Bluestone Gathering, a wholly owned subsidiary of DTE Energy Company (DTE), has signed a long-term agreement with Southwestern Energy Services Company (‘’SES’’) to build and operate a natural gas gathering system in Susquehanna County, Pennsylvania and Broome County, New York.
Under the terms of the agreement, Bluestone Gathering will supply natural gas from the Marcellus Shale formation to Tennessee Pipeline in Susquehanna and to Millennium Pipeline in Broome County.
Bluestone's initial capacity to both the Millennium and Tennessee pipelines will be over 250,000 decatherms per day (dth/day). After coming into service, Bluestone is expected to deliver over 1 trillion cubic feet of natural gas to the Millennium and Tennessee pipelines. The gathering system still has room for expansion as demand increases over time. The project is expected to be in service in the second quarter of 2012.
DTE Energy currently owns a 550 mile natural gas gathering system in northern Michigan which is designed to aggregate natural gas from the Antrim Shale and the Niagaran formations. Bluestone will be the company’s first gathering project outside Michigan. The company plans to spend more than $250 million over the next five years on both the Bluestone gathering lateral and in-field gathering system.
Additionally, Millennium Pipeline has approved its first two expansions slated to be in-service in late 2012 and late 2013. By adding two compressor stations, these two expansions are expected to increase Millennium's capacity from 525,000 dth/day to approximately 825,000 dth/day.
DTE Energy Company is supported by its stable and growing utilities business and its complementary non-utility businesses. Going forward, the growth momentum will be maintained by beneficial regulatory policies in Michigan, higher rates, and a strong balance sheet.
However, we believe valuation continues to be restrained by the present unfavorable macro backdrop, lower demand for electricity, the dismal Michigan economy and pending regulatory cases. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
Detroit-based, DTE Energy is a holding company with subsidiaries engaged in regulated and unregulated energy businesses. Detroit Edison Company and Michigan Consolidated Gas Company are its largest regulated subsidiaries. DTE Energy also has four non-utility segments engaged in a variety of energy-related business. DTE Energy’s unregulated businesses include gas pipelines and storage, unconventional gas exploration, development and production; power and industrial projects and coal transportation and marketing, and energy marketing and trading operations. Houston-based Southwestern Energy Services, a wholly owned subsidiary of Southwestern Energy Company (SWN), is the primary customer for Bluestone.
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