LINN Energy LLC (LINE), Energy Transfer Partners LP (ETP), Chesapeake Energy Corporation (CHK): Midstream Companies See Opportunity in This Shale Play

And more recently, Dominion Resources, Inc. (NYSE:D), Virginia’s largest utility company, and Caiman Energy II LLC, a privately held firm, formed a $1.5 billion joint venture to provide pipelines and processing services to Utica gas producers in Ohio and Pennsylvania.

The joint venture, known as Blue Racer Midstream LLC, is an equal partnership between the two firms, according to a joint statement the companies released in December. Dominion will supply the assets, while Caiman will contribute the capital necessary for the venture. Midstream operator Williams Partners L.P. (NYSE:WPZ), which maintains a 48% stake in Caiman, expects to spend roughly $380 million on the Utica projects over the next couple of years.

Blue Racer Midstream is expected to allow for outbound gas liquids shipments from Ohio via a long-haul pipeline currently being developed by Williams. The joint venture should provide a greater degree of certainty for Utica producers that have been holding back on bringing new wells online due to uncertainty about infrastructure constraints.

Final thoughts
As projects like these come online, they should encourage further drilling in the Utica. Caiman’s CEO Jack Lafield explained the importance of new infrastructure, saying in an interview: “You can sit down with a producer and he knows the fees he’s paying, and the method of getting it from his well to the cash register is well-defined.”

It will be interesting to see the scale of the effect that infrastructure improvements will have on producers’ drilling efforts. It will also be interesting to see last year’s data for Utica wells located in Ohio, which should be released next month by Ohio’s Department of Natural Resources (DNR) on its website.

Production data for the Utica has been sparse and many investors are still in the dark about the play’s true potential. While the Ohio DNR report will include data only on those wells that produced oil and gas last year, it should shed much-needed light on the productive potential of the play, as well as offer a better glimpse into which zones of the play are most promising going forward.

The article Midstream Companies See Opportunity in This Shale Play originally appeared on and is written by Arjun Sreekumar.

Fool contributor Arjun Sreekumar has no position in any stocks mentioned. The Motley Fool recommends Dominion Resources. The Motley Fool has the following options: Long Jan 2014 $20 Calls on Chesapeake Energy, Long Jan 2014 $30 Calls on Chesapeake Energy, and Short Jan 2014 $15 Puts on Chesapeake Energy.

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