Markwest Energy Partners LP — Investor Day (June 2010)
66 slides from Markwest Energy Partners LP's investor day presentation, Jun 2, 2010
Slide 1: MarkWest Energy Partners 2010 Investor & Analyst Conference
MarkWest Energy Partners 2010 Investor & Analyst Conference June 2, 2010 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,” “planned,” “proposed
Slide 3: Non-GAAP Measures
Non-GAAP Measures Distributable Cash Flow and Adjusted EBITDA are not measures of performance calculated in accordance with GAAP, and should not be considered separately from or as a substitute for net income, income from operations, or cash flow as reflected in our financial statements. The GAAP me
Slide 4: Agenda
Agenda ■ MarkWest Overview …………………................. Frank Semple ■ Operations Overview ………………………….… John Mollenkopf ■ Growth and Expansion Opportunities………… Randy Nickerson ■ Financial Overview ……………………….……… Nancy Buese ■ Questions & Answers 44
Slide 5: MarkWest Overview
MarkWest Overview Frank Semple
Slide 6: MarkWest Key Investment Considerations
MarkWest Key Investment Considerations ■ Leading presence in five core natural gas producing regions of the U.S. High Quality / Diversified Assets ■ Key long-term contracts with high-quality producers to develop the Marcellus Shale, Woodford Shale, Haynesville Shale, and Granite Wash formation ` ■ N
Slide 7: Geographic Footprint
Geographic Footprint ■S OUTHWEST ■N ORTHEAST East Texas Appalachia 500 MMcf/d gathering capacity Four processing plants with 280 MMcf/d cryogenic processing combined 330 MMcf/d capacity processing capacity 24,000 Bbl/d NGL Western Oklahoma fractionation facility 275 5 MMcf/d / gathering g
Slide 8: Growth Driven by Customer Satisfaction
Growth Driven by Customer Satisfaction Since 2006, MarkWest has Ranked # 1 or #2 in Natural Gas Midstream Services Customer Satisfaction EnergyPoint Research, Inc. Customer Satisfaction Survey R A N G E RESOURCES 88
Slide 9: MarkWest's Commitment to Major Unconventional Resource Plays
MarkWest’s Commitment to Major Unconventional Resource Plays MarkWest’s MarkWest s Role in Emerging Resource Plays U S Gas Resource Plays U.S. MarkWest is the largest gatherer in the Woodford with a system that covers more than 750 square miles of the core Woodford shale. MarkWest’s East Texas s
Slide 10: Strong Distribution Growth
Strong Distribution Growth 13% Compound Annual Distribution Growth since May 2002 IPO $2.75 $2 50 $2.50 $2.25 $2.00 Unit $1 75 $1.75 Distribution per Common U $1.50 $1.25 $1.00 $0.75 $0.50 $0.25 $0.00 2002* 2003 2004 2005 2006 2007 2008 2009 2010F* * Distributions have been annualized annualized. 10
Slide 11: Operations Overview
Operations Overview John Mollenkopf
Slide 12: MarkWest Operations Overview and Philosophy
MarkWest Operations Overview and Philosophy Overview ■ Midstream services for over 2 BCF of gas per day ■ Assets serving major producing basins including several of the new major resource plays in the United States ■ Diverse contractual mix Philosophy ■ Provide exceptional customer service ■ Focus o
Slide 13: Energy Point Survey
Energy Point Survey ■ Providing quality midstream services for our customers is a top priority, and we are very proud of our ranking in the recent EnergyPoint Research Inc. Customer Satisfaction Survey. Ranked 1st or 2nd overall in 2006/2009 Midstream Services Customer Satisfaction Surveys Ranke
Slide 14: Historical Capital Spending
Historical Capital Spending Shifted our capital focus from acquisitions and base production expansion to organic growth projects in major resource plays beginning in 2006 M kW t C MarkWest Capital it l SSpending di 600 500 400 $ in millions 300 200 100 0 2004 2005 2006 2007 2008 2009 2010F Acquisiti
Slide 15: Diverse Gathering Volumes in Major Producing Basins
Diverse Gathering Volumes in Major Producing Basins MarkWest Gathered Volumes 1,600 1,400 1,200 1,000 MMcf/d 800 600 400 200 - 2004 2005 2006 2007 2008 2009 2010F Appalachia Texas W Oklahoma W. S E Oklahoma (Woodford) S.E. Liberty (Marcellus) 15
Slide 16: Rich-Gas Economics
