EQT to Sell Gas Utility for $720 Million Cash -- Plus Marcellus Midstream
PITTSBURGH -- December 20, 2012
EQT Corporation (NYSE:EQT) today announced that it has entered into a
definitive agreement for the transfer of its natural gas distribution
business, Equitable Gas Company, LLC, to Peoples Natural Gas. As part of the
transaction, EQT will receive cash proceeds of $720 million, subject to
certain purchase price adjustments, and select midstream assets and commercial
arrangements, which are expected to generate at least $40 million in EBITDA
(earnings before interest, taxes, depreciation, and amortization) per year.
Concurrent with this announcement, EQT will also reduce its annual dividend,
effective January 2013. The new dividend rate of $0.12 per share reflects the
blend of EQT’s two remaining core businesses – a dividend-supporting midstream
business, and a capital-intensive, rapidly growing production business.
“Today’s announcement allows us to focus on and reinvest in our rapidly
growing natural gas production and midstream businesses. The proposed
transaction provides capital to accelerate the monetization of our reserves
beyond 2013 and also adds to our Marcellus midstream assets,” stated David
Porges, Chief Executive Officer of EQT Corporation.
As part of the transaction, EQT will receive approximately 200 miles of
regulated transmission pipelines, as well as four storage pools that have a
total of 15.1 Bcf working gas capacity. These assets are strategically located
across multiple counties in Pennsylvania and connect to EQT’s existing
transmission assets, which will increase the Company’s transportation and
Peoples Gas has also agreed to enter long-term contracts for gas transmission,
supply, and storage services with EQT. These agreements will secure supply of
local, Marcellus gas of approximately 35 Bcf per year to Peoples.
Morgan O’Brien, President and CEO of Peoples Natural Gas states, “The combined
utility will yield substantial benefits to the Western Pennsylvania community
by creating significant operational efficiencies, relative to the pipeline
systems; promoting greater competition for gas marketers; and continuing to
support local gas producers.” O’Brien continues, “Combining the companies’
respective pipeline systems will result in a more streamlined and efficient
operating system for customers. Furthermore, the greater aggregation of
customers will be more attractive to marketers and is expected to attract more
marketers that will create greater competition for customers’ supply needs.”
Equitable Gas provides natural gas distribution services to approximately
275,000 customers in Pennsylvania, West Virginia, and Kentucky; and owns
approximately 4,000 miles of pipeline.
The transaction requires regulatory approvals from the Pennsylvania Public
Utility Commission, West Virginia Public Service Commission, Kentucky Public
Service Commission, and the Federal Energy Regulatory Commission; and is also
subject to review under the Hart-Scott-Rodino Act. EQT expects to receive the
required approvals by the end of 2013. Therefore, this transaction will not
impact EQT’s previously announced 2013 capital program.
EQT will host a brief teleconference with security analysts beginning at 10:00
a.m. Eastern Time today. EQT’s teleconference with security analysts will be
webcast live via www.eqt.com, and will be available for replay on the website
for seven days.
Lazard Freres & Co. LLC acted as a financial advisor to EQT on this
transaction. Skadden, Arps, Slate, Meagher & Flom LLP; Baker Botts L.L.P.; and
Bracewell & Giuliani LLP were counsel to EQT on the transaction.
About EQT Corporation:
EQT Corporation is an integrated energy company with emphasis on Appalachian
area natural gas production, gathering, transmission, and distribution. EQT is
the general partner and majority equity owner of EQT Midstream Partners, LP.
With more than 120 years of experience, EQT is a technology-driven leader in
the integration of air and horizontal drilling. Through safe and responsible
operations, the Company is committed to meeting the country’s growing demand
for clean-burning energy, while continuing to provide a rewarding workplace
and enrich the communities where its employees live and work. Company shares
are traded on the New York Stock Exchange as EQT.
Visit EQT Corporation on the Internet at www.EQT.com.
About Peoples Natural Gas:
Peoples Natural Gas is a subsidiary of SteelRiver Infrastructure Fund of North
America. SteelRiver Infrastructure Fund acquired Peoples Natural Gas from
Dominion Resources in 2010. In 2011, the company purchased Peoples TWP,
formerly T.W. Phillips Gas and Oil Company. Peoples Natural Gas and its sister
company, Peoples TWP, currently provide safe and reliable service to
approximately 420,000 homes and businesses in 18 western Pennsylvania
Disclosures in this press release contain certain forward looking statements.
Words such as “may,” “will,” “anticipate,” “estimate,” “expect,” “project,”
“intend,” “plan,” “believe,” “target,” “forecast,” and words and terms of
similar substance used in connection with any discussion of future plans,
actions, or events identify forward-looking statements. Without limiting the
generality of the foregoing, forward-looking statements contained in this
press release specifically include, but are not limited to, statements
regarding: plans, strategies, and objectives of the transaction; guidance
regarding the expected form and amount of assets to be exchanged for Equitable
Gas Company, LLC; the expected EBITDA to be generated from the midstream
assets and commercial arrangements transferred by or entered into with Peoples
Natural Gas; uses of capital provided by the transaction, including the impact
to EQT’s 2013 capital program; the timing of receipt of required approvals;
and the expected amount and timing of the reduction to EQT’s dividend. EQT has
based these forward-looking statements on current expectations and assumptions
about future events. These statements are not guaranties of future performance
or events and are subject to significant business, economic, competitive,
regulatory and other risks and uncertainties, most of which are difficult to
predict and many of which are beyond EQT’s control; that could cause actual
results to differ materially from projected results. With respect to the
proposed transaction, these risks and uncertainties include, among others, the
ability to obtain regulatory approvals for the transaction on the proposed
terms and schedule; disruption to EQT's business, including customer, employee
and supplier relationships resulting from the transaction; risks that the
conditions to closing may not be satisfied; and impact of the transaction on
EQT’s future operating income, 2013 capital program and dividend. Additional
risks and uncertainties include, but are not limited to, those set forth under
Item 1A, “Risk Factors” of EQT’s Form 10-K filed for the year ended December
31, 2011, as updated by any subsequent Form 10-Qs.
EQT is unable to provide a reconciliation of projected EBITDA to projected net
income, the most comparable financial measure calculated in accordance with
GAAP, due to the unknown effect, timing and potential significance of certain
income statement items.
EBITDA is defined as operating income (loss) plus depreciation and
amortization expense less gains on dispositions; and is not a financial
measure calculated in accordance with generally accepted accounting principles
(GAAP). EBITDA is a non-GAAP supplemental financial measure that Company
management and external users of the Company’s financial statements, such as
industry analysts, investors, lenders and rating agencies, may use to assess:
(i) the Company’s performance versus prior periods; (ii) the Company’s
operating performance as compared to other companies in its industry; (iii)
the ability of the Company’s assets to generate sufficient cash flow to make
distributions to its investors; (iv) the Company’s ability to incur and
service debt and fund capital expenditures; and (v) the viability of
acquisitions and other capital expenditure projects and the returns on
investment of various investment opportunities.
Any forward-looking statement speaks only as of the date on which such
statement is made and EQT undertakes no obligation to correct or update any
forward-looking statement, whether as a result of new information, future
events or otherwise.
Analyst inquiries please contact:
Patrick Kane, 412-553-7833
Chief Investor Relations Officer
Nate Tetlow, 412-553-5834
Manager, Investor Relations
Media inquiries please contact:
Natalie Cox, 412-395-3941
Corporate Director, Communications
Peoples Natural Gas
Barry Kukovich, 412-232-6715
Manager, Communication and Community Affairs
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