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8-K - 8-K - MARKWEST ENERGY PARTNERS L Pa15-22288_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 2015 Financial Results

 

·                  Reported DCF of $176.0 million and Adjusted EBITDA of $230.3 million for the third quarter 2015

·                  Increased quarterly distribution to 93 cents per common unit with a 96 percent distribution coverage

·                  Received the first place ranking for Total Customer Satisfaction and five other categories in EnergyPoint Research’s 2015 Oil & Gas Midstream Services Customer Satisfaction Survey

·                  Reported record total gas volumes of 5.8 Bcf/d for the third quarter 2015, an increase of 28 percent from the third quarter 2014

·                  Processing capacity utilization averaged approximately 75 percent during the third quarter 2015, while the Partnership’s total processing capacity increased by almost 18% since June 2015

·                  Commenced operations of the 80 MMcf/d expansion of Carthage IV plant, increasing total processing capacity in East Texas to 600 MMcf/d

·                  Announced long-term fee-based agreement with Ascent Resources to support their Utica dry gas development

·                  Announced long-term fee-based agreement with Newfield Exploration to gather crude oil in the Cana-Woodford Shale

 

DENVER—November 4, 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 $176.0 million for the three months ended September 30, 2015, and $522.1 million for the nine months ended September 30, 2015. DCF for the three months ended September 30, 2015 represents distribution coverage of 96 percent. The third quarter 2015 distribution of $184.1 million, or $0.93 per common unit, will be paid to unitholders on November 13, 2015. The third quarter 2015 distribution represents an increase of $0.01 per common unit or 1.1 percent over the second quarter 2015 distribution and an increase of $0.04 per common unit or 4.5 percent compared to the third 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 nine months ended September 30, 2015 of $230.3 million and $678.8 million, respectively, compared to $235.5 million and $631.3 million for the respective three and nine months ended September 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

 

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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 (loss) before provision for income tax for the three and nine months ended September 30, 2015 of $51.4 million and ($45.0) million, respectively. Income before provision for income tax includes (a) non-cash gains (losses) associated with the change in fair value of derivative instruments of $12.2 million and ($3.4) million for the respective three and nine months ended September 30, 2015, (b) non-cash impairments associated with our Southwest segment of $25.5 million for the nine months ended September 30, 2015, and (c) loss on redemption of debt of $117.9 million for the nine months ended September 30, 2015. Excluding these items, income before provision for income tax for the three and nine months ended September 30, 2015 would have been $39.2 million and $101.8 million, respectively.

 

“Our solid third-quarter results reflect the resiliency of our business model during this period of extremely low commodity prices.  We will continue to optimize our capital and efficiently execute our plan in order to support our producer customers and growing volumes in many of the nation’s most economic resource plays. Our focus on operational excellence and customer service has once again resulted in MarkWest achieving the number one ranking in the industry-wide EnergyPoint Customer Satisfaction annual survey,” stated Frank Semple, Chairman, President and Chief Executive Officer of MarkWest. “We also look forward to the successful completion of our strategic combination with MPLX, which will create an incredibly powerful midstream company with an unrivaled growth profile.  This merger will create one of the largest MLPs 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 and long-term mid-twenty percent distribution growth.”

 

BUSINESS HIGHLIGHTS

 

MarkWest/MPLX Merger:

 

·                  On July 11, 2015, the Partnership 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 per Partnership common unit, and their pro rata share of a one-time cash payment of $675 million based on the total number of common units and Class B units outstanding at closing, which equates to approximately $3.27 per unit based on the current unit count. The transaction has received regulatory approval and is subject to approval by the Partnership’s unitholders.  The Partnership declared a record date of October 5, 2015 and has scheduled a special meeting of common unitholders to be held on Tuesday, December 1, 2015, at 9:00 a.m. Mountain Standard Time.  The meeting will be held at the Partnership’s offices at 1515 Arapahoe Street, Tower 1, Suite 1600, Denver, Colorado 80202.  The Partnership urges unitholders to submit their proxy as promptly as possible, either by telephone, via the internet or by marking, signing and dating the proxy card that was provided to unitholders along with the proxy statement and prospectus.

