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MarkWest Incurs Loss, Misses Rev

Zacks Equity Research

Natural gas processor and distributor, MarkWest Energy Partners LP (MWE), reported weak first-quarter 2013 results, reflecting lower commodity prices.

MarkWest’s loss per unit – excluding mark-to-market derivative activity and compensation expense – came in at 21 cents, against the Zacks Consensus Estimate for a profit of 30 cents per unit. Colo.-based MarkWest’s adjusted loss per unit also deteriorated from the year-earlier adjusted profit figure of 57 cents per unit.  

Revenues of $375.9 million were up 7.3% from the first quarter of 2012 but below our projection of $429.0 million.

Quarterly Cash Distribution

On Apr 25, 2013, MarkWest raised its first-quarter 2013 cash distribution by 1.2% sequentially and 5.1% year over year to 83 cents per unit ($3.32 per unit annualized).

Distributable Cash Flow

During the quarter, MarkWest generated distributable cash flow (“DCF”) – an indicator of cash paid out for distribution to unitholders – of $110.2 million, up from $109.2 million in the prior-year quarter, providing 1.02x distribution coverage.

Business Units Performance

Southwest: With regard to business units, the Southwest segment’s operating income decreased 33.6% from the year-ago level to $66.8 million, mainly reflecting lower  prices for commodity, partially offset by higher volumes.

Northeast: MarkWest’s Northeast segment’s operating profit of $31.2 million fell 43.2% from last year’s income of $54.9 million. The segment’s profit was affected by reduced natural gas liquids (NGL) processing.

Liberty: MarkWest’s Liberty segment (the partnership’s Marcellus Shale joint venture), reported a profit of $67.1 million (up by 73.4% from $38.7 million achieved in the year-earlier period). Improved natural gas volumes, gathering system throughputs and NGL sales added up to deliver an impressive quarter.

Utica: Operating loss from the partnership’s newest segment – Utica – was $2.0 million.

Capital Expenditure & Balance Sheet

During the quarter, MarkWest spent approximately $629.7 million on growth capital projects, an increase of $381.7 million compared to the year-ago period. As of Mar 31, 2013, the partnership had total outstanding debt of approximately $3.0 billion, representing a debt-to-capitalization ratio of about 48.3%.


Management lowered the range of DCF to $500–$540 million for 2013 while MarkWest maintained its growth capital expenditure to be in the vicinity of $1.5–$1.8 billion.

Stocks to Consider

MarkWest currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one-to-three months.

Meanwhile, one can look at energy firms like Atlas Energy LP (ATLS), ReneSola Ltd. (SOL) and SM Energy Company (SM) as attractive investments. All three firms sport a Zacks Rank #1 (Strong Buy).

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