Eagle Rock Energy Partners LP may have more of its operations weighted toward its upstream business, but that doesn’t mean it’s not focused on its midstream business, according to Joseph Mills, the company’s chairman and chief executive.

While speaking at last month's National Association of Publicly Traded Partnerships (NAPTP) MLP Investor Conference in Greenwich, Conn., Mills said that one area in which the company is very focused on is liquids, be it crude or natural gas liquids (NGL).

"We really are very heavily weighted to the liquids [side of the commodity mix]," said Mills. "We are an NGL as well as a crude oil company, and then obviously with our upstream business and our recent acquisition of Crow Creek Energy we have acquired more gas. Almost 60% of our commodity mix is in the liquids side, either crude or NGLs."

In addition to adding more gas to the company's commodity mix, the acquisition of Crow Creek Energy also adds the Midcontinent to the regions in which Eagle Rock produces. Prior to this acquisition, the company was primarily based in East Texas and the Texas Panhandle.

"While this acquisition added tremendous scale to our upstream business, it is also a very deleveraging acquisition for our partnership. Out of the $530 million purchase price, 57% of that consideration, or $300 million, was paid in the form of equity from Eagle Rock. All of that went to Natural Gas Partners, which is a highly successful private equity firm in Dallas," Mills said.

Natural Gas Partners was the largest owner of Eagle Rock shares prior to the acquisition, and it increased its percentage of common units from 24% to 40%.

He noted that the acquisition significantly increased the company’s probable and proved reserves, especially in the Cana shale. This is expected to increase the company's organic growth opportunities during the next two to four years.

Much of this growth is in the midstream sector, with much of the focus on the Granite Wash in addition to the drilling opportunities represented by the Crow Creek acquisition.

"This is an area that we think we can spend $50 million to $100 million per year for the next two to four years building additional processing. We have arguably one of the best gathering footprints in this play," Mills said.

Eagle Rock has 5,500 miles of pipeline and 19 natural gas processing plants as part of its midstream assets. Mills stated the company currently transports about 500 million cubic feet per day (MMcf/d) of natural gas and that these volumes are expected to increase quickly as the company increases its operations in the Granite Wash.

"We are one of the largest gatherers and processors in the Texas Panhandle, where our assets cover over 10 counties. … The focus is on the East Panhandle, where we acquired all of the gathering systems in the region from CenterPoint Energy Field Services last fall," he said.

These assets have been integrated with Eagle Rock’s existing assets in the region, allowing the company to increase their value by permitting shippers on these dry-gas systems to move liquids to Eagle Rock processing plants.

Eagle Rock has three meaningful plants with a capacity of 100 million cubic feet per day in the play, according to Mills. These plants are interconnected and operating at a 95% utilization rate.

Contact the author, Frank Nieto, at fnieto@hartenergy.com.

For more midstream content, visit Hart Energy’s Midstream Business website.

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