MarkWest Hydrocarbon, Inc. (AMEX: MWP) (the �Company�) today
reported a net loss of $7.3 million for the three months ended June
30, 2007, or $0.61 per diluted share, compared to a net loss of
$2.1 million, or $0.18 per diluted share, for the same period in
2006. For the six months ended June 30, 2007, the Company reported
a net loss of $6.3 million compared to net income of $0.7 million
for the six months ended June 30, 2006. Excluding the non-cash
items described below, income (loss) from operations for the
Standalone segment (as defined below) for the three months ended
June 30, 2007 and June 30, 2006, was $0.3 million and $(0.1)
million, respectively. The reported loss from operations for the
Standalone segment for the three months ended June 30, 2007 and
June 30, 2006, was $13.8 million and $5.7 million, respectively,
and included $14.1 million and $5.6 million, respectively, of
non-cash costs associated with the mark-to-market of derivative
instruments, the revaluation of the long-term shrink obligation,
and non-cash compensation expense. The Company will receive $8.8
million of distributions from its investment in MarkWest Energy
Partners for the second quarter of 2007, which represents a 54
percent increase over $5.7 million of distributions received for
the second quarter of 2006. In part as a result of these increased
distributions, the Company declared a quarterly cash dividend of
$0.36 per share of common stock, for an implied annual rate of
$1.44 per share, which is payable August 21, 2007, to shareholders
of record as of August 9, 2007. This quarterly cash dividend
represents an increase of $0.04 per share, or 13 percent, over the
cash dividend in the first quarter of 2007 and in increase of $0.12
per share, or 50 percent, over the cash dividend in the second
quarter of 2006. �We are pleased with our operating performance and
consistent growth in cash dividends,� said Frank Semple, President
and Chief Executive Officer. �Our financial performance in the
first half of 2007 resulted from MarkWest Energy Partners�
distribution growth as well as consistent strong operating cash
flow performance from our natural gas liquid marketing business.
Cash distributions from our investment in the Partnership were
nearly $9 million for the second quarter, a substantial increase
over the distributions for the second quarter of 2006, and the
Partnership is well positioned for future distribution growth which
will benefit the MarkWest Hydrocarbon shareholders.� �The frac
spread environment remains strong and we continue to take advantage
of the forward markets to lock in favorable long-term frac spread
margins through the first quarter of 2010.� The Company reports its
operations under two business segments, MarkWest Hydrocarbon
Standalone (�Standalone�) and MarkWest Energy Partners (the
�Partnership�). The Standalone business segment consists of the
Company�s natural gas liquid (�NGL�) marketing activities for NGL�s
extracted primarily at MarkWest Energy Partners� Siloam facility
and the management of keep-whole contracts in Appalachia. SECOND
QUARTER 2007 HIGHLIGHTS For the three months ended June 30, 2007,
the Standalone segment reported a loss from operations of $13.8
million, compared to a loss from operations of $5.7 million for the
same period in 2006. The variance was primarily attributable to:
The realized frac spread of $0.43 per gallon in the second quarter
of 2007 versus $0.42 per gallon in the same period in 2006,
combined with a reduction in facility expenses, resulted in a
positive impact on segment operating income of $0.4 million. As
further described below, this positive impact was offset by the
mark-to-market of derivative instruments, the revaluation of the
long-term shrink obligation, and an increase in selling, general
and administrative expenses. The Standalone segment reported a net
unrealized loss of $11.0 million for the mark-to-market of
derivative instruments and the revaluation of the long-term shrink
obligation, both of which are non-cash items. This compares to a
net unrealized loss of $4.6 million for the same items in the
second quarter of 2006, resulting in a negative quarter over
quarter variance of $6.4 million. In addition, selling, general and
administrative expense increased quarter over quarter by $2.3
million, of which $2.2 million is attributable to higher non-cash
compensation expense. For the Partnership segment, the Company�s
share of net income attributable to the Partnership, net of the
eliminating entry for non-controlling interest in net income of a
consolidated subsidiary, was $2.8 million in the second quarter of
2007, down from $3.4 million in the second quarter of 2006. The
decrease is primarily a result of higher non-cash costs associated
with the mark-to-market of derivative instruments and non-cash
compensation expense. The Company will receive $8.8 million of
distributions for the second quarter of 2007, which represents a 54
percent increase over $5.7 million of distributions received for
the second quarter of 2006. The Company will host a conference call
and webcast on Tuesday, August 14, 2007, at 5:00 P.M. ET to review
its second quarter 2007 financial results. Interested parties can
participate in the call by dialing (888)�324-4145, passcode
�MarkWest�, approximately ten minutes prior to the scheduled start
time. A replay of the call will be available through Tuesday,
August 21, 2007 by dialing (866)�393-0878, no passcode required. To
access the webcast, please visit the Investor Relations section of
our website at www.markwest.com. MarkWest Hydrocarbon, Inc. (AMEX:
MWP) controls and operates MarkWest Energy Partners, L.P. (NYSE:
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. Actual results could vary significantly
from those expressed or implied in such statements and are subject
to a number of risks and uncertainties. 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, 2006 as filed with the SEC. You are
urged to carefully review and consider the cautionary statements
and other disclosures made in those filings, specifically those
under the heading �Risk Factors.� We do not undertake any duty to
update any forward-looking statement. MarkWest Hydrocarbon, Inc.
