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NiSource to Build NGL Pipeline

Zacks Equity Research

NiSource Inc.’s (NI) business ancillary NiSource Midstream Services, LLC, announced the building of a 12-inch, 38-mile natural gas liquids ("NGL") pipeline which will act as an outlet for the Utica production.

The project named Pennant Midstream, LLC, is a joint venture between NiSource and Harvest Pipeline, an associate of Hilcorp Energy Company and involves an investment of roughly $60 million. The program is expected to be concluded by Jul 2014.

The NGL pipeline is crucial for tapping the resource-rich Utica Shale and Appalachia Basin outputs. The network will be a key infrastructure link for transporting the output to lucrative markets. The pipeline will initially have a maximum delivery capacity of approximately 90,000 barrels per day.

The line will boost operations at the Pennant gathering and processing facility and will make it a significant service provider for producers in the northern Utica. The facility will offer wet gas gathering and processing solutions as well as any residual gas and NGL takeaway to remote markets.

The midstream system will connect the Hickory Bend Cryogenic Processing Plant in New Middletown, Ohio, to the UEO Kensington facility near Kensington, Columbiana County. The initial production will be supplied to the UEO NGL pipeline in Columbiana County and from there the output will be shipped through the current UEO NGL infrastructure to UEO’s fractionator at Harrison Hub in Harrison County, Ohio.

NiSource has been making the most of the shale boom by expanding its midstream assets. The company has thus expanded its capital spending target to $2 billion for transmission development programs.

NiSource has also begun initial operation at its West Side Expansion project which will service the Marcellus production to the attractive Gulf Coast markets. In addition, the company will benefit from a 37% rise in natural gas demand in North America by 2035 backed by an anticipated 66% rise in dry gas production.

However, NiSource is presently facing several lawsuits from the Columbia pipeline explosion incident which could hurt its future prospects.  At the moment it carries a Zacks Rank #3 (Hold). Other better placed utilities include Zacks Ranked #2 (Buy) PNM Resources Inc. (PNM), IdaCorp Inc. (IDA) and Cleco Corp. (CNL).

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