DENVER, March 6 /PRNewswire-FirstCall/ -- MarkWest Hydrocarbon, Inc. (AMEX:MWP) (the "Company") today reported net income of $9.5 million for the twelve months ended December 31, 2006, or $0.79 per diluted share, compared to a net loss of $6.8 million, or $0.57 per diluted share, for the same period in 2005. The Company also reported a net loss of $1.2 million for the three months ended December 31, 2006, or $0.10 per diluted share, compared to a net loss of $1.0 million, or $0.09 per diluted share, for the fourth quarter of 2005. The full year and fourth quarter results for the Standalone segment, as defined below, include $4.9 million and $9.5 million, respectively, of non-cash, pre-tax costs associated with the mark-to-market of derivative instruments, the revaluation of long-term shrink obligation, and non-cash compensation expense.
"We are extremely pleased with our overall financial performance and the resultant growth in dividends and shareholder value," said Frank Semple, President and Chief Executive Officer. "Our strong financial performance in 2006 was a direct result of MarkWest Energy Partners' distribution growth and continued strong operating cash flow performance from our natural gas liquid marketing business. The partnership increased distributable cash flow by 168 percent in 2006 and is well positioned for future growth. Our share of distributions from our investment in the partnership was $20.1 million in 2006, representing a 63 percent increase from 2005." "Our marketing business experienced strong margins as a result of the favorable frac spread environment and we have extended our hedge program through the first quarter of 2010, which has allowed us to lock in historically high margins." The Company declared a quarterly cash dividend of $0.30 per share of its common stock for an implied annual rate of $1.20 per share, which was paid on February 21, 2007 to shareholders of record as of February 9, 2007. This quarterly cash dividend represents an increase of $0.02 per share, or 7 percent, over the cash dividend in the third quarter of 2006.
The Company reports its operations under two business segments, MarkWest Hydrocarbon Standalone ("Standalone") and MarkWest Energy Partners (the "Partnership").
The Standalone business segment consists of the Company's natural gas liquid ("NGL") marketing activities for NGL's extracted primarily at MarkWest Energy Partners' Siloam facility and the management of keep-whole contracts in Appalachia.
FULL YEAR 2006 HIGHLIGHTS For the year ended December 31, 2006, the Standalone segment reported net income of $9.5 million, an increase of $16.3 million when compared to a net loss of $6.8 million for the year ended December 31, 2005. The increase was primarily attributable to: * The realized frac spread improved significantly to $0.30 per gallon in
2006 versus $0.19 per gallon in 2005, resulting in a positive impact of
$11.7 million on segment net income.
* The Company had a net unrealized gain of $4.0 million for the mark-to-
market of derivative instruments and the revaluation of the long-term
shrink obligation, both of which are non-cash items. This compares to
a net unrealized loss of $5.3 million for the same items in 2005
resulting in a positive year over year variance of $9.3 million.
* The above items were offset, in part, by a $7.1 million year over year
increase in selling, general and administrative expense attributable to
higher non-cash compensation expense.
* In addition, the Company reported income tax expense of $5.1 million in
2006 compared to an income tax benefit of $1.8 million in the prior
year for a negative year over year variance of $6.9 million.
For the Partnership segment, the Company's share of net income attributable to the Partnership, net of the eliminating entry for non-controlling interest in net income of a consolidated subsidiary, was $10.4 million for the twelve months ended December 31, 2006, up from $2.2 million for the same period in 2005.
A key component of the Company's business activities is the cash distributions it receives for its ownership interest in the Partnership, which consists of approximately 4.9 million limited partner units, as adjusted for the two-for-one unit split effective on February 28, 2007; a two percent general partner interest; and incentive distribution rights. The Company received $20.1 million of distributions in 2006, which represents a 63 percent increase over the $12.3 million received in 2005.
FOURTH QUARTER 2006 HIGHLIGHTS For the three months ended December 31, 2006, the Standalone segment reported a net loss of $1.2 million, comparable to a net loss of $1.0 million for the same period in 2005. The decrease was primarily attributable to: * The realized frac spread improved significantly to $0.36 per gallon in
the fourth quarter of 2006 versus $0.09 per gallon in the same period
in 2005, resulting in a positive impact of $9.5 million on segment net
income.
* The Company had an income tax benefit of $0.6 million in the fourth
quarter of 2006 compared to income tax expense of $1.1 million in the
prior year quarter for a positive quarter over quarter variance of
$1.7 million.
* The above two items were offset by a net unrealized loss of
$6.1 million for the mark-to-market of derivative instruments and the
revaluation of the long-term shrink obligation, both of which are
non-cash items. This compares to a net unrealized gain of $3.0 million
for the same items in the fourth quarter of 2005 resulting in a
negative quarter over quarter variance of $9.1 million.
