Exhibit 99.1
MarkWest Hydrocarbon, Inc. | | Contact: | | Frank Semple, President and CEO |
155 Inverness Drive West, Suite 200 | | | | James Ivey, CFO |
Englewood, CO 80112-5000 | | | | Andy Schroeder, VP of Finance/Treasurer |
(800) 730-8388 | | Phone: | | (303) 290-8700 |
(303) 290-8700 | | E-mail: | | investorrelations@markwest.com |
(303) 290-8769 Fax | | Website: | | www.markwest.com |
| | | | |
MarkWest Hydrocarbon Reports 2006 First Quarter Results
DENVER—May 8, 2006—MarkWest Hydrocarbon, Inc. (AMEX: MWP) (the “Company”) today reported net income of $2.8 million for the three months ended March 31, 2006, or $0.26 per diluted share, compared to net income of $1.5 million, or $0.14 per diluted share, for the first quarter of 2005.
The Company reports its operations under two business segments, MarkWest Hydrocarbon Standalone (“Standalone”) and MarkWest Energy Partners (the “Partnership”).
MarkWest Hydrocarbon’s share of net income attributable to MarkWest Energy Partners (net of the eliminating entry for non-controlling interest in net income of consolidated subsidiary) was $3.3 million in the first quarter of 2006, up from $0.9 million in the first quarter of 2005.
A key element of MarkWest Hydrocarbon’s activity is the cash distributions it receives on its ownership interest in MarkWest Energy Partners, L.P., which consists of approximately 2.5 million limited partner units, its 2% general partner interest and its incentive distribution rights. MarkWest Hydrocarbon received $3.6 million in distributions in the first quarter of 2006, which represents a 29% increase over the $2.8 million received in the first quarter of 2005.
The Standalone business segment consists of the Company’s natural gas liquid (NGL) marketing activities for our NGL’s extracted primarily at MarkWest Energy Partners Siloam facility, the management of our keep-whole contracts in Appalachia and a wholesale propane marketing business. For the three months ended March 31, 2006, our Standalone segment reported a net loss of $0.5 million, a decrease of $1.1 million when compared to the $0.6 million of net income for the same period in 2005. This result is summarized as follows:
• Our realized fractionation (frac) spread declined significantly compared to the prior year (approximately $0.09 per gallon in 2006 vs. approximately $0.25 per gallon in 2005). When combined with a 1.7 million gallon reduction in sales, this amounted to a $7.5 million negative impact on segment net income.
• The revaluation of our long-term shrink obligation (a non-cash item) increased revenue by $4.1 million in the first quarter of 2006 compared to a $1.2 million decrease in 2005, resulting in a $5.3 million positive impact to the quarter-over-quarter comparison. Our derivative activity, also a non-cash item, resulted in a negative $1.6 impact on our Standalone operations for the quarter, compared to none in 2005.
• Other areas, including SG&A, depreciation, interest and dividend income and our other marketing operations offset these declines by a combined $2.2 million.
• Non-cash compensation included in SG&A was $0.7 million for the first quarter in 2006 compared to $1.3 million for 2005.
In April 2006, the Company declared a stock dividend of one share of MarkWest’s common stock for each ten shares of common stock held by MarkWest’s common stockholders. The stock dividend is to be paid on May 23, 2006, to the stockholders of record as of the close of business on May 11, 2006. The ex-dividend date is May 9, 2006. The Company also declared a quarterly cash dividend of $0.175 per share of its common stock for an implied annual rate of $0.70 per share to be paid on June 5, 2006, to shareholders of record as of May 26, 2006. This quarterly cash dividend represents an increase of $0.05 per share over the previous quarter’s dividend.
