Gulfport Energy Corporation announced yesterday that it had signed a Letter of Intent with Rice Midstream Holdings LLC, a subsidiary of Rice Energy Inc, to form a midstream joint venture to develop natural gas gathering and water services assets. The joint venture is to support Gulfport’s dry gas Utica Shale development in eastern Belmont County and Monroe County, Ohio, and will be supported by long-term, fee-based service agreements with Gulfport.
75% of the joint venture will be owned by Rice, who will be responsible for constructing and operating the assets:
- A dry gas gathering system with capacity to gather over 1.8 MMDth/d of natural gas consisting of approximately 165 miles of high and low pressure 12” – 30” gathering pipelines with multiple interconnections to interstate pipelines including: Rockies Express, ET Rover, TETCO and Dominion East Ohio
- Approximately 50,000 horsepower of compression for gathering and delivery into various downstream interstate pipelines
- A fresh water distribution system designed to deliver fresh water to pads for completion activities
Under the terms of the Agreement, Gulfport will own the remaining 25% and will dedicate approximately 77,000 leasehold acres, including the acreage recently acquired in its Paloma Partners III LLC and American Energy – Utica LLC transactions. Gulfport will also contribute an existing 11-mile gas gathering pipeline and a 350 MDth/d TETCO interconnect, which are both located in Monroe County.
Over the next six years Gulfport and Rice are planning to invest within the joint venture, roughly $520 million for the development of gathering and compression assets and $120 million for water assets, with each partner partner funding a proportional share.
It is expected that construction of the system will begin immediately, with the first deliveries planned for mid-2016.
Gulfport will have the right to participate on a proportionate basis in any sale transactions by Rice, direct or indirect, including potential drop down transactions with Rice Midstream Partners LP.
The Chief Executive Officer and President of Gulfport, Michael G. Moore, said of the announcement “Gulfport has a strong history with Rice in the Utica Shale and we are excited to expand our relationship by creating further alignment with one of our midstream providers. In addition, the JV will enable Gulfport to leverage Rice’s expertise as a midstream services provider and participate in the midstream value chain through accretive opportunities with clearly defined tag-along rights that will allow Gulfport to take part in the potential drop down strategies for the joint venture and its investments”.
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