DENVER, March 5 /PRNewswire-FirstCall/ -- MarkWest Energy Partners, L.P. (AMEX:MWE) today reported net income of $12.1 million for the three months ended December 31, 2006, compared to a net loss of $3.2 million for the fourth quarter of 2005. For the twelve months ended December 31, 2006, the Partnership reported net income of $70.1 million compared to net income of $2.4 million for the twelve months ended December 31, 2005.
As a Master Limited Partnership, cash distributions to limited partners are largely determined based on Distributable Cash Flow ("DCF"). For the three months ended December 31, 2006, DCF was $27.1 million compared to $13.1 million for the three months ended December 31, 2005, an increase of more than 105 percent. For the twelve months ended December 31, 2006, DCF was $117.9 million, compared to $44.0 million for the twelve months ended December 31, 2005, an increase of 168 percent. A reconciliation of DCF to net income, our most directly comparable GAAP financial measure, is provided within the financial tables of this press release.
On January 25, 2007, the board of directors of the general partner of MarkWest Energy Partners, L.P. increased the Partnership's quarterly cash distribution to $1.00 for the fourth quarter of 2006, an increase of $0.03 per unit, or 3.1 percent, over the previous quarter distribution and an increase of $0.18 per unit, or 22.0 percent, over the fourth quarter 2005 distribution. The fourth quarter distribution was paid on February 14, 2007 to unitholders of record as of February 8, 2007.
Furthermore, on January 25, 2007, the board of directors of the general partner of MarkWest Energy Partners, L.P. announced a two-for-one split of the Partnership's common and subordinated units. The unit split was issued on February 28, 2007 to unitholders of record as of February 22, 2007.
"We are pleased to report strong earnings and distributable cash flow for the fourth quarter of 2006," said Frank Semple, President and CEO. "Our fourth quarter results contributed to a full year of record financial performance. During 2006 we entered into significant, long-term agreements to drive further growth and increased profitability, including a strategic agreement with Newfield Exploration associated with their development of the Woodford Shale Play in southeastern Oklahoma and the acquisition of 100 percent of the ownership interest in Santa Fe Gathering, L.L.C. and the Grimes Gathering System located in Western Oklahoma. In conjunction with our existing assets, these relationships further strengthen MarkWest's position as a premier service provider." "Per unit distributions for 2006 of $3.76 represent an increase of 16 percent compared to 2005. In the four and one-half years since our inception we have achieved a 16.7 percent compounded annual growth rate of per unit distributions. Our total distribution coverage ratio, including the associated GP and IDR requirements, was 1.3x for the fourth quarter of 2006 and 1.6x for the full year 2006." "Looking ahead, our 2007 capital plan is in the range of $230 million to $240 million, with the Woodford project comprising approximately $160 million of the total. Capital expenditures may vary based on the timing of contemplated growth projects as well as the potential of additional growth projects or acquisitions. Furthermore, the combination of increased fee-based revenue and the continued aggressive execution of our hedge program at favorable terms has allowed us to lock in historically high margins through the first quarter of 2010 resulting in significantly reduced commodity-based volatility on our projected distributable cash flow in 2007 and beyond." FOURTH QUARTER 2006 HIGHLIGHTS The increase in net income in the fourth quarter of 2006, compared to the same period for 2005, was primarily attributable to: * Improved results of operations for our business segments with segment
operating income increasing by $11.4 million over the prior year
quarter. The majority of the improvement is related to our Southwest
Business Unit, consisting of our East Texas, Oklahoma, and Other
Southwest segments, for which combined operating income increased by
$9.7 million, or more than 110 percent, in the fourth quarter of 2006
compared to 2005. The increase was due primarily to the Carthage Gas
Processing Plant and natural gas liquids ("NGL") pipeline beginning
operations in the first quarter of 2006. We also experienced increased
gathering volumes as well as higher NGL prices, which had a positive
effect on earnings.
* We reported an unrealized loss of $1.4 million for the mark-to-market
of our derivative instruments. This is a non-cash item, and as such
does not affect distributable cash flow. In addition, we reported a
realized gain of $1.0 million for the quarter, resulting in a net
decrease to net income of $0.4 million for the period.
