PVR Partners LP (NYSE: PVR) has entered into a definitive agreement with Hess Corp. (NYSE: HES) to construct, own and operate a 45-mile natural gas trunkline and associated gathering pipelines and facilities servicing Hess's lean gas production in the Utica shale play in eastern Ohio.
In addition to providing committed volumes of gas to the project, the agreement establishes an area of mutual interest (AMI) covering portions of Belmont, Jefferson and Harrison counties where Hess holds a substantial acreage position. PVR will construct a minimum 20-inch-diameter trunk line with an expected minimum capacity of 450 million cubic feet per day and connections to the Texas Eastern and Rockies Express interstate pipelines, with possible future connections to other interstate systems.
Additionally, PVR will construct gathering pipelines, compression stations, dehydration facilities and other related facilities to gather Hess's production from the dedicated acreage. The services will be provided solely on a volumetric fee basis, with no direct commodity price exposure. The project is expected to begin operations in late 2014, and PVR anticipates contracting with additional producers for capacity and gathering services as construction of the system progresses.
PVR expects the total capital investment for the trunkline, initial gathering lines, compression stations and dehydration facilities to be in the range of $125-150 million, and expects to invest approximately $10 million during the remainder of 2013, and approximately $50 million during the first half of 2014 and $50 million during the second half of 2014, with the balance in 2015.
Bill Shea, president and CEO of PVR's general partner, said; "We believe Hess's selection of PVR as their midstream provider in the Utica Shale is another validation of our growing reputation for supplying reliable high-quality midstream services to meet the needs of shale gas producers. We have done so successfully in the Marcellus Shale region, and we expect to duplicate that success in the Utica Shale."