Statement of Operations (Unaudited, in thousands, except per share
amounts) � Three months ended June 30, Six months ended June 30,
2007 � 2006 � 2007 � 2006 � � Revenue: Revenue $ 176,893 $ 186,351
$ 352,290 $ 427,470 Derivative loss (13,913 ) � (13,057 ) � (27,822
) � (14,316 ) Total revenue 162,980 � 173,294 � 324,468 � 413,154 �
� Operating expenses: Purchased product costs 109,507 116,523
213,714 298,151 Facility expenses 18,415 14,313 30,477 27,795
Selling, general and administrative expenses 18,820 13,061 39,535
24,437 Depreciation 9,325 7,778 17,499 15,156 Amortization of
intangible assets 4,168 4,027 8,336 8,043 Accretion of asset
retirement obligations 28 � 26 � 55 � 51 � Total operating expenses
160,263 � 155,728 � 309,616 � 373,633 � � Income from operations
2,717 17,566 14,852 39,521 � Other income (expense): Earnings from
unconsolidated affiliates 1,656 1,228 3,423 2,173 Interest income
1,124 436 3,520 842 Interest expense (9,054 ) (10,798 ) (18,468 )
(21,842 ) Amortization of deferred financing costs and original
issue discount (a component of interest expense) (731 ) (859 )
(1,451 ) (1,684 ) Dividend income 217 109 339 215 Miscellaneous
(expense) income (534 ) 1,517 � (1,406 ) 3,759 � (Loss) income
before non-controlling interest in net income of consolidated
subsidiary and income taxes (4,605 ) 9,199 809 22,984
Non-controlling interest in net income of consolidated subsidiary
(5,562 ) (11,273 ) (9,522 ) (21,817 ) (Loss) income before taxes
(10,167 ) (2,074 ) (8,713 ) 1,167 Provision for income tax benefit
(expense) 2,895 � (58 ) 2,398 � (467 ) Net (loss) income $ (7,272 )
$ (2,132 ) $ (6,315 ) $ 700 � � Net (loss) income per share: Basic
$ (0.61 ) $ (0.18 ) $ (0.53 ) $ 0.06 � Diluted $ (0.61 ) $ (0.18 )
$ (0.53 ) $ 0.06 � � Weighted average number of outstanding shares
of common stock: Basic 11,996 � 11,936 � 11,991 � 11,921 � Diluted
11,996 � 11,936 � 11,991 � 12,046 � MarkWest Hydrocarbon, Inc.