Rich-Gas Economics RANGE RESOURCES 16
Slide 17: Segment Operating Income
Segment Operating Income 450 400 350 Operating Income ($ in millions) 300 250 200 Segment O 150 100 50 0 2004 2005 2006 2007 2008 2009 Note: adjusted for realized derivative activity. 17
Slide 18: Operating Segments – Contributions to Operating Income
Operating Segments – Contributions to Operating Income 2009 Actual Segment Operating Income Liberty 4% Gulf Coast 13% Southwest 62% Northeast 21% 2010 Forecasted Segment Operating Income Liberty 8% Southwest 55% Gulf Coast 11% Northeast 26% NOTE: We define Segment Operating Income as segment revenue
Slide 19: Diverse Contract Terms – Percentage by Contract Type
Diverse Contract Terms – Percentage by Contract Type Increasing Fee-based Percentage Over Time 2009 Actual Net Operating Margin 2010 Forecasted Net Operating Margin Keep-Whole Keep Whole 31% Keep-Whole Fee-Based 35% 39% Fee-Based 44% POP&POI POP&POI 30% 21% NOTE: Net Operating Margin is calculated a
Slide 20: Southwest Segment
Southwest Segment East Texas, Western Oklahoma, and Southeast Oklahoma
Slide 21: East Texas and Other Southwest Overview
East Texas and Other Southwest Overview East Texas ■ Competitive advantages □ Located in prolific East Texas Basin • Cotton Valley, Travis Peak and Pettit formations • Haynesville Shale – Currently gathering ~40 MMcf/d and expected to grow □ Multiple gas and NGL outlets to downstream markets □ Effic
Slide 22: Western Oklahoma System Overview
Western Oklahoma System Overview ■ Competitive advantages Located in prolific Anadarko Basin and the Granite Wash formation (in the Texas panhandle) Low and medium pressure service Arapaho Plant Modern highly fuel efficient and reliable with minimal losses F Foss Lake L k ■ Market Access Int
Slide 23: Southeast Oklahoma System Overview
Southeast Oklahoma System Overview ■ Competitive advantages □ Largest Woodford Shale Gathering System □ Low pressure, highly reliable and fuel efficient □ In I excess off 160,000 160 000 dedicated d di t d acres iin th the W Woodford df d Sh Shale l play l and the Hartshorne coal bed methane (CBM) p
Slide 24: Gulf Coast Segment
Gulf Coast Segment Javelina
Slide 25: Javelina Processing Facility Overview
Javelina Processing Facility Overview ■ Competitive advantages □ Javelina provides critical services for six refineries in Corpus Christi, Texas □ All refinery off-gas is committed to Javelina under long-term contracts □ Excellent relationships with refinery customers □ Efficient off-gas processing
Slide 26: Northeast Segment
Northeast Segment Appalachia and Michigan
Slide 27: Appalachia Overview
Appalachia Overview ■ Competitive advantages □ MarkWest is the largest gas processor in the prolific Appalachian Basin, a critical source of natural gas and natural gas liquids to Northeastern markets, with more than 20 years of operational experience ■ Gas processing capacity □ Approximately A i t
Slide 28: Liberty Segment
Liberty Segment
Slide 29: MarkWest Liberty Overview
MarkWest Liberty Overview ■ Joint Venture with The Energy & Minerals Group □ Partners one of the best midstream companies with a strong financial partner that shares a common view towards the value of the Marcellus ■ Competitive advantages □ Significant g first mover advantage g in the p prolific Ma
Slide 30: Liberty Marcellus Project Schedule
Liberty Marcellus Project Schedule MarkWest Liberty is developing integrated and scalable gathering, processing, fractionation, and marketing infrastructure to support production in excess of 1 Bcf/d Gathering Facilities Houston Processing Complex HP Pipelines (4Q09) 55 miles Houston I (1Q09) 35 MMc
Slide 31: Houston Plant Site – June 2008
Houston Plant Site – June 2008 31 31
Slide 32: Houston Plant Site – September 2008
Houston Plant Site – September 2008 32 32
Slide 33: Houston Plant Site – September 2009
Houston Plant Site – September 2009 33 33
Slide 34: Majorsville Plant Site – May 2010
Majorsville Plant Site – May 2010 34 34
Slide 35: Operations Summary
