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Anticipating Growth, UGI Buys NatGas Gathering System in Pennsylvania

UGI Energy Services LLC has acquired a 60-mile-plus natural gas gathering system that spans three counties of Pennsylvania in the Marcellus Shale northern tier from upstart Rockdale Marcellus LLC for an undisclosed amount.

The system in Tioga, Lycoming and Bradford counties is currently moving 30 MMcf/d for Rockdale Marcellus, which was established in July, according to state records. The company is a subsidiary of Houston-based Rockdale Energy LLC.

Part of the reason for the low volumes to date “has been because the prices have been low and they haven’t been actively engaging up there,” said UGI Energy’s Pamela Witmer, vice president of government affairs. “We anticipate that that will increase significantly.”

Witmer said the system is poised for growth. All three counties are hotbeds for Marcellus development, but Tioga in particular has seen an uptick in drilling activity recently as more operators test the Utica Shale or get back to work on state-owned lands that languished during the downturn.

“The system enables us to expand into that area,” Witmer told NGI’s Shale Daily. “...In Tioga, there’s an uptick in activity and that’s only going to grow.”

UGI Energy, a subsidiary of UGI Corp., supplies and markets natural gas, liquid fuels and electricity at more than 43,000 locations in the Mid-Atlantic region. It also owns midstream assets that support gas storage, transportation and delivery. Those assets have been expanded in recent years to meet growing Marcellus production.

The company recently brought online the Sunbury Pipeline to supply a gas-fired power plant in Snyder County. Last summer, one of three liquefied natural gas facilities it operates in the state was also commissioned in Wyoming County. An affiliate also has a 20% stake in the PennEast Pipeline, which is expected to receive a Federal Energy Regulatory Commission certificate “any day” now, Witmer said.

The UGI Texas Creek gathering system, as it will be called, is tied into the Tennessee Gas Pipeline and Transcontinental Gas Pipe Line systems. Witmer said the company is exploring ways it can meet more local demand with the system. Texas Creek is currently serving Rockdale’s wells.

“As we work with Rockdale and see what their drilling plans are, we can certainly do that,” Witmer said when asked if the system might eventually be expanded. “If there are other [operators] that are in the area, we’re willing to look and meet the needs of those that are up there and that are drilling now and that are going to want to drill later.”

Most of Rockdale’s executive management team joined the company last year, when it got off the ground by purchasing conventional gas properties in South Texas from Comstock Resources Inc. for $28 million. The company is currently active only in Texas.

Led by CEO Eddie Hebert, the management team has experience working with Reliance Industries Ltd., Newfield Exploration Co. and other smaller energy companies in plays stretching from the Midcontinent and Gulf Coast to the Marcellus.

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