Midstream InfrastructureGrowth Matches Escalating

Shale Play ActivityBy Al PickettSpecial Correspondent

The emergence of shale plays not only has changed the dynamics of thenatural gas industry in North America, but it also is creating billions of dollarsin growth opportunities for the midstream industry to provide treating,processing, storage and transportation infrastructure to get the new suppliesof shale gas to market.

“It really is exciting,” says Billy Lemmons, one of three managing partnersof EnCap Flatrock Midstream. “The new shale resource plays have greatrepeatability on the upstream side, and the midstream follows the success ofthe upstream. About 14,000 wells have been drilled over the past decade inthe Barnett Shale (with more than 8 trillion cubic feet of cumulative gasproduced to date, according to reports). As in the Barnett, large numbers ofwells are being drilled in each shale gas play. Every one of those wells needspipe and other midstream infrastructure.”

The industrywide shift to concentrate on the “liquids windows” within eachshale play to produce dry gas as well as premium-priced liquids such asbutane and propane, light oil and condensate only heightens the need forincreased gathering and processing capacity, Lemmons notes. “The wetterthe gas, the larger the requirement for gathering systems and processingfacilities,” he states.

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EnCap Flatrock Midstream, headquar-tered in San Antonio, has more than $1.2billion in midstream equity under man-agement. The company began raising itscurrent fund in the summer of 2008, whichBill Waldrip, another managing partner,admits was a difficult time to raise money.“But we closed the fund with $800 millionafter teaming with EnCap Investments,”he reports. “Both companies saw opportunityin the midstream sector and we came to-gether to form a partnership to manage theEnCap Energy Infrastructure Fund (EEIF).”EEIF provides private equity capital

to management teams focusing on mid-stream energy infrastructure opportunitiesin North America, including natural gasgathering, treating, compression, process-ing, liquid fractionation, storage and trans-portation, as well as oil gathering andhandling produced water.“Our focus is close to the wellhead:

gathering, treating and processing gas aswell as handling crude oil and NGLs,”Waldrip continues. “So far, we havebacked five portfolio companies that havebeen actively involved in shale resourceplays, and have gone back with secondofferings a couple times.”

‘Patient Capital’Meritage Midstream Services and

Caiman Energy LLC are two examplesof relatively new midstream companiesthat have been backed by private equityfrom EnCap Flatrock Midstream and itsEEIF fund. Jack Lafield, president andchief executive officer of Caiman Energy,says the private equity funding of thesenew midstream projects is a growingtrend in the industry.“Master limited partnerships were the

darlings of the past decade,” he explains.“But even prior to the 2008 capital marketscrash, MLPs were having difficulty raisingnew equity. They were built primarilyaround acquisitions and consolidation.When real growth started in shale playsin 2005, the midstream projects neededmore risk money. With new infrastructuredevelopment, cash flow does not showup as fast, so the MLPs were unable tomake immediate distributions.“The void has been filled by what I

call ‘patient capital,’ where investors arenot requiring immediate distributions,”Lafield continues. “So new shale mid-stream infrastructure has become a sig-nificant opportunity for private equity. In2010 and going into this year, private eq-uity is the capitalization plan for higher-risk infrastructure. It takes patient capitaland smart management teams to assessreservoir risk and give producers time to

develop an area.”Lemmons says projects funded by the

EEIF have gas flowing across the countryfrom the Marcellus Shale in Pennsylvaniaand West Virginia, to the Woodford Shalein Oklahoma and the Eagle Ford Shalein South Texas. EnCap Flatrock Midstreamalso is pursuing activity in the BakkenShale in North Dakota, the Avalon/BoneSpring play in New Mexico and WestTexas, and the Granite Wash in westernOklahoma and the Texas Panhandle, ac-cording to Lemmons.Most of those projects are in areas in

which the gas is rich in liquids. “One ofour key philosophies is to look at the up-stream side of the business and the eco-nomics for upstream producers,” Waldripsays. “The areas that contain NGL-richgas are where the economics look betterat this time. Some rich gas areas areseeing increased activity because of theadded value associated with the liquids.For example, we are seeing rigs beingrelocated from the Haynesville to theEagle Ford and Marcellus.”Lemmons says the industry is funda-

