable for completing the transaction, benefits and synergies of the transaction, future opportunities for the combined company and any other statements regarding MarkWest’s future operations, anticipated business levels, future earnings and distributions, planned activities, anticipated growth, market opportunities, strategies and competition. All such forward-looking statements involve estimates and assumptions that are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in such statements. Factors that could cause or contribute to such differences include: factors relating to the satisfaction of the conditions to the proposed transaction, including regulatory approvals and the required approval of MarkWest’s unitholders; the parties’ abilities to meet expectations regarding the timing and tax treatment of the proposed transaction; the possibility that the combined company may be unable to achieve expected synergies and operating efficiencies in connection with the transaction within the expected time-frames or at all; the integration of MarkWest being more difficult, time-consuming or costly than expected; the effect of any changes resulting from the proposed transaction in customer, supplier and other business relationships; general market perception of the proposed transaction; exposure to lawsuits and contingencies associated with MPLX; the ability to attract and retain key personnel; prevailing market conditions; changes in the economic and financial conditions of MarkWest and MPLX; uncertainties and matters beyond the control of management; and the other risks discussed in the periodic reports filed with the Securities and Exchange Commission (SEC), including MarkWest’s and MPLX’s Annual Reports on Form 10-K for the year ended December 31, 2014 and MarkWest’s Report on Form 10-Q for the quarter ended June 30, 2015. The forward-looking statements should be considered in light of all these factors.  In addition, other risks and uncertainties not presently known to MarkWest or that MarkWest considers immaterial could affect the accuracy of the forward-looking statements.  The reader is cautioned not to rely unduly on these forward-looking statements. MarkWest does not undertake any duty to update any forward-looking statement except as required by law.

 

Additional Information and Where to Find It

 

This communication may be deemed to be solicitation material in respect of the proposed acquisition of MarkWest by MPLX. In connection with the proposed acquisition, MarkWest and MPLX intend to file relevant materials with the SEC, including MPLX’s registration statement on Form S-4 that will include a joint proxy statement/prospectus. Investors and security holders are urged to read all relevant documents filed with the SEC, including the proxy statement/prospectus when they become available, because they will contain important information about the proposed transaction. Investors and security holders are able to obtain the documents (once available) free of charge at the SEC’s website, http://www.sec.gov, or for free from MarkWest by contacting Investor Relations by phone at 1-(866) 858-0482 or by email at investorrelations@markwest.com.

 

Participants in the Solicitation

 

This communication is not a solicitation of a proxy from any investor or security holder.  However, MarkWest and its directors and executive officers and certain employees may be deemed to be participants in the solicitation of proxies from the holders of MarkWest common units with respect to the proposed transaction. Information about MarkWest’s directors and executive officers is set forth in the proxy statement for MarkWest’s 2015 Annual Meeting of Common Unitholders, which was filed with the SEC on April 23, 2015 and MarkWest’s current reports on Form 8-K, as filed with the SEC on May 5, 2015, May 19, 2015 and June 8, 2015.  To the extent holdings of MarkWest securities have changed since the amounts contained in the proxy statement for MarkWest’s 2015 Annual Meeting of stockholders, such changes have been or will be reflected on Statements of Change in Ownership on Form 4 filed with the SEC.  Investors may obtain additional information regarding the interest of such participants by reading the proxy statement/prospectus regarding the acquisition (once available).  These documents (when available) may be obtained free of charge from the SEC’s website http://www.sec.gov, or from MarkWest using the contact information above.

 

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Non-Solicitation

 

This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.  No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.

 

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MarkWest Energy Partners, L.P.

