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MarkWest Energy Partners, L.P. (NYSE:MWE)

Q3 2012 Earnings Call

November 08, 2012 12:00 pm ET

Executives

Joshua Hallenbeck

Frank M. Semple - Chairman of MarkWest Energy GP LLC, Chief Executive Officer of MarkWest Energy GP LLC, President of MarkWest Energy GP LLC, Chief Executive Officer of MarkWest Hydrocarbon and President of MarkWest Hydrocarbon

Randy S. Nickerson - Chief Commercial Officer of Markwest Energy Gp L.L.C. and Senior Vice President of Markwest Energy Gp L L C

Analysts

John K. Tysseland - Citigroup Inc, Research Division

John Edwards - Crédit Suisse AG, Research Division

Heejung Ryoo - Barclays Capital, Research Division

Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division

Operator

Welcome to the MarkWest Energy Partners Third Quarter 2012 Earnings Conference Call. [Operator Instructions] This conference is being recorded. If you have any objections, please disconnect at this time. I will now turn the call over to Josh Hallenbeck. Sir, you may begin.

Joshua Hallenbeck

Thank you, Laurie, and welcome to those that have joined us on the conference call. Our comments today will include forward-looking statements, which involve risks and uncertainties and are not guarantees of future performance. Actual results could vary significantly from those expressed or implied in such statements. Although we believe that the expectations expressed today are reasonable, we can give no assurance that the expectations will prove to be correct, and we caution you that projected performance or distributions may not be achieved. Factors that could cause actual results to differ materially from ourexpectations are included in the periodic reports we file with the SEC. We encourage you to carefully review and consider the cautionary statements and other disclosures made in those filings, particularly those under the heading, Risk Factors.

With that, I will turn the call over to Frank Semple, Chairman, President and Chief Executive Officer.

Frank M. Semple

Good morning, and thanks to everyone for joining us on the call today. Now let me just say in advance that we've got a lot to cover today, which I assume you all expected given the large number of commercial, operational and financial activities that were summarized in our earnings release.

And as indicated in that release, we had another strong quarter, which was highlighted by a significant number of new agreements and facility startups in our Marcellus and the Utica operating areas. Our diverse set of midstream assets continues to capture significant volume growth and produce solid financial performance despite the challenging natural gas liquids price environment.

Our total year-over-year processed volumes continue to grow and increase over 20% during the third quarter.

As we near the close of 2012 and move into 2013, we continue to execute on our growth plans and be well positioned in many of the best resource plays in the United States. So today, I'll provide an overview of our significant growth and expansions throughout our operations. We expect 2013 to be a transformational year of growth for MarkWest as we complete many of our previously announced projects. By the end of next year, we will increase our processing capacity in the Marcellus and Utica by almost 2 billion cubic feet per day. When I put that into perspective, we will be increasing the partnership's total processing capacity by almost 80% in 2013 alone. These projects are largely supported by long-term, fee-based agreements that will drive future cash flow and increase distribution growth. We remain committed to maintaining a strong balance sheet and are well positioned to execute on our development plans going forward.

So during the call today, I'll discuss our financial performance, I'll provide a commercial and operational update focused primarily on our Marcellus and Utica projects, and review our balance sheet and recent capital market transactions. Finally, I'll discuss our 2013 distributable cash flow and capital expenditure guidance. And as always, I'll leave time at the end of the call to respond to your questions.

So beginning with a high-level overview of our financial performance. Distributable cash flow was $104.3 million during the third quarter, an increase of 22% compared to the third quarter of last year. Adjusted EBITDA was $108.2 million and segment operating income was $145.5 million. In October, we announced a third quarter distribution of $0.81 per common unit, an increase of 11% compared to the third quarter of 2011 and maintaining the distribution coverage ratio of 1.09x.

Moving to the operational update. We continue to focus our expansion and growth projects in liquids-rich resource plays. Throughout our operations, we have benefited from the successful drilling programs of our producer customers, and have experienced strong year-over-year volume growth as a result. Our total processed volumes continue to grow and as I said earlier, increased over 20% during the third quarter. In addition, total gathered volumes rose over 16% from the prior year quarter.

Our Southwest business unit, which, as you know, includes Texas and Oklahoma, continues to be a key driver of operational growth and financial performance. In the past year, we have announced or completed major expansions at 3 processing complexes.

Beginning with our Carthage system in East Texas, the previously announced 120 million cubic feet per day Carthage expansion is nearing completion and will be operational by the end of this year. This expansion will serve as a key asset for producer customers operating in the liquids-rich portion of the Haynesville Shale. Once complete, we expect the plant to quickly operate near capacity because we're currently bypassing rich gas to a third-party processing facility. We anticipate that with the completion of the plant expansion, 2013 processed volumes will rise by approximately 35%.

The growth of our Carthage system processing volumes is the result of our producer customers focusing their efforts towards the development of rich gas acreage rather than dry gas production, and we continue to see strong volume performance during the third quarter. Processed volumes increased by 18% when compared to the third quarter of last year, and remained flat when compared to last quarter. Gathered volumes rose 13% from the prior year quarter and 7% when compared to the last quarter.

