Following the receipt of approval from their unitholders, on March 9, 2011, Penn Virginia Resource Partners L.P. (PVR) and Penn Virginia GP Holdings L.P. (PVG) have successfully completed their merger.
As a result of the merger, the units of PVG are no longer traded on the New York Stock Exchange. The PVR common units will continue to be traded on the New York Stock Exchange under the ticker symbol “PVR.”
The partnership said PVG unitholders are entitled to receive 0.98 PVR units for each PVG unit held by them. Cash will be paid to PVG unitholders in lieu of any fractional units that would have resulted from the exchange. The holders of PVR common units will continue to own their existing units.
The merger between Penn Virginia Resource Partners and its general partner, Penn Virginia GP Holdings, was agreed upon in September 2010. Previously, Penn Virginia GP Holdings L.P. held a 37.6% stake in Penn Virginia Resources.
Management believes the merger will help lower PVR’s cost of capital and improve its competitive position as well as provide an opportunity to grow its distributable cash flows. The merger will also simplify PVR’s partnership structure, providing a capital and governance structure, which will be more easily understood by the investors.
Though management expects the additional PVR units issued to PVG unitholders to dilute PVR’s distributable cash flow per unit modestly in 2011, it expects the transaction to be accretive thereafter due to the elimination of incentive distributions currently being paid to PVG.
Radnor, Pennsylvania-based Penn Virginia Resource manages coal and natural resource properties as well as natural gas gathering and processing businesses. The partnership’s coal properties are located in Central and Northern Appalachia, Illinois Basin and San Juan Basin.
The partnership owns and operates natural gas midstream assets located in Oklahoma and Texas, including six natural gas processing facilities having 400 MMcf/d of total capacity and approximately 4,263 miles of natural gas gathering pipelines.
We currently have a short-term Zacks #3 Rank (Hold) on Penn Virginia Resources. The partnership is at par with its competitors like CONSOL Energy Inc. (CNX) and Massey Energy Co. (MEE) based on the short term Zacks Rank. We maintain our recently upgraded long-term Neutral recommendation on the stock.
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