Exhibit 99.1
MarkWest Hydrocarbon, Inc. | Contact: | Frank Semple, President and CEO |
1515 Arapahoe Street |
| Nancy Buese, SVP and CFO |
Tower 2, Suite 700 |
| Andy Schroeder, VP Finance & Treasurer |
Denver, CO 80202 | Phone: | (866) 858-0482 |
| Fax: | (303) 290-8769 |
| E-mail: | investorrelations@markwest.com |
| Website: | www.markwest.com |
MarkWest Hydrocarbon Reports First Quarter 2007 Financial Results
DENVER—May 7, 2007—MarkWest Hydrocarbon, Inc. (AMEX: MWP) (the “Company”) today reported net income of $1.0 million for the three months ended March 31, 2007, or $0.08 per diluted share, compared to net income of $2.8 million, or $0.24 per diluted share, for the same period in 2006.
Income (loss) from operations for the Standalone segment, as defined below, for the three months ended March 31, 2007 and March 31, 2006, was $0.3 million and $(0.4) million, respectively, and included $12.4 million and $(2.0) million, respectively, of non-cash costs (benefits) associated with the mark-to-market of derivative instruments, the revaluation of the long-term shrink obligation, and non-cash compensation expense. Excluding these non-cash items, income (loss) from operations for the three months ended March 31, 2007 and March 31, 2006, would have been $12.7 million and $(2.4) million, respectively.
The Company declared a quarterly cash dividend of $0.32 per share of its common stock, for an implied annual rate of $1.28 per share, which is payable on May 22, 2007, to shareholders of record as of May 10, 2007. This quarterly cash dividend represents an increase of $0.02 per share, or 7 percent, over the cash dividend in the fourth quarter of 2006.
“We are pleased with our continued strong financial performance and the resultant growth in dividends and shareholder value,” said Frank Semple, President and Chief Executive Officer. “Our financial performance in the first quarter of 2007 resulted from MarkWest Energy Partners’ distribution growth as well as strong operating cash flow performance from our natural gas liquid marketing business. Our share of distributions from our investment in the partnership was $7.1 million in the first quarter, representing an increase of 97 percent over the distributions in the first quarter of 2006.”
“We continue to experience a strong frac spread environment and have taken advantage of the forward markets to lock in favorable long-term frac spread margins through the first quarter of 2010.”
The Company reports its operations under two business segments, MarkWest Hydrocarbon Standalone (“Standalone”) and MarkWest Energy Partners (the “Partnership”).
The Standalone business segment consists of the Company’s natural gas liquid (“NGL”) marketing activities for NGL’s extracted primarily at MarkWest Energy Partners’ Siloam facility and the management of keep-whole contracts in Appalachia.
FIRST QUARTER 2007 HIGHLIGHTS
For the three months ended March 31, 2007, the Standalone segment reported income from operations of $0.3 million, compared to a loss from operations of $0.4 million for the same period in 2006. The increase was primarily attributable to:
· The realized frac spread improved to $0.41 per gallon in the first quarter of 2007 versus $0.09 per gallon in the same period in 2006, resulting in a positive impact of $15.3 million on segment operating income.
· The settled hedge gain in the first quarter of 2007 was $2.0 million whereas in the first quarter of 2006 the Company did not have a settled hedge gain.
· The positive impact in the first quarter of 2007 related to the improved frac spread and settled hedge gain was offset by a net unrealized loss of $9.3 million for the mark-to-market of derivative instruments and the revaluation of the long-term shrink obligation, both of which are non-cash items. This compares to a net unrealized gain of $2.7 million for the same items in the first quarter of 2006, resulting in a negative quarter over quarter variance of $12.0 million.
· In addition, selling, general and administrative expense increased quarter over quarter by $3.8 million, of which $2.5 million is attributable to higher non-cash compensation expense, and the remainder is due to increased costs to support the growth of the business.
For the Partnership segment, the Company’s share of net income attributable to the Partnership, net of the eliminating entry for non-controlling interest in net income of a consolidated subsidiary, was $0.8 million in the first quarter of 2007, down from $3.3 million in the first quarter of 2006. The Company received $7.1 million of distributions in the first quarter of 2007, which represents a 97 percent increase over the $3.6 million received in the first quarter of 2006.
The Company will host a conference call Tuesday, May 8, 2007, at 5:00 P.M. EDT to review its first quarter 2007 financial results. Interested parties can participate in the call by dialing (800) 867-1054 approximately ten minutes prior to the scheduled start time. A replay of the call will be available through Tuesday, May 15, 2007, by dialing (800) 405-2236 and entering the following passcode: 11089098#. To access the webcast, please visit our website at www.markwest.com.
