MarkWest Liberty Midstream & Resources, L.L.C., a partnership between MarkWest Energy Partners, L.P. (MWE) and The Energy & Minerals Group, announced that it has entered into a long-term service contract with Chesapeake Energy Corporation (CHK). Under the deal, MarkWest will extend additional natural gas midstream services in Chesapeake’s gas rich Marcellus acreage of West Virginia.
MarkWest Liberty will provide services at the West Virginia processing complex, Majorsville. The unit holds a cryogenic gas processing plant that is operating almost at its full capacity of 135 million cubic feet per day (MMcf/d).
MarkWest Liberty also targets completing the second plant (with the same capacity) at Majorsville soon and plans to set up a third facility. The natural gas liquids (NGLs) recovered at Majorsville are transported to MarkWest Liberty’s fractionation, storage, and marketing unit in Houston, Pennsylvania through pipeline.
By mid 2012, MarkWest Liberty expects to serve the gas producing majors of southwestern Pennsylvania and northern West Virginia from its 745 MMcf/d of cryogenic processing plant of Houston, Majorsville and the processing complexes of Logansport.
Based in Atlasburg, Pennsylvania, MarkWest Liberty was founded in 2009 and operates as a market leading integrated NGLs transportation, fractionation, storage, and marketing service provider to companies in and around northeast United States.
We believe that the resources of the Marcellus Shale play in western Pennsylvania and West Virginia remain lucrative for the parent company, MarkWest Energy Partners. This deal highlights the company’s efforts to reap more benefits from its strong position in the Marcellus Shale. In this regard, the company is involved in infrastructural expansion that will be required for development of the region.
However, the unstable nature of the natural gas processing business prevents us from being very optimistic on the MarkWest units in the next few quarters. We are maintaining our long-term Neutral recommendation on the stock.
MarkWest currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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