Building midstream infrastructure in the Marcellus Shale to keep up with growing natural gas volumes was a challenge in the first quarter, MarkWest Energy Partners LP CEO Frank Semple said last week.
“The ramp-up in both capacity and volumes has exceeded what we’ve talked about previously as guidance of 12-18 months to build and 12-18 months to fill,” he told analysts during a quarterly conference call.
Dry gas production from the Marcellus has skyrocketed over the last few years, from 1 Bcf/d in May 2010 to 8.4 Bcf/d in March 2013, according to Energy Information Administration data. The capacity challenges have been acknowledged recently by natural gas operators, which have complained about constraints in the Marcellus on a lack of takeaway capacity, which has left hundreds of wells awaiting completion.
However, since January, four processing facilities in the Marcellus and the Utica have been completed with a combined capacity of 645 MMcf/d, said Semple. “In order to support the success of our producer customers, we expect to complete 18 major projects and over 500 miles of gathering pipeline by the end of next year.”
At the MarkWest Liberty facilities, which serve Marcellus operators in five locations of Pennsylvania and West Virginia, gas volumes jumped 110% year/year in 1Q2013 and were nearly 20% higher sequentially. “We now have over 1.5 Bcf/d of total processing capacity…with our high-quality, diverse set of customers,” which include some of the biggest operators in the Marcellus,” said Semple. The Houston processing and fractionation complex in Washington County, PA, is operating “355 MMcf/d of processing capacity and we are developing another 200 MMcf/d plant” to support Range Resources Corp.
The Majorsville complex in Marshall County, WV, recently started up a third processing plant; before expanded operations, it was operating at near 90% capacity, he said. “The third plant brings our total capacity at the complex to 470 MMcf/d. By the end of this year, we will complete a fourth plant in Majorsville, increasing our capacity to 670 MMcf/d…” Mobley in Wetzel County, WV, was at 60% of capacity just a few weeks after it was completed last December. “We are quickly moving forward with the construction of a third plant, and by the end of this year, we will have installed 520 MMcf/d.”
Growth also is strong at the Sherwood complex in Doddridge County, WV, where MarkWest’s first 200 MMcf/d plant, which began operations lat October, “already is operating at capacity.” Several expansion projects are underway, and by the end of 2014, Sherwood would be the second complex in the Marcellus “with at least 800 MMcf/d of processing capacity.” By early next year, MarkWest also plans to have more than 200 MMcf/d in capacity at Keystone in Butler County, PA.
MarkWest is developing a similar set of critical midstream operations in the Utica Shale with joint venture partner The Energy & Minerals Group, Semple noted. In the past year it has “executed agreements with six key Utica producers, completed 60 miles of gathering pipelines and began operations of two large gas plants. During the next 12 months, we will complete an additional 200 miles of gathering pipelines, spanning five counties, we’ll add 800 MMcf/d of processing capacity and commission our third world-class fractionation complex in the Northeast. And we are also in active discussions with additional Utica producers.”
MarkWest logged revenue of $376 million, down almost 6% from a year earlier. The partnership reported a net income loss of $14.2 million in 1Q2013, compared with profits of $20.8 million a year earlier. Excluding one-time losses, earnings were $15.3 million (11 cents/unit), down from year-ago profits of $69 million (46 cents). Distributable cash flow (DCF) was $110.2 million in 1Q2013, nearly flat from a year ago when DCF totaled $109.2 million.
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