Natural gas processor and distributor
MarkWest Energy Partners L.P.
) reported weak third quarter 2012 results, reflecting lower
MARKWEST EGY PT (MWE): Free Stock Analysis
SUNOCO LOGISTIC (SXL): Free Stock Analysis
To read this article on Zacks.com click here.
The partnership's profit per unit - excluding mark-to-market
derivative activity and compensation expense - came in at 26
cents, against the Zacks Consensus Estimate of 37 cents.
Colorado-based MarkWest's adjusted earnings per unit also
deteriorated from the year-earlier period earnings of 35 cents
Revenue of $283.7 million was down 44.1% from the third quarter
2011 level and was also way below our projection of $352.0
Quarterly Cash Distribution
In October, MarkWest raised its third quarter 2012 cash
distribution by 1.3% sequentially and 11.0% year over year to 81
cents per unit ($3.24 per unit annualized). The partnership's new
distribution is payable on November 14 to unitholders of record
as on November 7, 2012.
Distributable Cash Flow
During the quarter, MarkWest generated distributable cash flow
("DCF") - an indicator of cash paid out for distribution to
unitholders - of $104.3 million, up from $85.3 million in the
prior-year quarter, providing 1.09x distribution coverage.
Business Units Performance
With regard to business units, the Southwest segment's operating
income decreased 14.5% from the year-ago level to $67.3 million,
mainly reflecting lower commodity prices, partially offset by
MarkWest's Northeast segment's operating profit of $22.7 million
fell 31.5% from the last year's income of $22.7 million, affected
by lower fractionated volumes.
Operating income from the Gulf Coast segment was down 26.5% year
over year to $12.5 million. This was mainly on account of lower
MarkWest's newest segment, Liberty (the partnership's Marcellus
Shale joint venture), reported a profit of $43.0 million (up from
$19.0 million achieved in the year-earlier period). Improved
natural gas volumes, gathering system throughputs and natural gas
liquids (NGL) sales - all added up to deliver an impressive
Capital Expenditure & Balance Sheet
During the quarter, MarkWest spent approximately $654.5 million
on growth capital projects, an increase of $530.9 million
compared to the year-ago period. As of September 30, 2012, the
partnership had a total debt of approximately $2.5 billion,
representing a debt-to-capitalization ratio of about 49.1%.
Looking forward, management guided toward a DCF of approximately
$410-$430 million for 2012. MarkWest's capital plan for the year
includes approximately $1.8 billion of capital expenditures for
Next year, the partnership expects DCF to be in the range of
$500-$575 million, while growth capital expenditure is likely to
be around $1.4-$1.9 billion.
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 #3 Rank (short-term Hold rating). We
are also maintaining our long-term Neutral recommendation on the