EQT and Equinor Strike Mega Deal: Swapping Onshore Assets in Pennsylvania

(Reuters) — EQT will sell 40% interest in its non-operated natural gas assets in northeast Pennsylvania to Equinor USA in exchange for Equinor's onshore asset in the Appalachian basin and $500 million in cash, the companies said on Monday.

Non-operating positions give holders a cut from the hydrocarbons sold without taking charge of drilling or other operations, although they must contribute their share of costs.

Natural gas prices have pummeled to three-year lows, forcing producers to curb output and spending on drilling activity.

Reuters reported last year that EQT was exploring a sale of a portfolio of minority stakes in wells in Pennsylvania's Marcellus shale formation.

"We plan to opportunistically divest the remaining portion of our non-operated assets in northeast Pennsylvania," EQT CEO Toby Rice said on Monday.

EQT's plan to exit the position comes as the company tries to accelerate cutting its $5.9 billion debt pile and boost shareholder returns.

"This (deal) also means that we have now fully exited all operated positions onshore U.S.," Philippe Mathieu, executive vice president for Exploration and Production International at Equinor, said.

EQT's Pipeline Expansion and LNG Deals

Last month, EQT made headlines with its all-stock acquisition of Equitrans Midstream, valued at approximately $14 billion, debt included. This move comes amid a challenging landscape marked by historically low gas prices, prompting companies to reassess their strategies.

Facing the ongoing global gas glut, EQT, known for its assertive consolidation efforts, is adjusting its production levels, with plans to curtail nearly 1 billion cubic feet per day (bcfpd) of natural gas output this month. The company's proactive stance reflects the broader industry trend of scaling back production and reducing drilling activity to adapt to market conditions.

By integrating Equitrans Midstream into its operations, EQT aims to optimize its margins by gaining better control over pipeline costs and processing. This strategic alignment is particularly crucial as EQT seeks to capitalize on global LNG export markets, positioning itself to leverage higher prices worldwide.

Key to this acquisition is the addition of over 2,000 miles of pipelines, which will enhance EQT's capacity to produce and transport natural gas more efficiently. Jeremy Knop, EQT's finance chief, emphasized the importance of cost efficiency, emphasizing that staying competitive requires maintaining low operating costs.

Moreover, EQT's preliminary agreements with LNG developers Commonwealth LNG, Glenfarne Energy Transition, and Energy Transfer are strategic moves that pave the way for future international market access. These partnerships underscore EQT's commitment to diversifying its revenue streams and expanding its global footprint in the LNG sector.

Equitrans Midstream's role as the lead partner and operator of the Mountain Valley natural gas pipeline adds another dimension to the deal. Despite encountering regulatory and legal challenges since construction began in 2018, this pipeline represents a significant asset, especially given its strategic location in the U.S. Northeast.

The deal, which is expected to close in the fourth quarter, will bring back business that EQT spun off in 2018. EQT shareholders will own about 74% of the combined company and Equitrans shareholders will own the rest.

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