###
MarkWest Hydrocarbon, Inc. (AMEX: MWP) controls and operates MarkWest Energy Partners, L.P. (NYSE: 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. Actual results could vary significantly from those expressed or implied in such statements and are subject to a number of risks and uncertainties. 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, 2006 as filed with the SEC. You are urged to carefully review and consider the cautionary statements and other disclosures made in those filings, specifically those under the heading “Risk Factors.” We do not undertake any duty to update any forward-looking statement.
2
MarkWest Hydrocarbon, Inc.
Statement of Operations
(Unaudited, in thousands, except per share amounts)
|
| Three months ended March 31, |
| ||||
|
| 2007 |
| 2006 |
| ||
|
| (in thousands) |
| ||||
Revenue: |
|
|
|
|
| ||
Revenue |
| $ | 175,397 |
| $ | 241,119 |
|
Derivative loss |
| (13,909 | ) | (1,259 | ) | ||
Total revenue |
| 161,488 |
| 239,860 |
| ||
|
|
|
|
|
| ||
Operating expenses: |
|
|
|
|
| ||
Purchased product costs |
| 104,207 |
| 181,628 |
| ||
Facility expenses |
| 12,062 |
| 13,482 |
| ||
Selling, general and administrative expenses |
| 20,715 |
| 11,376 |
| ||
Depreciation |
| 8,174 |
| 7,378 |
| ||
Amortization of intangible assets |
| 4,168 |
| 4,016 |
| ||
Accretion of asset retirement obligations |
| 27 |
| 25 |
| ||
Total operating expenses |
| 149,353 |
| 217,905 |
| ||
|
|
|
|
|
| ||
Income from operations |
| 12,135 |
| 21,955 |
| ||
|
|
|
|
|
| ||
Other income (expense): |
|
|
|
|
| ||
Earnings from unconsolidated affiliates |
| 1,767 |
| 945 |
| ||
Interest income |
| 2,396 |
| 406 |
| ||
Interest expense |
| (9,414 | ) | (11,044 | ) | ||
Amortization of deferred financing costs and original issue discount (a component of interest expense) |
| (720 | ) | (825 | ) | ||
Dividend income |
| 122 |
| 106 |
| ||
Miscellaneous (expense) income |
| (872 | ) | 2,242 |
| ||
Income before non-controlling interest in net income of consolidated subsidiary and income taxes |
| 5,414 |
| 13,785 |
| ||
|
|
|
|
|
| ||
Income tax (expense) benefit: |
|
|
|
|
| ||
Current |
| (801 | ) | 493 |
| ||
Deferred |
| 304 |
| (902 | ) | ||
Income tax expense |
| (497 | ) | (409 | ) | ||
�� |
|
|
|
|
| ||
Non-controlling interest in net income of consolidated subsidiary |
| (3,960 | ) | (10,544 | ) | ||
Net income |
| $ | 957 |
| $ | 2,832 |
|
|
|
|
|
|
| ||
Net income per share: |
|
|
|
|
| ||
Basic |
| $ | 0.08 |
| $ | 0.24 |
|
Diluted |
| $ | 0.08 |
| $ | 0.24 |
|
|
|
|
|
|
| ||
Weighted average number of outstanding shares of common stock (1): |
|
|
|
|
| ||
Basic |
| 11,987 |
| 11,906 |
| ||
Diluted |
| 12,043 |
| 12,019 |
|
(1) March 31, 2006 adjusted for the May 23, 2006 stock dividend.
3
MarkWest Hydrocarbon, Inc.