Financial Statistics

(unaudited, in thousands, except per unit data)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

Statement of Operations Data

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

Product sales

 

$

156,643

 

$

309,919

 

$

324,580

 

$

632,288

 

Service revenue

 

302,847

 

215,200

 

594,872

 

409,274

 

Derivative gain (loss)

 

138

 

(6,753

)

7,506

 

(10,720

)

Total revenue

 

459,628

 

518,366

 

926,958

 

1,030,842

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Purchased product costs

 

123,292

 

215,824

 

246,776

 

427,388

 

Derivative loss related to purchased product costs

 

2,255

 

11,964

 

6,795

 

4,166

 

Facility expenses

 

88,550

 

83,545

 

180,366

 

167,250

 

Derivative loss related to facility expenses

 

91

 

2,045

 

91

 

1,777

 

Selling, general and administrative expenses

 

34,971

 

27,701

 

69,606

 

62,991

 

Depreciation

 

121,909

 

104,078

 

241,501

 

206,007

 

Amortization of intangible assets

 

15,596

 

15,965

 

31,422

 

31,943

 

Impairment expense

 

 

 

25,523

 

 

Loss on disposal of property, plant and equipment

 

2,417

 

1,450

 

1,606

 

1,357

 

Accretion of asset retirement obligations

 

194

 

168

 

387

 

336

 

Total operating expenses

 

389,275

 

462,740

 

804,073

 

903,215

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

70,353

 

55,626

 

122,885

 

127,627

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Equity in earnings (loss) from unconsolidated affiliates

 

3,262

 

(721

)

3,774

 

(471

)

Interest expense

 

(52,087

)

(43,391

)

(102,144

)

(84,375

)

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

 

(1,562

)

(1,449

)

(3,197

)

(4,273

)

Loss on redemption of debt

 

(117,860

)

 

(117,860

)

 

Miscellaneous income, net

 

46

 

43

 

94

 

62

 

(Loss) income before provision for income tax

 

(97,848

)

10,108

 

(96,448

)

38,570

 

 

 

 

 

 

 

 

 

 

 

Provision for income tax expense (benefit):

 

 

 

 

 

 

 

 

 

Current

 

125

 

(19

)

164

 

326

 

Deferred

 

(11,581

)

(2,921

)

(15,741

)

9,280

 

Total provision for income tax (benefit) expense

 

(11,456

)

(2,940

)

(15,577

)

9,606

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

(86,392

)

13,048

 

(80,871

)

28,964

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to non-controlling interest

 

(15,094

)

(4,071

)

(29,698

)

(7,495

)

 

 

 

 

 

 

 

 

 

 

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

 

$

(101,486

)

$

8,977

 

$

(110,569

)

$

21,469

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.55

)

$

0.05

 

$

(0.60

)

$

0.13

 

Diluted

 

$

(0.55

)

$

0.05

 

$

(0.60

)

$

0.12

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of outstanding common units:

 

 

 

 

 

 

 

 

 

Basic

 

186,855

 

164,613

 

186,771

 

161,727

 

Diluted

 

186,855

 

181,237

 

186,771

 

178,378

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Data

 

 

 

 

 

 

 

 

 

Net cash flow provided by (used in):

 

 

 

 

 

 

 

 

 

Operating activities

 

$

162,404

 

$

244,450

 

$

363,338

 

$

356,823

 

Investing activities

 

$

(453,756

)

$

(429,684

)

$

(928,596

)

$

(1,005,158

)

Financing activities

 

$

100,230

 

$

361,165

 

$

501,533

 

$

862,442

 

 

 

 

 

 

 

 

 

 

 

Other Financial Data

 

 

 

 

 

 

 

 

 

Distributable cash flow

 

$

165,880

 

$

161,734

 

$

346,226

 

$

310,180

 

Adjusted EBITDA

 

$

218,868

 

$

208,231

 

$

448,523

 

$

395,798

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data

 

June 30, 2015

 

December 31, 2014

 

 

 

 

 

Total assets

 

$

11,359,559

 

$

10,980,778

 

 

 

 

 

Total debt

 

$

4,540,663

 

$

3,621,404

 

 

 

 

 

Total equity

 

$

5,828,801

 

$

6,193,239

 

 

 

 

 

 

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MarkWest Energy Partners, L.P.

