8-K 1 a2125149z8-k.htm 8-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) December 2, 2003

MARKWEST HYDROCARBON, INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)		   001-14841
(Commission File Number)		   84-1352233
(I.R.S. Employer
Identification Number)

 
 
 
 
 
155 Inverness Drive West, Suite 200, Englewood, CO
(Address of principal executive offices)		   80112-5000
(Zip Code)

Registrant's telephone number, including area code: 303-290-8700

N/A
(Former name or former address, if changed since last report)


ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

        On December 2, 2003, MarkWest Hydrocarbon, Inc. ("MarkWest Hydrocarbon") completed the sale of its wholly owned subsidiary, MarkWest Resources Canada Corporation, to Advantage Energy Income Fund for $79.4 million less debt and other liabilities assumed by Advantage.

        On December 2, 2003, MarkWest Hydrocarbon also entered into an agreement to sell its wholly owned subsidiary, MarkWest Midstream Services, Inc., for approximately $2.0 million. Upon the closing of the sale of this subsidiary, MarkWest Hydrocarbon will no longer own any Canadian oil and gas properties.

        Net proceeds from the two dispositions are expected to be approximately $67.3 million. A portion of the net proceeds from the sales was used to pay off all debt outstanding under MarkWest Hydrocarbon's existing credit facility, which was terminated on December 3, 2003. The dispositions are reflected in the Company's unaudited pro forma financial information filed with this report under Item 7.


ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

(a)
Financial Statements of Businesses Acquired.

        Not applicable.

(b)
Pro Forma Financial Information.

        The accompanying unaudited pro forma balance sheet is presented as if the transactions occurred as of September 30, 2003. The accompanying unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2003, and for the year ended December 31, 2002, present the historical operations of MarkWest Hydrocarbon as if the transactions had occurred on January 1, 2002.

        The unaudited pro forma consolidated financial statements have been prepared by MarkWest Hydrocarbon's management based upon the historical financial statements of MarkWest Hydrocarbon. These pro forma statements are not indicative of the results that actually would have occurred if the disposition had been completed on the dates indicated. The pro forma financial statements and notes thereto should be read in conjunction with the historical financial statements included in MarkWest Hydrocarbon's periodic reports previously filed with the Securities and Exchange Commission.

        As of September 30, 2003, MarkWest Hydrocarbon reflected oil and gas operations as discontinued. In accordance with Regulation S-X, Article 11, the historical statement of operations used in the pro forma financial information shall not report operations of a segment that has been discontinued. Consequently, the Unaudited Pro Forma Consolidated Statement of Operations for the Nine Months Ended September 30, 2003, does not reflect any results from oil and gas operations.

2



MARKWEST HYDROCARBON, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

September 30, 2003

(in thousands, except share and per share data)

 
   MarkWest
Hydrocarbon, Inc.
Historical
   Pro Forma
Adjustments
   MarkWest
Hydrocarbon, Inc.
Pro Forma
  
ASSETS                    

Current assets:
 
 
 
 
 
 
 
 
 
 
  Cash and cash equivalents   $ 7,580   $
 67,275
(2,000		 (A)
)(B)		 $ 72,855  
  Receivables, net     13,695           13,695  
  Inventories     6,553           6,553  
  Prepaid replacement natural gas     3,566           3,566  
  Other assets     2,314           2,314  
  Assets held for sale     5,046     (4,010 )(A)   1,036  
   
 
 
 
    Total current assets     38,754     61,265     100,019  
   
 
 
 
Property, plant and equipment:                    
  Gas processing, gathering, storage and marketing equipment     163,705           163,705  
  Land, buildings and other equipment     5,939           5,939  
  Construction in progress     893           893  
   
 
 
 
      170,537           170,537  
  Less: accumulated depreciation, depletion and amortization     (39,496 )         (39,496 )
   
 
 
 
    Total property and equipment, net     131,041           131,041  
Risk management asset     99           99  
Intangible assets, net     1,502           1,502  
Notes receivable from employees     217           217  
Assets held for sale     116,131     (107,849 )(A)   8,282  
   
 
 
 
    Total assets   $ 287,744   $ (46,584 ) $ 241,160  
   
 
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 

Current liabilities:
 
 
 
 
 
 
 
 
 
 
  Accounts payable   $ 19,746   $     $ 19,746  
  Accrued liabilities     15,438           15,438  
  Risk management liability     4,396           4,396  
  Liabilities held for sale     14,334     (13,348 )(A)   986  
   
 
 
