MarkWest Energy Partners, and NGP Midstream & Resources (M&R) declared an agreement to form a joint venture dedicated to the construction and operation of natural gas midstream services to support producer customers in the Marcellus Shale.

Under the terms of the joint venture, which will be owned 60 percent by MarkWest and 40 percent by M&R, MarkWest will operate the facilities and will contribute approximately $100 million of existing Marcellus Shale assets to the joint venture. M&R will invest the next $200 million of capital, which approximates the capital required to fund the Marcellus project in 2009. Capital funding for 2010 and 2011 will be driven by producer drilling programs. In order to achieve the 60 / 40 capital structure MarkWest will invest approximately $200 million in incremental capital by the end of 2011 in accordance with the joint venture agreement.

The Marcellus Shale continues to develop into one of the most prolific and economic natural gas shale plays in the United States. MarkWest has established a leading position in providing midstream services in the Marcellus Shale, including the recent development of gathering and processing infrastructure for Range Resources in southwest Pennsylvania. By the end of 2009, MarkWest and M&R expect the joint venture to be capable of processing up to 240 million cubic feet per day of gas for Range and other producers.

“M&R will be an excellent partner in our Marcellus project,” said Frank Semple, Chairman, President and Chief Executive Officer of MarkWest Energy Partners. “M&R has a strong appreciation for the long-term strategic value of the Marcellus play and shares our vision of delivering best-of-class midstream services to producer customers, including our significant relationship with Range Resources. The structure of the joint venture will allow MarkWest to achieve its long-term objectives in the Marcellus while significantly reducing capital requirements over the next several years, which is a critical component of our balance sheet and liquidity objectives. The experience and expertise of MarkWest and M&R are very complementary and we look forward to a long-term business relationship.”

“We are delighted to announce the partnership we have formed with MarkWest,” said John T. Raymond, Managing Partner and Chief Executive Officer of M&R. “The transaction leverages the firm’s in-house expertise, deep industry relationships, and financial scale which, when complemented by a proven experienced management team and a common view towards the inherent value of the Marcellus play, creates the foundation for a successful long-term strategic partnership. We look forward to working with the MarkWest management team to explore additional opportunities to partner together.”

The closing of the joint venture is subject to customary and other closing conditions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Act”).

Morgan Stanley is acting as MarkWest’s exclusive financial advisor in connection with the formation of the joint venture.

Tags: MarkWest Energy Partners, NGP Midstream & Resources