mentally different than it was only adecade ago. “The coming decades willbe dominated by shales,” he maintains.“People traditionally track rig counts asa barometer of industry activity, but withthe success of horizontal drilling andmultistage hydraulic fracturing, you donot have to have as many rigs running.The yield per rig is so much greater, andthere are more multiwell pads. That makessense operationally and environmentally.It also creates a very robust environmentfor the midstream industry.”Waldrip predicts as much as $10 billion

a year will be spent on midstream infra-structure in the near term. “There will betremendous development over the nextdecade to two,” he forsees. “Of course,midstream development activity will cyclewith pricing. But for every $1.00 spenton the upstream, there will be $0.15-$0.35 spent on associated midstream in-frastructure. That is a lot of capital thatwill need to be deployed.”Even in areas where the shale plays

sit adjacent to historical conventional gasresources, Lemmons says the old infra-structure is not sufficient from a size andpressure standpoint to handle high-volumeshale wells, especially those rich in NGLs.“I cannot underscore enough the oppor-tunities we see within the next 10-20years,” he adds. “We feel fortunate to be

Caiman Energy has secured $400 million in capital commitments and approximately400,000 acres in contractual acreage dedications from Marcellus Shale producers in aliquids-rich area of Southwest Pennsylvania and Northwest West Virginia that it projectswill produce more than 1 billion cubic feet a day within the next five years. The initial in-frastructure development includes laying a 24-inch trunk line through the center of thearea and more than 100 miles of gathering lines.

Oil & Gas Shales

off to a great start. Our portfolio companiesare successful because they are great atmeeting the needs of producers. At theend of the day, the midstream is a servicebusiness.”

Growth Opportunities

So what and where are the growth op-portunities for midstream service com-panies? “Emerging liquids-rich shale gasplays are creating the need for significantinfrastructure buildup everywhere, butthe Marcellus is number one on the list,”responds William R. Moler, senior vicepresident for natural gas midstream op-erations for Inergy LP, a Kansas City-based company whose business platformincludes the largest independent naturalgas and liquid propane storage operationsin the Northeast.“Although the first U.S. oil well was

drilled in Pennsylvania and large numbersof conventional shallow Oriskany gaswells have been drilled in the region,northern Pennsylvania and upstate NewYork are infrastructure-short,” he goeson. “This area has never seen this levelof drilling activity or the kinds of highlyproductive horizontal wells being drilledtoday in the Marcellus.”That has created a tremendous oppor-

tunity for Inergy, which has a number ofprojects under way to develop an integratedenergy storage hub in the Northeast, ac-cording to Moler. At the center of Inergy’s

strategy is the Stagecoach natural gasstorage facility, which is located near theNew York-Pennsylvania border 150 milesnorthwest of New York City, he says. “Itis the closest storage facility to the NewYork City market,” Moler points out. “Ifit gets cold in New York City, we get thefirst call.”Stagecoach is a high-performance,

multicycle gas storage facility with aworking gas capacity of 26.5 billion cubicfeet, injection capabilities of 250 millioncubic feet a day and withdrawal capabilitiesof 500 MMcf/d. It has connections toboth the Millenium and Tennessee Gasinterstate pipelines. To expand Stage-coach’s capacity, Moler says Inergy hastwo new projects under way.The first is the Marc I Hub Line, ex-

pected to be completed in the summer of2012. The 432-mile, 30-inch bidirectionalgas pipeline will run through SullivanCounty, Pa., providing firm wheeling op-portunities between TGP, Millennium,Transco and all points in between inNortheast Pennsylvania–a portion of theMarcellus Shale play that Moler describesas producing “very prolific initial pro-duction rates.”Meanwhile, the North-South Project

includes additional compression and meas-urement facilities to serve shippers seekingto wheel gas on a firm basis through In-ergy’s existing Stagecoach North or Southlaterals. It was expected to be in service

by the heating season.When completed, the two projects will

allow Inergy to wheel volumes on a firmtransportation basis through 75 miles ofpipe to and from Tennessee Gas PipelineCompany’s 300, Transco’s Leidy, andthe Millennium pipelines, according toMoler. “Combined, these two projectsare expected to add more than 45,000horsepower of additional compressionand 875,000 dekatherms/day of trans-portation capacity to our midstream busi-ness in the Northeast,” he reports.

