Wednesday, December 22, 2010

Enterprise Product Partners (EPD) and Chesapeake Energy Corp (CHK): Eagle Ford Shale Update

By Andrea:

Enterprise Products Partners L.P. (EPD) recently announced that they recently entered into a 10-year agreement with Chesapeake Energy Corp. (CHK) to handle a large portion of their natural gas production in the Eagle Ford Shale:

Chesapeake's gross acreage position currently comprises more than 625,000 acres in and around the oil and natural gas liquids - rich areas of the Eagle Ford Shale across Dimmit, LaSalle, McMullen, Webb, and Zavala counties located in South Texas. The agreements provide Chesapeake with a comprehensive package of midstream natural gas and NGL services, including firm commitments for gas transportation, processing, and NGL transportation and fractionation services.

"We are extremely pleased with our new agreements with Chesapeake, which represent one of the largest single producer commitments to date for Enterprise in the Eagle Ford Shale," said Michael A. Creel, Enterprise's president and chief executive officer. "The deal with Chesapeake marks the fifth major midstream transaction Enterprise has executed with Eagle Ford Shale producers in the past year, reflecting the strategic importance of our integrated and expanding assets serving the various demands of producers in the prolific region."

Enterprise has previously announced long-term commitments with Petrohawk, EOG, Anadarko and Pioneer.

Chesapeake's NGL-rich natural gas will initially be gathered and compressed by Chesapeake affiliate, Chesapeake Midstream Development, LLC, for delivery to a central location. Enterprise will then transport and process the NGL-rich gas at its existing facilities while a previously announced natural gas processing plant that is currently under development in Texas is completed. This cryogenic processing facility, expected to be completed early in 2012, is designed for an initial capacity of 600 million cubic feet per day (MMcf/d) and with an initial capability to extract as many as 75,000 barrels per day (BPD) of NGLs.

The NGL production from Chesapeake's gas will ultimately be transported on Enterprise's previously announced 127-mile NGL pipeline that will extend from the new gas processing plant to Enterprise's NGL fractionation complex in Mont Belvieu, Texas. This new NGL pipeline, also scheduled for completion in early 2012, is expected to have an initial capacity of more than 85,000 BPD and would be readily expandable to over 120,000 BPD.

Activity in the Eagle Ford Shale continues to increase as approximately 115 rigs working in the play have drilled more than 330 wells completed to date. Total current production from the play is estimated at approximately 425 MMcf/d of natural gas and 35,000 BPD of crude oil and condensate.

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