EQM Midstream Partners has agreed to acquire a 60% stake in the Eureka Midstream pipeline system and 100% in the Hornet Midstream gathering system in the US for a total sum of $1.03bn.
According to EQM, which is a subsidiary of Equitrans Midstream, the transaction amount is made up of nearly $860m to be paid in cash along with about $170m of assumed pro-rata debt. The stakes will be acquired from a fund managed by Morgan Stanley Infrastructure Partners.
Eureka Midstream is a 305.7km long gas gathering header pipeline system built across Ohio and West Virginia that serves dry Utica and wet Marcellus production.
Hornet Midstream, on the other hand, is a 24km, high-pressure gathering system built in West Virginia that connects to the Eureka Midstream pipeline.
The two assets averaged nearly 1.6 Bcf/d gathered volume during the fourth quarter of 2018 and are backed by minimum volume commitments (MVCs) of 0.8 Bcf/d which is expected to increase to 1.3 Bcf/d by 2021.
EQM chief operating officer Diana Charletta said: “With the ongoing natural gas development activity surrounding the Eureka system, we see significant value in leveraging our fast-growing water services business.
“We want to be the low-cost provider and partner of choice across all aspects of our business.
“This acquisition will help us achieve our goal by providing added scale and by allowing us to facilitate new commercial opportunities to deliver innovative and cost-effective solutions for our customers.”
The assets also have access to EQM system and downstream pipelines located at Clarington in Ohio and Mobley in West Virginia.
EQM said that the gathering system assets and complementary water services opportunities are expected to yield nearly $100m of EBITDA in the first twelve months. The company estimates the acquired assets and associated water services to achieve more than 20% annual EBITDA growth in the next several years.
EQM CEO Thomas Karam said: “This bolt-on acquisition, within our footprint, leverages our existing assets and core operating competencies and is the first step in executing our strategy to grow into a top-tier midstream company.
“These assets will complement EQM’s basin-leading gathering and transmission system, allowing us to continue being the low-cost provider for gas transportation and, increasingly, for water handling as well.”
The transaction, which is subject to regulatory approvals and other closing conditions, is anticipated to be completed by mid-April 2019.