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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) December 3, 1997 (November 21, 1997)
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MARKWEST HYDROCARBON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-11566 84-1352233
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
155 INVERNESS DRIVE WEST, SUITE 200, ENGLEWOOD, CO 80112-5004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 303-290-8700
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On November 21, 1997, MarkWest Hydrocarbon, Inc. ("MarkWest") acquired the
remaining 40 percent joint venture interest of its western Michigan project from
Michigan Energy Company, L.L.C. ("MEC"). The primary assets of the venture
include a sour gas pipeline and a natural gas liquids ("NGL") extraction plant
which is expected to start up operations in the fourth quarter of 1997. The
purchase price was $8.5 million in cash plus up to $13.5 million in future
contingent payments, and was negotiated by the two parties on an arms' length
basis. The future contingent payments consist of nine payments ranging from
$1.0 million to $2.7 million, and are contingent upon several factors,
including a minimum internal rate of return and substantial increases in system
throughput volumes, ranging from 45 mmcfd (million cubic feet per day) to 75
mmcfd.
At closing, funds due to MarkWest from MEC related to the project were deducted
from the purchase price and all legal disputes between the two parties were
settled. The funding for the acquisition was obtained through the Company's
existing credit facility maintained with the Bank of Montreal, as agent,
NationsBank and Colorado National Bank. The credit facility allows the Company
to borrow up to $55.0 million, subject to borrowing base calculations, pursuant
to a revolving loan commitment. Interest rates are based on either the agent
bank's prime rate plus 1% or the London Interbank Offered Rate (LIBOR), plus an
applicable margin of between 50 and 150 basis points, based upon the Company's
debt to capitalization ratio.
In addition, through the agreement with MEC, MarkWest will fund another
extension, the Claybanks Extension, which will add 27 miles of pipeline to the
south. This extension will connect shut-in gas wells with a production
capability of 23 mmcfd and reserves in excess of 38 bcf (billion cubic feet) and
stimulate increased drilling in Oceana county. MarkWest expects to complete its
expansion of the pipeline and gas treating and processing capacity from 35 mmcfd
to 50 mmcfd in the fourth quarter of 1998. In early 1998, MarkWest will perform
a feasibility analysis and begin permitting for an expansion to 100 mmcfd.
MarkWest started developing western Michigan as a core region in May 1996.
MarkWest earned its original 60 percent interest by funding a 26 mile extension
south of the existing 31 mile pipeline system, a 2 mile extension to the north
to reach a Shell treatment plant, the NGL plant, and other capital programs.
The extension provides access to shut-in production and new wells in this
region, which is experiencing a significant increase in drilling activity.
MarkWest expects growing profitability in western Michigan from this new NGL
extraction plant which will allow the Company to sell propane and other liquids
into higher-priced markets.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired.
It is impractical to provide the required financial information
at the time of filing this report. The required financial
information will be filed by amendment to this Form 8-K not later
than February 2, 1998.
(b) Pro Forma Financial Information.
It is impractical to provide the required pro forma financial
information at the time of filing this report. The required pro
forma financial information will be filed by amendment to this
Form 8-K not later than February 2, 1998.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARKWEST HYDROCARBON, INC.
(Registrant)
Date: December 3, 1997 BY: /s/ Gerald A. Tywoniuk
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Gerald A. Tywoniuk
Chief Financial Officer and
Vice President of Finance
(On Behalf of the Registrant and as
Principal Financial and Accounting
Officer)
