MarkWest Buys EQT's Processing Unit - Analyst Blog

MarkWest Energy Partners, L.P. (MWE) announced the acquisition of EQT Corporation's (EQT) Kentucky basednatural gas processing complex and an associated natural gas liquids (NGL) pipeline. The purchase price of the properties has been settled at $230 million.

The processing complex incorporates 100 million cubic feet per day (MMcf/d) cryogenic processing plant, a 75 MMcf/d refrigeration processing plant along with a 28,000 horsepower of compression. MarkWest plans to expand the capacity of the cryogenic processing plant after the deal closes within the first quarter of 2011.

Even after the acquisition, EQT will continue to provide processing services to MarkWest's Kentucky Huron/Berea shale gas, comprising natural gas liquids transportation, fractionation, and marketing services through 2022, via a long-term contract.

With this divesture, EQT aims to transfer its focus on the development and expansion of exploration activities, primarily in the Marcellus and Huron/Berea gas shales from the processing activities.

MarkWest management remains highly upbeat regarding this deal as it would solidify the company's hold over the energy sector, while strengthening its alliance with EQT.      

Headquartered in Denver, Colorado, MarkWest has market leading position in providing highly efficient and fully integrated NGL processing, fractionation, and marketing services in Appalachia. The company also has a significant presence in the other prolific natural gas producing basins of the U.S., including the Anadarko, Arkoma, East Texas, and Gulf Coast basins.

In our view, MarkWest's prospects in the Marcellus Shale play in western Pennsylvania and West Virginia remains very lucrative. With a diverse portfolio of assets, the company is favorably positioned to expand the infrastructural facilities necessary for the development of the Marcellus Shale leaseholds.

However, due to the volatile nature of the natural gas processing business, we do not see any significant price upside for MarkWest units in the next few quarters. We are maintaining our long-term Neutral recommendation on the stock.

MarkWest currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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