Pine Run Gathering LLC announced Feb. 16 that it has completed a transaction to acquire Pine Run Midstream LLC from an affiliate of PennEnergy Resources LLC and minority partners for $205 million.
Pine Run Gathering is a joint venture owned by a subsidiary of Stonehenge Energy Resources III LLC, a portfolio company of Energy Spectrum Partners VIII LP, and by a subsidiary of UGI Energy Services LLC (UGIES), which is a subsidiary of UGI Corp.
PennEnergy, a Pittsburgh-based independent oil and gas company, is a leading Appalachian based producer and anchor customer on the Pine Run system. Stonehenge III is the third partnership between Energy Spectrum Capital and Stonehenge Energy Resources management. The transaction will be financed with equity capital from both Stonehenge III (51 percent) and UGIES (49 percent) as well as a senior secured loan credit facility.
Pine Run Midstream operates 43-miles of dry gas gathering pipeline and compression assets located in Butler and Armstrong counties in western Pennsylvania. The Pine Run Midstream system has been in operation since 2014 and will be operated by Stonehenge. Stonehenge and UGI expect the investment to be immediately accretive to earnings.
Pine Run Gathering is Stonehenge’s fourth venture in the Appalachian basin.
“Stonehenge is pleased to add the Pine Run Midstream system to our operations in western Pennsylvania and views the strategic partnership with UGIES as a beneficial step to providing area producers with cost-effective, customer-focused services,” said Patrick Redalen, CEO of Stonehenge. “The Pine Run Midstream system is a high-quality asset that has been well managed and operated by the PennEnergy team. We are very pleased to have the chance to expand our relationship with Rich, Greg and the entire team at PennEnergy.”
This is the second recent investment in Appalachian basin natural gas gathering systems by UGIES, as it continues to invest in assets well positioned in highly productive areas of the Marcellus Shale. UGIES will add its ownership stake in Pine Run Gathering to UGI Appalachia LLC, which operates gathering assets in Pennsylvania, Ohio and West Virginia.
“We are very pleased to announce this investment, which complements our existing portfolio of midstream assets,” said Robert F. Beard, executive vice president of natural gas for UGI. “Adding our stake in Pine Run Gathering to UGI Appalachia enhances and expands our footprint in western Pennsylvania and is consistent with the strategy outlined when we announced our acquisition of Columbia Midstream Group in 2019. Pine Run Midstream has direct connectivity to UGI’s Big Pine Pipeline, which is one of the assets acquired as part of the Columbia Midstream deal, and is well positioned to capture additional production nearby. Importantly, expansion of our natural gas portfolio enables us to provide low-cost, environmentally responsible energy to more consumers.”
UGIES president Joseph L. Hartz added, “Pine Run Gathering is a great addition to our portfolio. It is well run and has a strong operations team in place that fits nicely with our midstream business.” Hartz added, “This asset will accelerate the growth of our existing western Pennsylvania natural gas gathering business and is a great strategic fit for UGIES.”
In connection with the transaction, Baker Botts LLP served as legal counsel for Pine Run Gathering and Winston & Strawn LLP served as legal counsel for PennEnergy.
Tudor, Pickering, Holt & Co. served as financial advisor for PennEnergy.