* To get 200 miles of pipelines, 4 storage pools
* Expects to get regulatory approvals by end 2013
* Cuts annual dividend to 12 cents per share from 22 cents
Dec 20 Appalachian natural gas company EQT Corp
said it will sell its distribution business to privately
held Peoples Natural Gas for about $720 million in cash to focus
on its growing production and pipeline businesses.
EQT will also receive certain pipeline assets, located in
Pennsylvania's Marcellus shale field, and commercial
arrangements, which are expected to generate at least $40
million in earnings before interest, taxes, depreciation and
amortization per year (EBITDA).
"We view the transaction positively as it creates a cleaner
story for investors, funds capex gap in 2014 while allowing for
acceleration in the Marcellus," analysts at Wells Fargo
Securities wrote in a note.
The Marcellus assets include about 200 miles of regulated
transmission pipelines, as well as four storage pools, which
have a total capacity of 15.1 billion cubic feet of gas.
EQT also entered into long-term contracts for gas supply,
transportation and storage services with Peoples Gas, a unit of
SteelRiver Infrastructure Fund.
"We read total proceeds as closer to $1.1 billion, or well
above our modeled $685 million in net asset value," Robert W.
Baird & Co analyst Michael Hall wrote in a note.
EQT has moved away from being an integrated gas company
through a series of acquisitions in the last two years. It sold
its only processing plant and a pipeline in 2011 and took its
master limited partnership, EQT Midstream Partners LP,
public earlier this year.
The company is also looking to sell its coal bed methane
acreage in Virginia and raise capital to develop its vast Huron
asset in Kentucky that is rich in natural gas liquids.
Analyst Hall said there could be a potential deal around the
company's Huron gas field, perhaps an upstream MLP, in the next
The company said it would cut its annual dividend to 12
cents per share from 22 cents per share, effective January.
"We would argue the greater proceeds, faster timing on the
sale, and future drop-down potential of the $40 million in
midstream EBITDA far outweigh the dividend reduction," Hall
The deal to sell Equitable Gas requires approvals from the
Federal Energy Regulatory Commission and from regulators in
Pennsylvania, West Virginia, and Kentucky, areas served by the
gas utility. It owns 4,000 miles of pipelines and provides
natural gas distribution services to roughly 275,000 customers.
EQT expects to receive the approvals by the end of 2013.
Lazard Freres & Co LLC advised EQT.
EQT's shares were up 4 percent at $59.06 in early trade on
Thursday on the New York Stock Exchange. The stock has risen 4
percent this year.