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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended September 30, 2000

OR

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 1-11566

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MARKWEST HYDROCARBON, INC.(Exact name of registrant as specified in its charter)

Delaware(State or other jurisdiction of
incorporation or organization)

84-1352233(IRS Employer Identification No.)


155 Inverness Drive West, Suite 200, Englewood, CO 80112-5000
(Address of principal executive offices)

Registrant's telephone number, including area code: (303) 290-8700

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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes /x/  No / /

The
registrant had 8,452,180 shares of common stock, $.01 per share par value, outstanding as of September 30, 2000.

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|                                                                                              |                                                                                                      | Page
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ----
|PART IFINANCIAL INFORMATION                                                                  |                                                                                                      |     
|Item 1. Consolidated Financial Statements                                                     |                                                                                                      |     
|                                                                                              | Consolidated Balance Sheet at September 30, 2000 and December 31, 1999                               |     
|                                                                                              | Consolidated Statement of Operations for the Three and Nine Months Ended September 30, 2000 and 1999 |     
|                                                                                              | Consolidated Statement of Cash Flows for the Three and Nine Months Ended September 30, 2000 and 1999 |     
|                                                                                              | Notes to the Consolidated Financial Statements                                                       |     
|Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                      | 7   
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                            |                                                                                                      | 13  
|PART IIOTHER INFORMATION                                                                     |                                                                                                      |     
|Item 1. Legal Proceedings                                                                     |                                                                                                      | 14  
|Item 6. Exhibits and Reports on Form 8-K                                                      |                                                                                                      | 14  
|SIGNATURE                                                                                     |                                                                                                      | 15  

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Glossary of Terms

|Bbls   |  | barrels                                                                                                                                                                                         
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Bcf    |  | billion cubic feet of natural gas                                                                                                                                                               
|Btu    |  | British thermal units, an energy measurement                                                                                                                                                    
|EBITDA |  | earnings before gain on sale, interest income, interest expense, income taxes, depreciation, depletion and amortization; a cash flow financial measure commonly used in the oil and gas industry
|MM     |  | million                                                                                                                                                                                         
|Mcf    |  | thousand cubic feet of natural gas                                                                                                                                                              
|Mcfd   |  | thousand cubic feet of natural gas per day                                                                                                                                                      
|MMBtu  |  | million British thermal units, an energy measurement                                                                                                                                            
|MMcf   |  | million cubic feet of natural gas                                                                                                                                                               
|MMcfd  |  | million cubic feet of natural gas per day                                                                                                                                                       
|NGL    |  | natural gas liquids, such as propane, butanes and natural gasoline                                                                                                                              

One
barrel of oil or NGL is the energy equivalent of six Mcf of natural gas.

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## 

PART IFINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MARKWEST HYDROCARBON, INC.

CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(000s, except share data)

|                                                                                  |                                                                                                                  | September 30,
2000 |                                            | December 31,
1999 |  
|--------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------- | ------------------ | ------------------------------------------ | ----------------- | -
|ASSETS                                                                            |                                                                                                                  |                    |                                            |                   |  
|Current assets:                                                                   |                                                                                                                  |                    |                                            |                   |  
|                                                                                  | Cash and cash equivalents                                                                                        |                    | $                                          | 1,714             |  
|                                                                                  | Receivables                                                                                                      |                    |                                            | 21,984            |  
|                                                                                  | Inventories                                                                                                      |                    |                                            | 11,819            |  
|                                                                                  | Prepaid feedstock                                                                                                |                    |                                            | 3,701             |  
|                                                                                  | Other assets                                                                                                     |                    |                                            | 283               |  
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|                                                                                  |                                                                                                                  |                    | Total current assets                       |                   |  
|Property and equipment:                                                           |                                                                                                                  |                    |                                            |                   |  
|                                                                                  | Gas processing, gathering, storage and marketing equipment                                                       |                    |                                            | 95,301            |  
|                                                                                  | Oil and gas properties and equipment                                                                             |                    |                                            | 15,391            |  
|                                                                                  | Land, buildings and other equipment                                                                              |                    |                                            | 6,357             |  
|                                                                                  | Construction in progress                                                                                         |                    |                                            | 4,665             |  
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|                                                                                  |                                                                                                                  |                    | 121,714                                    |                   |  
|                                                                                  | Less: accumulated depreciation, depletion and amortization                                                       |                    |                                            | (26,285           | )
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|                                                                                  |                                                                                                                  |                    | Total property and equipment, net          |                   |  
|Intangible assets, net of accumulated amortization of $607 and $438, respectively |                                                                                                                  |                    | 905                                        |                   |  
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|                                                                                  |                                                                                                                  |                    | Total assets                               |                   | $
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                              |                                                                                                                  |                    |                                            |                   |  
|Current liabilities:                                                              |                                                                                                                  |                    |                                            |                   |  
|                                                                                  | Accounts payable and accrued liabilities                                                                         |                    | $                                          | 24,864            |  
|                                                                                  | Current portion of long-term debt                                                                                |                    |                                            |                  |  
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|                                                                                  |                                                                                                                  |                    | Total current liabilities                  |                   |  
|Deferred income taxes                                                             |                                                                                                                  |                    | 9,620                                      |                   |  
|Long-term debt                                                                    |                                                                                                                  |                    | 43,000                                     |                   |  
|Stockholders' equity:                                                             |                                                                                                                  |                    |                                            |                   |  
|                                                                                  | Preferred stock, par value $0.01, 5,000,000 shares authorized, 0 shares outstanding                              |                    |                                            |                  |  
|                                                                                  | Common stock, par value $0.01, 20,000,000 shares authorized, 8,531,206 and 8,531,206 shares issued, respectively |                    |                                            | 85                |  
|                                                                                  | Additional paid-in capital                                                                                       |                    |                                            | 42,251            |  
|                                                                                  | Retained earnings                                                                                                |                    |                                            | 16,487            |  
|                                                                                  | Treasury stock, 79,026 and 69,504 shares, respectively                                                           |                    |                                            | (472              | )
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|                                                                                  |                                                                                                                  |                    | Total stockholders' equity                 |                   |  
|                                                                                  |                                                                                                                  |                    |                                            |                   |  
|                                                                                  |                                                                                                                  |                    | Total liabilities and stockholders' equity |                   | $
|                                                                                  |                                                                                                                  |                    |                                            |                   |  

