The chief executive of Chesapeake Midstream Partners LP says his partnership is now the largest gathering and processing master limited partnership ever.
According to Chesapeake Midstream's J. Mike Stice, following the drilling footprint of Chesapeake Energy Corp. and setting ambitious plans has made the partnership a great growth story in its 20 months of existence.
"We really do target being number one or number two in any basin or any play we have the opportunity to be in," he said during a keynote address at Hart Energy's Marcellus Midstream conference March 20. "If you are going to try to build a scalable business, then you need to plan on being number one or number two. This allows us to be the natural consolidator as that basin matures."
Chesapeake Midstream has approximately 3.7 million dedicated acres in which it is responsible for gathering infrastructure, has installed about 3,800 miles of pipe across multiple shale plays and is gathering from more than 5,000 wells.
"Today, our throughput on our pipe and gathering systems within the public unit alone is 2.8 Bcf per day," he said. "What I love about that number is that 2.8 Bcf per day makes us the largest gathering and processing MLP ever."
Stice also serves as the senior vice president of natural gas projects at Chesapeake Energy and as the president of Chesapeake's 100%-owned subsidiary Chesapeake Midstream Development LP, or CMD. Although confusing, Stice said, the relationship among Chesapeake Energy, Chesapeake Midstream Partners and CMD is an ideal model.
"We develop the assets at Chesapeake Midstream Development while they're immature, the risk is there and we're trying to understand what the resource looks like," he said. "When that matures to where we have line of sight to predictable cash flows, we then transfer it to Chesapeake Midstream Partners."
On March 13, CMD announced it was teaming up with M3 Midstream LLC and EV Energy Partners LP to build a $900 million midstream complex to service the Utica Shale. Once the Utica opportunities mature, Stice said, they will again be dropped down from CMD to Chesapeake Midstream Partners.
Although Chesapeake Midstream Partners depends a lot on Chesapeake Energy's drilling, Stice highlighted the diversity of Marcellus producers feeding gas into its recently acquired Marcellus system. "The [Marcellus drop-down] increased our third-party client base," he said. "Not only will we be providing services to Chesapeake, we're also providing services to Anadarko, Mitsui and Statoil."
Combining the opportunities in the Marcellus and Utica, Stice said, means the best is yet to come. "None of the plays [across the U.S.] stand up to what we're seeing in the Marcellus and what we're seeing in the Utica," he said. "The geologic diversity within this region is absolutely incredible."
Copyright 2012 SNL Financial LC. All Rights Reserved.
(Originally published March 22, 2012, in SNL Daily Gas Report.)