* Selling, general and administrative expense increased $8.7 million
during the fourth quarter of 2006 compared to the fourth quarter of
2005. The increase is primarily attributable to $6.2 million in
higher non-cash compensation expense resulting from the Partnership's
increased market value. The balance of the increase is primarily due
to increased headcount driven by our growth.
* We reported equity income of $2.1 million during the three months ended
December 31, 2006 for our investment in Starfish Pipeline Company,
compared to a $2.1 million equity loss in the comparable period in
2005. In addition, in the fourth quarter of 2006 we accrued
$4.5 million, which is included in miscellaneous income and expense,
for property insurance recovery from the repairs associated with the
damage from Hurricane Rita.
* Interest expense, including amortization of deferred financing costs,
was $3.8 million lower in the fourth quarter of 2006 compared to the
same period in 2005. The majority of the change relates to writing off
deferred financing costs resulting from refinancing our credit facility
in the fourth quarter of 2005.
FULL YEAR 2006 HIGHLIGHTS
The increase in net income for the year ended December 31, 2006, compared to 2005, was primarily attributable to: * Significantly improved results of operations for our business segments
with segment operating income increasing by $85.1 million, or
150 percent, to $141.8 million in 2006 from $56.7 million in 2005. In addition to the factors discussed above in the fourth quarter
highlights, segment operating income improved in 2006 due to a full
year of financial results for Javelina as well as historically high
processing margins and liquids prices in 2006 that resulted in improved
financial results in our Northeast business unit.
* We reported an unrealized gain of $6.2 million for the mark-to-market
of our derivative instruments. This is a non-cash item, and as such
does not affect distributable cash flow. In addition, we reported a
realized loss of $0.6 million for the year, resulting in a net increase
to net income of $5.6 million for the period.
* Selling, general and administrative expenses increased $22.6 million
during 2006 compared to 2005. The increase is attributable to
$12.0 million in higher non-cash compensation expense, driven by the
Partnership's increased market value, as well as increased costs
associated with the growth of the business.
* For our investment in Starfish Pipeline Company, we reported equity
income of $5.3 million during 2006 compared to an equity loss of
$2.2 million in 2005. In addition, in 2006 we accrued $14.0 million,
which is included in miscellaneous income and expense, for property
insurance recovery from the repairs associated with the damage from
Hurricane Rita.
* Interest expense, including amortization of deferred financing costs,
was $20.5 million higher in 2006 compared to the same period in 2005. Of this amount, $2.3 million is attributable to increased deferred
financing cost amortization and the balance is attributable to higher
outstanding debt associated with the Javelina acquisition.
The Partnership will host a conference call on Monday, March 5, 2007 at 4:00 p.m. EST to review its 2006 fourth quarter earnings. Interested parties can participate in the call by dialing (800) 218-0530 approximately ten minutes prior to the scheduled start time. A replay of the call will be available through Monday, March 12, 2007 by dialing (800) 405-2236 and entering the following passcode: 11084449#. To access the webcast, please visit our website at http://www.markwest.com/.
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. These forward-looking statements, which in many instances can be identified by words like "may," "will," "should," "expects," "plans," "believes" and other comparable words, involve risks and uncertainties that affect our operations, financial performance and other factors, as discussed in our filings with the Securities and Exchange Commission.
Although we believe that the expectations reflected in the forward-looking statements, specifically those including those referring to future performance, growth, cash flow, operating income, distributable cash flow (DCF), distributions, or other factors, are reasonable, but are not guarantees of future performance and we can give no assurance that such expectations will prove to be correct and that projected performance or distributions may not be achieved. Among the factors that could cause results to differ materially are those risks discussed in our Form S-1, as amended, and our Annual Report on Form 10-K, as filed with the SEC. You are also urged to carefully review and consider the cautionary statements and other disclosures, including those under the heading "Risk Factors," made in those filings, which identify and discuss significant risks, uncertainties and various other factors that could cause actual results to vary significantly from those expressed or implied in the forward-looking statements. We do not undertake any duty to update any forward-looking statement.
MarkWest Energy Partners, L.P. is a publicly traded master limited partnership with a solid core of midstream assets and a growing core of gas transmission assets. It is the largest processor of natural gas in the Northeast and is the largest gas gatherer of natural gas in the prolific Carthage field in east Texas. It also has a growing number of other gas gathering and intrastate gas transmission assets in the Southwest, primarily in Texas and Oklahoma.
