Natural gas processor and distributor, MarkWest Energy Partners LP (MWE), has closed its $500 million unsecured senior notes offering on Nov 21. The notes, which were priced at par and carried an interest rate of 4.875%, are due for maturity in 2024.
The partnership intends to use part of the net proceeds of about $494 million (after subtracting underwriter discounts and other offering-related expenses) to repay debt under its revolving credit facility. It plans to utilize the remaining amount to finance capital spending and for general corporate purposes.
Denver, CO-based MarkWest Energy is a master limited partnership (MLP) engaged in the gathering, processing and transmission of natural gas, transportation, fractionation and storage of natural gas liquids (NGLs), along with gathering and transportation of crude oil.
On Nov 5, MarkWest Energy reported strong third-quarter results on the back of significant improvement in processing volumes in the Marcellus, Utica and Southwest regions. The partnership reported adjusted earnings of 33 cents per unit, surpassing the Zacks Consensus Estimate of 29 cents. The bottom line also improved from the year-ago quarter adjusted earnings of 22 cents.
Moreover, MarkWest Energy increased its 2014 DCF guidance to $680–$700 million on expectation of reduced sensitivity toward commodity prices owing to higher fee-based income. Amid such strong projections, another earnings beat in the coming quarter is likely.
However, MarkWest’s core business – natural gas processing – faces a higher degree of commodity price exposure than most MLPs, and this makes us cautious. In consistence with these views, MarkWest Energy currently carries a Zacks Rank #3 (Hold).
Meanwhile, one could consider better-ranked players from the same industry like Atlas Pipeline Partners, L.P. (APL), Magellan Midstream Partners LP (MMP) and Regency Energy Partners LP (RGP). All these stocks hold a Zacks Rank #2 (Buy).
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