Operations Summary ■ High-quality Hi h lit assets t iin M Marcellus, ll A Appalachia, l hi W Woodford, df d E Eastt T Texas, G Granite it Wash, and Javelina ■ Impressive and diverse customer base ■ Diverse contractual mix with growing percentage of fee-based contracts ■ Best-of-class operations and
Slide 36: Growth and Expansion Opportunities
Growth and Expansion Opportunities Randy Nickerson
Slide 37: MarkWest's Commitment to Major Unconventional Resource Plays
MarkWest’s Commitment to Major Unconventional Resource Plays MarkWest’s MarkWest s Role in Emerging Resource Plays U S Gas Resource Plays U.S. MarkWest is the largest gatherer in the Woodford with a system that covers more than 750 square miles of the core Woodford shale. MarkWest’s East Texas s
Slide 38: Diverse Volume Growth
Diverse Volume Growth MarkWest Gathered Volumes 1,600 1,400 1,200 1 000 1,000 M j Resource Major R Pl Plays MMcf/d 800 600 400 Tight Sand 200 - 2004 2005 2006 2007 2008 2009 2010F 38
Slide 39: Southwest Business Unit
Southwest Business Unit ■ Woodford W df d Shale Sh l MarkWest is the largest gatherer with a system that covers more than 750 square miles of the core Woodford shale There are thousands of additional well sites that are committed to or primarily served by MarkWest Woodford is leading most of t
Slide 40: Southwest Business Unit
Southwest Business Unit ■ Woodford Shale MarkWest is the largest gatherer with a system that covers more than 750 square miles of the core Woodford shale There are thousands of additional well Haynesville sites that are committed to or primarily served by MarkWest Woodford is leading most of t
Slide 41: Southwest Business Unit
Southwest Business Unit ■ Woodford Shale MarkWest is the largest gatherer with a system that covers more than 750 square miles of the core Woodford shale There are thousands of additional well sites that are committed to or primarily served by M kW t MarkWest Woodford is leading most of the ot
Slide 42: Long-term Appalachian History
Long-term Appalachian History Long before the Marcellus was identified as an important new emerging shale play, play we understood the importance of gas processing and NGL fractionation in the hydrocarbon-rich areas of Southwest PA MarkWest is the largest gas processor and fractionator in the Appa
Slide 43: Vertical Integration is Essential
Vertical Integration is Essential 43
Slide 44: NGL Marketing in the Marcellus
NGL Marketing in the Marcellus MarkWest has successfully marketed NGLs in Appalachia for more than 20 years ■ The Northeast p provides p premium markets for NGLs produced in the Marcellus; however, Must be able to produce purity products Must have marketing options including truck, rail, and pip
Slide 45: Strong Market for Marcellus NGLs in the Northeast
Strong Market for Marcellus NGLs in the Northeast Bbls/d Winter Propane Market vs MarkWest Production Bbls/d Summer Propane Market vs MarkWest Production 120,000 80,000 Long Haul Long Haul Markets 70,000 Markets 100,000 60,000 Rail - Short Short Haul Haul 80,000 Markets 50 000 50,000 Pipeline Delive
Slide 46: MarkWest Liberty – Current
MarkWest Liberty – Current 625 MMcf/d processing (mid 2011) ~100 miles of HP/LP gathering pipeline 60,000 bbl/d fractionation (mid 2011) Rich Gas Dry Gas Huron Marcellus 46
Slide 47: MarkWest Liberty – 2012
MarkWest Liberty – 2012 Huron Marcellus 47
Slide 48: MarkWest Liberty – 2015
MarkWest Liberty – 2015 Huron Marcellus 48
Slide 49: MarkWest Liberty – 2020
MarkWest Liberty – 2020 Huron Marcellus 49
Slide 50: Marcellus Ethane
Marcellus Ethane A purity-ethane project to the Gulf Coast will maximize producer economics MarkWest conducted a detailed analysis of the U.S. ethane markets in order to identify the best possible market for Marcellus Shale ethane A critical component of the analysis included in-depth discussion
Slide 51: The Mariner Project
The Mariner Project MarkWest Liberty will construct a 45-mile liquid ethane pipeline Sunoco Logistics will convert its Sunoco 8” Sunoco existing 250 250-mile, mile 8-inch 8 inch refined Pipeline Phil d l hi Philadelphia products pipeline to liquid ethane Storage and service Docks The pipeline