MarkWest Energy Partners, L.P. Financial Statistics
(in thousands, except per unit data) Three months ended Year ended
December 31, December 31,
2006 2005 2006 2005
Statement of Operations Data
Revenues $121,173 $175,919 $575,952 $499,084
Operating expenses:
Purchased product costs 63,487 133,357 322,278 366,878
Plant operating expenses
and other expenses 15,148 14,767 60,112 47,972
Selling, general and
administrative expenses 13,781 5,086 44,185 21,573
Depreciation 7,531 5,861 29,993 19,534
Amortization of intangible
assets 3,975 3,368 16,047 9,656
Accretion of asset retirement
obligation 27 23 102 159
Total operating
expenses 103,949 162,462 472,717 465,772 Income from operations 17,224 13,457 103,235 33,312 Other income (expense):
Earnings (losses) from
unconsolidated affiliates 2,076 (2,144) 5,316 (2,153)
Interest income 253 157 962 367
Interest expense (9,453) (9,287) (40,666) (22,469)
Amortization of deferred
financing costs
(a component of interest
expense) (1,394) (5,312) (9,094) (6,780)
Miscellaneous income
(expense)(1) 3,523 (54) 11,100 78
Income (loss) before Texas
margin tax 12,229 (3,183) 70,853 2,355 Provision for Texas margin
tax (90) -- (769) --
Net income (loss) $12,139 $(3,183) $70,084 $2,355 Interest in net income (loss)
General partner $(1,291) $1,385 $(843) $2,113
Limited partners $13,430 $(4,568) $70,927 $242 Net income per limited
partner unit:
Basic $0.41 $(0.20) $2.45 $0.01
Diluted $0.41 $(0.20) $2.44 $0.01 Weighted average units
outstanding (2):
Basic 32,366 23,286 28,966 21,790
Diluted 32,480 23,286 29,098 21,858 Cash Flow Data
Net cash flow provided by
(used in):
Operating activities $30,469 $16,459 $150,977 $42,090
Investing activities (52,784) (377,474) (119,338) (469,308)
Financing activities 26,118 371,075 (17,342) 423,060 Other Financial Data
Distributable cash flow(3) $27,073 $13,114 $117,911 $44,041 Balance Sheet Data
Working capital $4,258 $11,944
Total assets 1,114,780 1,046,093
Total debt 526,865 604,000
Partners' capital 452,649 307,175
Total debt to book
capitalization 54% 66% (1) Includes income from insurance recoveries, net of insurance premiums. (2) Adjusted for the 2 for 1 unit split effective on February 28, 2007. (3) See Reconciliation of GAAP financial measures to Non-GAAP financial
measures.
MarkWest Energy Partners, L.P. Operating Statistics Three months ended Year Ended
December 31, December 31,
2006 2005 2006 2005
Southwest:
East Texas:
Gathering systems
throughput (Mcf/d) 398,000 342,300 378,100 321,000
NGL product sales
(gallons) 43,525,000 37,518,000 161,437,000 126,476,000 Oklahoma:
Foss Lake gathering
systems throughput
(Mcf/d) 92,200 84,500 87,500 75,800
Woodford gathering
systems throughput
(Mcf/d) (1) 34,000 NA 34,000 NA
Arapaho NGL product
sales (gallons) 21,508,000 14,723,000 79,093,000 60,903,000 Other Southwest:
Appleby gathering
systems throughput
(Mcf/d) 35,800 35,600 34,200 33,400
Other gathering systems
throughput (Mcf/d) 13,800 17,000 18,300 16,500
Lateral throughput
volumes (Mcf/d) 85,100 52,300 84,200 81,000 Northeast:
Appalachia:
Natural gas processed
for a fee (Mcf/d) 212,200 200,700 203,000 197,000
NGLs fractionated for a
fee (Gal/day) 467,200 441,600 454,800 430,000
NGL product sales
(gallons) 11,045,000 10,649,000 43,271,000 41,700,000 Michigan:
Natural gas processed
for a fee (Mcf/d) 6,700 6,100 6,500 6,600
NGL product sales
(Mcf/d) 1,299,000 1,250,000 5,643,000 5,697,000
Crude oil transported
for a fee (Bbl/d) 14,200 14,260 14,500 14,200 Javelina:
Natural gas processed
for a fee (Mcf/d) 121,600 115,000 124,300 115,000
NGLs fractionated for a
fee (Bbl/day) 26,800 19,400 26,200 19,400 (1) Represents throughput for the month of December 2006 only.