Storage Facilities

Inergy also has agreed to purchasethe Seneca Lake natural gas storagefacility in Schuyler County, N.Y., andtwo related pipelines for $63 millionfrom New York State Electric & GasCorporation. Seneca Lake is an under-ground salt cavern storage facility locatedon Inergy’s U.S. Salt property outsideWatkins Glen, N.Y., and has a maximumwithdrawal capacity of 145 MMcf/d anda maximum injection capacity of 75MMcf/d, Moler relates.Seneca Lake is connected to the Do-

minion Transmission System through the16-inch, 20-mile Seneca West Pipelineand indirectly to the city gate of Bing-hamton, N.Y., by way of the 12-inch,37.5-mile Seneca East Pipeline, whichruns within four miles of Inergy’s Stage-coach North Lateral interconnect withthe Millennium and Empire pipelines.Moler says the capacity of the SenecaLake facility is being expanded from 2Bcf to 12 Bcf.Inergy owns two gas storage facilities

in Steuben County, N.Y.: the Steuben GasStorage Company (6.2 Bcf working gascapacity and a facility-owned 12-inch,12.5-mile pipeline connected to the Do-minion, TGP and Millennium pipelines),and Thomas Corners (7.0 Bcf capacity),as well as two liquefied petroleum gasstorage facilities in New York: Bath (1.6million barrels of capacity) and FingerLakes near Watkins Glen (construction isexpected to be completed next spring toexpand capacity up to 5 million barrels).“The LPG storage facilities will help

the market handle the excess LPG fromthe rich gas produced in lower Pennsyl-vania,” Moler explains. “The Finger Lakesfacility positions Inergy is the largestLPG storage provider in the Northeast. Itis connected to the Teppco Pipeline, and

Seeking to capitalize on opportunities created by the emergence of the giant MarcellusShale gas play, Inergy has a number of projects under way to develop an integrated en-ergy storage hub in the Northeast. At the center of the company’s strategy in the North-east is the Stagecoach high-performance, multicycle storage facility–the nearest facilityto the New York City market.

Oil & Gas Shales

also has rail and truck access.”The storage facility expansions are

positioning Inergy to provide what Molerterms “significant Marcellus gas supplies”to the market, but he says there is anotherway to view it: “Storage and transportationexpansions are bringing the market tothe Marcellus,” he claims. “We have allof the Northeast local distribution com-panies and eight of the top 10 gas mar-keters participating in our assets, so ifproducers get their gas to our assets, theyare able to get their gas to market.”Jumping from the Appalachian Basin

to South Texas, Moler reports that Inergyclosed a deal in October to acquire TresPalacios, a gas storage facility located100 miles southwest of Houston inMatagorda County, Tx. The Tres Palaciosfacility offers the same strategy that Inergyemploys with its Marcellus storage facil-ities in the Northeast, he says.“It is located between the major markets

of San Antonio and Houston, and closeto the liquids-rich Eagle Ford Shale,” hesays. “Tres Palacios, which has 38.4 Bcfof working gas capacity with plannedexpansion to 47.9 Bcf, also is situatednear the largest gas-fired power generationmarket in the United States.”The acquisition includes a 40-mile,

24-inch bidirectional header system thatis connected to 10 intrastate and interstatepipelines serving markets in Texas aswell as the U.S. Northeast, Midwest,Southeast and Mid-Atlantic, and Mexico.Tres Palacios has a maximum withdrawalcapacity of 2.5 Bcf/d and a maximum in-jection capacity of 1.0 Bcf/d.

