Independent natural gas producer EQT has entered into a definitive agreement with funds managed by Blackstone Credit & Insurance to form a $3.5-billion midstream joint venture consisting of EQT's ownership interest in Mountain Valley Pipeline, certain regulated transmission and storage assets, and the Hammerhead Pipeline. The venture announcement follows EQT’s $5.45-billion purchase of Equitrans Midstream this past March. EQT will be the operator of the midstream joint venture, controlling all key decision making.
Under the terms of the agreement Blackstone Credit will provide EQT $3.5 billion in cash consideration in exchange for a noncontrolling common equity interest in the venture. The investment implies a total valuation for the new entity of around $8.8 billion. The venture provides EQT with a large-scale equity capital solution at an accretive cost of capital. Additionally, EQT will retain the rights to growth projects associated with the assets contributed to the venture, including the planned Mountain Valley Pipeline expansion and the Mountain Valley Southgate project.
The Mountain Valley Pipeline is a natural gas pipeline system that spans roughly 303 miles from northwestern West Virginia to southern Virginia, serving the Marcellus and Utica shale plays. The line was placed in service this past June.
The transmission and storage assets cover around 940 miles of pipeline running through Pennsylvania, Ohio, and West Virginia.
The 63-mile Hammerhead Pipeline is a 1.6 Bcf/D gathering header pipeline connecting natural gas produced in Pennsylvania and West Virginia to Mountain Valley Pipeline, Texas Eastern Transmission, and Eastern Gas Transmission.
"Blackstone is a leader in providing capital solutions to large corporations and we are thrilled to partner with them in this unique transaction, crafting a tailor-made equity financing solution at a price significantly below EQT's equity cost of capital while preserving key tax attributes,” said Jeremy Knop, chief financial officer at EQT.
The joint venture transaction is subject to customary closing adjustments, required regulatory approvals and clearances, and is expected to close prior to year-end.
EQT dubbed the Equitrans deal “transformative” at the time of the announcement last spring. It provided more than 2,000 miles of pipeline infrastructure with extensive overlap and connectivity in EQT’s core area of operations.
The combined company holds 27.6 Tcf equivalent (Tcfe) of proved reserves including natural gas, natural gas liquids, and crude oil across 1.9 million net acres with 6.3 Bcfe/D of net production and more than 8 Bcfe/D of gathering throughput across more than 3,000 miles of pipeline.