 
    Total current liabilities     53,914     (13,348 )   40,566  
Deferred income taxes     4,015           4,015  
Long-term debt     63,300     (2,000 )(B)   61,300  
Risk management liability     375           375  
Other long-term liabilities     46           46  
Minority interest in consolidated subsidiary     53,987           53,987  
Liabilities held for sale     49,678     (49,587 )(A)   91  
Commitments and contingencies                    
Stockholders' equity:                    
  Preferred stock, par value $0.01, 5,000,000 shares authorized, 0 shares outstanding     —           —  
  Common stock, par value $0.01, 22,000,000 shares authorized, 9,466,805 shares issued and outstanding     95           95  
  Additional paid-in capital     49,214           49,214  
  Retained earnings     15,582     19,381 (A)   34,963  
  Accumulated other comprehensive loss, net of tax     (1,920 )   (1,030 )(A)   (2,950 )
  Treasury stock, 82,792 shares     (542 )         (542 )
   
 
 
 
    Total stockholders' equity     62,429     18,351     80,780  
   
 
 
 
    Total liabilities and stockholders' equity   $ 287,744   $ (46,584 ) $ 241,160  
   
 
 
 

The accompanying notes are an integral part of these financial statements.

3


MARKWEST HYDROCARBON, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

Year Ended December 31, 2002

(in thousands, except per share data)

 
   MarkWest
Hydrocarbon Inc.
Historical
   Pro Forma
Adjustments
   MarkWest
Hydrocarbon, Inc.
Pro Froma
  
Revenues:                    
  Gathering, processing and marketing revenue   $ 154,338   $ —   $ 154,338  
  Exploration and production revenue     32,923     (22,467 )(C)   10,456  
   
 
 
 
    Total revenues     187,261     (22,467 )   164,794  
   
 
 
 

Operating expenses:
 
 
 
 
 
 
 
 
 
 
  Purchased gas costs     127,526           127,526  
  Plant operating expenses     16,257           16,257  
  Lease operating expenses     7,912     (5,136 )(C)   2,776  
  Transportation costs     1,680     (481 )(C)   1,199  
  Production taxes     2,044     (1,453 )(C)   591  
  Selling, general and administrative expenses     11,885     (1,970 )(C)   9,915  
  Depreciation and depletion     21,388     (13,179 )(C)   8,209  
   
 
 
 
    Total operating expenses     188,692     (22,219 )   166,473  
   
 
 
 
   
Loss from operations
 
 
(1,431
)
 
(248
)
 
(1,679
)
   
 
 
 

Other income (expense):
 
 
 
 
 
 
 
 
 
 
  Interest income     65           65  
  Interest expense     (3,840 )   98 (D)   (3,742 )
  Write-down of deferred financing costs     (2,977 )         (2,977 )
  Gain on sale of non-operating assets     5,454           5,454  
  Gain on sale of non-operating asset to a related party     141           141  
  Minority interest in net income of consolidated subsidiary     (1,947 )         (1,947 )
  Other expense, net     (73 )         (73 )
   
 
 
 
   
Loss before income taxes
 
 
(4,608
)
 
(150
)
 
(4,758
)
   
 
 
 

Benefit for income taxes
 
 
(1,812
)
 
(59
)(E)
 
(1,871
)
   
 
 
 
   
Net loss
 
$
(2,796
)
$
(91
)
$
(2,887
)
   
 
 
 

Basic loss per share of common stock
 
$
(0.33
)
 
 
 
$
(0.34
)
   
       
 
Loss per share assuming dilution   $ (0.33 )       $ (0.34 )
   
       
 

Weighted average number of outstanding shares of common stock:
 
 
 
 
 
 
 
 
 
 
  Basic     8,500           8,500  
   
       
 
  Assuming dilution     8,513           8,513  
   
       
 

The accompanying notes are an integral part of these financial statements.

4


MARKWEST HYDROCARBON, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

Nine Months Ended September 30, 2003

(in thousands, except per share data)

 
   MarkWest
Hydrocarbon, Inc.
Historical
   Pro Forma
Adjustments
   MarkWest
Hydrocarbon, Inc.
Pro Forma
  
Revenue   $ 146,767   $ —   $ 146,767  

Operating expenses:
 
 
 
 
 
 
 
 
 
 
  Purchased product costs     134,881           134,881  
  Facility expenses     14,381           14,381  
  Selling, general and administrative expenses     9,064           9,064  
  Depreciation and amortization     5,791           5,791  
  Loss on sale of terminals     55           55  
   
 
 
 
    Total operating expenses     164,172           164,172  
   
 
 
 
   
Loss from operations
 
 
(17,405
)
 
 
 
 
(17,405
)

Other income (expense):
 
 
 
 
 
 
 
 
 
 
  Interest income     68           68  
  Interest expense     (4,244 )   77 (D)   (4,167 )
  Gain on sale to related party     188           188  
  Minority interest in net income of consolidated subsidiary     (3,342 )         (3,342 )
  Other income     15           15  
   