Focused On Storage

John Hopper, chief executive officerof Peregrine Midstream Partners LLC,says the standard answer to where mid-stream infrastructure is needed is, ofcourse, the new shale gas plays. But hesays the answer for his company is wheremore storage is needed.Peregrine’s Ryckman Creek Resources

gas storage project concluded its non-binding open season in November forfirm natural gas storage service at itsproposed high-deliverability, multicyclenatural gas storage facility in UintaCounty, Wy.In response to Ryckman’s offer of 15

Bcf of capacity beginning in April 2012,it received market-priced bids requesting

53 Bcf of capacity from 29 companiesrepresenting different sectors of the in-dustry, Hopper reports. Peregrine expectsto receive Federal Energy RegulatoryCommission authorization by April forits Ryckman Creek project, which willallow Peregrine to meet the project’s tar-geted April 2012 in-service date. Ryckmanplans to have additional storage capacityavailable, for a total of 35 Bcf, by thespring of 2013, according to Hopper.Based on the open season responses,Peregrine now is considering a phasetwo expansion up to 50 Bcf at RyckmanCreek.“The Opal (Wy.) hub, located just north

of our Ryckman Creek facility, is pro-cessing a lot of unconventional gas,” Hop-per says. “We have interconnects withpipelines running both east and west outof Opal. This is the most liquid gaspipeline hub in the United States and ithas no storage. And the two largestpipelines out of Opal–Kern River andRockies Express–have no storage on theirsystems, either. So there clearly is a needin this part of the Rockies for more gasstorage capacity.”

Hopper contends that storage offersproducers more options for their gas. “Itgives them the flexibility to captureoptimal value through interconnects withmultiple pipelines as well as the abilityto capture pricing spreads between off-peak and peak seasons,” he says.Storage also is important in liquids-

rich plays, according to Hopper. “Espe-cially when there is processing involved,producers want their gas to flow, even ina down market, so they can capture valuefor their liquids,” he comments. “Theresidue gas has to go somewhere.”Hopper says Peregrine has another

storage project planned near the DelhiHub in Northeast Louisiana, which hedescribes as another underserved pipelinehub. “We want to be where the gas is,” hesays. “We look for a confluence of pipelinesand underserved markets, because wehave all this shale gas that needs storage.In the fall before it turns cold in theNortheast and Midwest, the storage facil-ities get full. We have seen record storagebuilt the past couple years. If we keepsetting records, it must mean we needmore storage. The gas will keep flowing,

In addition to developing storage infrastructure, Inergy has two projects under way to expandStagecoach’s capacity to allow volumes to be wheeled on a firm transportation basis through75 miles of pipe to and from large regional pipeline systems. Combined, the two projects areexpected to add more than 45,000 horsepower of compression and 875,000 dekatherms/dayof transportation capacity to Inergy’s midstream business.

Oil & Gas Shales

and if there is no market for it to go to,then it will have to go into storage. Whereelse will it go?”

Developing A Niche

Caiman Energy’s Lafield says he be-lieves his company has developed itsniche in the Marcellus Shale. Caimanannounced in July that the company hadsecured commitments totaling $400 mil-lion to support its growing inventory ofmidstream development projects acrossthe Marcellus play. He says Caiman,based in Dallas, also secured approxi-mately 400,000 acres in contractualacreage dedications from Marcellus pro-ducers in the liquids-rich area of South-west Pennsylvania and Northwest WestVirginia.“It is a chicken and egg thing,” Lafield

offers. “You cannot drill without infra-structure, and you cannot build infra-structure without operators drilling. Westudied the reservoir itself and gathereddata to support our need to clearly un-derstand the resource play. Range Re-sources was to the north and Chesapeakewas to the south, so we were able to sur-mise that this area had a high quality ofshale rock. We feel that the risk for us isnot in the reservoir, but in the timing andexecution of how development takesplace.”Lafield says Caiman believes its niche

area will produce more than 1 Bcf/d over

the next four or five years. “So we aredeveloping infrastructure that can beadded to,” he adds. “We are laying a 24-inch trunk line through the center of thearea, and we are putting in more than100 miles of gathering lines.”Construction of Caiman’s Ft. Beeler

processing plant, a 120 MMcf/d cryogenicprocessing facility, was expected to becompleted and operational by early De-cember, according to Lafield. “We haveordered another 200 MMcf/d of process-ing capacity, and in the second quarter,

we probably will need to order a thirdplant to add another 200 MMcf/d in ca-pacity,” he continues. “By the end of2011, we will have committed $400 mil-lion of capital.”Located near Cameron, W.V., south

