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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--(BUSINESS WIRE)--Aug. 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 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.
  • 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.

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 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.

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.

                       
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
 
 
     
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.
 
 
                         
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 )
Impairment expense   -     -  
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  
 
 
                         
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  
 
 
                       
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.
 
 
                       
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.
 
 

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

NGL
$/Gallon
(2)(3)

$ 0.65       $ 721       $ 736       $ 751
$ 0.60       $ 718       $ 733       $ 748
$ 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.”

Source: MarkWest Energy Partners, L.P.

MarkWest Energy Partners, L.P.
Frank Semple, 866-858-0482
Chairman, President & CEO
or
Nancy Buese, 866-858-0482
Executive VP and CFO
or
Josh Hallenbeck, 866-858-0482
VP of Finance & Treasurer
investorrelations@markwest.com