MarkWest Energy Foresees Fee-Based Growth - Analyst Blog

Natural gas processor and distributor, MarkWest Energy Partners LP MWE provided a positive 2014 outlook in its recently held investor conference. The partnership intends to increase its fee-based margin and expects 2014 fee-based net operating margin of over 70%, significantly higher than the 2013 level of 61%.

MarkWest Energy provided 2014 distributable cash flow (DCF) projection of $600–$690 million. It expects year-over-year distribution growth of 7% in 2015 and 10% in 2016. With no incentive distribution rights, the partnership has the ability to pass its entire cash benefit to the unit-holders, thus, facilitating higher distribution growth.

However, the 2014 capital budget was maintained at $2–$3 billion. In the past two years, MarkWest Energy completed 23 major infrastructure projects. The partnership currently has 14 major projects under construction, 7 of which are likely to complete in 2014.

MarkWest Energy expects the Marcellus segment to be the largest contributor of the 2014 projected operating income, constituting about 52%. The Southwest segment is anticipated to contribute around 34% to the 2014 operating income, while Northeast and Utica are expected to contribute 10% and 4% respectively.
 
MarkWest Energy is also focused on increasing its processing capacities as a means to drive growth. The partnership intends to increase its Marcellus and Utica processing capacity to over 4.1 billion cubic feet per day (Bcf/d) by the year-end from the current level of 3.1 Bcf/d.

Following this positive update, MarkWest Energy units gained about 2.4% on Jun 6 to close at $64.79.

Denver, CO-based MarkWest Energy, a master limited partnership, is engaged in the gathering, processing and transmission of natural gas, transportation, fractionation and storage of NGLs as well as the gathering and transportation of crude oil.

MarkWest Energy currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider better-ranked players in the same industry like Boardwalk Pipeline Partners LP BWP, Delek Logistics Partners LP DKL and Magellan Midstream Partners LP MMP. All these stocks sport a Zacks Rank #1 (Strong Buy).