MarkWest Energy Partners Reports Second Quarter 2007 Financial Results

MarkWest Energy Partners, L.P. (NYSE: MWE) today reported net income of $8.3 million for the three months ended June 30, 2007, compared to net income of $14.1 million for the three months ended June 30, 2006. For the six months ended June 30, 2007, the Partnership reported net income of $13.0 million compared to $28.0 million for the six months ended June 30, 2006. The financial results for the three months ended June 30, 2007 and June 30, 2006, include $12.4 million and $8.1 million, respectively, of non-cash costs associated with the mark-to-market of derivative instruments and non-cash compensation expense. Excluding these non-cash items, net income for the three months ended June 30, 2007 and June 30, 2006, would have been $20.7 million and $22.2 million, respectively. As a Master Limited Partnership, cash distributions to limited partners are largely determined based on Distributable Cash Flow ("DCF”). For the three months ended June 30, 2007, DCF was $35.4 million compared to $29.7 million for the three months ended June 30, 2006, an increase of 19 percent. A reconciliation of DCF to net income, the most directly comparable GAAP financial measure, is provided within the financial tables of this press release. On July 19, 2007, the board of directors of the general partner of MarkWest Energy Partners, L.P. increased the Partnership’s quarterly cash distribution to $0.53 for the second quarter of 2007, an increase of $0.07 per unit, or 15 percent, over the split-adjusted distribution in the second quarter of 2006, and an increase of $0.02 per unit, or 4 percent, over the distribution in the first quarter of 2007. The second quarter 2007 distribution is payable on August 14, 2007, to unitholders of record as of August 8, 2007. "We are pleased with our continued strong growth of distributable cash flow and distributions,” said Frank Semple, President and Chief Executive Officer. "Our total distribution coverage ratio for the second quarter of 2007 was 1.35, including the associated GP and IDR requirements. Our financial results for the first half of 2007 are significantly ahead of where we expected to be at this point in the year, and we are very excited about our recently announced expansion projects in Oklahoma and anticipated growth opportunities in our core operating areas.” SECOND QUARTER 2007 HIGHLIGHTS The increase in DCF in the second quarter of 2007 compared to 2006 is attributable, in part, to receiving distributions from our investment in Starfish compared to funding Hurricane Rita repairs in 2006, as well as the effect of higher non-cash items, including the mark-to-market of our derivative instruments non-cash compensation expense. In addition, the financial results for the second quarter of 2007 included: An unrealized loss of $8.4 million for the mark-to-market of our derivative instruments. This is a non-cash item that does not affect DCF, and resulted in a net decrease to net income of $8.4 million for the period. This compares to a net loss of $6.4 million in the second quarter of 2006, resulting in a year over year decrease to net income of $2.0 million. A $3.5 million increase in selling, general and administrative expenses during the second quarter of 2007 compared to the second quarter of 2006. The increase is primarily attributable to $2.3 million in higher non-cash compensation expense resulting from the Partnership's increased market value. The balance of the increase is primarily due to increased professional fees and consulting services. A $1.8 million decline in the financial results from our investment in Starfish Pipeline Company compared to the prior year quarter. Our share of equity income increased by $0.4 million to $1.6 million in the second quarter of 2007 compared to $1.2 million in the second quarter of 2006. This was offset by a $2.2 million reduction in insurance recoveries, included in miscellaneous expense, related to Hurricane Rita repairs. DCF from our investment in Starfish, including the effects of insurance-related items, improved $4.3 million in