“Our continued objective is to drive value for our MarkWest Hydrocarbon shareholders through the growth of MarkWest Energy Partners. The partnership had a very strong first quarter and we are very focused on continuing that performance,” said Frank Semple, President and Chief Executive Officer. “Contributions to MarkWest Hydrocarbon’s net income from MarkWest Energy Partners was $3.3 million. Additionally, through the ownership of the common units and GP interest, and since we are well into the 50% incentive distributions rights splits, Hydrocarbon’s distributions from the Partnership will continue to grow at a faster rate than the Partnership’s per unit growth rate. The recent Partnership acquisitions and core assets are performing extremely well and there are significant opportunities for additional growth. In addition to the strong distributable cash flow performance, we were also pleased with MarkWest Energy Partner’s recent rating as the top midstream service provider by the EnergyPoint Customer Satisfaction Research Survey. Our frac spread business had a negative impact on MarkWest Hydrocarbon’s financial performance on a standalone basis when compared to the strong first quarter we experienced in 2005, primarily due to the very high cost of natural gas during the last quarter of 2005 and early 2006. However, the spreads have improved during the last few months and the frac spread indicators look strong through the remainder of the year. We have hedged in excess of 20 million gallons through the first quarter of 2007 and will continue to evaluate opportunities to lock in favorable margins.”
The Company will host a conference call on Tuesday, May 9, 2006, at 2:00 P.M. MDT to review its first quarter 2006 earnings. Interested parties can participate in the call by dialing the following number approximately ten minutes prior to the scheduled start time: 1-800-366-3908. A replay of the call will be available through May 16, 2006by dialing 1-800-405-2236 and entering the following passcode: 11059923#. To access the webcast, please visit our website at www.markwest.com.
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MarkWest Hydrocarbon, Inc. (AMEX: MWP) controls and operates MarkWest Energy Partners, L.P. (AMEX: MWE), a publicly traded limited partnership engaged in the gathering, processing and transmission of natural gas; the transportation, fractionation and storage of natural gas liquids; and the gathering and transportation of crude oil. We also market natural gas and NGLs.
This press release includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. The forward-looking statements involve risks and uncertainties that affect our operations, financial performance and other factors as discussed in our filings with the Securities and Exchange Commission. Among the factors that could cause results to differ materially are those risks discussed in our Form 10-K for the year ended December 31, 2005 as filed with the SEC.
MarkWest Hydrocarbon, Inc.
Statement of Operations
(in thousands, except per share amounts)
| | Three Months Ended March 31, | |
| | 2006 | | 2005 | |
| | (in thousands) | |
| | | | | |
Revenues | | $ | 240,880 | | $ | 138,260 | |
Derivatives | | (1,259 | ) | 93 | |
Total Revenue | | 239,621 | | 138,353 | |
| | | | | |
Operating expenses: | | | | | |
Purchased product costs | | 181,167 | | 104,699 | |
Facility expenses | | 13,704 | | 9,260 | |
Selling, general and administrative expenses | | 11,376 | | 8,102 | |
Depreciation | | 7,378 | | 4,741 | |
Amortization of intangible assets | | 4,016 | | 2,095 | |
Accretion of asset retirement obligation | | 25 | | 10 | |
Impairments | | — | | — | |
Total operating expenses | | 217,666 | | 128,907 | |
| | | | | |
Income from operations | | 21,955 | | 9,446 | |
| | | | | |
Other income (expense): | | | | | |
Income from unconsolidated subsidiary | | 945 | | — | |
Interest income | | 406 | | 249 | |
Interest expense | | (11,044 | ) | (3,704 | ) |
Amortization of deferred financing costs (a component of interest expense) | | (825 | ) | (536 | ) |
Dividend income | | 106 | | 92 | |
Miscellaneous income (expense) | | 2,242 | | 87 | |
Income (loss) from continuing operations before non-controlling interest in net income of consolidated subsidiary and income taxes | | 13,785 | | 5,634 | |
| | | | | |
Income tax (expense) benefit | | | | | |
Current | | 493 | | — | |
Deferred | | (902 | ) | (770 | ) |
Income tax (expense) benefit | | (409 | ) | (770 | ) |
| | | | | |
Non-controlling interest in net income of consolidated subsidiary | | (10,544 | ) | (3,325 | ) |
| | | | | |
Net income | | $ | 2,832 | | $ | 1,539 | |
| | | | | |
Net income per share: | | | | | |
Basic | | $ | 0.26 | | $ | 0.14 | |
Diluted | | $ | 0.26 | | $ | 0.14 | |
| | | | | |
Weighted average number of outstanding shares of common stock: | | | | | |
Basic | | 10,821 | | 10,766 | |
Diluted | | 10,923 | | 10,917 | |
MarkWest Hydrocarbon, Inc.
