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Southwestern to Sell Natural Gas Gathering Assets in NE Pennsylvania

Southwestern Energy Co. is selling its natural gas gathering assets in northeast Pennsylvania's Bradford and Lycoming counties for $500 million to Texas-based newcomer Howard Midstream Energy Partners LLC., the company said Thursday.

The assets include 100 miles of gathering pipeline with a capacity of 600 MMcf/d and 53,000 hp. The deal is expected to close during the second quarter. Southwestern said it plans to use the proceeds to pay down debt associated with a series of recent acquisitions it has made in the Appalachian Basin (see Shale Daily, Dec. 23, 2014; Dec. 3, 2014; Oct. 16, 2014).

The deal also gives privately owned Howard Midstream, which owns 700 miles of natural gas pipelines, processing plants, storage plants and related assets in South Texas, entry into the Marcellus Shale. The company was founded in 2011. It is backed by Enlink Midstream LLC and the infrastructure investment firm Alinda Capital Partners. Howard has primarily operated in the Eagle Ford Shale.

"This is a significant transaction for us as these established assets place Howard Energy Partners in the heart of the prolific Marcellus Shale," said President Brad Bynum, who added that the acquisition is part of the company's long-term growth strategy.

Howard Midstream said it would also construct and operate a natural gas gathering system for Southwestern in Tioga County, where the producer plans to continue delineating its acreage this year and where others have recently seen successful wells, not only in the Marcellus, but the Utica Shale as well (see Shale Daily, March 9; Nov. 24, 2014). Howard said it plans to open an office in Pennsylvania once the deal closes.

After acquiring nearly 490,000 net acres in West Virginia and Pennsylvania for billions of dollars in separate deals last year with Chesapeake Energy Corp, Statoil ASA and WPX Energy Inc., Southwestern said it would fund those transactions with a combination of debt, equity, other securities and the sale of noncore assets (see Shale Daily, Dec. 30, 2014).

"With this deal, we are well on our way to achieving the $600 million to $800 million in divestiture proceeds announced as part of that plan," said Southwestern CEO Steve Mueller.

Southwestern's gross operated production in northeast Pennsylvania alone surpassed 1 Bcf/d at the end of last year, but it also plans to drill dozens of wells on its newly acquired acreage in southwest Pennsylvania and northern West Virginia this year (see Shale Daily, March 3).

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