of Wheeling, the facility is named afteran old frontier fort that was located nearthe site. “The Marcellus is still a goldrush,” Lafield points out. “There is still alot of active leasing. I would say 95percent of the area needs infrastructure,so this is still in the early stages. Youhave to be somewhat of a pioneer, so thisis a great area for Caiman to operate.”The Ft. Beeler facility will interconnect

with the Texas Eastern Pipeline, whichruns through the area from the south onits way to major Northeast markets. Al-though Caiman also has access to anumber of other pipelines, Lafield sayshe believes gas from Marshall and Wetzelcounties in West Virginia and GreeneCounty, Pa., eventually will replace gasfrom Louisiana and Texas in the TexasEastern Pipeline.Caiman also is expanding its 20 miles

of pipeline for gathering condensate, whichis designed to mitigate environmentalconcerns associated with production bygreatly reducing the amount of trucktraffic required to transport product, Lafieldnotes. The company also has commencedconstructing a new fractionation and ter-minal facility that will be located alongthe Ohio River in Marshall County, W.V.An NGL pipeline will run 25 miles from

Peregrine’s Ryckman Creek gas storage project concluded its nonbinding open seasonin November for firm natural gas storage service at its proposed high-deliverability, mul-ticycle natural gas storage facility in the Ryckman Creek Field in Uinta County, Wy. Lo-cated just south of the Opal hub, Ryckman Creek has interconnects with pipelinesrunning both east and west. In response to strong industry interest in Ryckman Creekcapacity, Peregrine already is considering a phase two expansion.

Caiman Energy’s new Ft. Beeler 120 MMcf/d cryogenic processing plant was expectedto be operational by early December. The company has ordered another 200 MMcf/d pro-cessing plant, and expects to order a third plant in the second quarter to expand capacityby another 200 MMcf/d. Located near Cameron, W.V., the facility interconnects with theTexas Eastern Pipeline.

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the Ft. Beeler processing plant to the newfractionation facility.“The fractionation facility will take a

blended liquid hydrocarbon product called‘Y Grade,’ and separate the Y Grade intopurity propane to be sold throughout theNortheast, and butane and natural gasolineto be sold to refineries for blending withmotor fuel,” he explains, adding that thefacility initially will handle 12,500 barrelsof Y Grade feedstock, and offer rail andtruck loading facilities as well as the po-tential of barge transportation on the OhioRiver.

Eagle Ford Facilities

Only a year old but backed by equitycommitments from EnCap Flatrock Mid-stream and TPH Partners, Meritage Mid-stream Services launched its first projectin South Texas by building the EagleFord Escondido gathering system in WebbCounty on the western edge of the play,reports Steve Huckaby, president andchief executive officer of the Golden,Co.-based company.“We signed our anchor tenant in March

and were flowing gas within six months.We have come a long way in the EagleFord in a very short period. We are finishing70 miles of large-diameter, high-pressurepipeline in the dry window of the play,”says Huckaby. “We are gathering forseveral producers, including Laredo EnergyLLC and Swift Energy Company.”On Sept. 28, Meritage Midstream an-

nounced it had entered an agreement withSwift Energy to provide natural gas gath-ering and treating services in the Eagle

Ford Shale. The 25-mile pipeline projectincludes two lateral extensions to Mer-itage’s Escondido gathering system: a14.5-mile, 12-inch pipeline to the north-west into Swift’s Fasken operating area,and a 10.5-mile, 16-inch extension to thesoutheast to increase take-away capacity.Meritage also will expand its treating ca-pacity at its South Calahan facility asvolumes on the gathering system increase,according to Huckaby.Then on Nov. 18, Meritage Midstream

announced it had completed the FaskenRanch lateral pipeline and had startedflowing gas. “It took less than two monthsfrom the time we announced the pipelineto start flowing first gas,” Huckaby mar-vels. “Our engineers and constructionpeople got it done quickly. Meritage’srapid response to the crucial need for in-frastructure in the Eagle Ford Shale meansour customers are able to begin flowingnatural gas from day one.”Huckaby says liquids-rich plays such

as the Eagle Ford and Marcellus have allthe momentum today, and he adds thatMeritage is working on projects that“would give us exposure in other ‘oily’shale plays.”He adds that his company’s business

plan is focused on medium and small in-dependents that need to move quickly inshale plays. “Our team has a strong andwell established history of working withproducers that have to execute fast,”Huckaby remarks. We have been suc-cessful because we have the experienceand the flexibility to come in early andget the job done quickly. That gives us acompetitive edge.”

