MWP Markwest Hydrocarbon,

DENVER, May 8 /PRNewswire-FirstCall/ -- 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 2.2 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 $4.2 million in the first quarter of 2006 compared to a $1.2 million decrease in 2005, resulting in a $5.4 million positive impact to the quarter-over-quarter comparison. Our derivative activity, also a non-cash item, resulted in a negative $1.5 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 $2.3 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: 1-866-249-6463. A replay of the call will be available through May 16, 2006 by dialing 1-800-405-2236 and entering the following passcode: 11059923#. To access the webcast, please visit our website at http://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 MarkWest Hydrocarbon Energy Eliminating Standalone Partners Entries Total ------------------------------------------------ Quarter 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 lease obligations -- 25 -- 25 Operating income (loss) (445) 22,400 -- 21,955 Other income (expense): Earnings from unconsolidated subsidiary -- 945 -- 945 Interest income 186 220 -- 406 Interest expense (68) (10,976) -- (11,044) Amortization of deferred financing costs (a component of interest expense) (17) (808) -- (825) Dividend income 106 -- -- 106 Other income 150 2,092 -- 2,242 Income before non-controlling interest in net income of consolidated subsidiary and income taxes (88) 13,873 -- 13,785 Income tax expense (409) -- -- (409) Non-controlling interest in net income of consolidated subsidiary -- -- (10,544) (10,544) Net income (loss) $(497) $13,873 $(10,544) $2,832 MarkWest MarkWest Hydrocarbon Energy Eliminating Standalone Partners Entries Total ------------------------------------------------ Quarter 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 -- 2,095 -- 2,095 Accretion of asset retirement and lease obligations -- 10 -- 10 Operating income (loss) 995 8,451 -- 9,446 Other income (expense): Interest income 182 67 -- 249 Interest expense (30) (3,674) -- (3,704) Amortization of deferred financing costs (a component of interest expense) (61) (475) -- (536) Dividend income 92 -- -- 92 Other income 191 (104) -- 87 Income before non-controlling interest in net income of consolidated subsidiary and income taxes 1,369 4,265 -- 5,634 Income tax expense (770) -- -- (770) Non-controlling interest in net income of consolidated subsidiary -- -- (3,325) (3,325) Net income (loss) $599 $4,265 $(3,325) $1,539 MarkWest Hydrocarbon, Inc. Segment Balance Sheet (in thousands) March 31, 2006 --------------------------------------------------- MarkWest MarkWest Hydrocarbon Energy Eliminating ASSETS Standalone Partners Entries Consolidated ----------- --------- ----------- ------------ 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. DATASOURCE: MarkWest Hydrocarbon, Inc. CONTACT: Frank Semple, President and CEO, or James Ivey, CFO, or Andy Schroeder, VP of Finance/Treasurer, all of MarkWest Hydrocarbon, Inc., +1-303-290-8700, Web site: http://www.markwest.com/

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