The
accompanying notes are an integral part of these financial statements.

1

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MARKWEST HYDROCARBON, INC.

CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(000s, except per share data)

|                                                               |                                                      | For the three months ended
September 30, |      | For the nine months ended
September 30, |       
|-------------------------------------------------------------- | ---------------------------------------------------- | ---------------------------------------- | ---- | --------------------------------------- | ------
|
|Revenues:                                                      |                                                      |                                          |      |                                         |       
|                                                               | Gathering, processing and marketing revenue          |                                          | $    | 55,868                                  |       
|                                                               | Oil and gas revenue, net of transportation and taxes |                                          |      | 650                                     |       
|                                                               |                                                      |                                          |      |                                         |       
|                                                               |                                                      | Total revenues                           |      |                                         | 56,518
|Operating expenses:                                            |                                                      |                                          |      |                                         |       
|                                                               | Cost of sales                                        |                                          |      | 45,559                                  |       
|                                                               | Operating expenses                                   |                                          |      | 4,354                                   |       
|                                                               | General and administrative expenses                  |                                          |      | 2,173                                   |       
|                                                               | Depreciation, depletion and amortization             |                                          |      | 1,427                                   |       
|                                                               |                                                      |                                          |      |                                         |       
|                                                               |                                                      | Total operating expenses                 |      |                                         | 53,513
|                                                               |                                                      | Income from operations                   |      |                                         | 3,005 
|Other income and expense:                                      |                                                      |                                          |      |                                         |       
|                                                               | Interest income                                      |                                          |      | 24                                      |       
|                                                               | Interest expense                                     |                                          |      | (820                                    | )     
|                                                               | Gain on sale of assets                               |                                          |      |                                        |       
|                                                               | Other income (expense)                               |                                          |      | (85                                     | )     
|                                                               |                                                      |                                          |      |                                         |       
|                                                               |                                                      | Income (loss) before income taxes        |      |                                         | 2,124 
|Provision (benefit) for income taxes:                          |                                                      |                                          |      |                                         |       
|                                                               | Current                                              |                                          |      | 439                                     |       
|                                                               | Deferred                                             |                                          |      | 360                                     |       
|                                                               |                                                      |                                          |      |                                         |       
|                                                               |                                                      |                                          | 799  |                                         |       
|                                                               |                                                      |                                          |      |                                         |       
|                                                               |                                                      | Net income                               |      | $                                       | 1,325 
|                                                               |                                                      |                                          |      |                                         |       
|Basic earnings per share of common stock                       |                                                      | $                                        | 0.16 |                                         | $     
|                                                               |                                                      |                                          |      |                                         |       
|Earnings per share assuming dilution                           |                                                      | $                                        | 0.16 |                                         | $     
|                                                               |                                                      |                                          |      |                                         |       
|Weighted average number of outstanding shares of common stock: |                                                      |                                          |      |                                         |       
|                                                               |                                                      | Basic                                    |      |                                         | 8,450 
|                                                               |                                                      |                                          |      |                                         |       
|                                                               |                                                      | Assuming dilution                        |      |                                         | 8,489 
|                                                               |                                                      |                                          |      |                                         |       

The
accompanying notes are an integral part of these financial statements.

