Penn Virginia Resource Partners, L.P. has signed a definitive agreement to acquire the gas gathering and transportation assets of Lone Star Gathering, L.P. (Lone Star) in the Fort Worth Basin.

The purchase price is the sum of: • $160 million of consideration at closing, consisting of $80 million in cash, $65 million of common units of Penn Virginia GP Holdings, L.P. and $15 million of newly-issued common units of PVR; • $5 million in cash payable on December 31, 2009; and • Contingent payments of $30 million and $25 million, payable at PVR's election in cash or common units of PVR, each of which payments will be triggered if a defined geographic area in which a subset of the acquired assets are located reaches certain revenue targets by or before June 30, 2013.

Prior to closing, PVR will purchase the PVG common units from Penn Virginia Corporation . Funding for the cash portion of the acquisition cost, as well as the purchase of PVG units from PVA, will be provided by borrowings under PVR's revolving credit facility. PVR anticipates the acquisition will close in July, subject to customary closing conditions including Hart-Scott-Rodino Act and other regulatory approvals.

Transaction Highlights

• The assets are located in the southern portion of the Fort Worth Basin of north Texas, with near-term growth in the transportation volumes related primarily to Barnett Shale production in Johnson and Hill Counties and future transportation volume growth expected from Hamilton, Bosque, Somervell and Erath Counties, where Barnett Shale drilling is increasingly active; • The assets include approximately 129 miles of gas gathering pipelines and approximately 240,000 acres dedicated by active producers; • The assets derive revenues primarily from fees charged for gathering, compression and transportation of natural gas, with the potential to increase revenues through the addition of processing, treating and other services; • The assets have been built and installed over the past three years and have minimal maintenance capital expenditure requirements; • PVR expects average daily gathering volumes of between 40 and 45 million cubic feet (MMcf) during the second half of 2008, growing to between 90 and 110 MMcf in 2009 and to between 140 and 160 MMcf in 2010; and • PVR expects cash flow, prior to financing costs, of approximately $3 million in the second half of 2008, growing to between $10 and $12 million in 2009 and to between $18 and $21 million in 2010.

A. James Dearlove, Chief Executive Officer of PVR, said, "The Lone Star acquisition expands the geographic scope of PVR Midstream into the prolific Barnett Shale play in the Fort Worth Basin. With high-quality, recently-constructed gathering pipelines and a strong acreage dedication to these gathering systems by a number of established Barnett Shale producers, we expect the acquisition to provide a growing, fee-based revenue stream. The acquisition also establishes a new platform from which to pursue future midstream growth projects and acquisitions."

Tags: Lone Star Gathering, Penn Virginia Resource Partners