PVR Partners, L.P.
) announced the completion of construction activities of its latest
natural gas trunk line in the north-central province of
Pennsylvania. The midstream project, Wyoming Pipeline, also came
online commercially. The pipeline system was initially constructed
by Chief Gathering LLC until it got acquired by PVR Partners in May
The pipeline is 30 miles in length and spans across the northern
Wyoming County southward to connect with the Transco interstate
pipeline system in Luzerne County. The 750 million cubic feet per
day ("MMcfd") capacity system will provide midstream services to
the producers operationally active in the Marcellus Shale play. The
program was bankrolled by funds that were added in the financing
agreement during the purchase of Chief Gathering.
Presently, the partnership has secured contracts for reliable
and efficient services on the Wyoming Pipeline from five
independent producers and expects more agreements to come on the
table. These agreements are wholly fee based and are insulated from
any direct commodity price risks. For 2012, the initial firm
transportation volume contracted by the producers totaled 255
We believe the acquisition of Chief Gathering LLC is a strategic
fit and will be a profitable addition to the partnership's asset
portfolio. The timely execution of this cost-effective project will
enable the partnership to carry out its high-quality programs in
the Marcellus play smoothly and also contribute positively to its
future business plans in the region.
The partnership faced constraints in supplying volumes from its
Susquehanna/Wyoming gathering facility to the Tennessee Gas
Pipeline 300 Line which impacted PVR Partners' operations. However,
the partnership expects the Wyoming Pipeline-Transco Pipeline
connectivity will lead to increase in volumes on the
Susquehanna/Wyoming gathering facility by more than 20%.
The ongoing developments at the Susquehanna/Wyoming gathering
unit will enable supply volumes to Wyoming Pipeline to further
expand with the linking of additional wells thereby increasing
Although natural gas prices are currently on a downhill, we
anticipate with rising demand for electricity in the U.S., gas
prices will improve steadily, which could add to the partnership's
near term top-line. Nonetheless, unexpected infrastructure outages
and pipeline accidents are risks that could pose serious challenges
to the partnership's operations.
We remind investors that the partnership had divested its
Crossroads natural gas gathering system and processing plant for
roughly $63 million to
DCP Midstream Partners, LP
), in mid-June 2012, to focus on the development of its core
midstream business in the Marcellus shale and Texas plays.
The Zacks Consensus Estimates for the third quarter and full
year 2012 for PVR Partners are pegged at 9 cents per unit and 54
cents per unit, respectively. One of its competitors is
Arch Coal Inc.
The partnership owns and operates a string of natural gas
midstream pipeline systems and processing plants and is also
involved in the management of coal as well as natural gas
properties. PVR Partners' current market capitalization stands at
ARCH COAL INC (ACI): Free Stock Analysis Report
DCP MIDSTREAM (DPM): Free Stock Analysis Report
PVR PARTNERS LP (PVR): Free Stock Analysis
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