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MarkWest CEO Sees 'Explosive Growth' in 2013

November 12, 2012
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Continuing growth in the Marcellus Shale and emerging opportunities in the Utica Shale should lead to an increase in natural gas liquids (NGL) processing to 4.8 Bcf/d in 2013 from 2012's 2.7 Bcf/d, CEO Frank Semple said last week.

MarkWest Energy Partners is getting ready for "explosive growth" in the Northeast "in 2013 and beyond," CEO Frank Semple said Thursday. Next year, NGL processing in the Marcellus and Utica shales combined should increase to 4.8 Bcf/d from 2.7 Bcf/d to serve producer customers.

The Denver-based operator expects to complete 12 processing plants over the next year to support a "significant inventory of fractionation and marketing in the Northeast, leading to ongoing development and expansion opportunities," he told analysts during an earnings conference call. By the end of 2014, 19 plants are scheduled to be built. The Marcellus Shale backlog, and increasingly the Utica, provide projects through 2014.

"The best way to think about where we are today and where we will be tomorrow and into 2014 is to break it apart into the Marcellus and Utica and focus in each of those areas on processing." In the Marcellus Shale, "we'll be at the end of 2012, with projects announced and completed, at 1.1 Bcf/d of processing capacity. Fast forward to 2014 in Marcellus, and that number is going to double to 2.2 Bcf/d. Then, with projects announced, we have a huge amount of interest to stay ahead of producer customers. With the current projects, we will have 3 Bcf/d of processing capacity by the end of 2014...Ohio is easier to calculate" because production has only begun." MarkWest now is processing 60 MMcf/d in Ohio. "Then in 2013 we'll layer on to get 830 MMcf/d of processing by the end of the year..."

Last week MarkWest said it would add 200 MMcf/d of gas processing to its Mobley complex in West Virginia to support rich-gas production in the Marcellus by EQT Corp., Magnum Hunter Resources Corp. and others.

Also last week MarkWest Utica EMG LLC, a joint venture with The Energy and Minerals Group (EMG), agreed to develop Ohio midstream infrastructure in Noble County, OH, for Antero Resources. An interim 45 MMcf/d refrigeration plant at the MarkWest Utica Seneca processing complex is to be brought online, with expected completion in 2Q2013. That facility would be followed by Seneca I, a 200 MMcf/d cryogenic facility, set to begin operations in 3Q2012. Another 200 MMcf/d cryogenic facility, Seneca II, could be ready by the end of next year. In Harrison County, OH, a gathering system also is planned to MarkWest Utica's Cadiz processing complex and on to a fractionation and marketing complex. Caziz would include a de-ethanization facility where produced purity ethane would be delivered into the Appalachia to Texas (Atex Express) ethane pipeline (see NGI, Jan. 30).

"2013 will be a transformational year," said Semple. Marcellus and Utica processing is set to increase by almost 2 Bcf/d, and total processing capacity should jump 80%. The Marcellus "will be the highest producer in the United States" in 2013, Semple said. "We now are installing 11 new cryogenic plants and by the end of 2013 we expect to double capacity to 2.2 Bcf/d. By the end of 2014, we expect to have 19 processing plants."

MarkWest's southwestern operations, which include the Carthage gas gathering facilities in East Texas, serve Haynesville Shale operators. An expansion is under way, and in 2013 processed volumes are expected to be up by 35% from this year. Producer customers "are focusing their efforts on rich gas acreage rather than dry gas performance."

While the Marcellus has moved into a "manufacturing mode," more resources are being poured into the Utica. In the next few days the first large gathering trunk should be completed in Ohio, followed by another in the next several weeks and two more in 2013. The first two trunk lines would accommodate 500 MMcf/d and by the end of next year, the new lines would "allow more than 1 Bcf/d to be processed." Developing the Utica has been a "natural progression from Marcellus," said Semple.

Operating income in 3Q2012 was $145.5 million, a decrease of $2.3 million from the same period a year ago. The decrease primarily was attributed to lower natural gas prices and derivatives, which cost the partnership $8.4 million versus $15.8 million in 3Q2011. Adjusting for the one-time items, earnings were $108.2 million, versus $107 million a year ago. Cash flow was $104.3 million for 3Q2012. Quarterly distribution of $95.3 million (81 cents/unit), is to be paid to unitholders this month. Adjusted earnings were $108.2 million, versus $107 million a year ago.

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