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The Zacks Analyst Blog Highlights: MarkWest Energy, Rex Energy, International Paper, Weyerhaeuser and MeadWestvaco

MWE REXX IP WY MWV

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For Immediate Release

Chicago, IL – June 5, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include MarkWest Energy Partners L.P. (MWE - Analyst Report), Rex Energy Corporation (REXX - Snapshot Report), International Paper Co. (IP - Analyst Report), Weyerhaeuser Co.’s (WY - Analyst Report) and MeadWestvaco Corporation (MWV - Analyst Report).

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Here are highlights from Monday’s Analyst Blog:

MarkWest Absorbs Keystone

 

MarkWest Energy Partners L.P. (MWE - Analyst Report) announced that it has completed the purchase of Keystone Midstream Services, LLC. The acquisition, which was announced in early May, was made for a price of $512 million.

MarkWest bought the 100% ownership interest in Keystone from Stonehenge Energy Resources, L.P., and affiliates of Rex Energy Corporation (REXX - Snapshot Report) and Sumitomo Corporation.

With the acquisition, MarkWest gained access to Keystone’s properties across Butler County, Pennsylvania that includes two cryogenic gas processing plants with a combined capacity of 90 million cubic feet per day (MMcfd), a gas gathering system and related field compression.

This transaction also enriched MarkWest’s asset base in the rich natural gas reserves in the Marcellus Shale to northwest Pennsylvania and eastern Ohio.

MarkWest intends to invest $500 million over the next five years in the development and extension of the gathering and processing facilities of Keystone. MarkWest also targets to achieve gas volume production rate of 170 million cubic feet per day (MMcfd) at the end of 2013 from the current level of 40 MMcfd. This rate is expected to go up to 350 MMcfd by 2016.

Apart from these properties, MarkWest also received an 895 square mile acreage from Rex Energy and Sumitomo. The former will be engaged in gathering and processing of rich gas and natural gas liquids from the area under long-term, fee-based contracts.

MarkWest is a master limited partnership (MLP) 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.

We are also maintaining a long-term Outperform recommendation on the stock, implying that we see it as an attractive investment option.

 

 

International Paper Divests 3 Mills

 

International Paper Co. (IP - Analyst Report) is selling its three containerboard mills for $470 million to fulfill its agreement with the Department of Justice (DoJ) in connection with its acquisition of Temple-Inland.

As per the mandates of the DoJ, International Paper was required to divest 970,000 tons of containerboard capacity. International Paper had agreed to divest Temple-Inland's mills in Ontario, California and New Johnsonville, Tennessee, and its existing mill in Hueneme, California. The New Johnsonville mill is being sold to Hood Companies, Inc. while the other two mills are being sold to New-Indy Containerboard LLC, a newly formed joint venture of The Kraft Group, LLC and Schwarz Partners, LP.

In February this year, after an eight-month chase, International Paper completed the acquisition of Temple-Inland for nearly $4.5 million or $32.00 per share. The deal included an assumption of $700 million of Temple-Inland debt.                

The integration is already on track. The company generated $10 million in synergies in the first partial quarter of ownership. The transaction is expected to be accretive to earnings within 12 months of closing and incrementally beyond 2013. The company has recently raised its synergy expectation from the Temple-Inland acquisition to $400 million (from $300 million) over the first two years. Moreover, the combination will fortify the company’s packaging business in North America by increasing its share in the corrugated packaging market to 34% from the current 27%.

International Paper’s acquisition of Texas-based Temple-Inland is its largest since the August 2008 acquisition of Weyerhaeuser Co.’s (WY - Analyst Report) corrugated-packaging business for $6 billion. Given the magnitude of the Temple-Inland deal, integration risks continue to be a challenge. In addition, International Paper’s failure to realize the projected synergies from the acquisition could negatively impact the company’s earnings. The divestiture of the three mills, as directed by DoJ, takes away some of the benefits from the merger.

We maintain our Neutral recommendation on International Paper. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the shares over the near term.

Based in Memphis, Tennessee, International Paper Company is a global paper and packaging company with operations in North America, Europe, Latin America, Russia, Asia, and North Africa. International Paper conducts its businesses through five segments. It competes with companies like MeadWestvaco Corporation (MWV - Analyst Report) and Weyerhaeuser Co.

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