MarkWest Energy Nabs Keystone Midstream in First-Quarter 2012, Plans Up to $1.5 Billion in CapEx for Year

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Natural gas and natural gas liquids (NGL) producer and transmission provider MarkWest Energy Partners LP (NYSE:MWE) (Denver, Colorado) reported solid growth in the first quarter of 2012 as the company's well-positioned midstream services in the liquids-rich U.S. shale plays proved to be more beneficial than expected. MarkWest also is preparing to acquire Keystone Midstream Services LLC (Broomfield, Colorado). Net income for the quarter was reported to be $16.02 million, compared with a net loss of $84.03 million in first-quarter 2011.

MarkWest executives noted the difference when excluding the effects of income taxes; interest expenses; losses on redemption of debt; cash flow from unconsolidated affiliates; non-cash compensation expenses and derivative activities; depreciation; amortization; impairment; and other specific adjustments and expenses. Using this measurement, called "adjusted EBITDA," the company saw income of $132.94 million, a 38.21% increase.

Total revenues were reported to be $350.47 million, a 33.15% increase from the same period last year. Stronger results in the company's four major geographic segments were spurred by higher NGL volumes in the Southwest and Northeast segments, and numerous growth projects and the acquisition of a non-controlling interest in the Liberty segment. Capital expenditures in the quarter totaled $254.3 million, part of which came from $388 million in proceeds from an equity offering.

MarkWest also announced that it is fully acquiring Keystone, which boasts two cryogenic gas-processing facilities with a total capacity of 90 million cubic feet per day, as well as a gas-gathering system and field compression services, on more than 68,400 acres in Butler County, Pennsylvania. Keystone is currently owned by Stonehenge Energy Resources LP (Westminster, Colorado), Rex Energy Corporation (NASDAQ:REXX) (State College, Pennsylvania) and Sumitomo Corporation (TYO: 8053) (Tokyo, Japan). Under long-term, fee-based agreements, MarkWest will process the rich gas and fractionate the NGLs. The acquisition is estimated to be worth $512 million.

Industrial Info is tracking $934 million in active MarkWest projects, including the $60 million expansion of the Carthage East Natural Gas Processing Plant in Carthage, Texas. The project involves increasing capacity by 120 million standard cubic feet per day, bringing the total capacity to 400 million from the Haynesville Shale play. In March, the company announced it has entered into long-term gathering and processing agreements with Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas), Chevron Corporation (NYSE:CVX) (San Ramon, California), PetroQuest Energy (NYSE:PQ) (Lafayette, Louisiana), and Samson Lone Star (Houston, Texas) to support the expansion. It is expected to be completed by November 2012.

"We continue to focus our expansion projects on rich-gas resource plays," said Frank Semple, the chairman, president and chief executive officer of MarkWest, in a conference call.

All four of MarkWest's major geographic segments reported increases in operating income and NGL sales for the quarter:

• The Southwest segment reported $214.73 million in revenues for the quarter, a 6.42% increase from first-quarter 2011, and $86.05 million in operating income, an 11.4% increase. Total NGL sales stood at 153.7 million gallons, a 22.86% increase.
• The Northeast segment reported $86.92 million in revenues for the quarter, a 5.62% decrease from the same period last year, and $54.85 million in operating income, a 20.24% increase. NGL sales stood at 82.5 million gallons, a 16.69% increase.
• The Liberty segment reported $75.58 million in revenues for the quarter, compared with $41.22 million in first-quarter 2011, and $38.7 million in operating income, compared with $12.79 million. NGL sales stood at 97.5 million gallons, compared with 51.8 million.
• The Gulf Coast segment reported $24.23 million in revenues for the quarter, an 11.35% increase from first-quarter 2011, and $14.59 million in operating income, a 14.27% increase. NGL sales stood at 89.3 million gallons, a 22.83% increase.

Capital expenditures for full-year 2012 are expected to be between $1.1 billion and $1.5 billion, a number that was increased following the announcement of the Keystone acquisition, although it does not include the estimated $512 million purchase price. About $20 million of the total is expected to go toward maintenance. MarkWest also is planning to construct 13 cryogenic natural gas processing facilities in the Haynesville/Cotton Valley, Huron, Marcellus and Utica areas to assist producers.

"Capturing premium NGL markets in the northeast is critical for producers as they develop their rich gas acreage in the Marcellus, and our extensive NGL infrastructure is key in maximizing the value of the production," Semple said in the conference call. "With the Keystone acquisition, we will be operating five large processing complexes, all of which are or will be connected to our highly integrated NGL gathering, fractionation and marketing facilities."

For more information, visit Industrial Info's North American Oil & Gas Production Project Database and North American Oil & Gas Transmission Project Database.

View Plant Profile - 3053827
View Project Report - 300068877

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.