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MarkWest Stepping Up Midstream Capabilities in Appalachia

MarkWest Energy Partners LP and MarkWest Liberty Midstream & Resources LLC have announced an acquisition as well as an infrastructure development deal to serve EQT Corp. and other producers in Appalachia.

In one arrangement, MarkWest Energy Partners is acquiring EQT's gas processing complex in Langley, KY, and an associated natural gas liquids (NGL) pipeline for $230 million in a transaction that is expected to close during the first quarter.

The Langley complex includes a 100 MMcf/d cryogenic processing plant, a 75 MMcf/d refrigeration processing plant and about 28,000 hp of compression. MarkWest said it will begin installing a 60 MMcf/d cryogenic plant after the deal closes. And EQT said it will make a long-term agreement with MarkWest to provide processing for its Kentucky Huron/Berea shale gas and extend an existing agreement for NGL transportation, fractionation and marketing services until 2022.

"For more than 20 years we have been a leader in providing highly efficient and fully integrated NGL processing, fractionation and marketing services in Appalachia. This transaction expands and complements our extensive midstream systems that serve the Huron/Berea and Marcellus shales and will provide strategic, long-term value to EQT," said MarkWest CEO Frank Semple.

MarkWest said it will also complete the Ranger NGL pipeline to allow NGLs recovered at Langley to be delivered to MarkWest's Siloam fractionation, storage and marketing complex in South Shore, KY. MarkWest will also process EQT's liquids-rich Marcellus gas in West Virginia.

"The sale of these valuable Kentucky assets is the first step in our commitment to prioritize our capital to our most profitable investment opportunities, which for us means development activities, primarily in the Marcellus and also in the Huron/Berea, rather than processing activities," said EQT CEO David Porges.

In a separate deal, MarkWest Liberty Midstream & Resources, a partnership of MarkWest Energy Partners and The Energy & Minerals Group, said it is developing a gas processing complex in Logansport, WV.

MarkWest Liberty said it will construct a 120 MMcf/d cryogenic facility and associated NGL pipeline by mid-2012 to process liquids-rich gas transported in EQT Corp.'s Equitrans pipeline, which recently announced an expansion. EQT has rich-gas Marcellus acreage in northern West Virginia and has contracted with MarkWest Liberty for the majority of the Logansport capacity. The NGLs recovered at Logansport will be transported via pipeline to MarkWest Liberty's fractionation, storage and marketing complex in Houston, PA.

"The linking of NGL processing with downstream transportation will provide the critical infrastructure solution to facilitate the development of EQT's and other liquids-rich Marcellus acreage in northern West Virginia," said said Randall Crawford, EQT senior vice president.

The Logansport complex is MarkWest Liberty's third processing complex serving Marcellus production in southwestern Pennsylvania and northern West Virginia. The new facility and associated NGL pipeline expands the integrated processing, fractionation and NGL marketing services that MarkWest provides to producers in the Appalachian region.

"We continue to expand our midstream presence in the rich-gas area of the Marcellus, and the Logansport complex will allow EQT and other producers to fully develop their Marcellus acreage in Wetzel and Doddridge counties," said Semple. "We are excited to access significant new Marcellus acreage and to take advantage of the tremendous downstream takeaway options for residue gas on the Equitrans system, including Equitrans' planned expansion to five interstate pipelines."

DCP Midstream Partners LP and sponsor DCP Midstream LLC had been in talks with EQT to provide processing services in the Marcellus and Huron shales but said they have now scrapped that effort. "We will continue to actively pursue economically attractive business opportunities in the Marcellus," said DCP Midstream LLC CEO Tom O'Connor.

Separately, DCP Midstream Partners said it has acquired Marysville Hydrocarbon Holdings LLC for $95 million in cash plus inventory and other working capital of approximately $6 million. Through subsidiary Marysville Hydrocarbons Inc. (MHI), Marysville owns and operates a propane and butane storage facility in Marysville, MI, which includes:

"This immediately accretive acquisition, with the majority of its margins being fee-based tied to storage capacity, expands our existing wholesale propane business," said partnership CEO Mark Borer. "The addition of this Michigan storage asset builds on our supply and logistics capabilities, while providing future expansion potential and new business opportunities."

The partnership said it believes the Marysville storage facility has expansion potential through the development of two additional underground salt caverns. Additionally, the partnership said it will convert MHI from a corporation to a limited liability company.

And in other midstream news, Denver-based Bear Tracker Energy LLC said it has struck agreements with an independent producer to construct, own, operate and expand a gas gathering system that includes compression and other related facilities in the Bakken area. The associated gas production from 18 townships in Burke and Mountrail counties, ND, will be committed to the system during the term of the agreement. Bear Tracker said it will gather, compress and deliver the gas for further handling at a Stanley, ND, facility. Construction is to begin during the first quarter with operations estimated to start in mid-year.

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