Rice Energy Inc. (RICE) said Oct. 8 it has entered an Utica Shale midstream joint venture (JV) in Ohio with Gulfport Energy Corp. (GPOR).

The Canonsburg, Pa. company's subsidiary, Rice Midstream Holdings LLC, has signed an agreement with Gulfport for the JV worth about $640 million.

The partnership plans to develop natural gas gathering and water services assets to support Gulfport's dry gas Utica Shale development in eastern Belmont County and Monroe County, Ohio.

Oklahoma City's Gulfport will dedicate about 77,000 leasehold acres to the JV. This includes acreage recently acquired in its Paloma Partners III LLC and America Energy - Utica LLC transactions.

Rice will own 75% of the JV and be responsible for constructing and operating the assets. Gulfport will own the remaining interest.

Rice and Gulfport plan to invest about $520 million to develop gathering and compression assets and $120 million for water assets within the JV over the next six years. Each partner will fund its proportionate share of the total capital investments.

The JV will include:

  • A dry gas gathering system with capacity to gather over 1.8 million dekatherms per day of natural gas consisting of about 165 miles of high and low pressure 12- to 30-inch gathering pipelines with multiple interconnections to interstate pipelines (includes Rockies Express, ET Rover, TETCO and Dominion East Ohio);
  • About 50,000 horsepower of compression for gathering and delivery into various downstream interstate pipelines; and
  • A fresh water distribution system designed to deliver fresh water to pads for completion activities.

In addition, Gulfport will also contribute an existing 11-mile gas gathering pipeline and a TETCO interconnect, which are both located in Monroe County.

The JV significantly increases Rice's leading midstream position in the core of the Utica Shale. By leveraging its existing footprint, Rice said it's able to grow its third-party business and expand its relationship with Gulfport across Gulfport's premier position in the prolific dry gas Utica Shale.

"This joint venture will be one of the premier midstream systems in the prolific dry gas core of the Utica and adds to Rice's attractive inventory of potential drop down candidates to Rice Midstream Partners," said Daniel J. Rice IV, CEO, in a statement.

Rice and Gulfport plan to pursue third-party gas gathering and water services opportunities within a 340,000-acre area of mutual interest that will cover portions of Belmont and Monroe counties, Ohio.

The JV will be supported by long-term, fee-based service agreements with Gulfport. Initial construction of the system is expected to begin immediately and first deliveries are planned for the middle of 2016.