 
 
 
   
Income (loss) from continuing operations before income taxes
 
 
(24,720
)
 
77
 
 
(24,643
)

Provision (benefit) for income taxes
 
 
(9,058
)
 
28
(E)
 
(9,030
)
   
 
 
 
   
Income (loss) from continuing operations
 
$
(15,662
)
$
49
 
$
(15,613
)
   
 
 
 

Basic loss from continuing operations per share of common stock
 
$
(1.67
)
 
 
 
$
(1.67
)
   
       
 
Loss from continuing operations per share assuming dilution   $ (1.67 )       $ (1.67 )
   
       
 

Weighted average number of outstanding shares of common stock:
 
 
 
 
 
 
 
 
 
 
    Basic     9,364           9,364  
   
       
 
    Assuming dilution     9,380           9,380  
   
       
 

The accompanying notes are an integral part of these financial statements.

5


MARKWEST HYDROCARBON, INC.

NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS

    Basis of Presentation

        The accompanying unaudited pro forma consolidated balance sheet as of September 30, 2003, adjusts MarkWest Hydrocarbon, Inc.'s balance sheet for the dispositions of its Canadian oil and gas properties as if the transactions had occurred on September 30, 2003. The accompanying unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2003, and for the year ended December 31, 2002, adjusts the historical operations of MarkWest Hydrocarbon, Inc. for the dispositions of its Canadian properties as if the transactions had occurred on January 1, 2002.

        These pro forma statements may not be indicative of the results that actually would have occurred if the dispositions had occurred on the dates indicated.

    Adjustments

        The following is a list of adjustments to reflect the following (amounts in thousands).

(A)
The disposition of the Canadian properties.

Net cash received   $ 67,275  
Net assets     (47,894 )
   
 
Gain on sale   $ 19,381  
   
 

    Net assets of MarkWest Resources Canada Corp. and MarkWest Midstream Services, Inc. at September 30, 2003 consisted of the following:

Accounts receivable   $ 3,399  
Other current assets     611  
Property and equipment, net     107,725  
Other assets     124  
Accounts payable     (11,730 )
Accrued liabilities     (1,618 )
Long-term debt     (17,053 )
Other liabilities     (3,823 )
Deferred income taxes     (28,711 )
Accumulated other comprehensive income     (1,030 )
   
 
Net assets   $ 47,894  
   
 
(B)
The reduction of $2.0 million of debt by utilizing a portion of the disposition proceeds.

(C)
The elimination of the Canadian results of operations.

(D)
The reduction of interest expense as a result of MarkWest Hydrocarbon paying down $2.0 million of debt with a portion of the disposition proceeds using a weighted average interest rate of 3.87% for the nine months ended September 30, 2003, and 4.88% for the year ended December 31, 2002.

(E)
Tax expense (benefit) resulting from the disposition of the Canadian oil and gas operations.

6

    Loss Per Share

        Pro forma basic and dilutive loss per share are computed by dividing pro forma loss from continuing operations for the nine months ended September 30, 2003, and net loss for the year ended December 31, 2002 by the weighted average number of shares outstanding during the period. Common stock equivalents are not considered in the computation, as their effect would be anti-dilutive.

7

(c)
Exhibits.

Exhibit No.
   Exhibit Description
10.1   Share Purchase Agreement, dated as of November 12, 2003, by and among MarkWest Hydrocarbon, Inc. and Advantage Oil & Gas Ltd.

10.2
 
Clarification and Amending Agreement re: Share Purchase Agreement, dated December 2, 2003, between MarkWest Hydrocarbon, Inc. and Advantage Oil & Gas Ltd.

8


SIGNATURE

        Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

    MARKWEST HYDROCARBON, INC.
(Registrant)

Date: December 17, 2003
 
By:
/s/  DONALD C. HEPPERMANN      
Donald C. Heppermann,
 Senior Vice President and Chief
Financial Officer

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EXHIBIT INDEX

Exhibit No.
   Exhibit Description
10.1   Share Purchase Agreement, dated as of November 12, 2003, by and among MarkWest Hydrocarbon, Inc. and Advantage Oil & Gas Ltd.

10.2
 
Clarification and Amending Agreement re: Share Purchase Agreement, dated December 2, 2003, between MarkWest Hydrocarbon, Inc. and Advantage Oil & Gas Ltd.


QuickLinks

MARKWEST HYDROCARBON, INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET September 30, 2003 (in thousands, except share and per share data)
MARKWEST HYDROCARBON, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Year Ended December 31, 2002 (in thousands, except per share data)
MARKWEST HYDROCARBON, INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS Nine Months Ended September 30, 2003 (in thousands, except per share data)
MARKWEST HYDROCARBON, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
SIGNATURE
EXHIBIT INDEX