The deal reunites Equitrans Midstream Corp. with EQT in an all-stock deal that pays a roughly 12% premium for the infrastructure company. (Source: Shutterstock.com)
Editor's note: This article has been updated with comments from EQT President and CEO Toby Rice.
E&P EQT Corp. and Equitrans Midstream Corp. have entered into a definitive merger agreement reuniting the two companies in an all-stock deal worth roughly $5.45 billion, according to a March 11 press release.
The companies said the deal creates the U.S.’ only large-scale, vertically integrated natural gas company prepared to “compete on the global stage,” according to EQT — an echo of the rationale Chesapeake Energy cited in its $7.4 billion merger announcement in January with Southwestern Energy.
Under the terms of the merger agreement, each outstanding share of Equitrans common stock will be exchanged for 0.3504 shares of EQT common stock, representing an implied value of $12.50 per Equitrans share based on the volume weighted average price of EQT common stock for the 30 days ending on March 8. The transaction suggests a 12% premium over Equitrans’ March 8 closing price of $11.16.
After the deal, EQT shareholders would own 74% of the combined company and Equitrans shareholders the remaining 26%.
EQT said that when complete, the combined company’s enterprise value would exceed $35 billion and add more than 2,000 miles of critical pipeline infrastructure with “extensive overlap with EQT's core upstream operations and existing midstream assets.”
On a March 11 call to discuss the transaction, EQT President and CEO Toby Z. Rice said its upstream acquisition activity has had a common theme.
“Each acquisition we’ve done included midstream ownership which was by design as we recognized early on the strategic value associated with owning integrated midstream infrastructure,” he said. “Pro forma for Equitrans, approximately 90% of our operated production will flow through EQT owned midstream assets creating unrivaled margin enhancement relative to the rest of the industry. This vertical integration positions EQT as the lowest cost natural gas producer in the United States with a pro forma long term cash flow breakeven price of less than $2 per MMbtu.”
The combined company would also boast 27.6 Tcfe of proved reserves across about 1.9 million net acres with 6.3 Bcfe/d of net production and more than 8 Bcfe/d of gathering throughput across 3,000 miles of pipeline. EQT is the largest U.S. natural gas producers.
The companies said the merger also creates $250 million in annual synergies, including lower financial and corporate costs; uptime and production optimization; and reduced capital and operating costs. The companies have identified an “upside pathway” to another $175 million in additional yearly synergies, the press release said.
The deal would reunite the two companies after they separated in 2018. Rice said Equitrans is the most strategic and transformational transaction EQT has ever pursued. “We see this as a once in a lifetime opportunity to vertically integrate one of the highest quality natural gas resource bases anywhere in the world.”
“As we enter the global era of natural gas, it is imperative for U.S. natural gas companies to evolve their business models to compete on the global stage against vertically integrated rivals,” Rice said. “We have identified multiple, high confidence near-term synergies, with significant upside from future infrastructure optimization projects that we believe will drive material value creation for shareholders over time.”
The transaction is expected to close during fourth-quarter 2024. The transaction’s closing is contingent on Federal Energy Regulatory Commission authorizing the Mountain Valley Pipeline to commence service.
The deal also requires regulatory approvals and clearances, approval of the transaction by shareholders of both EQT and Equitrans and other customary closing conditions.
Guggenheim Securities LLC acted as lead financial adviser and RBC Capital Markets LLC acted as a financial adviser to EQT.
Kirkland & Ellis LLP is serving as EQT's legal counsel on the transaction. Barclays and Citi served as financial advisers to Equitrans, and Latham & Watkins LLP is serving as legal counsel to Equitrans.
Recommended Reading
Occidental Temporarily Reduces Warrants Price to Raise $1.6B
2025-03-03 - Occidental Petroleum’s offer to warrant-holders at a reduced exercise price of $21.30 would raise $1.6 billion, the company said.
Dividends Declared Week of Feb. 24
2025-03-02 - As 2024 year-end earnings wrap up, here is a compilation of dividends declared from select upstream and midstream companies.
Q&A: Patterson’s OFS Perspective on the Shale Boom, Pandemic and Current Upswing
2025-02-27 - Former Basic Energy Services CEO Roe Patterson details his perspective on the shale boom and the lessons learned to get back to the current upswing in the industry.
2025 Pinnacle Award: Christine Ehlig-Economides is a Pioneer in the Field and Classroom
2025-02-27 - University of Houston petroleum engineering professor Christine Ehlig-Economides has left an indelible mark on the industry and blazed a trail for women.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.