 

Marcellus:

 

·                  In July, the Partnership commenced operations of Sherwood VI, a 200 million cubic feet per day (MMcf/d) processing plant at the Sherwood complex in Doddridge County, West Virginia. The new plant is anchored by Antero Resources Corporation (NYSE: AR) and increases total processing capacity of the Sherwood complex to 1.2 billion cubic feet per day (Bcf/d). The

 

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Partnership also expects to place into service 40,000 barrels per day (Bbl/d) of de-ethanization capacity by the end of 2015, and is constructing a seventh 200 MMcf/d processing plant at the Sherwood complex with a scheduled completion in the first quarter 2017.

 

Utica:

 

·                  In August, the Partnership and The Energy & Minerals Group (EMG) announced the development of a new, large-scale dry gas gathering system to support Ascent Resources’ development program in the Utica Shale. Ascent Resources has dedicated approximately 100,000 gross acres in northern Belmont and Jefferson counties, Ohio. The system will be designed to gather more than 2 Bcf/d of gas, and could ultimately consist of more than 250 miles of pipeline and more than 200,000 horsepower of compression. Initial operation is expected to begin by the end of 2015.  Development of the new system will occur under a new joint venture, which will be owned two-thirds by the Partnership and one-third by EMG.

 

Southwest:

 

·                  In October, the Partnership increased total processing capacity of its Carthage IV plant in Panola County, Texas by 80 MMcf/d, and currently supports Anadarko Petroleum Corporation (NYSE: APC) and other producers operating in the Haynesville Shale and Cotton Valley formation with 600 MMcf/d of total capacity in East Texas.

 

·                  Today, the Partnership is announcing the execution of a long-term, fee-based agreement with Newfield Exploration Company (NYSE: NFX) to develop a crude oil gathering system in the Cana-Woodford Shale. The new system will be developed in conjunction with the rich-gas system already being constructed to support Newfield’s STACK acreage in Kingfisher, Blaine, and Canadian counties, Oklahoma.

 

Capital Markets:

 

·                  During the third quarter of 2015, the Partnership issued 3.8 million common units and received net proceeds of $198.3 million.  Fourth quarter to date we have received over $120 million of net proceeds.

 

FINANCIAL RESULTS

 

Balance Sheet:

 

·                  As of September 30, 2015, the Partnership had $629.7 million of remaining capacity under its $1.3 billion Senior Secured Credit Facility after consideration of $8.3 million of outstanding letters of credit and $662.0 million of outstanding borrowings.

 

Operating Results:

 

·                  Operating income before items not allocated to segments for the three months ended September 30, 2015, was $247.6 million, a decrease of $9.3 million when compared to $256.9 million over the same period in 2014. This decrease was primarily attributable to the decline in commodity pricing, partially offset by higher processing volumes. Processed volumes continued to increase in the third quarter of 2015, growing approximately 28 percent when compared to the third quarter of 2014, primarily due to the Partnership’s Marcellus and Utica segments.

 

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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 $11.8 million in the third quarter of 2015 and ($0.9) million in the third quarter of 2014.

 

Capital Expenditures:

 

·                  For the three months ended September 30, 2015, the Partnership’s portion of capital expenditures was $422.7 million.

 

2015 ADJUSTED EBITDA, DCF AND CAPITAL EXPENDITURE FORECAST

 

For 2015, the Partnership’s Adjusted EBITDA forecast remains in a range of $925 million to $975 million and DCF remains in 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.

 

The Partnership’s portion of growth capital expenditures for 2015 is expected to be approximately $1.6 billion. The Partnership’s forecasted maintenance capital for 2015 is approximately $20 million.

 

2016 ADJUSTED EBITDA, DCF AND CAPITAL EXPENDITURE FORECAST

 

For 2016, the Partnership forecasts Adjusted EBITDA in a range of $1.05 billion to $1.15 billion and DCF in a range of $800 million to $870 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 2016 DCF based on changes in composite NGL prices and changes in volume assumptions is provided within the tables of this press release.

