After only a little more than a year in business,EQT Midstream
) is already making a splash on Wall Street.
The company is a master limited partnership that provides
natural gas transmission, storage and gathering services in
Pennsylvania and West Virginia. It owns, operates, buys and
develops midstream assets in the Appalachian Basin's Marcellus
EQT Midstream was spun off as a public company last year byEQT
), an integrated energy company engaged in in the exploration,
development and production of natural gas, natural gas liquids
and crude oil in the Appalachian Basin.
EQT Midstream had its initial public offering in late June
2012 at an opening price of 29. Since then, the stock price has
risen more than 50% and currently trades near 48.
During its first four quarters as a publicly traded company,
EQT Midstream has grown revenue at least 26%. Revenue growth has
accelerated each quarter during that span.
Part of its growth is due to the fact that the company does
its business in a very productive region. It operates a 700-mile
pipeline system to transmit natural gas from the Appalachian
basin. It also has more than 2,000 miles of low-pressure
EQT Midstream serves natural gas producers, local distribution
companies, marketers and commercial and industrial users.
"EQM is among a select group of midstream MLPs and general
partners (GPs) delivering more than 15% to 20% annual
distribution growth over a multiyear period," RBC Capital Markets
analyst T.J. Schultz noted following EQT Midstream's July 25
second-quarter earnings report.
He added the company has a "premier infrastructure footprint
in the heart of the Marcellus Shale, and we believe this
footprint will also allow for organic growth opportunities as
producers around the system look for optionality and the best
EQT Midstream reported second-quarter earnings of 50 cents a
share. That was up from 21 cents the previous year and in line
with consensus estimates.
Adjusted EBITDA for the quarter came in at $23.4 million,
slightly ahead of estimates. Revenue rose 51% to $44.8 million,
above views for $42.44 million.
In a note following EQT Midstream's Q2 report, JPMorgan
analyst Jeremy Tonet said the revenue beat was "due to higher
system throughput related to the Marcellus development" as well
as increased contracted transmission associated with the
company's Blacksville Compressor Station expansion project in
Tonet also sounds bullish about EQT Midstream's future growth
prospects, saying the company's Equitrans pipeline system
"possesses a premier footprint that positions EQT Midstream to
capitalize on the play's expected robust production growth."
"While Marcellus midstream opportunities alone could support
strong distribution growth, EQT's sizable portfolio of drop-down
candidates reinforces our belief that EQT Midstream will achieve
top-tier growth," he added.
Analysts polled by Thomson Reuters expect EQT Midstream to
post full-year EPS of $2.21, a gain of 45% from the prior year.
Annual earnings are seen rising 10% in 2014 and 18% in 2015.
EQT Midstream expanded its operation July 22, when it acquired
Sunrise Pipeline from EQT. The Sunrise assets consist of 41.5
miles of 24-inch diameter Federal Energy Regulatory
Under terms of the deal, EQT Midstream paid $507.5 million in
cash and $32.5 million of common and general partner units, with
an additional $110 million of consideration to be paid to EQT if
an additional third-party transportation agreement becomes
Sunrise parallels and interconnects with a segment of EQT
Midstream's transmission and storage system from Wetzel County,
W.Va., to Greene County, Pa. It also connects to the Jefferson
compressor station in Greene County and with the Texas Eastern
pipeline in Greene County.
Citigroup analyst John Tysseland said the deal "came slightly
earlier than expected and was also larger and more
Sunrise has existing throughput capacity of approximately 400
billion British Thermal Units (
) per day.
With a $30 million compressor expansion, Sunrise is expected
to reach 950 billion BTU per day of total capacity in the third
quarter of 2014.
On a second-quarter conference call with analysts, EQT
Midstream Senior Vice President Randall Crawford called the
Sunrise Pipeline "a strategic addition.
"It links natural gas liquids processing with downstream
transportations, providing the critical infrastructure solution
to facilitate the development of both liquids-rich and dry
Marcellus acreage in West Virginia and Western Pennsylvania,"
said Crawford, who also serves as president of the company's
Midstream, Distribution & Commercial unit.
The transaction is immediately accretive to cash flows and "is
expected to be significantly accretive in years two and three as
the compressor expansion comes online," he added.