As expected, Summit Midstream Partners LLC has exercised its option to acquire a 40% interest in two companies developing midstream infrastructure in southeast Ohio, under a deal that found it entering the Utica Shale in December when it agreed to purchase the assets of Blackhawk Midstream LLC (see Shale Daily, Dec. 23, 2013).
Otherwise known as Summit Investments, a privately held company that owns and controls the general partner of MarkWest Energy Partners LP, it will acquire nearly half of the equity interest in Ohio Gathering Co. LLC and Ohio Condensate Co. LLC from affiliates of MarkWest and a private equity manager, The Energy & Minerals Group (EMG).
By exercising its option, Summit Investments paid MarkWest and EMG approximately $377 million, or 40% of all the Ohio Gathering investments made to date. MarkWest Utica EMG LLC and MarkWest Utica EMG Condensate LLC will retain a 60% stake in the midstream system, and along with Summit, the venture expects to develop more than $3 billion of gathering and stabilization infrastructure in the coming years.
Ohio Gathering operates and is developing midstream infrastructure in some of the most active areas of the Utica Shale play, including Harrison, Guernsey, Belmont, Noble and Monroe counties, where operators have reported increasingly positive results (see Shale Daily, June 2; April 15; Nov. 19, 2013).
The infrastructure includes a liquids-rich and dry gas gathering system, storage, condensate transportation and a stabilization facility. In addition to generating its fees from Gulfport Energy Corp., Rex Energy Corp. and PDC Energy Inc., the 181 MMcf/d system serves as an inlet to MarkWest’s Cadiz and Seneca processing complexes, located in Harrison and Noble counties respectively.
In December, Summit bought-in to the Utica Shale by acquiring the assets of Blackhawk Midstream, which was a joint venture between Gulfport and Wexford Capital LP, for $190 million. Since it was formed in 2009 by private equity firm Energy Capital Partners (see Daily GPI, Sept. 14, 2009), Summit has focused on developing midstream assets in onshore basins across the country in Appalachia, North Dakota, Texas and Colorado, including a series of acquisitions made last year (see Shale Daily, June 27, 2013; June 6, 2013; Jan. 11, 2013).