2

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MARKWEST HYDROCARBON, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(000s)

|                                                     |                                                                 | For the three months
ended September 30,            |        | For the nine months
ended September 30, |       
|---------------------------------------------------- | --------------------------------------------------------------- | --------------------------------------------------- | ------ | --------------------------------------- | ------
|
|Cash flows from operating activities:                |                                                                 |                                                     |        |                                         |       
|                                                     | Net income                                                      |                                                     | $      | 1,325                                   |       
|                                                     | Add income items that do not affect working capital:            |                                                     |        |                                         |       
|                                                     |                                                                 | Depreciation, depletion and amortization            |        |                                         | 1,427 
|                                                     |                                                                 | Deferred income taxes                               |        |                                         | 360   
|                                                     |                                                                 | Gain on sale of assets                              |        |                                         |      
|                                                     |                                                                 | Other                                               |        |                                         | (12   
|                                                     |                                                                 |                                                     |        |                                         |       
|                                                     |                                                                 |                                                     | 3,100  |                                         |       
|Adjustments to working capital:                      |                                                                 |                                                     |        |                                         |       
|                                                     | (Increase) decrease in receivables                              |                                                     |        | (5,563                                  | )     
|                                                     | (Increase) decrease in inventories                              |                                                     |        | (5,058                                  | )     
|                                                     | (Increase) decrease in prepaid expenses and other assets        |                                                     |        | 486                                     |       
|                                                     | Increase (decrease) in accounts payable and accrued liabilities |                                                     |        | 3,437                                   |       
|                                                     |                                                                 |                                                     |        |                                         |       
|                                                     |                                                                 |                                                     | (6,698 | )                                       |       
|                                                     |                                                                 | Net cash provided by (used in) operating activities |        |                                         | (3,598
|Cash flows from investing activities:                |                                                                 |                                                     |        |                                         |       
|                                                     | Capital expenditures                                            |                                                     |        | (3,139                                  | )     
|                                                     | Proceeds from sale of assets                                    |                                                     |        | 8                                       |       
|                                                     |                                                                 |                                                     |        |                                         |       
|                                                     |                                                                 | Net cash provided by (used in) investing activities |        |                                         | (3,131
|Cash flows from financing activities:                |                                                                 |                                                     |        |                                         |       
|                                                     | Proceeds from long-term debt                                    |                                                     |        | 20,000                                  |       
|                                                     | Repayment of long-term debt                                     |                                                     |        | (13,000                                 | )     
|                                                     | Net reissuance (buy-back) of treasury stock                     |                                                     |        | (2                                      | )     
|                                                     | Debt issuance costs                                             |                                                     |        | (73                                     | )     
|                                                     |                                                                 |                                                     |        |                                         |       
|                                                     |                                                                 | Net cash provided by (used in) financing activities |        |                                         | 6,925 
|                                                     |                                                                 |                                                     |        |                                         |       
|Net increase (decrease) in cash and cash equivalents |                                                                 |                                                     | 196    |                                         |       
|Cash and cash equivalents at beginning of period     |                                                                 |                                                     | 1,518  |                                         |       
|                                                     |                                                                 |                                                     |        |                                         |       
|Cash and cash equivalents at end of period           |                                                                 | $                                                   | 1,714  |                                         | $     
|                                                     |                                                                 |                                                     |        |                                         |       

The
accompanying notes are an integral part of these financial statements.

3

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MARKWEST HYDROCARBON, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1.  GENERAL

The consolidated financial statements include the accounts of MarkWest Hydrocarbon, Inc. ("MarkWest" or the "Company"), and its wholly owned
subsidiaries: MarkWest Resources, Inc., and MarkWest Michigan, Inc. All significant intercompany accounts and transactions have been eliminated in consolidation.

The
unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-Q and do not include all the information and
note disclosures required by generally accepted accounting principles for complete financial statements. The interim consolidated financial statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto for the year ended December 31, 1999, included in the Company's Annual Report on
Form 10-K, as filed with the Securities and Exchange Commission. In the opinion of management, all adjustments necessary for a fair statement of the results for the unaudited
interim periods have been made. These adjustments consist only of normal recurring adjustments.

The
effective corporate tax rate for interim periods is based on the estimated annual effective corporate tax rate, excluding certain nonrecurring or unusual events. The effective tax
rate varies from statutory rates primarily due to tax credits.

Certain
prior year amounts have been reclassified to conform to the current year's presentation.

NOTE 2.  LONG-TERM DEBT

Effective May 26, 2000, the Company amended its existing credit agreement. The amended agreement extends for an additional year, through the year 2006,
and provides for a $15 million increase to the maximum borrowing amount, now $65 million, pursuant to a revolving loan commitment. Actual borrowing limits may be a lesser amount,
depending on trailing cash flow, as defined in the agreement.

NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement, as amended by SFAS Nos. 137 and 138, is effective for
fiscal years beginning after June 15, 2000. SFAS No. 133 requires an entity to recognize all derivatives as assets or liabilities in the balance sheet and measure those instruments at
fair value. The Company is currently evaluating SFAS No. 133. To date, the Company has inventoried its contracts subject to SFAS 133 and determined which are fair value and cash flow
hedges. Evaluation of methodologies for assessing hedge effectiveness is in progress.