 

The Partnership expects a 4.3% distribution growth rate in 2016 and also expects to be able to achieve an 8% to 10% annual distribution growth rate from 2017 to 2020 based on our analysis of producer customers’ development programs and forecasted commodity prices.

 

The Partnership’s portion of growth capital expenditures for 2016 is forecasted in a range of $900 million to $1.5 billion.  Maintenance capital for 2016 is forecasted at approximately $25 million.

 

CONFERENCE CALL

 

The Partnership will host a conference call and webcast on Wednesday, November 4, at 12:00 p.m. Eastern Time to review its third quarter 2015 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 third 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) 839-5571 (no passcode required).

 

###

 

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MarkWest Energy Partners, L.P. is a master limited partnership that owns and operates midstream services related businesses. MarkWest has 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 where it provides midstream services to its producer customers.

 

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 the Partnership by MPLX, the expected timetable for completing the transaction, benefits and synergies of the transaction, future opportunities for the combined company and any other statements regarding the Partnership’s and MPLX’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 the Partnership’s unitholders; the parties’ ability 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 the Partnership 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 the Partnership and MPLX; uncertainties and matters beyond the control of management; and the other risks discussed in the periodic reports filed with the SEC, including the Partnership’s and MPLX’s Annual Reports on Form 10-K for the year ended December 31, 2014 and the Partnership’s Report on Form 10-Q for the quarter ended September 30, 2015. These risks, as well as other risks associated with the Partnership, MPLX and the proposed transaction are also more fully discussed in the proxy statement and prospectus included in the registration statement on Form S-4 filed with the SEC by MPLX and declared effective by the SEC on October 29, 2015. The Partnership has mailed the proxy statement/prospectus to its unitholders. The forward-looking statements should be considered in light of all these factors. In addition, other risks and uncertainties not presently known to the Partnership or MPLX or that the Partnership or MPLX considers immaterial could affect the accuracy of the forward-looking statements. The reader is cautioned not to rely unduly on these forward-looking statements. The Partnership and MPLX 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 the Partnership by MPLX. In connection with the proposed acquisition, the Partnership and MPLX have filed relevant materials with the SEC, including MPLX’s registration statement on Form S-4 that includes a definitive proxy statement and a prospectus and was declared effective by the SEC on October 29, 2015. Investors and security holders are urged to read all relevant documents filed with the SEC, including the definitive proxy statement and prospectus, because they contain important information about the proposed transaction. Investors and security holders are able to obtain the documents free of charge at the SEC’s website, http://www.sec.gov, or for free from the Partnership by contacting Investor Relations by phone at 1-(866) 858-0482 or by email at investorrelations@markwest.com or for free from MPLX LP at its website, http://ir.mplx.com, or in writing at 200 E. Hardin Street, Findlay, Ohio 45840, Attention: Corporate Secretary.

 

Participants in Solicitation

 

This communication is not a solicitation of a proxy from any investor or securityholder. However, the Partnership and its directors and executive officers and certain employees may be deemed to be participants in the solicitation of proxies from the holders of Partnership common units with respect to the proposed transaction. Information about the Partnership’s directors and executive officers is set forth in the proxy statement for the Partnership’s 2015 Annual Meeting of Common Unitholders, which was filed with the SEC on April 23, 2015 and the Partnership’s current reports on Form 8-K, as filed with the SEC on May 5, 2015, May 19, 2015 and June 8, 2015, and in the prospectus filed by MPLX on October 30, 2015 and the related Registration Statement on Form S-4, which was declared effective by the SEC on October 29, 2015. Information about MPLX’s directors and executive officers is available in MPLX’s Annual Report on Form 10-K filed with the SEC on February 27, 2015 and MPLX’s current report on Form 8-K, as filed with the SEC on March 9, 2015. To the extent holdings of Partnership securities have changed since the amounts contained in the definitive proxy statement filed by the Partnership, 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 joint proxy

 

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statement and prospectus regarding the acquisition. These documents may be obtained free of charge from the SEC’s website http://www.sec.gov, or from the Partnership and MPLX using the contact information above.

