Back in May I noticed an announcement by DCP Midstream, a MWE competitor, that it was forming a 50-50 JV with EQT, a big NG driller to gather/process NG in the Marcellus, Huron, and Berea formations. Each firm was to put $200million into the JV. Anchoring the project would be the $900 million EQT drilling program aimed at producing 375 horizontal wells. I've heard nothing since on the project. Checking around I note that DCP and EQT are now a)..."evaluating a number of alternatives" b) the EQT logo appears on MWE customer slide and c)DCP's propane business in New England is scrambling for supplies because of TEPPCO pipeline problems and a Rhode Island import terminal outage. Meanwhile MWE Liberty powers ahead. My translation is that MWE's "Firstest with the Mostest" Marcellus strategy is starting to impact competitors. Getting the Mariner Project commercial and extending the Houston(PA) Majorsville(WV) axis to Smithfield(WV) will further pressure competition IMO. My respect is growing for MWE mgmt in making what is now looking like a very solid "Bet the Ranch" result. In six months when MWE's Marcellus fractionation area goes commercial we should see all of this tremendous effort pay off. DCF in 2012 should be remarkable. Merry Christmas,everbody,our investment in MWE is starting to roll!
This morning's announcement that MWE is taking over EQT's processing operation in the KY/WV area is a terrific P.S. to my Dec 20th note on the proposed DPM/EQT JV set up to challenge MWE. And as a REAL cutie note that this is a MWE acquisition, NOT MWE/Liberty! Our MWE is becoming a HITTER! Its' "Firstest with the Mostest" strategy in the Marcellus is Rolling! HAPPY NEW YEAR EVERYONE!!!
MWE paying 12.7x ebitda while Williams continues its aggressive organic growth at 8x ebitda.... Williams signed long term with Cabot who is the big dog... Williams in Laurel Mountain JV with Chevron via Atlas acquisition by Chevron. Laurel Mountain is 1800 mileds of nat gas gathering lines in the Marcellus. Chevron and Williams are going to grow Marcellus assets much quicker than MWE ever can and more importantly Chevron is already extracting concessions from everyone in the build areas because of their pricing power and ability to bring large sums to the area quickly.
The problem for you is Williams is the big dog and they are signing contracts to deliver Marcellus shale gas to utilities up/down the eastern seaboard delivered via their Transco pipeline which goes from gulf of Mexico to New Jersey and eventually into New England states.
Don't get me wrong MWE will be a significant secondary player in Marcellus but paying 12.7x ebitda to grow in Marcellus when Williams is paying 8x ebitda and in some cases lower than that for organic growth with existing assets..... having Cabot and Chevron on your team..... MWE will deal with smaller e&ps while Williams will no doubt be the biggest dog in Marcellus.
The map of Williams pipeline from Marcellus to Transco does not lie. The Cabot agreement and Chevron JV is fact.
Own MWE if you like it but if you don't look at Williams LP and make it a sigificant core position..... your loss.