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MarkWest, EMG Close on Liberty Sale

MarkWest Energy Partners LP has closed on its acquisition of partner The Energy and Minerals Group's (EMG) 49% stake in MarkWest Liberty Midstream & Resources LLC.

The deal, worth roughly $1.8 billion in cash and stock, gives MarkWest full ownership of the Marcellus Shale joint venture (JV) created three years ago and makes private equity fund EMG a "significant" owner of MarkWest, according to the companies (see Shale Daily, Dec. 15, 2011).

The partners also announced a new Utica Shale JV to develop "significant natural gas processing and NGL [natural gas liquids] fractionation, transportation and marketing infrastructure in eastern Ohio" in 2012. Although details won't be available until later this month, the companies said EMG would "fund a majority of the initial capital expenditures."

"The Liberty joint venture has been very successful in leveraging its first-mover advantage to become the largest provider of world-class midstream infrastructure critical to the development of the liquids-rich area of the Marcellus," MarkWest CEO Frank Semple said. "Given the quality and compelling producer economics of the Marcellus Shale, we anticipate significant additional growth in our producers' volumes and out midstream assets for years to come."

Through the sale, MarkWest paid $1 billion in cash and 19.95 million of its unregistered Class B units, worth between $750 million and $800 million in December, according to MarkWest.

MarkWest and EMG previously said the Utica joint venture would be similar in scope to their operations in the Marcellus. The MarkWest Liberty joint venture is responsible for constructing four processing complexes, including currently operational facilities in Houston, PA, and Majorsville, WV, and facilities in Mobley and Sherwood, WV, expected to come online this year.

The joint venture also sanctioned Project Mariner West, a 50,000 b/d pipeline to move Marcellus ethane from Houston, PA, to Sarnia, ON, and continued to promote Project Mariner East, an associated effort to barge ethane to the U.S. Gulf Coast (see Shale Daily, Nov. 11, 2011).

Altogether, MarkWest Liberty ended 2011 with 325 MMcf/d of gathering capacity, 625 MMcf/d of cryogenic processing capacity and 60,000 b/d of propane fractionation in operation.

While exploration in the Utica today is similar to the levels seen in the Marcellus in 2008, when the companies formed MarkWest Liberty, the Utica is already attracting midstream investment.

Spectra Energy Corp. subsidiary Texas Eastern Transmission LP (Tetco), American Electric Power and Chesapeake Energy Marketing Inc. recently announced a $500 million project to add 1 Bcf/d of capacity by November 2014 in eastern Ohio (see Shale Daily, Dec. 22, 2011).

And Chesapeake recently agreed to be the anchor tenant on Enterprise Products Partners LP's proposed pipeline to carry ethane from the Marcellus and Utica to the Gulf Coast by committing 75,000 b/d of production over a five-year ramp-up period (see Shale Daily, Nov. 3, 2011).

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