Kinder-Copano Join WPZ

Eagle Ford Gathering LLC, a joint venture (JV) between Kinder Morgan Energy Partners, L.P. (KMP - Analyst Report) and Copano Energy, L.L.C. (CPNO), entered into a long-term agreement to provide midstream services to Williams Partners L.P. (WPZ - Snapshot Report) at the Markham processing plant.

The deal entitles Eagle Ford Gathering to build a seven-mile, 20-inch lateral for processing Eagle Ford Shale production at Williams Partners’ Markham plant in Matagorda County, Texas.

The construction mainly aims to connect the Markham plant with the previously announced crossover pipeline project and install compression of approximately 3,400 horsepower for about $27 million. The group is slated to begin pipeline connection in July and start operations during the fourth quarter of 2011.

The JV will initially process 100 million cubic feet per day (MMcf/d) of natural gas at Markham, with an option to enhance it to up to 200 MMcf/d. The latest deal will not only expand the JV’s gas processing potential, it will also give a boost to the contract signed earlier with Formosa Hydrocarbons Company, which would in turn lead to 375 MMcf/d of total processing capacity through the crossover project.

Overall, Eagle Ford Gathering has secured pipeline commitments for South Texas producers to transfer up to 1.4 billion cubic feet of natural gas and 100,000 barrels of natural gas liquids on a daily basis.

Kinder Morgan and Copano expects to spend approximately $300 million in midstream infrastructure through their joint venture company in order to facilitate gathering, transportation, processing and fractionation services to Eagle Ford Shale producers.

Kinder Morgan is the largest independent owner and operator of petroleum-product pipelines in the U.S. It is one of the largest publicly traded master limited partnerships (MLPs) and generally serves as a benchmark for the pipeline MLP group.

The partnership competes with other players such as Enterprise Products Partners L.P. (EPD - Analyst Report) and Energy Transfer Partners L.P. (ETP - Analyst Report). Its collaborator in the JV, Houston-based Copano Energy is a natural gas based midstream service provider with operations in Oklahoma, Texas, Wyoming and Louisiana.

Both Kinder Morgan and Copano shares currently retain Zacks #3 Rank, which translates into a short-term Hold rating.