Appalachian natural gas company
) has agreed to sell its natural gas distribution business,
Equitable Gas Company, LLC, to Peoples Natural Gas - a regulated
natural gas distribution company managed by an affiliate of
investment fund SteelRiver Infrastructure Partners LP. The
transfer will raise about $720 million in cash and EQT Corp will
acquire certain midstream assets. The proceeds are likely to be
allocated towards its pipeline business and production growth.
EQT MIDSTRM PTR (EQM): Free Stock Analysis
EQT CORP (EQT): Free Stock Analysis Report
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As a part of the deal, EQT Corp will acquire various pipeline
assets, located in Pennsylvania's Marcellus shale field, as well
as commercial arrangements. These assets are projected to yield
annual earnings before interest, taxes, depreciation and
amortization (EBITDA) of about $40 million. They are connected to
the company's existing transmission assets and will enhance its
transportation and storage operations. About 200 miles of
regulated transmission pipelines as well as four storage pools,
which have a total capacity of 15.1 billion cubic feet of gas,
comprise the Marcellus assets. EQT Corp has also inked a
long-term contract with Peoples Gas for the supply,
transportation and storage functions of gas. These agreements
assure Peoples Gas the delivery of local Marcellus gas of around
35 billion cubic feet per year.
The transaction is subject to the approvals of the Federal Energy
Regulatory Commission and regulators in Pennsylvania, West
Virginia, and Kentucky areas served by the gas utility. It will
also be reviewed under the Hart-Scott-Rodino Act. EQT anticipates
receiving the approvals by the end of 2013.
Equitable Gas owns 4,000 miles of pipelines and delivers natural
gas distribution services to about 275,000 customers.
In a separate development, the company has announced a cut in its
annual dividend to 12 cents per share from 22 cents per share,
effective January 2013.
EQT Corp, which recently formed a master limited partnership −
EQT Midstream Partners, L.P.
) − in order to own selective interstate pipeline assets, holds a
Zacks #3 Rank (short-term Hold rating). Longer term, we maintain
our Neutral recommendation.