EX-99.1 2 a06-7472_1ex99d1.htm EXHIBIT 99

Exhibit 99.1

 

 

MarkWest Hydrocarbon Reports 2005 Fourth Quarter and Year-End Results

 

DENVER—March 21, 2006—MarkWest Hydrocarbon, Inc. (AMEX: MWP) (the “Company”) today reported a net loss of $1.0 million for the three months ended December 31, 2005, or an $0.09 loss per diluted share, compared to net income of $6.7 million, or $0.63 per diluted share, for the fourth quarter of 2004. For the year ended December 31, 2005, the Company reported a net loss of $6.8 million, or $0.63 per diluted share, compared to a net loss of $0.9 million, or $0.08 per diluted share, for the year ended December 31, 2004.

 

The Company reports its operations under two business segments, MarkWest Hydrocarbon Standalone (Standalone) and MarkWest Energy Partners. 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 December 31, 2005, Standalone reported a loss from operations of $0.4 million, a decrease of $6.3 million when compared to the $5.9 million of income from operations for the same period in 2004. This result is summarized as follows:

 

•                  Our realized fractionation (frac) spread declined significantly compared to the prior year. This amounted to an $11.6 million impact (approximately $0.09 per gallon in 2005 vs. approximately $0.41 per gallon in 2004).

•                  The revaluation of our long-term shrink obligation (a non-cash item) increased revenue by $3 million in 2005 compared to a $0.4 million decrease in 2004, resulting in a $3.4 million positive impact to the quarter-over-quarter comparison.

•                  The loss from operations was further offset by the favorable impact of decreased facility expense and selling, general and administrative expenses of $1.0 million and $0.6 million, respectively.

 

For the year ended December 31, 2005, MarkWest Hydrocarbon Standalone reported a loss from operations of $11.8 million compared to a loss from operations for the year ended December 31, 2004 of $4.9 million, an increase of $6.9 million. This result is summarized as follows:

 

•                  The long-term shrink obligation (a non-cash item) accounted for $5.2 million of this decrease.

•                  A decline in the realized frac spread accounted for a further $4.7 million of this amount (approximately $0.19 per gallon in 2005 vs. approximately $0.21 per gallon in 2004).

•                  The Michigan E&P activities and Net profits interest also declined by $1.0 million.

•                  These amounts were offset by a $3.4 million reduction in facility expenses, primarily attributable to efficiencies at the new Cobb facility. Increased income from our wholesale and other fee business accounted for a $0.6 million improvement for 2005 compared to 2004.

 

A key element of the MarkWest Hydrocarbon’s activity is the cash distributions it receives on its ownership interest in MarkWest Energy Partners, L.P., which consists of approximately 2.8 million limited partner units, its 2% general partner interest and its incentive distribution rights. MarkWest Hydrocarbon received $3.3 million in distributions in the fourth quarter of 2005, which represents a significant increase over the $2.6 million received in the fourth quarter of 2004. For the year ended December 31, 2005 MarkWest Hydrocarbon received $12.3 million in distributions from MarkWest Energy Partners, compared to $8.7 million for the year ended December 31, 2004.

 

MarkWest Energy Partners, L.P. reported income from operations of $13.5 million in the fourth quarter of 2005, up from $8.6 million in the fourth quarter of 2004. For the year ended December 31, 2005 MarkWest Energy Partners, L.P. reported income from operations of $33.3 million, up from $24.4 million for the year ended December 31, 2004.

 


 

In January 2006, the Company paid a quarterly cash dividend of $0.125 per share of its common stock held by the common stockholders. This matched the quarterly dividend distribution for the third quarter of 2005.