In
December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") No. 101,Revenue Recognition in
Financial Statements,that provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. This bulletin, as amended by
SAB No. 101B, must be implemented no later than the fourth fiscal quarter of 2000. Although the Company is currently evaluating SAB No. 101, it is not expected to have a material impact
on the financial condition or operations of the Company.

4

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NOTE 4.  SEGMENT REPORTING

The Company's operations are classified into two reportable segments, as follows:



MarkWest
evaluates the performance of its segments and allocates resources to them based on operating income. There are no intersegment revenues. MarkWest's business is conducted
solely in the United States.

The
table below presents information about operating income for the reported segments for the third quarter of 2000 and the nine months ended September 30, 2000, and for the
corresponding periods in 1999. Operating income for each segment includes total revenues less operating expenses, and excludes depreciation, depletion and amortization, corporate administrative
expenses, interest expense, interest
income and income taxes. Asset information by reportable segment is not reported, since MarkWest does not produce such information internally.

|                                             |  | Gathering,
Processing and Marketing
(000s) |         | Exploration
and Production
(000s) |   | Total
(000s)
|-------------------------------------------- |  | ------------------------------------------ | ------- | --------------------------------- | - | ------------
|For the Quarter Ended September 30, 2000     |  |                                            |         |                                   |   |             
|Revenues                                     |  | $                                          | 55,868  |                                   | $ | 650         
|Segment operating income                     |  | $                                          | 6,247   |                                   | $ | 358         
|For the Quarter Ended September 30, 1999     |  |                                            |         |                                   |   |             
|Revenues                                     |  | $                                          | 30,123  |                                   | $ | 361         
|Segment operating income                     |  | $                                          | 3,291   |                                   | $ | 173         
|For the Nine Months Ended September 30, 2000 |  |                                            |         |                                   |   |             
|Revenues                                     |  | $                                          | 139,199 |                                   | $ | 1,770       
|Segment operating income                     |  |                                            | 19,794  |                                   | $ | 938         
|For the Nine Months Ended September 30, 1999 |  |                                            |         |                                   |   |             
|Revenues                                     |  | $                                          | 69,462  |                                   | $ | 1,093       
|Segment operating income                     |  | $                                          | 8,915   |                                   | $ | 478         

5

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A reconciliation of total segment operating income to total consolidated income (loss) before taxes is as follows (000s):

|                                    |                            | For the quarter ended
September 30, |        | For the nine months ended
September 30, |  
|----------------------------------- | -------------------------- | ----------------------------------- | ------ | --------------------------------------- | -
|
|Total segment operating income      |                            | $                                   | 6,605  |                                         | $
|General and administrative expenses |                            |                                     | (2,173 | )                                       |  
|Depreciation and amortization       |                            |                                     | (1,427 | )                                       |  
|Interest income                     |                            |                                     | 24     |                                         |  
|Interest expense                    |                            |                                     | (820   | )                                       |  
|Gain on sale of assets              |                            |                                     |       |                                         |  
|Other income (expense)              |                            |                                     | (85    | )                                       |  
|                                    |                            |                                     |        |                                         |  
|                                    | Income (loss) before taxes |                                     | $      | 2,124                                   |  
|                                    |                            |                                     |        |                                         |  

6

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations contains statements which, to the extent that they are not recitations of
historical fact, constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 ("Section 27A") and Section 21E of the Securities and
Exchange Act of 1934 ("Section 21E"). All forward-looking statements involve risks and uncertainties. The forward-looking statements in this document are intended to be subject to the safe
harbor protection provided by Sections 27A and 21E. Factors that most typically impact MarkWest's operating results and financial condition include (i) changes in general economic conditions in
regions in which the Company's products are located; (ii) the availability and prices of NGL and competing commodities; (iii) the availability and prices of raw natural gas supply;
(iv) the ability of the Company to negotiate favorable marketing agreements; (v) the risks that third party or Company natural gas exploration and production activities will not occur or
be successful; (vi) the Company's dependence on certain significant customers, producers, gatherers, treaters and transporters of natural gas, (vii) competition from other NGL
processors, including major energy companies; (viii) the Company's ability to identify and consummate grass roots projects or acquisitions complementary to its business; and (ix) winter
weather conditions. For discussions identifying other important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, see the Company's
Securities and Exchange Commission filings. Forward-looking statements involve many uncertainties that are beyond the Company's ability to control and in many cases the Company cannot predict what
factors would cause actual results to differ materially from those indicated by the forward-looking statements.

Third Quarter 2000 Results

For the quarter ended September 30, 2000, net income was $1.3 million, or $0.16 per share, compared to $59,000, or $0.01 per share for the third
quarter of 1999. Earnings before interest, taxes, and depreciation, depletion and amortization ("EBITDA") totaled $4.3 million for the quarter, up from $1.8 million reported for the same
period in 1999.

