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EQT Midstream Partners, LP (NYSE: EQM) and EQT Corporation (NYSE: EQT) today announced that EQT Midstream Partners has agreed to acquire EQT Corporation’s (EQT) wholly owned subsidiary, Sunrise Pipeline, LLC (Sunrise), for $507.5 million cash and $32.5 million of common and general partners units. EQT Midstream Partners (Partnership) also agreed to pay additional consideration of $110 million to EQT upon the effectiveness of a new transportation agreement with a third-party that the Partnership expects to become effective post-closing. In addition, the Partnership announced a $0.40 cash distribution per unit for the second quarter 2013, which represents a $0.03 or 8% increase over the first quarter 2013 cash distribution per unit.
Sunrise AcquisitionThe primary assets of Sunrise consist of: (i) 41.5 miles of 24-inch diameter FERC-regulated pipeline that parallels and interconnects with the segment of the Partnership’s transmission and storage system from Wetzel County, West Virginia to Greene County, Pennsylvania; (ii) the Jefferson compressor station in Greene County; and (iii) an interconnect with the Texas Eastern pipeline in Greene County. The Sunrise pipeline has existing throughput capacity of approximately 400 BBtu per day, all of which is subscribed under firm transmission contracts with a weighted-average remaining contract life based on contracted revenues of approximately 10 years as of June 30, 2013. EQT Energy, LLC (EQT Energy), EQT’s marketing affiliate, has entered into a firm contract for 305 BBtu per day of capacity. In addition, 95 BBtu per day of capacity has been contracted with third-parties. These contracts provide $44.3 million in annual firm reservation revenue and up to $0.7 million of annual firm usage revenue, if fully utilized.
Sunrise is currently expanding its Jefferson compressor station, which will provide approximately 550 BBtu per day of additional capacity. The Partnership will invest $30 million for the expansion, which is fully subscribed and expected to be in service by September 1, 2014. EQT Energy has entered into a precedent agreement for approximately 295 BBtu per day of firm capacity over a 10-year term, commencing on the date the expansion is placed in service, which results in $26.9 million of annual firm reservation revenue.