Texas Focused

Houston-based Eagle Rock EnergyPartners is both a midstream and upstream

Although it also has upstream operations, two-thirds of Eagle Rock Energy Partners’business is midstream and focused in the Texas Panhandle and East Texas. In the Pan-handle, where Eagle Rock has 3,943 miles of pipeline, 137,370 compression horsepowerand seven processing plants with a combined capacity of 200 MMcf/d in 10 counties,activity is experiencing a rebirth with horizontal drilling and large multistage fracs in theliquids-rich Granite Wash, Cleveland sands and Tonkawa.

Meritage Midstream Services’ Eagle Ford Escondido gathering system in Webb County,Tx., includes 70 miles of large-diameter, high-pressure pipeline in a dry gas window of theEagle Ford Shale. This fall, Meritage Midstream completed two lateral extensions to theEscondido system as part of an agreement with Swift Energy to provide gathering andtreating services for Eagle Ford production from Swift’s Fasken Ranch operating area.

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company, according to Joseph Mills,chairman and chief executive officer.However, he says two-thirds of EagleRock’s business is midstream, calling thecompany “Texas based and Texas fo-cused.”Eagle Rock’s midstream operations

are focused in two areas: the Texas Pan-handle and East Texas.“The Panhandle is one of the great

gas basins, producing since the 1920s,”Mills exclaims. “But that area is seeing arebirth with horizontal drilling and largemultistage fracs in the Granite Wash, theCleveland sands, and now the Tonkawa.The Granite Wash is liquids-rich, with3.5 to 4.5 gallons of liquids per Mcf ofgas. We are a sizable processor and gath-erer in the Panhandle.”Mills says the Texas Panhandle is

laced with pipelines, but they were builtin a different era and handled much lowervolumes. “We are building pipe and pro-cessing systems to handle the rebirth,”he offers. “The initial production rates ofthese new wells are impressive, withsome as high as 20 MMcf/d-30 MMcf/d.Of course, there has to be processing tohandle the wet gas.”Eagle Rock has 3,943 miles of pipeline

and 137,370 compression horsepoweracross 10 counties in the Panhandle, aswell as seven processing plants with acombined capacity of 200 MMcf/d. Theplants are running about 60 percent capacity,according to Mills.

He says the company refurbished itsPhoenix plant in Hemphill County, whichwent on line in October with 50 MMcf/dand the potential to expand to 80 MMcf/dof capacity through additional compres-sion.Eagle Rock’s East Texas operations

include both the East Texas main linethat runs north and south and the Brooke-land system that runs east and west. TheBrookeland processing plant, located inJasper County, services the Austin Chalk,which Mills says like the Texas Panhandle,is seeing a resurgence because of the ap-plication of advanced horizontal drillingand hydraulic fracturing techniques.“They are drilling dual laterals–a

downdip and an updip lateral–with mul-tistage fracs,” Mills observes. “The resultshave been extremely impressive. Thesenew wells are deeper and hotter.”Moving to the north, Eagle Rock’s

East Texas main line in Angelina, Nacog-doches, Rusk and Shelby counties is serv-icing several formations, including theJames Lime, Bossier and Haynesville.“The Haynesville has been an extraordi-nary game changer, with 20 MMcf/d-35MMcf/d IPs,” he continues.Unlike the Panhandle and the Austin