The
major contributor to increased earnings was MarkWest's Appalachian operations which increased $2.2 million after tax, principally from processing margins per gallon more
than doubling for the third quarter of 2000 compared to the third quarter of 1999, and also from contributions from the Company's new Maytown gas plant. Decreased western Michigan throughput and sales
volumes reduced third quarter 2000 results by $0.4 million after tax. General and administrative, depreciation,
and interest expenses increased by $0.6 million after tax, primarily due to the Company's expansion in Appalachia and higher average debt balances and interest rates.

Nine Months Ended September 30, 2000, Results

For the nine months ended September 30, 2000, net income was $5.7 million, or $0.67 per share, up $4.9 million or $0.58 per share from
1999. Excluding gains on asset sales in both periods, net income was $5.1 million, or $0.60 per share, for the nine months ended September 30, 2000 compared to a net loss of
$0.8 million, or $0.10 per share, for the nine months ended September 30, 1999. EBITDA in 2000 was $14.7 million, or $1.74 per share, compared to $4.4 million, or $0.52 per
share, for the first nine months of 1999.

Results
from MarkWest's Appalachian operations increased $7.6 million after tax for the nine months ended September 30, 2000, compared to results from the same period in
1999, from increased processing margins ($7.0 million after tax) and contributions from the Company's new Maytown gas plant. Decreased western Michigan throughput and sales volumes reduced
results by $0.7 million after tax. Expected increases in general and administrative, depreciation, and interest expenses, as a result of the Appalachian expansion, further decreased results by
$1.0 million after tax.

7

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Operating Statistics

|                 |                                       | Three Months Ended September 30,  |  | Nine Months Ended September 30, |           
|---------------- | ------------------------------------- | --------------------------------- |  | ------------------------------- | ----------
|
|Appalachia:      |                                       |                                   |  |                                 |           
|                 | NGL productionSiloam plant (gallons) |                                   |  | 41,500,000                      |           
|                 | NGL salesSiloam plant (gallons):     |                                   |  |                                 |           
|                 |                                       | Sales earning a processing margin |  |                                 | 29,900,000
|                 |                                       | Sales earning fee income          |  |                                 | 9,900,000 
|                 |                                       |                                   |  |                                 |           
|                 |                                       | Total NGL salesSiloam plant      |  |                                 | 39,800,000
|                 | Processing margin per gallon:         |                                   |  |                                 |           
|                 |                                       | Average NGL sales price           |  | $                               | 0.63      
|                 |                                       | Average natural gas cost          |  | $                               | 0.43      
|                 |                                       |                                   |  |                                 |           
|                 |                                       | Average margin                    |  | $                               | 0.20      
|Michigan:        |                                       |                                   |  |                                 |           
|                 | Pipeline throughput (Mcfd)            |                                   |  | 9,600                           |           
|                 | NGL sales (gallons)                   |                                   |  | 2,000,000                       |           
|Rocky Mountains: |                                       |                                   |  |                                 |           
|                 | Natural gas produced (Mcfd)           |                                   |  | 3,400                           |           

Gathering, Processing and Marketing

MarkWest is paid for its processing in Appalachia through sales of liquids extracted and fees for units of throughput. Recent third-quarter sales volumes of
liquids at the Company's Siloam, Kentucky, fractionation facility were a record 39.8 million gallons compared to 24.4 million gallons for the 1999 third quartera
63 percent increase. As part of the Phase II expansion, MarkWest will further increase NGL production from 460,000 to 550,000 gallons per day, beginning in the third quarter of 2001. The Phase
II expansion is expected to add $2 million in EBITDA in the last half of 2001. The potential for additional gas plants in both the north and south ends of the basin provide
near-term opportunity to further expand throughput.

To
market its rising production of NGLs, MarkWest is expanding its distribution capabilities. The expansion of MarkWest's new truck and rail loading facilities at Siloam is almost
completed. This will
enable simultaneous loading of 12 rail cars and 8 trucksup from the previous 8 and 4, respectively. MarkWest has acquired sixty 1998-vintage rail cars for $4 million,
financed by an operating lease, expanding the Company's fleet of owned and leased cars to 163. This will enable MarkWest to ship propane as far as Florida and New England on a competitive basis.
Finally, MarkWest's innovative new propane logistics service is already cutting costs for its customers.

In
western Michigan, volumes were 9,600 Mcfd for the recent third quarter compared to 17,400 Mcfd for the same period in 1999. This decline was partially offset by higher NGL prices
and the new Au Gres project in eastern Michigan. To help counter this decline, MarkWest entered a five-well exploration effort in western Michigan to enhance production into the pipeline.
These efforts with industry partners resulted in four dry holes, and the fifth well is being evaluated. MarkWest's net interest in the wells averaged 25 percent. Management is reevaluating the
western Michigan pipeline and related facilities as to possible alternative use or disposition.

The
new Au Gres project in eastern Michigan is producing as planned after resolution of startup issues in the third quarter, and a decision on expanding will be made as soon as
sufficient production

8

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history has been obtained to ascertain the reserves and productive life of the initial well. Initial results look positive and could lead to significant additional investment in the project.

