(Source: Business Wire)
MarkWest Energy Partners, L.P. (NYSE: MWE) (the Partnership) today reported cash available for distribution to common unitholders, or distributable cash flow (DCF), of $39.9 million for the three months ended June 30, 2009, and $88.9 million for the six months ended June 30, 2009. DCF for the three months and six months ended June 30, 2009, represents 104 percent and 119 percent coverage, respectively, of the cash distributions declared for those periods. As a Master Limited Partnership, cash distributions to common unitholders are largely determined based on DCF. A reconciliation of DCF to net income (loss) attributable to the Partnership, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release.
The Partnership reported Adjusted EBITDA of $61.1 million for the three months ended June 30, 2009, and $141.8 million for the six months ended June 30, 2009. MarkWest believes the presentation of Adjusted EBITDA is useful to investors because it is commonly used by master limited partnerships in the midstream natural gas industry to gauge the performance of ongoing business operations. A reconciliation of Adjusted EBITDA to net income (loss) attributable to the Partnership, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release.
Net income (loss) attributable to the Partnership for the three and six months ended June 30, 2009, was $(67.5) million and $(97.2) million, respectively. Net income (loss) attributable to the Partnership includes non-cash costs associated with the mark-to-market of derivative instruments of $(89.2) million and $(154.9) million for the three and six months ended June 30, 2009, respectively.
"We delivered solid quarterly financial results, strengthened our balance sheet, and maintained volumes during a period of weak commodity prices and a volatile market environment," said Frank Semple, Chairman, President and Chief Executive Officer of MarkWest. "The impact of the challenging market conditions was offset by the strength of our fee-based business and increased volumes in certain operating segments, particularly in the shale plays. We completed two capital market transactions during the second quarter that generated over $171 million in net proceeds. When combined with the joint venture agreements we executed this year and the cash flow we are generating from capital projects completed in 2008, the capital raised in the second quarter will allow us to fund our growth capital requirements for the foreseeable future. Looking forward, we remain focused on our key priorities of providing quality midstream services for our customers, strengthening our balance sheet, and achieving our distribution objectives."
SECOND QUARTER 2009 HIGHLIGHTS
Business Development
Liberty -- In May 2009, MarkWest Liberty Midstream & Resources, LLC (MarkWest Liberty), a partnership between MarkWest and NGP Midstream & Resources, L.P. announced the start-up of a 30 million cubic feet per day (MMcf/d) cryogenic processing plant in southwestern Pennsylvania to support the significant ongoing development of the Marcellus Shale. MarkWest Liberty also increased the capacity of its mechanical refrigeration processing plant that it commissioned in 2008 to 40 MMcf/d. Range Resources and other Marcellus producers continue to experience significant success in southwestern Pennsylvania and gas volumes are expected to grow significantly in the second half of 2009 and into 2010. To provide the required midstream services, MarkWest Liberty expects to further increase the capacity of its mechanical refrigeration processing plant and to complete the installation of a 120 MMcf/d cryogenic processing plant in late 2009 or early 2010. In addition, MarkWest Liberty continues to expand its gathering and compression infrastructure to serve the increasing volumes.
Southeast Oklahoma -- In May 2009, MarkWest and an affiliate of ArcLight Capital Partners, LLC ("ArcLight") announced the formation of a joint venture to own and operate the Arkoma Connector Pipeline, a 50-mile interstate pipeline placed into service in July 2009 that provides 638,000 dekatherms per day of Woodford Shale takeaway capacity and interconnects with Midcontinent Express Pipeline and Gulf Crossing Pipeline at Bennington, Oklahoma. Under the terms of the joint venture agreement, ArcLight acquired a 50 percent equity interest in the joint venture for $62.5 million. MarkWest will receive a service fee for operating and managing the joint venture. MarkWest and ArcLight will invest equally in the ongoing costs to operate or expand the pipeline.
Gulf Coast -- In June 2009, MarkWest entered into an agreement to sell the steam methane reformer (SMR) currently being constructed at its Javelina refinery off-gas processing facility in Corpus Christi, Texas. Under the terms of the agreement, the purchaser would complete the construction of the SMR and would provide hydrogen to MarkWest pursuant to a long-term agreement. The pending divestiture of the SMR is anticipated to close in the third quarter of 2009 and is subject to certain closing conditions.
Financial Results
Balance Sheet
At June 30, 2009, the Partnership had $56.5 million of cash and cash equivalents and a $435.6 million revolving credit facility that matures in February 2012. As of June 30, 2009, $173.1 million was available for borrowing under the revolving credit facility after consideration of $29.7 million of outstanding letters of credit.