 

“The less favorable frac spreads significantly affected our earnings on a standalone basis when compared to the strong fourth quarter and year we experienced in 2004,” said Frank Semple, President and Chief Executive Officer. “Frac spreads are an important part of our business from both a financial and operational risk perspective. We proactively manage this exposure primarily through a combination of frac spread hedges at times when we can lock in positive operating margin and optimization of our operational pre-delivery capabilities. In addition, as the cash flow from our investment in MarkWest Energy Partners increases over time, the Hydrocarbon standalone component of our business will decline and our relative sensitivity to commodity prices and frac spreads will also continue to decrease. We are very focused on both the continued growth of MWE and the mitigation of our frac spread exposure. I am extremely excited about 2006 and beyond. With the exception of the hurricane impact on Starfish, the MWE core assets are performing well and we now have a very broad asset base, which provides both diversity of cash flows and significant opportunities for internal growth capital projects. I am also very pleased by the organizational growth and development during the past year. This is always the biggest challenge with a rapidly expanding company and we have added significant capabilities both in the field and our corporate office in Denver.”

 

The Company will host a conference call on Wednesday, March 22, 2006, at 2:00 P.M. MST to review its fourth quarter 2005 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 March 29, 2006 by dialing 1-800-405-2236 and entering the following passcode: 11056719#. 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. (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
December 31, 2005

 

Three Months
Ended
December 31, 2004

 

Year Ended
December 31, 2005

 

Year Ended
December 31, 2004

 

Revenues

 

$

264,159

 

$

155,878

 

$

714,177

 

$

460,113

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Purchased product costs

 

220,155

 

115,301

 

583,084

 

363,261

 

Facility expenses

 

13,250

 

8,121

 

45,577

 

28,580

 

Selling, general and administrative expenses

 

8,210

 

10,495

 

33,350

 

28,132

 

Depreciation

 

6,068

 

5,200

 

20,829

 

16,895

 

Amortization of intangible assets

 

3,368

 

2,172

 

9,656

 

3,640

 

Accretion of asset retirement obligation

 

23

 

2

 

160

 

15

 

Impairments

 

—

 

130

 

—

 

130

 

Total operating expenses

 

251,074

 

141,421

 

692,656

 

440,653

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

13,085

 

14,457

 

21,521

 

19,460

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Income (loss) from unconsolidated subsidiary

 

(2,144

)

49

 

(2,153

)

—

 

Interest income

 

219

 

111

 

1,060

 

647

 

Interest expense

 

(9,349

)

(3,591

)

(22,622

)

(9,383

)

Amortization of deferred financing costs (a component of interest expense)

 

(5,328

)

(1,547

)

(6,979

)

(5,281

)

Dividend income

 

103

 

90

 

392

 

259

 

Miscellaneous income (expense)

 

(34

)

192

 

266

 

788

 

Income (loss) from continuing operations before non-controlling interest in net income of consolidated subsidiary and income taxes

 

(3,448

)

9,761

 

(8,515

)

6,490

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

 

 

 

 

 

 

 

 

Current

 

(554

)

131

 

(554

)

(20

)

Deferred

 

(542

)

380

 

2,358

 

(58

)

Income tax (expense) benefit

 

(1,096

)

511

 

1,804

 

(78

)

 

 

 

 

 

 

 

 

 

 

Non-controlling interest in net income of consolidated subsidiary

 

3,500

 

(3,556

)

(91

)

(7,315

)

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(1,044

)

$

6,716

 

$

(6,802

)

$

(903

)

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.09

)

$

0.63

 

$

(0.63

)

$

(0.08

)

Diluted

 

$

(0.09

)

$

0.63

 

$

(0.63

)

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

Weighted average number of outstanding shares of common stock:

 

 

 

 

 

 

 

 

 

Basic

 

10,800

 

10,750

 

10,785

 

10,686

 

Diluted

 

10,800

 

10,825

 

10,785

 

10,686

 

 


 

MarkWest Hydrocarbon, Inc.

