Natural gas processor and distributor MarkWest Energy Partners LP (MWE) reported lower-than-expected fourth-quarter 2014 results due to decreased gathering systems’ throughput volume in the Southwest region and lesser processing and fractionation volumes in the Northeast area.
The partnership reported earnings – excluding mark-to-market derivative activity, impairment expense, compensation expense and asset sale adjustments – of 24 cents per unit, missing the Zacks Consensus Estimate of 32 cents. The bottom line, however, improved from the year-ago quarter adjusted earnings of 10 cents.
Revenues of $538.3 million came below the Zacks Consensus Estimate of $636 million. However, the top line was up over 19% from the fourth quarter of 2013.
For the year ended Dec 31, 2014, MarkWest Energy reported income (excluding non-operating items) of 82 cents per unit, way above the year-ago adjusted profit of 19 cents. Revenues were recorded at $2.2 billion against the year-ago number of $1.7 billion.
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 $201 million, exhibiting a surge of about 58% from the prior-year quarter level of $127.2 million, providing 1.20x distribution coverage.
Business Units Performance
Southwest: With regard to business units, the Southwest segment’s operating income decreased 0.7% from the year-ago level to $65.9 million. The results reflect lower Southeast Oklahoma gathering systems’ throughput volume.
Northeast: The segment’s operating profit of $18.1 million was down 39.3% from the year-ago quarter’s $29.8 million owing to lower processing and fractionation volumes.
Marcellus: This segment (the partnership’s Marcellus Shale joint venture) reported a profit of $139.9 million, up 56.4% from $89.5 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 was $16.6 million against a loss of $0.6 million in fourth-quarter 2013. A significant increase in throughput and processing volumes led to the improvement.
Operating Cost
The partnership reported operating expenses of roughly $428.2 million, reflecting an increase of 2.2% from $419 million in the year-earlier quarter.
Capital Expenditure & Balance Sheet
During the quarter under review, MarkWest Energy spent approximately $718.8 million capital, reflecting a decline from $870.2 million a year ago.
The partnership also declared that it had $35.4 million in cash and cash equivalents in its wholly owned subsidiaries. Total outstanding debt was approximately $3.6 billion, representing a debt-to-capitalization ratio of about 36.9%.
2015 Guidance
MarkWest Energy projected DCF in the $700–$800 million range, lower than the prior guidance of $800–$880 million.
The partnership decreased its projected growth capital spending to $1.5−$1.9 billion from the prior range of 1.8–$2.3 billion. In 2016, MarkWest Energy will likely expend $1.5 billion.
Zacks Rank & Other Stocks to Consider
MarkWest Energy currently has a Zacks Rank #5 (Strong Sell), implying that the stock will significantly underperform the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include VTTI Energy Partners LP (VTTI), Western Gas Equity Partners LP (WGP) and Valero Energy Partners LP (VLP). All these stocks sport a Zacks Rank #1 (Strong Buy).
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