Must-know: MarkWest Energy Partners’ guidance for 2014

Market Realist

Must-know highlights from MarkWest Energy Partners' analyst day (Part 7 of 7)

(Continued from Part 6)

Distribution

MWE maintained its distributable cash flow forecast of $600 million to $690 million in 2014. The company will earn the majority of this cash in the second half of 2014.

On April 23, 2014, MarkWest Energy raised its first quarter 2014 cash distribution to $0.87 per common unit. This was an increase of 1.2% sequentially and 4.8% year-over-year. On an annualized basis, the distribution was $3.48 per unit and represents a coverage ratio of 1.05x for the first quarter. MarkWest management expects the distribution growth to increase 5% in 2014, 7% in 2015, and 10% in 2016.

For context, we’ve provided a comparison of distributions and yield and how MWE is trading compared to its competitors, which include DCP Midstream (DPM), Kinder Morgan Partners (KMP), Regency Energy Partners (RGP), and Targa Resources (NGLS). All these companies are part of the Alerian MLP ETF (AMLP).

Capital expenditure

MarkWest has forecasted that it will spend $2 billion to $2.3 billion for its major growth projects in 2014. The 2015 capex will be approximately $2 billion. This year, MarkWest will spend 69% of its capex on the Marcellus segment, 24% on the Utica segment, and 7% on the Southwest segment.

Fee-based margins

Plus, fee-based margins for this quarter are stated to be more than 70%.

As a result of growing fee-based income, MWE’s DCF will depend less on commodity price changes and more on volume changes.

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