PVR’s operations and the acquisition
PVR’s operations fall into three divisions.
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The Eastern Midstream division comprises a natural gas trunkline and gathering assets in the Appalachia region, with exposure to the Marcellus Shale, and potential upside to the Utica Shale. PVR notes that the revenues it generates in from its Eastern Midstream division are currently 100% fee-based, with no direct commodity risk.
The Midcontinent Midstream division comprises gathering assets and six natural gas processing plants, located across Oklahoma and Northern Texas. The assets are located in the Anadarko and Arkoma Basins with exposure to the Granite Wash play.
The Coal and Natural Resource Management division is primarily involved in the management and leasing of coal properties. PVR allows third-party miners to mine its coal reserves in exchange for royalty payments, and it doesn’t operate any mines.
The bulk of PVR’s EBITDA (earnings before interest, tax, depreciation, and amortization) in 2013 is expected to come from its Eastern Midstream business. In its last earnings release, PVR noted that it expected full-year 2013 adjusted EBITDA of ~$295 million to ~$340 million. Of this total, Eastern Midstream is expected to contribute $160 to $185 million, Midcontinent Midstream is expected to contribute $60 to 70 million, and Coal and Natural Resource Management is expected to contribute $75 to $85 million.
In brief, the bulk of PVR’s assets are for the transportation and processing of natural gas—particularly in Pennsylvania, where it’s exposed to the Marcellus Shale, and in Oklahoma and North Texas, where it’s exposed to the Granite Wash.