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Analyzing ACMP's first quarter earnings and key growth drivers

Part 5
Analyzing ACMP's first quarter earnings and key growth drivers (Part 5 of 8)

Why Utica is set to become a big growth driver for ACMP

Utica’s growing importance

The growing importance of this shale in ACMP’s operations is evident from the fact that its share in the capital budget has increased to 40% within a little more than one year of operation. In Utica, ACMP has a joint venture with M3 Midstream LLC and EV Energy Partners, L.P. (EVEP) to develop necessary infrastructure for the gathering, processing, and fractionation of natural gas and NGLs (or natural gas liquids). In this region, ACMP is constructing the Harrison Hub facility, which is expected to have over 135,000 barrels per day of fractionation capacity available later this year. It will also have 0.87 million barrels of storage facility. Harrison Hub provides access to the downstream market (for example, petrochemical plants) via both rail and pipeline interconnects between Enterprise TE Products and ATEX pipelines.

Utica AssetsEnlarge Graph

At the Kensington facility, ACMP currently has a cryogenic processing capacity of 400 million cubic feet a day with another 200 million cubic feet a day coming available in 3Q14. Plus, significant construction activity is underway on the Leesville facility that will expand Utica East Ohio Midstream’s (UEOM) capacity by adding another 200 million a day of processing capacity in 4Q14. UEOM was acquired as part of the CMO acquisition in December 2012. Mike Stice, the CEO of ACMP, said in the 1Q14 conference call, “Business development efforts in the Utica look extremely promising as we continue to get requests for additional capacity for both local processing and fractionation.”

How Utica Shale region became part of ACMP’s plans

In December 2012, ACMP acquired the 100% equity interest in Chesapeake Midstream Operating, L.L.C. (“CMO”) from Chesapeake (CHK) for a total consideration of $2.16 billion. As a result of the acquisition, ACMP received ownership in certain midstream assets in the Eagle Ford, Utica, and Niobrara regions. ACMP’s Utica Shale region operation has a wet gas gathering system, four lean gas gathering systems ,and a joint venture that owns two processing trains.

The region’s operations are primarily located in northeast Ohio and consist of 265 miles of pipeline with average throughput of 0.267 billion cubic feet per day. In the Cardinal Joint Venture, in which ACMP has 66% interest in a wet gas gathering system, the agreement extends from January 2012 through mid-2032. The Utica Dry facility, in which ACMP has 100% ownership interest in four dry gas gathering systems, has an agreement starting from July 2012 and extends up to mid-2027. The Utica Shale assets of ACMP represent a vertically integrated system that is able to serve producers from the wellhead through fractionation.

Access Midstream Partners, L.P. (ACMP) is a master limited partnership operating in the midstream energy space. Williams Companies (WMB) and Global Infrastructure Partners jointly own ACMP’s general partnership. The majority of ACMP’s revenues come from Chesapeake Energy (CHK). ACMP is part of the Alerian MLP ETF (AMLP) and Chesapeake is part of the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

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