 

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 September 30,

 

Nine months ended September 30,

 

Statement of Operations Data

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

Product sales

 

$

142,422

 

$

346,461

 

$

467,002

 

$

978,749

 

Service revenue

 

316,450

 

248,796

 

911,322

 

658,070

 

Derivative gain

 

15,419

 

11,829

 

22,925

 

1,109

 

Total revenue

 

474,291

 

607,086

 

1,401,249

 

1,637,928

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Purchased product costs

 

108,741

 

246,801

 

355,517

 

674,189

 

Derivative gain related to purchased product costs

 

(9,043

)

(13,564

)

(2,248

)

(9,398

)

Facility expenses

 

95,028

 

83,579

 

275,394

 

250,829

 

Derivative loss related to facility expenses

 

515

 

1,128

 

606

 

2,905

 

Selling, general and administrative expenses

 

35,981

 

28,860

 

105,587

 

91,851

 

Depreciation

 

128,749

 

105,072

 

370,250

 

311,079

 

Amortization of intangible assets

 

15,678

 

16,313

 

47,100

 

48,256

 

Impairment expense

 

 

 

25,523

 

 

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

 

1,458

 

(766

)

3,064

 

591

 

Accretion of asset retirement obligations

 

308

 

168

 

695

 

504

 

Total operating expenses

 

377,415

 

467,591

 

1,181,488

 

1,370,806

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

96,876

 

139,495

 

219,761

 

267,122

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Equity in earnings (loss) from unconsolidated affiliates

 

7,699

 

(1,555

)

11,473

 

(2,026

)

Interest expense

 

(51,498

)

(39,448

)

(153,642

)

(123,823

)

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

 

(1,632

)

(1,469

)

(4,829

)

(5,742

)

Loss on redemption of debt

 

(29

)

 

(117,889

)

 

Miscellaneous income, net

 

19

 

55

 

113

 

117

 

Income (loss) before provision for income tax

 

51,435

 

97,078

 

(45,013

)

135,648

 

 

 

 

 

 

 

 

 

 

 

Provision for income tax expense (benefit):

 

 

 

 

 

 

 

 

 

Current

 

125

 

39

 

289

 

365

 

Deferred

 

2,104

 

10,991

 

(13,637

)

20,271

 

Total provision for income tax expense (benefit)

 

2,229

 

11,030

 

(13,348

)

20,636

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

49,206

 

86,048

 

(31,665

)

115,012

 

 

 

 

 

 

 

 

 

 

 

Net income attributable to non-controlling interest

 

(20,079

)

(8,614

)

(49,777

)

(16,109

)

 

 

 

 

 

 

 

 

 

 

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

 

$

29,127

 

$

77,434

 

$

(81,442

)

$

98,903

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

Basic

 

$

0.15

 

$

0.43

 

$

(0.44

)

$

0.58

 

Diluted

 

$

0.15

 

$

0.41

 

$

(0.44

)

$

0.54

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of outstanding common units:

 

 

 

 

 

 

 

 

 

Basic

 

191,908

 

176,757

 

188,502

 

166,792

 

Diluted

 

200,679

 

189,440

 

188,502

 

182,105

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Data

 

 

 

 

 

 

 

 

 

Net cash flow provided by (used in):

 

 

 

 

 

 

 

 

 

Operating activities

 

$

205,111

 

$

139,257

 

$

568,449

 

$

496,080

 

Investing activities

 

$

(434,959

)

$

(609,887

)

$

(1,363,555

)

$

(1,615,045

)

Financing activities

 

$

212,753

 

$

269,254

 

$

714,286

 

$

1,131,696

 

 

 

 

 

 

 

 

 

 

 

Other Financial Data

 

 

 

 

 

 

 

 

 

Distributable cash flow

 

$

176,009

 

$

195,223

 

$

522,148

 

$

505,402

 

Adjusted EBITDA

 

$

230,318

 

$

235,519

 

$

678,767

 

$

631,316

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data

 

September 30, 2015

 

December 31, 2014

 

 

 

 

 

Total assets

 

$

11,659,307

 

$

10,980,778

 

 

 

 

 

Total debt

 

$

4,755,352

 

$

3,621,404

 

 

 

 

 

Total equity

 

$

5,877,117

 

$

6,193,239

 

 

 

 

 

 

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MarkWest Energy Partners, L.P.

