EQT Midstream Partners LP (NYSE: EQM) has entered into an agreement to acquire the Jupiter natural gas gathering system (Jupiter) from EQT Corp.(NYSE: EQT) for $1.18 billion, of which $1.121 billion will be paid in cash and $59 million will be paid in common and general partner units.
The Jupiter system was designed and constructed to gather EQT’s Marcellus production in portions of Greene and Washington counties, P. The Jupiter assets consist of approximately 35-miles of natural gas gathering pipeline and two compressor stations with approximately 21,300 horsepower of compression. The Callisto compressor station has 150 MMcf per day of compression capacity and the Jupiter compressor station has 75 MMcf per day of compression capacity. Jupiter has total pipeline capacity of 970 MMcf per day and has six interconnects with the Partnership’s transmission and storage system.
The partnership will complete several expansion projects related to Jupiter during 2014 and 2015. The 2014 expansions involve the addition of 350 MMcf per day of compression capacity and the installation of gathering pipelines. The 2014 capital expenditures are forecasted to cost $106 million and the compression is expected to be placed into service in the fourth quarter of 2014. The 2015 expansions involve the addition of 200 MMcf per day of compression capacity and the installation of gathering pipelines. The 2015 capital expenditures are forecasted to cost $76 million and the compression is expected to be placed into service in the fourth quarter of 2015.
The Jupiter acquisition is expected to be immediately accretive to the partnership’s distributable cash flow per unit. The Jupiter assets are supported by a gathering agreement with EQT that includes 10-year firm capacity reservation commitments on the available compression capacity. The compression capacity is currently 225 MMcf per day and is anticipated to grow to 775 MMcf per day by the end of 2015. Upon completion of the expansion projects, revenues generated under the firm reservation charges are forecasted to be approximately $173 million annually. EQT will also pay a per unit fee on any volumes above the contracted compression capacity. The partnership forecasts revenues associated with Jupiter to be approximately $130 million for the full-year 2014 and $160 million in 2015. ThepPartnership forecasts ongoing operating expenses associated with Jupiter, excluding depreciation and amortization, to be approximately $20 million for the full-year 2014. After placing the expansion projects into service, the Partnership expects ongoing operating expenses, excluding depreciation and amortization, to be approximately $28 million per year. The Partnership also expects ongoing maintenance capital expenditures related to Jupiter to be less than $2 million per year.
Pittsburgh-based EQT currently holds approximately 48,000 net acres surrounding Jupiter, including approximately 31,000 undeveloped net acres. As of March 31, 2014, 206 Marcellus wells and 9 Upper Devonian wells have been drilled in the Jupiter service area. The average daily gathered volume in the first quarter of 2014 from Jupiter was approximately 595 MMcf per day.
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