Exhibit 99.1

 

 

 

 

MarkWest Hydrocarbon, Inc.		Contact:		Frank Semple, President and CEO
155 Inverness Drive West, Suite 200				James Ivey, CFO
Englewood, CO 80112-5000				Andy Schroeder, VP of Finance/Treasurer
(800) 730-8388		Phone:		(303) 290-8700
(303) 290-8700		E-mail:		investorrelations@markwest.com
(303) 290-8769 Fax		Website:		www.markwest.com

 

MarkWest Hydrocarbon Reports 2006 First Quarter Results

 

DENVER—May 8, 2006—MarkWest Hydrocarbon, Inc. (AMEX: MWP) (the “Company”) today reported net income of $2.8 million for the three months ended March 31, 2006, or $0.26 per diluted share, compared to net income of $1.5 million, or $0.14 per diluted share, for the first quarter of 2005.

 

The Company reports its operations under two business segments, MarkWest Hydrocarbon Standalone (“Standalone”) and MarkWest Energy Partners (the “Partnership”).

 

MarkWest Hydrocarbon’s share of net income attributable to MarkWest Energy Partners (net of the eliminating entry for non-controlling interest in net income of consolidated subsidiary) was $3.3 million in the first quarter of 2006, up from $0.9 million in the first quarter of 2005.

 

A key element of MarkWest Hydrocarbon’s activity is the cash distributions it receives on its ownership interest in MarkWest Energy Partners, L.P., which consists of approximately 2.5 million limited partner units, its 2% general partner interest and its incentive distribution rights. MarkWest Hydrocarbon received $3.6 million in distributions in the first quarter of 2006, which represents a 29% increase over the $2.8 million received in the first quarter of 2005.

 

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 March 31, 2006, our Standalone segment reported a net loss of $0.5 million, a decrease of $1.1 million when compared to the $0.6 million of net income for the same period in 2005.  This result is summarized as follows:

 

•                  Our realized fractionation (frac) spread declined significantly compared to the prior year (approximately $0.09 per gallon in 2006 vs. approximately $0.25 per gallon in 2005).  When combined with a 1.7 million gallon reduction in sales, this amounted to a $7.5 million negative impact on segment net income.

•                  The revaluation of our long-term shrink obligation (a non-cash item) increased revenue by $4.1 million in the first quarter of 2006 compared to a $1.2 million decrease in 2005, resulting in a $5.3 million positive impact to the quarter-over-quarter comparison.  Our derivative activity, also a non-cash item, resulted in a negative $1.6 impact on our Standalone operations for the quarter, compared to none in 2005.

 

 

•                  Other areas, including SG&A, depreciation, interest and dividend income and our other marketing operations offset these declines by a combined $2.2 million.

•                  Non-cash compensation included in SG&A was $0.7 million for the first quarter in 2006 compared to $1.3 million for 2005.

 

In April 2006, the Company declared a stock dividend of one share of MarkWest’s common stock for each ten shares of common stock held by MarkWest’s common stockholders.  The stock dividend is to be paid on May 23, 2006, to the stockholders of record as of the close of business on May 11, 2006.  The ex-dividend date is May 9, 2006.  The Company also declared a quarterly cash dividend of $0.175 per share of its common stock for an implied annual rate of $0.70 per share to be paid on June 5, 2006, to shareholders of record as of May 26, 2006.  This quarterly cash dividend represents an increase of $0.05 per share over the previous quarter’s dividend.

 

“Our continued objective is to drive value for our MarkWest Hydrocarbon shareholders through the growth of MarkWest Energy Partners. The partnership had a very strong first quarter and we are very focused on continuing that performance,” said Frank Semple, President and Chief Executive Officer.  “Contributions to MarkWest Hydrocarbon’s net income from MarkWest Energy Partners was $3.3 million.  Additionally, through the ownership of the common units and GP interest, and since we are well into the 50% incentive distributions rights splits, Hydrocarbon’s distributions from the Partnership will continue to grow at a faster rate than the Partnership’s per unit growth rate.  The recent Partnership acquisitions and core assets are performing extremely well and there are significant opportunities for additional growth.  In addition to the strong distributable cash flow performance, we were also pleased with MarkWest Energy Partner’s recent rating as the top midstream service provider by the EnergyPoint Customer Satisfaction Research Survey.  Our frac spread business had a negative impact on MarkWest Hydrocarbon’s financial performance on a standalone basis when compared to the strong first quarter we experienced in 2005, primarily due to the very high cost of natural gas during the last quarter of 2005 and early 2006.  However, the spreads have improved during the last few months and the frac spread indicators look strong through the remainder of the year.  We have hedged in excess of 20 million gallons through the first quarter of 2007 and will continue to evaluate opportunities to lock in favorable margins.”

