MarkWest Energy Partners Reports Third Quarter 2009 Financial Results

• Press Release
• Source: MarkWest Energy Partners, L.P.
• On 5:30 pm EST, Monday November 9, 2009

DENVER--(BUSINESS WIRE)--MarkWest Energy Partners, L.P. (NYSE: MWE - News) (the Partnership) today reported cash available for distribution to common unitholders, or distributable cash flow (DCF), of $40.3 million for the three months ended September 30, 2009, and $129.2 million for the nine months ended September 30, 2009. DCF for the three months and nine months ended September 30, 2009, represents 95 percent and 110 percent coverage, respectively, of the cash distributions declared for those periods. As a Master Limited Partnership, cash distributions to common unitholders are largely determined based on DCF. A reconciliation of DCF to net income (loss) attributable to the Partnership, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release.

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Symbol	Price	Change
MWE	24.90	+0.42

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The Partnership reported Adjusted EBITDA of $60.5 million for the three months ended September 30, 2009, and $202.3 million for the nine months ended September 30, 2009. MarkWest believes the presentation of Adjusted EBITDA is useful to investors because it is commonly used by master limited partnerships in the midstream natural gas industry to gauge the performance of ongoing business operations. A reconciliation of Adjusted EBITDA to net income (loss) attributable to the Partnership, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release.

The Partnership reported income (loss) before provision for income tax for the three months and nine months ended September 30, 2009, of $12.5 million and $(115.1) million, respectively. Income (loss) before provision for income tax includes non-cash costs associated with the mark-to-market of derivative instruments of $7.7 million and $(147.2) million for the three and nine months ended September 30, 2009, respectively.

“Our third quarter financial results keep us firmly on track to achieve our distributable cash flow objectives for 2009,” said Frank Semple, Chairman, President and Chief Executive Officer of MarkWest. “I am very pleased with our ability to strengthen our balance sheet, maintain our distribution, and continue to deliver on our strategic growth projects in some of the most exciting resource plays in the U.S.

“During 2009 we have improved our liquidity by approximately $700 million through a combination of capital market transactions, joint ventures, and the divestiture of the steam methane reformer facility. This incremental liquidity funds our share of the Partnership’s 2009 and 2010 growth capital projects in the Marcellus, Woodford, Haynesville, and Granite Wash. These high-quality midstream projects are driving higher volumes in our core operating areas and will further strengthen our market presence in and cash flow from these long-term, economic plays. In 2009 we continued to expand our NGL operations and marketing presence in Appalachia by adding 140 million cubic feet per day of gas processing capacity and 9,500 barrels per day of fractionation capacity. During the second and third quarter we stored approximately 450,000 barrels of propane, which will be sold in the winter months.

“Our decision to raise additional equity capital to pre-fund our growth capital projects, coupled with our seasonal increase in propane inventory, impacted our distribution coverage ratio for the third quarter. However, the midpoint of our revised 2009 full-year distributable cash flow guidance continues to provide for a coverage ratio of greater than 1.1 times our current annualized distribution per unit. Most importantly, we continue to deliver on our key priorities of providing quality customer service, maintaining a strong balance sheet, and achieving our long-term distribution growth objectives.”

