Key takeaways from MarkWest Energy’s 4Q14 earnings (Part 4 of 6)
(Continued from Part 3)
DCF guidance
For 2015, MarkWest Energy (MWE) has forecasted its distributable cash flow (or DCF) to be between $700 million and $800 million. The company expects adjusted EBITDA (or earnings before interest, tax, depreciation, and amortization) between $925 million and $1.025 billion.
The press release noted that MWE’s 2015 projections are “based on its current forecast of operational volumes and prices for natural gas liquids, crude oil, natural gas, and derivative instruments currently outstanding.”
DCF sensitivity
A master limited partnership (or MLP) is not invulnerable to commodity prices, but its commodity exposure is relatively lower compared to an upstream company. Moreover, an MLP has significantly more fee-based income, implying even less sensitivity to changes in commodity prices.
For 2015, MWE estimates that net operating margin will be 89% fee-based.
Distributions
MarkWest is forecasting distributions of approximately $3.70 in 2015 and $3.97 for 2016. From then on, the company expects distribution to grow at an annual growth rate of 10% from 2017 to 2020. MWE’s 2014 distribution was $3.54.
The company is anticipating an annualized distribution coverage ratio between 1.0x and 1.2x during the entire period.
Capex
Following in the steps of its MLP peer Plains All American Pipeline, (PAA), MWE has slashed its capex (or capital expenditure) for 2015 to $1.5 billion from $1.9 billion. MarkWest spent about $2.2 billion in capex in 2014. In 2016, the company expects to spend roughly $1.5 billion “to align with producers’ current drilling programs.”
Chevron (CVX), EOG Resources (EOG), Chesapeake Energy (CHK), have slashed their 2015 capex. These producer companies are components of the Vanguard Energy Fund (VDE). All together, they make up about 15% of the ETF.
To learn more about Plains All American Pipeline’s recent earnings, read A closeup of Plains All American Pipeline’s stock performance.
Continue to Part 5
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