EQT, an American natural gas production company, has signed a cash and stock deal worth $5.2bn to acquire the upstream assets of THQ Appalachia I (Tug Hill) and the gathering and processing assets of THQ-XcL (XcL Midstream).
The consideration is made up of $2.6bn in cash and nearly $2.6bn worth of shares of EQT.
XcL Midstream and Tug Hill, which operate in the Appalachia Basin, are backed by equity commitments from funds managed by private equity firm Quantum Energy Partners.
EQT president and CEO Toby Rice said: “The acquisition of Tug Hill and XcL Midstream checks all the boxes of our guiding principles around M&A, including accretion on free cash flow per share, NAV per share, lowering our cost structure and reducing business risk, while maintaining an investment grade balance sheet.
“The valuation metrics are compelling and accretion from the deal should lower our NYMEX free cash flow breakeven price by approximately $0.15 per MMBtu, which gives us greater free cash flow durability through the cycle.”
From Tug Hill, EQT will be adding nearly 800 million cubic feet of natural gas equivalent per day (MMcfe/d) in the core of southwest Appalachia. The production comes from 90,000 net acres, which are said to offset the existing core leasehold of EQT in West Virginia.
Through XcL Midstream, EQT will add nearly 153km of owned and operated midstream gathering systems that are said to be connected to all major long-haul interstate pipelines in southwest Appalachia.
The midstream part of the deal also gives the natural gas producer one billion cubic feet equivalent (Bcfe/d) rich gas trunkline and 3.5Bcfe/d lean gas trunkline having 600MMcf/d of compression capacity.
Also included in the deal are the 225MMcf/d Clearfork processing plant and 20,000 barrels of oil equivalent (Bbls/d) of condensate stabilisation.
Tug Hill and XcL Midstream CEO Michael Radler said: “I am very proud of the Tug Hill and XcL Midstream teams and the amazing job they have done in building premier upstream and midstream companies in the heart of southwest Appalachia.
“Quantum has been a great partner and stood beside us as we built these companies over the last decade. People are what make companies great, and EQT, Tug Hill, XcL Midstream and Quantum have great people with shared values.”
The deal, which is subject to the meeting of customary closing conditions, is anticipated to close in Q4 2022.
