23 June 2017

EQT to take over Rice Energy

Energy firm EQT is acquiring Rice Energy in a deal worth around USD 8,200 million to expand its natural gas business. The two New York Stock Exchange-listed companies, when merged, will become the largest natural gas producer in the US, according to the purchaser’s press release. The announcement comes as energy companies are pouring money into places like Pennsylvania, West Virginia and Ohio, with the US soon to be the largest natural gas exporter globally, Reuters reported.

Under the terms, EQT is paying in a mix of cash and shares and will assume about USD 1,500 million-worth of net debt and preferred equity in Rice Energy. With an implied value of USD 27.05 per share, the offer price represents a 37.4 per cent premium over the target’s close of USD 19.69 on 16th June, the last trading day prior to the bid being announced.

While the boards at both companies have given the green light, the merger remains subject to approvals from the US Department of Justice, Federal Trade Commission and shareholders.

Based in Canonsburg, Pennsylvania, Rice Energy is engaged in the acquisition and development of oil and natural gas assets in the Appalachian Basin. Through the deal, EQT is aiming to take over the target’s holdings in the Marcellus, Utica and Upper Devonian regions, where it already has a presence.

Most of Rice Energy’s acreage is next to EQT’s assets. This will allow the buyer to operate more efficiently by drilling horizontal wells. Furthermore, with the combined properties, EQT expects to up its average sales volume by 1,300 million to 3,600 million cubic feet equivalent per day in 2017.

As part of the deal, EQT is also getting hold of Rice Energy’s midstream assets. They include 92.0 per cent of Rice Midstream GP Holdings, which controls all of the general partner incentive distribution rights and 28.0 per cent of the limited partner interests in New York Stock Exchange-listed Rice Midstream Partners. In addition, EQT plans to transfer some of Rice Energy’s midstream properties, which are expected to yield about USD 130 million of earnings before interest, tax, depreciation and amortization next year, to its affiliate EQT Midstream Partners.

Commenting on the transaction, EQT’s president and chief executive Steve Schlotterbeck said: “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” He added: “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.”

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