Income (Loss) from Operations

(in thousands)

 

 

 

MarkWest 
Hydrocarbon 
Standalone

 

MarkWest 
Energy 
Partners

 

Eliminating 
Entries

 

Total

 

 

 

(in thousands)

 

Three Months Ended December 31, 2005:

 

 

 

 

 

 

 

 

 

Revenues

 

$

106,629

 

$

175,919

 

$

(18,389

)

$

264,159

 

Purchased product costs

 

98,848

 

133,357

 

(12,050

)

220,155

 

Net operating margin

 

7,781

 

42,562

 

(6,339

)

44,004

 

Facility expenses

 

4,822

 

14,767

 

(6,339

)

13,250

 

Selling, general and administrative expenses

 

3,124

 

5,086

 

—

 

8,210

 

Depreciation

 

207

 

5,861

 

—

 

6,068

 

Amortization of intangible assets

 

—

 

3,368

 

—

 

3,368

 

Accretion of asset retirement and sublease obligations

 

—

 

23

 

—

 

23

 

Income (loss) from operations

 

$

(372

)

$

13,457

 

$

—

 

$

13,085

 

 

 

 

 

 

 

 

 

 

 

December 31, 2005:

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

863

 

$

20,105

 

$

—

 

$

27,038

 

Current assets

 

92,821

 

148,498

 

(11,361

)

229,958

 

Current liabilities

 

43,609

 

136,554

 

11,361

 

168,802

 

Total assets

 

124,966

 

1,046,093

 

(38,755

)

1,132,304

 

Total debt

 

7,500

 

604,000

 

—

 

611,500

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2004:

 

 

 

 

 

 

 

 

 

Revenues

 

$

77,619

 

$

93,988

 

$

(15,729

)

$

155,878

 

Purchased product costs

 

61,915

 

62,594

 

(9,208

)

115,301

 

Net operating margin

 

15,704

 

31,394

 

(6,521

)

40,577

 

Facility expenses

 

5,844

 

8,798

 

(6,521

)

8,121

 

Selling, general and administrative expenses

 

3,708

 

6,787

 

—

 

10,495

 

Depreciation

 

297

 

4,903

 

—

 

5,200

 

Amortization of intangible assets

 

—

 

2,172

 

—

 

2,172

 

Accretion of asset retirement and lease obligations

 

2

 

—

 

—

 

2

 

Impairments

 

—

 

130

 

—

 

130

 

Income from operations

 

$

5,853

 

$

8,604

 

$

—

 

$

14,457

 

 

 

 

 

 

 

 

 

 

 

December 31, 2004:

 

 

 

 

 

 

 

 

 

Cash, cash equivalents and restricted cash

 

$

3,581

 

$

24,263

 

$

—

 

$

27,844

 

Current assets

 

70,865

 

72,959

 

(12,849

)

130,975

 

Current liabilities

 

27,505

 

62,412

 

12,849

 

77,068

 

Total assets

 

99,933

 

529,422

 

(35,781

)

593,574

 

Total debt

 

—

 

225,000

 

—

 

225,000

 

 


 

 

 

MarkWest 
Hydrocarbon 
Standalone

 

MarkWest 
Energy 
Partners

 

Eliminating 
Entries

 

Total

 

 

 

(in thousands)

 

Year Ended December 31, 2005:

 

 

 

 

 

 

 

 

 

Revenues

 

$

280,015

 

$

499,084

 

$

(64,922

)

$

714,177

 

Purchased product costs

 

258,188

 

366,878

 

(41,982

)

583,084

 

Net operating margin

 

21,827

 

132,206

 

(22,940

)

131,093

 

Facility expenses

 

20,545

 

47,972

 

(22,940

)

45,577

 

Selling, general and administrative expenses

 

11,777

 

21,573

 

—

 

33,350

 

Depreciation

 

1,295

 

19,534

 

—

 

20,829

 

Amortization of intangible assets

 

—

 

9,656

 

—

 

9,656

 

Accretion of asset retirement and sublease obligations

 

1

 

159

 

—

 

160

 

Income (loss) from operations

 

$

(11,791

)

$

33,312

 

$

—

 

$

21,521

 

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2004:

 

 

 

 

 

 

 

 

 

Revenues

 

$

218,337

 

$

301,314

 

$

(59,538

)

$

460,113

 

Purchased product costs

 

185,951

 

211,534

 

(34,224

)

363,261

 

Net operating margin

 

32,386

 

89,780

 

(25,314

)

96,852

 

Facility expenses

 

23,983

 

29,911

 

(25,314

)

28,580

 

Selling, general and administrative expenses

 

11,999

 

16,133

 

—

 

28,132

 

Depreciation

 

1,339

 

15,556

 

—

 

16,895

 

Amortization of intangible assets

 

—

 

3,640

 

—

 

3,640

 

Accretion of asset retirement and lease obligations

 

2

 

13

 

—

 

15

 

Impairments

 

—

 

130

 

—

 

130

 

Income (loss) from operations

 

$

(4,937

)

$

24,397

 

$

—

 

$

19,460

 

 


 

MarkWest Hydrocarbon, Inc.