Operating Statistics (1)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Marcellus

 

 

 

 

 

 

 

 

 

Gathering systems throughput (Mcf/d)

 

857,100

 

599,500

 

835,900

 

600,500

 

Natural gas processed (Mcf/d)

 

2,894,500

 

1,823,200

 

2,869,700

 

1,732,500

 

 

 

 

 

 

 

 

 

 

 

C2 produced (Bbl/d)

 

61,400

 

45,900

 

58,100

 

47,400

 

C3+ NGLs fractionated (Bbl/d)

 

131,100

 

82,200

 

128,800

 

76,200

 

Total NGLs fractionated (Bbl/d)

 

192,500

 

128,100

 

186,900

 

123,600

 

 

 

 

 

 

 

 

 

 

 

Utica

 

 

 

 

 

 

 

 

 

Gathering systems throughput (Mcf/d)

 

582,700

 

188,700

 

542,500

 

184,700

 

Natural gas processed (Mcf/d)

 

761,600

 

293,800

 

758,500

 

272,700

 

 

 

 

 

 

 

 

 

 

 

C2 produced (Bbl/d)

 

4,100

 

 

4,000

 

 

C3+ NGLs fractionated (Bbl/d)

 

29,800

 

13,500

 

30,000

 

12,900

 

Total NGLs fractionated (Bbl/d)

 

33,900

 

13,500

 

34,000

 

12,900

 

 

 

 

 

 

 

 

 

 

 

Condensate Stabilized (Bbl/d)

 

8,900

 

 

6,100

 

 

 

 

 

 

 

 

 

 

 

 

Northeast

 

 

 

 

 

 

 

 

 

Natural gas processed (Mcf/d)

 

278,500

 

281,500

 

272,300

 

268,600

 

NGLs fractionated (Bbl/d)

 

15,400

 

17,500

 

15,200

 

17,500

 

 

 

 

 

 

 

 

 

 

 

Keep-whole NGL sales (gallons, in thousands)

 

24,400

 

24,800

 

55,600

 

57,000

 

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

 

30,700

 

29,900

 

60,900

 

56,000

 

Total NGL sales (gallons, in thousands)

 

55,100

 

54,700

 

116,500

 

113,000

 

 

 

 

 

 

 

 

 

 

 

Crude oil transported for a fee (Bbl/d)

 

10,000

 

10,600

 

10,200

 

10,200

 

 

 

 

 

 

 

 

 

 

 

Southwest

 

 

 

 

 

 

 

 

 

East Texas gathering systems throughput (Mcf/d)

 

615,400

 

549,500

 

615,600

 

522,800

 

East Texas natural gas processed (Mcf/d)

 

490,000

 

398,500

 

493,500

 

383,400

 

East Texas NGL sales (gallons, in thousands)

 

103,600

 

109,500

 

210,800

 

203,400

 

 

 

 

 

 

 

 

 

 

 

Western Oklahoma gathering systems throughput (Mcf/d)

 

345,900

 

348,200

 

344,200

 

322,700

 

Western Oklahoma natural gas processed (Mcf/d)

 

287,500

 

296,300

 

289,300

 

269,800

 

Western Oklahoma NGL sales (gallons, in thousands)

 

38,400

 

56,900

 

72,900

 

111,300

 

 

 

 

 

 

 

 

 

 

 

Southeast Oklahoma gathering systems throughput (Mcf/d)

 

427,800

 

414,500

 

410,200

 

398,200

 

Southeast Oklahoma natural gas processed (Mcf/d)

 

184,500

 

186,600

 

181,600

 

167,000

 

Southeast Oklahoma NGL sales (gallons, in thousands)

 

30,900

 

29,200

 

59,500

 

50,200

 

Arkoma Connector Pipeline throughput (Mcf/d)

 

237,300

 

229,600

 

223,700

 

227,400

 

 

 

 

 

 

 

 

 

 

 

Other Southwest gathering systems throughput (Mcf/d)

 

56,200

 

48,900

 

51,200

 

47,900

 

 

 

 

 

 

 

 

 

 

 

Javelina refinery off-gas processed (Mcf/d)

 

101,800

 

112,000

 

101,000

 

111,300

 

Javelina liquids fractionated (Bbl/d)

 

17,300

 

21,000

 

16,600

 

20,200

 

Javelina NGL sales (gallons, in thousands)

 

66,200

 

80,300

 

126,200

 

153,300

 

 

 

 

 

 

 

 

 

 

 

Total Southwest Gathering system throughput (Mcf/d)

 

1,445,300

 

1,361,100

 

1,421,200

 

1,291,600

 

Total Southwest natural gas and refinery off-gas processed (Mcf/d)

 

1,063,800

 

993,400

 

1,065,400

 

931,500

 

Total Southwest NGL Sales (gallons, in thousands)

 

239,100

 

275,900

 

469,400

 

518,200

 

 


(1)         Refer to Item 2 in Form 10-Q for additional disclosures.