Similar to East Texas, in Southeast Oklahoma, we continue to see producers focusing their drilling programs on rich gas areas. Yesterday, in our earnings release, we announced the planned expansion of Centrahoma, our existing joint venture with Cardinal Midstream. Centrahoma currently includes 2 cryogenic processing plants with total capacity of 100 million cubic feet per day. The new facility will provide an additional 120 million cubic feet per day in processing capacity and support the expected growth in liquids-rich production from our producer customers operating in the Woodford Shale. That plant is expected to be operational at the end of 2013 and will be partially supported by rich gas that is currently being processed at third-party facilities.

Processed volumes continue to grow in Southeast Oklahoma, increasing 22% from the third quarter of last year and 8% from last quarter. Gathered volumes were approximately 485 million cubic feet per day and slightly lower when compared to the prior year quarter and the second quarter of 2012. And while we expect overall gathered volumes to decline modestly due to our reduction of dry gas production, processed volumes should increase steadily over 2013.

So now let's move over to Foss Lake and Granite Wash operations in Western Oklahoma. It's been slightly over a year since we completed our last processing expansion, and I'm pleased to report that our Arapaho complex continues to operate to near capacity and our total processed volumes increased 37% when compared to the third quarter of last year. At the startup of operations, volumes came on strong because we were able to process gas that was previously being bypassed around the facility. We expect processing volumes to continue to grow by as much as 10% in 2013 given a high liquids content of the Granite Wash. There are large quantities of reserves to be drilled throughout the unconventional resource plays around our Southwest segment, and we remain focused on providing essential midstream infrastructure and best-of-class customer service.

So let's move now to our Northeast segment, which serves the Huron Shale and the Southern Appalachian Basin. Processed volumes rose 15% when compared to the third quarter of last year and were relatively flat when compared to the second quarter of this year. You may have noticed in the operating statistics of our earnings release that fractionated volumes in the Northeast segment have declined. However, this is due to the startup of the Liberty fractionator, up in Pennsylvania, during September of 2011, and the Marcellus NGLs are now being fractionated at that Liberty complex. Now when you adjust for that change, fractionated volumes in the Northeast actually increased over 9% from the third quarter of last year.

So while we expect total volumes to remain flat in 2013, we have continued to support our existing producer customers' current and future development plans for the Huron. Yesterday, in our earnings release, we announced the start up of our 150 million cubic feet per day Langley cryogenic processing plant expansion in Southeast Kentucky. This expansion replaces an existing refrigeration facility and will allow us to recover additional liquids on behalf of our producer customers.

With the addition of Langley, our total processing capacity in the Northeast segment is now 655 million cubic feet per day and we remain the largest processor and fractionator in the Appalachian Basin. Transitioning to our Liberty segment, where we continue to see extraordinary growth and have developed a franchise position over the past 4 years in one of the country's largest and most productive natural gas plays. In fact, by the end of 2013, the Marcellus is expected to be the largest producing field in the United States. In order to support the continued rapid growth of Marcellus Shale, we are currently installing 11 new cryogenic processing plants throughout the liquids-rich area of the Marcellus.

And based on our construction forecast, by the end of 2013, we expect to double our processing capacity to 2.2 billion cubic fee per day. And by the end of '14, we anticipate operating 19 plants at 5 major complexes with almost 3 billion cubic feet per day of total processing capacity.

In Southwest Pennsylvania, we continue the development of our extensive gathering system, which has proved to be very successful. With the connection of new wells for range resources, gathered volumes in our Liberty segment have increased over 70% since the third quarter of last year, and 20% when you compare it to the second quarter of this year. One of our key gathering projects is the connection of our Houston and Majorsville facilities with a high-pressure gas gathering heater. This interconnecting pipeline essentially creates a super processing complex that will significantly increase the reliability and optionality to our producer customers in the Marcellus Shale.

Now while the development of infrastructure in Southwest Pennsylvania is a significant focus for us, we continue to see rapid growth in Northern West Virginia, where we have 3 large processing complexes. At our Majorsville complex in Marshall County, where we currently operate 207 million cubic feet per day of processing capacity, we have announced 4 processing plant expansions totaling 800 million cubic feet per day. These expansions will support the expected volume growth based on our producers' development plans. We are making solid progress and 2 of these expansions totaling 400 million cubic feet per day are expected to come online in the first and fourth quarters of this -- next year.

Now turning to our Mobley complex in Wetzel County, which is supported by EQT, Magnum Hunter Resources and other producers, we expect to start up the first plant in the next few weeks. This 200 million cubic feet per day processing facility will be followed by a 120 million cubic feet per day plant, which is expected to begin operations during the first quarter of next year. In addition, yesterday, we announced a 200 million cubic feet per day expansion at our Mobley complex that are supported by existing agreements with EQT. We expect to begin operations of the third facility by the end of next year.