* In addition, selling, general and administrative expense increased
quarter over quarter by $2.6 million attributable to higher non-cash
compensation expense.
For the Partnership segment, the Company's share of net income attributable to the Partnership, net of the eliminating entry for non-controlling interest in net income of a consolidated subsidiary, was $0.7 million in the fourth quarter of 2006, up from $0.4 million in the fourth quarter of 2005. The Company received $6.5 million of distributions in the fourth quarter of 2006, which represents a 97 percent increase over the $3.3 million received in the fourth quarter of 2005.
The Company will host a conference call Tuesday, March 6, 2007, at 4:00 P.M. EST to review its 2006 fourth quarter and full year earnings. Interested parties can participate in the call by dialing (800) 218-0713 approximately ten minutes prior to the scheduled start time. A replay of the call will be available through Tuesday, March 13, 2007 by dialing (800) 405-2236 and entering the following passcode: 11084450#. To access the webcast, please visit our website at http://www.markwest.com/.
MarkWest Hydrocarbon, Inc. (AMEX:MWP) controls and operates MarkWest Energy Partners, L.P. (AMEX:MWE), a publicly traded limited partnership engaged in the gathering, processing and transmission of natural gas; the transportation, fractionation and storage of natural gas liquids; and the gathering and transportation of crude oil. We also market natural gas and NGLs.
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. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect our operations, financial performance and other factors as discussed in our filings with the Securities and Exchange Commission. Among the factors that could cause results to differ materially are those risks discussed in our Form 10-K for the year ended December 31, 2005 as filed with the SEC. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading "Risk Factors." MarkWest Hydrocarbon, Inc. Statement of Operations
(in thousands, except per share amounts) Three months ended Year ended
December 31, December 31,
2006 2005 2006 2005 Revenues:
Revenue $164,354 $265,596 $775,339 $717,375
Derivative gain (loss) 1,977 (1,437) 10,383 (3,198)
Total revenue 166,331 264,159 785,722 714,177 Operating expenses:
Purchased product costs 106,082 220,155 512,327 583,084
Facility expenses 14,826 13,250 57,403 45,577
Selling, general and
administrative expenses 19,532 8,210 63,038 33,350
Depreciation 7,728 6,068 31,010 20,829
Amortization of intangible
assets 3,975 3,368 16,047 9,656
Accretion of asset retirement
obligations 27 23 102 160
Total operating expenses 152,170 251,074 679,927 692,656 Income from operations 14,161 13,085 105,795 21,521 Other income (expense):
Earnings (losses) from
unconsolidated affiliates 2,076 (2,144) 5,316 (2,153)
Interest income 468 219 1,574 1,060
Interest expense (9,517) (9,349) (40,942) (22,622)
Amortization of deferred
financing costs and original
issue discount (a component of
interest expense) (1,424) (5,328) (9,229) (6,979)
Dividend income 120 103 447 392
Miscellaneous income (expense) 3,800 (34) 11,537 266
Income (loss) before
non-controlling interest in
net income of consolidated
subsidiary and income taxes 9,684 (3,448) 74,498 (8,515) Income tax (expense) benefit:
Current 3,033 (554) 179 (554)
Deferred (2,430) (542) (5,431) 2,358
Income tax (expense) benefit 603 (1,096) (5,252) 1,804 Non-controlling interest in net
(income) loss of consolidated
subsidiary (11,454) 3,500 (59,709) (91)
Net income (loss) $(1,167) $(1,044) $9,537 $(6,802) Net income (loss) per share:
Basic $(0.10) $(0.09) $0.80 $(0.57)
Diluted $(0.10) $(0.09) $0.79 $(0.57) Weighted average number of
outstanding shares of common
stock (December 31, 2005
adjusted to reflect May 23, 2006
Stock Dividend):
Basic 11,958 11,880 11,939 11,864
Diluted 11,958 11,880 12,033 11,864 MarkWest Hydrocarbon, Inc. Segment Income (Loss)
(in thousands) MarkWest MarkWest
Hydrocarbon Energy Consolidating
Standalone Partners Entries Total Year ended December 31, 2006:
Revenue $278,655 $570,320 $(73,636) $775,339
Derivative gain 4,751 5,632 -- 10,383
Total revenue 283,406 575,952 (73,636) 785,722 Purchased product costs 239,359 322,278 (49,310) 512,327
Facility expenses 21,617 60,112 (24,326) 57,403
Selling, general and
