Exhibit 99.1
MARKWEST
LOGO
MarkWest Hydrocarbon, Inc. Contact: John Fox, President and CEO
155 Inverness Drive West, Suite 200 Donald Heppermann, Sr. VP-Finance and CFO
Englewood, CO 80112-5000 Phone: (303) 290-8700
(800) 730-8388 E-mail: investorrelations@markwest.com
(303) 290-8700 Website: www.markwest.com
(303) 290-8769 Fax
MARKWEST HYDROCARBON REPORTS 2003 FIRST QUARTER RESULTS
DENVER--May 14, 2003--MarkWest Hydrocarbon, Inc. (AMEX: MWP), today
reported first quarter net loss of $1.0 million or $0.12 per share for the
quarter ending March 31, 2003, compared to net income of $0.2 million or $0.02
per share for the first quarter of 2002. The continuing unfavorable results of
our hedges primarily caused our first quarter 2003 net loss. Hedging losses more
than offset the benefits realized from the high natural gas prices that
prevailed throughout the first quarter of 2003.
Toward the end of the first quarter, natural gas prices began to be
unusually high relative to NGL prices. Unusually high natural gas prices
adversely impact that portion of our NGL business that is "keep-whole" contract
based. This unusual disparity in prices has reduced our internally generated
cash flows and may cause limitations on the availability of borrowings under our
credit facility. In light of the forecasted reduction in cash flows and possible
limits on available borrowings under our credit facility, MarkWest Hydrocarbon
has undertaken a series of initiatives to enhance our liquidity position and to
take advantage of favorable market valuations of domestic exploration and
production assets. Accordingly, we have engaged a third party to act as
financial advisor to MarkWest Hydrocarbon to assist in soliciting acquisition
proposals for certain of our mature developed oil and gas properties. The
expected sale proceeds from these properties would substantially improve our
liquidity and allow us to maintain our Canadian drilling program at planned
levels.
Through our 47 percent-owned subsidiary, MarkWest Energy Partners,
L.P., we completed our acquisition of Pinnacle Natural Gas Company and certain
affiliates for approximately $38 million on March 28, 2003. The effective date
of the merger was January 1, 2003. The acquired assets are comprised of three
lateral natural gas pipelines transporting up to 1.1 Bcf/day under firm
contracts to power plants and twenty systems gathering more than 44 MMcf/d. Our
first quarter results include only four days of Pinnacle's results, in
accordance with generally accepted accounting principles. However, during the
first three months of 2003, Pinnacle generated approximately $2.2 million of pro
forma EBITDA (earnings before interest, taxes, depreciation and amortization).
John Fox, President and CEO, commented, "While our hedges have
adversely impacted first quarter 2003 results, the majority of these hedges
terminate at the end of the year. Conversely, we believe that the high natural
gas prices we are experiencing makes it a good time to sell some of our mature
exploration and production properties and redeploy the capital into our Canadian
drilling program. Furthermore, the acquisition of the Pinnacle companies is
highly accretive to MarkWest Energy Partners and our underlying 47 percent
ownership in the MLP."
EXPLORATION AND PRODUCTION
During the first quarter of 2003 MarkWest Hydrocarbon drilled or
recompleted 5 (1.875 net) wells in the U.S. and 12 (11.25 net) wells in Canada,
resulting in 14 commercial completions and 1 well being evaluated for an
alternative zone completion. Our first quarter capital programs led to the
addition of approximately 3.5 Bcfe of net proven reserves. Production during the
first quarter of 2003 was 2.39 Bcfe (0.87 Bcfe in the U.S. and 1.52 Bcfe in
Canada).
Our remaining 2003 capital budget plans call for the drilling or
recompletion of approximately 11 (5.2 net) more wells in the U.S. In Canada, we
plan to drill approximately 36 (33 net) more wells.
MIDSTREAM SERVICES
MarkWest Hydrocarbon's midstream services business is largely conducted
through MarkWest Energy Partners, L.P. (Please see our separate earnings release
for MarkWest Energy Partners, L.P.)