Now when all of our announced projects are operational, Mobley, up in Wetzel County, West Virginia, will have 520 million cubic feet per day of cryogenic processing capacity to support rich gas development in Northern West Virginia. So about 50 miles south of Mobley, in Doddridge County, we're also seeing significant growth at our Sherwood complex. Last week, we announced with Antero Resources the startup of our first 200 million cubic feet per day cryogenic processing plant and associated gathering and compression. We're currently constructing a second 200 million cubic feet per day facility at Sherwood that's expected to be operational by the second quarter of next year.

Our agreements with Antero provide for the installation of a third plant, which will be operational in the third quarter of 2013, and would increase our total processing capacity at Sherwood to 600 million cubic feet per day. MarkWest and Antero estimate that future capacity at Sherwood complex could exceed 1 billion cubic feet per day with the continued development by Antero of this rich gas acreage.

Now while all of this gathering and processing infrastructure are critical to support our producer's drilling programs, the real value creation comes from the sale of purity natural gas liquids, which requires fractionation infrastructure and marketing capabilities to achieve the full liquids uplift. Our Houston complex currently includes 60,000 barrels per day, a C3+ fractionation capacity. By the beginning of 2014, we expect 3 deethanization facilities to be operational at our Houston and Majorsville complexes that will allow us to recover 115,000 barrels per day of purity ethane.

With the completion of our ethane pipeline between Majorsville and Houston, our sales producers will have access to Mariner West, Mariner East and ATEX, all of which will originate at our Houston Complex. It's amazing that Marcellus ethane is so quickly becoming a major supply source with the planned petrochemical expansions in the Gulf Coast and Northeast.

During the third quarter, we joined Range Resources in announcing firm capacity commitments on the Mariner East pipeline project. Now this successful completion of the open season for Mariner East confirms our long-standing view and vision that ethane and propane can effectively be exported from the Northeast to international markets. Prior to the start of Mariner East in 2014, we expect to continue to export Northeast propane to international markets through Sunoco's Marcus Hook facility. We began exporting propane in July of this year and today have sold over 900,000 barrels internationally. We're currently delivering the propane over to Marcus Hook by truck and expect to add rail deliveries by the end of the year.

So before moving to our financials, let's transition to our Utica operations, where this year, we have begun a major expansion with our partner, The Energy & Minerals Group. In June, we executed agreements with Gulfport Energy, and since that time, we've been working to construct a significant gathering system that covers much of Harrison County as well as key portions of Belmont, Guernsey and Noble Counties in Ohio.

As Gulfport reported in their earnings call yesterday, we are nearing completion of the critical first phase of the gathering and processing system. Over the next several days, we will bring into operation our first large gathering trunk that will allow us to begin delivering gas from Gulfport's prolific Wagner well to our Cadiz processing complex in Harrison County. We will process that gas at Cadiz through a 60 million cubic feet per day refrigeration plant that we will start up in conjunction with the gathering trunk line.

Now prior to this point, we have been gathering the well through a small lateral and processing the gas through 2 small temporary JT plants. Over the course of the next several weeks, we will complete a second trunk line to gather an additional Gulfport well into Cadiz and we will complete a third trunk line early next year. Gulfport's announced well results today have been fantastic, and we have designed the gathering system to allow the full development of this area by Gulfport and other producers.

The first 3 trunk lines will have an ultimate gathering capacity of 500 million cubic feet per day and beginning construction on 2 additional trunk lines. When fully built out, the gathering system will have a capacity of as much as 1 billion cubic feet per day. In addition to the gathering pipelines, we're currently permitting and constructing the first phase of 5 large compressor stations that will have an initial capacity of roughly 200 million cubic feet per day and an ultimate capacity of over 500 million cubic feet per day. We plan to build an additional 3 compressor stations to increase the compression capacity to match the gathering capacity.

By the end of 2014, we expect to have approximately 270 miles of gas and liquids gathering pipelines and 60,000 horsepower of compression. The refrigeration plant that we are currently completing is just the first step in our processing plants to support Gulfport and other producers' drilling efforts. The Cadiz 1 plant, which is a 125 million cubic feet per day cryogenic gas plant, is scheduled to come online in the first quarter of 2013. We're also moving forward with the Cadiz 2 plant, which is a 200 million cubic feet per day plant, and it will be operational as early as the third quarter of 2013. These plants are critical to allowing Gulfport and other producers to fully capture the NGL uplift from their rich gas production.

Now our engineering and construction teams in Ohio have worked incredibly hard to construct the facilities required to gather Gulfport's gas as soon as possible. MarkWest and our industry peers have continued to work closely with Ohio Governor Kasich and his staff, as well as all of the Ohio regulatory groups to develop clear and effective rules and regulations for operating in Ohio. But acquiring the many miles of pipeline right away and the associated federal and state permits is, to say the least, very challenging. And our efforts were also impacted by the super storm Sandy. And while we have benefited from our extensive experience in Pennsylvania and West Virginia, we still experience the delays.

As with all of our operations in the Northeast, we have learned that the only way to effectively construct the needed midstream infrastructure is to develop a deep relationship with our producer customers and integrate our activities and efforts with them at every possible level. Gulfport is a great partner, and we're very fortunate to have them as our anchored customer as we work through the challenging initial hurdles to create a world-class and world-scale system in the Utica Shale.

