EQT Corporation is celebrating a significant financial victory today, as its stock price climbs following the announcement of a substantial deal with Blackstone Credit & Insurance (BXCI). The two companies have entered into a definitive agreement to create a new midstream joint venture, injecting a substantial boost into EQT’s financial standing and signaling confidence in the energy sector.
The deal involves BXCI providing EQT with $3.5 billion in cash in exchange for a non-controlling equity stake in the joint venture. This valuation places the new venture at approximately $8.8 billion, representing a robust 12x EBITDA multiple. This strategic move provides EQT with a highly accretive capital solution, optimizing its financial structure and bolstering its growth prospects.
This isn’t just about immediate financial gains; it’s a strategic play for long-term growth. EQT retains rights to crucial growth projects linked to the contributed assets, most notably the planned expansion of the Mountain Valley Pipeline and the MVP Southgate project. These projects represent significant future revenue streams, further solidifying EQT’s position in the market.
EQT plans to use the proceeds from the transaction to strategically reduce its debt load. The plan is to decrease its term loan, revolving credit facility, and redeem or tender senior notes. Coupled with the recent sale of its remaining non-operated assets in northeast Pennsylvania, EQT projects to end 2024 with approximately $9 billion in net debt – a substantial reduction.
EQT’s leadership is enthusiastic about the partnership and its implications. EQT President and CEO Toby Z. Rice highlighted the “ultra-high-quality nature” of EQT’s regulated midstream assets, emphasizing their service to one of the fastest-growing power demand regions in the United States, secured by long-term contracts with leading utilities. He further emphasized the deal’s preservation of the benefits of the Equitrans acquisition, securing long-term value from synergy and growth projects. The partnership with Blackstone opens doors to explore additional strategic opportunities across Blackstone’s extensive portfolio in energy, power, and digital infrastructure.
Jeremy Knop, EQT’s Chief Financial Officer, added that the partnership with Blackstone, a leader in corporate capital solutions, resulted in a “tailor-made equity financing solution at a price significantly below EQT’s equity cost of capital.” He emphasized the company’s commitment to debt reduction, stating that the announced divestitures—totalling $5.25 billion in projected cash proceeds—exceed their initial target and were achieved ahead of schedule. This speaks volumes about EQT’s effective financial management and strategic planning.
The transaction is subject to customary closing adjustments, regulatory approvals, and clearances, with an expected closing date in the fourth quarter of 2024. Investors interested in gaining exposure to EQT can explore options like the Invesco S&P 500 Equal Weight Energy ETF (RSPG) and the First Trust Natural Gas ETF (FCG).
The market has reacted positively to the news, with EQT shares experiencing a premarket surge of 3.22%, reaching $47.40 at last check. This deal firmly positions EQT for continued growth and success in the dynamic energy sector.
