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MarkWest Energy's Other Areas
While MarkWest Energy Partners (NYSE:MWE) is focusing the majority of its capital and attention on building midstream infrastructure to serve the Marcellus Shale, the company also plans considerable investment in other areas of the United States.
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2012 Capital Plan
MarkWest Energy has budgeted from $1.1 billion to $1.5 billion in 2012, with most of the spending dedicated to gathering and processing future oil and gas production from the Liberty region. The company also plans to handle its rapidly growing productions from other plays in the onshore U.S. The company's discounted cash flow forecast for 2012 is anywhere between $440 million to $500 million.
SEE: Taking Stock Of Discounted Cash Flow
Southwest
MarkWest Energy is active in the Southwestern U.S. and this segment generated 54% of the company's operating income in 2011. The company estimates that this share will decline to 45% in 2012. This segment spans across Oklahoma, Texas, New Mexico and Louisiana and serves a number of growing plays in those states, including the Woodford Shale, Granite Wash and Haynesville Shale.
MarkWest Energy is currently expanding the company's footprint here with the construction of the Carthage East facility, which will add 120 million cubic feet per day of cryogenic processing capacity in the East Texas area. The company plans to spend from $80 to $100 million in capital in the Southwest segment in 2012. Anadarko Petroleum (NYSE:APC) is active in East Texas and recently contracted with the company to use this facility to process future natural gas production from the area.
SEE: Natural Gas Industry: An Investment Guide
Gulf Coast
MarkWest Energy's Gulf Coast segment is the company's smallest and generated 10% of operating income in 2011. This percentage is expected to decline to 6% in 2012 as the company directs its growth capital elsewhere. The Javelina Processing Facility provides fractionation and other services to several local refineries in the area and MarkWest Energy plans to spend between $5 million and $15 million in capital in this segment in 2012.
Northeast
MarkWest Energy's Northeast segment was responsible for 25% of operating income in 2011, and this percentage is set to decline to 23% in 2012. This segment serves Kentucky, West Virginia and Michigan and provides processing and other services to operators active in various plays in these areas. The company also owns a 250-mile crude oil pipeline that connects to the larger Lakehead Pipeline System.
SEE: How Does Crude Oil Affect Gas Prices
MarkWest Energy has allocated between $35 million and $65 million in capital for the Northeast segment in 2012, and is building an expansion to the Langley natural gas processing facility. The expansion will add 150 million cubic feet per day of processing capacity to this plant. MarkWest Energy purchased this system from EQT (NYSE:EQT) for $230 million in early 2011.
The Bottom Line
Although MarkWest Energy is counting on the expansion of Marcellus Shale development to help the company generate most of its growth over the next few years. The company is also active in other regions of the U.S. The company plans to leverage some growth off these in 2012 and beyond.
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.
2012 Capital Plan
MarkWest Energy has budgeted from $1.1 billion to $1.5 billion in 2012, with most of the spending dedicated to gathering and processing future oil and gas production from the Liberty region. The company also plans to handle its rapidly growing productions from other plays in the onshore U.S. The company's discounted cash flow forecast for 2012 is anywhere between $440 million to $500 million.
SEE: Taking Stock Of Discounted Cash Flow
Southwest
MarkWest Energy is active in the Southwestern U.S. and this segment generated 54% of the company's operating income in 2011. The company estimates that this share will decline to 45% in 2012. This segment spans across Oklahoma, Texas, New Mexico and Louisiana and serves a number of growing plays in those states, including the Woodford Shale, Granite Wash and Haynesville Shale.
MarkWest Energy is currently expanding the company's footprint here with the construction of the Carthage East facility, which will add 120 million cubic feet per day of cryogenic processing capacity in the East Texas area. The company plans to spend from $80 to $100 million in capital in the Southwest segment in 2012. Anadarko Petroleum (NYSE:APC) is active in East Texas and recently contracted with the company to use this facility to process future natural gas production from the area.
Gulf Coast
MarkWest Energy's Gulf Coast segment is the company's smallest and generated 10% of operating income in 2011. This percentage is expected to decline to 6% in 2012 as the company directs its growth capital elsewhere. The Javelina Processing Facility provides fractionation and other services to several local refineries in the area and MarkWest Energy plans to spend between $5 million and $15 million in capital in this segment in 2012.
Northeast
MarkWest Energy's Northeast segment was responsible for 25% of operating income in 2011, and this percentage is set to decline to 23% in 2012. This segment serves Kentucky, West Virginia and Michigan and provides processing and other services to operators active in various plays in these areas. The company also owns a 250-mile crude oil pipeline that connects to the larger Lakehead Pipeline System.
SEE: How Does Crude Oil Affect Gas Prices
MarkWest Energy has allocated between $35 million and $65 million in capital for the Northeast segment in 2012, and is building an expansion to the Langley natural gas processing facility. The expansion will add 150 million cubic feet per day of processing capacity to this plant. MarkWest Energy purchased this system from EQT (NYSE:EQT) for $230 million in early 2011.
The Bottom Line
Although MarkWest Energy is counting on the expansion of Marcellus Shale development to help the company generate most of its growth over the next few years. The company is also active in other regions of the U.S. The company plans to leverage some growth off these in 2012 and beyond.
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
by
Eric Fox
Eric J. Fox, CFA, is a freelance financial writer and has previous experience working in the asset management industry as an equity analyst and portfolio manager on the buy side. His favorite area to write on is the energy sector and he keeps current on the industry by reading Haynesville Shale, Permian Oil and Gas and various other blogs.
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