MarkWest to buy EMG stake in midstream joint venture

MarkWest Energy Partners has signed a letter of intent (LOI) to acquire Energy & Minerals Group’s (EMG’s) 49% stake in MarkWest Liberty Midstream & Resources, a joint venture engaged in the natural gas midstream business.

The companies intend to execute a definitive agreement and close the transaction by the end of 2011.

The acquisition price includes $1bn in cash and the issuance of 19.95 million unregistered MarkWest Energy Class B units to EMG.

The Class B units would convert into MarkWest Energy common units on a one-for-one basis in five equal annual installments beginning on 1 July 2013.

MarkWest Energy has increased its 2012 distributable cash flow forecast to a range of $480m to $540m, as a result of the acquisition.

The company also anticipates its capital spending will be in a range of $900m to $1.3bn in 2012.

Under the LOI, MarkWest and EMG will create a new Utica Shale midstream joint venture in eastern Ohio, US.

The new venture will develop natural gas processing and NGL fractionation, transportation and marketing infrastructure beginning in 2012.

Most of the initial capital expenditures for development of the Utica midstream infrastructure will be funded by EMG, a US-based private investment firm.

MarkWest Energy chairman, president and CEO Frank Semple said the MarkWest Liberty Midstream & Resources joint venture has made significant investments to develop world-class midstream infrastructure needed for the development of the Marcellus shale area.

"Looking ahead, we are very pleased to work closely with EMG in a new joint venture to leverage a similar operational and financial platform to develop integrated NGL transportation, fractionation, storage and marketing services in the liquids-rich corridor of the Utica Shale," Semple said.

MarkWest Energy is engaged in the gathering, transportation and processing of natural gas, the transportation, fractionation, marketing and storage of natural gas liquids and the gathering and transportation of crude oil.