Operating Statistics (1)

 

 

 

Three months ended September 30,

 

Nine months ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Marcellus

 

 

 

 

 

 

 

 

 

Gathering systems throughput (Mcf/d)

 

875,400

 

702,300

 

849,200

 

634,800

 

Natural gas processed (Mcf/d)

 

2,865,600

 

2,223,300

 

2,868,300

 

1,897,900

 

 

 

 

 

 

 

 

 

 

 

C2 produced (Bbl/d)

 

65,900

 

55,200

 

60,700

 

51,200

 

C3+ NGLs fractionated (Bbl/d)

 

132,100

 

102,700

 

129,900

 

85,100

 

Total NGLs fractionated (Bbl/d)

 

198,000

 

157,900

 

190,600

 

136,300

 

 

 

 

 

 

 

 

 

 

 

Utica

 

 

 

 

 

 

 

 

 

Gathering systems throughput (Mcf/d)

 

762,900

 

322,300

 

616,800

 

231,100

 

Natural gas processed (Mcf/d)

 

928,700

 

459,800

 

815,800

 

335,700

 

 

 

 

 

 

 

 

 

 

 

C2 produced (Bbl/d)

 

4,900

 

 

4,300

 

 

C3+ NGLs fractionated (Bbl/d)

 

37,300

 

19,500

 

32,500

 

16,100

 

Total NGLs fractionated (Bbl/d)

 

42,200

 

19,500

 

36,800

 

16,100

 

 

 

 

 

 

 

 

 

 

 

Condensate Stabilized (Bbl/d)

 

20,500

 

 

11,300

 

 

 

 

 

 

 

 

 

 

 

 

Northeast

 

 

 

 

 

 

 

 

 

Natural gas processed (Mcf/d)

 

274,800

 

296,500

 

273,200

 

278,000

 

NGLs fractionated (Bbl/d)

 

15,500

 

20,200

 

15,300

 

18,400

 

 

 

 

 

 

 

 

 

 

 

Keep-whole NGL sales (gallons, in thousands)

 

26,600

 

30,400

 

82,200

 

87,400

 

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

 

30,900

 

32,300

 

91,800

 

88,300

 

Total NGL sales (gallons, in thousands)

 

57,500

 

62,700

 

174,000

 

175,700

 

 

 

 

 

 

 

 

 

 

 

Crude oil transported for a fee (Bbl/d)

 

10,000

 

9,200

 

10,100

 

9,900

 

 

 

 

 

 

 

 

 

 

 

Southwest

 

 

 

 

 

 

 

 

 

East Texas gathering systems throughput (Mcf/d)

 

601,500

 

591,800

 

610,800

 

546,100

 

East Texas natural gas processed (Mcf/d)

 

479,600

 

458,700

 

488,800

 

414,900

 

East Texas NGL sales (gallons, in thousands)

 

107,600

 

119,600

 

318,400

 

323,100

 

 

 

 

 

 

 

 

 

 

 

Western Oklahoma gathering systems throughput (Mcf/d)

 

358,500

 

358,800

 

349,000

 

334,900

 

Western Oklahoma natural gas processed (Mcf/d)

 

316,700

 

298,600

 

298,600

 

279,500

 

Western Oklahoma NGL sales (gallons, in thousands)

 

54,900

 

54,500

 

127,800

 

165,800

 

 

 

 

 

 

 

 

 

 

 

Southeast Oklahoma gathering systems throughput (Mcf/d)

 

402,100

 

396,300

 

407,500

 

397,600

 

Southeast Oklahoma natural gas processed (Mcf/d)

 

187,200

 

176,700

 

183,500

 

170,300

 

Southeast Oklahoma NGL sales (gallons, in thousands)

 

32,200

 

28,500

 

91,700

 

78,700

 

Arkoma Connector Pipeline throughput (Mcf/d)

 

245,000

 

217,000

 

230,900

 

223,900

 

 

 

 

 

 

 

 

 

 

 

Other Southwest gathering systems throughput (Mcf/d)

 

51,700

 

50,000

 

51,400

 

48,600

 

