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American Energy to Spin Off Midstream Business in July

American Energy -- Midstream LLC, an Aubrey McClendon-led entity whose business today is concentrated in Appalachia natural gas pipelines, is transitioning in July as a standalone company with a new name.

As of July 1, Traverse Midstream Partners LLC would be "fully independent" of the American Energy Partners LP (AELP) platform, which management said had been planned since its formation in June 2014. McClendon, the former chief of Chesapeake Energy Corp., formed AELP in April 2013 and subsequently created affiliated partnerships that concentrate on developing U.S. onshore oil and natural gas.

Traverse is capitalized with a $500 million equity commitment provided by The Energy & Minerals Group (EMG) and equity provided by McClendon, other members of AELP management and affiliated parties of McClendon, who is to continue to serve as chairman. EMG, long AELP's leading private equity sponsor, holds the majority of board seats at the midstream partnership.

Traverse now is involved in two of Energy Transfer Partners LP's (ETP) Appalachia natural gas pipeline projects.

"We currently have investments in two of the most important natural gas pipeline projects for the Utica and Marcellus regions, both of which will be operated by one of the premiere pipeline operators in the industry, Energy Transfer Partners," said CEO Dave Shiels, a former Chesapeake executive.

Traverse has a 35% equity interest in ETP's Rover Pipeline LLC, a 710-mile interstate natural gas pipeline company set to begin service by the end of 2016 (see Shale Daily, June 8; Oct. 31, 2014). Rover, designed to transport 3.25 Bcf/d, initially would serve Gulf Coast and Midwest markets. Service to other markets, including Michigan and Canada's Dawn Hub, is scheduled to begin by the middle of 2017.

Traverse also has a one-quarter stake in the Ohio River System (ORS), formerly named the Utica Ohio River Project, which ETP secured through a merger with Regency Energy Partners LP (see Shale Daily, Jan. 26; Aug. 7, 2014). The 52-mile, 36-inch diameter gas gathering trunkline has overall system deliverability of 3.5 Bcf/d.

Set for initial service over the next three months, ORS would deliver up to 2.1 Bcf/d to Rockies Express Pipeline and Texas Eastern Transmission on the southern end of the line, and 1.4 Bcf/d through a 12-mile, 30-inch diameter lateral to the interstate grid on the northern end of the line. ORS is to access eastern Ohio's Monroe, Belmont, Jefferson and Harrison counties.

The midstream separation comes two weeks after AELP announced it would spin off by the end of the year American Energy Appalachia Holdings LLC as Ascent Resources Corp. (see Shale Daily, June 10).

"Along with Ascent Resources Corp.'s announced separation two weeks ago...Traverse Midstream announcement serves as a reminder of the successful collaboration between EMG and AELP in starting, funding and developing first-class companies dedicated to a particular play, basin or strategy," McClendon said.

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