Why Penn Virginia Resource Partners Shares Surged
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Penn Virginia Resource Partners (NYS: PVR) rose 12% today after the company announced a big pipeline acquisition.
So what: The company is buying Chief Gathering, a natural gas pipeline company with operations in Pennsylvania, for $1 billion. The deal will be paid for with debt and equity issuances. This gives Penn Virginia a foothold in gas-rich Marcellus shale where there has been a natural gas boom for the past few years.
Now what: In some locations, natural gas drilling is slowing down because of low prices, but Penn Virginia is betting that the Marcellus shale will continue to be strong in this environment. Further south, in Texas, the company will be taking a newly announced charge of $115 million to $130 million due to weak drilling in the area.
This move to expand in the Marcellus shale is a strong strategic move, and I think it makes this energy company with a 9% dividend yield very attractive, even if it does dilute current shares some.
Interested in more info on Penn Virginia Resource Partners? Add it to your watchlist byclicking here.
At the time this article was published Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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