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EQT Corp 8-K Report, Material Agreement (Mar 3, 2020)

Filed March 3, 2020For Securities:EQT

Summary

This 8-K filing by EQT Corporation (EQT) announces a significant Gas Gathering and Compression Agreement (Global GGA) with EQM Gathering Opco, LLC, a subsidiary of EQM Midstream Partners, LP. This agreement, effective February 26, 2020, covers gas gathering services in the Marcellus and Utica Shales for EQT's production subsidiaries through December 31, 2035, with an initial minimum volume commitment of 3.0 billion cubic feet per day. Notably, the Global GGA includes provisions for substantial gathering fee relief for EQT, estimated at $270 million in the first year and $230 million in the second year after the Mountain Valley Pipeline (MVP) becomes operational. There are also provisions for potential cash bonus payments tied to natural gas prices and an option for EQT to receive a significant cash payment from EQM if the MVP's in-service date is delayed beyond January 1, 2022. In addition to the GGA, EQT also announced on March 3, 2020, the early results and upsizing of its tender offer for its 4.875% Senior Notes due 2021. The company increased the maximum principal amount of notes to be repurchased from $400 million to $500 million, indicating a proactive approach to managing its debt obligations. These announcements collectively signal EQT's strategic moves in managing its midstream infrastructure relationships and optimizing its capital structure.

Key Highlights

  • 1EQT entered into a long-term Gas Gathering and Compression Agreement (Global GGA) with EQM Opco for services in the Marcellus and Utica Shales, effective February 26, 2020.
  • 2The Global GGA includes an initial annual minimum volume commitment of 3.0 billion cubic feet per day for EQT's production subsidiaries.
  • 3The agreement provides for significant gathering fee relief for EQT, estimated at $500 million over the first two years after the Mountain Valley Pipeline (MVP) is in service.
  • 4EQT has the option to receive a $196 million cash payment from EQM if the MVP's in-service date is delayed beyond January 1, 2022.
  • 5EQT announced an upsizing of its tender offer for its 4.875% Senior Notes due 2021, increasing the maximum repurchase amount to $500 million.
  • 6The Global GGA has a long-term commitment through December 31, 2035, with automatic year-to-year renewals thereafter, providing operational certainty.
  • 7The agreement includes potential cash bonus payments to EQM contingent on Henry Hub natural gas spot prices exceeding certain thresholds after the MVP is in service.

Frequently Asked Questions

The Global GGA is a material definitive agreement for EQM Opco to provide gas gathering services to EQT's production subsidiaries in the Marcellus and Utica Shales. This agreement ensures EQT has the necessary infrastructure to transport its natural gas.

The MVP's in-service date is crucial as it triggers significant gathering fee relief for EQT, estimated at $270 million in the first year and $230 million in the second year post-in-service. It also influences potential cash bonus payments and EQT's option to receive a substantial cash payment if the MVP is delayed.

EQT announced an upsizing of its tender offer to repurchase these notes. The company increased the maximum principal amount it intends to purchase from $400 million to $500 million, indicating a strategy to reduce outstanding debt.

The Global GGA runs from February 26, 2020, through December 31, 2035, and will renew year-to-year thereafter unless terminated by either EQT or EQM Opco, providing a long-term operational framework.