EQT Midstream Partners (EQM) Assigned 'BBB-' Rating by S&P

Standard & Poor's Ratings Services said today it assigned its 'BBB-' issuer credit rating to EQT Midstream Partners L.P. (NYSE: EQM), an MLP focused on developing midstream energy assets in the Marcellus Shale. The outlook on the rating is stable.

"The partnership's 'fair' business risk profile reflects the stable cash flows coming from long-term fee-based contracts and customer relationship with EQT Corp., which represents most of the partnership's cash flow," said Standard & Poor's credit analyst Michael Grande.

This is partially offset by EQT Midstream's moderate size and limited asset and geographic diversity. The partnership's "significant" financial risk profile reflects conservative financial measures, as well as the MLP structure that strongly motivates EQT Midstream to pay out most of its cash flow after maintenance capital spending to unitholders each quarter.

We assess EQT Midstream's stand-alone credit profile to be 'bb' and notch its rating up to 'BBB-' to reflect its strategic importance to parent EQT Corp. Our ratings approach reflects the partnership's close ties with EQT Corp., which owns 100% of the general partner and a 34% limited partner interest in EQT Midstream. It is also by far EQT Midstream's most significant customer, accounting for about 85% of revenue. Furthermore, we believe EQT Corp. will continue to use EQT Midstream as a funding source to support its drilling program in the Marcellus Shale, as EQT Corp. monetizes a sizable portion of additional gathering assets. Although not absolute, we believe EQT Corp. would provide some support to the partnership if it were under stress or was unable to access the capital markets.

The outlook on EQT Midstream is stable and reflects the outlook on EQT Corp. EQT Corp.'s stable outlook reflects our expectation that the company will continue to focus on aggressively expanding its E&P operations in the Marcellus Shale while maintaining strong financial measures such as FFO to debt of at least 50%.

We would lower EQT Midstream's ratings if we lowered EQT Corp.'s rating. We could lower ratings if the EQT Corp.'s financial performance weakens such that expected FFO to debt declines below 45% with no near-term remedy. This could occur if natural gas prices fell below $3.50 per million Btu for a prolonged period without a compensating reduction in capital spending. Separately, if our view of EQT Midstream's strategic link with EQT Corp. were to deteriorate, we could lower EQT Midstream's rating closer to its stand-alone rating.

EQT Midstream's rating would only improve if we raise EQT Corp.'s rating. We could raise ratings on EQT Corp. if the company maintains more conservative financial measures such as FFO to debt above 60% and debt to EBITDA below 1.5x.

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