On Feb 26, 2014, natural gas processor and distributor,
MarkWest Energy Partners LP
), reported weak fourth-quarter 2013 earnings, after the closing
bell. Significant hike in operating expenses hampered the
results. The soft results were also reflected in the 3.2% fall in
the per unit price of the partnership on the next trading day.
MarkWest Energy's earnings - excluding mark-to-market derivative
activity, compensation expense and asset sale adjustments - came
in at approximately 10 cents per unit, missing the Zacks
Consensus Estimate of 22 cents per unit. Earnings were also lower
than the year-ago adjusted earnings per unit of 24 cents.
Revenues of $453.5 million were up approximately 22.9% from the
fourth quarter of 2012. The top line also surpassed the Zacks
Consensus Estimate of $452.0 million. Considerably higher natural
gas processing volume owing to strong results from the Marcellus
segment favored the results.
For the year ended Dec 31, 2013, MarkWest Energy reported income
(excluding non-operating items) of 44 cents per unit down from
year-ago adjusted profit of $1.01. Revenues were recorded at $1.7
billion against the year-ago number of $1.4 billion.
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 $127.2 million, 13.8% higher
than the prior-year quarter level of $111.8 million, providing
0.94x distribution coverage.
Business Units Performance
With regard to business units, the Southwest segment's operating
income decreased 7.9% from the year-ago level to $66.4 million.
The results mainly reflect a significant increase in operating
expenses, partially offset by volume expansion.
The segment's operating profit of $29.8 million was down 5.6%
from last year's income of $31.6 million. Lower processing volume
of natural gas during the quarter affected the results.
This segment (the partnership's Marcellus Shale joint venture)
reported a profit of $89.5 million, up 49.9% from $59.7 million
in the year-earlier quarter. Significant improvement in natural
gas processing volume aided the results.
Operating loss from MarkWest Energy's newest segment - Utica -
was $0.6 million, narrower than the year-ago loss of $1.3
The partnership report operating expenses of roughly $419.0
million, reflecting a significant increase of 36.2% from $307.7
million reported in the year-ago quarter.
Capital Expenditure & Balance Sheet
During the fourth quarter, MarkWest Energy spent approximately
$864.6 million on growth capital projects, up from $709.1 million
a year ago. MarkWest Energy added that in wholly owned
subsidiaries, the partnership had roughly $80.0 million of cash
and cash equivalents. Total outstanding debt came at
approximately $3.0 billion, representing a debt-to-capitalization
ratio of about 38.7%.
Management reaffirms its projected DCF of $600.0-$690.0 million
for 2014, taking into consideration the forecasted volume and
commodity prices. MarkWest Energy maintains its projected 2014
growth capital spending in the band of $1.8-$2.3 billion and
maintenance capital expenditure at $25.0 million.
The partnership 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 look at better-ranked players in the oil and
production pipeline sectors like
Magellan Midstream Partners LP
NuStar Energy LP
Crestwood Equity Partners LP
). All the partnerships sport a Zacks Rank #2 (Buy).
CRESTWOOD EQTY (CEQP): Free Stock Analysis
MAGELLAN MDSTRM (MMP): Free Stock Analysis
MARKWEST EGY PT (MWE): Free Stock Analysis
NUSTAR ENERGY (NS): Free Stock Analysis
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