Penn Virginia Corp. (PVA) is selling substantially all of its Eagle Ford Shale natural gas midstream assets to a newly-formed affiliate of ArcLight Capital Partners LLC for gross cash proceeds of $100 million.
Assets to be sold include a gas gathering and gas lift systems including about 119 miles of pipelines and associated facilities in Gonzales and Lavaca counties, TX. Net of its partners' interest in the gross proceeds, PVA said it will use the remaining proceeds of $95 million to help fund its 2014 capital spending.
"The divestiture of our natural gas midstream assets is the first step in a series of potential divestitures which will reduce our indebtedness, improve our liquidity and fund further investment in our oily Eagle Ford Shale play," said CEO Baird Whitehead.
This sale is expected to close during the first quarter and is subject to customary conditions.
According to its website, ArcLight has invested $2.7 billion in the midstream energy sector in 18 deals. An affiliate of ArcLight is a 50% partner in NET Midstream, which owns six intrastate gas pipelines in Texas and markets natural gas across the United States. NET Midstream's NET Mexico Pipeline LP is developing a 124-mile, 42-inch diameter pipeline to carry natural gas produced in the Eagle Ford Shale to the Texas-Mexico border (see Shale Daily, Feb. 25).
Last spring PVA acquired 40,600 gross acres (19,000 net) in Gonzales and Lavaca counties for $401 million from Magnum Hunter Resources Corp. (MHR) (see Shale Daily, April 4). "Penn Virginia is here and is a real Eagle Ford player," Whitehead said at the time.
Wells Fargo Securities analyst David Tameron said in a note Monday that the Eagle Ford midstream price was right in line with what he expected based on talks with the company. If this deal goes as planned, he wrote that he expects PVA to next divest its Selma Chalk/Granite Wash assets, for proceeds of $100 million to $150 million "...as PVA appears likely to build out infrastructure on its MHR acreage before pursuing a sale."