Antero Midstream Partners LP (AM) said late Monday that it would buy in to the largest natural gas liquids infrastructure system in the Appalachian Basin through a unique 50/50 joint venture with MarkWest Energy Partners LP.
AM said it expects to invest up to $800 million through 2020 as part of its ownership in the JV to support Antero Resources Corp.'s prolific wet gas position in West Virginia. AM has agreed to release its 195,000 gross acre processing dedication from Antero, increasing MPLX LP subsidiary MarkWest Energy's Marcellus dedication from 167,000 gross acres to more than 360,000 acres. The additional dedicated acreage is in Tyler, Wetzel and Ritchie counties, WV.
MarkWest would contribute three processing facilities currently under construction at its 1.2 Bcf/d Sherwood Complex in Doddridge County, WV. Those would provide 600 MMcf/d of incremental capacity for Antero when they come online this year and next. The company said the JV could develop up to eight more processing facilities for Antero, both at the Sherwood Complex and at a new location in West Virginia.
The JV also would invest in 20,000 b/d of fractionation capacity at MarkWest's 180,000 b/d Hopedale Complex in Harrison County, OH, with an option to invest in future expansions. MarkWest would continue to own and operate all processing, fractionation and related assets. AM said it would initially contribute $155 million for its share of the processing and fractionation assets. The company announced a public offering of more than 5 million common units to help fund borrowings under its revolving credit facility to pay for the venture and increased this year's net income and cash flow guidance.
AM has previously indicated an interest in expanding its operations into processing in the basin. The move comes at a time when natural gas liquids drilling is again gaining interest in the basin as prices rebound.
While other operators in the region shifted their sights during the downturn almost exclusively to dry gas, Antero's approach was more balanced. It is infrastructure constrained in the dry Utica of Southeast Ohio and produced nearly 1.9 Bcfe/d in 3Q2016, more than a quarter of which was liquids.
The company has 624,000 acres and is a premiere operator in the basin. AM's deal with MarkWest, which was founded in 2002 and has since grown to become the region's largest processor and fractionator, not only builds on the companies’ current relationship, but leverages its acreage dedications and reflects Antero's position, according to financial analysts.