In addition to the processing plants, our Cadiz Complex will include a 40,000-barrel per day, deethanization facility, where purity ethane will be produced and delivered into the ATEX ethane pipeline for delivery down to the Gulf Coast. The propane and heavier natural gas liquids will be transported by pipeline to the new 60,000-barrel per day Harrison County fractionator for separation in the purity products. We expect to begin operations of the Harrison County fractionation complex by the first quarter of 2014. The Harrison County fractionator will be connected through an extension of the Marcellus NGL gathering system to our Houston Pennsylvania fractionation and marketing complex. Now connecting these 2 complexes will allow us to cost-effectively expand our Marcellus fractionation capacity under long-term contracts, while creating world-class midstream facilities in the heart of the Utica. Houston and Harrison County will be the 2 largest fractionation complexes in the Northeast, and will provide tremendous operating flexibility and reliability, as well as market access.

It also appears that wellhead condensate gathering will be a critical need in the Utica, and we recently executed a letter of intent with Gulfport to gather and stabilize their condensate. As the system is currently planned, we will construct an integrated condensate gathering and stabilization system that will consist of gathering facilities, field injection stations, stabilization equipment, storage and trucking rail loading facilities. The condensate system will be complementary to our development of the gas gathering and processing facilities and will be advantage because of our multi-line rights of way that we acquired for the gas gathering pipelines. The integrated condensate system will enable Gulfport to increase the value of its condensate production by stabilizing the condensate at the Harrison County plant and then marketing the stabilized condensate to all of the regional refineries and into the Canadian oil sands producers for use as [indiscernible].

We will utilize truck and rail loading facilities at our Cadiz complex and will potentially add unit train shipments as the condensate volumes grows. While we are finalizing the detailed engineering, we're planning to begin gathering the stabilizing condensate through the new system as early as September of next year. Our Gulfport relationship has been a huge focus for us in the Utica and we were also pleased to announce this week the completion of definitive agreements with Antero Resources. This Antero Resources transaction is going to anchor our second large processing complex in the Utica. Now we're excited to expand our partnership with Antero from the Marcellus into the development of their unconventional gas resources in the Utica. The Seneca complex in Noble County, Ohio, will initially include a 45 million cubic feet per day refrigeration plant that is scheduled to begin operations during the second quarter of next year. Our refrigeration capacity will be followed by the completion of a 200 million cubic feet per day cryogenic processing plant, which is expected to be operational by the third quarter of 2013.

Our agreements with Antero provide for the construction of an additional 200 million cubic feet per day plant, which may be installed as soon as the end of next year. We also constructed an NGL gathering pipeline from our Seneca complex to the Cadiz complex and on to the Harrison County fractionator for the separation of natural gas liquids. And liquids recovered at Seneca will ultimately have access to all of our planned NGL marketing solutions in the Utica. By the end of next year, we expect to have 830 million cubic feet per day of processing capacity in the Utica Shale. As the rich gas window of this emerging area continues to evolve, we believe that our infrastructure in Harrison, Belmont, Guernsey and Noble counties is in the heart of what appears to be the most prospective acreage of this exciting new play.

Our development of the Utica is a natural progression of our significant Marcellus operations and leverages our 25-year presence in the Northeast. We're excited to lead the development of midstream solutions in Ohio and we look forward to providing timely and critical infrastructure for our producer customers' rich gas productions.

Now turning to our financials. The balance sheet continues to be a key area of focus for us, and we continue to be active in the capital markets to support our organic growth program. In August, we raised $1.1 billion of debt and equity to continue to fund our capital expenditure program. And today, we have available liquidity of nearly $1.4 billion.

As of September 30, our debt to total capital was 49%, our leverage ratio was 4.3x and our interest coverage ratio was a healthy 5.2x. Now given our distribution objectives and the variability of the forward markets, we continue to consistently hedge our future commodity positions. This is a full hedge for the remainder of 2012 and 2013 at approximately 67% and 73%. And for 2014, we are currently hedged at approximately 22%. And we continue to shift a larger percentage of our long liquids position to direct product hedges with approximately 35% of our total hedged commodity exposure for 2014 completed, utilizing direct product hedges.

In addition to an active hedging program, we continue to make progress on our goal of increasing our fee-based margin. Almost all of our growth projects are supported by long-term, fee-based contracts. For the third quarter of this year, 53% of our net operating margin is fee based. This was up 12% from the third quarter of 2011. And with the growth of our Marcellus and Utica operations, we now expect fee-based margin for the full year 2013 to reach 60% and will approach 70% by the end of '14.

Before concluding, let me touch briefly on our guidance for the remainder of 2012 and our initial guidance for 2013. We have now narrowed our 2012 DCF guidance to a range of $410 million to $430 million, which results in year-over-year growth of approximately 26%. We've increased our 2012 capital forecast to approximately $1.8 billion. Now this increase is due to the acceleration and timing for our processing and fractionation projects as a result of our producers' continued success in the Marcellus, primarily. This forecast does not include the Keystone acquisition. It's also net of the $500 million of the Utica JV capital that will be funded by EMG. We expect to start funding our portion of the Utica capital during the first quarter of next year.

