Penn Virginia buying Marcellus pipelines for $1 billion

NEW YORK - Penn Virginia Resources Partners L.P. (NYSE: PVR) said on April 10 that it will pay $1 billion to buy privately-held pipeline firm Chief Gathering LLC. Radnor, Pa.-based Penn Virginia said the acquisition will expand its presence in the Marcellus Shale in Pennsylvania and West Virginia.

Chief Gathering, which is owned by Chief E and D Holdings LP, is a midstream pipeline company with operating assets serving Marcellus Shale natural gas producers primarily in northeastern Pennsylvania.

Customers of Chief Gathering LLC include Chesapeake Energy Corp., Anadarko Petroleum Corp. and Exxon Mobil Corp.

Private-equity firm Riverstone Holdings LLC will be a significant owner of PVR units following the acquisition.

The transaction, when closed, will result in a major expansion of PVR's pipeline systems in the gas-rich Marcellus Shale.

PVR expects to finance the purchase through a combination of committed equity and debt. The transaction is expected to close in the second quarter of 2012, subject to regulatory clearances and other customary closing conditions.

Chief Gathering's assets include six natural gas gathering systems serving over 300,000 dedicated acres in Bradford, Lycoming, Sullivan, Susquehanna, Wyoming and Greene Counties, Pa., and Preston County, W. Va.. Additionally, Chief Gathering is currently constructing a new 750 MMcfd trunkline, anticipated to be in service in the third quarter of 2012, extending from northern Wyoming County to Luzerne County with a connection to Transco's interstate pipeline. PVR currently owns two gathering systems in Lycoming and Wyoming Counties, with a third system in early stage development in Susquehanna County.

William H. Shea, Jr., Chief Executive Officer of PVR's general partner, said, "We expect that by year-end 2013 our midstream business unit will account for almost 75 percent of PVR's EBITDA, up from 40-45 percent today. These assets, together with our Lycoming and Wyoming County gathering assets, position us well to capture significant midstream opportunities in six of the most prolific counties in the northeastern area of the Marcellus Shale. We believe that there are substantial operating synergies and capital cost savings to be realized because of the proximity of the PVR and Chief Gathering systems, and the connectivity to both the Transco and Tennessee interstate pipelines.”

All of the gathering, compression, and dehydration services for the Chief Gathering systems are provided under fee-based agreements with active Marcellus producers including Chesapeake, Anadarko, Statoil, Mitsui, EXCO/BG Group, ExxonMobil/XTO, Chief, Enerplus and Chevron.

As of February 2012, volumes on the Chief Gathering systems were approximately 235 MMcfd and volumes on PVR's Marcellus systems were approximately 210 MMcfd. The new Wyoming County trunkline has 15-year firm transportation volume commitments of 255 MMcfd for 2012, increasing to 355 MMcfd in 2013.

The purchase price of $1.0 billion, subject to adjustments to reflect, among other things, a Jan. 1, 2012, economic effective date of the acquisition, will be paid in a combination of cash and the issuance to Chief of $200 million in a new class of PVR limited partner interests ("Special Units"). The Special Units are substantially similar to PVR common units, except that the Special Units will not pay or accrue distributions until they automatically convert to common units, on a one-for-one basis once the Special Units have not received six consecutive quarterly distributions following issuance.

Chief Gathering LLC sues Pennsylvania residents over anti-pipeline tactics

DALLAS TOWNSHIP, Pa. - A natural gas pipeline company fired back against Goodleigh Estates residents, alleging their interference with and public anger toward the company's Dallas Township pipeline project could cost millions of dollars - money the company wants the residents to make up.

In the 143-page suit filed in federal court on Sept. 22, Dallas, Texas-based Chief Gathering LLC is seeking a minimum of $683,000 from William E. and Patricia Watkins and Jeffrey and Jo Ann Dickson, claiming a delay they could cause will lead to losses of at least $18 million.

The company also wants to recover attorneys' fees and charge extra damages for residents' "outrageous conduct" and keep them and others from making malicious statements about Chief in the media and in online social forums.

The action is in response to a lawsuit filed in Luzerne County court on Sept. 20 by the Watkinses and Dicksons against their neighbor Tuula D'Anca, who leased Chief a right-of-way through her Goodleigh Farms property. They asked the court to halt the pipeline construction, alleging it violates the development's covenants, creates a nuisance and potential danger. Chief was not included in the suit.

D'Anca and Goodleigh Estates residents Patrick and Patricia Dougherty, who also leased rights-of-way, are named in Chief's suit, but only in an action asking the court to make a judgment as soon as possible in order to proceed with the project.

"Chief doesn't comment on pending litigation, but I can confirm the lawsuit was filed," stated Kristi Gittins, vice president of public affairs for Chief Oil & Gas. "We feel legal action is necessary to protect our interests in the pipeline project."

According to the suit, which was filed by attorneys Ken Komoroski, L. Poe Leggette and Emily B. Thomas of Fulbright & Jaworski and Jeffrey Malak of Chariton, Schwager & Malak: For the past 22 months, Chief sought permits and rights-of-way - including 30 in Dallas Township - for a 24-inch pipeline from natural gas wells in Susquehanna County to connect to the Transco interstate pipeline in Dallas Township via a metering station. It is "one of the largest and most important projects Chief Gathering has ever undertaken."