MarkWest Energy Partners, L.P. Segment Operating Income and Reconciliation to Net Income
(in thousands) East Other
Texas Oklahoma Southwest
Three months ended
December 31, 2006: Revenue $24,205 $44,233 $14,808 Segment operating expenses:
Purchased product costs 5,075 35,923 10,269
Facility expenses 3,934 2,448 1,451
Depreciation, amortization,
impairment and accretion 4,106 803 942
Total segment operating
expenses 13,115 39,174 12,662 Segment operating income
(loss) $11,090 $5,059 $2,146
East Other
Texas Oklahoma Southwest
Three months ended
December 31, 2005: Revenue $26,435 $77,894 $37,355 Segment operating expenses:
Purchased product costs 16,252 72,468 33,449
Facility expenses 2,795 1,478 1,717
Depreciation, amortization,
impairment and accretion 3,443 667 804
Total segment operating
expenses 22,490 74,613 35,970 Segment operating income
(loss) $3,945 $3,281 $1,385
Appalachia Michigan Javelina Total
Three months ended
December 31, 2006: Revenue $19,072 $3,274 $15,958 $121,550 Segment operating expenses:
Purchased product costs 11,267 953 -- 63,487
Facility expenses 3,619 1,196 2,500 15,148
Depreciation, amortization,
impairment and accretion 924 1,165 3,582 11,522
Total segment operating
expenses 15,810 3,314 6,082 90,157 Segment operating income
(loss) $3,262 $(40) $9,876 $31,393
Appalachia Michigan Javelina Total
Three months ended
December 31, 2005: Revenue $18,784 $3,056 $13,832 $177,356 Segment operating expenses:
Purchased product costs 10,453 735 -- 133,357
Facility expenses 4,707 1,918 2,152 14,767
Depreciation, amortization,
impairment and accretion 794 1,171 2,373 9,252
Total segment operating
expenses 15,954 3,824 4,525 157,376 Segment operating income
(loss) $2,830 $(768) $9,307 $19,980
Reconciliation of Segment Three months ended Three months ended
Operating Income to December 31, December 31,
Net Income 2006 2005 Total segment operating
income before derivative
gain (loss), selling,
general and administrative
expenses and depreciation
expense not allocated
to segments $31,393 $19,980
Derivative gain (loss)
not allocated to segments (377) (1,437)
Depreciation expense not
allocated to segments (11) --
Selling, general and
administrative expenses
not allocated to segments (13,781) (5,086)
Income (loss) from
operations $17,224 $13,457 Earnings (losses) from
unconsolidated affiliates 2,076 (2,144)
Interest income 253 157
Interest expense (9,453) (9,287)
Amortization of deferred
financing costs (1,394) (5,312)
Miscellaneous income (expense) 3,523 (54)
Income before Texas
Margin Tax 12,229 (3,183) Texas Margin Tax (90) --
Net income $12,139 $(3,183) MarkWest Energy Partners, L.P. Segment Operating Income and Reconciliation to Net Income
(in thousands) East Other
Texas Oklahoma Southwest
Year ended December 31, 2006: Revenue: $120,320 $207,510 $84,595 Segment operating expenses:
Purchased product costs 37,678 170,168 67,349
Facility expenses 15,683 7,883 5,638
Depreciation, amortization,
impairment and accretion 16,071 3,033 4,120
Total segment operating
expenses 69,432 181,084 77,107 Segment operating income
(loss) $50,888 $26,426 $7,488
East Other
Texas Oklahoma Southwest
Year ended December 31, 2005: Revenue $86,261 $214,043 $107,712 Segment operating expenses:
Purchased product costs 39,024 193,787 92,602
Facility expenses 10,463 4,927 4,990
Depreciation, amortization,
impairment and accretion 13,162 2,448 3,473 Total segment operating
expenses 62,649 201,162 101,065 Segment operating income
(loss) $23,612 $12,881 $6,647
Appalachia Michigan Javelina Total
Year ended December 31, 2006: Revenue: $75,663 $13,282 $68,950 $570,320 Segment operating expenses:
Purchased product costs 43,648 3,435 -- 322,278