 

 

 

 

 

 

 

 

 

 

Javelina refinery off-gas processed (Mcf/d)

 

105,100

 

117,200

 

102,400

 

113,300

 

Javelina liquids fractionated (Bbl/d)

 

19,000

 

21,700

 

17,400

 

20,700

 

Javelina NGL sales (gallons, in thousands)

 

73,400

 

83,800

 

199,900

 

237,100

 

 

 

 

 

 

 

 

 

 

 

Total Southwest Gathering system throughput (Mcf/d)

 

1,413,800

 

1,396,900

 

1,418,700

 

1,327,200

 

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

 

1,088,600

 

1,051,200

 

1,073,300

 

978,000

 

Total Southwest NGL Sales (gallons, in thousands)

 

268,100

 

286,400

 

737,800

 

804,700

 

 


(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 September 30, 2015

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

199,693

 

$

82,654

 

$

20,636

 

$

192,803

 

$

 

$

495,786

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

1,874

 

(108

)

8,589

 

98,387

 

 

108,742

 

Segment facility expenses

 

44,363

 

19,040

 

7,906

 

33,671

 

 

104,980

 

Total operating expenses before items not allocated to segments

 

46,237

 

18,932

 

16,495

 

132,058

 

 

213,722

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment portion of operating income attributable to non-controlling interests

 

 

32,411

 

 

2,084

 

 

34,495

 

Operating income before items not allocated to segments

 

$

153,456

 

$

31,311

 

$

4,141

 

$

58,661

 

$

 

$

247,569

 

 

Three months ended September 30, 2014

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

230,241

 

$

47,520

 

$

52,120

 

$

276,666

 

$

(1,298

)

$

605,249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

57,569

 

11,023

 

18,350

 

159,964

 

 

246,906

 

Segment facility expenses

 

36,171

 

14,150

 

9,515

 

32,267

 

(1,298

)

90,805

 

Total operating expenses before items not allocated to segments

 

93,740

 

25,173

 

27,865

 

192,231

 

(1,298

)

337,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment portion of operating income attributable to non-controlling interests

 

 

10,616

 

 

5

 

 

10,621

 

Operating income before items not allocated to segments

 

$

136,501

 

$

11,731

 

$

24,255

 

$

84,430

 

$

 

$

256,917

 

 


(1) Refer to footnote 15, 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 September 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Operating income before items not allocated to segments

 

$

247,569

 

$

256,917

 

Portion of operating income attributable to non-controlling interests

 

14,569

 

6,065

 

Derivative gain not allocated to segments

 

23,947

 

24,265

 

Revenue adjustment for unconsolidated affiliate

 

(43,124

)

(15,463

)

Revenue deferral adjustment

 

1,075

 

5,471

 

Compensation expense included in facility expenses not allocated to segments

 

(918

)

(801

)

Facility expense and purchase product cost adjustments for unconsolidated affiliate

 

13,318

 

5,444

 

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

 

19,926

 

4,556

 

Facility expenses adjustments

 

2,688

 

2,688

 

Selling, general and administrative expenses

 

(35,981

)

(28,860

)

Depreciation

 

(128,749

)

(105,072

)

Amortization of intangible assets

 

(15,678

)

(16,313

)

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

 

(1,458

)

766

 

Accretion of asset retirement obligations

 

(308

)

(168

)

Income from operations

 

96,876

 

139,495

 

Other income (expense):

 

 

 

 

 

Earnings (loss) from unconsolidated affiliates

 

7,699

 

(1,555

)

Interest expense

 

(51,498

)

(39,448

)

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

 

(1,632

)

(1,469

)

Loss on redemption of debt

 

(29

)

 

Miscellaneous income, net

 

19

 

55

 

Income before provision for income tax

 

$

51,435

 

$

97,078

 

 

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)

 

Nine months ended September 30, 2015

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

596,180

 

$

205,507

 

$

73,252

 

$

589,280

 

$

(44

)

$

1,464,175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

12,944

 

752

 

30,850

 

310,972

 

 

355,518

 

Segment facility expenses

 

127,683

 

51,630

 

22,368

 

101,581

 

