Midstream News
EQT to Sell Jupiter System for $1.18B
EQT Midstream Partners LP has agreed to acquire the Jupiter natural gas gathering system from EQT Corp. for $1.18 billion. EQT will receive $1.12 billion of cash and $59 million of common and general partner units. In addition, the partnership will fund $182 million of expansion projects related to Jupiter.
The Jupiter system gathers EQT's Marcellus production in portions of Greene and Washington Counties, PA, and consists of approximately 35 miles of natural gas gathering pipeline and approximately 21,300 horsepower of compression. Jupiter has a total of 970 MMcf/d of pipeline capacity and six interconnects with the partnership's transmission and storage systems.
The 2014 expansions will add approximately 350 MMcf/d of compression capacity, with an in-service date anticipated for the fourth quarter 2014. The 2015 expansion will add approximately 200 MMcf/d of compression capacity, with an in-service date anticipated for the fourth quarter 2015. In addition, the partnership plans to install approximately 20 miles of pipeline during this time. In total, the compression and gathering expansion projects have an estimated cost of approximately $182 million.
The Jupiter assets are supported by a gathering agreement with EQT that includes 10-year firm capacity reservation commitments. The contracted capacity is initially 225 MMcf/d and will grow to 775 MMcf/d by the end of 2015. EQT will also pay a per-unit fee for volume above the contracted capacity; and expects full-year 2014 firm reservation charges and usage fees to be approximately $130 million. Operating expenses, excluding depreciation and amortization, are forecast to be approximately $20 million in 2014.
EQT currently holds approximately 48,000 net acres surrounding Jupiter, including approximately 31,000 undeveloped net acres. As of March 31, 2014, a total of 206 Marcellus and 9 Upper Devonian wells were drilled in the Jupiter service area. Jupiter's average daily gathered volume for the first quarter 2014 was approximately 595 MMcf/d.
Report predicts strong growth for US onshore pipelines industry
Demand for onshore pipelines will increase in the United States, providing a positive outlook for the North American oil and gas industry, according to a new report conducted by Europe's second largest steel producer, Tata Steel.
The study, produced by the company's energy and power division, points to a rise in environmental concerns shifting energy demand towards natural gas and the continued growth in shale as the main drivers for increased investment in production and transport infrastructure.
The report also says the reduction in the price of natural gas combined with improved drilling technology will continue to maintain high oil production, resulting in further demand for pipelines.
Overall the report paints a positive outlook for the North American oil and gas industry, with the findings suggesting that while a slow economy has had an effect on production activity in recent years, the increased investment in large-scale projects is now pointing the market towards an upturn.
Atlas to sell interests in WTLPG for $135M
Atlas Pipeline Partners LP has entered into a definitive agreement to sell its subsidiaries that own a 20% stake in West Texas LPG Limited Partnership (WTLPG) to a subsidiary of Martin Midstream Partners LP for $135 million in cash, subject to certain closing adjustments. Proceeds from the sale will be used to further reduce the partnership's outstanding debt. Citigroup Global Markets Inc. acted as financial advisor and Jones Day acted as legal advisor for the transaction.
WTLPG is operated by Chevron Pipe Line Co., an affiliate of Chevron Corp., which owns the remaining 80% interest.
WTLPG owns a common carrier natural gas liquids (NGLs) transportation pipeline system originating in the Permian Basin continuing across North Texas and through East Texas with delivery to Mont Belvieu, TX for fractionation. In addition, the WTLPG system offers shippers access to several other connections including the Cajun-Sibon interstate pipeline in Southeast Texas. The WTLPG system features numerous receipt points including natural gas processing plants, truck loading facilities and NGL pipelines across multiple production basins. WTLPG owns approximately 2,300 miles of pipeline with long-haul capacity of approximately 240,000 barrels per day and volumes that have been at or near capacity since 2011. The transaction marks the first significant investment by the partnership tied to the Permian Basin.
Assuming no new growth capital investments, the partnership expects to realize distributable cash flow from the acquisition of approximately $5 million for the remainder of 2014 and approximately $9 million for the full year 2015. The partnership's general partner, Martin Resource Management Corp. (MRMC) and Alinda Capital Partners, have agreed to relinquish the next $3 million in incentive distribution rights. This support makes the acquisition immediately accretive to distributable cash flow per limited partner unit.
The partnership will fund the transaction using available capacity under its revolving credit facility and expects closing to occur in 2Q14.
