EQT Corp. and DCP Midstream Partners LP and its sponsor, DCP Midstream LLC, have agreed to create a natural gas processing and related natural gas liquids (NGL) infrastructure joint venture to serve EQT and third-party producers in the Marcellus and Huron shale areas of the Appalachian Basin.
Under a letter of intent, EQT and DCP would pursue gas processing and related NGL infrastructure opportunities in the Marcellus and Huron shales. The joint venture would be the preferred processor for EQT's wet gas in the Marcellus and Huron shales.
EQT has more than three million acres of firmly held acreage in the Appalachian Basin. The company recently announced plans to spend approximately $900 million in 2010 to drill wells in the basin, including approximately 100 horizontal Marcellus Shale wells and approximately 275 horizontal Huron/Berea Shale wells (see NGI, May 3a). DCP is one of the largest NGL producers in the United States.
"We are excited to be working with an experienced partner in EQT and believe the joint venture would facilitate additional investment opportunities to meet the rapidly growing needs of EQT and other producers, for processing capacity and NGL infrastructure in the basin," said DCP Midstream CEO Tom O'Connor.
DCP and EQT would each initially own a 50% interest in the joint venture. DCP would contribute approximately $200 million in cash in exchange for its 50% interest and would operate the venture. EQT would contribute an equivalent value in existing assets consisting of its 170 MMcf/d gas processing plant and related NGL pipeline located in southeastern Kentucky serving EQT's Huron Shale production in exchange for its 50% interest.
The joint venture would use the cash from DCP to fund the initial expansion of the facilities to accommodate EQT and third-party production growth in the Marcellus and Huron shales.
"This joint venture accomplishes three key objectives for EQT: it ensures the transportation and sale of EQT's liquids through the addition of a highly capable partner; it reduces the amount of incremental EQT capital required for the investments in midstream projects necessary to support our growing volumes of produced natural gas; and it allows EQT to retain a financial stake, at least over the near term, in the profitable processing of EQT's liquids-rich natural gas," said EQT CEO David L. Porges.
Closing, which is expected to occur in the third quarter, is subject to finalizing definitive documentation for the joint venture and receipt of customary approvals, including board approval from each of the parties.
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