High Hopes After $2 Billion Marcellus Deal

Posted by - Wednesday, December 14th, 2011

The Utica Shale formation in Ohio is opening up “enormous opportunities” with developmental plans underway said Frank Semple, CEO of MarkWest Energy Partners L.P.

MarkWest is a limited partnership that specializes in “midstream assets” in the Northeast, Southwest, and the Gulf Coast.

Partners within the company have recently confirmed that they will disclose full details of their new plans for the Utica shale at some point next month. This confirmation occurred shortly after the firm released news of a” $2 billion acquisition in the Marcellus shale with the private-equity firm Energy & Minerals Group.”

This past Monday, MarkWest publicized an aggrement to pay $1 billion in cash and another billion dollars in stock for Energy & Minerals Group's 49% stake in MarkWest Liberty Midstream & Resources LLC – “the largest processor of natural gas in the Marcellus shale of Pennsylvania and West Virginia.”

Utica Shale
*Image courtesy of ShaleBlog.com.

We view [the Utica and Marcellus deal announcements] favorably for credit because they will increase MarkWest’s scale and diversity,” analysts at Standard & Poor’s said in a note to clients on Tuesday.

Semple said the partnership with Energy & Minerals Group in the Utica will build on the two firms’ success in the Marcellus.

We anticipate significant additional growth in our producers’ volumes and our midstream assets [in the Marcellus] for years to come,” Semple said.

Energy & Minerals Group, which specializes in natural resources and with more than $3.8 billion under management, is led by CEO John Raymond, who has also worked as CEO of Plains Resources Inc. and Chief Operating Officer of Plains Exploration & Production Co. PXP -7.64% . 

In the first nine months of this year, the Utica landmass raked in 42 drilling permit approvals – back in 2010 it had only acquired a total of two permits.

According to the Ohio Department of Natural Resources, there's probably 1.3 billion to 5.5 billion barrels of oil in the Utica shale region. The area potentially holds another 15.7 trillion cubic feet of natural gas.

Hearing how much oil and gas could be extracted from this region, several energy companies have taken action to get in on the profits that await. Hess Corp. (HES), Consol Energy (CNX), and Chesapeake Energy (CHK) are among the biggest investors.

The Utica shale has piqued investor interest from all over the nation; both from corporations and from individuals interested in those companies' stocks. What are you waiting for?

*Quotations and indented excerpts from MarketWatch.


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