MarkWest Energy Partners LP, the natural-gas processor and transporter that gained 48 percent last year, agreed to pay $230 million for EQT Corp.’s Kentucky processing plant and pipeline to help meet rising U.S. Appalachian output.
MarkWest, based in Denver, will increase the capacity of the processing complex in Langley, Kentucky, after the deal closes, the companies said in a statement today. EQT will sign a long-term agreement for MarkWest to process its gas from shale formations in Kentucky and West Virginia, as well as extending an existing gas transport and marketing agreement.
EQT had agreed in May to form an Appalachian fuel-processing joint venture with DCP Midstream Partners LP, controlled by Spectra Energy Corp. and ConocoPhillips. DCP is no longer pursuing the joint venture, it said today in a separate statement.
Wells in the Kentucky and West Virginia shale formations produce gas rich in petroleum liquids that in current markets are more valuable than the gas itself.
The sale will enable more drilling by EQT, boosting its production forecast 5 percent more than expected, Scott Hanold, an analyst for RBC Capital Markets, said today in a note to clients.
EQT will focus on gas development instead of processing, David Porges, chief executive officer of the Pittsburgh-based company, said in the statement. The company today cut its 2011 capital spending by 19 percent from 2010 levels, while forecasting production this year would rise to the equivalent of 175 billion cubic feet of gas, a 31 percent increase.
West Virginia Plant
Separately, a partnership that includes MarkWest announced construction of a plant and pipeline to handle EQT’s liquids-rich gas production from the Marcellus Shale in West Virginia.
MarkWest Liberty Midstream & Resources LLC, a partnership of MarkWest Energy and closely held The Energy and Minerals Group, said it will build a plant in Logansport, West Virginia and a related pipeline by mid-2012 to handle EQT’s rising production from the Marcellus shale. Terms weren’t disclosed.
MarkWest Energy fell 72 cents, or 1.6 percent, to $43.33 at 4:03 p.m. in New York Stock Exchange composite trading. EQT rose 13 cents to $45.69. DCP Midstream Partners rose 6 cents to $37.47.