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NiSource, Hilcorp Announce Major Utica Shale Venture

MERRILLVILLE, Ind., July 9, 2012 /PRNewswire/ -- NiSource Inc.'s (NYSE: NI) Midstream & Minerals Group, LLC, today announced a joint venture with affiliates of Hilcorp Energy Company ("Hilcorp"), a privately owned oil and gas exploration and development company based in Houston, Texas, to construct new gathering pipeline infrastructure and natural gas liquids (NGL) processing facilities to support natural gas production in the Utica Shale region of northeast Ohio and western Pennsylvania. The first phase of the venture's investment program, amounting to approximately $300 million, is planned for later this year.

As part of the agreement, NiSource also announced that it will participate in a separate joint venture with Hilcorp to develop the hydrocarbon potential on a significant combined acreage block in the Utica/Point Pleasant Shale formation in northeast Ohio and western Pennsylvania. NiSource will participate in the joint venture as a non-operating working interest owner in the total acreage position. Hilcorp will serve as operator and manage the development of the combined acreage.

"This joint venture, involving one of America's most respected and successful independent energy production firms, leverages NiSource's extensive asset base and operating experience in the Utica Shale region to create near-term value, as well as long-term sustainable growth for our customers and shareholders," NiSource President and CEO Robert C. Skaggs, Jr. said. "This is a tangible example of the various upstream and midstream growth options available to NiSource across the shale energy region. We will continue to build our inventory of growth and investment projects as development and delineation of the shale play unfolds."

Supplying Critical Utica Pipeline and Processing Infrastructure

The newly named midstream joint venture, Pennant Midstream, LLC, will initially invest in the construction of 50 miles of 20-inch gathering pipeline facilities in northeast Ohio and western Pennsylvania. In addition, Pennant will invest in the construction and installation of a cryogenic NGL processing plant in Ohio with initial capacity of 200 million cubic feet (mcf) per day.  

NiSource Midstream Services, LLC, will operate the system, which is expected to initially provide approximately 400 mcf per day of both wet and dry gas gathering, with significant anticipated expansion opportunities based on production activity in the area. The Hilcorp/NiSource upstream joint venture will anchor the project with a long-term gathering and processing agreement, while additional capacity will be marketed to other active producers in the area. The project is expected to be in service by the third quarter of 2013. Pennant is also reviewing multiple downstream NGL options with several parties, including the development of its own fractionation facilities.

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