Chesapeake Midstream Partners LP continues to benefit from what the company’s CEO Mike Stice calls a low-risk business model. The company secured $56.8 million in minimum volume commitments from its customers in Q4 2010, which highlights the company’s ability to withstand any changes in focus from producers.

“We continue to see a shift in drilling activity from the dry gas in the Barnett shale to the liquids-rich plays in our Mid-Continent and Permian [Basin] regions. With our Barnett revenue protected by our contractual terms, we actually benefit from the additional Mid-Continent activity related to this shift to oilier plays,” Stice said during a recent conference call to discuss Q4 earnings.

The company’s finances are also supported by dropdown deals from its parent, Chesapeake Energy Corp., which can be incorporated very quickly.

“It allows us to move the assets into the partnership quickly, with immediate integration of personnel, processes and tools,” he said. “Operationally this seamless transition means accelerated cash at a minimum cost. Our ability to essentially flip the switch and have these assets immediately contribute to our bottom line is extremely efficient and effective.”

The first of these dropdown agreements occurred late last year when the partnership acquired the 220-mile Springridge natural gas gathering system and its related facilities in the Haynesville shale for $500 million. Following this acquisition, the company had more than $500 million in liquidity.

Stice stated that the company has several strong dropdown candidates including the 210-mile Mansfield pipeline with 530 million cubic feet per day (MMcf/d) throughput in the Haynesville; the 360-mile North Marcellus pipeline system with 330 MMcf/d of throughput; the 850-mile Central Marcellus pipeline system with 120 MMcf/d of throughput; the 110-mile Eagle Ford pipeline system; 10 miles of pipeline in the Granite Wash with 40 MMcf/d of throughput; and 15 miles of pipeline in the Niobrara.

“We continue to evaluate the potential for additional asset acquisitions from Chesapeake, as well as third-party acquisition opportunities as they become available in the marketplace. I see both acquisition types as opportunities to expand our scale in our current areas of operation, as well as expand our footprint into other regions,” Stice said.

The company’s predictable cash flow also benefitted from a large number of new well connects in the quarter that increased the company’s volumes by more than 6% from the previous year’s quarter.

These new well connects and minimum volume commitments helped Chesapeake Midstream to experience a 59% increase in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) in the quarter to $115.6 million from Q4 2009. – Frank Nieto