the second quarter of 2007 compared to the second quarter of 2006. A decrease of $2.1 million in interest expense, including amortization of deferred financing costs and net of interest income, to $9.2 million in the second quarter of 2007 from $11.3 million in the second quarter of 2006. The majority of the decrease relates to interest expense associated with higher outstanding debt in the second quarter of 2006 following the acquisition of Javelina in late 2005. The Partnership will host a conference call and webcast on Tuesday, August 14, 2007 at 4:00 p.m. ET to review its second quarter 2007 financial results. Interested parties can participate in the call by dialing (888) 677-5720, passcode "MarkWest,” approximately ten minutes prior to the scheduled start time. A replay of the call will be available through Tuesday, August 21, 2007 by dialing (888) 568-0911, no passcode required. To access the webcast, please visit the Investor Relations section of our website at www.markwest.com. MarkWest Energy Partners, L.P. is a publicly traded master limited partnership with a solid core of midstream assets and a growing core of gas transmission assets. It is one of the largest processors of natural gas in the Northeast and is the largest gas gatherer of natural gas in the prolific Carthage field in east Texas. It also has a growing number of other gas gathering and intrastate gas transmission assets in the Southwest, primarily in Texas and Oklahoma. This press release includes "forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. These forward-looking statements, which in many instances can be identified by words like "may,” "will,” "should,” "expects,” "plans,” "believes” and other comparable words, involve risks and uncertainties that affect our operations, financial performance and other factors, as discussed in our filings with the Securities and Exchange Commission. Although we believe that the expectations reflected in the forward-looking statements, specifically those including those referring to future performance, growth, cash flow, operating income, distributable cash flow (DCF), distributions, or other factors, are reasonable, but are not guarantees of future performance and we can give no assurance that such expectations will prove to be correct and that projected performance or distributions may not be achieved. Among the factors that could cause results to differ materially are those risks discussed in our Form S-1, as amended, our Annual Report on Form 10-K for the year ended December 31, 2006, as amended, and our Quarterly Reports on Form 10-Q, each as filed with the SEC. You are also urged to carefully review and consider the cautionary statements and other disclosures, including those under the heading "Risk Factors,” made in those filings, which identify and discuss significant risks, uncertainties and various other factors that could cause actual results to vary significantly from those expressed or implied in the forward-looking statements. We do not undertake any duty to update any forward-looking statement. MarkWest Energy Partners, L.P. Financial Statistics (Unaudited, in thousands, except per unit data)   Three months ended June 30, Six months ended June 30, 2007 2006 2007 2006 Statement of Operations Data Revenue: Segment revenue $ 144,026 $ 142,041 $ 265,572 $ 298,783 Derivative loss (7,363 ) (6,901 ) (14,292 ) (6,661 ) Total revenue 136,663   135,140   251,280   292,122     Operating expenses: Purchased product costs 74,213 76,244 138,218 177,205 Facility expenses 20,303 15,160 33,259 29,229 Selling, general and administrative expenses 12,475 8,988 26,317 17,326 Depreciation 9,127 7,384 16,913 14,557 Amortization of intangible assets 4,168 4,027 8,336 8,043 Accretion of asset retirement obligations 28   26   55   51   Total operating expenses 120,314   111,829   223,098   246,411     Income from operations 16,349 23,311 28,182 45,711   Other income (expense): Earnings from unconsolidated affiliates 1,656 1,228 3,423 2,173 Interest income 479 259 2,399 479 Interest expense (8,991 ) (10,714 ) (18,346 ) (21,690 ) Amortization of deferred