Segment Income
(Unaudited, in thousands)
|
| MarkWest |
| MarkWest |
| Consolidating |
| Total |
| ||||
Three months ended March 31, 2007: |
|
|
|
|
|
|
|
|
| ||||
Revenue: |
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 72,926 |
| $ | 121,546 |
| $ | (19,075 | ) | $ | 175,397 |
|
Derivative loss |
| (6,980 | ) | (6,929 | ) | — |
| (13,909 | ) | ||||
Total revenue |
| 65,946 |
| 114,617 |
| (19,075 | ) | 161,488 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Purchased product costs |
| 52,814 |
| 64,005 |
| (12,612 | ) | 104,207 |
| ||||
Facility expenses |
| 5,569 |
| 12,956 |
| (6,463 | ) | 12,062 |
| ||||
Selling, general and administrative expenses |
| 6,873 |
| 13,842 |
| — |
| 20,715 |
| ||||
Depreciation |
| 388 |
| 7,786 |
| — |
| 8,174 |
| ||||
Amortization of intangible assets |
| — |
| 4,168 |
| — |
| 4,168 |
| ||||
Accretion of asset retirement and lease obligations |
| — |
| 27 |
| — |
| 27 |
| ||||
Income from operations |
| 302 |
| 11,833 |
| — |
| 12,135 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
| — |
| — |
| — |
|
|
| ||||
Earnings from unconsolidated affiliates |
| — |
| 1,767 |
| — |
| 1,767 |
| ||||
Interest income |
| 476 |
| 1,920 |
| — |
| 2,396 |
| ||||
Interest expense |
| (59 | ) | (9,355 | ) | — |
| (9,414 | ) | ||||
Amortization of deferred financing costs (a component of interest expense) |
| (59 | ) | (661 | ) | — |
| (720 | ) | ||||
Dividend income |
| 122 |
| — |
| — |
| 122 |
| ||||
Miscellaneous expense |
| (143 | ) | (729 | ) | — |
| (872 | ) | ||||
Income before non-controlling interest in net income of consolidated subsidiary and income taxes |
| 639 |
| 4,775 |
| — |
| 5,414 |
| ||||
Income tax expense |
| (494 | ) | (19 | ) | 16 |
| (497 | ) | ||||
Non-controlling interest in net income of consolidated subsidiary |
| — |
| — |
| (3,960 | ) | (3,960 | ) | ||||
Interest in net income of consolidated subsidiary |
| 812 |
| — |
| (812 | ) | — |
| ||||
Net income |
| $ | 957 |
| $ | 4,756 |
| $ | (4,756 | ) | $ | 957 |
|
|
|
|
|
|
|
|
|
|
| ||||
|
| MarkWest |
| MarkWest |
| Consolidating |
| Total |
| ||||
Three months ended March 31, 2006: |
|
|
|
|
|
|
|
|
| ||||
Revenue: |
|
|
|
|
|
|
|
|
| ||||
Revenue |
| $ | 102,092 |
| $ | 156,742 |
| $ | (17,715 | ) | $ | 241,119 |
|
Derivative (loss) gain |
| (1,499 | ) | 240 |
| — |
| (1,259 | ) | ||||
Total revenue |
| 100,593 |
| 156,982 |
| (17,715 | ) | 239,860 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Purchased product costs |
| 92,322 |
| 100,961 |
| (11,655 | ) | 181,628 |
| ||||
Facility expenses |
| 5,473 |
| 14,069 |
| (6,060 | ) | 13,482 |
| ||||
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 lease obligations |
| — |
| 25 |
| — |
| 25 |
| ||||
(Loss) income from operations |
| (445 | ) | 22,400 |
| — |
| 21,955 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
| ||||
Earnings from unconsolidated affiliates |
| — |
| 945 |
| — |
| 945 |
| ||||
Interest income |
| 186 |
| 220 |
| — |
| 406 |
| ||||
Interest expense |
| (68 | ) | (10,976 | ) | — |
| (11,044 | ) | ||||
Amortization of deferred financing costs (a component of interest expense) |
| (17 | ) | (808 | ) | — |
| (825 | ) | ||||
Dividend income |
| 106 |
| — |
| — |
| 106 |
| ||||
Miscellaneous income |
| 150 |
| 2,092 |
| — |
| 2,242 |
| ||||
(Loss) income before non-controlling interest in net income of consolidated subsidiary and income taxes |
| (88 | ) | 13,873 |
| — |
| 13,785 |
| ||||
Income tax expense |
| (409 | ) | — |
| — |
| (409 | ) | ||||
Non-controlling interest in net income of consolidated subsidiary |
| — |
| — |
| (10,544 | ) | (10,544 | ) | ||||
Interest in net income of consolidated subsidiary |
| 3,329 |
| — |
| (3,329 | ) | — |
| ||||
Net income |
| $ | 2,832 |
| $ | 13,873 |
| $ | (13,873 | ) | $ | 2,832 |
|
4
MarkWest Hydrocarbon, Inc.
