Markwest Hydrocarbon — Investor Conference September 2006
38 slides from Markwest Hydrocarbon's conference presentation, Sep 12, 2006
Slide 1: MarkWest Hydrocarbon, Inc. Investor Conference
MarkWest Hydrocarbon, Inc. Investor Conference September 12 and 14, 2006 Houston and New York
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains forward-looking statements and information. These forward-looking statements, which in many instances can be identified by words like “could,” “may,” “will,” “should,” “expects,” “plans,” “project,” “anticipates,” “believes,” “potential,” and oth
Slide 3: Non-GAAP Measures
Non-GAAP Measures This presentation utilizes the Non-GAAP financial measures of EBITDA, Segment EBITDA and Distributable Cash Flow. We define EBITDA as net income or loss before interest; provision for income taxes; and depreciation and amortization expense. We define Segment EBITDA as segment reven
Slide 4: Agenda
Agenda • Frank Semple – Overview and Strategy • Andy Schroeder – Financial Performance • Randy Nickerson – MWE Overview • Randy Nickerson – NGL Marketing • Andy Schroeder – Dividend Analysis • Frank Semple – Closing Summary • Q&A Investor Conference September 2006 3
Slide 5: Frank Semple: Overview and Strategy
Frank Semple Overview and Strategy Investor Conference September 2006 4
Slide 6: MarkWest Hydrocarbon Overview
MarkWest Hydrocarbon Overview ¾ Founded in 1988, IPO in 1996 ¾ MWP (AMEX), 12 million shares outstanding ¾ 89.2% Ownership of MWE General Partner ¾ 15.3% Ownership of MWE limited units ¾ $40 million working capital facility ¾ 3.7% dividend yield ¾ 120 million gal/year NGL marketing business ¾ Keep w
Slide 7: MarkWest - Structure
MarkWest - Structure MarkWest Energy Partners, L.P. Ticker — MWE (AMEX) 16.2 million units outstanding Price (9/8/06) — $47.00 MarkWest Hydrocarbon, Inc. Market cap (9/8/06) — $760 million Ticker — MWP (AMEX) Key assets: 12.0 million shares outstanding • Southwest Price (9/8/06) —
Slide 8: Business Strategy
Business Strategy • Effective control and financial reporting environment Provide Efficient Corporate • Maintain conservative capital and risk management Structure in Support of MWE strategy and Marketing Business • Continue to focus on SG&A reductions Support the Continued Growth • Investment in un
Slide 9: Andy Schroeder: Financial Performance
Andy Schroeder Financial Performance Investor Conference September 2006 8
Slide 10: Business Strategy
Business Strategy • Effective control and financial reporting environment Provide Efficient Corporate • Maintain conservative capital and risk management Structure in Support of MWE strategy and Marketing Business • Continue to focus on SG&A reductions Support the Continued Growth • Investment in un
Slide 11: Consolidating Income Statement
Consolidating Income Statement Six months ended June 30, 2006 (in millions): Markwest Markwest Hydrocarbon Energy Consolidating Standalone Partners Entries Total Revenues: Revenue $ 164.3 $ 298.8 $ (35.6) $ 427.5 Derivatives (7.7) (6.7) - (14.3) Total Revenue 156.6 292.1 (35.6) 413.2 Purchased produ
Slide 12: MWP Standalone Segment EBITDA
MWP Standalone Segment EBITDA (unaudited, in millions; except per gallon data) MarkWest Hydrocarbon Standalone 3Q05 4Q05 1Q06 2Q06 MarkWest Hydrocarbon: Marketing - NGL product sales (gallons) 33.0 45.5 50.0 29.5 Appalachia - NGL product sales (gallons) 10.1 10.6 10.5 10.5 Total Equity Gallons 22.9
Slide 13: Consolidating Balance Sheet
Consolidating Balance Sheet June 30, 2006 MarkWest (unaudited, in millions) Hydrocarbon MarkWest Consolidating Standalone Energy Partners Entries Consolidated ASSETS Current assets: Cash and cash equivalents $ 5.2 $ 21.1 $ - $ 26.3 Marketable securities 6.5 - - 6.5 Receivables 21.5 75.6 (10.2) 86.9
