Pittsburgh-based natural gas producer EQT Corp. announced Monday it is acquiring Equitrans Midstream Corp., the developer of the Mountain Valley Pipeline, for about $5.5 billion in stock.
EQT said the transaction has an initial enterprise value of more than $35 billion. Pending final approvals, EQT’s existing shareholders are expected to own approximately 74 percent of the combined company while Equitrans’ shareholders will own about 26 percent.
It is anticipated to be America’s first large-scale, integrated natural gas producer prepared to compete on the global stage.
The deal would bring back two companies that had been together until 2018, when an activist investor firm pushed for Equitrans to be spun off from EQT. Both companies’ operations are focused in the Appalachian Basin.
Equitrans, a midstream services company, is one of the biggest natural gas gatherers in the United States. It owns the Mountain Valley Pipeline, a nearly 400-mile natural gas pipeline that runs from West Virginia into Virginia, which is expected to be completed this year.
“As we enter the global era of natural gas, it is imperative for U.S. natural gas companies to evolve their business models to compete on the global stage against vertically integrated rivals,” EQT President and CEO Toby Rice said. “We have identified multiple, high confidence near-term synergies, with significant upside from future infrastructure optimization projects that we believe will drive material value creation for shareholders over time. Our modern, data-driven operating model, first-hand knowledge of Equitrans’ operations and successful track record integrating $9 billion of acquisitions, all of which included midstream assets, gives me tremendous confidence in EQT’s ability to seamlessly combine the two companies and capture synergies,” Rice added.
The transaction will provide more than 2,000 miles of irreplaceable pipeline infrastructure with extensive overlap and connectivity in EQT’s core area of operations. Overall, the combined company will have 27.6 Tcfe of proved reserves across 1.9 million net acres with 6.3 Bcfe/d of net production and more than 8.0 Bcfe/d of gathering throughput across some 3,000 miles of pipeline. It would also improve the economics of EQT’s remaining 4,000 drilling locations.
“This strategic transaction with EQT is the culmination of an exhaustive process conducted by the ETRN board to determine the best strategic path forward for our shareholders, employees, and stakeholders,” said Thomas Karam, executive chairman of Equitrans Midstream headquartered in Canonsburg, Pa. “Combining with EQT creates a premier vertically integrated natural gas business that is a game changer for the natural gas industry and Appalachian Basin. The transaction delivers full and fair value to ETRN shareholders and provides the opportunity to participate in future value growth as EQT executes on its strategy. We are proud of our employees who have worked hard to build one of the leading midstream companies in the Appalachian Basin. And we are excited for the future with EQT.”
The transaction is expected to close during the fourth quarter, subject to required regulatory approvals and clearances, shareholders approvals, and other closing conditions. Upon closing, three representatives from Equitrans will join EQT’s Board of Directors.
EQT’s executive management team will lead the combined company with headquarters remaining in Pittsburgh.