Our initial 2013 DCF forecast is a range of $500 million to $575 million. The midpoint of that range results in a year-over-year DCF growth of 28%. The coverage ratio in 2013, using our current distribution and units outstanding, will be 1.41x for the full year. And we included in our earnings release an update to our commodity price sensitivity table that shows projected 2013 DCF based on a range of NGL to crude oil ratios. And we're transitioning to this new format in order to be more consistent with analysts and industry models.

Our estimated capital forecast for 2013 is a range of $1.4 billion to $1.9 billion. In order to provide additional flexibility to our capital markets activities, yesterday, we filed with the SEC for a continuous equity offering program. This program should allow us, from time to time, to issue common units, but we're under no obligation to issue equity under the program. We believe that if we decide to choose to issue a unit-bid program, it will strengthen our balance sheet and provide additional approach to efficiently fund our ongoing capital requirements.

In 2013, we expect to spend about 95% of that capital on the continued development of high-quality, fee-based growth projects in the Marcellus and the Utica. Roughly 2/3 of our capital is expected to be spent in the Marcellus and almost all the remaining capital will be spent in the Utica.

So in closing, we're extremely pleased with our performance in 2012, particularly given the weak commodity price environment. We expect to finish the year with strong, year-over-year growth in volumes and cash flow and continue to maintain a strong coverage ratio. Most exciting is the explosive growth plans for 2013 and beyond. We expect to commission 12 processing plants, which will increase our total processing capacity from 2.7 billion cubic feet per day to 4.8 billion cubic feet per day. The large majority of this capacity will serve our customers in the Marcellus and the Utica Shale, 2 of the best resource plays in the U.S. This growth will support a significant expansion of our fractionation and NGL marketing franchise position in the Northeast, which has become a huge value driver for our producer customers. And we feel strongly that our full-service midstream model and our focus on providing excellent customer service will result in ongoing development in expansion opportunities. So with that, Laurie, I'll turn it back to you for questions.

Question-and-Answer Session

Operator

[Operator Instructions] So your first question does come from John Tysseland.

John K. Tysseland - Citigroup Inc, Research Division

Quick question on the Northeast and kind of a CapEx budget that you put out there. Are you experiencing cost pressures on your construction projects up in that region? Or given the rapid ramp-up in infrastructure that's needed there? Or should we attribute pretty much 100% of the increased CapEx guidance to the new projects that you announced?

Frank M. Semple

Yes, John. It's interesting. We just completed a board meeting last week and we provided a lot of details to the board in terms of our 2012 CapEx program. And part of that analysis was a project-by-project analysis on cost. And essentially, if you look at our overall budget for 2012 against the cost that we forecast for the remainder of the year, through the remainder of the year, we're basically right on top of that original forecast. Now obviously, our forecast changed as we moved through the year to add new projects. So to answer your question, all of that increase that we're talking about, up to the 1.8, is due to acceleration of projects and addition of new projects that have recently been announced. Because as you know, these projects take 12 to 18 months to implement. So yes, it's just basically been due to the success that our producer customers are having up in the Marcellus.

John K. Tysseland - Citigroup Inc, Research Division

So we should expect no kind of degradation in terms of returns on your CapEx spending as a result of any kind of cost increases and you're executing pretty much in line with what you expected?

Frank M. Semple

Yes, it's correct. And the projects have been coming in on budget, returns are as expected. And as I've said in previous calls, though, Ohio, Pennsylvania, West Virginia, is not East Texas and Western Oklahoma. It's hard going up there. The cost overall, all the way from -- right away in permitting through the completion of construction, is more expensive. And so that's what we're dealing with. But obviously, we've factored those additional costs into our economics for the projects.

John K. Tysseland - Citigroup Inc, Research Division

Okay, that's very helpful. And then also, given the significant jump that you saw in 2013 or at least versus what we had expected for CapEx, do you see the need or any value in pursuing additional JVs in the region or on some of that budget? Or do you think your current backlog is pretty manageable for what you're capable of?

Frank M. Semple

Well, we feel it's pretty manageable. Again, it's really critical for us, as I mentioned earlier in the comments, that we stay ahead of our capital program and which means that the capital markets are obviously very critical for us to be able to continue to finance this level of CapEx. And one of the reasons why we've initiated this continuous equity program is to give us another knob to turn, if you will, from a financing standpoint. And we look at every option. I mean -- you know what, we're very sensitive to the fact that -- or the possibility that the capital markets may be pretty volatile over the next year or so. So we continue to evaluate all options from a financing standpoint. It's great to have a partner like The Energy & Minerals Group over in the Utica. They were a great partner for us in the Marcellus. And again, it gives us -- that relationship gives us another option, if you will, for financing. So yes, we look at all the options. But currently, we don't feel like it's necessary to do anything different with regard to the EMG structure or any new JV partnerships.