Segment Income (Loss)
(in thousands)
| | MarkWest
Hydrocarbon
Standalone | | MarkWest
Energy
Partners | | Eliminating
Entries | | Total | |
| | (in thousands) | |
Three Months Ended March 31, 2006: | | | | | | | | | |
Revenues | | $ | 100,593 | | $ | 156,743 | | $ | (17,715 | ) | $ | 239,621 | |
Purchased product costs | | $ | 92,025 | | $ | 100,797 | | $ | (11,655 | ) | 181,167 | |
Net operating margin | | 8,568 | | 55,946 | | (6,060 | ) | 58,454 | |
Facility expenses | | 5,770 | | 13,994 | | (6,060 | ) | 13,704 | |
Selling, general and administrative expenses | | 3,038 | | 8,338 | | — | | 11,376 | |
Depreciation | | 205 | | 7,173 | | — | | 7,378 | |
Amortization of intangible assets | | — | | 4,016 | | — | | 4,016 | |
Accretion of asset retirement and sublease obligations | | — | | 25 | | — | | 25 | |
Income (loss) from operations | | $ | (445 | ) | $ | 22,400 | | $ | — | | $ | 21,955 | |
| | | | | | | | | |
March 31, 2006: | | | | | | | | | |
Cash, cash equivalents and restricted cash | | $ | 11,809 | | $ | 26,823 | | $ | — | | $ | 38,632 | |
Marketable securities | | 6,378 | | — | | — | | 6,378 | |
Current assets | | 78,222 | | 118,011 | | (6,707 | ) | 189,526 | |
Total assets | | 110,779 | | 1,019,322 | | (34,624 | ) | 1,095,477 | |
Current liabilities | | 32,601 | | 119,109 | | (6,706 | ) | 145,004 | |
Total debt | | — | | 592,500 | | — | | 592,500 | |
| | | | | | | | | |
Three Months Ended March 31, 2005: | | | | | | | | | |
Revenues | | $ | 64,521 | | $ | 89,637 | | $ | (15,805 | ) | $ | 138,353 | |
Purchased product costs | | 53,821 | | 60,785 | | (9,907 | ) | 104,699 | |
Net operating margin | | 10,700 | | 28,852 | | (5,898 | ) | 33,654 | |
Facility expenses | | 5,827 | | 9,331 | | (5,898 | ) | 9,260 | |
Selling, general and administrative expenses | | 3,463 | | 4,639 | | — | | 8,102 | |
Depreciation | | 415 | | 4,326 | | — | | 4,741 | |
Amortization of intangible assets | | 239,621 | | 2,095 | | — | | 241,716 | |
Accretion of asset retirement and lease obligations | | — | | 10 | | — | | 10 | |
Income from operations | | $ | (238,626 | ) | $ | 8,451 | | $ | — | | $ | (230,175 | ) |
| | | | | | | | | |
March 31, 2005: | | | | | | | | | |
Cash, cash equivalents and restricted cash | | $ | 21,364 | | $ | 15,184 | | $ | — | | $ | 36,548 | |
Marketable securities | | 20,544 | | — | | — | | 20,544 | |
Current assets | | 74,485 | | 51,231 | | (9,570 | ) | 116,146 | |
Total assets | | 104,433 | | 557,828 | | (33,892 | ) | 628,369 | |
Current liabilities | | 27,410 | | 54,611 | | (9,570 | ) | 72,451 | |
Total debt | | — | | 265,000 | | — | | 265,000 | |
MarkWest Hydrocarbon, Inc.