(44

)

303,218

 

Total operating expenses before items not allocated to segments

 

140,627

 

52,382

 

53,218

 

412,553

 

(44

)

658,736

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment portion of operating income attributable to non-controlling interests

 

 

76,151

 

 

5,693

 

 

81,844

 

Operating income before items not allocated to segments

 

$

455,553

 

$

76,974

 

$

20,034

 

$

171,034

 

$

 

$

723,595

 

 

Nine months ended September 30, 2014

 

Marcellus

 

Utica

 

Northeast

 

Southwest

 

Eliminations (2)

 

Total

 

Segment revenue

 

$

589,134

 

$

102,112

 

$

157,150

 

$

807,136

 

$

(3,769

)

$

1,651,763

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment purchased product costs

 

131,569

 

22,511

 

53,974

 

466,276

 

 

674,330

 

Segment facility expenses

 

105,399

 

38,176

 

25,138

 

99,143

 

(3,769

)

264,087

 

Total operating expenses before items not allocated to segments

 

236,968

 

60,687

 

79,112

 

565,419

 

(3,769

)

938,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment portion of operating income attributable to non-controlling interests

 

 

18,439

 

 

10

 

 

18,449

 

Operating income before items not allocated to segments

 

$

352,166

 

$

22,986

 

$

78,038

 

$

241,707

 

$

 

$

694,897

 

 


(1) Refer to footnote 15, 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.

 

 

 

Nine months ended September 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Operating income before items not allocated to segments

 

$

723,595

 

$

694,897

 

Portion of operating income attributable to non-controlling interests

 

37,478

 

13,384

 

Derivative gain not allocated to segments

 

24,567

 

7,602

 

Revenue adjustment for unconsolidated affiliate

 

(103,671

)

(19,296

)

Revenue deferral adjustment and other

 

1,229

 

4,352

 

Compensation expense included in facility expenses not allocated to segments

 

(2,967

)

(2,707

)

Facility expense and purchase product cost adjustments for unconsolidated affiliate

 

39,319

 

8,042

 

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

 

44,366

 

5,065

 

Facility expenses adjustments

 

8,064

 

8,064

 

Selling, general and administrative expenses

 

(105,587

)

(91,851

)

Depreciation

 

(370,250

)

(311,079

)

Amortization of intangible assets

 

(47,100

)

(48,256

)

Loss on disposal of property, plant and equipment

 

(3,064

)

(591

)

Accretion of asset retirement obligations

 

(695

)

(504

)

Impairment expense

 

(25,523

)

 

Income from operations

 

219,761

 

267,122

 

Other income (expense):

 

 

 

 

 

Earnings (loss) from unconsolidated affiliates

 

11,473

 

(2,026

)

Interest expense

 

(153,642

)

(123,823

)

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

 

(4,829

)

(5,742

)

Loss on redemption of debt

 

(117,889

)

 

Miscellaneous income, net

 

113

 

117

 

(Loss) income before provision for income tax

 

$

(45,013

)

$

135,648

 

 

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 September 30,

 

Nine months ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

49,206

 

86,048

 

$

(31,665

)

$

115,012

 

Depreciation, amortization and other non-cash operating expenses

 

144,735

 

121,631

 

418,097

 

360,942

 

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

 

1,458

 

(766

)

3,064

 

591

 

Loss on redemption of debt, net of current tax benefit

 

29

 

 

117,889

 

 

Amortization of deferred financing costs and debt discount

 

1,632

 

1,469

 

4,829

 

5,742

 

(Earnings) loss from unconsolidated affiliates

 

(7,699

)

1,555

 

(11,473

)

2,026

 

Partnership’s share of distributions from unconsolidated affiliates

 

11,137

 

3,276

 

31,626

 

7,186

 

Non-cash compensation expense

 

3,865

 

1,646

 

12,777

 

7,448

 

Unrealized (gain) loss on derivative instruments

 

(12,159

)

(25,186

)

3,361

 

(18,162

)

Deferred income tax expense (benefit)

 

2,104

 

10,991

 

(13,637

)

20,271

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

(13,626

)

(5,330

)

(34,554

)

