Stonehenge and UGI expand Appalachian midstream footprint with Superior Midstream acquisition

Stonehenge Energy Resources III, LLC (Stonehenge) and UGI Corporation (NYSE: UGI) have cemented their commitment to the Appalachian energy market by acquiring Superior Midstream Appalachian, LLC (Superior Appalachian) for $120 million. The transaction, completed through Pine Run Gathering LLC, reflects the companies’ strategic focus on enhancing midstream operations and supporting natural gas producers in the region.

The acquisition bolsters their natural gas gathering footprint, highlighting the growing demand for efficient, reliable midstream infrastructure in Pennsylvania’s energy-rich Appalachian basin.

What Does the Superior Midstream Acquisition Include?

The deal encompasses three critical natural gas gathering systems: Pittsburgh Mills, Snow Shoe, and Brookfield, all located in Pennsylvania. Combined, these systems manage an impressive daily throughput of approximately 190 million cubic feet of natural gas. Each system benefits from long-term acreage dedications, ensuring stability and operational consistency for the joint venture.

Notably, the Pittsburgh Mills system is directly connected to UGIES’ Big Pine gathering system, creating valuable synergies and extending Stonehenge and UGI’s ability to serve producers and end-use customers across the state.

Stonehenge’s President and CEO, Patrick Redalen, emphasized the strategic importance of this acquisition:

“This transaction strengthens our position in the Appalachian basin and allows us to collaborate closely with producers and stakeholders. We’re committed to supporting our partners and delivering energy solutions that meet market demands.”

How Does the Acquisition Align with Industry Trends?

The acquisition signals the continued growth and consolidation within the midstream energy sector, particularly in natural gas infrastructure. As demand for cleaner energy sources rises, companies are investing in integrated systems that enhance operational efficiency while addressing environmental concerns.

Stonehenge’s focus on midstream development dates back to its founding in 2007. Headquartered in Westminster, Colorado, the company has played a pivotal role in enabling early unconventional shale gas development in Pennsylvania. With the addition of Superior Appalachian, Stonehenge now operates five natural gas gathering systems across western and central Pennsylvania, further solidifying its leadership in the region.

UGI Corporation’s President and CEO, Bob Flexon, echoed the sentiment:

“This acquisition reflects our strategy to invest in assets that complement our existing infrastructure. It also enhances our ability to deliver sustainable, reliable energy solutions to our customers while creating long-term growth opportunities.”

How Was the Deal Financed?

The $120 million transaction was wholly financed through debt by Pine Run Gathering LLC, the joint venture formed by Stonehenge (51% ownership) and UGI Energy Services, LLC (49% ownership). The financing arrangements were supported by major financial institutions, including BOK Financial, Cadence Bank, and Citizens Bank.

Legal counsel for Pine Run Gathering was provided by Baker Botts L.L.P. and Vinson & Elkins LLP, ensuring the transaction adhered to industry regulations and financial best practices.

The acquisition is expected to be immediately accretive to earnings, highlighting the venture’s sound financial planning and the acquisition’s potential to generate significant value.

Why Is This Acquisition Significant for Pennsylvania’s Energy Market?

Pennsylvania remains a key player in the U.S. natural gas industry, thanks to its abundant resources in the Appalachian basin. This acquisition reinforces Stonehenge and UGI’s ability to deliver natural gas from producers to end-use customers efficiently.

The systems acquired—Pittsburgh Mills, Snow Shoe, and Brookfield—are strategically positioned to meet rising demand while maintaining sustainable operations. Furthermore, the integration of these systems with existing infrastructure like UGIES’ Big Pine gathering system ensures streamlined operations and cost efficiencies.

What Are the Broader Implications for the Energy Sector?

The acquisition highlights a growing trend in the energy industry: the need for companies to enhance midstream operations to remain competitive in an evolving market. With global energy transitions emphasizing cleaner fuels, natural gas remains a critical bridge fuel, offering a lower-carbon alternative to coal and oil.

For Stonehenge and UGI, this transaction not only expands their market presence but also reflects their commitment to meeting energy demands sustainably and efficiently. Their combined expertise and resources position them as leaders in Pennsylvania’s natural gas market, capable of addressing the challenges of both producers and consumers.

Expert Insight on the Acquisition

Energy analysts note that this deal underscores the importance of collaboration in building resilient energy infrastructure. By pooling resources, companies like Stonehenge and UGI can better navigate market fluctuations and deliver value to stakeholders.

“The acquisition of Superior Midstream Appalachian is a calculated move,” said an energy sector analyst. “It demonstrates a clear understanding of market dynamics and a commitment to operational excellence in the Appalachian region.”