By BOB DOWNING
At the end of 2011, MarkWest Energy and The Energy & Minerals Group (EMG) announced that MarkWest was buying out EMG’s share in a 3-year-old joint venture deal in the wet gas portion of the Marcellus Shale called MarkWest Liberty Midstream. EMG owned a 49% stake in that JV (seeMarkWest Pays $1.8B to Buy Out JV Partner in Liberty Midstream). At the time of the buyout, the two companies announced they would form a new JV to build midstream infrastructure in Ohio’s Utica Shale starting in 2012.
The new Utica JV (called MarkWest Utica EMG) ramped up in early 2012 as the pair set out to duplicate their success in building out the Marcellus in the fledgling Utica. The strategy? “Creating a large network of processing complexes connected through an extensive NGL gathering system,” which they immediately began to do by beginning construction on two new processing complexes in Harrison and Monroe counties in Ohio (seeMarkWest to Expand/Build NGL Plants on New Agreements). Just one tiny problem: the Utica JV is now running short on cash…
On Tuesday, MarkWest and EMG announced an update to their Utica JV plans: EMG is more than doubling their investment in the Utica JV—from $450 million to $950 million. Normally an increase like that would mean EMG gets a bigger ownership share of the JV, but according to the press release, such is not the case. Interesting.
In the same announcement, MarkWest says they will contribute an additional $150 million to the Utica JV on “a short-term basis.” MarkWest will be reimbursed for its “contribution” out of the new money coming from EMG. Translation: The JV is going well but cash has dried up, so MarkWest is floating the JV a short-term loan until a larger “hit” comes in from EMG.