financing costs (a component of interest expense) (661 ) (826 ) (1,322 ) (1,634 ) Miscellaneous (expense) income (451 ) 1,515   (1,180 ) 3,607   Income before Texas margin tax 8,381 14,773 13,156 28,646   Provision for Texas margin tax (106 ) (679 ) (125 ) (679 ) Net income $ 8,275   $ 14,094   $ 13,031   $ 27,967     Interest in net income General partner $ 1,943   $ 818   $ 2,042   $ 1,646   Limited partners $ 6,332   $ 13,276   $ 10,989   $ 26,321     Net income per limited partner unit: Basic $ 0.18   $ 0.52   $ 0.32   $ 1.02   Diluted $ 0.17   $ 0.51   $ 0.32   $ 1.02     Weighted average units outstanding (1): Basic 36,095   25,758   34,254   25,752   Diluted 36,216   25,876   34,412   25,860     Cash Flow Data Net cash flow provided by (used in): Operating activities $ 20,211 $ 37,845 $ 43,560 $ 78,880 Investing activities $ (84,827 ) $ (31,349 ) $ (138,942 ) $ (46,859 ) Financing activities $ 64,841 $ (12,226 ) $ 93,386 $ (31,033 )   Other Financial Data Distributable cash flow $ 35,427 $ 29,685 $ 67,980 $ 53,323   Balance Sheet Data June 30, 2007 December 31, 2006 Working capital $ (8,869 ) $ 4,258 Total assets $ 1,278,443 $ 1,114,780 Total debt $ 529,030 $ 526,865 Partners' capital $ 566,818 $ 452,649 Total debt to book capitalization 48 % 54 %     (1) Three and six months ended June 30, 2006, have been adjusted for the 2-for-1 stock split effective on February 28, 2007. MarkWest Energy Partners, L.P. Operating Statistics   Three months ended June 30, Six months ended June 30, 2007 2006 2007 2006 Southwest: East Texas: Gathering systems throughput (Mcf/d) 407,000 375,000 404,000 360,000 NGL product sales (gallons) 44,486,000 40,461,000 86,274,000 75,897,000   Oklahoma: Foss Lake gathering systems throughput (Mcf/d) 103,700 84,500 99,400 86,100 Woodford gathering system throughput (Mcf/d) (1) 102,800 N/A 76,900 N/A Grimes gathering system throughput (Mcf/d) (2) 11,200 N/A 11,900 N/A Arapaho NGL product sales (gallons) 22,233,000 19,615,000 42,758,000 38,032,000   Other Southwest: Appleby gathering system throughput (Mcf/d) 58,000 33,600 53,400 33,600 Other gathering systems throughput (Mcf/d) 9,600 21,900 13,000 20,500 Lateral throughput volumes (Mcf/d) 68,100 93,600 59,200 71,500   Northeast: Appalachia: Natural gas processed (Mcf/d) 196,000 197,000 199,000 201,000 NGLs fractionated (Gal/d) 442,000 450,000 455,000 450,000 NGL product sales (gallons) 10,639,000 10,468,000 22,047,000 20,951,000   Michigan: Natural gas throughput (Mcf/d) 6,100 5,800 6,100 5,200 NGL product sales (gallons) 1,065,000 1,394,000 2,190,000 2,843,000 Crude oil transported (Bbl/d) 14,200 14,900 14,200 14,600   Gulf Coast: Refinery off-gas processed (Mcf/d) 102,000 130,000 115,000 125,000 Liquids fractionated (Bbl/d) 24,100 26,900 24,500 25,900     (1) The Partnership began construction and operation of the Woodford gathering system in late 2006. (2) The Partnership acquired the Grimes gathering system in December 2006. MarkWest Energy Partners, L.P. Segment Operating Income and Reconciliation to Net Income (Unaudited, in thousands)   East Texas Oklahoma Other Southwest Appalachia Michigan Javelina Total Three months ended June 30, 2007: Revenue $ 25,085 $ 61,107 $ 17,665 $ 19,721 $ 2,960 $ 17,488 $ 144,026   Segment operating expenses: Purchased product costs 4,706 44,727 11,803 12,491 486 - 74,213 Facility expenses 4,446 4,975 1,706 3,675 1,488 2,984 19,274 Depreciation, amortization and accretion 4,250 2,316 1,091 884 1,169 3,599 13,309 Total segment operating expenses 13,402 52,018 14,600 17,050 3,143 6,583 106,796   Segment operating income (loss) $ 11,683 $ 9,089 $ 3,065 $ 2,671 $ (183) $ 10,905 $ 37,230     East Texas Oklahoma Other Southwest Appalachia Michigan Javelina Total Three months ended June 30, 2006: Revenue $ 31,591 $ 47,926 $ 22,270 $ 18,309 $ 3,288 $ 18,657 $ 142,041   Segment operating expenses: Purchased product costs 10,156 37,022 17,815 10,347 904 - 76,244 Facility expenses 4,278 1,466 1,601 3,474 1,414 2,927 15,160 Depreciation, amortization and accretion 3,992 746 1,045 901 1,180 3,573 11,437 Total segment operating expenses 18,426 39,234 20,461 14,722 3,498 