Pipeline operator MarkWest Energy Partners L.P. (MWE) has commenced an underwritten public offering of 3,200,000 common units representing limited partner interests.
The gathering and processing master limited partnership (MLP) also intends to provide the underwriters with a 30-day option to purchase up to 480,000 additional common units to cover over-allotments, if any.
MarkWest plans to use the net proceeds from this offering to pay back the outstanding debt under its revolving credit facility and to part fund its ongoing capital expenditure program.
Denver, Colorado-based MarkWest Energy is engaged in the gathering, processing and transmission of natural gas, transportation, fractionation and storage of natural gas liquids (NGLs), and the gathering and transportation of crude oil.
MarkWest owns a high-quality and diverse portfolio of midstream assets that generate stable and recurring revenues by engaging in long-term fee-based contracts. Over the last few years, the partnership has consolidated its position in the midstream business, achieved through a combination of organic efforts and accretive acquisitions.
With its proven track record of supporting producers in the development of shale plays, MarkWest is in a great position to participate in the development of infrastructure that will be required for the development of the leaseholds.
The partnership’s targeted growth capital investments since 2006 have been driving its strong, long-term volume growth. We also appreciate MarkWest’s steady improvement in its liquidity/cash flow position. Furthermore, with 168% distribution growth since the IPO in May 2002, we are confident of the partnership’s total return potential.
Lat year, MarkWest teamed up with another MLP, Sunoco Logistics Partners L.P. (SXL), to build a distribution system to transport ethane produced in the Marcellus Shale Basin (in the north eastern U.S.) to markets along the Gulf Coast.
We believe that the initiative, known as the ‘Mariner Project,’ offers several benefits. Not only will the project help MarkWest to profit by capturing demand for ethane takeaway capacity at Marcellus, but it will also support higher gathering system volumes and higher ethane production.
However, MarkWest’s core business – natural gas processing – is faced with a higher degree of commodity price exposure than most MLPs. This is expected to limit its ability to generate positive earnings surprises in the next few quarters. During this period, we expect the partnership to grow at a somewhat more conservative and sustainable pace.
As such, we expect MarkWest Energy’s growth potential to be restrained with little room for meaningful upside from current levels. MarkWest currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
MARKWEST EGY PT (MWE): Free Stock Analysis Report
Be the first to comment