Exploration and Production

Natural gas sold during the third quarter of 2000 totaled 3,400 Mcfda 42 percent increase over the same period last year. Production has
increased because of the Company's 1999 capital program. Starting in the recent third quarter, MarkWest is investing $1.8 million in workover and recompletion work on its San Juan Basin
properties, as well as infill drilling of additional gas wells. A similar amount of work is also scheduled for the properties in 2001. Production is expected to ramp up to 4,500 Mcfd by
year-end 2001.

Three Months Ended September 30, 2000, Compared to the Three Months Ended September 30, 1999 (in 000s)

|                                     |  | 2000 |        | 1999 |   | $ Change
|------------------------------------ |  | ---- | ------ | ---- | - | --------
|Revenues                             |  | $    | 56,518 |      | $ | 30,484  
|Income from operations               |  | $    | 3,005  |      | $ | 542     
|Income (loss) before income taxes    |  | $    | 2,124  |      | $ | (92     
|Provision (benefit) for income taxes |  | $    | 799    |      | $ | (151    
|                                     |  |      |        |      |   |         
|Net income                           |  | $    | 1,325  |      | $ | 59      
|                                     |  |      |        |      |   |         

Revenues

Gathering, processing and marketing revenue.Gathering, processing and marketing revenue increased $25.7 million
or 85 percent for the three months ended September 30, 2000, compared to the same period in 1999. The reasons for the increase are primarily increased NGL volumes and prices in
Appalachia. Processing margin volumes increased 5.5 million gallons due to completion of Phase I expansion, which increased revenues by $2.3 million. The increase in NGL prices is
attributable to the increase in crude oil prices, which increased revenues by $6.4 million. Fee income sales at the new Maytown plant added $6.2 million in revenues for the first quarter
2000. Finally, increased natural gas marketing contributed $10.1 million in revenues during the third quarter 2000. Combined with a corresponding increase in gas marketing costs of sales, the
third quarter 2000 gross margin from gas marketing decreased $0.1 million compared to the third quarter 1999. The natural gas marketing activities generate low margin; these activities are
executed in support of MarkWest's processing business. Other items increased revenues $0.7 million.

Costs and Expenses

Cost of sales.Cost of sales increased $21.4 million or 89 percent for the three months ended
September 30, 2000, compared to the same time period in 1999. The Company's replacement feedstock in Appalachia increased $10.4 million as a result of increased volumes and unit costs.
In addition, the cost of sales for natural gas marketing increased $10.2 million due to the increased volumes. Combined with a corresponding increase in gas marketing sales, the third quarter
2000 gross margin from gas marketing decreased $0.1 million compared to third quarter 1999. The natural gas marketing activities generate low margins; these activities are executed in support
of MarkWest's processing business. Other items increased cost of sales by $0.8 million.

Operating expenses.Operating expenses increased $1.5 million or 51 percent for the three months ended
September 30, 2000, compared to the same time period in 1999. The increase is primarily attributable to operating costs associated with incremental facilities added in Appalachia since
September 30, 1999: the Lynchburg and Lordstown terminals; the Maytown, Boldman, and Cobb extraction facilities and related pipeline; and the expanded Siloam fractionation plant.

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General and administrative expenses.General and administrative expenses increased $0.5 million or
33 percent primarily in support of the additional and expanded Appalachia facilities previously mentioned and rent for office space; the Company sold its corporate headquarters and leased back
its office space commencing in February 2000.

Depreciation, depletion and amortization.Depreciation, depletion and amortization increased as a result of the
completion of the Phase I expansion in Appalachia in the first quarter of 2000.

Nine Months Ended September 30, 2000, Compared to the Nine Months Ended September 30, 1999 (in 000s)

|                                     |  | 2000(1) |         | 1999(2) |   | $ Change
|------------------------------------ |  | ------- | ------- | ------- | - | --------
|Revenues                             |  | $       | 140,969 |         | $ | 70,555  
|Income from operations               |  | $       | 10,378  |         | $ | 595     
|Income (loss) before income taxes    |  | $       | 8,244   |         | $ | (1,491  
|Provision (benefit) for income taxes |  |         | 3,178   |         |   | (684    
|                                     |  |         |         |         |   |         
|Net income (loss)                    |  | $       | 5,066   |         | $ | (807    
|                                     |  |         |         |         |   |         

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Revenues

Gathering, processing and marketing revenue.Gathering, processing and marketing revenue increased $69.7 million
or 100 percent for the nine months ended September 30, 2000, compared to the same period in 1999. The reasons for the increase are primarily increased NGL volumes and prices in
Appalachia. Processing margin volumes increased 4.2 million gallons due to completion of Phase I expansion, which increased revenues by $1.4 million. The increase in NGL prices is
attributable to the increase in crude oil prices, which increased revenues by $21.9 million. Fee income sales at the new
Maytown plant added $14.1 million in revenues. Increased natural gas marketing contributed an additional $30.9 million in revenues during the first nine months of 2000. Combined with a
corresponding increase in gas marketing costs of sales, gross margin from gas marketing increased $0.1 million over the nine-month period ended September 30, 1999. The
natural gas marketing activities generate low margins; these activities are executed in support of MarkWest's processing business. Lastly, increased processing and related fee income in Appalachia
from Phase I expansion and other items added $1.4 million.

