Coal and natural gas management partnership,
Penn Virginia Resource Partners, LP
) completed its sale of Crossroads Systems to
DCP Midstream Partners, LP
) for roughly $63 million. The facility is involved in natural gas
gathering and processing operations.
CLOUD PEAK EGY (CLD): Free Stock Analysis
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PENN VA RESRC (PVR): Free Stock Analysis Report
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The system is situated in the southeastern portion of Harrison
County in East Texas. The unit's assets consist of an 80 million
cubic feet per day cryogenic processing plant with approximately 8
miles of gas gathering pipe and around 20 miles of Natural Gas
Liquids (NGL) pipeline. Crossroads System also has a 50% ownership
in a roughly 11-mile residue gas pipeline.
Penn Virginia decided to sell its East Texas unit as these assets
no longer fit with its long-term strategy of diversifying and
expanding the midstream business. The deal will enable the
partnership to divert its capital to higher return core growth
projects in the Marcellus Shale and Panhandle facility in the Texas
and Oklahoma areas. In the first quarter of 2012, the natural gas
midstream business accounted for 84% of total revenue, higher than
the year-ago share of 81.3% owing to volume growth in the Marcellus
Shale and Panhandle facilities.
Besides divesting assets, the partnership often engages in periodic
high profile acquisitions to widen its revenue base. Recent deals
include the purchase of Chief Gathering LLC and an agreement with
four Marcellus Shale natural gas producers to extend the
partnership's natural gas pipeline in Lycoming County. These
activities are expected to strengthen Penn Virginia's market share
and enhance its pipeline portfolio. The midstream business is
expected to gain steadily from coal to natural gas switching,
particularly in the electric power sector, owing mainly to much
cheaper gas prices.
Penn Virginia's closest competitor
Console Energy Inc.
) also recently sold its non-performing Northern River Powder Basin
Cloud Peak Energy
) in an all-cash agreement of $170 million. The company will retain
8% production royalty on roughly 200 million tons of permitted fee
coal which bring its overall asset divestitures for 2012 to $224
Going forward, the partnership expects EBITDA for fiscal 2012 in
the range of $260-$280 million with distributable cash flow, net of
maintenance and replacement capital to remain unchanged in the
range of $160-$180 million. Besides, its healthy balance sheet and
flexible liquidity will enable Penn Virginia to engage in multiple
projects smoothly and effectively.
Penn Virginia presently retains a Zacks#3 Rank which translates to
a short-term Hold rating. The Zacks Consensus Estimates for the
second quarter and fiscal 2012 are currently pegged at 21 cents per
share and 95 cents per share, respectively.
Based in Radnor Pennsylvania, the partnership is involved in the
management of coal and natural resource properties; and gathering
and processing of natural gas in the United States.