Pennsylvania natural gas, energy companies close $5.4B merger deal

Pittsburgh-based independent natural gas production company EQT Corp. has closed on its deal to buy back Mountain Valley Pipeline operator Equitrans Midstream Corp. in an all-stock deal worth $5.4 billion.

“We are excited to complete this highly strategic transaction significantly ahead of our original timeline and welcome both Equitrans employees and shareholders to EQT,” said EQT President and CEO Toby Rice. “The early close resulted in nearly $150 million of savings relative to our original forecast and brings forward our de-leveraging and synergy capture timetables.”

In November 2018, EQT bowed to pressure from activist investors and split itself into two companies: EQT Corp. and Equitrans Midstream. The now-closed merger, first announced on March 10, brings the two companies together again, and as of July 22, Canonsburg, Pa.-based Equitrans Midstream has become a wholly owned subsidiary of EQT that’s now named The Midstream Company LLC.

In turn, EQT now has control over the natural gas transporter’s Mountain Valley Pipeline, which on June 11 received authorization from the Federal Energy Regulatory Commission to begin operations.

With a vast supply of natural gas from Marcellus and Utica shale production, the Mountain Valley Pipeline is 303 miles long and can move up to 2.0 billion cubic feet per day of natural gas from Wetzel County, W.V., to an interconnection with Transcontinental Gas Pipeline’s compressor station in Pittsylvania County, Va.

The Mountain Valley Pipeline has signed long-term agreements with multiple shippers for the full capacity of the pipeline for at least 20 years from the in-service date, and the pipeline will enable its shippers to access markets in the Northeast, Mid-Atlantic, and Southeast.

The EQT merger creates a large-scale, vertically integrated natural gas business, and the combined company is projected to have an unlevered NYMEX free cash flow breakeven price of roughly $2.00 per Metric Million British Thermal Unit (MMBtu), which is at the low end of the North American cost curve and ensures robust free cash flow generation through all parts of the commodity cycle, according to EQT.

“We are wasting no time unleashing our integration team, which has a successful track record of rapidly integrating three large-scale acquisitions over the past several years, to efficiently combine these organizations,” Rice said. “This combination leaves EQT in a tremendously advantaged position to compete and win as we enter the global era of natural gas.”

EQT, which has approximately 4,000 drilling locations, has identified more than $425 million of annual synergies associated with the combination that, upon realization, could drive even further downside to EQT’s long-term free cash flow breakeven price.

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