UGI and Tenaska Resources to jointly develop Marcellus shale resources

Valley Force, Pa.-based UGI Corporation [NYSE: UGI] announced Jan. 14 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 about 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 COO 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 CEO 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.”

UGI is a distributor and marketer of energy products and services. Through subsidiaries, UGI operates natural gas and electric utilities in Pennsylvania, distributes propane both domestically and internationally, manages midstream energy and electric generation assets in Pennsylvania, and engages in energy marketing in the Mid-Atlantic region. UGI, through subsidiaries, is the sole general partner and owns 26% of AmeriGas Partners LP [NYSE: APU], the nation's largest retail propane distributor.

UGI Energy Services, Inc. owns 14.7 bcf of underground natural gas storage in north-central Pennsylvania, operates LNG and propane/air peaking plants in Pennsylvania, and is developing midstream projects throughout the Marcellus Shale region. UGI Energy Services also markets natural gas, electricity and liquid fuels to approximately 18,000 commercial and industrial customers at approximately 43,000 locations in nine eastern states and Washington DC and owns electric generation assets in Pennsylvania.

Tenaska Resources LLC is the natural gas exploration and production affiliate of Omaha, Neb.-based energy company Tenaska, one of the leading independent power producers in the U.S. Tenaska Resources manages drilling and production targeting natural gas reserves in the Marcellus Shale geologic formation beneath most of Pennsylvania and West Virginia.

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