On Aug 5, 2015, natural gas processor and distributor MarkWest Energy Partners LP MWE reported weak second-quarter 2015 results due to lower natural gas liquid (NGL) sales volumes in the Javelina refinery and Western Oklahoma. Following the underperformance, the partnership’s unit price fell more than 6% on the NYSE.
The partnership reported loss – excluding one-time items – of 14 cents per unit against the Zacks Consensus Estimate of 19 cents earnings. The partnership had reported earnings of 16 cents in the year-ago quarter.
Revenues of $459.6 million came below the Zacks Consensus Estimate of $528 million and lower than the year-ago quarter figure of $518.4 million.
Distributable Cash Flow
During the reported quarter, MarkWest Energy generated distributable cash flow (DCF) – an indicator of cash paid out for distribution to unitholders – of $165.9 million. The reported DCF reflects improvement of about 2.6% from the prior-year quarter level of $161.7 million and provides 0.94x distribution coverage.
Business Units Performance
Southwest: With regard to business units, the Southwest segment’s operating income decreased 32.8% from the year-ago level to $55.9 million. The results reflect lower NGL sales volumes in the Javelina refinery and Western Oklahoma.
Northeast: The segment’s operating profit of $5.3 million tumbled 73.8% from the year-ago quarter’s $20.1 million due to lower NGL fractionation volumes.
Marcellus: This segment (the partnership’s Marcellus Shale joint venture) reported profit of $154.8 million, up 40.4% from $110.3 million in the year-earlier quarter. Increased natural gas gathering and processing volumes aided the upside.
Utica: Operating income from MarkWest Energy’s Utica segment jumped from $6.6 million in second-quarter 2014 to $23.7 million. A significant increase in throughput and processing volumes led to the improvement.
Operating Cost
The partnership reported operating expenses of roughly $389.3 million, reflecting a decrease of 15.9% from $462.7 million in the year-earlier quarter.
Capital Expenditure & Balance Sheet
During the quarter under review, MarkWest Energy spent approximately $464.4 million capital, reflecting a decline from $728.2 million a year ago.
The partnership also declared that it has $25.6 million in cash and cash equivalents in its wholly owned subsidiaries. Total outstanding debt came at approximately $4.5 billion, representing a debt-to-capitalization ratio of about 43.8%.
Guidance
MarkWest Energy narrowed its 2015 projected DCF range to $700–$750 million.
On the other hand, the partnership reaffirmed its 2015 projected growth capital spending of $1.5−$1.9 billion.
Zacks Rank & Other Stocks
MarkWest Energy currently has a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Some better-ranked players in the energy sector are Valero Energy Partners LP VLP, Seadrill Partners LLC SDLP and Alon USA Energy Inc. ALJ. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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