With the aim of supporting the increasing natural gas production in the Upper Devonian formations and Marcellus Shale, natural gas processor and distributor MarkWest Energy Partners LP (MWE) has decided to expand the infrastructure of its midstream assets at the Keystone complex in Butler County, PA.
Deals to Support Expanded Midstream Asset
MarkWest Energy added that in order to support its expanded midstream properties, it has entered into two new deals with upstream energy firm, Rex Energy Corporation (REXX) and privately held EdgeMarc Energy.
As per the expansion agreements, MarkWest Energy is expected to construct Bluestone III and IV processing plants. Both plants will likely process natural gas at a rate of roughly 200 million cubic feet per day (MMcf/d). Bluestone III will be online by the fourth quarter of 2015 while Bluestone IV is anticipated to commence operations by the second quarter of 2016.
Included in the deal, MarkWest Energy will also expand its de-ethanization capacity by constructing a plant which will separate ethane − a key component of natural gas – from natural gas liquid at a rate of 40,000 barrels per day (Bbl/d). The partnership will also improve its fractionation capacity by over 20,000 Bbl/d.
Rex Energy is now increasing its operation in Butler County, which is known for natural gas producing areas in the Marcellus Shale and the overlying Upper Devonian Burkett shale.
Hence, with the increase in natural gas production from the Upper Devonian formations and Marcellus Shale areas, MarkWest Energy will get more gas for processing and fractionation activities, which in turn can help the partnership in generating significant cash flows.
Inside Keystone Complex
The partnership’s Keystone complex comprises of Bluestone processing and fractionation facility as well as the Sarsen processing complex. The total processing capacity from the two complexes is 210 MMcf/d, while the fractionation capacity stands at 26,500 Bbl/d.
By May 2014, the partnership started operating the Bluestone II processing plant – of 120 MMcf/d capacity − and a fractionation plant that can separate ethane and propane from natural gas at a rate of 10,000 Bbl/d – mainly to support the mounting natural gas production of Rex Energy in Butler County.
Outlook
With the expansion of the midstream assets in the Keystone complex in Butler County, MarkWest Energy has significantly strengthened its asset base. Once Bluestone III and IV processing plants start operating, MarkWest Energy will eventually be able to earn considerable cash flows for its unit holders.
Our Take
MarkWest Energy currently has a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Sanchez Energy Corporation (SN) and Cameron International Corporation (CAM). Both stocks sport a Zacks Rank #1 (Strong Buy).
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