The midstream division of Penn Virginia Resource Partners, L.P., PVR Midstream, entered into an agreement with a subsidiary of Range Resources Corporation to construct and operate gas gathering pipelines and compression facilities servicing Range's Marcellus Shale natural gas production primarily in Lycoming County, Pennsylvania.
PVR Midstream and Range have agreed to an area of mutual interest (AMI) that covers parts of Lycoming, Tioga and Bradford Counties in north central Pennsylvania, in which Range currently holds a substantial acreage position. Within this AMI, PVR Midstream will construct approximately 16 miles of 24- and 30-inch gathering trunklines, smaller-diameter field gathering lines and compression facilities required to gather Range's production from the AMI..
The gathering system will have over 700 million cubic feet per day (MMcf per day) of throughput capacity, and the initial phase is expected to become operational in the fourth quarter of 2010. The agreement provides Range significant firm gathering capacity in the system, and PVR Midstream will be compensated for the gathering and compression services provided to Range through a combination of volumetric fees, with no direct commodity exposure..
Excess capacity on the system and the location within a core area of Marcellus Shale development should allow PVR Midstream to develop additional revenue by providing gathering and compression services to area producers..
PVR Midstream's total capital investment in this system is anticipated to range from $170 to $200 million and will be expended between 2010 and 2015, with $35 to $40 million planned for 2010. PVR Midstream expects the project to be accretive to distributable cash flow once the system is operational.