 

8



 

MarkWest Energy Partners, L.P.

Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure

Operating Income before Items not Allocated to Segments (1)

(unaudited, in thousands)

 

Three months ended June 30, 2015

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

199,311

 

$

63,942

 

$

22,595

 

$

200,210

 

$

 

$

486,058

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

4,568

 

679

 

9,743

 

108,302

 

 

123,292

 

Segment facility expenses

 

39,938

 

15,952

 

7,584

 

33,993

 

 

97,467

 

Total operating expenses before items not allocated to segments

 

44,506

 

16,631

 

17,327

 

142,295

 

 

220,759

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment portion of operating income attributable to non-controlling interests

 

 

23,633

 

 

2,062

 

 

25,695

 

Operating income before items not allocated to segments

 

$

154,805

 

$

23,678

 

$

5,268

 

$

55,853

 

$

 

$

239,604

 

 

Three months ended June 30, 2014

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

183,734

 

$

30,826

 

$

43,777

 

$

271,140

 

$

(900

)

$

528,577

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

39,710

 

7,353

 

15,169

 

153,628

 

 

215,860

 

Segment 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment 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

 

 


(1) Refer to footnote 14, Segment Information, in Form 10-Q for additional disclosures.

(2) Amounts represent revenues and expenses associated with the Northeast segment fractionation completed on behalf of the Marcellus segment.

 

 

 

Three months ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Operating income before items not allocated to segments

 

$

239,604

 

$

220,132

 

Portion of operating income attributable to non-controlling interests

 

11,495

 

4,184

 

Derivative loss not allocated to segments

 

(2,208

)

(20,762

)

Revenue adjustment for unconsolidated affiliate

 

(33,016

)

(3,833

)

Revenue deferral adjustment

 

1,076

 

375

 

Compensation expense included in facility expenses not allocated to segments

 

(942

)

(903

)

Facility expense and purchase product cost adjustments for unconsolidated affiliate

 

12,543

 

2,598

 

Portion of operating loss attributable to non-controlling interests of an unconsolidated affiliate

 

14,200

 

509

 

Facility expenses adjustments

 

2,688

 

2,688

 

Selling, general and administrative expenses

 

(34,971

)

(27,701

)

Depreciation

 

(121,909

)

(104,078

)

Amortization of intangible assets

 

(15,596

)

(15,965

)

Loss on disposal of property, plant and equipment

 

(2,417

)

(1,450

)

Accretion of asset retirement obligations

 

(194

)

(168

)

Income from operations

 

70,353

 

55,626

 

Other income (expense):

 

 

 

 

 

Earnings (loss) from unconsolidated affiliates

 

3,262

 

(721

)

Interest expense

 

(52,087

)

(43,391

)

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

 

(1,562

)

(1,449

)

Loss on redemption of debt

 

(117,860

)

 

Miscellaneous income, net

 

46

 

43

 

(Loss) income before provision for income tax

 

$

(97,848

)

$

10,108

 

 

9



 

MarkWest Energy Partners, L.P.

Reconciliation of GAAP Financial Measure to Non-GAAP Financial Measure

Operating Income before Items not Allocated to Segments (1)

(unaudited, in thousands)

 

Six months ended June 30, 2015

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

396,487

 

$

122,853

 

$

52,616

 

$

396,477

 

$

(44

)

$

968,389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

11,070

 

860

 

22,261

 

212,585

 

 

246,776

 

Segment facility expenses

 

83,320

 

32,590

 

14,462

 

67,910

 

(44

)

198,238

 

Total operating expenses before items not allocated to segments

 

94,390

 

33,450

 

36,723

 

280,495

 