THIRD QUARTER 2009 HIGHLIGHTS

Business Development

• Liberty – In September 2009, MarkWest Liberty announced that it reached definitive agreements with Chesapeake Appalachia, L.L.C. and Statoil Natural Gas L.L.C. to process gas at MarkWest Liberty’s new Majorsville processing plant. The gas produced by Chesapeake and Statoil will be gathered by Columbia Gas Transmission using its infrastructure. Columbia will deliver the gas to MarkWest Liberty’s Majorsville processing plant, which will be located adjacent to Columbia’s existing Majorsville compressor station. The hydrocarbon liquids produced at the Majorsville plant will be connected via pipeline to MarkWest Liberty’s Houston, Pennsylvania processing complex. MarkWest Liberty plans to install an approximate 37,000 barrel per day fractionation facility at the Houston complex, as well as transportation, storage, and marketing infrastructure, to sell the hydrocarbon liquids into high-value markets in the northeastern United States.
• Gulf Coast – In September 2009, MarkWest announced the closing of the sale of its steam methane reformer (SMR) facility currently being constructed at its Javelina processing facility in Corpus Christi, Texas, for proceeds of approximately $73.1 million. Under the terms of the purchase and sale agreement, Air Products and Chemicals, Inc. will complete the construction of the SMR, which is expected to be on-stream in March 2010. In conjunction with the purchase and sale agreement, the companies executed a long-term supply agreement whereby Air Products will provide hydrogen and steam to MarkWest. The hydrogen produced by the SMR facility, together with hydrogen generated by the Javelina plant, will be sold to MarkWest’s existing refinery customers.
• Liberty – Effective November 1, 2009, MarkWest executed an agreement to amend the MarkWest Liberty Midstream & Resources joint venture. Under the terms of the amended agreement, M&R will invest an additional $150 million in 2010. After M&R has contributed the additional $150 million, MarkWest will contribute the majority of the future required capital until MarkWest has invested 51 percent of the joint venture’s total capital. MarkWest and M&R will maintain a 60 / 40 percent respective ownership interest until January 1, 2011, at which time the ownership percentages will be adjusted to 51 / 49 percent, respectively.

Financial Results

Balance Sheet

• At September 30, 2009, the Partnership’s available liquidity was $417.6 million, comprised of $65.3 million of cash and cash equivalents and $352.3 million available for borrowing under the $435.6 million revolving credit facility after consideration of $31.5 million of outstanding letters of credit.
• In the third quarter of 2009, the Partnership completed a public equity offering of approximately 6.0 million common units and used the net proceeds from the offering of approximately $121.0 million to repay borrowings under its revolving credit facility and to fund a portion of its 2009 growth capital program.
• In the third quarter of 2009, the Partnership received the second and final payment of $31.25 million from ArcLight in satisfaction of ArcLight’s obligation related to the acquisition of a 50 percent equity interest in the Arkoma Connector Pipeline. In addition, the Partnership received approximately $73.1 million related to the divestiture of the SMR described above.

Operating Results

• Segment operating income for the three months ended September 30, 2009, was $83.4 million, a decrease of $20.7 million when compared to segment operating income of $104.1 million in the same period in 2008. This decrease is primarily attributable to significantly lower commodity prices compared to the prior year quarter, which was offset, in part, by higher volumes in the Southwest, Northeast, and Liberty segments and the benefit of processing capacity expansions and upgrades in the Southwest and Northeast segments that were completed in 2008.
• Segment operating income does not include realized gains or losses on derivative instruments. Realized losses on derivative instruments were $6.0 million in the third quarter of 2009 compared to realized losses on derivative instruments of $14.8 million in the third quarter of 2008.

Growth Capital Expenditures

• For the three months and nine months ended September 30, 2009, combined growth capital expenditures and equity investments were $66.9 million and $389.6 million, respectively. Growth capital expenditures for the nine months ended September 30, 2009, were funded, in part, through net proceeds of approximately $265 million related to capital contributions from the Partnership’s existing joint venture partners and proceeds from the divestiture of the SMR facility.

2009 DCF AND GROWTH CAPITAL FORECAST

For 2009, the Partnership forecasts DCF in a range of $170 million to $180 million. This range provides for approximately 106 percent to 113 percent coverage of the Partnership’s full-year distribution based on current quarterly distributions and common units outstanding.

The Partnership’s 2009 growth capital expenditures are forecasted at approximately $465 million, of which MarkWest anticipates approximately $310 million will be funded through a combination of capital contributions from the Partnership’s existing joint venture partners and proceeds from the divestiture of the SMR facility. As a result, MarkWest’s share of growth capital expenditures for 2009 will be approximately $155 million. Maintenance capital for 2009 is forecasted in a range of $5 million to $10 million.