Chalk areas, however, the Haynesvilleand Middle Bossier formations producevery dry gas, according to Mills. “It hasa little carbon dioxide, so it must betreated, but there is very little liquid con-tent,” he notes. “There are significant

pipelines in the area, but because of thegrowth of the Haynesville and Bossierplays, we are looking to build more in-frastructure.”Eagle Rock owns 1,195 miles of

pipeline, 43,700 horsepower in compres-sion and seven processing plants in theHaynesville Shale, Deep Bossier/AngelinaRiver and Austin Chalk plays in EastTexas.Mills says many areas in the country

are similar to Eagle Rock’s experience inthe Texas Panhandle and East Texas be-cause they have old infrastructure andneed high-pressure pipelines and increasedprocessing capacity to handle the high-rate and/or liquids-rich gas plays. He liststhe Marcellus, Eagle Ford, Bakken, Nio-brara in northern Colorado and Wyoming,and the Cana Shale in Oklahoma as ex-amples.“I am still amazed at the level of

drilling today in the Haynesville wherethe gas is dry, but many operators areshifting rigs to liquids-rich areas becauseof strong NGL prices,” he comments.Mills notes that take-away capacity is

always a concern. He says Eagle Rockhas ample take-away in the Panhandle,extending a contract with ONEOK through2020 to take 14,000 bbl/d out of the Mid-Continent to a fractionation facility. Headds that the company also maintains ayear-to-year contract on a 19-mile NGLpipeline to the Black Lake facility inEast Texas.

Fayetteville Shale

Frontier Energy Services LLC’s man-agement team has more than 150 yearsof combined experience in all phases ofthe midstream industry. Frontier manages$600 million in capital, which includes4,000 miles of pipeline, 1.3 Bcf/d in pro-cessing capacity and 260 MMcf/d intreating capacity, according to Dave Pres-ley, president and chief executive officer.The company is one of the largest

third-party gatherers in the FayettevilleShale in Arkansas, and also has a footholdin the Granite Wash in the Texas Panhan-dle, Presley says. “We have five systemsand approximately 100 miles of low-pressure gathering lines and 40 miles ofhigh-pressure transmission lines withnominal capacity of 500 MMcf/d inArkansas,” he says.The Fayetteville Shale has become a

world-class reservoir with the success of

Eagle Rock owns 1,195 miles of pipeline, 43,700 horsepower compression and sevenprocessing plants in the Haynesville Shale, Deep Bossier/Angelina River and AustinChalk plays in East Texas, including both the East Texas main line that runs north andsouth and the Brookeland system that runs east and west.

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horizontal drilling and mutistage fracs,Presley comments. Although the Fayet-teville produces dry gas, he adds thatdrilling activity has been robust, with morethan 1,190 permits issued in the past 12months. There is approximately 2.2 Bcf/dproducing from the Fayetteville Shale,and Presley says he expects the volume ofFayetteville production to continue to in-crease over the next several years.“Everybody is drilling to simply hold

acreage through production,” Presleypoints out. “I think we will see that con-tinue through 2011, but then we will startseeing infill drilling, especially as gasprices begin to recover. The IPs andEURs continue to improve as Fayettevilleproducers increase lateral lengths. Ourcustomers have said publicly that theFayetteville Shale is economic, and webelieve production will continue to grow.”Frontier has interconnects with all the

major interstate pipelines in the area, ac-cording to Presley, including the Ozark,Fayetteville Express and Boardwalkpipelines. “The gas has some carbon diox-

ide and requires treating prior to deliveryinto the interstate pipelines,” Presley notes.However, the high liquids content of

the production stream also makes theGranite Wash a world-class reservoir aswell, Presley adds. He says Frontier hasa 36 MMcf/d, state-of-the-art cryogenicprocessing plant in Roberts County inthe Texas Panhandle, and is constructing

another 60 MMcf/d expansion to addressa shortage of processing capacity in theGranite Wash play.Frontier Energy Services also is looking

to expand into the Eagle Ford Shale,where rig counts continue to tick upward.“The Eagle Ford has a lot infrastructureneeds,” Presley relates. “Where there is aneed, there is an opportunity.” r

Frontier Energy Services is one of the largest third-party gatherers in the FayettevilleShale in Arkansas, with five systems consisting of 100 miles of low-pressure gatheringlines and 40 miles of high-pressure transmission lines with nominal capacity of 500MMcf/d. Frontier has interconnects with all the major interstate pipelines in the area, in-cluding the Ozark, Fayetteville Express and Boardwalk pipelines.

Oil & Gas Shales