EQT has closed the previously announced acquisition of Equitrans Midstream, aimed at creating a major vertically integrated natural gas enterprise in the US, with an initial enterprise value of more than $35bn.
The all-stock deal between the two American midstream firms was announced in March 2024.
Listed on the New York Stock Exchange (NYSE), EQT is a natural gas production company focused on the Appalachian Basin.
Equitrans Midstream is the parent entity of natural gas gathering company EQM Midstream Partners. The former specialises in gas transmission, storage, and gathering systems, supports natural gas exploration and production throughout the Appalachian Basin.
The enlarged EQT, following the acquisition, will own a pipeline infrastructure of over 3,218km to enhance connectivity within the company’s operational areas.
It will control 27.6 trillion cubic feet equivalent (Tcfe) of proved reserves across nearly 1.9 million net acres, with a net production rate of 6.3 billion cubic feet equivalent per day (Bcfe/d). The gathering throughput is projected to exceed 8Bcfe/d, facilitated by over 4,828km of pipeline.
Under the acquisition terms, each share of Equitrans Midstream will be exchanged for 0.3504 shares of EQT. This equates to an approximate value of $12.5 per Equitrans Midstream share, based on the volume-weighted average price of EQT common stock as of 8 March 2024.
Following the merger, EQT’s original shareholders will hold about 74% of the combined entity, with Equitrans Midstream shareholders owning approximately 26%.
The new company is expected to have an unlevered New York Mercantile Exchange (NYMEX) free cash flow breakeven price of around $2 per MMBtu, positioning it at the low end of the North American cost curve and enhancing its free cash flow generation potential.
EQT anticipates over $425m in annual synergies from the merger, which could further reduce its long-term free cash flow breakeven price.
The integration of Equitrans Midstream’s assets is expected to enhance the economics of EQT’s approximately 4,000 drilling locations and capitalise on increasing demand for natural gas both domestically and internationally.
EQT president and CEO Toby Rice said: “The early close resulted in nearly $150m of savings relative to our original forecast and brings forward our de-leveraging and synergy capture timetables.
“We are wasting no time unleashing our integration team, which has a successful track record of rapidly integrating three large-scale acquisitions over the past several years, to efficiently combine these organisations.
“This combination leaves EQT in a tremendously advantaged position to compete and win as we enter the global era of natural gas.”
Guggenheim Securities served as the lead financial adviser, with RBC Capital Markets also advising EQT. Kirkland & Ellis provided legal counsel to EQT. Barclays and Citi acted as financial advisers to Equitrans Midstream, with Latham & Watkins LLP offering legal counsel to Equitrans.