Slide 52: Financial Overview
Financial Overview Nancy Buese
Slide 53: Financial Strategy Overview
Financial Strategy Overview MarkWest is a growth MLP focused on generating strong financial returns and delivering long-term, sustainable distribution growth while maintaining an appropriate distribution coverage ratio Flexible and responsive p to p producer requirements q Increasing percent o
Slide 54: 2010 Growth Capital Forecast
2010 Growth Capital Forecast 2010 growth capital forecast in a range of $300 million to $350 million Southwest $90MM to $110MM Liberty Southwest • Rich gas gathering system • Amine plant • Houston III processing plant • Haynesville gathering lines • Majorsville I processing plant • Compressor / pipe
Slide 55: Risk Management Program
Risk Management Program ■ We remain committed to the disciplined execution of our hedging program to manage the risk associated with commodity price exposure and to meet our distribution di t ib ti objectives bj ti ■ Direct product and crude proxy hedges are executed on a 36-month time horizon using
Slide 56: Percentage Hedged
Risk Management Program Th Three months th ended d d March M h 31, 31 2010 Th Three months th ended d d March M h 31,31 2010 Net Operating Margin by Contract Type Net Operating Margin including Hedges POP&POI Commodity Fee-Based 27% Based 31% Hedged 24% 43% Keep-Whole 42% Fee-Based 33% 2010 – 2013 C
Slide 57: Capital Structure
Capital Structure Pro forma P f As of As of As of ($ in millions) December 31, 2009 March 31, 2010 March 31, 2010 Cash $ 97.8 $ 105.2 $ 194.2 Credit Facility (1) 59.3 53.0 - 6-7/8% Senior Notes due 2014 216.9 217.3 217.3 6-7/8% Senior Notes due 2014 120.7 121.7 121.7 8-1/2% Senior Notes due 2016 274
Slide 58: Capital Markets and Liquidity Update
Capital Markets and Liquidity Update In early 2010, Moody’s and Standard & Poor’s upgraded MarkWest’s credit ratings to Ba3 and BB- The primary drivers behind the ratings upgrades include MarkWest MarkWest’ss successful track record in executing its growth strategy, improved liquidity and streng
Slide 59: Analyst Summary
Analyst Summary Financial Institution Target Price Rating Bank of America / Merrill Lynch $ 35.00 Buy Barclays $ 34.00 Overweight J.P. Morgan $ 33.00 Overweight Morgan Keegan $ 32.50 Market Perform Morgan Stanley $ 34.00 Equal-weight RBC Capital Markets $ 35.00 Sector Perform Stifel Nicolaus $ 32.50
Slide 60: The Key is Sustainable Distribution Growth
The Key is Sustainable Distribution Growth Long-term sustainability is a critical consideration as we evaluate our distribution decisions Distribution coverage was 1.4 times in 1Q 2010 and 1.2 times for the full-year 2009 Since going public in 2002, our CAGR for distributions is 13% Our 2010
Slide 61: Keys to Success
Keys to Success ■ Maintain stronghold in key resource plays with high-quality assets ■ Execute growth projects that are well diversified across the asset base ■ Provide best-of-class midstream services for our producer customers ■ Preserve strong financial profile ■ Deliver sustainable distribution
Slide 62: Questions & Answers
Questions & Answers
Slide 63: Appendix
Appendix
Slide 64: Distribution Coverage
Distribution Coverage Year ended Three months December 31, ended ($ in millions) 2009 March 31, 2010 Net income (loss) $ (113.4) $ 26.0 Depreciation, amortization, impairment, and other non-cash operating expenses 144.4 38.6 Non-cash (earnings) loss from unconsolidated affiliates (3.5) 0.1 Contribut
Slide 65: Reconciliation of Adjusted EBITDA
Reconciliation of Adjusted EBITDA Year ended Year ended LTM ended December 31, December 31, March 31, ($ in millions) 2008 2009 2010 Net income (loss) $ 204.8 $ (113.4) $ (57.7) Non-cash compensation expense 14.9 3.9 5.9 Non-cash derivative activity (263.1) 222.8 158.3 Interest expense1 72.9 94.6 99
Slide 66: Contact details
1515 Arapahoe Street Tower 2, Suite 700 Denver, Colorado 80202 Phone: 303-925-9200 Investor Relations: 866-858-0482 Email: investorrelations@markwest.com Website: www.markwest.com