MarkWest To Acquire EMG Interest In MarkWest Liberty JV
To buy interest in MarkWest Liberty Midstream & Resources LLC, which provides gas midstream services in Marcellus shale primarily in SW PA & N WV, which incldues on-site gas liquid storage capacity of 52,000 Bbls, gathering capacity of 325 MMcf/d and cryogenic processing capacity of 625 MMcf/d.
MarkWest Energy Partners L.P. (NYSE: MWE) signed a letter of intent to acquire The Energy & Mineral Group’s (EMG) interest in MarkWest Liberty Midstream & Resources LLC by Dec. 31, 2011.
The agreement includes $1billion of cash and the issuance of 19.95 million unregistered MWE Class B Units to EMG. These units that would be issued to EMG would convert into MWE common units on a one-for-one basis in five equal annual installments beginning on July 1, 2013 and each of the four annual anniversaries thereafter.
MarkWest Liberty is a joint venture operated by MarkWest and The Energy & Minerals Group, and provides gas midstream services in the liquids-rich areas of the Marcellus shale primarily in southwestern Pennsylvania and northern West Virginia. The assets feature on-site gas liquid storage capacity of 52,000 barrels, (with access to more than 1 million barrels of additional dedicated storage), gathering capacity of 325 million cubic feet per day and cryogenic processing capacity of 625 million cubic feet per day.
MarkWest officials stated that the company will increase its 2012 DCF guidance to a range of $480-$540 million and its capex guidance to $900 million to $1.3 billion as a result of the agreement. This acquisition is also expected to increase MarkWest’s fee-based net operating margin by up to 6% annually starting in 2012.
This letter of intent also calls for MarkWest and EMG to create a new Utica Shale midstream joint venture to develop natural gas processing and NGL fractionation, transportation, and marketing infrastructure in eastern Ohio beginning in 2012. EMG would fund a majority of the initial capital expenditures required to develop the Utica midstream infrastructure.
“Our Liberty joint venture with EMG has made significant capital investments to develop world-class midstream infrastructure that has been critical to the development of the liquids-rich area of the Marcellus,” Frank Semple, chairman, president and chief executive of MarkWest, said in a news release. “The joint venture has been very successful and we believe this acquisition represents a significant achievement for both parties. The creative acquisition structure includes up-front cash and deferred issuance of MWE common units. This structure provides immediate and future accretion and reflects the strength of our relationship with EMG as well as their confidence in the future value of MWE’s common units. Looking ahead, we are very pleased to work closely with EMG in a new joint venture to leverage a similar operational and financial platform to develop integrated NGL transportation, fractionation, storage, and marketing services in the liquids-rich corridor of the Utica Shale.”
“Since inception a mere three years ago, the Liberty JV has adapted to the success and needs of the producer community – as demonstrated by record drilling activity levels in the basin – via multiple iterations of geographic and functional expansions that has manifested the development of a large scale, world-class integrated midstream system that allows the producers to fully develop and maximize the value of their underlying reserves,” John Raymond, managing partner and chief executive of EMG, said in a news statement. “This is the direct result of the strong relationship between the teams at EMG and MarkWest. To that end, MarkWest has been an exceptional partner and, as operator of the JV, has consistently delivered best-in-class execution in the development of these critical assets. The JV has also exercised considerable commercial and financial flexibility via structural solutions and scalable capital needs to support the development of this multi-billion dollar project. Via the newly formed Utica JV, we look forward to again working with the dedicated and talented group of people at MarkWest to continue to meet the dynamic needs of the producer community in one of the most promising basins in North America over the years to come. We look forward to long-term participation in the continued growth of the value of MarkWest via our substantial unit position and the newly formed Utica JV.”