Kinder Morgan to expand CO2 infrastructure in CO, NM
Kinder Morgan Energy Partners LP will invest approximately $671 million to grow its carbon dioxide (CO2) infrastructure. The company plans to expand its CO2 production operations in the Cow Canyon area of the McElmo Dome source field in Montezuma County, CO, and expand the approximately 500-mile Cortez Pipeline that transports CO2 from southwestern Colorado to eastern New Mexico and West Texas for use in enhanced oil recovery (EOR) projects.
Capital expenditures for the Cow Canyon development are estimated at approximately $344 million and will increase CO2 production in the McElmo Dome source field by 200 MMcf/d. The plan includes on-going 3-D seismic acquisition, 16 new wells, activation of one production well and one produced water disposal well, water separation facilities, one central compressor station, and associated gathering and produced water disposal pipelines. Pending regulatory approvals, the company anticipates that 100 MMcf/d of CO2 from the Cow Canyon development will come online by July 2015, with the remaining 100 MMcf/d expected to be in service by the end of 2015.
Capital expenditures for the Cortez Pipeline expansion are estimated at approximately $327 million and will increase the pipeline's capacity from 1.35 bcf/d to 2 bcf/d by adding a 64-mile loop in New Mexico and three new pump stations, one in Colorado and two in New Mexico; and modifying five existing pump stations, one in Colorado, three in New Mexico, and one in Texas. This expansion will accommodate the increased CO2 supply from the McElmo Dome field, the recently announced St. Johns source field, and other sources in southwestern Colorado. Kinder Morgan owns a 50% interest in and operates the Cortez Pipeline. Pending regulatory approvals, the northern portion of the Cortez Pipeline expansion is expected to be completed by July 2015 to handle the additional volumes from Cow Canyon, while the southern portion is expected to be complete by mid-2016 to handle the additional 300 MMcf/d of CO2 expected from the company's St. Johns CO2 source field.
MarkWest to expand Marcellus gas processing capacity
MarkWest Energy Partners LP is expanding its rich-gas processing capacity in the Marcellus Shale. The partnership plans two new cryogenic processing plants at its Sherwood complex in Doddridge County, WV and its Mobley Complex in Wetzel County, WV.
At the Sherwood complex, MarkWest will construct an additional 200 MMcf/d processing plant at the request of Antero Resources Corp. The new plant is anchored by a long-term, fee-based contract and will expand total capacity at the Sherwood complex to 1.2 bcf/d by the second quarter of 2015. Antero is the anchor producer supporting the Sherwood complex.
At the Mobley complex, MarkWest will increase total processing capacity to 920 MMcf/d with the construction of an additional 200 MMcf/d processing plant at the request of EQT Corp. The new plant is anchored by a long-term, fee-based contract and is expected to be in service by 2Q15. The Mobley complex currently consists of three plants with 520 MMcf/d of total processing capacity and during 4Q14, MarkWest will begin operations of a fourth plant at the complex, increasing capacity to 720 MMcf/d. The Mobley complex supports growing Marcellus rich-gas production from EQT, Magnum Hunter Resources Corp., Stone Energy Corp., CONSOL Energy Inc., and Noble Energy Inc.
MarkWest continues to develop its position in the Marcellus and Utica shales with 17 major processing and fractionation projects currently under development. In 2014, MarkWest expects to complete 11 of these projects, bringing total Northeast processing and fractionation capacity to 4 bcf/d and 250,000 b/d, respectively.
Briefs
North Dakota LNG to be state's first LNG producer to market
North Dakota LNG LLC (NDLNG), the newest member of Prairie Companies LLC's portfolio of oil and gas service businesses, has brought a liquefied natural gas (LNG) production facility to North Dakota. Located in Tioga, the plant will be the first-to-market in the state to produce 10,000 gallons per day (GPD) starting in the summer of 2014. A phase two facility is scheduled to be operational in 4Q14 and capable of producing 66,000 GPD. NDLNG has entered into a contract with Hess Corp. to receive residue gas as a natural gas feedstock for the facility.
Mexico energy reform
President Enrique Peña Nieto formally presented to the General Congress of the United Mexican States (Congress) secondary legislation to implement constitutional changes passed in December. The proposal includes nine new bills and amendments to several existing laws. Legislation for the midstream sector includes: Open access for the natural gas market, with open seasons to be held for transportation, subject to certification and regulations issued by the Energy Regulatory Commission (CRE). Pipeline owners are not allowed to participate in marketing hydrocarbons. Rules are introduced to reduce market concentration of pipeline and marketing capacity over five and 10-year periods. A new entity, the National Center for Natural Gas Control (CENAGAS), will receive PEMEX pipeline infrastructure and initiate capacity reservation contracts with PEMEX. Other functions of CENAGAS will include administration of gas transportation and storage, development of plans for expansion and optimization of infrastructure and coordination of maintenance programs.