Slide 14: Business Strategy – Power of the IDR
Business Strategy – Power of the IDR Percent of MWE Distributions received by GP (including IDRs) 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 00 50 00 50 00 50 00 .0 .2 .5 .0 .5 .0 .5 .0 .5 .0 .5 .0 .5 .0 .5 .0 .5 0. 0. 1. 1. 2. 2. 3. $2 $2 $2 $3
Slide 15: Randy Nickerson: MWE Overview
Randy Nickerson MWE Overview Investor Conference September 2006 14
Slide 16: Business Strategy
Business Strategy Provide Efficient Corporate • Effective control and financial reporting environment Structure in Support of MWE • Maintain conservative capital and risk management strategy and Marketing Business • Continue to focus on SG&A reductions Support the Continued • Investment in units and
Slide 17: Grow MWE - Diversified Portfolio of Quality Assets
Grow MWE - Diversified Portfolio of Quality Assets Foss Lake Gathering System Carthage Gathering & • Acquired December 2003 Processing System Michigan Crude Oil Pipeline • 167 miles of gathering pipeline • Acquired July 2004 and Natural Gas System • Gas processing plant • 230 miles of gathering • Cr
Slide 18: MarkWest Energy Named #1 in Natural Gas Customer Satisfaction
“MarkWest Energy Named #1 in Natural Gas Customer Satisfaction” EnergyPoint Research, Inc 2006 Customer Satisfaction Survey Investor Conference September 2006 17
Slide 19: Grow MWE - Expansion CapEx
Business Strategy Grow MWE - Expansion CapEx ($ in millions) $92 $80 $69 to $150 $29 $0 $2 2002 2003 2004 2005 2006 2007 Prelim. Expansion Projects 2006 Plan $10 $13 Appalachia $100 million in organic growth projects since IPO with $5 Starfish Javelina $92 million currently targeted for 2006 $20 Okl
Slide 20: Grow MWE - Diversified Growth Strategy
Grow MWE - Diversified Growth Strategy ($ in millions) $440 Acquisitions $794 million in acquisitions since IPO $243 $111 2002 2003 2004 2005 ($ in millions) EBITDA Over 1300% Growth since IPO $149.2 (annualized) $74.6 $60.8 $43.6 $10.9 $16.4 2002 2003 2004 2005 6 months ended June 30, 2006 (annuali
Slide 21: Grow MWE – Distribution Increases Since IPO
Grow MWE – 12 Distribution Increases Since IPO ce I PO sin n Gr o wt h i str ibutio CAGR) D (15% 84% Common Unit Distribution Investor Conference September 2006 20
Slide 22: MWE Acquisition Success Drives its Growth
MWE Acquisition Success Drives its Growth IPO IPO Present Present Unit Unit Price Price $20.50 +132% $47.65 Annualized Annualized $2.00 +84% $3.68 Distribution Distribution (1) (1) EBITDA EBITDA $10.9 million +1369% $149.2 million Total Total Assets Assets $85.9 million 1110% $1,039.0 million (1) Fr
Slide 23: MWE Distribution Coverage
MWE Distribution Coverage 3 Months Ended 6/30/06 $ millions Net income $ 14.1 Plus: Depreciation and amortization 11.4 Other 4.8 Less: Sustaining capital expenditures (0.6) Distributable cash flow (DCF) $ 29.7 Actual distributions paid $18.7 DCF / Actual distribution coverage ratio 1.59x Units outst
Slide 24: Grow MWE - Distribution Coverage Sensitivity
Grow MWE - Distribution Coverage Sensitivity MarkWest Energy Partners is a midstream provider and because of its contract mix has exposure to commodity price volatility. In response to analysts’ questions about the impact on distributable cash flow and coverage ratio, we want to put this sensitivity
Slide 25: Business Strategy
Business Strategy Provide Efficient Corporate • Effective control and financial reporting environment Structure in Support of MWE • Maintain conservative capital and risk management strategy and Marketing Business • Continue to focus on SG&A reductions Support the Continued Growth • Investment in un
