NiSource Gas Transmission and Storage, a subsidiary of NiSource Inc. ( NI - Analyst Report ) , announced its business wing, Midstream & Minerals Group, LLC has entered into a joint venture program with affiliates of Hilcorp Energy Company to diversify their operations in northeast Ohio and western Pennsylvania.

The joint agreement is aimed at developing a potential hydrocarbon resource base at the Utica/Point Pleasant shale formations. Construction of gathering pipeline infrastructure and natural gas liquids processing units are also on the cards under this venture. For the first stage of the joint program, capital investment of roughly $300 million is planned for later this year.

As per the combined venture, named Pennant Midstream, LLC, 50 miles of gathering pipeline is to be constructed with output capacity of 400 million cubic feet (mcf) per day. Additionally, investment will be made for the development of a natural gas cryogenic processing plant with production capacity of 200 mcf per day.

Under the upstream joint agreement, NiSource will combine its acreage area with Hilcorp’s to form a substantial acreage block in Utica. The project is expected to commence its operations by 2013. NiSource has a non-operating working ownership in the total acreage, with Hilcorp serving as the operator.

The venture will solidify NiSource’s position in the midstream business and enable the company to meet the critical needs of the producer customers. We view this project as a profitable addition to NiSource’s extensive asset base.

The venture is expected to yield returns from the latter half of 2013 which will complement NiSource’s strategy of sustainable long-term growth. The company’s transmission business reported revenue of $409.2 million in the first quarter 2012, compared with $402.9 million in the year-ago quarter.

NiSource has steadily been involved in investment activities for expanding its business. Its recent $220 million, West Side expansion project will provide accessibility to other markets thus increasing its coverage area. The company’s proposed capital investment of $4 billion over a five-year period is anticipated to ensure operational flexibility.

The company retained its earnings guidance for 2012 in the range of $1.40 per share to $1.50 per share. The Zacks Consensus Estimates for the second quarter and 2012 are 20 cents per share and $1.45 per share, respectively.

The Utica Shale is one of the fastest-growing natural gas development regions attracting major energy companies like Hess Corp. ( HES - Analyst Report ) and Chesapeake Energy Corp. ( CHK - Analyst Report ) .

Based in Merrillville, Indiana, NiSource is involved in natural gas transmission, storage and distribution, as well as electric generation, transmission and distribution business. The company’s operation stretches from the Gulf Coast through Midwest to New England. The company presently retains a Zacks #3 Rank, which translates to a short-term Hold rating.