Markwest Hydrocarbon — Deutsche Bank 2007 Leveraged Finance Conference
29 slides from Markwest Hydrocarbon's conference presentation, Oct 3, 2007
Slide 1: Deutsche Bank 2007 Leveraged Finance Conference
Deutsche Bank 2007 Leveraged Finance Conference Nancy Buese – Senior Vice President and Chief Financial Officer Andy Schroeder – Vice President Finance and Treasurer October 3, 2007
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: Joint Proxy Statement / Prospectus
Joint Proxy Statement / Prospectus MarkWest Energy Partners and MarkWest Hydrocarbon will file a joint proxy statement/prospectus and other documents with the Securities and Exchange Commission (the “SEC”) in relation to the merger transaction announced on September 5, 2007. Investors and security h
Slide 4: Non-GAAP Measures
Non-GAAP Measures This presentation utilizes the Non-GAAP financial measures of Adjusted EBITDA and Distributable Cash Flow. We define Adjusted EBITDA as net income or loss before interest, provision for income taxes, depreciation and amortization expense, non-cash compensation expense, and non-cash
Slide 5: MarkWest Structure
Owns 15.2% of MWE MarkWest Structure MarkWest Hydrocarbon, Inc. Ticker — MWP (AMEX) 12.0 million shares outstanding Price (9/28/07) — $58.13 Market cap (9/28/07) — $698 million Key assets: 4.9 million units in MWE 89.7% of MWE General Partner Gas and natural gas liquid marketing No debt outstanding
Slide 6: Benefits of Merger
Benefits of Merger Eliminate the IDRs and improve our equity cost of capital Energy Partners will exchange a new class of limited partner equity units in exchange for the IDRs, as well as for the GP interest and the existing limited units owned by Hydrocarbon Reduce go-forward cost of equity and str
Slide 7: Post Merger Corporate Structure
Post Merger Corporate Structure Ownership Structure – Pro Forma Ownership Structure – Current Public 31.4 MM MWE Common Units MarkWest Energy GP, L.L.C. MarkWest Energy Partners, L.P. 36.5 MM Total Common Units 2.0% G.P. Interest and IDRs MarkWest Hydrocarbon, Inc. 4.9MM MWE Common Units 89.7% Offic
Slide 8: Overview of Merger Agreement
Overview of Merger Agreement In early September 2007, MarkWest Energy Partners and MarkWest Hydrocarbon entered into a definitive redemption and merger agreement, valued at approximately $734 million Hydrocarbon shareholders will receive consideration of approximately 15.4 million common units of En
Slide 9: Overview of Merger Agreement continued
Overview of Merger Agreement continued Other than the issuance of common units to acquire the outstanding shares of Hydrocarbon and to acquire certain interests in the general partner of Energy Partners, Energy Partners does not anticipate issuing units to raise equity capital to consummate the merg
Slide 10: Pro-Forma DCF per Unit Analysis for Merger
Pro-Forma DCF per Unit Analysis for Merger (in millions of $ and units) 2007 Pro-Forma Without Merger 2007 Pro-Forma With Merger DCF 140.0 $ DCF Allocation Units GP LP Common 48.0 68% Distributed (1) 104.8 $ 27.5 $ 77.4 $ Class A 22.5 32% Total Limited 70.5 DCF Allocation Undistributed 35.2 $ 17.6 $
Slide 11: MWE Investment Highlights
MWE Investment Highlights High-quality, diverse portfolio of midstream assets serving very prolific natural gas basins in the US Ranked #1 in natural gas customer satisfaction (EnergyPoint Research, Inc. 2006 Customer Satisfaction Survey) Successful track record of accretive acquisitions and organic
Slide 12: MWE: Proven Results Since IPO
(1) Adjusted for the 2:1 unit split effective on February 28, 2007. (2) From year ended December 31, 2002, to LTM as of June 30, 2007. See appendix for reconciliation of Adjusted EBITDA to Net Income. MWE: Proven Results Since IPO $85.9 million $1,278.4 million +1,388% Total Assets $11.0 million $17
Slide 13: MWE: Consistent Distribution Growth Since IPO
MWE: Consistent Distribution Growth Since IPO 112% Distribution Growth since IPO (16% CAGR) Common Unit Distribution $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07
Slide 14: Western Oklahoma, Appalachia, Carthage, Michigan and other assets
Western Oklahoma Gathering Systems and Processing Plant Foss Lake and Arapaho acquired in December 2003 JMA Grimes acquired in December 2006 105 MMcf/d gathering capacity 100 MMcf/d processing plant (expanding to 160 MMcf/d) Appalachia 5 processing plants with 350 MMcf/d capacity NGL fractionation p
Slide 15: Growth Driven by Customer Satisfaction
“MarkWest Energy Named #1 in Natural Gas Customer Satisfaction” EnergyPoint Research, Inc. 2006 Customer Satisfaction Survey Growth Driven by Customer Satisfaction
