Equitrans Midstream Corp. said Thursday that it has reached a deal with Morgan Stanley Infrastructure Partners to acquire two midstream systems in the Appalachian Basin for $1.03 billion, marking its first strategic transaction since it separated from EQT Corp. late last year.
Equitrans affiliate EQM Midstream Partners LP would take a 60% stake in Eureka Midstream Holdings LLC and a 100% interest in Hornet Midstream Holdings LLC, a smaller system that taps into the sizable Eureka lines. EQM said it would pay $860 million in cash and take on $170 million of debt for the assets, which it would fund with with the issuance of $1.1 billion of equity to lead investors. The deal is expected to close by April 15.
“This bolt-on acquisition within our footprint leverages our existing assets and core operating competencies and is the first step in executing our strategy to grow into a top-tier midstream company,” Equitrans CEO Thomas Karam said. He added that the acquisition would bolster the company’s gathering, transmission and water handling services.
“With the ongoing natural gas development activity surrounding the Eureka system, we see significant value in leveraging our fast-growing water services business,” said Equitrans COO Diana Charletta. “We want to be the low-cost provider and partner of choice across all aspects of our business. This acquisition will help us achieve our goal by providing added scale and by allowing us to facilitate new commercial opportunities to deliver innovative and cost-effective solutions for our customers.”
Eureka Midstream is a 190-mile gathering header pipeline system that straddles core areas of the Marcellus and Utica shales in Ohio and West Virginia, collecting both dry and wet gas. Hornet Midstream is a 15-mile, high-pressure gathering system in West Virginia that connects to Eureka.
EQM said the assets averaged 1.6 Bcf/d of gathered volumes during 4Q2018. They come with 200,000 dedicated acres in the Marcellus and Utica, with minimum volume commitments of 800 MMcf/d, growing to 1.3 Bcf/d by 2021. The systems move about 67% dry gas and 33% wet gas. They also offer access to EQM’s current system and downstream pipelines in Clarington, OH, and Mobley, WV.
Morgan Stanley Infrastructure took a stake in Eureka years ago, when it partnered with Magnum Hunter Resources Corp, which later filed for bankruptcy and emerged as Blue Ridge Mountain Resources Inc. (BRMR), now part of Montage Resources Corp. BRMR in late 2017 sold the remaining stake in the system to South Korean conglomerate SK Holdings Co. Ltd.