EQT and Equitrans Midstream announced that they have entered into a definitive merger agreement to create a premier vertically integrated natural gas business with an initial enterprise value of over $35 billion. The combined company will be positioned to become a globally competitive energy giant. It will have the advantage of a peer-leading cost of supply and durable free cash flow in all price environments.
These are some of the financial benefits of the deal. First, it creates the first large-scale and integrated natural gas producer with an unrivaled low-cost structure that offers investors the best risk-adjusted exposure to natural gas prices. Secondly, it provides over 2,000 miles of irreplaceable pipeline infrastructure with extensive overlap and connectivity in EQT’s core area of operations. Plus, the combined company will have 27.6 Tcfe of proved reserves across approximately 1.9 million net acres with 6.3 Bcfe/d of net production and more than 8.0 Bcfe/d of gathering throughput across over 3,000 miles of pipeline.
This deal also unlocks upside to gas price volatility as a pro forma cost structure, thus reducing hedging requirements – positioning EQT shareholders for unmatched price upside. And the cost structure integration materially improves the economics of EQT’s remaining approximately 4,000 drilling locations, unlocking industry-leading terminal value. The symbiotic nature of the assets is expected to drive about $250 million of annual synergies.
Under the terms of the merger agreement, which were unanimously approved by the boards of both companies, EQT will buy Equitrans in an all-stock transaction. And each outstanding share of Equitrans common stock will be exchanged for 0.3504 shares of EQT common stock – representing an implied value of $12.50 per Equitrans share based on the volume weighted average price of EQT common stock for the 30 days ending on March 8, 2024.
As a result of the transaction, EQT’s existing shareholders are expected to own about 74% of the combined company, and Equitrans shareholders are expected to own approximately 26%.
The deal is expected to close during the fourth quarter of 2024, subject to required regulatory approvals and clearances, approval of the transaction by shareholders of both EQT and Equitrans, and other customary closing conditions. And the deal closing is contingent on FERC authorizing MVP to commence service. Upon the closing of the transaction, 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, Pennsylvania.
Guggenheim Securities acted as the lead financial advisor, and RBC Capital Markets was EQT’s financial advisor. Kirkland & Ellis is EQT’s legal counsel on the transaction. Barclays and Citi served as Equitrans’s financial advisors, and Latham & Watkins served as Equitrans’s legal counsel.
KEY QUOTES:
“Equitrans is the most strategic and transformational transaction EQT has ever pursued, and we see this as a once-in-a-lifetime opportunity to vertically integrate one of the highest quality natural gas resource bases anywhere in the world. 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. 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.”
– EQT President and CEO Toby Z. Rice
“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. 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.”
– Thomas F. Karam, Executive Chairman, Equitrans Midstream
