MarkWest Offering Raises $138M - Analyst Blog

Pipeline operator MarkWest Energy Partners L.P. (MWE) announced the closure of its previously announced public offering. The partnership priced the public offering of 3,450,000 common units at $41.20 apiece, including a fully exercised over-allotment option for 450,000 units.

MarkWest plans to use the net proceeds from this offering – approximately $138.1 million after the underwriting discount and estimated offering expenses – to part-finance its ongoing capital expenditure program, including a portion of the costs related to the previously announced purchase of assets – a Kentucky-based natural gas processing complex and an associated natural gas liquids pipeline – from integrated energy firm EQT Corp. (EQT).

(Read our full coverage on this news: MarkWest Buys EQT's Processing Unit).

Denver, Colorado-based MarkWest Energy, a master limited partnership (“MLP”), is engaged in the gathering, processing and transmission of natural gas, transportation, fractionation and storage of natural gas liquids, and the gathering and transportation of crude oil. Over the last few years, the partnership has consolidated its position in the midstream business, achieved through a combination of organic efforts and accretive acquisitions.

However, following the stock's recent price strength, our long-term total return expectation remains rather muted. While we continue to like MarkWest for its high-quality and diverse portfolio of midstream assets, as well as its proven track record of supporting producers in the growth of shale plays and the steady improvement in its liquidity/cash flow position, we think that the current valuation is fair and adequately reflects the partnership's future growth prospects.

MarkWest's core business – natural gas processing – is also faced with a higher degree of commodity price exposure than most MLPs. This is expected to further limit its ability to generate positive earnings surprises in the next few quarters. During this period, we expect the partnership to grow at a somewhat more conservative and sustainable pace.

As such, we expect MarkWest Energy's growth potential to be restrained with little room for meaningful upside from current levels. Our long-term Neutral recommendation is supported by a Zacks #3 Rank (short-term Hold rating).

 
EQT CORP (EQT): Free Stock Analysis Report
 
MARKWEST EGY PT (MWE): Free Stock Analysis Report
 
Zacks Investment Research