 

The Company will host a conference call on Tuesday, May 9, 2006, at 2:00 P.M. MDT to review its first quarter 2006 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 May 16, 2006by dialing 1-800-405-2236 and entering the following passcode: 11059923#.  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 March 31,
		2006			2005
		(in thousands)
Revenues		$	240,880		$	138,260
Derivatives		(1,259		)	93
Total Revenue		239,621			138,353
Operating expenses:
Purchased product costs		181,167			104,699
Facility expenses		13,704			9,260
Selling, general and administrative expenses		11,376			8,102
Depreciation		7,378			4,741
Amortization of intangible assets		4,016			2,095
Accretion of asset retirement obligation		25			10
Impairments		—			—
Total operating expenses		217,666			128,907
Income from operations		21,955			9,446
Other income (expense):
Income from unconsolidated subsidiary		945			—
Interest income		406			249
Interest expense		(11,044		)	(3,704		)
Amortization of deferred financing costs (a component of interest expense)		(825		)	(536		)
Dividend income		106			92
Miscellaneous income (expense)		2,242			87
Income (loss) from continuing operations before non-controlling interest in net income of consolidated subsidiary and income taxes		13,785			5,634
Income tax (expense) benefit
Current		493			—
Deferred		(902		)	(770		)
Income tax (expense) benefit		(409		)	(770		)
Non-controlling interest in net income of consolidated subsidiary		(10,544		)	(3,325		)
Net income		$	2,832		$	1,539
Net income per share:
Basic		$	0.26		$	0.14
Diluted		$	0.26		$	0.14
Weighted average number of outstanding shares of common stock:
Basic		10,821			10,766
Diluted		10,923			10,917

 

 

MarkWest Hydrocarbon, Inc.

Segment Income (Loss)

(in thousands)

 

		MarkWest Hydrocarbon Standalone			MarkWest Energy Partners			Eliminating Entries			Total
		(in thousands)
Three Months Ended March 31, 2006:
Revenues		$	100,593		$	156,743		$	(17,715	)	$	239,621
Purchased product costs		$	92,025		$	100,797		$	(11,655	)	181,167
Net operating margin		8,568			55,946			(6,060		)	58,454
Facility expenses		5,770			13,994			(6,060		)	13,704
Selling, general and administrative expenses		3,038			8,338			—			11,376
Depreciation		205			7,173			—			7,378
Amortization of intangible assets		—			4,016			—			4,016
Accretion of asset retirement and sublease obligations		—			25			—			25
Income (loss) from operations		$	(445	)	$	22,400		$	—		$	21,955
March 31, 2006:
Cash, cash equivalents and restricted cash		$	11,809		$	26,823		$	—		$	38,632
Marketable securities		6,378			—			—			6,378
Current assets		78,222			118,011			(6,707		)	189,526
Total assets		110,779			1,019,322			(34,624		)	1,095,477
Current liabilities		32,601			119,109			(6,706		)	145,004
Total debt		—			592,500			—			592,500
Three Months Ended March 31, 2005:
Revenues		$	64,521		$	89,637		$	(15,805	)	$	138,353
Purchased product costs		53,821			60,785			(9,907		)	104,699
Net operating margin		10,700			28,852			(5,898		)	33,654
Facility expenses		5,827			9,331			(5,898		)	9,260
Selling, general and administrative expenses		3,463			4,639			—			8,102
Depreciation		415			4,326			—			4,741
Amortization of intangible assets		239,621			2,095			—			241,716
Accretion of asset retirement and lease obligations		—			10			—			10
Income from operations		$	(238,626	)	$	8,451		$	—		$	(230,175	)
March 31, 2005:
Cash, cash equivalents and restricted cash		$	21,364		$	15,184		$	—		$	36,548
Marketable securities		20,544			—			—			20,544
Current assets		74,485			51,231			(9,570		)	116,146
Total assets		104,433			557,828			(33,892		)	628,369
Current liabilities		27,410			54,611			(9,570		)	72,451
Total debt		—			265,000			—			265,000

 

 

MarkWest Hydrocarbon, Inc.

