$2.9B Deal to Expand Marcellus Presence for EQT

$2.9B Deal to Expand Marcellus Presence for EQT
EQT's CEO said the deal marks "an attractive entry into the Northeast Marcellus."

(Bloomberg) -- EQT Corp., the largest U.S. natural gas producer, agreed to acquire assets in Appalachia for $2.9 billion in cash and stock from closely held Alta Resources Development LLC. Shares fell the most in more than a year.

The deal will give EQT Alta’s interests in upstream and midstream businesses and add 300,000 acres in the Marcellus Shale, the company said Thursday in a statement. The transaction, expected to close in the third quarter, will add about 1 billion cubic feet per day equivalent of gas production and boost EQT’s annual free cash flow by as much as $400 million.

EQT, led by Chief Executive Officer Toby Rice, has been looking to expand via acquisitions in order to achieve economies of scale as gas prices remain subdued. The Pittsburgh-based company agreed to buy Chevron Corp.’s assets in Appalachia for $735 million in October and also approached CNX Resources Corp. about a combination that same month, Bloomberg News reported.

The Alta deal “represents an attractive entry into the Northeast Marcellus while accelerating our deleveraging path, providing attractive free cash flow” and adding to EQT’s inventory, Rice said in the statement.

EQT shares slid 9.3% to $18.30 at 10:14 a.m. in New York after earlier falling as much as 12%, the most since April 2020.

“Investors are likely to remain skeptical as the deal is outside of EQT’s core operating area and is heavy on equity,” Holly Stewart, an analyst at Scotiabank, wrote in a note to clients. “Admittedly this checks a lot of consolidation boxes, but we anticipate near-term weakness as investors digest and gain comfort around a large, step-out transaction.”

Closely held Alta, led by Chief Executive Officer Joseph Greenberg, has Blackstone Group Inc.’s credit arm among its backers.

BofA Securities is financial adviser to EQT on the deal, and Latham & Watkins LLP is its legal counsel. For Alta, Citi Global Markets Inc. is financial adviser and Kirkland & Ellis LLP is legal counsel.

--With assistance from Christine Buurma.

© 2021 Bloomberg L.P.


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