(10,626

)

Revenue deferral adjustment

 

(1,076

)

1,720

 

(1,229

)

5,533

 

Impairment expense

 

 

 

25,523

 

 

Other (1)

 

1,877

 

3,481

 

10,824

 

24,503

 

Maintenance capital expenditures

 

(5,474

)

(5,312

)

(13,284

)

(15,064

)

Distributable cash flow

 

$

176,009

 

$

195,223

 

$

522,148

 

$

505,402

 

 

 

 

 

 

 

 

 

 

 

Maintenance capital expenditures

 

$

5,474

 

$

5,312

 

$

13,284

 

$

15,064

 

Growth capital expenditures of consolidated subsidiaries

 

392,443

 

491,264

 

1,217,695

 

1,756,836

 

Capital expenditures of unconsolidated subsidiaries (2)

 

40,047

 

148,165

 

210,489

 

188,178

 

Total capital expenditures

 

437,964

 

644,741

 

1,441,468

 

1,960,078

 

Joint venture partner contributions

 

(15,217

)

(273,003

)

(130,766

)

(393,109

)

Total capital expenditures, net

 

$

422,747

 

$

371,738

 

$

1,310,702

 

$

1,566,969

 

 

 

 

 

 

 

 

 

 

 

Distributable cash flow

 

$

176,009

 

$

195,223

 

$

522,148

 

$

505,402

 

Maintenance capital expenditures

 

5,474

 

5,312

 

13,284

 

15,064

 

Changes in receivables, inventories and other assets

 

(7,610

)

(22,250

)

43,726

 

(65,013

)

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

 

11,204

 

(41,545

)

(52,610

)

53,496

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

13,626

 

5,330

 

34,554

 

10,626

 

Other

 

6,408

 

(2,813

)

7,347

 

(23,495

)

Net cash provided by operating activities

 

$

205,111

 

$

139,257

 

$

568,449

 

$

496,080

 

 


(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., Ohio Condensate Company, L.L.C, MarkWest POET, L.L.C. and Jefferson Gas Gathering 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 September 30,

 

Nine months ended September 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

49,206

 

86,048

 

(31,665

)

115,012

 

Non-cash compensation expense

 

3,865

 

1,646

 

12,777

 

7,448

 

Unrealized (gain) loss on derivative instruments

 

(12,159

)

(25,186

)

3,361

 

(18,162

)

Interest expense (1)

 

51,130

 

38,856

 

152,424

 

123,339

 

Depreciation, amortization and other non-cash operating expenses

 

144,735

 

121,631

 

418,097

 

360,942

 

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

 

1,458

 

(766

)

3,064

 

591

 

Loss on redemption of debt, net of current tax benefit

 

29

 

 

117,889

 

 

Provision for income tax expense (benefit)

 

2,229

 

11,030

 

(13,348

)

20,636

 

Adjustment for cash flow from unconsolidated affiliates

 

3,438

 

4,831

 

20,153

 

9,212

 

Impairment expense

 

 

 

25,523

 

 

Cash adjustment for non-controlling interest of consolidated subsidiaries

 

(13,626

)

(5,330

)

(34,554

)

(10,626

)

Other (2)

 

13

 

2,759

 

5,046

 

22,924

 

Adjusted EBITDA

 

$

230,318

 

$

235,519

 

$

678,767

 

$

631,316

 

 


(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 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 2016, the Partnership estimates that net operating margin will be approximately 92 percent fee-based.

 

The analysis further assumes derivative instruments outstanding as of, and production volumes estimated through December 31, 2016.

 

Estimated Range of 2016 DCF

 

 

 

 

 

Volume Forecast (1)

 

 

 

 

 

Low Case

 

Base Case

 

High Case

 

NGL
$/Gallon
(2)(3)

 

$

0.55

 

$

827

 

$

869

 

$

906

 

 

$

 0.50

 

$

811

 

$

852

 

$

889

 

 

$

 0.45

 

$

794

 

$

835

 

$

872

 

 

$

 0.40

 

$

777

 

$

818

 

$

855

 

 

$

 0.35

 

$

761

 

$

802

 

$

838

 

 


(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