In the second quarter of 2009, the Partnership strengthened its balance sheet by completing a public equity offering of 3.335 million common units and a private placement of $150 million of 6.875% senior unsecured notes due 2014 at an issue price to yield 12.59 percent to maturity. The Partnership used the combined net proceeds from the two offerings of approximately $171 million to repay borrowings under its revolving credit facility and to fund a portion of its 2009 capital program.
Subsequent to the end of the second quarter of 2009, the Partnership received the second and final payment of $31.25 million from ArcLight in satisfaction of ArcLight's obligation related to the acquisition of a 50 percent equity interest in the Arkoma Connector Pipeline. In addition, the Partnership expects to receive approximately $70 million in the third quarter of 2009 related to the pending divestiture of the SMR described above. At the end of the second quarter of 2009 the Partnership's available liquidity was $229.6 million. These subsequent events will increase the Partnership's available liquidity by approximately $100 million.
Operating Results
Segment operating income for the three months ended June 30, 2009, was $70.9 million, a decrease of $29.7 million when compared to segment operating income of $100.6 million in the same period in 2008. This decrease is primarily attributable to significantly lower commodity prices compared to the prior year quarter, which was offset, in part, by higher volumes in the Southwest segment in Woodford and Stiles Ranch combined with the benefit of processing capacity expansions in East Texas and western Oklahoma completed in late 2008; higher volumes in the Northeast segment due to the processing plant expansions and upgrades that were completed in 2008; and higher volumes in the Liberty segment from the commencement of operations in the fourth quarter of 2008.
Segment operating income does not include realized gains or losses on derivative instruments. Realized gains on derivative instruments were $4.3 million in the second quarter of 2009 compared to a realized loss on derivative instruments of $15.2 million in the second quarter of 2008. The $19.5 million increase reflects the benefit of the Partnership's hedge program.
Growth Capital Expenditures
For the three months and six months ended June 30, 2009, growth capital expenditures and equity investments were $150.9 million and $322.8 million, respectively. Growth capital expenditures were funded, in part, through net proceeds of approximately $79 million and $124 million, respectively, related to the sale of equity interest in joint ventures.
2009 DCF AND GROWTH CAPITAL FORECAST
For 2009, the Partnership forecasts DCF in a range of $160 million to $190 million. This range provides for approximately 105 percent to 125 percent coverage of the Partnership's full-year distribution based on current quarterly distributions and common units outstanding. Included within the tables of this press release is a sensitivity analysis for forecasted 2009 DCF that incorporates actual DCF for the first six months of 2009 and forecasted DCF for the remainder of 2009.
The Partnership's 2009 growth capital expenditures are forecasted at approximately $480 million, of which MarkWest anticipates approximately $330 million will be funded through a combination of capital contributions from the Partnership's existing joint venture partners and proceeds from the pending divestiture of the SMR facility. As a result, MarkWest's share of growth capital expenditures for 2009 will be approximately $150 million, which is lower than the Partnership's previous 2009 net growth capital forecast of $225 million. The reduction in MarkWest's share of growth capital is attributable to expanded growth capital spending offset by increased proceeds received from joint venture and divestiture activities. Maintenance capital for 2009 is forecasted in a range of $5 million to $10 million.
CONFERENCE CALL
The Partnership will host a conference call and webcast on Tuesday, August 11, 2009, at 4:00 p.m. Eastern Time to review its second quarter 2009 financial results. Interested parties can participate in the call by dialing (888) 469-1569, passcode "MarkWest", approximately ten minutes prior to the scheduled start time. To access the webcast, please visit the Investor Relations section of the Partnership's website at www.markwest.com. A replay of the conference call will be available on the MarkWest website or by dialing (866) 454-9173 (no passcode required).
MarkWest Energy Partners, L.P. is a master limited partnership engaged in the gathering, transportation, and processing of natural gas; the transportation, fractionation, marketing, and storage of natural gas liquids; and the gathering and transportation of crude oil. MarkWest has extensive natural gas gathering, processing, and transmission operations in the southwest, Gulf Coast, and northeast regions of the United States, including the Marcellus Shale, and is the largest natural gas processor in the Appalachian region.
This press release includes "forward-looking statements." All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect our operations, financial performance, and other factors as discussed in our filings with the Securities and Exchange Commission. Among the factors that could cause results to differ materially are those risks discussed in the periodic reports we file with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2008, and our Quarterly Reports on Form 10-Q for the six months ended June 30, 2009. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading "Risk Factors." We do not undertake any duty to update any forward-looking statement except as required by law.
MarkWest Energy Partners, L.P.
