MarkWest Energy Partners LP -- the largest gas processor and fractionator in the Northeast -- saw record volumes in Appalachia during the third quarter as the leading Marcellus Shale and up-and-coming Utica Shale kept on giving. There's more to come, CEO Frank Semple told analysts who follow the company.
"By the end of this year, the Marcellus alone is expected to produce a quarter of America's natural gas production," Semple said during a conference call. "And according to the Energy Information Agency, the Utica is the nation's fastest-growing shale play. Producer activity in these two areas is truly remarkable, and it continues to drive tremendous opportunities for future growth."
As producers drive growth in the Marcellus, they drive up the volumes of gas moving through the company's infrastructure.
MarkWest total system volumes averaged 4.6 Bcf/d during the quarter, up 16% from the second quarter and 52% from the year-ago quarter. "Our Marcellus segment continues to grow at an impressive rate and processed volumes exceeded 2 Bcf/d for the first time," Semple said. "In the Utica segment, processed volumes reached 460 MMcf/d, an increase of 56-57% from the second quarter and 251% from the third quarter of last year."
Ranked among the top four gas processors in the United States based on volume, MarkWest could soon rise to No. 1, thanks to the 21 "major" facilities it has under construction to meet growing producer demand, Semple said.
Since the second quarter, MarkWest has started up five new facilities in the Marcellus and Utica, adding 800 MMcf/d of processing capacity and 40,000 b/d of fractionation, Semple said. In the last two months, three new producer customers have signed up for long-term, fee-based service. They are American Energy Partners in the Utica and EdgeMarc Energy and PennEnergy Resources in the Marcellus, he said.
"In addition, we are on track to commission four new facilities over the next two months, bringing our full year total to 16," Semple said. "And over the next 24 months, we'll bring another 17 plants online."
The company's Southeast segment saw gas volumes grow while utilization of processing facilities averaged 85% during the third quarter. "In East Texas, our three processing plants are operating at capacity as robust producer activity in the rich gas areas of the Haynesville and Cotton Valley formations is driving growth," Semple said. "Processed volumes in East Texas have increased 15% from last quarter and 33% from the third quarter of last year. We've accelerated the completion of our fourth plant in Carthage, TX, and now expect to begin operations in December. Once online, our total processing capacity in East Texas will increase to 520 MMcf/e."
The western Oklahoma operations saw volumes increase 37% since the year-ago quarter. Meanwhile, the 200 MMcf/d Buffalo Creek facility was brought online to serve producers in the Granite Wash. "We're also excited that recent upstream acquisition and development activity in the Anadarko Basin continues to highlight producer interest in this very productive resource play," Semple said.
MarkWest reported distributable cash flow (DCF) of $195.2 million for the third quarter, representing distribution coverage of 119%. DCF for the third quarter of 2013 was $117.9 million. Adjusted earnings before interest, taxes, depreciation and amortization in the third quarter was $235.5 million, compared with $153.9 million in the year-ago period.