Segment Balance Sheet
(Unaudited, in thousands)
March 31, 2007 |
| MarkWest |
| MarkWest |
| Consolidating |
| Total |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
| ||||
Current assets: |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 50,648 |
| $ | 32,181 |
| $ | — |
| $ | 82,829 |
|
Marketable securities |
| 8,626 |
| — |
| — |
| 8,626 |
| ||||
Receivables |
| 14,187 |
| 100,995 |
| (6,933 | ) | 108,249 |
| ||||
Inventories |
| 14,129 |
| 2,684 |
| — |
| 16,813 |
| ||||
Fair value of derivative instruments |
| 358 |
| 1,627 |
| — |
| 1,985 |
| ||||
Other current assets |
| 9,880 |
| 3,980 |
| — |
| 13,860 |
| ||||
Total current assets |
| 97,828 |
| 141,467 |
| (6,933 | ) | 232,362 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Property, plant and equipment, net |
| 3,835 |
| 595,764 |
| — |
| 599,599 |
| ||||
Investment in and advances to other equity investee |
| — |
| 63,319 |
| — |
| 63,319 |
| ||||
Investment in consolidated subsidiaries |
| 10,591 |
| — |
| (10,591 | ) | — |
| ||||
Fair value of derivative instruments |
| 2,592 |
| 1,739 |
| — |
| 4,331 |
| ||||
Other long term assets |
| 2,905 |
| 355,393 |
| — |
| 358,298 |
| ||||
Total assets |
| $ | 117,751 |
| $ | 1,157,682 |
| $ | (17,524 | ) | $ | 1,257,909 |
|
|
|
|
|
|
|
|
|
|
| ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| ||||
Current liabilities: |
|
|
|
|
|
|
|
|
| ||||
Accounts payable and accrued liabilities |
| $ | 18,938 |
| $ | 129,003 |
| $ | (6,933 | ) | $ | 141,008 |
|
Fair value of derivative instruments |
| 5,568 |
| 2,832 |
| — |
| 8,400 |
| ||||
Deferred income taxes |
| 526 |
| — |
| — |
| 526 |
| ||||
Total current liabilities |
| 25,032 |
| 131,835 |
| (6,933 | ) | 149,934 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt |
| — |
| 576,947 |
| — |
| 576,947 |
| ||||
Deferred income taxes |
| 8,744 |
| 769 |
| (641 | ) | 8,872 |
| ||||
Non-controlling interest in consolidated subsidiary |
| 965 |
| — |
| 431,946 |
| 432,911 |
| ||||
Fair value of derivative instruments |
| 6,488 |
| 4,340 |
| — |
| 10,828 |
| ||||
Other long-term liabilities |
| 36,892 |
| 1,895 |
| — |
| 38,787 |
| ||||
Total liabilities |
| 78,121 |
| 715,786 |
| 424,372 |
| 1,218,279 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total stockholders’ equity |
| 39,630 |
| 441,896 |
| (441,896 | ) | 39,630 |
| ||||
Total liabilities and stockholders’ equity |
| $ | 117,751 |
| $ | 1,157,682 |
| $ | (17,524 | ) | $ | 1,257,909 |
|
5
MarkWest Hydrocarbon, Inc.
Segment Balance Sheet
(Unaudited, in thousands)
December 31, 2006 |
| MarkWest |
| MarkWest |
| Consolidating |
| Total |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
| ||||
Current assets: |
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 14,442 |
| $ | 34,402 |
| $ | — |
| $ | 48,844 |
|
Marketable securities |
| 7,713 |
| — |
| — |
| 7,713 |
| ||||
Receivables |
| 16,940 |
| 90,780 |
| (6,604 | ) | 101,116 |
| ||||
Inventories |
| 31,668 |
| 3,593 |
| — |
| 35,261 |
| ||||
Fair value of derivative instruments |
| 5,727 |
| 4,211 |
| — |
| 9,938 |
| ||||
Other current assets |
| 12,217 |
| 3,047 |
| — |
| 15,264 |
| ||||
Total current assets |
| 88,707 |
| 136,033 |
| (6,604 | ) | 218,136 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Property, plant and equipment, net |
| 3,449 |
| 550,886 |
| — |
| 554,335 |
| ||||
Investment in and advances to other equity investee |
| — |
| 64,240 |
| — |
| 64,240 |
| ||||
Investment in consolidated subsidiaries |
| 12,683 |
| — |
| (12,683 | ) | — |
| ||||
Fair value of derivative instruments |
| 35 |
| 2,759 |
| — |
