MarkWest Energy Partners L.P.
) announced that it has completed the purchase of Keystone
Midstream Services, LLC. The acquisition, which was announced in
early May, was made for a price of $512 million.
MarkWest bought the 100% ownership interest in Keystone from
Stonehenge Energy Resources, L.P., and affiliates of
Rex Energy Corporation
) and Sumitomo Corporation.
With the acquisition, MarkWest gained access to Keystone's
properties across Butler County, Pennsylvania that includes two
cryogenic gas processing plants with a combined capacity of 90
million cubic feet per day (MMcfd), a gas gathering system and
related field compression.
This transaction also enriched MarkWest's asset base in the rich
natural gas reserves in the Marcellus Shale to northwest
Pennsylvania and eastern Ohio.
MarkWest intends to invest $500 million over the next five years
in the development and extension of the gathering and processing
facilities of Keystone. MarkWest also targets to achieve gas volume
production rate of 170 million cubic feet per day (MMcfd) at the
end of 2013 from the current level of 40 MMcfd. This rate is
expected to go up to 350 MMcfd by 2016.
Apart from these properties, MarkWest also received an 895
square mile acreage from Rex Energy and Sumitomo. The former will
be engaged in gathering and processing of rich gas and natural gas
liquids from the area under long-term, fee-based contracts.
MarkWest is a master limited partnership (MLP) engaged in the
gathering, processing and transmission of natural gas,
transportation, fractionation and storage of natural gas liquids,
and the gathering and transportation of crude oil.
We are also maintaining a long-term Outperform recommendation on
the stock, implying that we see it as an attractive investment
We believe that MarkWest owns a high-quality and diverse
portfolio of midstream assets that generate stable and recurring
revenues in the coming months. Over the last few years, the
partnership has consolidated its position in the midstream
business, achieved through a combination of organic efforts and
With its proven track record of supporting producers, MarkWest
is in a great position to participate in the development of
infrastructure that will be required for the leaseholds. Additional
positives in the partnership story include accelerating demand for
natural gas liquids and steady improvement in its liquidity and
cash flow position.
MARKWEST EGY PT (MWE): Free Stock Analysis
REX ENERGY CORP (REXX): Free Stock Analysis
To read this article on Zacks.com click here.