6,500 102,841   Segment operating income (loss) $ 13,165 $ 8,692 $ 1,809 $ 3,587 $ (210) $ 12,157 $ 39,200       East Texas Oklahoma Other Southwest Appalachia Michigan Javelina Total Six months ended June 30, 2007: Revenue $ 47,188 $ 108,029 $ 33,022 $ 39,282 $ 5,704 $ 32,347 $ 265,572   Segment operating expenses: Purchased product costs 8,349 81,780 22,215 24,704 1,170 - 138,218 Facility expenses 8,713 8,572 3,205 7,044 3,047 2,082 32,663 Depreciation, amortization and accretion 8,415 3,446 2,102 1,792 2,333 7,190 25,278 Total segment operating expenses 25,477 93,798 27,522 33,540 6,550 9,272 196,159   Segment operating income (loss) $ 21,711 $ 14,231 $ 5,500 $ 5,742 $ (846) $ 23,075 $ 69,413     East Texas Oklahoma Other Southwest Appalachia Michigan Javelina Total Six months ended June 30, 2006: Revenue $ 64,079 $ 110,194 $ 47,730 $ 36,443 $ 6,485 $ 33,852 $ 298,783   Segment operating expenses: Purchased product costs 23,324 92,347 39,238 20,457 1,839 - 177,205 Facility expenses 7,952 3,545 2,952 6,815 2,853 5,112 29,229 Depreciation, amortization and accretion 7,887 1,464 2,069 1,744 2,354 7,133 22,651 Total segment operating expenses 39,163 97,356 44,259 29,016 7,046 12,245 229,085   Segment operating income (loss) $ 24,916 $ 12,838 $ 3,471 $ 7,427 $ (561) $ 21,607 $ 69,698 Three months ended June 30,   Six months ended June 30, 2007 2006 2007 2006   Operating income before items not allocated to segments $ 37,230 $ 39,200 $ 69,413 $ 69,698 Derivative loss not allocated to segments (8,392 ) (6,901 ) (14,888 ) (6,661 ) Depreciation expense not allocated to segments (14 ) - (26 ) - Selling, general and administrative expenses not allocated to segments (12,475 ) (8,988 ) (26,317 ) (17,326 ) Income from operations 16,349 23,311 28,182 45,711   Earnings from unconsolidated affiliates 1,656 1,228 3,423 2,173 Interest income 479 259 2,399 479 Interest expense (8,991 ) (10,714 ) (18,346 ) (21,690 ) Amortization of deferred financing costs (661 ) (826 ) (1,322 ) (1,634 ) Miscellaneous (expense) income (451 ) 1,515   (1,180 ) 3,607   Income before Texas margin tax 8,381 14,773 13,156 28,646   Texas margin tax (106 ) (679 ) (125 ) (679 ) Net income $ 8,275   $ 14,094   $ 13,031   $ 27,967   MarkWest Energy Partners, L.P. Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures (Unaudited, in thousands)   Three months ended June 30, Six months ended June 30, 2007 2006 2007 2006   Income before Texas margin tax $ 8,381 $ 14,773 $ 13,156 $ 28,646 Depreciation, amortization and accretion 13,323 11,437 25,304 22,651 Amortization of deferred financing costs 661 826 1,322 1,634 Non-cash earnings from unconsolidated affiliates (1,656 ) (1,228 ) (3,423 ) (2,173 ) Distributions from (contributions to) unconsolidated affiliates, net of expansion capital 3,501 (2,961 ) 6,189 (5,338 ) Non-cash compensation expense 4,020 1,717 9,644 3,146 Non-cash derivative activity 8,399 6,424 17,722 6,723 Texas margin tax (106 ) (679 ) (125 ) (679 ) Other 38 - 43 - Loss (gain) on sale of property, plant and equipment 9 (10 ) 10 (296 ) Maintenance capital expenditures (1,143 ) (614 ) (1,862 ) (991 ) Distributable cash flow $ 35,427   $ 29,685   $ 67,980   $ 53,323     Maintenance capital expenditures $ 1,143 $ 614 $ 1,862 $ 991 Expansion capital expenditures 83,698   11,006   137,060   23,789   Total capital expenditures $ 84,841   $ 11,620   $ 138,922   $ 24,780     Distributable cash flow $ 35,427 $ 29,685 $ 67,980 $ 53,323 Contributions to unconsolidated affiliates - 2,961 - 5,338 Maintenance capital expenditures 1,143 614 1,862 991 (Increase) decrease in receivables (17,335 ) 3,154 (28,413 ) 33,559 (Increase) decrease in receivables from affiliates (190 ) (92 ) 673 3,866 (Increase) decrease in inventories (169 ) (6,570 ) 258 (8,533 ) Increase in other current assets (2,594 ) (3,044 ) (3,527 ) (3,239 ) Increase (decrease) in accounts payable, accrued liabilities and other liabilities 4,412 7,083 4,023 (9,783 ) (Decrease) increase in payables to affiliates (243 ) 3,375 949 2,679 Other (240 ) 679   (245 ) 679   Net cash provided by operating activities $ 20,211   $ 37,845   $ 43,560   $ 78,880