Penn Virginia Resource Partners LP (PVR), best known for its coal and land management operations, said Tuesday it is buying natural gas gathering and processing assets in Oklahoma and Texas from Cantera Resources Holdings LLC, a portfolio company of Morgan Stanley Capital Partners, for $191 million in cash.

The midstream assets include 3,400 miles of gas gathering pipelines that supply three natural gas processing facilities with 160 MMcf/d of total capacity. PVR said the assets derive revenues from sharing gas and liquids sales proceeds with producers and from fees charged for gathering and treating of natural gas volumes and other related services. The assets are located in four geographic regions:

In total, the assets currently gather 135 MMcf/d and the gas plants are processing 120 MMcf/d and producing 9,300 bbl/d of natural gas liquids. Most of Cantera’s operating, commercial and support personnel are expected to remain with Penn Virginia after closing.

“This transaction is an important strategic development for the partnership, providing an entry into the natural gas midstream business and establishing a platform for future growth,” said CEO A. James Dearlove. “The acquisition is expected to be immediately accretive to our unitholders in terms of net income and distributable cash flow. Based on expected cash flow accretion, we anticipate increasing quarterly distributions to unitholders upon closing this transaction.

“Cantera’s experienced operating and commercial staff will be integrated into PVR’s midstream management team. Our future plans include expanding the partnership’s natural gas midstream business around the Cantera assets and seeking additional growth opportunities,” Dearlove added.

PVR is a limited partnership formed by Penn Virginia Corp. in July 2001 to primarily manage coal properties in the United States. PVR does not operate any mines, but rather enters into long-term leases with third-party mine operators for the right to mine coal reserves in exchange for royalty payments. As of Dec. 31, 2003, PVR’s properties contained 588 million tons of proven and probable coal reserves located in 241,000 acres in Virginia, West Virginia, New Mexico and eastern Kentucky. PVR also earns revenues from the sale of standing timber on its properties.

In 2003, 94.4% of PVR’s revenues were attributable to coal and land leasing operations, 3.8% were attributable to coal services operations and 1.8% were attributable to timber operations.

PVR said the midstream gas transaction is expected to generate about $25-28 million in incremental cash flow from operations during the first 12 months following the closing, which is expected in 1Q2005. The partnership will use a combination of debt facilities and new equity capital to close the acquisition.

A conference call and web cast to discuss the acquisition is scheduled for 11 a.m. EST on Nov. 30. To access the web cast, visit www.pvresource.com

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