EQT Corp. announced this morning it is selling its Equitable Gas utility arm to Peoples Natural Gas for $720 million in cash.
The Downtown-based energy firm will receive some 200 miles of pipelines across Pennsylvania as part of the deal, a move that could significantly boost the firm's ability to transport gas it extracts from the Marcellus Shale.
EQT will also provide Peoples customers with Marcellus Shale gas under the contract.
EQT will acquire about 200 miles of transmission line from Peoples, expanding its pipeline network in Allegheny, Beaver, Indiana, Clarion and Westmoreland counties.
The transaction will make Peoples Natural Gas the largest natural gas utility in Western Pennsylvania, adding approximately 275,000 Equitable customers to its existing 420,000. The region's other utility, Columbia Gas, services about 415,000 customers.
Under the deal, Peoples and EQT will enter into a contract that requires EQT to supply about 35 billion cubic feet of Marcellus gas to Peoples per year.
The deal is subject to approval by the Pennsylvania Public Utility Commission, as well as regulatory bodies in West Virginia and Kentucky, as well as federal regulators and antitrust authorities. The companies expect the deal to close in the second half of 2013.
In an interview this morning, EQT Corp. Chief Executive Officer David Porges said he expects any job losses at Equitable Gas and Peoples to come at a senior or executive level where positions at the two companies are duplicated. He said he does not expect operational personnel, many of whom are part of unions, to be affected.
Mr. Porges said money raised from the sale will be directed toward increased drilling activity on leased land that hasn't been developed yet.
"We have a lot of land under lease," he said. "We have opportunities that are figuratively sitting on a shelf."
The firm has been outspending its cash flow by about $300 million per year for the past few years, in part because of the cost of drilling, he said. It costs about $6 million to drill a Marcellus well.
The announcement came together in the past 12 hours. Mr. Porges called the governors of Pennsylvania and West Virginia last night around 8 p.m. -- well after the markets closed -- to tell them the news.
Wall Street seemed to respond well to the news. EQT shares were up more than 4 percent about an hour after the market opened.
Erich Schwartzel: firstname.lastname@example.org or 412-263-1455.