EQT Corp. (EQT), a natural gas company based in the Appalachian region of the United States, signed an agreement with DCP Midstream Partners LP (DPM) and its sponsor DCP Midstream LLC, to form a gas processing and natural gas liquid (NGL) infrastructure joint venture. The joint venture is intended to provide facilities for the company and third party producers in the Marcellus and Huron shale areas of the basin, to accommodate rising output in the region.
 
Ownership of the project will be equally distributed among EQT and DCP Midstream. As the operator of the project, DCP holds 50% participating interest and plans to contribute about $200 million in cash. On the other hand, EQT will offer assets equivalent to its 50% stake, in the form of 170 million cubic feet per day (MMcf/d) natural gas processing plant and related NGL pipeline located in Southeast Kentucky serving the company’s Huron shale production. The cash contributed by DCP Midstream will fund the initial expansion of the facilities in the Marcellus and Huron.
 
The company expects to spend approximately $900 million in 2010 to drill wells in the Appalachian basin, including approximately 100 horizontal Marcellus shale wells and approximately 275 horizontal Huron/Berea shale wells.
 
Apart from building out needed sales capacity in the Marcellus, the deal provides EQT an opportunity to participate in the economics of natural gas processing while reducing the necessity to invest additional cash to fund expansion.
 
The venture is expected to close in the third quarter of 2010, subject to approvals, including board approvals from each party.
 
EQT is an Appalachian pure play with an integrated business model that enjoys an inherent near-the-market geographic advantage. With an industry-leading organic growth engine, the company’s focused management team drives attractive and sustained returns on equity and a peer-leading cost structure.
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