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2010-03-02

MarkWest Energy Tops View

MarkWest Energy Partners L.P. (MWE: 30.05 +0.09 +0.30%), a master limited partnership (MLP), reported significantly better than expected fourth quarter results. Earnings per unit, excluding mark-to-market derivative loss and compensation expense, came in at 75 cents, which was way ahead of the Zacks Consensus Estimate of 19 cents.
 
In the year-ago period, the Colorado-based natural gas pipeline operator lost $2.03 per unit on an adjusted basis. Revenue rose approximately 45.6% to $282.3 million.
 
The year-over-year positive comparisons reflect the performance of MarkWest’s core assets and the growing contribution from its Marcellus expansion projects.
 
Distribution Maintained
 
MarkWest’s quarterly distribution of 64 cents per unit ($2.56 per unit annualized), remains unchanged from the year-earlier quarter and the previous quarter distribution.
 
Distributable Cash Flow
 
During the quarter, the partnership generated record distributable cash flow (DCF) of $63.2 million, up from $41.3 million in the prior-year quarter, providing 1.48x distribution coverage.
 
Business Units
 
With regard to business units, the Southwest segment’s operating income increased 86.1% from the year-ago level to $62.3 million, mainly reflecting rising natural gas liquids (NGL) product sales from the Arapaho gas processing plant and contributions from the recently acquired Arkoma Connector Pipeline. These were partially offset by lower gathering systems throughput volumes from Foss Lake and Appleby facilities.
 
The partnership continues to increase its gathering presence in southeast Oklahoma (in the Woodford Shale gathering system), where volumes were up approximately 20.2% to 456,100 thousand cubic feet per day (Mcf/d).
 
MarkWest’s Northeast segment’s operating profit of $31.4 million improved significantly from last year’s loss of $12.9 million. The quarterly results were buoyed by a 12.2% increase in total NGL product sales on the back of processing capacity expansions and upgrades, partially offset by a 9.3% drop in natural gas processed in the Appalachian area and a 5.6% decline in fee-based crude oil transportation.
 
Operating income from the Gulf Coast segment was up 44.6% year over year to $12.9 million, mainly due to more gas processed at the partnership’s Javelina facility.
 
Finally, MarkWest’s newest segment, Liberty (the partnership’s Marcellus Shale joint venture), reported a profit of $3.8 million.
 
Capital Expenditure & Balance Sheet
 
During the quarter, MarkWest spent approximately $89.9 million on growth capital projects (including equity investments), a decrease of $168.1 million, compared to the year-ago period. As of December 31, 2009, the partnership had a long-term debt of approximately $1.2 billion, representing a debt-to-capitalization ratio of about 45.9%.
 
Guidance
 
Looking forward, management guided towards a DCF of approximately $180 – $220 million for 2010. MarkWest’s capital plan for the year includes approximately $300 – $350 million of capital expenditures for growth projects, plus $10 million to $15 million for maintenance capital.

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