EQT agrees to buy Rice Energy for $6.7 billion
June 19, 2017
Michael Bradwell
Observer Reporter
EQT Corp. said Monday it is buying Southpointe-based Rice Energy for $6.7 billion, making EQT the largest natural gas producer in the United States.
According to a news release from EQT, the two companies have a merger agreement under which EQT will acquire all of the outstanding shares of Rice common stock for $6.7 billion.
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 this year.
“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 .
Schlotterbeck noted that since the beginning of 2016, EQT has added more than 485,000 acres to its development portfolio, achieving significant scale in the core of the Marcellus.
“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,” said Rice Chief Executive Officer Daniel Rice IV.
As the vast majority of the acquired acreage is contiguous with EQT’s existing acreage position, EQT said it anticipates a 50 percent increase in average lateral lengths for future wells located in Greene and Washington counties. It noted that it will also complement the infrastructure footprint of EQT Midstream Partners, where growth opportunities are expected.
According to data provided by EQT, it is acquiring 187,000 core acres in the Marcellus; 64,000 in the Upper Devonian; 105,000 in the Pennsylvania and West Virginia Utica; and 65,000 in the Ohio Utica.
Already a leading producer in the Appalachian Basin, the Rice Energy acquisition will make EQT the largest natural gas producer in the United States.
With the acquisition, EQT’s 2017 estimated average sales volume will increase by 1.3 billion cubic feet per day to 3.6 Bcfe/d.
EQT will also obtain Rice’s midstream assets, including a 92 percent interest in Rice Midstream GP Holdings LP, which owns 100 percent of the general partner incentive distribution rights and 28 percent of the limited partner interests in Rice Midstream Partners LP, and the retained midstream assets currently held at Rice.
The retained midstream assets, which EQT intends to sell to EQM in the future, are expected to generate approximately $130 million of earnings before interest, depreciation and amortization in 2018.
The boards of directors of both companies have unanimously approved the transaction.
Completion of the transaction is subject to the approval of both EQT and Rice shareholders, as well as certain customary regulatory and other closing conditions.
Rice, which went public in January 2014, is headquartered in Southpointe. Last year, it completed a move to a new headquarters building in the Zenith Ridge section of Southpointe. The company had a 2017 drilling and completion budget that earmarked $1.035 billion, nearly double that of 2016, with $585 million allocated to Marcellus Shale activity in Washington and Greene counties, and $450 million allocated to Utica Shale activity in Belmont County, Ohio.
As of this spring, Rice employed more than 475 people.