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PVR Offers 5.5M Common Units

Zacks Equity Research

PVR Partners, L.P. (PVR) has started to issue common units and intends to utilize the net proceeds to repay a part of the borrowings outstanding under its revolving credit facility. In this occasion, the partnership made a public offering of 5.5 million units representing limited partner interests.

Per the conditions of the offering, the underwriters can issue up to 825,000 additional common units within one month to cover the over subscription, if necessary.

As of July 12, 2013, PVR Partners had a total of 95,724,743 common units. The partnership follows the practice of issuing new units and utilizes the proceeds to repay borrowings from its credit facilities. In Nov 2011 and 2012, PVR Partners issued 6.5 million and 7 million common units, respectively. The partnership used the net proceeds to pay-back the portions of borrowings under its credit facilities.

During the six months ended on Jun 30, 2013, PVR Partners paid cash distribution of $105.5 million to its unitholders. The proposed issue of common units will increase the total cash distribution amount.

Radnor, PA-based PVR Partners owns and operates a string of natural gas midstream pipeline systems and processing plants and is also involved in the management of coal as well as natural gas properties.

The pipeline operators invest substantial amounts to install new pipelines after getting long-term service contracts from the petroleum companies. These contracts provide the midstream companies regular flow of income.

Recently, PVR Partners entered into an agreement with Hess Corp. (HES) to provide trunkline plus gathering and compression services to the latter. Per the contract, the partnership will invest $125-$150 million to install a 45-mile natural gas trunkline and set up allied gathering pipelines and facilities at Hess Corp.’s lean gas production facility in the Utica Shale.

As PVR Partners is replenishing its borrowings, the partnership can utilize a portion of its replenished revolving credit facility for its upcoming infrastructure addition projects. The installation of a number of new pipelines will allow the partnership to strengthen its presence in the region, which will subsequently increase the number of contract-awards while improving top line, going forward.

We believe that improvement in operating results will help PVR Partners to meet the fund requirement for paying cash distribution, while reducing external debts.

PVR Partners currently has a Zacks Rank #3 (Hold). However, other stocks from the industry that are presently performing well include Oiltanking Partners L.P. (OILT) with a Zacks Rank #1 (Strong Buy), and SemGroup Corp. (SEMG) with a Zacks Rank #2 (Buy).

Read the Full Research Report on PVRRead the Full Research Report on OILTRead the Full Research Report on HESRead the Full Research Report on SEMGZacks Investment Research