Slide 26: NGL Marketing Business
NGL Marketing Business • NGL marketing – Approximately 120 million equity gallons sold annually – Fees paid to MarkWest Energy approximately $22 million annually – Producer contract restructured in late 2004 – Hedges in place through Q1 2007 • Producer contracts – More than 300 keep-whole gas proces
Slide 27: Andy Schroeder: Financial Strategy
Andy Schroeder Financial Strategy Investor Conference September 2006 26
Slide 28: Business Strategy
Business Strategy Provide Efficient Corporate • Effective control and financial reporting environment Structure in Support of MWE • Maintain conservative capital and risk management strategy and Marketing Business • Continue to focus on SG&A reductions Support the Continued Growth • Investment in un
Slide 29: Hydrocarbon Dividend History
Hydrocarbon Dividend History $1.00 $0.92 $0.87 $0.90 $0.82 $0.82 $0.80 $0.80 $0.80 $0.74 $0.76 $0.78 $0.70 $0.67 $0.69 $0.64 $0.58 $0.58 $0.60 $0.52 $0.50 $0.40 $0.24 $0.30 $0.18 $0.20 $0.08 $0.10 $0.10 $0.13 $0.13 $0.03 $0.03 $0.05 $0.10 $- 3 3 3 4 4 4 5 5 5 6 6 02 03 04 05 00 00 00 00 00 00 00 00
Slide 30: Dividend Durability
Dividend Durability ¾Proforma basis assuming NOLs fully utilized (estimated second half 2006) ¾Assumes Standalone segment is break-even for income tax purposes MWE Quarterly per unit distribution rate $ 0.92 $ 0.96 $ 1.00 $ 1.04 $ 1.08 Quarterly Cash to MWP (millions): Limited units $ 2.3 $ 2.4 $ 2.
Slide 31: Closing Summary
Closing Summary ¾ Significant Value Creation since Formation of MWE ¾ Effective Financial Reporting and Control Environment Continue to be Key Priorities ¾ Optimization of NGL Marketing Business and Effective Risk Management Execution Continue to be Critical Components of the Business Plan ¾ Strong
Slide 32: Q&A
Q&A Investor Conference September 2006 31
Slide 33: Thank You
Thank You 1515 Arapahoe, Tower 2 Suite 700, Denver, CO 80202 303-290-8700 Investor Relations, toll free: 866-858-0482 Email: investorrelations@markwest.com For additional information and/or to be added to our email notifications, visit: www.markwest.com
Slide 34: Appendix
Appendix Investor Conference September 2006 33
Slide 35: Appendix – Risk Factors
Appendix – Risk Factors You should carefully consider each of the risks described below, together with all of the other information contained in the MarkWest Energy Partners, L.P.’s (the “Partnership”) and MarkWest Hydrocarbon, Inc.’s (the “Company”, and singularly or collectively “MarkWest” “us”, “
Slide 36: Appendix – Risk Factors
Appendix – Risk Factors • The Partnership may not have sufficient cash after the establishment of cash reserves and payment of the general partner's fees and expenses to enable it to pay distributions at the current level. • The Company may not have sufficient cash after the establishment of cash re
Slide 37: Appendix – Risk Factors
Appendix – Risk Factors • We have found material weaknesses in our internal controls that require remediation and concluded, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, that our internal controls over financial reporting at December 31, 2005, 2004 and 2003, were not effective. If we f
Slide 38: Reconciliation of MWP Standalone Segment EBITDA to Net Income
Reconciliation of MWP Standalone Segment EBITDA to Net Income (unaudited, in millions) MarkWest Hydrcarbon Standalone 3Q05 4Q05 1Q06 2Q06 Segment EBITDA $ (9.1) $ 0.1 $ (0.2) $ (5.4) Dividend income 0.1 0.1 0.1 0.1 Interest income 0.2 0.1 0.2 0.2 Miscellaneous income (expense) - (0.3) 0.1 - EBITDA (
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