Appalachia NGL volumes averaged 446,000 gallons per day for the three
months ended March 31, 2003, down 7 percent since the first quarter of 2002.
Production volumes decreased due to colder than normal weather in the
northeastern United States during much of the first quarter, which caused a
reduction in the volume of natural gas delivered to our plants. Looking forward,
the Pinnacle assets are expected to significantly increase cash flow from
operations, as reflected by Pinnacle's pro forma first quarter results.
Gathering and processing volumes in Michigan continued to flow
substantially higher during the first quarter of 2003 relative to the prior year
due to new well connections over the past year. We averaged 15,400 Mcf/d during
the three months ended March 31, 2003, compared to 11,000 Mcf/d for the first
quarter of 2002.
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MarkWest Hydrocarbon, Inc. (AMEX: MWP), operates in three business segments:
exploration and production of natural gas, midstream services, and marketing of
natural gas and NGL products. Our exploration and production segment produces
natural gas in Alberta, Canada; in the San Juan Basin of Colorado and New
Mexico; and in Michigan. In our midstream services segment, which is principally
conducted through our 47 percent-owned affiliate, MarkWest Energy Partners, L.P.
(AMEX: MWE), we gather natural gas from the wellhead and process the natural gas
to remove impurities and the valuable natural gas liquids (NGLs). We also
transport natural gas to the end user. MarkWest Hydrocarbon markets its own
natural gas and NGL products.
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, 2002.
MarkWest Hydrocarbon, Inc.
Financial and Operating Statistics
(in thousands except per share amounts and operating statistics)
Three Months Ended March 31,
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2003 2002 % Change
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Statement of Operations Data
Revenues (a) $ 61,310 $ 44,387 38%
Net income (loss) $ (1,042) $ 175 NM
Basic and diluted earnings (loss) per $ (0.12) $ 0.02 NM
share
Weighted average shares outstanding 8,511 8,515 --
(basic)
Operating Data
Exploration and production
Natural gas produced (Mcfe/d) 27,500 29,200 (6%)
MarkWest Energy Partners (b)
Appalachia:
Natural gas processed for a fee 264,000 269,000 (2%)
(Mcf/d)
NGLs fractionated for a fee (gal/day) 446,000 479,000 (7%)
Michigan:
Gas volume processed for a fee (Mcf/d) 15,400 11,000 40%
March 31, 2003 December 31, 2002 March 31, 2002
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Consolidated Balance Sheet Data
Total assets $ 314,081 $ 253,314 $ 239,311
Total debt $ 105,824 $ 64,223 $ 100,936
Stockholders' equity before
accumulated other comprehensive $ 61,092 $ 62,210 $ 65,007
income
Accumulated other comprehensive
income (loss) (c) (6,987) (8,858) (9,418)
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Stockholders' equity $ 54,105 $ 53,352 $ 55,589
(a) Includes gas marketing revenues of $7.8 million and $7.1 million for the
three months ended March 31, 2003 and 2002. Gas marketing activities are
low margin; these activities are done in support of MarkWest Hydrocarbon's
processing business.
(b) Reflects MarkWest Hydrocarbon, Inc., until May 23, 2002, and MarkWest
Energy Partners, L.P., from May 24, 2002--the date its initial public
offering closed.
(c) As part of our commodity price risk management strategy, we hedge a portion
of our future NGL product, and to a lesser extent natural gas, sales. In
addition, this account includes our foreign currency translation adjustment
and the effect of interest rate hedges. Balance includes related deferred
income taxes. Note that only the only hedge instrument is marked-to-market,
not the hedged item. Under a completely effective hedge, these
mark-to-market adjustments would offset.
MarkWest Hydrocarbon, Inc.
Reconciliation of GAAP Measures to Non-GAAP Measures
(in thousands)
Three Months Ended
March 31, 2003
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Pinnacle pro forma:
Revenues $ 18,614
Operating expenses:
Purchased product cost 15,305
Plant operating expense 885
Selling, general and administrative 258
Depreciation 1,031
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Total operating expenses 17,479
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Income from operations 1,135
Add back:
Depreciation 1,031
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EBITDA $ 2,166
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