Natural gas processor and distributor
MarkWest Energy Partners LP
) reported lower-than-expected first-quarter 2014 earnings. The
results suffered due to a significant rise in operating expenses.
MarkWest Energy's earnings - excluding mark-to-market derivative
activity, compensation expense and asset sale adjustments - came in
at approximately 5 cents per unit, substantially lower than the
Zacks Consensus Estimate of 26 cents.
However, the reported figure improved from the year-ago adjusted
loss per unit of 21 cents. Strong result from the Marcellus
segment, which led to higher natural gas processing volumes,
favored the year-over-year improvement.
Revenues of $512.5 million failed to meet the Zacks Consensus
Estimate of $522.0 million. The top line, however, was up
approximately 37.3% from the first quarter of 2013.
Quarterly Cash Distribution
On Apr 23, 2014, MarkWest Energy raised its first-quarter 2014 cash
distribution by 1.2% sequentially and 4.8% year over year to 87
cents per unit ($3.48 per unit annualized). The distribution will
be paid on May 15.
Distributable Cash Flow
During the reported quarter, MarkWest Energy generated
distributable cash flow (DCF) - an indicator of cash paid out for
distribution to unitholders - of $148.5 million, 35.2% higher than
the prior-year quarter level of $109.8 million, providing 1.05x
Business Units Performance
With regard to business units, the Southwest segment's operating
income increased 13.1% from the year-ago level to $74.1 million.
The results reflect higher sales volumes from East Texas and the
Gulf Coast, partially offset by a substantial fall in Southeast
The segment's operating profit of $33.7 million was up 8.1% from
last year's income of $31.2 million on the back of higher
This segment (the partnership's Marcellus Shale joint venture)
reported a profit of $105.4 million, up 57.1% from $67.1 million in
the year-earlier quarter. A significant improvement in natural gas
processing volume aided the results.
Operating income from MarkWest Energy's newest segment, Utica, was
$4.6 million, against a loss of $2.0 million in first-quarter 2013.
Higher throughput and processing volumes led to the improvement.
The partnership reported operating expenses of roughly $440.5
million, reflecting a significant increase of 42.3% from $309.6
million reported in the year-ago quarter.
Capital Expenditure & Balance Sheet
During the first quarter, MarkWest Energy spent approximately
$584.4 million on growth capital projects, down from $629.7 million
a year ago. The partnership also declared that it had roughly
$123.1 million of cash and cash equivalents in its wholly owned
subsidiaries. Total outstanding debt came in at approximately $3.4
billion, representing a debt-to-capitalization ratio of about
Management reaffirmed its projected DCF of $600.0-$690.0 million
for 2014, taking into consideration the forecasted volume and
commodity prices. MarkWest Energy narrowed its projected 2014
growth capital spending in the band of $2.0-$2.3 billion and
maintenance capital expenditure at $25.0 million.
Zacks Rank & Other Stocks to Consider
MarkWest Energy currently has a Zacks Rank #3 (Hold), implying that
it is expected to perform in line with the broader U.S. equity
market over the next one to three months.
Meanwhile, one can consider better-ranked players in the oil and
production pipeline sectors like
Boardwalk Pipeline Partners, LP
Targa Resources Partners LP
Delek Logistics Partners, LP
). While Boardwalk Pipeline and Targa Resources sport a Zacks Rank
#1 (Strong Buy), Delek Logistics has a Zacks Rank #2 (Buy).
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