MarkWest Energy Partners L.P.
) and its subsidiary MarkWest Energy Finance Corporation
announced the closure of its previously announced public offering
of senior notes. MarkWest priced the public offering of 4.5%
senior unsecured notes of $1.0 billion, due in 2023.
The gathering and processing master limited partnership (MLP)
plans to use the net proceeds from this offering along with the
available cash balance to redeem its outstanding 8.75% senior
notes due 2018, a portion of its 6.5% senior notes due 2021 and
6.25% senior notes due 2022. The balance proceeds will be used by
the partnership for capital spending and for common working
capital and partnership purposes.
MarkWest is currently a Zacks Rank #3 (Hold). We are also
maintaining our long-term Neutral recommendation on the unit.
The company owns a high-quality and diverse portfolio of
midstream assets that generate stable and recurring revenues
based on long-term fee-based contracts. Over the last few years,
the partnership has consolidated its position in the midstream
business, achieved through a combination of organic efforts and
With its proven track record of supporting producers in the
development of shale plays, MarkWest is in a good position to
participate in an infrastructure upgrade that will be required
for the development of the leasehold assets.
However, gathering and processing MLPs, like MarkWest, are more
sensitive to commodity prices compared to other MLP subgroups. As
a result, collapsing energy prices have adversely affected their
cash flow stability.
MarkWest's non-fee-based keep-whole and percentage-of-liquids
basis contracts for its midstream assets - which make up more
than 60% of its net operating margin - expose the partnership to
commodity price risk. If these contracts become less profitable,
MarkWest's cash flow stream could be adversely affected, leading
Among MarkWest's peers,
Sunoco Logistics Partners L.P.
) also retains a Zacks Rank #3 (Hold).
MARKWEST EGY PT (MWE): Free Stock Analysis
SUNOCO LOGISTIC (SXL): Free Stock Analysis
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