Bloomberg News

EQT Evaluates Pipeline Venture, Partnership Versus Spinoff

October 27, 2011

(Updates with closing share price in sixth paragraph.)

Oct. 27 (Bloomberg) -- EQT Corp., the Appalachian producer with properties in Pennsylvania and West Virginia, said it’s considering forming a joint venture or master limited partnership with its natural-gas pipeline and storage business.

The company sees more benefit in retaining control of the assets rather than selling or spinning them off into a separate company, said Chief Executive Officer David Porges on a conference call with analysts and investors today.

EQT, based in Pittsburgh, would be able to raise capital for its core oil-and-gas business with a partnership or joint venture, which wouldn’t be the case if the company spun off the assets to shareholders, Porges said.

Investors were disappointed that they didn’t get a clearer answer about EQT’s plans for its pipeline operations, also known as its midstream business, said Scott Hanold, an analyst at RBC Capital Markets in Minneapolis.

“There was a lot of anticipation built into the stock for some more definite decision on restructuring of the midstream business at EQT,” said Hanold, who has an “outperform” rating on EQT shares and owns none. “The concern now is that it may take longer to get this done.”

EQT fell 4.2 percent to $64.35 at the close of trading in New York after plunging as much as 8.5 percent earlier. Before today, the stock had climbed 50 percent this year.

Marcellus Production Rise

EQT has seen rising output from the Marcellus Shale, which accounted for about 44 percent of its production sales volumes, compared with 19 percent in the third quarter of 2010.

Porges said the company wants to reach a decision on its pipeline business around the end of the year, with a goal of implementing a plan next year to avoid diverting capital from exploration and production projects. EQT doesn’t want to make any decisions that would preclude other structural alternatives, he said.

EQT has started to learn more about master limited partnerships and has had discussions with possible joint-venture partners, Porges said.

Earlier today, EQT said net income surged to $178.9 million, or $1.19 a share, in the third quarter from $36.5 million, or 24 cents, a year earlier as production sales volumes rose 51 percent. Excluding a gain from an asset sale, EQT earned about 45 cents a share, which exceeded by 2 cents the average of 18 analysts’ estimates compiled by Bloomberg.

--Editors: Susan Warren, Jessica Resnick-Ault

To contact the reporter on this story: Edward Klump in Houston at eklump@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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