EQM Midstream to buy stake in Marcellus-Utica pipeline assets for $1bn

EQM Midstream Partners has reached a definitive agreement to purchase a 60% interest in Eureka Midstream and a 100% interest in Hornet Midstream from Morgan Stanley Infrastructure Partners for $1.03bn.

The total consideration for the transaction includes around $860m in cash and $170m of assumed pro-rata debt.

The pipeline assets in which EQM is acquiring stakes connect the Marcellus and Utica shale basins.

Servicing both dry Utica and wet Marcellus production, Eureka Midstream is a 190-mile gathering header pipeline system in Ohio and West Virginia.

The second asset, Hornet Midstream, is a 15-mile, high-pressure gathering system that connects to the Eureka system.

EQM CEO Thomas Karam said: “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.

“These assets will complement EQM’s basin-leading gathering and transmission system, allowing us to continue being the low-cost provider for gas transportation and, increasingly, for water handling as well. As we continue to implement our plan, we are committed to maintaining our strong balance sheet and delivering shareholder value.”

Pipeline infrastructure is key to the gas companies operating in the Utica and Marcellus shale basins.

For EQM, the transaction will give exposure to fee-based gas gathering systems with growing cash flows, underpinned by long-term contracts.

The acquisition is expected to add 200,000 acres dedicated in core Marcellus and Utica development areas.

EQM COO Diana Charletta said: “With the ongoing natural gas development activity surrounding the Eureka system, we see significant value in leveraging our fast-growing water services business. 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 allowing us to facilitate new commercial opportunities to deliver innovative and cost-effective solutions for our customers.”

During the fourth quarter of 2018, the Eureka and Hornet pipeline systems averaged 1.6Bcf/d gathered volume.

The assets have also several interstate pipeline interconnects and offer access to four major processing plants.

Expected to take place in April, the completion of the acquisition is subject to the satisfaction of customary regulatory and other closing conditions.