Facility expenses 13,997 5,721 11,190 60,112
Depreciation, amortization,
impairment and accretion 3,585 5,015 14,303 46,127 Total segment operating
expenses 61,230 14,171 25,493 428,517 Segment operating income
(loss) $14,433 $(889) $43,457 $141,803
Appalachia Michigan Javelina Total
Year ended December 31, 2005: Revenue $66,608 $12,479 $13,832 $500,935 Segment operating expenses:
Purchased product costs 38,435 3,030 -- 366,878
Facility expenses 19,360 6,080 2,152 47,972
Depreciation, amortization,
impairment and accretion 3,228 4,665 2,373 29,349 Total segment operating
expenses 61,023 13,775 4,525 444,199 Segment operating income
(loss) $5,585 $(1,296) $9,307 $56,736
Reconciliation of Segment Year ended Year ended
Operating Income to December 31, December 31,
Net Income 2006 2005 Total segment operating
income before derivative
gain (loss), selling,
general and administrative
expenses and depreciation
expense not allocated to
segments $141,803 $56,736
Derivative gain (loss)
not allocated to segments 5,632 (1,851)
Depreciation expense not
allocated to segments (15) --
Selling, general and
administrative expenses
not allocated to segments (44,185) (21,573)
Income (loss) from
operations 103,235 33,312 Earnings (losses) from
unconsolidated affiliates 5,316 (2,153)
Interest income 962 367
Interest expense (40,666) (22,469)
Amortization of deferred
financing costs (9,094) (6,780)
Miscellaneous income 11,100 78
Income before Texas
Margin Tax 70,853 2,355 Texas Margin Tax (769) --
Net income $70,084 $2,355 Mark West Energy Partners, L.P. Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
(in thousands) Three months ended Year ended
December 31, December 31,
2006 2005 2006 2005
Income (loss) before Texas
margin tax $12,229 $(3,183) $70,853 $2,355
Depreciation, amortization
and accretion 11,533 9,252 46,142 29,349
Amortization of deferred
financing costs 1,394 5,312 9,094 6,780
Non-cash (earnings) losses
from unconsolidated
affiliates (2,076) 1,552 (5,316) 1,561
Distributions from
(contributions to)
unconsolidated affiliates,
net of expansion capital (2,872) 592 (9,424) 2,441
Non-cash compensation
expense 6,186 (57) 15,171 3,131
Non-cash derivative
activity 1,420 725 (6,245) 657
Other 93 48 119 (28)
Gain on sale of property,
plant and equipment 6 12 (192) (24)
Sustaining capital
expenditures (840) (1,139) (2,291) (2,181)
Distributable cash flow $27,073 $13,114 $117,911 $44,041 Sustaining capital
expenditures $840 $1,139 $2,291 $2,181
Expansion capital
expenditures 33,582 19,428 75,096 68,569
Total capital expenditures $34,422 $20,567 $77,387 $70,750 Distributable cash flow $27,073 $13,114 $117,911 $44,041
Contributions to
unconsolidated
subsidiaries (included
in Cash flows from
investing activities) 2,872 -- 9,424 --
Sustaining capital
expenditures 840 1,139 2,291 2,181
Increase (decrease) in
receivables (3,772) 22,683 18,912 11,216
Increase (decrease) in
receivables from
affiliates (733) (3,861) 3,286 (2,094)
(Increase) decrease in
inventories 400 (824) (39) (1,318)
Increase (decrease) in
other current assets 1,358 (6,567) 3,043 (6,676)
Increase (decrease) in
accounts payable, accrued
liabilities and other
liabilities 2,422 (9,423) (2,380) (1,678)
Increase (decrease) in
payables to affiliates 9 198 (1,471) (3,582) Net cash provided by
operating activities $30,469 $16,459 $150,977 $42,090
DATASOURCE: MarkWest Energy Partners, L.P.
CONTACT: Frank Semple, President and CEO, or Nancy K. Buese, CFO, or Andy Schroeder, VP of Finance/Treasurer, all of MarkWest Energy Partners, L.P., +1-303-925-9200, fax +1-303-290-8309, Web site: http://www.markwest.com/
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