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Blog Exposure – EQT’s Board Approves Plan to Separate Upstream and Midstream Businesses

Stock Monitor: Marathon Oil Post Earnings Reporting

LONDON, UK / ACCESSWIRE / February 23, 2018 / Active-Investors.com has just released a free research report on EQT Corp. (NYSE: EQT). If you want access to this report all you need to do is sign up now by clicking the following link www.active-investors.com/registration-sg/?symbol=EQT as the Company's latest news hit the wire. On February 21, 2018, the Company, which is the biggest natural gas producer in the US, declared that its Board of Directors has unanimously approved a plan to separate its upstream and midstream businesses. This would result in the creation of a standalone publicly traded corporation, NewCo, which will focus on midstream operations. This move to separate business units came after months of pressure from investors such as D.E. Shaw & Co and Jana Partners. Register today and get access to over 1000 Free Research Reports by joining our site below:

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Active-Investors.com is currently working on the research report for Marathon Oil Corporation (NYSE: MRO), which also belongs to the Basic Materials sector as the Company EQT Corp. Do not miss out and become a member today for free to access this upcoming report at:

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Active-Investors.com is focused on giving you timely information and the inside line on companies that matter to you. This morning, EQT Corp. most recent news is on our radar and our team decided to put out a fantastic report on the company that is now available for free below:

www.active-investors.com/registration-sg/?symbol=EQT

Plan of Action Prior To Separation

Prior to the separation of the business units, EQT plans to construct a drop-down of the retained midstream assets in an accretive transaction to EQT Midstream Partners LP (NYSE:EQM). The Company also intends to merge EQM and Rice Midstream Partners LP (NYSE:RMP) in an accretive transaction. Besides, it plans to sell the RMP Incentive Distribution Rights (IDRs) to EQT GP Holdings LP (NYSE:EQGP).

As per EQT's plan, EQGP will retain the EQM IDRs, while EQGP and EQM will remain separate publicly traded entities after separation. However, EQT does not mean to modify its existing gathering and transmission contracts with EQM with regards to the separation. Also, completion of midstream-related transactions is not a condition for the completion of separation.

EQT expects that this separation would qualify as tax-free for EQT's shareholders for US federal income tax purposes. Post the separation, EQT's shareholders will retain their shares of EQT stock and receive a pro-rata share of the new independent midstream Company. Both Companies will remain headquartered in Pittsburgh, Pennsylvania.

Strategic Rationale for Separation

EQT's decision to separate its business units has created one of the strongest midstream Companies in the Appalachian Basin. James Rohr, EQT's lead Independent Director, believes that this spin-off transaction represents a new chapter for the EQT business as it unlocks the value created by the Company over the last 10 years. Steve Schlotterbeck, President and Chief Executive Officer (CEO) at EQT, shared that the Rice Energy acquisition positioned the Company to further enhance value through separation. The acquisition accelerated the maturation of EQT's both businesses, and offered scale that considerably enhanced the standalone prospects of both businesses. EQT expects the following benefits from creating an independent midstream public Company:

  • Creation of two pure-play Companies with clear investment thesis
  • The visibility to attract long-term investors, suited for each business
  • Capital structures aligned with cash flow risk/reward profiles for each business
  • Dedicated management focused on their distinct strategic visions
  • Simpler and easier to understand financial reporting systems
  • More efficient allocation of capital
  • Greater potential for organic growth and customer base expansion
  • Investment grade ratings for both Companies
  • Enhanced equity currency and access to capital

Competitive Strengths of EQT and NewCo

EQT is the largest natural gas producer in the US with an industry leading cost structure. It is spread across 680,000 core Marcellus acres and 65,000 core Ohio Utica acres. The Company has an inventory depth for sustained 10% - 15% production growth. EQT expects to generate $2.3 billion to $2.8 billion of free cash flow over 2019 to 2023, which is equivalent to 10% - 15% of its annual production growth. The Company expects to be cash flow breakeven in 2019, with a focus on returning cash from 2020.

NewCo's natural gas gathering is the third largest in the US, with a premier asset footprint in the Appalachian Basin. The Company has a 246,000-acreage dedication in core Marcellus and 166,000 in core Ohio Utica. Its Mountain Valley Pipeline extends its pipeline network into the southeast markets. NewCo has a stable and predictable cash flow profile and a 5-year projected organic growth capital of $4.8 billion. Approximately 85% of the Company's revenue is generated from investment grade counterparties.

Management Changes

Post the separation, Steve Schlotterbeck will retain his position as CEO of EQT.

Jerry Ashcroft, the senior Vice President and President, midstream for EQT, and senior Vice President and Chief Operating Officer (COO) of EQM, will lead NewCo as CEO after the completion of the separation. Ashcroft has over 15 years of experience in the oil, gas, and pipeline industries, and has held various roles of increasing responsibility at Gulf Oil L.P., JP Energy Partners, Buckeye Partners, L.P., and Colonial Pipeline Co., L.P.

Transaction Closing Conditions

  • The proposed spin-off is subject to customary conditions, such as the receipt of a favorable opinion of legal counsel and/or a private letter from the Internal Revenue Service for the tax treatment of the transaction for US federal income tax purposes. The transaction also needs the effectiveness of a Form 10 registration statement, which is to be filed with the Securities and Exchange Commission (SEC) for the shares of NewCo.
  • Moreover, the spin-off is subject to the final approval and declaration of the spin-off dividend by the EQT's Board of Directors.
  • Post this clearance, the transaction is expected to close by the end of the third quarter of 2018.

Stock Performance Snapshot

February 22, 2018 - At Thursday's closing bell, EQT Corp.'s stock climbed 2.03%, ending the trading session at $50.82.

Volume traded for the day: 6.83 million shares, which was above the 3-month average volume of 3.85 million shares.

After yesterday's close, EQT Corp.'s market cap was at $13.71 billion.

Price to Earnings (P/E) ratio was at 30.23.

The stock has a dividend yield of 0.24%.

The stock is part of the Basic Materials sector, categorized under the Independent Oil & Gas industry. This sector was up 0.8% at the end of the session.

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