Spectra, Allies OPEN Pipeline Pact - Analyst Blog
December 22 2011 - 6:45AM
Zacks
Texas Eastern Transmission, LP – a
subsidiary of Spectra Energy Corp. (SE),
American Electric Power (AEP) and Chesapeake
Energy Marketing, Inc., a wholly owned subsidiary of
Chesapeake Energy Corporation (CHK) have jointly
agreed on a pipeline deal. The pipeline will link the emerging
Utica Shale gas supplies to the rapidly growing markets attached to
the Texas Eastern system and natural gas fired power generation
plants in Ohio.
The plan involves development and
expansion of a proposed natural gas pipeline, called Ohio Pipeline
Energy Network (OPEN). The project comprises a network of about 70
miles of new pipeline which will further augment the transportation
capacity by 1 billion cubic feet per day to serve local
distribution companies, industrial users, gas-fired power
generators in the Ohio market and markets along the Texas Eastern
system.
A binding open season for the OPEN
project is intended for the first quarter of 2012 while the
expected in-service time is November 2014. The companies have not
revealed the financial aspects of the partnership.
The OPEN project combines the
expertise of the largest producer and leaseholder in the Utica
Shale play, the leading power generator in the region and the
premier pipeline company with over 60 years of safe and reliable
operational history in the state of Ohio.
American Electric Power will invest
in OPEN with an aim to build transportation capacity that would
allow the company to connect Ohio gas supplies with its gas-fired
power plants in the Midwest.
Chesapeake is considered to have
the largest holding in the Utica Shale with a 1.5 million net
acres. It aspires to increase capacity to gain entry into the
extensive Texas Eastern markets spanning from the Gulf of Mexico to
the Northeast U.S.
American Electric Power and
Chesapeake both hold a Zacks #3 Rank, which is equivalent to a
Neutral rating for a period of one to three months. For the long
term, we maintain a Neutral rating on both the stocks.
Spectra Energy is one of North
America’s premier natural gas infrastructure plays and has strong
business positions in growth markets. These should lead to
value-creating investment opportunities in the coming years.
Infrastructure development in the Haynesville, Eagle Ford and
Marcellus Shales, along with the construction of a new gas plant
with long-term customer commitments, will be a synergistic
approach, in our view.
Spectra Energy holds a Zacks #2
Rank, which is equivalent to a Buy rating for a period of one to
three months. We maintain an Outperform rating on the stock for the
long term.
AMER ELEC PWR (AEP): Free Stock Analysis Report
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
SPECTRA ENERGY (SE): Free Stock Analysis Report
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