Segment Income (Loss) (Unaudited, in thousands) � MarkWest
Hydrocarbon Standalone MarkWest Energy Partners Consolidating
Entries Total Three months ended June 30, 2007: Revenue: Revenue $
52,159 $ 144,026 $ (19,292 ) $ 176,893 Derivative loss (6,550 )
(7,363 ) - � (13,913 ) Total revenue 45,609 136,663 (19,292 )
162,980 � Purchased product costs 48,706 74,213 (13,412 ) 109,507
Facility expenses 4,206 20,303 (6,094 ) 18,415 Selling, general and
administrative expenses 6,345 12,475 - 18,820 Depreciation 198
9,127 - 9,325 Amortization of intangible assets - 4,168 - 4,168
Accretion of asset retirement and lease obligations - � 28 � - � 28
� (Loss) income from operations (13,846 ) 16,349 214 2,717 � Other
income (expense): � � � Earnings from unconsolidated affiliates -
1,656 - 1,656 Interest income 645 479 - 1,124 Interest expense (63
) (8,991 ) - (9,054 ) Amortization of deferred financing costs (a
component of interest expense) (70 ) (661 ) - (731 ) Dividend
income 136 81 - 217 Miscellaneous expense (2 ) (532 ) - � (534 )
(Loss) income before non-controlling interest in net income of
consolidated subsidiary and income taxes (13,200 ) 8,381 214 (4,605
) Non-controlling interest in net income of consolidated subsidiary
- - (5,562 ) (5,562 ) Interest in net income of consolidated
subsidiary 2,800 � - � (2,800 ) - � (Loss) income before taxes
(10,400 ) 8,381 (8,148 ) (10,167 ) Provision for income tax benefit
(expense) 2,914 � (106 ) 87 � 2,895 � Net (loss) income $ (7,486 )
$ 8,275 � $ (8,061 ) $ (7,272 ) � MarkWest Hydrocarbon Standalone
MarkWest Energy Partners Consolidating Entries Total Three months
ended June 30, 2006: Revenue: Revenue $ 62,189 $ 142,041 $ (17,879
) $ 186,351 Derivative loss (6,156 ) (6,901 ) - � (13,057 ) Total
revenue 56,033 135,140 (17,879 ) 173,294 � Purchased product costs
52,205 76,244 (11,926 ) 116,523 Facility expenses 5,106 15,160
(5,953 ) 14,313 Selling, general and administrative expenses 4,073
8,988 - 13,061 Depreciation 394 7,384 - 7,778 Amortization of
intangible assets - 4,027 - 4,027 Accretion of asset retirement and
lease obligations - � 26 � - � 26 � (Loss) income from operations
(5,745 ) 23,311 - 17,566 � Other income (expense): Earnings from
unconsolidated affiliates - 1,228 - 1,228 Interest income 177 259 -
436 Interest expense (84 ) (10,714 ) - (10,798 ) Amortization of
deferred financing costs (a component of interest expense) (33 )
(826 ) - (859 ) Dividend income 109 - - 109 Miscellaneous income 2
� 1,515 � - � 1,517 � (Loss) income before non-controlling interest
in net income of consolidated subsidiary and income taxes (5,574 )
14,773 - 9,199 Non-controlling interest in net income of
consolidated subsidiary - - (11,273 ) (11,273 ) Interest in net
income of consolidated subsidiary 3,364 � - � (3,364 ) - � (Loss)
income before taxes (2,210 ) 14,773 (14,637 ) (2,074 ) Provision
for income tax benefit (expense) 78 � (679 ) 543 � (58 ) Net (loss)
income $ (2,132 ) $ 14,094 � $ (14,094 ) $ (2,132 ) MarkWest
Hydrocarbon, Inc. Segment Income (Loss) (Unaudited, in thousands) �
MarkWest Hydrocarbon Standalone MarkWest Energy Partners
Consolidating Entries Total Six months ended June 30, 2007:
Revenue: Revenue $ 125,085 $ 265,572 $ (38,367 ) $ 352,290
Derivative loss (13,530 ) (14,292 ) - � (27,822 ) Total revenue
111,555 251,280 (38,367 ) 324,468 � Purchased product costs 101,520
138,218 (26,024 ) 213,714 Facility expenses 9,775 33,259 (12,557 )
30,477 Selling, general and administrative expenses 13,218 26,317 -
39,535 Depreciation 586 16,913 - 17,499 Amortization of intangible
assets - 8,336 - 8,336 Accretion of asset retirement and lease
obligations - � 55 � - � 55 � (Loss) income from operations (13,544
) 28,182 214 14,852 � Other income (expense): Earnings from
unconsolidated affiliates - 3,423 - 3,423 Interest income 1,121
