Why MarkWest provides capex guidance of $2 billion in 2014

Market Realist

Must-know: An investor’s guide to MarkWest Energy Partners (Part 4 of 5)

(Continued from Part 3)

MarkWest’s growth plans

In 2014, MWE expects volumes to increase by over 60% as MarkWest customers continue to develop their acreage positions in the prolific Marcellus, Utica, Haynesville, and Granite Wash resource plays. MWE maintained its distributable cash flow (or DCF) forecast of $600 million to $690 million in 2014. The majority of the DCF will be earned in the second half of 2014.

Also, MarkWest management expects the distribution growth to increase by 5% in 2014, 7% in 2015, and by 10% in 2016.

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 the capex on the Marcellus segment, 24% on the Utica segment, and 7% on the Southwest segment. The ETFs that hold MWE include the Alerian MLP ETF (AMLP), the Global X MLP ETF (MLPA), the Alerian Energy Infrastructure ETF (ENFR), and the Global X MLP & Energy Infrastructure ETF (MLPX).

Additionally, fee-based margins for this quarter are stated to be more than 70%. As a result of growing fee-based income, MWE’s DCF is less dependent on commodity price changes and more dependent on volume changes.

MarkWest’s 1Q14 growth was driven by accelerated growth in the Marcellus and Utica shales. In particular, the Marcellus Shale is considered to be one of the largest natural gas plays in the world.

Continue reading this series to learn how MWE plans to benefit from its Marcellus investments in 2014.


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