UGI Corporation (NYSE: UGI), today announced that it has entered into agreements with Tenaska Resources, LLC, a natural gas exploration and production affiliate of independent energy company Tenaska, to jointly develop gas resources in the Marcellus Shale region in north-central Pennsylvania. UGI Energy Services, Inc. will construct and operate approximately 20 miles of new gathering pipelines and related gas processing and compression facilities for wells that Tenaska intends to drill in Potter County, Pa., with the first phase of construction targeted for late 2013 or early 2014. The initial investment in the proposed gas gathering system is estimated to be up to $25 million, with the total investment in gathering for full development of Tenaska’s Potter County acreage estimated to be in the range of $65 million over ten years. In addition to the gathering opportunity, UGI announced that it has invested $25 million for an approximate 19% non-operating working interest in acreage that Tenaska operates near Mainesburg in Tioga County, Pa. Both projects are located in proximity to UGI’s midstream and distribution assets, including 14.7 billion cubic feet (Bcf) of natural gas storage.
Tom A. Boyd, vice president and general manager of Tenaska Resources, said, “UGI has a specialized working knowledge of the regional natural gas market and expertise in midstream infrastructure. This strategic relationship will add value to Tenaska’s producing wells and prospects.”
John L. Walsh, president and chief operating officer of UGI, said, “We have a long working relationship with Tenaska, a strong company with a proven track record of success in developing energy projects. We look forward to our expanded relationship with Tenaska in the development of natural gas resources within the Marcellus Shale, and our midstream team remains active and focused on identifying and executing additional midstream investment opportunities like this one.”
Lon R. Greenberg, chairman and chief executive officer of UGI, added, “We are pleased to announce another tangible example of the execution of our strategy to build a midstream business within our existing footprint in the Marcellus Shale. The opportunities we are announcing today, along with our previously-announced Auburn II gathering project, leverage both UGI’s significant asset base and deep knowledge of local and regional gas markets while demonstrating UGI’s commitment to investing in infrastructure that will provide consumers with increased access to abundant, regionally-produced natural gas.”
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