(44

)

445,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment portion of operating income attributable to non-controlling interests

 

 

43,740

 

 

3,609

 

 

47,349

 

Operating income before items not allocated to segments

 

$

302,097

 

$

45,663

 

$

15,893

 

$

112,373

 

$

 

$

476,026

 

 

Six months ended June 30, 2014

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

358,893

 

$

54,592

 

$

105,030

 

$

530,470

 

$

(2,471

)

$

1,046,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

74,000

 

11,488

 

35,624

 

306,312

 

 

427,424

 

Segment 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment 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

 

 


(1) Refer to footnote 14, Segment Information, in Form 10-Q for additional disclosures.

(2) Amounts represent revenues and expenses associated with the Northeast segment fractionation completed on behalf of the Marcellus segment.

 

 

 

Six months ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Operating income before items not allocated to segments

 

$

476,026

 

$

437,980

 

Portion of operating income attributable to non-controlling interests

 

22,909

 

7,319

 

Derivative gain (loss) not allocated to segments

 

620

 

(16,663

)

Revenue adjustment for unconsolidated affiliate

 

(60,547

)

(3,833

)

Revenue deferral adjustment and other

 

154

 

(1,119

)

Compensation expense included in facility expenses not allocated to segments

 

(2,049

)

(1,906

)

Facility expense and purchase product cost adjustments for unconsolidated affiliate

 

26,001

 

2,598

 

Portion of operating loss attributable to non-controlling interests of an unconsolidated affiliate

 

24,440

 

509

 

Facility expenses adjustments

 

5,376

 

5,376

 

Selling, general and administrative expenses

 

(69,606

)

(62,991

)

Depreciation

 

(241,501

)

(206,007

)

Amortization of intangible assets

 

(31,422

)

(31,943

)

Loss on disposal of property, plant and equipment

 

(1,606

)

(1,357

)

Accretion of asset retirement obligations

 

(387

)

(336

)

Impairment expense

 

(25,523

)

 

Income from operations

 

122,885

 

127,627

 

Other income (expense):

 

 

 

 

 

Earnings (loss) from unconsolidated affiliates

 

3,774

 

(471

)

Interest expense

 

(102,144

)

(84,375

)

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

 

(3,197

)

(4,273

)

Loss on redemption of debt

 

(117,860

)

 

Miscellaneous income, net

 

94

 

62

 

(Loss) income before provision for income tax

 

$

(96,448

)

$

 38,570

 

 

10



 

MarkWest Energy Partners, L.P.

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,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

(86,392

)

13,048

 

$

(80,871

)

$

28,964

 

Depreciation, amortization and other non-cash operating expenses

 

137,698

 

120,361

 

273,362

 

239,311

 

Loss on sale or disposal of property, plant and equipment

 

2,417

 

1,450

 

1,606

 

1,357

 

Loss on redemption of debt, net of current tax benefit

 

117,860

 

 

117,860

 

 

Amortization of deferred financing costs and debt discount

 

1,562

 

1,449

 

3,197

 

4,273

 

(Earnings) loss from unconsolidated affiliates

 

(3,262

)

721

 

(3,774

)

471

 

Partnership’s share of distributions from unconsolidated affiliates

 

9,597

 

2,541

 

20,489

 

3,910

 

Non-cash compensation expense

 

3,053

 

1,835

 

8,986

 

5,802

 

Unrealized loss on derivative instruments

 

7,360

 

18,844

 

15,520

 

7,024

 

Deferred income tax (benefit) expense

 

(11,581

)

(2,921

)

(15,741

)

9,280

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

(10,514

)

(3,178

)

(20,928

)

(5,296

)

Revenue deferral adjustment

 

(1,076

)

1,722

 

(154

)

3,813

 

Impairment expense

 

 

 

25,523

 

 

Other (1)

 

4,397

 

12,867

 

8,961

 

21,022

 

Maintenance capital expenditures

 

(5,239

)

(7,005

)

(7,810

)

(9,751

)

Distributable cash flow

 

$

165,880

 

$

161,734

 

$

346,226

 

$

310,180

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital expenditures

 

$

5,239

 

