Appalachian gas processing company MarkWest Energy Partners LP (MWE) plans to make a footprint in the Southwest region by purchasing Pinnacle Natural Gas Co. and affiliates from Energy Spectrum Partners LP for about $38 million. The deal gives MarkWest three Texas natural gas pipelines, transporting about 1.1 Bcf/d to several power plants, and 18 gas gathering systems, gathering about 44 MMcf/d. The transaction is expected to close March 28.

“Already being the largest gas processor in the Northeast, we are delighted to strategically diversify to the Southwest,” said MarkWest CEO John Fox. “This acquisition fits very well with our current asset base and core competencies. The assets are excellent for the partnership because of the fee-based nature of the cash flows from the pipeline laterals and the growth prospects for the gathering systems. Having a strong business presence in the Southwest should also provide future growth and development opportunities.”

Fox said MarkWest expects the Pinnacle acquisition to be “significantly accretive” to cash available for distribution to MWE unitholders. The company also plans to increase its annual distribution per unit by at least 20 cents to $2.28 in the first full quarter after the transaction closes. MWE shares were up 4.4% Tuesday morning to $24.05.

“We now will be ahead of our previously announced distribution target to increase the annual distribution per unit 10% annually. An increase to $2.28 would represent an increase of 14% within MWE’s first year of existence,” said Fox.

The acquisition will be financed through existing credit lines plus a $15 million expansion of MWE’s existing credit facility. After the acquisition, the partnership will still have a conservative capital structure with an overall debt to total capital ratio of 50%.

MarkWest is a publicly traded master limited partnership and is 47% owned by gas producer MarkWest Hydrocarbon Inc., which has operations in Alberta, the San Juan Basin and Michigan. MarkWest Energy Partners is the largest processor of natural gas in the Northeast, processing gas from the Appalachian basin and from Michigan. Its assets include natural gas processing facilities, liquids fractionation, transportation and storage facilities.

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