Utica Shale Midstream Venture

Written By Brianna Panzica

Posted July 12, 2012

Caiman Energy II, LLC began as a midstream energy company focused on the Marcellus shale in 2009. Earlier this year, the company’s subsidiary Caiman Eastern Midstream, LLC sold to Williams Partners (NYSE: WPZ) for $2.5 billion.

This sale included all of Caiman’s Marcellus assets, like its West Virginia cryogenic processing plant.

But Caiman is not out of the shale game.

On Tuesday, Caiman announced plans for a joint venture with Williams Partners, this time in the Utica shale region.

The Utica shale play stretches through New York, Pennsylvania, Ohio, and West Virginia, and according to the Ohio Department of Natural Resources, it could hold between 1.3 and 5.5 billion barrels of shale oil and 3.8 to 15.7 trillion cubic feet of natural gas.

This shale play is less developed than some of the others across North America, like the Bakken, so estimates remain broad and uncertain.

But there is no denying that it will be profitable.

Caiman and Williams will raise $800 million in investments for their project, with $380 million coming from Williams and the remainder from Caiman, EnCap Flatrock Midstream of San Antonio, and Highstar Capital of New York.

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The project will consist of midstream infrastructure to process wet gas drawn from the Utica shale by companies like XTO Energy, Chevron (NYSE: CVX), and Chesapeake Energy (NYSE: CHK). Their processing facilities will separate the methane from other substances for commercial use.

From MarketWatch:

“We’re very proud of the expansive system we built in the Marcellus and the great relationships Caiman developed with producers and the people of West Virginia. We look forward to continuing our work in new regions, especially the Utica Shale. The development of this vast, liquids-rich resource will require similar midstream infrastructure as we build out in the Marcellus,” said Jack Lafield, Caiman’s chairman and CEO.

Williams’ CEO Alan Armstrong was also positive about the venture, excited about the opportunity a midstream project in Utica would provide.

The venture will operate in Ohio and Pennsylvania.

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