administrative expenses 18,853 44,185 -- 63,038
Depreciation, Amortization and
Accretion 1,017 46,142 -- 47,159
Income (loss) from operations 2,560 103,235 -- 105,795 Earnings from unconsolidated
affiliates -- 5,316 -- 5,316
Interest income (expense), net 336 (39,704) -- (39,368) Amortization of deferred
financing costs and original
issue discount (a component of
interest expense) (135) (9,094) -- (9,229)
Dividend income 447 -- -- 447
Miscellaneous income 437 11,100 -- 11,537
Income before non-controlling
interest in net income of
consolidated subsidiary and
income taxes 3,645 70,853 -- 74,498
Income tax (expense) benefit (5,124) (769) 641 (5,252)
Non-controlling interest in net
income of consolidated
subsidiary -- -- (59,709) (59,709)
Interest in net income of
consolidated subsidiary 11,016 -- (11,016) --
Net income (loss) $9,537 $70,084 $(70,084) $9,537 MarkWest MarkWest
Hydrocarbon Energy Consolidating
Standalone Partners Entries Total Year ended December 31, 2005:
Revenue $281,362 $500,935 $(64,922) $717,375
Derivative loss (1,347) (1,851) -- (3,198)
Total revenue 280,015 499,084 (64,922) 714,177 Purchased product costs 258,188 366,878 (41,982) 583,084
Facility expenses 20,545 47,972 (22,940) 45,577
Selling, general and
administrative expenses 11,777 21,573 -- 33,350
Depreciation, Amortization and
Accretion 1,296 29,349 -- 30,645
Income (loss) from operations (11,791) 33,312 -- 21,521 Losses from unconsolidated
affiliates -- (2,153) -- (2,153)
Interest income (expense), net 540 (22,102) -- (21,562)
Amortization of deferred
financing costs and original
issue discount (a component of
interest expense) (199) (6,780) -- (6,979) Dividend income 392 -- -- 392
Miscellaneous income 215 51 -- 266
Income (loss) before
non-controlling interest in
net income of consolidated
subsidiary and income taxes (10,843) 2,328 -- (8,515)
Income tax benefit 1,804 -- -- 1,804
Non-controlling interest in net
income of consolidated
subsidiary -- 27 (118) (91)
Interest in net income of
consolidated subsidiary 2,237 -- (2,237)
Net income (loss) $(6,802) $2,355 $(2,355) $(6,802) MarkWest Hydrocarbon, Inc. Segment Income (Loss)
(in thousands) MarkWest MarkWest
Hydrocarbon Energy Consolidating
Standalone Partners Entries Total Three months ended
December 31, 2006:
Revenue $61,152 $121,550 $(18,348) $164,354
Derivative gain (loss) 2,354 (377) -- 1,977
Total revenue 63,506 121,173 (18,348) 166,331 Purchased product costs 54,578 63,487 (11,983) 106,082
Facility expenses 6,043 15,148 (6,365) 14,826
Selling, general and
administrative expenses 5,751 13,781 -- 19,532
Depreciation, Amortization and
Accretion 197 11,533 -- 11,730
Income (loss) from operations (3,063) 17,224 -- 14,161 Earnings from unconsolidated
affiliates -- 2,076 -- 2,076
Interest income (expense), net 151 (9,200) -- (9,049) Amortization of deferred financing
costs and original issue discount
(a component of interest expense) (30) (1,394) -- (1,424)
Dividend income 120 -- -- 120
Miscellaneous income 277 3,523 -- 3,800
Income before non-controlling
interest in net income of
consolidated subsidiary and
income taxes (2,545) 12,229 -- 9,684 Income tax (expense) benefit 595 (90) 98 603
Non-controlling interest in net
income of consolidated subsidiary -- -- (11,454) (11,454)
Interest in net income of
consolidated subsidiary 783 -- (783) --
Net income (loss) $(1,167) $12,139 $(12,139) $(1,167) MarkWest MarkWest
Hydrocarbon Energy Consolidating
Standalone Partners Entries Total Three months ended
December 31, 2005:
Revenue $106,629 $177,356 $(18,389) $265,596
Derivative gain (loss) -- (1,437) -- (1,437)
Total revenue 106,629 175,919 (18,389) 264,159 Purchased product costs 98,848 133,357 (12,050) 220,155
Facility expenses 4,822 14,767 (6,339) 13,250
Selling, general and
administrative expenses 3,124 5,086 -- 8,210
Depreciation, Amortization and
Accretion 207 9,252 -- 9,459
Income (loss) from operations (372) 13,457 -- 13,085 Earnings from unconsolidated
affiliates -- (2,144) -- (2,144)
Interest income (expense), net -- (9,130) -- (9,130) Amortization of deferred financing
costs and original issue discount
(a component of interest expense) (16) (5,312) -- (5,328)
Dividend income 103 -- -- 103
Miscellaneous income (expense) (29) (5) -- (34)
Income before non-controlling
interest in net income of
consolidated subsidiary and
income taxes (314) (3,134) -- (3,448) Income tax expense (1,096) -- -- (1,096)