Operating Statistics

 

 

 

Three Months Ended 
December 31,

 

Year Ended December 31,

 

 

 

2005

 

2004

 

2005

 

2004

 

MarkWest Hydrocarbon Standalone:

 

 

 

 

 

 

 

 

 

Marketing

 

 

 

 

 

 

 

 

 

NGL product sales (gallons)

 

45,516,000

 

47,900,000

 

162,000,000

 

178,000,000

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

 

 

 

 

 

 

 

 

NGL product sales (gallons) (1)

 

27,305,000

 

26,338,000

 

68,879,000

 

42,154,000

 

 

 

 

 

 

 

 

 

 

 

MarkWest Energy Partners:

 

 

 

 

 

 

 

 

 

Southwest:

 

 

 

 

 

 

 

 

 

East Texas (2)

 

 

 

 

 

 

 

 

 

Gathering systems throughput (Mcf/d)

 

342,300

 

267,700

 

321,000

 

259,300

 

NGL product sales (gallons)

 

37,518,000

 

29,210,000

 

126,476,000

 

41,478,000

 

 

 

 

 

 

 

 

 

 

 

Oklahoma

 

 

 

 

 

 

 

 

 

Foss Lake gathering systems throughput (Mcf/d)

 

84,500

 

61,500

 

75,800

 

60,900

 

Arapaho NGL product sales (gallons)

 

14,723,000

 

16,587,000

 

60,903,000

 

45,273,000

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

 

 

Appleby gathering systems throughput (Mcf/d)

 

35,600

 

29,600

 

33,400

 

27,100

 

Other gathering systems throughput (Mcf/d)

 

17,000

 

16,600

 

16,500

 

17,000

 

Lateral throughput volumes (Mcf/d) (3)

 

52,300

 

67,100

 

81,000

 

75,500

 

 

 

 

 

 

 

 

 

 

 

Appalachia:

 

 

 

 

 

 

 

 

 

Natural gas processed for a fee (Mcf/d) (4)

 

200,700

 

208,000

 

197,000

 

203,000

 

NGLs fractionated for a fee (Gal/day)

 

441,600

 

478,000

 

430,000

 

475,000

 

NGL product sales (gallons)

 

10,649,000

 

9,467,000

 

41,700,000

 

42,105,000

 

 

 

 

 

 

 

 

 

 

 

Michigan:

 

 

 

 

 

 

 

 

 

Natural gas processed for a fee (Mcf/d)

 

6,100

 

10,800

 

6,600

 

12,300

 

NGL product sales (gallons)

 

1,250,000

 

2,261,000

 

5,697,000

 

9,818,000

 

Crude oil transported for a fee (Bbl/d)

 

14,260

 

14,400

 

14,200

 

14,700

 

 

 

 

 

 

 

 

 

 

 

Gulf Coast: (5)

 

 

 

 

 

 

 

 

 

Natural gas processed for a fee (Mcf/d)

 

115,000

 

NA

 

115,000

 

NA

 

NGLs fractionated for a fee (Gal/day)

 

19,400

 

NA

 

19,400

 

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)          We acquired our East Texas System in late July 2004. Volumes are for the periods of time since we acquired the facility in 2004.

(3)          We acquired our Lubbock pipeline (a/k/a the PowerTex Lateral Pipeline) in September 2003 and our Hobbs lateral pipeline in April 2004. The Lubbock and Hobbs pipelines are the only laterals we own 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)          We acquired our Javelina gathering system in November 2005. Volumes are for the periods of time since we acquired the facility in 2005.