MarkWest Energy Partners Cuts 2015 Capex, Expects to Benefit from Lower Project Costs

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Natural gas processing, fractionation and transportation company MarkWest Energy Partners LP (NYSE:MWE) (Denver Colorado) joined the growing ranks of energy production-related companies that have announced significant reductions in capital expenditures (capex) this year to reflect market realities. However, company executives said they expect to benefit from lower construction contract and labor costs.

Chief Executive Officer (CEO) Frank Semple said during the partnership's fourth-quarter earnings conference call that MarkWest has revised its 2015 capital forecast to a range of $1.5 billion to $1.9 billion, from its previous forecast range of $1.8 billion to $2.3 billion. In comparison, capex was nearly $2.68 billion in 2014, and nearly $3.05 billion in 2013. MarkWest operates in the Marcellus and Utica shales, as well as the U.S. Southwest.

Industrial Info is tracking 31 MarkWest projects worth $1.51 billion. Nineteen projects, valued at $668 million, are under construction; one project, valued at $30 million, is in the engineering phase; and 11 projects, valued at $816 million, are in the planning phases, where a variety of factors could alter their outcomes.

With a total investment value of $200 million, a natural gas processing plant expansion is under construction at the Seneca complex in Summerfield, Ohio. The Train IV addition at the 600 million-standard-cubic-foot-per-day (MMSCFD) facility would increase capacity by 200 MMSCFD. Exterran Partners LP (NASDAQ:EXLP) (Houston, Texas) is serving as the design engineer and Kokosing Construction Company (Westerville, Ohio) is the engineering, procurement and construction (EPC) contractor. Project completion is slated for second-quarter 2015.

Semple said that MarkWest has 18 major infrastructure projects under construction, with 10 to be completed this year. The facilities will increase the company's processing capacity to 8.2 billion cubic feet per day (Bcf/d) and fractionation capacity to more than 600,000 barrels per day (BBL/d), he said.

MarkWest's Marcellus operations include 27 completed facilities and 15 facilities under construction. Chief Operating Officer John Mollenkopf said the company will push back the timing of some of the projects in order to meet the new capex forecast.

Mollenkopf also said that bids for future projects have come down significantly. He said there are more available contractors available than two or three years ago, which has heightened competition for projects. He added the market has seen labor cost reductions of 20% to 30% in some areas.

MarkWest reported $45.29 million in fourth-quarter 2014 net earnings, compared with a net loss of $6.56 million a year earlier. Revenue for the quarter totaled $538.25 million, up from $453.54 million in fourth-quarter 2013.

The company reported it placed into service 720 million cubic feet per day (MMCFD) of new processing capacity. It processed more than 3.2 billion cubic feet per day (Bcf/d) of natural gas from the Marcellus and Utica shales in the fourth quarter, an increase of more than 100% from a year earlier. Fractionated volumes from the Marcellus and Utica were more than 200,000 barrels per day (BBL/d) of natural gas liquids (NGLs) during the fourth quarter, up more than 100% from fourth-quarter 2013.

MarkWest stated it had started operations at a third, 60,000-BBL/d propane and heavier fractionation facility in the northeast U.S. during the fourth quarter. The facility is the second fractionation unit at the Hopedale complex, located in Harrison County, Ohio. The Hopedale complex is shared between MarkWest and MarkWest Utica EMG, a joint venture between MarkWest and The Energy & Minerals Group (EMG) (Houston). Plans also were announced Wednesday for a third 60,000-BBL/d fractionator at the Hopedale site, to begin operations in first quarter of 2016.

In February, the partnership, together with Enterprise Products Partners LP (NYSE:EPD) (Houston), Anadarko Petroleum Corporation (NYSE:APC) (Houston) and DCP Midstream Partners LP (NYSE:DPM) (Denver), announced a joint venture, under which Enterprise will assign a 45% ownership interest in its wholly owned Panola Pipeline Company LLC. The interest will be evenly divided among MarkWest, WGR Asset Holding Company LLC (Anadarko's affiliate) and DCP Midstream. The Panola Pipeline, which transports NGLs, originates in Carthage, Texas, and extends 181 miles to Mont Belvieu, Texas. Enterprise recently announced plans to install 60 miles of new pipeline, as well as pumps and other associated equipment, as part of an expansion project designed to increase capacity by 50,000 BBL/d.

For all of fiscal 2014, MarkWest reported $160.3 million in net income, up from $40.45 million in 2013. Revenue for 2014 totaled $2.18 billion, up from $1.66 billion in 2013.

The company forecasted 2015 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) at a range of $925 million to $1.02 billion, compared with $874.3 million in 2014.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, 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.