Segment Balance Sheet

(in thousands)

 

		MarkWest			MarkWest
		Hydrocarbon			Energy			Eliminating
		Standalone			Partners			Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	11,809		$	26,823		$	—		$	38,632
Marketable securities		6,378			—			—			$	6,378
Receivables		30,255			78,615			(6,707		)	$	102,163
Inventories		10,539			5,517			—			$	16,056
Other		19,241			7,056			—			$	26,297
Total current assets		78,222			118,011			(6,707		)	189,526
Property, plant and equipment, net		1,620			499,315			—			500,935
Investment in and advances to other equity investee		7,191			199			(7,191		)	199
Other assets		3,020			401,797			—			404,817
Total assets		90,053			1,019,322			(13,898		)	1,095,477
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		30,626			114,432			(6,707		)	138,351
Fair value of derivative instruments		1,499			1,027			—			2,526
Deferred income taxes		477			—			—			477
Current portion of long term debt		—			3,650			—			3,650
Total current liabilities		32,602			119,109			(6,707		)	145,004
Long-term debt		—			588,850			—			588,850
Non-controlling interest in consolidated subsidiary		508			—			302,972			303,480
Other long-term liabilities		15,127			1,200			—			16,327
Total liabilities		48,237			709,159			296,265			1,053,661
Total stockholders’ equity		41,816		#	310,163			(310,163		)	41,816
Total liabilities and stockholders’ equity		$	90,053		$	1,019,322		$	(13,898	)	$	1,095,477

 

 

MarkWest Hydrocarbon, Inc.

Segment Balance Sheet (continued)

(in thousands)

 

 

		December 31, 2005
		MarkWest			MarkWest
		Hydrocarbon			Energy			Eliminating
		Standalone			Partners			Entries			Consolidated
ASSETS
Current assets:
Cash and cash equivalents		$	863		$	20,105		—			$	20,968
Marketable securities		6,070			—			—			6,070
Receivables		38,922			117,978			(11,361		)	145,539
Inventories		26,946			3,554			—			30,500
Other		20,020			6,861			—			26,881
Total current assets		92,821			148,498			(11,361		)	229,958
Property, plant and equipment, net		1,737			492,961						494,698
Investment in and advances to other equity investee		6,668			182			(6,668		)	182
Other assets		3,014			404,452			—			407,466
Total assets		104,240			1,046,093			(18,029		)	1,132,304
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		43,247			133,088			(11,361		)	164,974
Fair value of derivative instruments		—			728			—			728
Deferred income taxes		362			—			—			362
Current portion of long term debt		—			2,738			—			2,738
Total current liabilities		43,609			136,554			(11,361		)	168,802
Long-term debt		7,500			601,262			—			608,762
Non-controlling interest in consolidated subsidiary		508			—			300,507			301,015
Other long-term liabilities		12,641			1,102			—			13,743
Total liabilities		64,258			738,918			289,146			1,092,322
Total stockholders’ equity		39,982			307,175			(307,175		)	39,982
Total liabilities and stockholders’ equity		$	104,240		$	1,046,093		$	(18,029	)	$	1,132,304

 

 

MarkWest Hydrocarbon, Inc.

Operating Statistics

 

		Three Months Ended March 31,
		2006		2005
MarkWest Hydrocarbon Standalone:
Marketing
NGL product sales (gallons)		49,967,000		52,164,000
Wholesale
NGL product sales (gallons)(1)		27,196,000		19,672,332
MarkWest Energy Partners:
Southwest:
East Texas (2)
Gathering systems throughput (Mcf/d)		346,000		287,000
NGL product sales (gallons)		35,436,000		27,612,000
Oklahoma
Foss Lake gathering systems throughput (Mcf/d)		87,600		67,000
Arapaho NGL product sales (gallons)		18,417,000		15,217,000
Other
Appleby gathering systems throughput (Mcf/d)		33,500		28,000
Other gathering systems throughput (Mcf/d)		19,100		17,000
Lateral throughput volumes (Mcf/d)(3)		49,700		52,000
Appalachia:
Natural gas processed for a fee (Mcf/d)(4)		205,000		210,000
NGLs fractionated for a fee (Gal/day)		449,000		462,000
NGL product sales (gallons)		10,482,000		10,765,000
Michigan:
Natural gas processed for a fee (Mcf/d)		6,300		6,900
NGL product sales (gallons)		1,449,000		1,563,000
Crude oil transported for a fee (Bbl/d)		14,000		14,100
Gulf Coast:(5)
Natural gas processed for a fee (Mcf/d)		120,000		NA
NGLs fractionated for a fee (Gal/day)		820,000		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)   The Partnership acquired its East Texas System in late July 2004.  Volumes are for the periods of time since the facility was acquired in 2004.

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