Natural gas processor and distributor
MarkWest Energy Partners L.P.
) reported lower-than-expected fourth quarter earnings, reflecting
weak results from its Gulf Coast business unit.
The partnership's profit per unit - excluding mark-to-market
derivative loss and compensation expense - came in at 47 cents,
against the Zacks Consensus Estimate of 53 cents.
However, Colorado-based MarkWest's adjusted earnings per unit
showed a significant improvement over the year-earlier period, when
it incurred a loss of 5 cents per share. The outperformance was on
account of the partnership's impressive exposure to the Marcellus
Shale play in western Pennsylvania and West Virginia.
Revenue (excluding hedging impact) of $424.8 million was up
19.1% from the fourth quarter 2010 level and was also ahead of our
projection of $388.0 million.
For its fiscal year ended December 31, 2011, MarkWest reported a
profit of $1.39 per unit on revenues of $1.5 billion.
Quarterly Cash Distribution
Prior to the earnings release, MarkWest raised its fourth
quarter 2011 cash distribution by 4.1% sequentially and 16.9% year
over year to 76 cents per unit ($3.04 per unit annualized). The
partnership's new distribution was paid on February 14 to
unitholders of record as on February 6, 2012.
Distributable Cash Flow
During the quarter, MarkWest generated distributable cash flow
("DCF") - an indicator of cash paid out for distribution to
unitholders - of $88.4 million, up from $69.1 million in the
prior-year quarter, providing 1.21x distribution coverage.
Business Units Performance
With regard to business units, the Southwest segment's operating
income increased 31.9% from the year-ago level to $100.1 million,
mainly reflecting higher volumes.
MarkWest's Northeast segment's operating profit of $40.4 million
rose 34.3% from last year's income of $30.1 million, buoyed by an
86.1% jump in natural gas processed. The quarterly results were
also positively impacted by a 3.1% increase in total natural gas
liquids ("NGL") product sales.
Operating income from the Gulf Coast segment was down 7.2% year
over year to $11.8 million. This was mainly on account of lower
volumes of gas processed and liquids fractionated. NGL sales volume
also dipped 4.3% from the fourth quarter of 2010.
MarkWest's newest segment, Liberty (the partnership's Marcellus
Shale joint venture), reported a profit of $18.7 million (up from
$15.9 million achieved in the year-earlier period). Improved
natural gas volumes, gathering system throughputs and NGL sales -
all added up to deliver an impressive quarter.
Capital Expenditure & Balance Sheet
During the quarter, MarkWest spent approximately $183.9 million
on growth capital projects (including equity investments), an
increase of $102.3 million compared to the year-ago period. As of
December 31, 2011, the partnership had a total debt of
approximately $1.8 billion, representing a debt-to-capitalization
ratio of about 55.1%.
Looking forward, management guided towards a DCF of
approximately $440-$500 million for 2012, contingent upon the buy
out of The Energy & Minerals Group's 49% interest in the
Marcellus shale joint venture project, Liberty.
MarkWest's capital plan for the year includes approximately $900
million to $1.3 billion of capital expenditures for growth projects
plus $20 million for maintenance capital.
Rating & Recommendation
MarkWest - which has teamed up with another partnership,
Sunoco Logistics Partners L.P.
), to build a distribution system to transport ethane produced in
the Marcellus Shale Basin to markets along the Gulf Coast -
currently retains a Zacks #2 Rank (short-term Buy rating). We are
also maintaining our long-term Outperform recommendation on the
MARKWEST EGY PT (
): Free Stock Analysis Report
SUNOCO LOGISTIC (
): Free Stock Analysis Report
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