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What: Shares of Penn Virginia Resource Partners
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 by clicking here.
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.
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