EQT Announces it Will Split Into Two Companies

EQT Corporation (NYSE: EQT) announced that it plans 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 US federal income tax purposes and is expected to be completed by the end of the third quarter 2018.

As quoted in the press release:

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.

James Rohr, lead independent director, commented:

The decision to build our midstream business in parallel with upstream growth has created one of the strongest midstream companies in the Appalachian Basin. 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.

Click here to read the full EQT Corporation (NYSE: EQT) press release.