EQT to Spin Off Midstream Biz

PITTSBURGH–(BUSINESS WIRE)–EQT Corporation (NYSE: EQT) today announced that its Board of Directors has unanimously approved a plan to separate its upstream and midstream businesses, creating a standalone publicly traded corporation (NewCo) that will focus on midstream operations. The separation is intended to qualify as tax-free to EQT shareholders for U.S. federal income tax purposes; and is expected to be completed by the end of the third quarter 2018. Under the separation plan, EQT 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, PA.

“The decision to build our midstream business in parallel with upstream growth has created one of the strongest midstream companies in the Appalachian Basin,” said James Rohr, EQT’s lead independent director. “We have taken many steps to highlight the value of our midstream assets through a series of transactions including, the initial public offering of EQM, midstream asset dropdowns to EQM, and the initial public offering of EQGP. This transaction represents a new chapter for our business as we unlock the value created during the past 10 years.”

Steve Schlotterbeck, EQT’s president and chief executive officer, said, “When we announced the Rice Energy acquisition, we committed to addressing the sum-of-the-parts discount in our shares. The Rice transaction accelerated the maturation of both our businesses, provided scale that significantly enhanced the standalone prospects of both companies, and positioned us to further enhance value through separation. We are now the largest natural gas producer in the U.S. – with a strong and strategic midstream system in the best natural gas basin in the country. We will complete the separation with urgency, consistent with our commitment to shareholders.”

Benefits of Separation

EQT believes that creating an independent midstream public company offers a number of benefits to the standalone businesses, including:

  • Pure-play companies providing a clear investment thesis
  • Visibility to attract a long-term investor base suited to each business
  • Capital structures aligned with cash flow risk/reward profiles
  • Dedicated management and boards focused on distinct strategic visions
  • Simpler and easier to understand financial reporting
  • More efficient allocation of capital
  • Enhanced potential for customer base expansion and organic growth
  • Investment grade ratings expected for both companies
  • More attractive equity currency and access to capital

Midstream plan of action prior to separation

EQT plans to pursue the following:

  • A drop-down of the retained midstream assets in an accretive transaction to EQT Midstream Partners, LP (NYSE: EQM)
  • A merger of EQM and Rice Midstream Partners LP (NYSE: RMP) in an accretive transaction
  • A sale of the RMP Incentive Distribution Rights (IDRs) to EQT GP Holdings, LP (NYSE: EQGP)

Under EQT’s plan, EQGP will retain the EQM IDRs, and EQGP and EQM will remain separate publicly traded entities after separation. EQT does not intend to modify its existing gathering and transmission contracts with EQM in connection with the separation. Additional details concerning the midstream transactions will be provided in the near future. Completion of the midstream related transactions will not be a condition to completion of the separation.

Competitive Strengths of EQT and NewCo


  • Largest natural gas producer in the United States
  • Industry leading cost structure
  • 680,000 core Marcellus acres & 65,000 core Ohio Utica acres
  • Inventory depth for sustained 10%-15% production growth
  • Averaging 13,600 foot laterals in southwestern PA in 2018
  • $2.3 – $2.8 billion of free cash flow over 2019 – 2023 (10% – 15% annual production growth)
  • Expect to be cash flow breakeven in 2019, with a focus on returning cash in 2020+


  • Natural gas gathering is third largest in the United States
  • Premier asset footprint in the Appalachian Basin
  • Stable and predictable cash flow profile
  • 16-year weighted average contract life
  • 60% of revenue generated from long-term firm reservation charges
  • 85% of revenue from investment grade counterparties
  • $4.8 billion 5-year projected organic growth capital
  • 246,000 acreage dedication in core Marcellus and 166,000 in core Ohio Utica
  • Mountain Valley Pipeline extends pipeline network into the southeast markets

Leadership Team

Upon completion of the separation, Steve Schlotterbeck will remain CEO of EQT and Jerry Ashcroft, senior vice president and president, midstream for EQT; and senior vice president and chief operating officer of EQM, will lead NewCo as chief executive officer.

Transaction Details

The proposed spin-off is subject to customary conditions, including receipt of a favorable opinion of legal counsel and/or a private letter ruling from the Internal Revenue Service with respect to the tax treatment of the transaction for U.S. federal income tax purposes, the effectiveness of a Form 10 registration statement to be filed with the Securities and Exchange Commission (SEC) for the shares of NewCo, and final approval and declaration of the spin-off dividend by the EQT Board of Directors.

Financial and Legal Advisors

In reaching its separation decision, the Board of Directors was advised by Guggenheim Securities, LLC, Tudor, Pickering, Holt & Co., and Wachtell, Lipton, Rosen & Katz.

2018 Annual Meeting

EQT will hold its 2018 annual meeting of shareholders on June 21, 2018 in Pittsburgh, PA. Accordingly, the window in which eligible EQT shareholders may nominate directors and/or propose other business in accordance with EQT’s bylaws will extend from February 21, 2018 until March 23, 2018. Any nominations or proposals must be made in compliance with EQT’s bylaws and applicable law.

Webcast Information

EQT will host a conference call with security analysts at 10:30 a.m. Eastern Time today. A brief Q&A session for security analysts will immediately follow the transaction discussion. Slides accompanying the prepared remarks are available on our website at ir.eqt.com. The conference call will be broadcast live via the EQT investor information page at ir.eqt.com, with a replay available for seven days following the call.

About Jerry Ashcroft

Jeremiah “Jerry” Ashcroft was appointed senior vice president, EQT Corporation; and president, midstream; and also senior vice president and chief operating officer for the general partner of EQM in August 2017. He was also elected as a member of the board of directors of the general partner of EQM.

Ashcroft has more than 15 years of experience in the oil, gas, and pipeline industries – and before joining EQT, he was chief executive officer of Gulf Oil L.P. Ashcroft has a distinguished military career with the United States Marine Corps and received a Bachelor of Science degree from the United States Naval Academy. Ashcroft has also held various roles of increasing responsibility at JP Energy Partners, Buckeye Partners, L.P., and Colonial Pipeline Company, L.P.

About EQT Corporation:

EQT Corporation is an integrated energy company with emphasis on Appalachian area natural gas production, gathering, and transmission. With nearly 130 years of experience and a long-standing history of good corporate citizenship, EQT is the largest producer of natural gas in the United States. As a leader in the use of advanced horizontal drilling technology, EQT is committed to minimizing the impact of drilling-related activities and reducing its overall environmental footprint. Through safe and responsible operations, EQT is helping to meet our nation’s growing demand for clean-burning energy, while continuing to provide a rewarding workplace and enrich the communities where its employees live and work. EQT owns the general partner interest and a 90% limited partner interest in EQT GP Holdings, LP, which owns the general partner interest, all of the incentive distribution rights, and a portion of the limited partner interest in EQT Midstream Partners, LP. EQT also owns the general partner interest, all of the incentive distribution rights, and a 28% limited partner interest in Rice Midstream Partners LP.

Visit EQT Corporation at www.EQT.com; and to learn more about EQT’s sustainability efforts, please visit https://csr.eqt.com.