EQT Corporation and Rice Energy Inc. have entered into a definitive merger agreement under which EQT will acquire all of the outstanding shares of Rice Energy common stock for total consideration of approximately $6.7 billion – consisting of 0.37 shares of EQT common stock and $5.30 in cash per share of Rice common stock. EQT will also assume or refinance approximately $1.5 billion of net debt and preferred equity. The transaction is expected to close in the fourth quarter of 2017, subject to customary closing conditions.
Under the terms of the agreement, EQT will also obtain Rice Energy’s midstream assets, including a 92% interest in Rice Midstream GP Holdings LP. The retained midstream assets, which EQT intends to sell to EQT Midstream Partners in the future through drop-down transactions, are expected to generate approximately $130 million of earnings before interest, tax, depreciation and amortization in 2018.
“This transaction brings together two of the top Marcellus and Utica producers to form a natural gas operating position that will be unmatched in the industry,” said Steve Schlotterbeck, EQT’s president and chief executive officer. “Rice has built an outstanding company with an acreage footprint that is largely contiguous to our existing acreage, which will provide substantial synergies and make this transaction significantly accretive in the first year. Since the beginning of 2016, we have added more than 485,000 acres to our development portfolio and have achieved significant scale in the core of the Marcellus. We will now shift our focus from acquisitions to integration as we work to drive higher capital efficiency through longer laterals; reduce per unit operating costs through operational and G&A synergies; improve our sales portfolio by expanding access to premium markets; and deliver increased value to our shareholders.”
As the vast majority of the acquired acreage is contiguous with EQT’s existing acreage position, the company anticipates a 50% increase in average lateral lengths for future wells located in Greene and Washington Counties in Pennsylvania. This same land synergy also complements the infrastructure footprint of EQT Midstream Partners, LP, where growth opportunities are expected through drop-downs and additional organic projects. Already a leading producer in the Appalachian Basin, this acquisition will make EQT the largest natural gas producer in the United States.
“Natural gas is the key to a cleaner energy world; and the combination of Rice and EQT – two of the United States’ largest, lowest-cost, and most responsible natural gas producers – creates an unparalleled leader in shale gas development that will benefit the environment and our shareholders for many decades to come,” Daniel J. Rice IV, chief executive officer, Rice Energy, said.