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Can EQT Midstream Partners Gain Upward Momentum Now?

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Can EQT Midstream Partners Gain Upward Momentum Now? PART 1 OF 4

EQT-RICE Merger: How EQT Midstream Partners Could Benefit

EQT-Rice merger

In a press release on Monday, June 19, 2017, EQT Corporation (EQT), the sponsor for EQT Midstream Partners (EQM), announced its acquisition of Rice Energy (RICE) for $6.7 billion. The combined company is expected to become the largest natural gas producer in the United States. EQT will acquire all of Rice Energy’s upstream assets and retained midstream assets as well as a 92.0% interest in Rice GP Holdings, which owns the IDRs (incentive distribution rights) and GP (general partner) interest in Rice Midstream Partners (RMP).

EQT-RICE Merger: How EQT Midstream Partners Could Benefit

How EQM benefits

EQM, which provides natural gas gathering and transportation services to EQT and other third-party producers, can expect the retained midstream assets from EQT to fall after the merger is completed. The retained midstream assets are expected to generate $130.0 million of annual EBITDA (earnings before interest, tax, depreciation, and amortization) by the end of 2018. The merger is also expected to drive EQM’s organic expansion opportunities. There’s also the possibility of an RMP-EQM merger if EQT plans to simplify its organizational structure in the future.

EQT Midstream’s market performance

EQT Midstream’s shares rallied 3.8% following the merger announcement. At the same time, the Alerian MLP ETF (AMLP), which is comprised of 25 energy MLPs, fell 0.80%. EQT GP Holdings (EQGP), which owns the GP of EQM, rose 17.0% in a single trading session following the announcement.

EQM’s gain could also be attributed to Moody’s affirmation of the partnership’s rating of Ba1. Amol Joshi, Moody’s vice president, said in a press release, “EQT’s acquisition of Rice adds significant Marcellus midstream assets in Pennsylvania and Utica midstream assets in Ohio.” Joshi added, “While these assets will initially reside at EQT, we expect some or all of these assets to be owned by EQM over time potentially improving EQM’s credit profile depending on funding sources and EQM’s pro forma capital structure.”

Series overview

In this series, we’ll explore whether EQM can gain upward momentum from here on. We’ll look at its valuations and technical indicators, including moving averages. Then we’ll take a look at analyst ratings for the stock.

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