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Crestwood (CEQP) to Divest Marcellus Shale Assets for $205M

Crestwood Equity Partners LP CEQP is divesting its gathering and compression assets in the Marcellus shale play to Antero Midstream Corporation AM for $205 million.

The to-be-divested assets involve 72 miles of dry gas gathering pipelines and nine compressor stations, with 700 million cubic feet per day (MMcf/d) of compression capacity.

The assets comprise a legacy gas system acquired in 2012. The system’s current throughput is 200 MMcf/d, resulting in significant available growth capacity without major capital investment.

The acquisition aligns with Antero Midstream’s strategy to invest in infrastructure within the low-cost Marcellus shale play. It offers significant synergies that drive economic growth and lead to immediate free cash flow accretion.

Per the terms of the deal, Antero Midstream will obtain 425 undeveloped drilling locations and 120,000 gross dedicated acres, mainly in Harrison County of West Virginia. Beside this, the acquisition will boost the company’s compression capacity by 20% and gathering pipeline mileage by 15%.

In recent years, the to-be-divested assets were affected by Crestwood’s anchor-producer-focused development activity on the rich gas window of the southwest Marcellus shale. Thus, the assets have been on a natural field decline since 2017 and are non-core to Crestwood’s long-term growth strategy to be a leading midstream operator in the Williston, Delaware and Power River basins.

Crestwood will utilize the divestment proceeds to enhance its financial flexibility by reducing debt and undertaking opportunistic common unit repurchases. The transaction, subject to customary regulatory approvals, is expected to close in the fourth quarter of 2022.

Price Performance

Shares of Crestwood have underperformed the industry in the past six months. The stock has declined 3% against the industry’s 12.3% growth.

 


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Zacks Rank & Key Picks

Crestwood currently carries a Zack Rank #4 (Sell).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Phillips 66 PSX is the leading player in each of its operations like refining, chemicals and midstream in terms of size, efficiency and strengths. Phillips 66 has hiked its quarterly dividend to 97 cents per share, representing an increase of 5% from the prior quarter. This has resulted in the company’s 11th annual dividend hike since its inception in 2012.

Phillips 66 has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Value, Growth and Momentum. PSX is expected to see earnings growth of 184.6% in 2022.

EQT Corporation EQT is a pure-play Appalachian explorer, which is one of the largest natural gas producers in the United States. For 2022, it expects a free cash flow of $2.2-$2.5 billion, suggesting an increase from $934.7 million reported last year.

EQT Corp has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. The company currently has a Zacks Style Score of A for Momentum and B for Growth. EQT is expected to see earnings growth of 329.4% in 2022.


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EQT Corporation (EQT): Free Stock Analysis Report
 
Antero Midstream Corporation (AM): Free Stock Analysis Report
 
Phillips 66 (PSX): Free Stock Analysis Report
 
Crestwood Equity Partners LP (CEQP): Free Stock Analysis Report
 
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