John K. Tysseland - Citigroup Inc, Research Division

I guess I was thinking more from an operational perspective and synergistically, from a operator or other midstream companies. You have your JVs with Sunoco and MG. Are there any other participants in the industry in that area that you think you could do a JV with to maybe add, I guess, core competencies to get something done?

Frank M. Semple

Well, the fact is, John, that it's really important as we continue to grow our presence in the Marcellus and the Utica to use that example specifically, that we maintain this full-service capability, all the way from gathering low pressure, all the way through NGL marketing. So you can imagine, as we continue to grow our business up there, as we build our relationship with our producer customers, that we're looking at all of the available options from a right of way, from a pipeline standpoint, primarily in kind of those -- more of those gathering type functions, because there's a lot of pipe in the ground up there. And yes, we continuously evaluate partnerships, we evaluate structures that might allow us to optimize with other midstreamers and producers, the assets that are in the Marcellus and the Utica. And we've done some of that. So yes, this is very expensive, it's really critical. I'm actually pretty excited just over the last, course of, the last 4, 5 years how much open discussions there's been between producers and utilities and other midstream companies about how do we work together to optimize the development of these huge resources up in the Northeast.

Operator

[Operator Instructions] This next question is from Mr. John Edwards.

John Edwards - Crédit Suisse AG, Research Division

Just, Frank, if you could -- in aggregating all these expansions -- I mean, I'm just looking back at my notes. We had -- a previous number we had was 1.8 bcf a day of processing, 124,000 barrels a day of fractionation. So with these recent announcements, what's the number now if you aggregate everything together?

Frank M. Semple

Well, kind of the best way to think about...

John Edwards - Crédit Suisse AG, Research Division

I speak for Marcellus -- I'm sorry, I didn't mean to interrupt you. Go ahead.

Frank M. Semple

Yes, I think that's the point is, the best way to think about where we are today versus where we will be tomorrow and in our next year and in 2014 is to really break it apart into the Marcellus and the Utica and focus in each of those areas first on processing. So in -- like I said in my comments, in 2013 -- let's start with where we're going to end up at the end of 2012. So we'll be at the end of 2012 with the projects that we have announced and are completing by the end of this year, that number in the Marcellus is 1.1 bcf a day of processing capacity. And then so, then you fast-forward into 2013, again, in the Marcellus, that number is essentially going to double to 2.2 bcf. And then with the projects that we've announced and we're not stopping here because there's just a huge amount of interest for us to say ahead of the producers' drilling programs, but that number's with the current projects announced will be 3 bcf a day of processing capacity in the Marcellus by the end of 2014. So that's the track we're on. And so if you look, John, at our presentations that we've been putting out recently, it provides kind of the timing, the details of those projects. But the majority of that capacity is coming -- not the majority, all that capacity is really centered around our existing processing facilities in Northern West Virginia, Mobley and Sherwood and Majorsville and then up in the Northeast corridor with our Keystone facilities. And then [indiscernible] so we move over to Ohio, and Ohio is easier to kind of calculate because we're almost to the end of the year and really the only processing that we're going to have online in the Utica is our 60 million a day of refrigeration for the Gulfport volumes. But then in 2013, we start layering on. Almost every couple of months, another plant project, which is going to get us to about -- get us to the 830 million cubic feet a day of processing capacity by the end of '13. So I realized it's hard to keep score and we're doing our best, that's why I stayed -- I've been providing the details this morning in our formal comments because it's just important for us to continuously update you and the marketplace on the continued development of these 2 areas. And obviously, that's what's driving the additional capital that we're seeing in 2012 and into 2013. It's critical, we feel it's very, very critical to continue to establish a very, very strong footprint that includes all of those capabilities, gathering, processing and fractionation and NGL marketing for both of these big resource plays.

John Edwards - Crédit Suisse AG, Research Division

That's really helpful. And then if you're going to fractionation, if you could kind of do the same step up, the same step for '12, '13, '14 for Marcellus and Utica just to make sure we're keeping track.

Frank M. Semple

Okay. I'm going to take a drink of water here and I'll let Randy just continue that discussion on where we're going to be at the end of 2012 and into 2013 with all of our fractionation projects and upgrades. So, Randy, you want you take that?

Randy S. Nickerson

Absolutely. So today, currently, we operate about 60,000 -- we operate 60,000 barrels a day. We're finishing one final depropanizer at Houston. So we're 60,000 barrels a day at C3+ in the Marcellus. Next year, we will add to that 2 38,000-barrel a day deethanizers. So 76,000 barrels a day of deethanizers to that and then we'll add at '14 1 additional 30,000-barrel a day deethanizer in the Marcellus. So we're going to have round numbers, 115,000 barrels of C2 on top of the 60,000 barrels a day of C3+. Jumping over to Utica. From a fractionation perspective, we're currently constructing another 60,000-barrel a day C3+ frac claim and we'll add to that the first 38,000, 40,000 barrels we've talked about, both deethanization. So we're about 100,000 barrels a day of fractionation in the Utica. And I would add, the good thing is almost every one of our presentations that Nancy or Frank had done and analysts or I've done sort of the industries, our IR team did, I think, a spectacular job of sort of laying every one of these projects out. So we missed a number, here are the folks on the call. You can easily go out to our, I think, to our presentations and check our numbers and make sure it's perfectly clear because we sort of constantly debate and update those to make sure they're the best information. Even though when you get into '14, it gets a little less budget in '13, but that's, as Frank said, that's where we've gone so far.

