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Dominion Midstream Acquires Questar Pipeline for $1.8B
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Dominion Midstream Partners, LP (DM - Free Report) announced that it expanded the natural gas storage and distribution business through the acquisition of Questar Pipeline from Dominion Resources, Inc. (D - Free Report) . The deal was valued at $1.725 billion, of which the partnership paid $823 million in cash, and issued $167 million of common units and $300 million of convertible preferred units to Dominion. Moreover, the partnership Questar Pipeline's outstanding debt of $435 million.
Planned DropDowns Continue
Dominion Midstream is a Delaware limited partnership formed by Dominion Resources in Mar 2014 in its efforts to create a portfolio of natural gas terminaling, processing, storage, transportation and related assets.
Note that on Oct 31, following the closure of the Dominion-Questar merger, Dominion announced the decision to drop down Questar Pipeline to the midstream partnership and utilize the net proceeds to lower its existing debt.
In Apr 2015, the partnership acquired Dominion Carolina Gas Transmission from Dominion for $495 million. This dropdown added nearly 1,500 miles of Federal Energy Regulatory Commission (FERC)-regulated interstate natural gas pipeline in South Carolina and southeastern Georgia to Dominion Midstream’s assets and became immediately accretive to its earnings.
How will Dominion Midstream Benefit?
The acquisition will add FERC-regulated natural gas transmission and storage assets owned by Questar Pipeline in Colorado, Utah and Wyoming to Dominion Midstream’s existing asset base. These high-quality assets will be immediate accretive to the partnership’s cash flow and support its cash distribution growth goal.
The asset dropdown will also provide Dominion Midstream with an alternative source of earnings to support growth and cash distribution rate, without another asset dropdown or additional equity, until the second half of 2018.
Price Movement
Over the last one year, Dominion Midstream has been underperforming the Oil and Gas Pipeline industry. The partnership’s units lost 9.8%, compared with the Zacks Categorized industry’s 23.4% gain.
When compared to the industry, the partnership’s unit returns were higher up to Apr 2016. The subsequent drop resulted from a persistently dismal in comparison to market expectations in the last three quarters.
We expect the strategic acquisition of Questar Pipeline to help the partnership to improve its performance going ahead.
Zacks Rank & Other Key Picks
Dominion Midstream currently has a Zacks Rank #2 (Buy). A couple of other favorably placed stocks in the same space include Azure Midstream Partners, LP and Transmontaigne Partners L.P. . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Azure Midstream’s earnings surpassed the Zacks Consensus Estimate by 288% in the preceding quarter. Its 2016 loss estimates narrowed to $2.00 from $3.51 in the last 60 days.
Transmontaigne Partners’ earnings surpassed the Zacks Consensus Estimate by 18.4% in the prior quarter. Its 2016 earnings estimates improved 5.3% to $1.90 in the last 60 days.
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Dominion Midstream Acquires Questar Pipeline for $1.8B
Dominion Midstream Partners, LP (DM - Free Report) announced that it expanded the natural gas storage and distribution business through the acquisition of Questar Pipeline from Dominion Resources, Inc. (D - Free Report) . The deal was valued at $1.725 billion, of which the partnership paid $823 million in cash, and issued $167 million of common units and $300 million of convertible preferred units to Dominion. Moreover, the partnership Questar Pipeline's outstanding debt of $435 million.
Planned DropDowns Continue
Dominion Midstream is a Delaware limited partnership formed by Dominion Resources in Mar 2014 in its efforts to create a portfolio of natural gas terminaling, processing, storage, transportation and related assets.
Note that on Oct 31, following the closure of the Dominion-Questar merger, Dominion announced the decision to drop down Questar Pipeline to the midstream partnership and utilize the net proceeds to lower its existing debt.
In Apr 2015, the partnership acquired Dominion Carolina Gas Transmission from Dominion for $495 million. This dropdown added nearly 1,500 miles of Federal Energy Regulatory Commission (FERC)-regulated interstate natural gas pipeline in South Carolina and southeastern Georgia to Dominion Midstream’s assets and became immediately accretive to its earnings.
How will Dominion Midstream Benefit?
The acquisition will add FERC-regulated natural gas transmission and storage assets owned by Questar Pipeline in Colorado, Utah and Wyoming to Dominion Midstream’s existing asset base. These high-quality assets will be immediate accretive to the partnership’s cash flow and support its cash distribution growth goal.
The asset dropdown will also provide Dominion Midstream with an alternative source of earnings to support growth and cash distribution rate, without another asset dropdown or additional equity, until the second half of 2018.
Price Movement
Over the last one year, Dominion Midstream has been underperforming the Oil and Gas Pipeline industry. The partnership’s units lost 9.8%, compared with the Zacks Categorized industry’s 23.4% gain.
DOMINION MIDSTR Price and Consensus
DOMINION MIDSTR Price and Consensus | DOMINION MIDSTR Quote
When compared to the industry, the partnership’s unit returns were higher up to Apr 2016. The subsequent drop resulted from a persistently dismal in comparison to market expectations in the last three quarters.
We expect the strategic acquisition of Questar Pipeline to help the partnership to improve its performance going ahead.
Zacks Rank & Other Key Picks
Dominion Midstream currently has a Zacks Rank #2 (Buy). A couple of other favorably placed stocks in the same space include Azure Midstream Partners, LP and Transmontaigne Partners L.P. . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Azure Midstream’s earnings surpassed the Zacks Consensus Estimate by 288% in the preceding quarter. Its 2016 loss estimates narrowed to $2.00 from $3.51 in the last 60 days.
Transmontaigne Partners’ earnings surpassed the Zacks Consensus Estimate by 18.4% in the prior quarter. Its 2016 earnings estimates improved 5.3% to $1.90 in the last 60 days.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>