Zacks_Analysts' Blog : Penn Virginia Buys Right-of-Way - Analyst Blog

To build a new natural gas gathering pipeline, Penn Virginia Resource Partners, L.P. (PVR) has acquired an option to purchase a pipeline easement in Susquehanna County from the Rail-Trail Council of Northeastern Pennsylvania ("RTC").

The company is eyeing to construct a Marcellus Shale pipeline which will be interconnected to the Tennessee system and will serve the natural gas producers in the region. The easement extends north from the Tennessee pipeline right-of-way in the town of Union Dale through the towns of Thompson and Lanesboro to the New York state line.

As the easement is perfectly located at 28.8 mile right-of-way corridor in the Pennsylvania Marcellus Shale, the company will not have to create another utility corridor in the region for the construction of the Marcellus pipeline.

Penn Virginia Resource Partners is a publicly traded limited partnership which owns and manages coal and natural resource properties and related assets, and owns and operates midstream natural gas gathering and processing businesses. Its coal business generates revenues by leasing its coal reserves under long-term contracts to operators for a royalty payment. Penn Virginia’s royalty structure allows for asset and producer diversification, while it eliminates the direct exposure risks namely mine operating costs and risks, environmental liabilities and labor challenges.

We also like Penn Virginia’s diversified asset base, robust midstream operations, solid balance sheet and strong distribution growth, which provide significant growth opportunities. For instance, the company is planning for construction of a 24-inch mainline trunk system capable of transporting approximately 360 million cubic feet per day of production to major northeastern US consumption markets.

However, the company is surrounded by continuous instability in the capital markets and fluctuation in commodity prices. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock. The company mainly competes with Arch Coal, Inc. (ACI) and CONSOL Energy Inc. (CNX).