2010 DCF AND GROWTH CAPITAL FORECAST

For 2010, the Partnership forecasts DCF in a range of $170 million to $210 million based on current forward price estimates for crude oil and natural gas and a return to historical price relationships between crude oil and NGLs in the third quarter of 2010.

Growth capital expenditures for 2010 are forecasted at $480 million, of which MarkWest anticipates approximately $180 million will be funded through capital contributions from the Partnership’s existing joint venture partners. As a result, MarkWest’s share of growth capital expenditures for 2010 is estimated at approximately $300 million. Maintenance capital for 2010 is currently forecasted in a range of $10 million to $15 million.

CONFERENCE CALL

The Partnership will host a conference call and webcast on Tuesday, November 10, 2009, at 4:00 p.m. Eastern time to review its third quarter 2009 financial results. Interested parties can participate in the call by dialing 888-469-1569, passcode “MarkWest,” approximately ten minutes prior to the scheduled start time. To access the webcast, please visit the Investor Relations section of the Partnership’s website at www.markwest.com. A replay of the conference call will be available on the MarkWest website or by dialing 888-566-0569 (no passcode required).

MarkWest Energy Partners, L.P. is a master limited partnership engaged in the gathering, transportation, and processing of natural gas; the transportation, fractionation, marketing, and storage of natural gas liquids; and the gathering and transportation of crude oil. MarkWest has extensive natural gas gathering, processing, and transmission operations in the southwest, Gulf Coast, and northeast regions of the United States, including the Marcellus Shale, and is the largest natural gas processor in the Appalachian region.

This press release includes “forward-looking statements.” 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 the periodic reports we file with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2008, and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2009. 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.” We do not undertake any duty to update any forward-looking statement except as required by law.

MarkWest Energy Partners, L.P.
Distributable Cash Flow Sensitivity Analysis
(unaudited, in millions)

MarkWest periodically estimates the effect on DCF resulting from its hedge program, changes in crude oil and natural gas prices, and the correlation of natural gas liquids (NGL) prices to crude oil. The table below reflects MarkWest’s estimate of the range of DCF for 2010 at the noted crude oil prices. The analysis assumes various combinations of crude oil prices and the ratio of crude oil to gas based on three NGL correlation scenarios, including:

a. The historical average NGL correlation to crude over the past three years.
b. One standard deviation above the historical average NGL correlation to crude over the past three years.
c. One standard deviation below the historical average NGL correlation to crude over the past three years.

The analysis further assumes derivative instruments outstanding as of November 6, 2009, and production volumes estimated through December 31, 2010.

The range of stated hypothetical changes in commodity prices considers current and historic market performance. During the past 10 years, the annual average NGL correlation has ranged between one standard deviation below the historical average and one standard deviation above the historical average.

Estimated Range of 2010 DCF

The table is based on current information, expectations, and beliefs concerning future developments and their potential effects, and does not consider actions MarkWest management may take to mitigate exposure to changes. Nor does the table consider the effects that such hypothetical adverse changes may have on overall economic activity. Historical prices and correlations do not guarantee future results.

Although MarkWest believes the expectations reflected in this analysis are reasonable, MarkWest can give no assurance that such expectations will prove to be correct and readers are cautioned that projected performance, results, or distributions may not be achieved. Actual changes in market prices, and the correlation between crude oil and NGL prices, may differ from the assumptions utilized in the analysis. Actual results, performance, distributions, volumes, events, or transactions could vary significantly from those expressed, considered, or implied in this analysis. All results, performance, distributions, volumes, events, or transactions are subject to a number of uncertainties and risks. Those uncertainties and risks may not be factored into or accounted for in this analysis. Readers are urged to carefully review and consider the cautionary statements and disclosures made in MarkWest’s periodic reports filed with the SEC, specifically those under the heading “Risk Factors.”

MarkWest Energy Partners, L.P.
Frank Semple, 866-858-0482
Chairman, President & CEO
or
Senior VP and CFO
Nancy Buese, 866-858-0482
or
Dan Campbell, 866-858-0482
Treasurer & IR Officer
investorrelations@markwest.com