John Edwards - Crédit Suisse AG, Research Division

Okay, that's helpful. I just want to make sure we're tracking along with your most recent presentations and that we're catching anything incremental to those. That's the main thing I'm trying to make sure I understand here. And it sounds like things are ramping up. Can you talk a little bit about in terms of total -- in terms of what you're evaluating now in terms of backlog beyond your announced CapEx for this year, what you're looking at going beyond all of these announced projects? Can you give us an idea there?

Frank M. Semple

John, that's a critical part of the discussion in my opinion because as you noted, the fact is that we have established a strong set of capabilities in the Marcellus and ramping up quickly in the Utica. So Randy and his team and our operations folks are doing a really good job of continuing to work with our existing producer customers and other producer customers, trying to understand their requirements. So there is a backlog there. And that backlog is pretty expensive extensive. If you look at what's happened in the Utica, we announced our Utica development plans early this year. It's amazing that it's only been, whatever, 10 months or so. And the producers, obviously, have continued to expand their analysis for the Utica and evaluate midstream options, the same thing that was happening 4, 5 years ago in the Marcellus. And it's so important for us as a company, as a midstreamer to make sure we're in front of all of these producer customers to understand their needs because these are long lead time-type projects. So that's kind of a long answer to your question, but we are -- we definitely have a strong backlog. And the reason that we're seeing all these, I would call it, fairly significant changes to our network, our capabilities, particularly in the Marcellus and Utica is because we will work for months with the producer customers confidentially until we're able to announce a project, but that may take 6 months to be able to do that. And during that period of time, we're making decisions about how we can potentially accommodate that producer customers to minimize the lead time, to get these facilities in place, because obviously, the producer customers can move pretty quickly and it's important for us to stay ahead of them. So this relationship part of the business with our producer customers has been a critical part of our DNA and really our success. So it's really resulted in a lot of new opportunities and I think it will continue to occur.

John Edwards - Crédit Suisse AG, Research Division

Is it safe to say it's some multiple of what you've got going for the next year?

Frank M. Semple

Well, certainly in the Utica, I think you could say that. I think the Marcellus is starting to take on a more of a manufacturing type of a future volume profile. But yes, the Utica is -- there's a lot of competition out there from a producer standpoint and a midstream standpoint, but there's a lot of decisions to be made to develop what we think is going to be a spectacular play, and particularly with all the -- as Randy mentioned earlier, the NGLs, and as I mentioned earlier, the condensate and ultimately, crude. So lots of opportunities there. And again, that's where we're spending a lot of our time. And EMG has been a big help out there with us to help us evaluate the producers' perspective, their resource analysis, as well as the midstream commercial opportunities. So a lot of activities there. So it's important every quarter that we give you a pretty good understanding of where we think we're going to be over the course of the next 12 months or so.

Operator

Your next question comes from Helen Ryoo of Barclays.

Heejung Ryoo - Barclays Capital, Research Division

So Frank, first on the question related to the guidance. The guidance number, what type of capacity utilization does it assume, especially in Marcellus? I mean, you are adding -- you're exiting this year with 1.1, you're going to exit next year with 2.2, so you are adding about 1.1 during '13. So I guess that number is going to -- your actual capacity during that year will move up pretty steeply during that year, but I just wanted to get a sense when you put together the guidance table, what type of capacity utilization you should assume?

Frank M. Semple

Yes, Helen. The way to think about how quickly we fill these new plants is it kind of ties back to what I was talking about with John. It starts a year or so in advance of us making our first investment for a new plant, working with producer customers because it's based on their projected drilling program for a particular acreage. And so when we -- the way to model us and the way we model ourselves is that, because of that visibility in the producers' drilling program, in many cases, these producers are already way out ahead of us as Gulfport is, with 6 to 8 wells already drilled, shut in and resting -- drill completed and resting, we are -- we have a pretty good line of sight on how quickly those facilities, those plants and gathering systems will fill up. But the way to model us and the way that we model ourselves is that once that plant is on stream because of all these planning that we do, that it takes about 12 to 18 months, although they're usually is kind of a jumpstart, they're usually is a large slug of additional volumes that comes into the plant, but it kind of takes about 12 to 18 months to fill us up to about 90% utilization. That may be a little bit conservative, but that's the way we think about our volumes and our cash flow that will result from the completion of these projects. So kind of easy to remember, it takes about 12 to 18 months to complete a large plant and it takes about 12 to 18 months to fill a large plant.

Heejung Ryoo - Barclays Capital, Research Division

That's very helpful. So we should think the same about the Utica plants coming online?

