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Midcoast Enters East Texas Eaglebine, Building New Pipeline

Activity in the emerging Eaglebine Shale of East Texas has prompted Midcoast Energy Partners LP to enter the play through an acquisition and an expansion project, the company said Monday.

Midcoast has struck agreements with Burk Royalty Co. Ltd. and SEM Operating Co. LLC, a subsidiary of Sequitur Energy Resources LLC, to construct, own and operate the Ghost Chili Lateral pipeline and associated facilities in Houston County, TX. The initial facilities are projected to be placed in service by late 2015, with the Ghost Chili Lateral expected to be in full service by mid-2016.

Midcoast has also executed an agreement with New Gulf Resources LLC (NGR) to purchase NGR's midstream business in Leon, Madison and Grimes counties, TX. The acquisition consists of a natural gas gathering system that is currently in operations moving equity and third-party production.

The collective Eaglebine investments total about $160 million and will be undertaken by Midcoast Operating LP. The investment will be jointly funded 51.6% by Midcoast Energy Partners and 48.4% by Enbridge Energy Partners LP.

"The combined transactions of the Ghost Chili Lateral and the new NGR acquisition enhance MEP's competitive position in the Eaglebine and provide additional opportunities for accretive growth in MEP's natural gas gathering, processing, and transportation business...[T]he contracts associated with these investments are largely volume commitment-based, which is in line with our commitment to progress MEP toward contract structures with more certain cash flows," said Midcoast Partners President Gregory Harper.

Companywide, Midcoast has a combined processing and treating capacity of 2.9 Bcf/d. The new Ghost Chili Lateral and NGR assets will complement MEP's East Texas system, which is composed of 4,100 miles of gathering and transmission pipelines, five active natural gas processing plants, in addition to the new Beckville processing plant targeted to enter service early in the second quarter of 2015, and seven active treating plants, the company said. The system serves customers producing in the Cotton Valley, Haynesville Shale, Bossier Shale and other productive formations.

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