Costs and Expenses

Cost of sales.Cost of sales increased $55.6 million or 106 percent for the nine months ended
September 30, 2000 compared to the same time period in 1999. The Company's replacement feedstock in Appalachia increased $24.1 million as a result of increased volumes and unit cost. In
addition, the cost of sales for natural gas marketing increased $30.8 million due to the increased volumes. Combined with a corresponding increase in gas marketing costs of sales, the gross
margin from gas marketing increased $0.1 million over the nine-month period ended September 30, 1999. The natural gas marketing activities generate low margins; these
activities are executed in support of MarkWest's processing business. Other items increased cost of sales by $0.7 million.

Operating expenses.Operating expenses increased $3.5 million or 40 percent for the nine months ended
September 30, 2000, compared to the same time period in 1999. The increase is primarily attributable to operating costs associated with incremental facilities added in Appalachia since
September 30, 1999: the Lynchburg and Lordstown terminals; the Maytown, Boldman and Cobb extraction facilities and related pipeline; and the expanded Siloam fractionation plant.

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General and administrative expenses.General and administrative expenses increased $1.1 million or
23 percent primarily in support of the additional and expanded Appalachia facilities previously mentioned and rent for office space; the Company sold its corporate headquarters and leased back
its office space commencing in February 2000.

Depreciation, depletion and amortization.Depreciation, depletion and amortization increased as a result of the
completion of the Phase I expansion in Appalachia in the first quarter of 2000.

Liquidity and Capital Resources

The Company's sources of liquidity and capital resources historically have been internal cash flow and its revolving line of credit. In the first quarter of
2000, these sources were supplemented by proceeds from the sale of the Company's corporate office building. In the second quarter of 2000, MarkWest increased its line of credit by $15 million
to $65 million. MarkWest believes its ability to generate cash from operations to reinvest in its business is one of its fundamental financial strengths. The Company anticipates that its
operating activities in 2000, coupled with selective asset sales and existing bank credit arrangements, will continue to provide adequate cash flows for its business expansion and to meet its
financial commitments.

The
following summary table reflects comparative cash flows for the Company for the nine months ended September 30, 2000 and 1999 (in thousands):

|                                                                                   |  | For the nine months ended September 30, |       
|---------------------------------------------------------------------------------- |  | --------------------------------------- | ------
|
|Net cash provided by operating activities before change in working capital         |  | $                                       | 10,462
|Net cash provided by (used in) operating activities from change in working capital |  |                                         | (2,640
|Net cash provided by (used in) investing activities                                |  |                                         | (5,935
|Net cash used in financing activities                                              |  | $                                       | (1,529

Capital Investment Program

MarkWest forecasts a baseline capital budget of $20 million in 2000 and $14 million in 2001. This budget funded the completion of Phase I and
will fund Phase II expansion in Appalachia and other requirements, including maintenance capital. Management believes that funds generated from
operations, the February 2000 sale of the Company's office building for $5.0 million in net cash proceeds, and unused borrowing capacity will enable the Company to fund its
2000-2001 capital expenditure programs.

Financing Facilities

Financing activities consist primarily of net borrowings under the Company's credit facility. At September 30, 2000, the Company had $65 million
of available credit, of which net debt (debt less cash) of $41.2 million had been utilized, and working capital of $14.6 million. MarkWest's credit availability has increased
significantly since December 31, 1999, as the Company's trailing cash flow calculation, the determinant of the Company's available credit, rose because of improvements in Appalachia processing
margins and completion of its Phase I expansion. To further increase its financial flexibility, in the second quarter of 2000 the Company amended its existing credit facility increasing the maximum
borrowing amount from $50 million to $65 million. As of September 30, 2000, unutilized credit was $23.8 million. Depending on the timing and amount of the Company's future
projects beyond the level described above, MarkWest may be required to seek additional sources of capital. While the Company believes that it will be able to secure additional financing on terms
acceptable to the Company, if required, no assurance can be given that it will be able to do so.

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## 

Risk Management Activities

The Company's primary risk management objectives are to optimize revenues while minimizing price declines by utilizing a statistical approach that analyzes
momentum, average pricing over time, and various fundamental data such as industry inventories, industry production, demand and weather. Hedging levels increase with capital commitments and debt
levels and when above-average margins exist. The Company maintains a committee, including members of senior management, which oversees all hedging activity.

MarkWest
achieves its goals utilizing a combination of fixed-price forward contracts, New York Mercantile Exchange ("NYMEX")-traded futures, and
fixed-for-float price swaps on the over-the-counter ("OTC") market. Futures and swaps allow the Company to protect margins, because gains or losses in
the physical market are generally offset by corresponding losses or gains in the value of financial instruments.

