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Marcellus operators sign processing, transportation agreements

Units of Magnum Hunter Resources Corp., Houston, have agreed to provide new processing and transportation services for Marcellus shale gas production in northwestern West Virginia, Magnum Hunter reported.

Eureka Hunter Pipeline LLC and Triad Hunter LLC signed the agreements with MarkWest Liberty Midstream & Resources LLC, a partnership of MarkWest Energy Partners LP, Denver, and Energy & Minerals Group, Houston.

The agreements provide for long-term midstream natural gas processing and related services in the Marcellus shale. This will include production in northwestern West Virginia that is gathered through Eureka Hunter’s pipeline system, including equity production for Triad Hunter and other third-party producers.

Under the agreements, Eureka Hunter has sold its 200-MMcfd capacity Thomas Russell cryogenic gas processing plant, currently under construction, to MarkWest Liberty. MarkWest Liberty will install the new plant, to be named Mobley 2, next to MarkWest's 120-MMcfd plant, Mobley 1, also still under construction. Mobley 1 is to be operating in second-quarter 2012; Mobley 2 in third-quarter 2012.

Completion of both plants will increase MarkWest Liberty's total gas processing capacity by 320 MMcfd. NGL services also will be provided by MarkWest Liberty, with fractionation anticipated to be at its Houston, Pa., processing and fractionation complex.

Eureka Hunter will extend its 20-in. gas gathering system to the Mobley processing complex by May 1, 2012, in order to begin delivering unprocessed gas production to both plants. Eureka Hunter will be gathering both Triad Hunter's and other third parties' natural gas production for delivery to the Mobley complex. Initial delivery volumes from Eureka Hunter to Mobley are to be 50-75 MMbtu/day.

Under current NGL pricing, said the announcement, Eureka Hunter and other third-party producers anticipate a “pricing uplift” of $1-1.25/Mcf equivalent sold, after gathering and processing charges. In addition, natural gas production processed at the Mobley plants will be able to access both the Columbia Gas Transmission and the Equitrans interstate pipeline systems.

The agreements announced on Oct. 5 also include a mutual cooperation agreement between Eureka Hunter and MarkWest Liberty whereby both companies agreed to develop jointly “critical natural gas-related services” to support Marcellus shale producers in a large portion of northwestern West Virginia.

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