MarkWest Energy Buys Granite Wash Assets
Bought multiple midstream assets in the Anadarko Basin.
MarkWest Energy Partners LP (NYSE: MWE) has bought multiple midstream assets in the Anadarko Basin from a wholly-owned subsidiary of Chesapeake Energy Corp. (NYSE: CHK), for $245 million in cash.
The acquired assets consist of a 200 million cubic feet per day cryogenic gas processing plant (Buffalo Creek Plant) and 22 miles of gas gathering pipeline in Hemphill County, Texas, and 30 miles of rights-of-way associated with the future construction of a high-pressure trunk line.
Additional assets consist of an amine treating facility and a five-mile gas gathering pipeline in Washita County, Okla. The high-recovery Buffalo Creek Plant and associated trunk line are currently under construction and are expected to be placed into service in early 2014. Producing formations in the Anadarko Basin associated with these assets include the highly prolific Granite Wash and Hogshooter formations, and multiple other liquids-rich zones.
In conjunction with the acquisition, MarkWest has signed a long-term, fee-based agreement with Chesapeake for gas gathering, compression, treating, and processing services. As part of the gas processing agreement, Chesapeake has dedicated 130,000 acres throughout the Anadarko Basin.
MarkWest anticipates initial gas volumes from Chesapeake of 50 million cubic feet (MMcf) per day, increasing to over 250 MMcf per day by 2017. Additionally, MarkWest forecasts EBITDA of $30 million for the full-year 2014, increasing to more than $50 million by 2017.
To support Chesapeake’s drilling program, MarkWest anticipates additional capital investment of $90 million over the next five years tom complete and expand the associated infrastructure. The majority of capital will be spent over the next two years to finalize construction of the Buffalo Creek Plant and the high-pressure trunk line to connect various low-pressure gas gathering systems, which are owned and operated by third parties.
Once completed, MarkWest argues these assets will be highly synergistic with its existing operations in the Granite Wash, which include gas gathering systems totaling 340 million cubic feet per day of throughput capacity and the 235 million cubic feet per day Arapaho processing complex in Custer County, Okla.
In addition, Chesapeake and MarkWest have furthered their relationship in the Appalachian Basin through the extension of a key processing agreement for five additional years to 2020.
MarkWest Energy Partners LP is a midstream operator based in Denver.