Slide 16: Strategic Investments Drive Increasing Return
Capital Investment $ millions $ millions Adjusted EBITDA* *See appendix for reconciliation of Adjusted EBITDA to Net Income. Acquisitions Expansion capital Strategic Investments Drive Increasing Return $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 2003 2004 2005 2006 2007F $0 $20 $40 $60 $80 $
Slide 17: Expansion Capex Summary
Expansion Capex Summary 2007 expansion capital forecast of $287 million ($139 million actual expenditures thru 2Q07) Woodford Appalachia Other SW Javelina Oklahoma East Texas Oklahoma Woodford project development $196.6M Compressor additions/other expansion $10.2M Processing plant expansion $5.0M We
Slide 18: Southeast Oklahoma – Woodford Shale Long-term Expansion Opportunities
Southeast Oklahoma – Woodford Shale Long-term Expansion Opportunities Key Attributes of the gathering system Highly-reliable, low-pressure header system Gathering, compression, dehydration and treating with significant market options Gathering system will cover 200 square miles in four counties of A
Slide 19: Southeast Oklahoma – Woodford Shale Capital Expenditure Forecast
Southeast Oklahoma – Woodford Shale Long-term Expansion Opportunities Capital expenditure forecast $225 million by end of 2007 (including 2006 spend) Estimated $350 million through 2011 Current project status Assumed all full-gathering operations on May 1 Acquired and installed approximately 200 mil
Slide 20: Diversified Operations
Diversified Operations (1) As defined in our Quarterly Report on Form 10-Q, Net Operating Margin is calculated as total revenues less purchased product costs. (2) Keep-whole exposure largely offset by long natural gas position derived from POI and natural gas contracts. POI & Natural Gas 0% (2) Net
Slide 21: Risk Management Program
Risk Management Program We have an ongoing hedge program, designed to manage exposure to commodity price risk, which is primarily due to our long NGL position Hedges are executed on a 36-month time horizon, using a combination of collars and swaps, and direct product and crude proxy hedges We are fu
Slide 22: MWE Capital Structure
MWE Capital Structure As of June 30, 2007 As of December 31, 2006 ($ in millions) LTM Adjusted EBITDA / Interest Expense $ 46.1 LTM Interest expense Total Debt / Capitalization Total Debt / LTM Adjusted EBITDA $ 1,095.8 Total Capitalization Total Debt 8-1/2% Senior Notes due 2016 Total Partners' Cap
Slide 23: MWE Distribution Coverage
Six months ended June 30, 2007 Year ended December 31, 2006 ($ in millions) 25.3 46.1 Depreciation, amortization, and accretion 17.7 (6.2) Non-cash derivative activity 1.59x $ 74.0 $ 117.9 (2.3) 10.2 $ 70.1 Plus: 1.34x Distribution coverage ratio $ 51.0 Distributions paid Maintenance capital expendi
Slide 24: 2007 Guidance and Key Assumptions
2007 Guidance and Key Assumptions 2007 Financial Guidance Segment operating income of $150 million to $160 million Distributable cash flow of $130 million to $140 million Expansion capital expenditures in the $285 million to $290 million range, of which approximately $200 million will be related to
Slide 25: Investment Highlights
Investment Highlights High-quality, diverse portfolio of midstream assets serving very prolific natural gas basins in the US Ranked #1 in natural gas customer satisfaction (EnergyPoint Research, Inc. 2006 Customer Satisfaction Survey) Successful track record of accretive acquisitions and organic exp
Slide 26: Appendix
MARKWEST Appendix
Slide 27: Reconciliation of Distributable Cash Flow to Net Income
Six months ended June 30, 2007 Year ended December 31, 2006 ($ in millions) (1.9) (2.3) Maintenance capital expenditures 17.7 (6.2) Non-cash derivative activity 25.3 46.1 Depreciation, amortization, and accretion (3.4) (5.3) Non-cash earnings from unconsolidated affiliates $ 117.9 9.7 (9.4) $ 70.1 $
Slide 28: Reconciliation of Adjusted EBITDA to Net Income
Year ended December 31, $ 4.8 - 2003 46.1 49.8 29.2 Interest expense 0.2 0.8 - - Taxes 4.8 (6.2) 0.7 Non-cash derivative activity $ 10.0 48.7 46.0 29.2 Depreciation and amortization 21.7 15.2 3.1 Non-cash compensation expense $ 2.4 $ 64.6 LTM 2Q07 ($ in millions) $ 55.1 $ 70.1 Net Income Adjusted EB
Slide 29: Contact details
1515 Arapahoe Street Tower 2 Suite 700 Denver, CO 80202 Phone: 303-925-9200 Investor Relations: 866-858-0482 Email: investorrelations@markwest.com Website: www.markwest.com
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