EQT buys up Rice Energy for $6.7 billion in company’s biggest ever deal

EQT deal makes company largest US natgas producer

EQT Corp said on Monday it is buying Rice Energy for $6.7 billion, in a deal that would make EQT the biggest natural gas producer in the United States.

The Pittsburgh-based oil and gas company says this deal is the firm’s largest as it looks to expand its natural gas business.

US energy firms are currently pumping money into gas-rich states like Pennsylvania, West Virginia and Ohio at a time when the United States hopes to become the world’s largest gas exporter.

Following the announcement, Rice Energy’s shares jumped almost 27 per cent to $24.95 in afternoon trading, but remained below the $27.05 per share offered by EQT.

EQT’s shares fell 7.6 per cent in Monday trading.

According to Reuters, the deal would put EQT-Rice ahead of Exxon Mobil Corp as the largest gas producer in the United States.

“EQT appears to be empire building,” analysts at Mizuho said in a report.

Mizuho analysts say they expect EQT to begin monetizing Rice’s midstream assets by dropping them down to EQT Midstream Partners.  The move could raise $1.3 billion.

The company said it will be able to drill longer horizontal wells in Pennsylvania after the deal is complete because most of the land acquired is next to where EQT already drills or owns land.

According to Dallas Salazar, CEO of energy consulting firm Atlas Consulting, the deal will benefit EQT because the company “is a decade behind in fracking technology used by industry leaders in Marcellus/Utica.”

Salazar says Rice Energy “offers a lot of what it needs.”

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EQT says the deal will increase its 2017 average sales volume by 1.3 billion cubic feet equivalent per day (bcfe/d) and core acres in the Marcellus field by 187,000 to 670,000.

As well, the purchase also gives the company access to Rice Energy’s midstream asset, including a 92 per cent share in Rice Midstream GP Holdings.

EQT says it will take on $1.5 billion in debt.

According to the company, Rice Energy shareholders will receive $5.30 per share in cash and 0.37 EQT shares for each share they hold.

Calculations by Reuters show the offer means a share price of $27.05 per Rice Energy share, representing a premium of 37.4 per cent to the stock’s Friday closing price.