Segment Balance Sheet
(in thousands)
| | MarkWest | | MarkWest | | | | | |
| | Hydrocarbon | | Energy | | Eliminating | | | |
| | Standalone | | Partners | | Entries | | Consolidated | |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | | $ | 11,809 | | $ | 26,823 | | $ | — | | $ | 38,632 | |
| | | | | | | | | |
Marketable securities | | 6,378 | | — | | — | | $ | 6,378 | |
Receivables | | 30,255 | | 78,615 | | (6,707 | ) | $ | 102,163 | |
Inventories | | 10,539 | | 5,517 | | — | | $ | 16,056 | |
Other | | 19,241 | | 7,056 | | — | | $ | 26,297 | |
Total current assets | | 78,222 | | 118,011 | | (6,707 | ) | 189,526 | |
| | | | | | | | | |
Property, plant and equipment, net | | 1,620 | | 499,315 | | — | | 500,935 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Investment in and advances to other equity investee | | 7,191 | | 199 | | (7,191 | ) | 199 | |
Other assets | | 3,020 | | 401,797 | | — | | 404,817 | |
Total assets | | 90,053 | | 1,019,322 | | (13,898 | ) | 1,095,477 | |
| | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | | 30,626 | | 114,432 | | (6,707 | ) | 138,351 | |
Fair value of derivative instruments | | 1,499 | | 1,027 | | — | | 2,526 | |
Deferred income taxes | | 477 | | — | | — | | 477 | |
Current portion of long term debt | | — | | 3,650 | | — | | 3,650 | |
Total current liabilities | | 32,602 | | 119,109 | | (6,707 | ) | 145,004 | |
| | | | | | | | | |
Long-term debt | | — | | 588,850 | | — | | 588,850 | |
Non-controlling interest in consolidated subsidiary | | 508 | | — | | 302,972 | | 303,480 | |
Other long-term liabilities | | 15,127 | | 1,200 | | — | | 16,327 | |
Total liabilities | | 48,237 | | 709,159 | | 296,265 | | 1,053,661 | |
| | | | | | | | | |
Total stockholders’ equity | | 41,816 | # | 310,163 | | (310,163 | ) | 41,816 | |
Total liabilities and stockholders’ equity | | $ | 90,053 | | $ | 1,019,322 | | $ | (13,898 | ) | $ | 1,095,477 | |
MarkWest Hydrocarbon, Inc.
Segment Balance Sheet (continued)
(in thousands)
| | December 31, 2005 | |
| | MarkWest | | MarkWest | | | | | |
| | Hydrocarbon | | Energy | | Eliminating | | | |
| | Standalone | | Partners | | Entries | | Consolidated | |
ASSETS | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | | $ | 863 | | $ | 20,105 | | — | | $ | 20,968 | |
Marketable securities | | 6,070 | | — | | — | | 6,070 | |
Receivables | | 38,922 | | 117,978 | | (11,361 | ) | 145,539 | |
Inventories | | 26,946 | | 3,554 | | — | | 30,500 | |
Other | | 20,020 | | 6,861 | | — | | 26,881 | |
Total current assets | | 92,821 | | 148,498 | | (11,361 | ) | 229,958 | |
| | | | | | | | | |
Property, plant and equipment, net | | 1,737 | | 492,961 | | | | 494,698 | |
Investment in and advances to other equity investee | | 6,668 | | 182 | | (6,668 | ) | 182 | |
Other assets | | 3,014 | | 404,452 | | — | | 407,466 | |
Total assets | | 104,240 | | 1,046,093 | | (18,029 | ) | 1,132,304 | |
| | | | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable and accrued liabilities | | 43,247 | | 133,088 | | (11,361 | ) | 164,974 | |
Fair value of derivative instruments | | — | | 728 | | — | | 728 | |
Deferred income taxes | | 362 | | — | | — | | 362 | |
Current portion of long term debt | | — | | 2,738 | | — | | 2,738 | |
Total current liabilities | | 43,609 | | 136,554 | | (11,361 | ) | 168,802 | |
| | | | | | | | | |
Long-term debt | | 7,500 | | 601,262 | | — | | 608,762 | |
Non-controlling interest in consolidated subsidiary | | 508 | | — | | 300,507 | | 301,015 | |
Other long-term liabilities | | 12,641 | | 1,102 | | — | | 13,743 | |
Total liabilities | | 64,258 | | 738,918 | | 289,146 | | 1,092,322 | |
| | | | | | | | | |
Total stockholders’ equity | | 39,982 | | 307,175 | | (307,175 | ) | 39,982 | |
Total liabilities and stockholders’ equity | | $ | 104,240 | | $ | 1,046,093 | | $ | (18,029 | ) | $ | 1,132,304 | |
| | | | | | | | | | | | | |
MarkWest Hydrocarbon, Inc.
