A new joint venture formed by Crestwood Midstream Partners LP and Crestwood Holdings Partners LLC has acquired a Marcellus Shale gathering system in northern West Virginia owned by Antero Resources Appalachian Corp., the companies announced Monday.
The $415 million deal includes $375 million in cash plus an earn-out clause allowing Antero to earn an additional $40 million based on production levels in 2012 and 2013.
The assets include 33 miles of low pressure gathering lines currently moving around 210 MMcf/d from 59 horizontal Marcellus wells to regional pipelines including Columbia, Dominion and Equitrans. Antero also expects to make deliveries into MarkWest Energy Partners' Sherwood gas processing plant scheduled to come online in the third quarter.
Through the deal, expected to close sometime in March, Crestwood and Antero also agreed to sign a 20-year gas gathering and compression agreement for production within an Area of Dedication covering 127,000 gross (104,000 net) acres in the rich-gas window of the southwestern core of the Marcellus. The deal would be effective as of Jan. 1, 2012.
"This transaction is an excellent fit with our strategy and adds to our portfolio another great shale focused producer, a long-term fixed-fee contract and core acreage dedication in the rich gas window of the premier natural gas shale play in the industry," said Robert G. Phillips, CEO of Crestwood Midstream Partners' general partner. Crestwood Midstream Partners will own 65% of the joint venture and Crestwood Holdings Partners will own the remaining 35%.
The deal gives Crestwood its first assets in Appalachia. The company currently owns gathering systems in unconventional basins in Texas, Louisiana, Arkansas and New Mexico.
The proceeds from the sale will fund Antero's 2012 drilling and leasing program.
The Denver-based company plans to spend $861 million this year, including $711 million for drilling and completion, $100 million for leasing and $50 million for building midstream infrastructure. Antero plans to spend around 79% of its upstream budget in the Marcellus, 15% in the Piceance Basin of Colorado and 6% in the Woodford and Fayetteville shales in Oklahoma and Arkansas. Antero currently runs six rigs in the Area of Dedication in the Marcellus, and one rig in the Piceance. The remaining budget is for non-operated wells.
Antero expects to produce between 370-400 MMcfe/d in 2012, up 52-64% over 2011.
The company dramatically increased its presence in the Marcellus last year, adding $126 million to its capital budget in June and picking up a 7% overriding royalty interest in Consol Energy Inc. acreage in the play (see Shale Daily, Sept. 27, 2011; June 1, 2011).