| 2,794 |
| ||||
Other long term assets |
| 2,874 |
| 360,862 |
| — |
| 363,736 |
| ||||
Total assets |
| $ | 107,748 |
| $ | 1,114,780 |
| $ | (19,287 | ) | $ | 1,203,241 |
|
|
|
|
|
|
|
|
|
|
| ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| ||||
Current liabilities: |
|
|
|
|
|
|
|
|
| ||||
Accounts payable and accrued liabilities |
| $ | 19,370 |
| $ | 131,684 |
| $ | (6,604 | ) | $ | 144,450 |
|
Fair value of derivative instruments |
| 7,385 |
| 91 |
| — |
| 7,476 |
| ||||
Deferred income taxes |
| 180 |
| — |
| — |
| 180 |
| ||||
Current portion of long term debt |
| — |
| — |
| — |
| — |
| ||||
Total current liabilities |
| 26,935 |
| 131,775 |
| (6,604 | ) | 152,106 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt |
| — |
| 526,865 |
| — |
| 526,865 |
| ||||
Deferred income taxes |
| 9,425 |
| 769 |
| (641 | ) | 9,553 |
| ||||
Non-controlling interest in consolidated subsidiary |
| 965 |
| — |
| 440,607 |
| 441,572 |
| ||||
Fair value of derivative instruments |
| 98 |
| 1,362 |
| — |
| 1,460 |
| ||||
Other long-term liabilities |
| 28,836 |
| 1,360 |
| — |
| 30,196 |
| ||||
Total liabilities |
| 66,259 |
| 662,131 |
| 433,362 |
| 1,161,752 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total stockholders’ equity |
| 41,489 |
| 452,649 |
| (452,649 | ) | 41,489 |
| ||||
Total liabilities and stockholders’ equity |
| $ | 107,748 |
| $ | 1,114,780 |
| $ | (19,287 | ) | $ | 1,203,241 |
|
6
MarkWest Hydrocarbon, Inc.
Operating Statistics
|
| Three months ended March 31, |
| ||
|
| 2007 |
| 2006 |
|
MarkWest Hydrocarbon Standalone: |
|
|
|
|
|
Marketing |
|
|
|
|
|
Hydrocarbon frac spread sales (gallons) |
| 51,075,000 |
| 39,485,000 |
|
Maytown sales (gallons) |
| 11,409,000 |
| 10,482,000 |
|
Total NGL product sales (gallons)(1) |
| 62,484,000 |
| 49,967,000 |
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
NGL product sales (gallons)(2) |
| N/A |
| 27,196,000 |
|
|
|
|
|
|
|
MarkWest Energy Partners: |
|
|
|
|
|
East Texas: |
|
|
|
|
|
Gathering systems throughput (Mcf/d) |
| 401,400 |
| 346,000 |
|
NGL product sales (gallons) |
| 41,788,000 |
| 35,436,000 |
|
|
|
|
|
|
|
Oklahoma : |
|
|
|
|
|
Foss Lake gathering system throughput (Mcf/d) |
| 95,200 |
| 87,600 |
|
Woodford gathering system throughput (Mcf/d) (3) |
| 51,200 |
| N/A |
|
Grimes gathering system throughput (Mcf/d) (4) |
| 12,700 |
| N/A |
|
Arapaho NGL product sales (gallons) |
| 20,524,000 |
| 18,417,000 |
|
|
|
|
|
|
|
Other Southwest: |
|
|
|
|
|
Appleby gathering system throughput (Mcf/d) |
| 51,100 |
| 33,500 |
|
Other gathering systems throughput (Mcf/d) |
| 16,400 |
| 19,100 |
|
Lateral throughput volumes (Mcf/d) |
| 52,800 |
| 49,700 |
|
|
|
|
|
|
|
Appalachia: |
|
|
|
|
|
Natural gas processed (Mcf/d) |
| 203,400 |
| 205,000 |
|
NGLs fractionated (Gal/d) |
| 467,700 |
| 449,000 |
|
NGL product sales (gallons) |
| 11,409,000 |
| 10,482,000 |
|
|
|
|
|
|
|
Michigan: |
|
|
|
|
|
Natural gas throughput (Mcf/d) |
| 6,000 |
| 6,300 |
|
NGL product sales (gallons) |
| 1,125,000 |
| 1,449,000 |
|
Crude oil transported (Bbl/d) |
| 14,200 |
| 14,000 |
|
|
|
|
|
|
|
Gulf Coast: |
|
|
|
|
|
Refinery off-gas processed (Mcf/d) |
| 119,300 |
| 120,000 |
|
Liquids fractionated (Bbl/d) |
| 25,000 |
| 24,900 |
|
(1) Represents sales at the Siloam fractionator.
(2) Represents sales from our wholesale business. In December 2006 the Company terminated its wholesale agreement.
(3) The Partnership began construction and operation of the Woodford gathering system in late 2006.
(4) The Partnership acquired the Grimes gathering system in December 2006.
7