2,399 - 3,520 Interest expense (122 ) (18,346 ) - (18,468 )
Amortization of deferred financing costs (a component of interest
expense) (129 ) (1,322 ) - (1,451 ) Dividend income 258 81 - 339
Miscellaneous expense (145 ) (1,261 ) - � (1,406 ) (Loss) income
before non-controlling interest in net income of consolidated
subsidiary and income taxes (12,561 ) 13,156 214 809
Non-controlling interest in net income of consolidated subsidiary -
- (9,522 ) (9,522 ) Interest in net income of consolidated
subsidiary 3,612 � - � (3,612 ) - � (Loss) income before taxes
(8,949 ) 13,156 (12,920 ) (8,713 ) Provision for income tax benefit
(expense) 2,420 � (125 ) 103 � 2,398 � Net (loss) income $ (6,529 )
$ 13,031 � $ (12,817 ) $ (6,315 ) � MarkWest Hydrocarbon Standalone
MarkWest Energy Partners Consolidating Entries Total Six months
ended June 30, 2006: Revenue: Revenue $ 164,281 $ 298,783 $ (35,594
) $ 427,470 Derivative loss (7,655 ) (6,661 ) - � (14,316 ) Total
revenue 156,626 292,122 (35,594 ) 413,154 � Purchased product costs
144,527 177,205 (23,581 ) 298,151 Facility expenses 10,579 29,229
(12,013 ) 27,795 Selling, general and administrative expenses 7,111
17,326 - 24,437 Depreciation 599 14,557 - 15,156 Amortization of
intangible assets - 8,043 - 8,043 Accretion of asset retirement and
lease obligations - � 51 � - � 51 � (Loss) income from operations
(6,190 ) 45,711 - 39,521 � Other income (expense): Earnings from
unconsolidated affiliates - 2,173 - 2,173 Interest income 363 479 -
842 Interest expense (152 ) (21,690 ) - (21,842 ) Amortization of
deferred financing costs (a component of interest expense) (50 )
(1,634 ) - (1,684 ) Dividend income 215 - - 215 Miscellaneous
income 152 � 3,607 � - � 3,759 � (Loss) income before
non-controlling interest in net income of consolidated subsidiary
and income taxes (5,662 ) 28,646 - 22,984 Non-controlling interest
in net income of consolidated subsidiary - - (21,817 ) (21,817 )
Interest in net income of consolidated subsidiary 6,693 � - �
(6,693 ) - � Income (loss) before taxes 1,031 28,646 (28,510 )
1,167 Provision for income tax (expense) benefit (331 ) (679 ) 543
� (467 ) Net income $ 700 � $ 27,967 � $ (27,967 ) $ 700 � MarkWest
Hydrocarbon, Inc. Segment Balance Sheet (Unaudited, in thousands) �
June 30, 2007 MarkWest Hydrocarbon Standalone MarkWest Energy
Partners Consolidating Entries Total ASSETS Current assets: Cash
and cash equivalents $ 7,503 $ 32,406 $ - $ 39,909 Trading
securities 15,806 - - 15,806 Available for sale securities 9,170 -
- 9,170 Receivables 14,808 118,520 (6,880 ) 126,448 Inventories
33,492 2,853 - 36,345 Fair value of derivative instruments 2,009
1,514 - 3,523 Other current assets 19,710 6,574 - � 26,284 Total
current assets 102,498 161,867 (6,880 ) 257,485 � Property, plant
and equipment, net 4,450 703,862 - 708,312 Investment in and
advances to other equity investee - 61,474 - 61,474 Investment in
consolidated subsidiaries 11,101 - (11,101 ) - Fair value of
derivative instruments 3,840 656 - 4,496 Deferred tax asset 4,000 -
- 4,000 Other long term assets 2,768 350,584 - � 353,352 Total
assets $ 128,657 $ 1,278,443 $ (17,981 ) $ 1,389,119 � LIABILITIES
AND STOCKHOLDERS� EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 28,096 $ 165,445 $ (6,880 ) $ 186,661 Fair
value of derivative instruments 13,333 5,291 - 18,624 Deferred tax
liability 732 - - � 732 Total current liabilities 42,161 170,736
(6,880 ) 206,017 � Long-term debt - 529,030 - 529,030 Deferred tax
liability 476 769 (641 ) 604 Non-controlling interest in
consolidated subsidiary 965 - 556,358 557,323 Fair value of
derivative instruments 13,129 9,084 - 22,213 Other long-term
liabilities 42,793 2,006 - � 44,799 Total liabilities 99,524
711,625 548,837 � 1,359,986 � Total stockholders� equity 29,133
566,818 (566,818 ) 29,133 Total liabilities and stockholders�
