Sanchez Energy Corp. (SN) said Oct. 5 it will construct an Eagle Ford Shale gas processing plant and takeaway pipeline as part of a new joint venture (JV).

The Houston company entered into JV agreements with Targa Resources Partners LP (NGLS) to construct a new cryogenic natural gas processing plant and associated high pressure gathering pipelines.

As part of the agreement, Sanchez intends to invest about $115 million and receive a 50% ownership interest in the plant and pipelines, which will be located near its Catarina asset in South Texas.

The processing plant and gathering pipelines will be designed, built and operated by Targa. The plant is anticipated to be operational by early 2017.

The plant is expected to have initial capacity of 200 million cubic feet per day (MMcf/d) with the ability to increase to 260 MMcf/d. It will be located in La Salle County, Texas.

The about 45 miles of high pressure gathering pipelines will connect the company's existing Catarina gathering system to the plant. Targa will hold all of the transportation capacity on the pipeline, and the gathering JV will receive fees for transportation.

Sanchez said it expects the JV to provide significant operational and commercial benefits and improve yields, increase net-back prices, and lower the gathering and transportation fees it currently pays for its Catarina production.

The JV is also expected to improve the company's access to end markets, "including the developing Mexico and global LNG markets, and provide opportunities to increase revenue through utilization of the new midstream system to transport and process third party volumes," said Tony Sanchez III, CEO of Sanchez Energy.

Sanchez has firm capacity for 125 MMcf/d of plant processing and associated pipeline capacity for the first five years. It has dedicated the Catarina acreage and all production developed during the 15-year term.

The company has the option to deliver additional volumes and commit additional acreage to the new plant as production increases.

As the project develops, Tony Sanchez said the company intends to explore potential alternative financing or other options for the JV to maintain its liquidity. The company will also explore whether there are any "mutually beneficial funding strategies with Sanchez Production Partners LP that might be attractive to us," he added.