Southwestern Energy Company : PVR Partners Announces $380 Million of Planned Marcellus Shale Pipeline Project Investments Anchored by Agreements With Marcellus Producers
05/21/2012| 08:55am US/Eastern
RADNOR, Pa., May 21, 2012 /PRNewswire/ -- Penn Virginia Resource Partners, L.P. (NYSE: PVR) ("PVR") today announced that its midstream subsidiary has entered long-term agreements to extend its natural gas pipeline in Lycoming County, Pennsylvania and provide various gathering, compression and related services to four Marcellus Shale natural gas producers in northeast Pennsylvania. The agreements with a Royal Dutch Shell (NYSE: RDS.A) subsidiary, SWEPI LP, ("Shell"), affiliates of Southwestern Energy Company ("Southwestern") (NYSE: SWN), Range Resources Corporation ("Range") (NYSE: RRC), and privately-held Inflection Energy LLC ("Inflection"), are all fee-based with no direct commodity price risk.
(Logo: http://photos.prnewswire.com/prnh/20110224/PH54022LOGO )
William H. Shea, Jr., Chief Executive Officer of PVR's general partner, said, "We are extremely pleased to announce these fee-based producer agreements and our plans for the continued build-out of our Lycoming County pipeline system. The further expansion of PVR's Lycoming County system, ultimately with a connection to the Tennessee Gas Pipeline 300, will allow us to realize our long-term vision of providing our Marcellus producers with access to multiple gas markets and further expand our midstream business in the Marcellus Shale. We are gratified that, based on our demonstrated record of responsive and reliable performance, these recognized companies, all with a commitment to the long-term development of the Marcellus Shale, have entrusted us to meet their midstream service requirements."
"We believe that the continued development of our Lycoming County system, together with our Wyoming County system and the recently completed addition of Chief Gathering LLC's midstream assets, position PVR as the midstream service provider of choice in six of the most prolific counties in the Marcellus Shale region in northeast Pennsylvania," concluded Mr. Shea.
Under the agreements with Southwestern, Shell and Range, PVR will extend its existing 30-inch trunkline approximately 19 miles north through Lycoming County and into Tioga County, Pennsylvania. Construction of Phase III of the trunkline is expected to begin within two weeks and be completed in the fourth quarter of 2012. PVR will also construct lateral pipelines for Shell and Range to bring gas from the wellheads to the trunkline for transport to the Transcontinental Pipeline ("Transco") and, by early 2014, to the Tennessee Gas Pipeline 300 ("TGP").
The 15-year agreement with Southwestern provides for a firm take-or-pay capacity commitment in years two through eight, with an option to increase that commitment during this period. The agreement also provides Southwestern with interruptible capacity subject to availability.
Under the 20-year Shell agreement PVR will build a 24-inch pipeline lateral, which is expected to be completed in the fourth quarter of 2012, that will connect the Lycoming County system to Shell's Texas Creek gathering system in Bradford County, Pennsylvania. PVR will also build a 16-inch pipeline lateral, which is expected to be completed in late 2013 or early 2014, that will connect the Lycoming County system to Shell's Wellsboro Loop gathering system in Tioga County, Pennsylvania. These new laterals will provide operational flexibility for Shell to move gas south to Transco, as well as the capability to move gas between the 24-inch lateral and Shell's proprietary pipeline systems. The Shell agreement provides for a take-or-pay firm capacity commitment in months 7-139 of the agreement, with an option during the first two years of the agreement to increase the firm capacity commitment. The agreement also provides for additional interruptible capacity subject to availability, as well as dehydration services.
The Range agreement provides for gathering, compression and related services under terms and conditions substantially similar to those currently being provided under PVR's existing agreements with Range. The agreement also expands the existing Area of Mutual Interest with Range to include Range's acreage in eastern Clinton County where Range anticipates future Marcellus Shale development. Additionally, construction of the Range lateral lines and compression facilities, with a multi-year build-out schedule, will be staged to follow Range's drilling program.
The Inflection agreement dedicates defined acreage in Lycoming County, east of PVR's existing Lycoming County system, to PVR, and provides Inflection with significant firm volume capacity and compression services, and a connection to Transco. The new gathering system is anticipated to be built-out in five phases designed to match Inflection's drilling and production schedule, with construction of each subsequent phase tied to Inflection's achieving certain well completion and production milestones. Assuming all milestones are met, plans are for a total of 10 miles of 16-inch trunkline and 15 miles of lateral gathering lines, together with associated compressor stations, providing an expected total system capacity of 380 MMcfd when completed in 2013.
PVR's capital investment for these projects is expected to total approximately $380 million, and is anticipated to be expended between 2012 and 2018. The cost for development and construction of the approximately 54-miles of pipeline and related facilities for the Lycoming County trunkline extension and the associated Shell lateral lines is projected to total approximately $160 million and is anticipated to be expended over the next three years, with approximately $110 million expended in 2012. The cost for development and construction of the Range gathering system is projected to total approximately $140 million, with expenditures staged over five years tentatively scheduled to begin in 2014. Assuming all of the milestones under the Inflection agreement are met, PVR expects to invest total capital of approximately $80 million for the east Lycoming County system during 2012 and 2013, with approximately $44 million planned for 2012.
Penn Virginia Resource Partners, L.P. (NYSE: PVR) is a publicly traded limited partnership which owns and manages coal and natural resource properties and related assets, and owns and operates midstream natural gas gathering and processing businesses. We own approximately 900 million tons of proven coal reserves in Northern and Central Appalachia, and the Illinois and San Juan Basins; our midstream natural gas assets are located principally in Texas, Oklahoma and Pennsylvania and include more than 4,500 miles of natural gas gathering pipelines and 7 processing systems with approximately 480 million cubic feet per day of capacity. For more information about PVR, visit our website at www.pvrpartners.com.
This press release includes "forward-looking statements" within the meaning of federal securities laws. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Partnership's ability to control or predict, which could cause results to differ materially from those expected by management. Such risks and uncertainties include, but are not limited to, regulatory, economic and market conditions, our ability to successfully complete the construction and development of Chief's midstream systems, to integrate the business of Chief with ours and to realize the anticipated benefits from the acquisition of Chief, the timing and success of business development efforts and other uncertainties. Additional information concerning these and other factors can be found in our press releases and public periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011 and most recently filed Quarterly Reports on Form 10-Q. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.
Contact: Stephen R. Milbourne
Director - Investor Relations
SOURCE Penn Virginia Resource Partners, L.P.