(Bloomberg) — EQT Corp., the most important U.S. pure fuel producer, agreed to accumulate a privately held competitor in a $5.2 billion deal to develop holdings within the prolific Marcellus shale.
The Pittsburgh-based driller will take over THQ Appalachia I LLC, a Tug Hill-operated firm that’s backed by Quantum Vitality Companions, in a money and fairness transaction, the corporate mentioned in a press release on Tuesday. The acquisition may also incorporate Tug Hill’s XcL Midstream LLC, which owns roughly 95 miles of fuel pipelines connecting to interstate programs.
It’s the newest in a collection of acquisitions made by EQT over the previous couple of years as the corporate seeks to consolidate holdings throughout the Marcellus within the northeast US. Led by Chief Government Officer Toby Rice, the corporate final 12 months purchased belongings from Alta Sources Growth LLC for about $2.9 billion. It additionally acquired Chevron Corp.’s belongings in Appalachia for $735 million in 2020.
The transfer has largely paid off as a world provide crunch has despatched pure fuel costs to the very best ranges in additional than a decade. Whereas the driller’s capability to revenue from the rally has been curbed by hedges in opposition to the potential for a fuel droop, the corporate continues to be set to generate document quantities of money from its operations whereas slashing debt and boosting returns to shareholders. Its shares have greater than doubled over the previous 12 months.
The $5.2 billion buy of Tug Hill belongings consists of $2.6 billion in money and about $2.6 billion in EQT widespread inventory, with Quantum set to turn out to be a “core” shareholder of EQT after the transaction is concluded.
EQT has additionally doubled its share buyback authorization to $2 billion and elevated its year-end 2023 debt discount purpose by 60% to $4 billion “because of much more confidence within the sustainability of our enterprise,” Rice mentioned within the assertion. The transaction will result in elevated free money circulate per share, decrease prices and lowered enterprise threat, based on the CEO.
The deal is predicted to shut by the fourth quarter, pending some circumstances.
RBC Capital Markets served as monetary adviser to EQT, and Kirkland & Ellis LLP is serving as EQT’s authorized counsel on the transaction, the assertion mentioned. J.P. Morgan Securities and Wells Fargo Securities served as monetary advisers to Tug Hill and XcL Midstream and Vinson & Elkins LLP is serving as authorized counsel to Tug Hill and XcL Midstream.
THQ Appalachia produces almost 800 million cubic ft of fuel a day in West Virginia, based on the assertion. The corporate has about 11 years of stock at upkeep capital ranges. EQT is predicted to provide the equal of 5.5 bcf a day this 12 months.
EQT shares fell 3.3% as of 4:40 p.m. after regular-trading hours in New York.