Non-controlling interest in net
(income) loss of consolidated
subsidiary -- (49) 3,549 3,500
Interest in net income of
consolidated subsidiary 366 -- (366) --
Net income (loss) $(1,044) $(3,183) $3,183 $(1,044) MarkWest Hydrocarbon, Inc. Segment Balance Sheet
(in thousands) MarkWest MarkWest
Hydrocarbon Energy Consolidating
December 31, 2006 Standalone Partners Entries Consolidated ASSETS
Current assets:
Cash and cash equivalents $14,442 $34,402 $-- $48,844
Marketable securities 7,713 -- -- 7,713
Receivables 16,940 90,780 (6,604) 101,116
Inventories 31,668 3,593 -- 35,261
Fair value of derivative
instruments 5,727 4,211 -- 9,938
Other current assets 12,217 3,047 -- 15,264
Total current assets 88,707 136,033 (6,604) 218,136 Property, plant and
equipment, net 3,449 550,886 -- 554,335
Investment in and advances
to other equity investee 12,683 -- (12,683) --
Fair value of derivative
instruments 35 2,759 -- 2,794
Other long term assets 2,874 425,102 -- 427,976
Total assets $107,748 $1,114,780 $(19,287) $1,203,241 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable and
accrued liabilities $19,370 $131,684 $(6,604) $144,450
Fair value of derivative
instruments 7,385 91 -- 7,476
Deferred income taxes 180 -- -- 180
Current portion of long term
debt -- -- -- --
Total current liabilities 26,935 131,775 (6,604) 152,106 Long-term debt -- 526,865 -- 526,865
Deferred income taxes 9,425 769 (641) 9,553
Non-controlling interest in
consolidated subsidiary 965 -- 440,607 441,572
Fair value of derivative
instruments 98 1,362 -- 1,460
Other long-term liabilities 28,836 1,360 -- 30,196 Total stockholders' equity 41,489 452,649 (452,649) 41,489
Total liabilities and
stockholders' equity $107,748 $1,114,780 $(19,287) $1,203,241 MarkWest Hydrocarbon, Inc. Segment Balance Sheet
(in thousands) MarkWest MarkWest
Hydrocarbon Energy Consolidating
December 31, 2005 Standalone Partners Entries Consolidated ASSETS
Current assets:
Cash and cash equivalents $863 $20,105 $-- $20,968
Marketable securities 6,070 -- -- 6,070
Receivables 38,922 117,978 (11,361) 145,539
Inventories 37,513 3,554 -- 41,067
Other current assets 9,453 6,861 -- 16,314
Total current assets 92,821 148,498 (11,361) 229,958 Property, plant and equipment,
net 1,737 492,961 -- 494,698
Investment in and advances to
other equity investee 6,668 182 (6,668) 182
Other long term assets 3,014 404,452 -- 407,466
Total assets $104,240 $1,046,093 $(18,029) $1,132,304 LIABILITIES AND
STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable and accrued
liabilities $43,247 $133,088 $(11,361) $164,974
Fair value of derivative
instruments -- 728 -- 728
Deferred income taxes 362 -- -- 362
Current portion of long term
debt -- 2,738 -- 2,738
Total current liabilities 43,609 136,554 (11,361) 168,802 Long-term debt 7,500 601,262 -- 608,762
Non-controlling interest in
consolidated subsidiary 508 -- 300,507 301,015
Other long-term liabilities 12,641 1,102 -- 13,743 Total stockholders' equity 39,982 307,175 (307,175) 39,982
Total liabilities and
stockholders' equity $104,240 $1,046,093 $(18,029) $1,132,304 MarkWest Hydrocarbon, Inc. Operating Statistics Three months ended Year ended
December 31, December 31,
2006 2005 2006 2005
MarkWest Hydrocarbon
Standalone:
Marketing
Hydrocarbon frac
spread sales
(gallons) 37,966,000 34,867,000 118,581,000 120,300,000
Maytown sales
(gallons) 11,045,000 10,649,000 43,271,000 41,700,000
Total NGL product
sales (gallons) 49,011,000 45,516,000 161,852,000 162,000,000 Wholesale
NGL product sales
(gallons) 7,440,000 27,305,000 46,555,000 68,879,000 MarkWest Energy
Partners:
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 Shale
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 Appalachia:
Natural gas processed
for a fee (Mcf/d) 212,200 200,700 203,000 197,000
NGLs fractionated for
a fee (Gal/d) 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
(gallons) 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/d) 26,800 19,400 26,200 19,400 (1) Represents throughput for the month of December 2006 only. DATASOURCE: MarkWest Hydrocarbon, Inc.
CONTACT: Frank Semple, President and CEO, or Nancy K. Buese, CFO, or Andy Schroeder, VP Finance & Treasurer, all of MarkWest Hydrocarbon, Inc., +1-866-858-0482, or fax, +1-303-290-8769, Web site: http://www.markwest.com/
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