MarkWest Energy Reports Lower Q2 Results

On Wednesday afternoon, MarkWest Energy announced second-quarter results that were lower than last year, though roughly in line with expectations. Contending with meager gas and NGL prices, net income was cut by more than half to $84 million from $187 million last year, and though processing volumes actually increased dramatically by 53% over last year, weak commodity prices prevented a commensurate profit increase. Distributable cash flow improved by 40% to $128 million due to the lower impact of non-cash derivatives on cash flow this year, and the partnership increased by 5% its distribution per unit to $0.84, compared with the second quarter of 2012.

Distribution coverage came in at 1.08 times. Analysts expect MarkWest’s second half of 2013 to remain challenged by commodity prices, but partly offset by incremental cash flows from ongoing capacity expansion projects coming online. MarkWest maintained its forecast of $500 million to $540 million of distributable cash flow for the year.

Meanwhile, the partnership continues on its $1.6 billion expansion plan for the year with 500 MMcf/day of new processing capacity starting up in West Virginia and Ohio. During the quarter, the partnership also kept busy with a bit of M&A and the signing of new contracts: MarkWest sold gathering capacity in West Virginia for $208 million, acquired Chesapeake’s midstream assets in the Granite Wash for $225 million, and announced several new gathering, processing, and and fractionation projects across the Marcellus and Utica plays. In addition, the partnership announced plans to form an NGL joint venture with Kinder Morgan Energy Partners to oversee three major projects including a processing complex in Ohio, an NGL pipeline from Ohio to the Gulf Coast with capacity up to 400,000 barrels per day, and Gulf Coast fractionation facilities.

Generally, investors view these capacity additions positively, as it capitalizes on MarkWest’s existing footprint in the Marcellus and Utica and further expands its network reach around the Gulf Coast. The NGL pipeline project appears very attractive, given plans involve a relatively low cost expansion that repurposes 200 miles of Kinder Morgan’s pipelines.


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