MarkWest Energy Misses Estimates - Analyst Blog

Natural gas processor and distributor MarkWest Energy Partners LP ( MWE ) reported weak fourth quarter 2012 results, reflecting lower commodity prices.

The partnership's profit per unit - excluding mark-to-market derivative activity and compensation expense - came in at 22 cents against the Zacks Consensus Estimate of 36 cents. Colorado-based MarkWest's adjusted earnings per unit also deteriorated from the year-earlier adjusted figure of 47 cents per unit.

Revenue of $371.5 million was up 11.3% from the fourth quarter 2011 level but was below our projection of $402.0 million.

Quarterly Cash Distribution

On Jan 23, 2013, MarkWest raised its fourth quarter 2012 cash distribution by 1.2% sequentially and 7.9% year over year to 82 cents per unit ($3.28 per unit annualized).

Distributable Cash Flow

During the quarter, MarkWest generated distributable cash flow ("DCF") - an indicator of cash paid out for distribution to unitholders - of $111.8 million, up from $88.4 million in the prior-year quarter, providing 1.06x distribution coverage.

Business Units Performance

Southwest: With regard to business units, the Southwest segment's operating income decreased 34.6% from the year-ago level to $73.2 million, mainly reflecting lower commodity prices, partially offset by higher volumes.

Northeast: MarkWest's Northeast segment's operating profit of $31.6 million fell 21.8% from last year's income of $40.4 million, affected by lower fractionated volumes.

Liberty: MarkWest's Liberty segment (the partnership's Marcellus Shale joint venture), reported a profit of $59.7 million (up by 219.2% from $18.7 million achieved in the year-earlier period). Improved natural gas volumes, gathering system throughputs and natural gas liquids (NGL) sales added up to deliver an impressive quarter.

Utica: Operating loss from the partnership's newest segment - Utica - was $1.3 million.

Capital Expenditure & Balance Sheet

During the quarter, MarkWest spent approximately $709.8 million on growth capital projects, an increase of $525.9 million compared to the year-ago period. As of Dec 31, 2012, the partnership had total outstanding debt of approximately $2.5 billion, representing a debt-to-capitalization ratio of about 44.0%.


Management maintained its projected DCF range of $500-$575 million for 2013 while its growth capital expenditure was pegged in the vicinity of $1.5-$1.8 billion.

Stocks to Consider

MarkWest Energy currently carries a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one-to-three months.

Meanwhile, one can look at other energy firms like Total SA ( TOT ), Breitburn Energy Partners LP ( BBEP ) and Memorial Production Partners LP ( MEMP ) as attractive investments. All these firms - sporting a Zacks Rank #2 (Buy) - offer value and are worth accumulating at current levels.

MEMORIAL PRODUC (MEMP): Free Stock Analysis Report

MARKWEST EGY PT (MWE): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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