MarkWest Energy Partners LP (MWE)
Q4 2010 Earnings Call
March 01, 2011 4:00 pm ET
Previous Statements by MWE
» MarkWest Energy Partners LP Q2 2010 Earnings Call Transcript
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» MarkWest Energy Partners LP Q4 2009 Earnings Call Transcript
Dan Campbell - Investor Relations Officer of MarkWest Energy GP LLC and Treasurer of MarkWest Energy GP LLC
John Mollenkopf - Chief Operations Officer of MarkWest Energy GP LLC and Senior Vice President of Southwest Business Unit of Markwest Energy GP LLC
Randy Nickerson - Chief Commercial Officer of MarkWest Energy GP L.L.C and Senior Vice President of MarkWest Energy GP L L C
Louis Shamie - Zimmer Lucas
John Edwards - Morgan Keegan & Company, Inc.
Welcome to the MarkWest Energy Partners Fourth Quarter 2010 Earnings Conference Call. [Operator Instructions] I would now turn the call over to Dan Campbell. Thank you, sir. You may begin.
Thank you, Sarah, and welcome to everyone that's joined us today on the call. Our comments today will include forward-looking statements, which involve risks and uncertainties and are not guarantees of future performance. Actual results could vary significantly from those expressed or implied in such statements. Although we believe that the expectations expressed today are reasonable, we can give no assurance that the expectations will prove to be correct, and we caution you that projected performance or distributions may not be achieved. Factors that could cause actual results to differ materially from their expectations are included in the periodic reports we file with the SEC. We encourage you to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading Risk Factors.
And with that, I’ll turn the call over to Frank Semple, our Chairman, President, and CEO.
Good afternoon, and thanks to everyone for joining us on the call today. As indicated in our earnings release, we closed out the year with solid financial results for the quarter and the full year. Our core assets continue to demonstrate strong performance with year-over-year gathering volumes increasing by nearly 15%. We also benefited from strong NGL prices and processing margins.
During the call today, I'll give an overview of our financial performance, provide a commercial and operational update, and then conclude with a review of our balance sheet and our updated guidance. And then, we'll move on to your questions.
Beginning with our financial performance, distributable cash flow during the fourth quarter was a record $69 million. Adjusted EBITDA was $88 million and segment operating income was $135 million. For the full year, we generated record DCF of $241 million, adjusted EBITDA of $333 million and segment operating income of $472 million.
In January, we announced a fourth quarter distribution of $0.65 per common unit, which results in a distribution coverage ratio of 1.4x for the quarter and 1.3x for the full year. We're very pleased with our 2010 financial results, including the resumption of growth in our distribution, which reflects our long-term objective of delivering sustainable top quartile total returns for our unit holders.
Now moving to the operational update, our focus remains on expanding our presence in liquids-rich resource plays that provide superior economics to MarkWest and our producer customers. The result of this strategy is that we are seeing volume increases even in a low natural gas pricing environment. And we are also benefiting financially from the uplift in processing margins. We've been executing this strategy for a number of years and our operational performance in 2010 demonstrates that this strategy continues to be very successful.
In Western Oklahoma, which includes both our Foss Lake and Granite Wash systems, gathering volumes during the fourth quarter of 2010 averaged 191 million cubic feet per day, an increase of approximately 3% year-over-year. While we continue to see declines in our Foss Lake volumes due to pricing, our Granite Wash volumes increased to nearly 120 million cubic feet per day.
As a result of the tremendous growth from the liquids-rich zones of the Granite Wash, hence seeing a significant increase in the percentage of rich-gas volumes that we gather and process, consequently, we announced last week the expansion of our gathering system and Arapaho processing complex in Western Oklahoma to serve this growth. When the expansion comes online in the third quarter of this year, our total processing capacity will be 220 million cubic feet per day.
The Granite Wash continues to be one of the most profitable plays in the U.S. for Newfield, LINN Energy and other producers. MarkWest has been a premier midstream service provider in Western Oklahoma for nearly a decade and is ideally positioned to continual supporting the increasing production from the Granite Wash and surrounding areas.
In Southeastern Oklahoma, our Woodford gathering volumes grew approximately 25% in 2010 compared to 2009 to an average of 521 million cubic feet per day. The Woodford shale has been a significant growth story for MarkWest when you consider that we were gathering only 100 million cubic feet per day just three years ago.
While the Woodford still has tremendous potential, much of the gas is dry. And in the current commodity price environment, we expect to see a modest decline in Woodford volumes in 2011 compared to 2010. However, a portion of the Woodford produces liquids-rich gas. We expect Newfield and other producers to continue to prioritize their drilling resources on the rich area of the Woodford. The liquids-rich acreage of the Woodford is also more profitable for MarkWest and our producers because of the processing upgrade.