$

7,005

 

$

7,810

 

$

9,751

 

Growth capital expenditures of consolidated subsidiaries

 

389,552

 

681,198

 

825,252

 

1,265,572

 

Capital expenditures of unconsolidated subsidiaries (2)

 

69,564

 

40,013

 

170,442

 

40,013

 

Total capital expenditures

 

464,355

 

728,216

 

1,003,504

 

1,315,336

 

Joint venture partner contributions

 

(45,301

)

(120,106

)

(115,549

)

(120,106

)

Total capital expenditures, net

 

$

419,054

 

$

608,110

 

$

887,955

 

$

1,195,230

 

 

 

 

 

 

 

 

 

 

 

Distributable cash flow

 

$

165,880

 

$

161,734

 

$

346,226

 

$

310,180

 

Maintenance capital expenditures

 

5,239

 

7,005

 

7,810

 

9,751

 

Changes in receivables, inventories and other assets

 

(5,150

)

(35,710

)

51,336

 

(42,763

)

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

 

(16,382

)

120,755

 

(63,814

)

95,041

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

10,514

 

3,178

 

20,928

 

5,296

 

Other

 

2,303

 

(12,512

)

852

 

(20,682

)

Net cash provided by operating activities

 

$

162,404

 

$

244,450

 

$

363,338

 

$

356,823

 

 


(1) Includes amounts related to capitalized interest associated with joint venture capital expenditures and fees earned related to development of joint venture capital projects.

(2) Growth capital expenditures includes Ohio Gathering Company, L.L.C. and Ohio Condensate Company, L.L.C.

 

11



 

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,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

(86,392

)

13,048

 

(80,871

)

28,964

 

Non-cash compensation expense

 

3,053

 

1,835

 

8,986

 

5,802

 

Unrealized loss on derivative instruments

 

7,360

 

18,844

 

15,520

 

7,024

 

Interest expense (1)

 

51,633

 

42,765

 

101,294

 

84,483

 

Depreciation, amortization and other non-cash operating expenses

 

137,698

 

120,361

 

273,362

 

239,311

 

Loss on disposal of property, plant and equipment

 

2,417

 

1,450

 

1,606

 

1,357

 

Loss on redemption of debt, net of current tax benefit

 

117,860

 

 

117,860

 

 

Provision for income tax (benefit) expense

 

(11,456

)

(2,940

)

(15,577

)

9,606

 

Adjustment for cash flow from unconsolidated affiliates

 

6,335

 

3,262

 

16,715

 

4,381

 

Impairment expense

 

 

 

25,523

 

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

(10,514

)

(3,178

)

(20,928

)

(5,296

)

Other (2)

 

874

 

12,784

 

5,033

 

20,166

 

Adjusted EBITDA

 

$

218,868

 

$

208,231

 

$

448,523

 

$

395,798

 

 


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

(2) Includes amounts related to capitalized interest associated with joint venture capital expenditures and fees earned related to development of joint venture capital projects, non-controlling interest in consolidated subsidiaries and an adjustment for deferred revenue.

 

12



 

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 2015, the Partnership estimates that net operating margin will be approximately 90 percent fee-based.

 

The analysis further assumes derivative instruments outstanding as of, and production volumes estimated through December 31, 2015.

 

Estimated Range of 2015 DCF

 

 

 

 

 

Volume Forecast (1)

 

 

 

 

 

Low Case

 

Base Case

 

High Case

 

 

 

$

0.65

 

$

721

 

$

736

 

$

751

 

 

 

$

 0.60

 

$

718

 

$

733

 

$

748

 

NGL $/Gallon (2)(3)

 

$

 0.55

 

$

715

 

$

729

 

$

744

 

 

 

$

 0.50

 

$

712

 

$

726

 

$

740

 

 

 

$

 0.45

 

$

708

 

$

722

 

$

737

 

 

 

$

 0.40

 

$

704

 

$

718

 

$

733

 

 


(1)         Volume Forecast is increased/decreased by 5% in the Marcellus and Utica segments for the High and Low Cases.

(2)         The composition is based on the Partnership’s projected NGL 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.”

 

13