The
Company enters into futures transactions on NYMEX and through OTC swaps with various counterparties, consisting primarily of other energy companies. The Company conducts its
standard credit review of OTC counterparties and has agreements with such parties that contain collateral requirements. The Company generally uses standardized swap agreements that allow for offset of
positive and negative exposures. OTC exposure is marked to market daily for the credit review process. The Company's OTC credit risk exposure is partially limited by its ability to require a margin
deposit from its major counterparties based upon the mark-to-market value of their net exposure. The Company is subject to margin deposit requirements under NYMEX and OTC
agreements.

The
use of financial instruments may expose the Company to the risk of financial loss in certain circumstances, including instances when (a) equity volumes are less than
expected, or (b) the Company's OTC counterparties fail to purchase or deliver the contracted quantities of natural gas, NGL, or crude oil or otherwise fail to perform. To the extent that the
Company engages in hedging activities, it may be prevented from realizing the benefits of favorable price changes in the physical market. However, it is similarly insulated against decreases in such
prices.

MarkWest
seeks to reduce its basis risk for natural gas but is generally unable to do so for NGL. Basis is the difference in price between the physical commodity being hedged and the
price of the futures or
physical contract used for hedging. Basis risk is the risk that an adverse change in the futures or physical market will not be completely offset by an equal and opposite change in the cash price of
the commodity being hedged. The Company's basis risk primarily stems from the geographic price differentials between MarkWest's sales locations and futures or OTC contract delivery locations.

The
Company protects Appalachia processing margins by using a combination of methods. MarkWest protects margins by purchasing natural gas priced on predetermined Btu differentials to
propane or crude, by simultaneously selling propane or crude oil and purchasing natural gas, and by using swaps to achieve the same result. Crude oil is highly correlated with certain NGL products.
All projected margins on open positions assume the basis differentials between the Company's sales location and the hedging contract's specified location and between crude oil and NGL are consistent
with historical averages. No basis risk was hedged except for a portion of the natural gas. The

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Company's position, in terms of NGL volumes hedged and associated projected margin per NGL gallon, as of November 8, 2000 is as follows:

Hedged Processing Margins

|                                 |  | Q4 2000 |            | Q1 2001 |   | Q2 2001    |  | Total 2001
|-------------------------------- |  | ------- | ---------- | ------- | - | ---------- |  | ----------
|Using crude oil:                 |  |         |            |         |   |            |  |           
|NGL gallons                      |  |         | 6,200,000  |         |   |           |  |           
|NGL processing margin ($/gallon) |  | $       | 0.27       |         |   |           |  |           
|Using propane:                   |  |         |            |         |   |            |  |           
|Propane gallons                  |  |         | 16,400,000 |         |   | 16,200,000 |  |           
|NGL processing margin ($/gallon) |  | $       | 0.20       |         | $ | 0.23       |  | $         
|Total:                           |  |         |            |         |   |            |  |           
|NGL gallons                      |  |         | 22,600,000 |         |   | 16,200,000 |  |           
|NGL processing margin ($/gallon) |  | $       | 0.22       |         | $ | 0.23       |  | $         

Finally,
the Company has locked in a $3.98 per MMBtu sales price on 650,000 fourth quarter 2000 and first quarter 2001 MMBtus for certain Appalachia natural gas
revenues. The Company has also locked in a $5.19 per MMBtu for another 650,000 fourth quarter 2001 and first quarter 2002 MMBtus.

Given
the size of the Company's capital expenditure program, the Company's primary hedging strategy in 2000 was designed to protect a portion of its Appalachian margins against
possible decline in product prices. This strategy limited the benefit the Company otherwise would have recognized had its hedges not been in place during the first nine months of 2000. Specifically,
net income would have been higher by approximately $0.7 million and $1.6 million for the three and nine months ended September 30, 2000.

The
Company also hedges exposure to changes in spot market prices on certain levels of natural gas production. As of November 8, 2000, the Company's position, in terms of
production volumes and sales price hedged, was as follows:

Hedged Natural Gas Sales

|      |  | 2000 |         | 2001 |   | 2002   
|----- |  | ---- | ------- | ---- | - | -------
|
|Mcf   |  |      | 154,000 |      |   | 240,000
|$/Mcf |  | $    | 2.16    |      | $ | 3.02   

The Company enters into speculative futures transactions on an infrequent basis. Specific approval by the Board of Directors is necessary prior to executing such
transactions. Speculative futures are marked to market at the end of each accounting period, and any gain or loss is recognized in income for that period. There were no such speculative activities for
the quarters ended September 30, 2000, and 1999.

In
addition to these risk management tools, MarkWest utilizes its NGL storage facilities and contracts for third-party storage to build product inventories during historically
lower-priced periods for resale during higher-priced periods. Also, MarkWest has contractual arrangements to purchase certain quantities of its natural gas feedstock in advance of physical needs.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Reference is made to Risk Management Activities in Item 2 of this Form 10-Q.

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## 

SIGNATURE

Pursuant to the requirements of the Securities 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: November 8, 2000 |  | By:                                   

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