Operating Statistics
| | Three Months Ended March 31, | |
| | 2006 | | 2005 | |
MarkWest Hydrocarbon Standalone: | | | | | |
Marketing | | | | | |
NGL product sales (gallons) | | 49,967,000 | | 52,164,000 | |
| | | | | |
Wholesale | | | | | |
NGL product sales (gallons)(1) | | 27,196,000 | | 19,672,332 | |
| | | | | |
MarkWest Energy Partners: | | | | | |
Southwest: | | | | | |
East Texas (2) | | | | | |
Gathering systems throughput (Mcf/d) | | 346,000 | | 287,000 | |
NGL product sales (gallons) | | 35,436,000 | | 27,612,000 | |
| | | | | |
Oklahoma | | | | | |
Foss Lake gathering systems throughput (Mcf/d) | | 87,600 | | 67,000 | |
Arapaho NGL product sales (gallons) | | 18,417,000 | | 15,217,000 | |
| | | | | |
Other | | | | | |
Appleby gathering systems throughput (Mcf/d) | | 33,500 | | 28,000 | |
| | | | | |
Other gathering systems throughput (Mcf/d) | | 19,100 | | 17,000 | |
Lateral throughput volumes (Mcf/d)(3) | | 49,700 | | 52,000 | |
| | | | | |
Appalachia: | | | | | |
Natural gas processed for a fee (Mcf/d)(4) | | 205,000 | | 210,000 | |
NGLs fractionated for a fee (Gal/day) | | 449,000 | | 462,000 | |
NGL product sales (gallons) | | 10,482,000 | | 10,765,000 | |
| | | | | |
Michigan: | | | | | |
Natural gas processed for a fee (Mcf/d) | | 6,300 | | 6,900 | |
NGL product sales (gallons) | | 1,449,000 | | 1,563,000 | |
Crude oil transported for a fee (Bbl/d) | | 14,000 | | 14,100 | |
| | | | | |
Gulf Coast:(5) | | | | | |
Natural gas processed for a fee (Mcf/d) | | 120,000 | | NA | |
NGLs fractionated for a fee (Gal/day) | | 820,000 | | NA | |
(1) Represents sales from our wholesale business. Volumes are for the period since the Company started the line of business in February 2004.
(2) The Partnership acquired its East Texas System in late July 2004. Volumes are for the periods of time since the facility was acquired in 2004.
(3) The Partnership acquired its Lubbock pipeline (a/k/a the PowerTex Lateral Pipeline) in September 2003 and its Hobbs lateral pipeline in April 2004. The Lubbock and Hobbs pipelines are the only laterals owned that produce revenue on a per-unit-of-throughput basis. We receive a flat fee from our other lateral pipelines and, consequently, the throughput data from these lateral pipelines is excluded from this statistic.
(4) Includes throughput from our Kenova, Cobb, and Boldman processing plants.
(5) The Partnership acquired its Javelina gathering system in November 2005. Volumes are for the periods of time since the facility was acquired in 2005.