equity $ 128,657 $ 1,278,443 $ (17,981 ) $ 1,389,119 MarkWest
Hydrocarbon, Inc. Segment Balance Sheet (Unaudited, in thousands) �
December 31, 2006 MarkWest Hydrocarbon Standalone MarkWest Energy
Partners Consolidating Entries Total ASSETS Current assets: Cash
and cash equivalents $ 14,442 $ 34,402 $ - $ 48,844 Marketable
securities 7,713 - - 7,713 Receivables 16,940 90,780 (6,604)
101,116 Inventories 31,668 3,593 - 35,261 Fair value of derivative
instruments 5,727 4,211 - 9,938 Other current assets 12,217 3,047 -
15,264 Total current assets 88,707 136,033 (6,604) 218,136 �
Property, plant and equipment, net 3,449 550,886 - 554,335
Investment in and advances to other equity investee - 64,240 -
64,240 Investment in consolidated subsidiaries 12,683 - (12,683) -
Fair value of derivative instruments 35 2,759 - 2,794 Other long
term assets 2,874 360,862 - 363,736 Total assets $ 107,748 $
1,114,780 $ (19,287) $ 1,203,241 � LIABILITIES AND STOCKHOLDERS�
EQUITY Current liabilities: Accounts payable and accrued
liabilities $ 19,370 $ 131,684 $ (6,604) $ 144,450 Fair value of
derivative instruments 7,385 91 - 7,476 Deferred tax liability 180
- - 180 Current portion of long term debt - - - - Total current
liabilities 26,935 131,775 (6,604) 152,106 � Long-term debt -
526,865 - 526,865 Deferred tax liability and FIN 48 liability 9,425
769 (641) 9,553 Non-controlling interest in consolidated subsidiary
965 - 440,607 441,572 Fair value of derivative instruments 98 1,362
- 1,460 Other long-term liabilities 28,836 1,360 - 30,196 Total
liabilities 66,259 662,131 433,362 1,161,752 � Total stockholders�
equity 41,489 452,649 (452,649) 41,489 Total liabilities and
stockholders� equity $ 107,748 $ 1,114,780 $ (19,287) $ 1,203,241
MarkWest Hydrocarbon, Inc. Operating Statistics � Three months
ended June 30, Six months ended June 30, 2007 2006 2007 2006
MarkWest Hydrocarbon Standalone: Marketing Hydrocarbon frac spread
sales (gallons) 17,605,000 19,027,000 68,681,000 58,511,000 Maytown
sales (gallons) 10,639,000 10,468,000 22,047,000 20,951,000 Total
NGL product sales (gallons)(1) 28,244,000 29,495,000 90,728,000
79,462,000 � Wholesale NGL product sales (gallons)(2) N/A 7,867,000
N/A 35,063,000 � MarkWest Energy Partners: East Texas: Gathering
systems throughput (Mcf/d) 407,000 375,000 404,000 360,000 NGL
product sales (gallons) 44,486,000 40,461,000 86,274,000 75,897,000
� Oklahoma : Foss Lake gathering system throughput (Mcf/d) 103,700
84,500 99,400 86,100 Woodford gathering system throughput (Mcf/d)
(3) 102,800 N/A 76,900 N/A Grimes gathering system throughput
(Mcf/d) (4) 11,200 N/A 11,900 N/A Arapaho NGL product sales
(gallons) 22,233,000 19,615,000 42,758,000 38,032,000 � Other
Southwest: Appleby gathering system throughput (Mcf/d) 58,000
33,600 53,400 33,600 Other gathering systems throughput (Mcf/d)
9,600 21,900 13,000 20,500 Lateral throughput volumes (Mcf/d)
68,100 93,600 59,200 71,500 � Appalachia: Natural gas processed
(Mcf/d) 196,000 197,000 199,000 201,000 NGLs fractionated (Gal/d)
442,000 450,000 455,000 450,000 NGL product sales (gallons)
10,639,000 10,468,000 22,047,000 20,951,000 � Michigan: Natural gas
throughput (Mcf/d) 6,100 5,800 6,100 5,200 NGL product sales
(gallons) 1,065,000 1,394,000 2,190,000 2,843,000 Crude oil
transported (Bbl/d) 14,200 14,900 14,200 14,600 � Gulf Coast:
Refinery off-gas processed (Mcf/d) 102,000 130,000 115,000 125,000
Liquids fractionated (Bbl/d) 24,100 26,900 24,500 25,900 � � (1)
Represents sales at the Siloam fractionator. � (2) Represents sales
from our wholesale business. In December 2006 the Company
terminated its wholesale agreement. � (3) The Partnership began
construction and operation of the Woodford gathering system in late
2006. � (4) The Partnership acquired the Grimes gathering system in
December 2006.
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