Denver, Colorado-based MarkWest Energy Partners, L.P. (MWE) announced the signing of a Letter of Intent (LOI) with Gulfport Energy Corporation (GPOR), whereby the former will extend gathering, processing, fractionation and marketing services in the liquids-rich corridor of the Utica.
MarkWest executed the transaction through a joint venture–MarkWest Utica EMG, L.L.C. aka MarkWest Utica–formed with private-equity group The Energy & Minerals Group (“EMG”). The operations of the joint venture include the development of natural gas gathering, transportation and processing and natural gas liquid (NGL) transportation, fractionation, as well as marketing infrastructure in the Utica shale in eastern Ohio.
Per the terms of LOI, MarkWest Utica along with Gulfport and other producers will set up extensive natural gas gathering infrastructure across the Harrison, Guernsey, and Belmont counties. These facilities are expected to be operational this year.
MarkWest Utica plans to process gas at its Harrison County processing complex and render NGL fractionation and marketing services at the Harrison County fractionator. The NGL purity products will be marketed by truck, rail and pipeline from this unit.
MarkWest management remains optimistic about this collaboration and expects to come up with high returns from the resource rich holdings in the southern Utica shale.
We remain bullish on MarkWest’s performance in the coming quarters based on its strong position in the midstream business, achieved through a combination of organic efforts and accretive acquisitions.
The partnership also has robust exposure to the fertile prospects in the Marcellus Shale play in western Pennsylvania and West Virginia that is expected to boost long-term revenue growth. In this regard, MarkWest acquired a 49% interest in the joint venture–MarkWest Liberty Midstream & Resources LLC–from EMG in December 2011. The venture operates in the Marcellus Shale formation and provides natural gas midstream services to support producers in western Pennsylvania and West Virginia.
Additional positives in the MarkWest story include accelerating demand for natural gas liquids, an active hedging policy and steady improvement in its liquidity and cash flow position.
As such, we view MarkWest units as an attractive investment and maintain our long-term Outperform recommendation on the stock.
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