Frank M. Semple

[indiscernible] And that's way I would model the Utica. But again, the thing that's happening over in the Utica, as we discussed earlier, is that because of the size of these wells, because of the amount of liquids and condensate in these wells, we are -- we've made the decision and the timing of our producers' drilling programs, we have decided to kind of improve that ramp-up by installing these refrigeration plants. So let's just say, by the time we get our first cryogenic processing plant up and operational in the first quarter at Cadiz up in Harrison County, then we will be -- our 60 million cubic feet a day refrigeration plant will be full. So the 60 million will be moved directly over to the cryogenic plant. So that ramp-up is a little bit quicker because of the fact that we're making investments in refrigeration capacity to be able to support the producers' well program. Again specifically, we're talking now about Gulfport and Antero, but we're also planning to do that same sort of thing with other producer customers.

Heejung Ryoo - Barclays Capital, Research Division

Okay. And then would you say the return profile of your projects in Utica is more or less in line with the Marcellus? Or is one better than the other?

Frank M. Semple

Yes. The Utica economics are similar to our Marcellus economics.

Heejung Ryoo - Barclays Capital, Research Division

Okay. And on Utica, you'll have 830 million cubic feet of processing capacity, and that's what has already been announced. But is that -- is most of that capacity dedicated to Gulfport and Antero at this point? Or is there some capacity to add other producers on what's been already announced?

Frank M. Semple

Yes. Let me be clear, the 830 million -- the plants that we've announced, are primarily being completed for those 2 producer customers, Gulfport and Antero. However, we do have, in our marketing capacity for additional third-party producer customers. So I mean, that's just the smart thing to do when you're talking about building this amount of infrastructure, is to make sure that you are optimizing, rightsizing if you will, the gathering systems and the processing fractionation NGL pipeline capacity that's required. So yes, when you talk specifically about our 2013 capacities, those are primarily for those 2 large customers and the success that they're having in the Utica. But we do have available capacity in the third parties. And in fact, when we build this facilities, that's why we called them complexes because we buy a lot of acreage and it allows us to add additional processing trains as required to be able to support new customers. Just like we did in the Marcellus.

Heejung Ryoo - Barclays Capital, Research Division

Okay. That's very helpful. Just the last question. On the Centrahoma expansion, would you be still the 40% owner of the newly expanded capacity?

Frank M. Semple

That's correct.

Operator

And this next question comes from Selman Akyol of Stifel, Nicolaus.

Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division

I just wanted to explore a little bit on the marketing of the barrels of propane. You went through that for this quarter. Was that a maximum number that you guys put up or is there any constraints at all in that?

Frank M. Semple

Selman, you're talking about the export?

Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division

Correct.

Frank M. Semple

Okay. Yes, I touched on that in my call. But why don't I just go ahead and turn it over to Randy? He can talk a little about the current marketing efforts and where we think that's going -- how that's going to develop.

Randy S. Nickerson

Sure. Particular related to export, that was -- we were selling into market, both our barrels and barrels of some of the refineries out of Philadelphia and in conjunction with Sunoco. And so the sales that we did, really what we felt matched sort of the supply and demand profile that we had. And so we really designed those. We could have sold more, we could have sold less. We just -- that number fit very well with our supply and demand.

Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division

Okay. So then as we start going into the Q4 and Q1, should we expect this to fall off reasonably because of when they're coming online? Would there be any opportunities, I guess, going forward for Q4 and Q1?

Randy S. Nickerson

Sure, that's an interesting dynamic. Certainly, what we've seen is, particularly where these [indiscernible] propane over the European market, the basis has strengthened even since it has been historically or even recently. So we think there absolutely continues to be a lot of opportunities to continue those international markets. However, at the same time, in the -- the Northeast has certainly been much, much more -- we're back into balance. We've sort of essentially totally recovered. But just in the basin perspective from the really warm, the non-winter we had last year and some of the other issues and the summer was some storage facilities, we really recovered from all that. So as we look at the Northeast basin, we're very much in line. And so if it's a normal winter, there's going to be a whole lot of demand in the Northeast as well. So it's setting up to be a very good next 3 to 5 months at least for producers and marketers like us in the Northeast just speaking for propane.

Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then, just so I'm clear on this, you are marketing on behalf of your customers? Or was this on barrels you owned as well?

Randy S. Nickerson

Both, both. We have some equity barrels up in the Northeast and we market along with our fractionation services, we market for the vast majority of our producer customers.

Operator

I will now turn the call over to Mr. Frank Semple for closing remarks.

Frank M. Semple

Thank you, Laurie, and thanks to everyone for joining us on the call today. No doubt, this is an exciting time for MarkWest. As I think you gathered from our comments, our growth has continued to be driven by our producer customers' success in these expanding resource plays. It's also an exciting time for the U.S. energy industry, because now, more than ever, I think we have a pretty clear line of sight on how we can continue to expand and optimize our energy resources and energy infrastructure and ultimately achieve energy independence, that's what it's all about. And we're really, really proud to be a part of that equation. Again, we appreciate your interest and we look forward to providing you all with another update during our next call. That concludes our call for today. Thanks, Laurie.

Operator

Thank you for joining today's conference call. You may disconnect your lines at this time.

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