PITTSBURGH--(BUSINESS WIRE)--Equitrans Midstream Corporation (NYSE: ETRN) and EQM Midstream Partners, LP (NYSE: EQM) today announced that EQM has entered into a definitive agreement with a fund managed by Morgan Stanley Infrastructure Partners to acquire a 60% interest in Eureka Midstream Holdings, LLC and a 100% interest in Hornet Midstream Holdings, LLC for total consideration of $1,030 million, comprised of approximately $860 million in cash and approximately $170 million of assumed pro-rata debt. The proposed acquisition is expected to close on or about April 15, 2019, subject to customary regulatory and other closing conditions.

“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,” said Thomas F. Karam, chief executive officer of EQM. “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. As we continue to implement our plan, we are committed to maintaining our strong balance sheet and to delivering shareholder value.”

“The Eureka team did a tremendous job in building out the system during the last few years and attracting a strong mix of producer customers,” added Diana M. Charletta, chief operating officer of EQM. “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.”

Asset Overview

Eureka Midstream is a 190-mile gathering header pipeline system in Ohio and West Virginia that services both dry Utica and wet Marcellus production. Hornet Midstream is a 15-mile, high-pressure gathering system in West Virginia that connects to the Eureka system.

Asset Highlights

• Averaged approximately 1.6 Bcf/d gathered volume during Q4 2018
• Minimum volume commitments (MVCs) of 0.8 Bcf/d and growing to 1.3 Bcf/d by 2021
• Volume mix of 67% dry gas and 33% wet gas
• Approximately 200,000 acres dedicated in core Marcellus and Utica
• Multiple producer customers with 17-year weighted average contract life
• Several interstate pipeline interconnects and access to four major processing plants
• Access to EQM system and downstream pipelines at Clarington, OH and Mobley, WV

Combined, the gathering system assets and complementary water services opportunities are expected to generate approximately $100 million of EQM EBITDA during the first twelve months. EQM forecasts that the acquired assets and corresponding water services will achieve greater than 20% annual EBITDA growth over the next several years. The transaction is expected to be neutral to EQM distributable cash flow over the first 12-months and accretive thereafter.

Financing

EQM will fund the acquisition with cash proceeds from the issuance of $1,100 million of newly issued Series A Convertible Preferred Units (Convertible Preferred Units). The financing is consistent with EQM’s leverage targets, and the Convertible Preferred Units issuance is expected to close simultaneously with the proposed acquisition close. EQM has entered into an agreement to sell the Convertible Preferred Units to lead investors consisting of funds managed by BlackRock, GSO Capital Partners, and Magnetar Capital; and to supporting investors The Carlyle Group and Foundation Infrastructure Partners in connection with Neuberger Berman Private Credit. The Convertible Preferred Units will receive quarterly cash distributions based on an 8.5% annual coupon. Two years after issuance, the Convertible Preferred Units will be convertible by the holders on a one-for-one basis into EQM Common Units and convertible by EQM, under certain circumstances. The Convertible Preferred Units will be priced at $48.77 per unit, a 20.0% premium to the 20-day volume weighted average price of the EQM Common Units, prior to agreement signing.

Advisors

Citi and Guggenheim Securities, LLC are acting as financial advisors and Latham & Watkins is acting as legal advisor to ETRN and EQM. Citi and Guggenheim Securities, LLC are also acting as joint placement agents for the Convertible Preferred Units issuance.

About Equitrans Midstream Corporation

Equitrans Midstream Corporation (ETRN) has a premier asset footprint in the Appalachian Basin and is one of the largest natural gas gatherers in the United States. With a rich 135-year history in the energy industry, ETRN was launched as a standalone company in 2018 and, through its subsidiaries, has an operational focus on gas gathering systems, transmission and storage systems, and water services assets that support natural gas producers across the Basin. ETRN is helping to meet America’s growing need for clean-burning energy, while also providing a rewarding workplace and enriching the communities where its employees live and work. ETRN owns the non-economic general partner interest and an approximate 60% limited partner interest in EQM.

For more information on Equitrans Midstream Corporation, visit www.equitransmidstream.com

About EQM Midstream Partners

EQM Midstream Partners, LP (EQM) is a growth-oriented limited partnership formed to own, operate, acquire, and develop midstream assets in the Appalachian Basin. As one of the largest gatherers of natural gas in the United States, EQM provides midstream services to producers, utilities, and other customers through its strategically located natural gas transmission, storage, and gathering systems, and water services to support energy development and production in the Marcellus and Utica regions. EQM owns approximately 950 miles of FERC-regulated interstate pipelines and approximately 2,200 miles of high- and low-pressure gathering lines.

For more information on EQM Midstream Partners, LP, visit www.eqm-midstreampartners.com