BY Richard Summerfield
EQT Corp, the largest natural gas producer in the US, has announced that it has agreed to acquire Quantum Energy and Tug Hill Operating-backed THQ Appalachia I LLC and associated pipeline infrastructure in a deal worth $5.2bn.
Under the terms of the deal, EQT will acquire Tug Hill’s XcL Midstream, a pipeline firm that moves gas in Appalachia to market. EQT will pay $2.6bn in cash and about $2.6bn in stock to THQ Appalachia, which has net production of around 760 million cubic feet per day. According to a statement announcing the deal, EQT believes the acquisition of the THQ assets will add an estimated 800 million cubic feet per day of gas equivalent production.
The transaction is expected to close in the fourth quarter of 2022, with an effective date of 1 July 2022. Subject to the transaction close and EQT’s board approval process, Wil VanLoh, founder and chief executive of Quantum Energy Partners, will join EQT’s board of directors.
“The acquisition of Tug Hill and XcL Midstream checks all the boxes of our guiding principles around M&A, including accretion on free cash flow per share, NAV per share, lowering our cost structure and reducing business risk, while maintaining an investment grade balance sheet,” said Toby Z. Rice, president and chief executive of EQT. “The valuation metrics are compelling and accretion from the deal should lower our NYMEX free cash flow breakeven price by approximately $0.15 per MMBtu, which gives us greater free cash flow durability through the cycle.
“As a result of even more confidence in the sustainability of our business, we are enhancing our shareholder returns framework by doubling our share repurchase authorization to $2.0 billion and increasing our year-end 2023 debt reduction goal from $2.5 billion to $4.0 billion,” he added.
“We are extremely pleased to have entered into this transaction and, in doing so, look forward to becoming a core shareholder in EQT and working closely with the EQT management team and board to enhance the long-term value of the company,” said Mr VanLoh. “We believe the company is in a uniquely strong position as the largest producer of natural gas in the country, with a differentiated track record of operational excellence, a deep core inventory base and a peer-leading commitment to ESG. The Tug Hill and XcL Midstream assets are complementary to EQT’s existing footprint, and we believe the company is now positioned to create even more value for its shareholders through this highly strategic combination.”
THQ Appalachia is an exploration and production company operating in West Virginia. Private equity firm Quantum Energy invested in Tug Hill in 2014 and also has an equity commitment in THQ Appalachia, which is operated by Tug Hill.
News: Gas producer EQT to buy peer THQ Appalachia for $5.2 bln