PVR Partners L.P.
) continues to increase the throughput capacity of its Eastern
Midstream segment, primarily backed by its increasing presence in
the Marcellus Shale and higher-than-expected well connections in
CABOT OIL & GAS (COG): Free Stock Analysis
PVR PARTNERS LP (PVR): Free Stock Analysis
QEP MIDSTRM PTR (QEPM): Free Stock Analysis
SUNOCO LOGISTIC (SXL): Free Stock Analysis
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The partnership's Eastern Midstream segment is engaged in natural
gas gathering and other related services, catering to the
upstream players in Pennsylvania and West Virginia.
As per PVR Partners, the average total throughput volumes at its
Eastern Midstream segment surged 60% year over year to more than
1.8 billion cubic feet per day ("Bcfd") in Dec 2013. This was
primarily driven by the completion of 10 more well connections in
2013 from the previous projection of 91.
PVR Partners also announced that it has inked a deal with a
natural gas producer. Per the contract, the partnership will set
up a new interconnection in its facilities for the transportation
of natural gas for this producer in the Marcellus Shale. The
producer has committed 50 million cubic feet per day ("MMcfd") of
firm natural gas transportation on the partnership's Wyoming
trunkline. The facility is expected to be online in the fourth
quarter of 2014.
Marcellus Shale, located across New York, Pennsylvania, West
Virginia, Ohio and Maryland, is rich in natural gas. As per the
United States Geological Survey ("USGS") estimates, the formation
covers a total area of approximately 95,000 square miles, with a
depth of 4,000 feet to 8,000 feet.
As per the U.S. Energy Information Administration report,
published in Jan 2014, natural gas production is expected to
increase by 40% to 14 Bcfd in 2014 from the year-ago production
of approximately 10 Bcfd, primarily due to a sharp rise in new
well gas production per rig.
PVR Partners started its operations in the Marcellus Shale in
2010 and continues to expand its coverage in the region. In 2012,
the partnership acquired the membership interests of Chief
Gathering LLC for about $1.0 billion. This acquisition enabled
PVR Partners to add six more natural gas gathering systems of
Chief Gathering LLC mainly focused on the Marcellus Shale and
Granite Wash regions.
We note that the exploration and development companies are
drilling actively in the Marcellus Shale to tap its vast
resources. We remind investors that
Cabot Oil and Gas Corp.
), an independent oil and gas exploration company, recently
announced its success in the Marcellus shale. The 10-well pad
that the company successfully completed will result in a 30-day
average production of 168 MMcfd with a peak production capacity
of 201 MMcfd.
So, the demand for midstream operators will gradually increase in
this region. To cater to the increasing demand from upstream
companies for transportation services, another pipeline operator,
Sunoco Logistics Partners LP
), recently declared the beginning of Mariner East 2 pipeline
project's binding open season. The open season is for shippers
willing to carry natural gas liquids from Marcellus and Utica
Shale based processing facilities to the Marcus Hook Industrial
area of Sunoco Logistics.
We believe construction of the new facilities besides signing new
service-agreement will ensure steady cash inflow for the pipeline
operators. This will subsequently enable the companies to install
new infrastructure in the region, thereby serving more upstream
PVR Partners currently has a Zacks Rank #3 (Hold). However, a
better-ranked stock in the same sector is
QEP Midstream Partners, LP
) with a Zacks Rank #2 (Buy).