The largest natural gas producer in the US, EQT Corporation, will purchase Alta Resources Development LLC in a cash and stock deal valued at around $2.93 billion. Alta is a private-equity-backed producer led by Blackstone Group. EQT said it will pay $1 billion to Alta in cash and the rest in stock. It expects to fund the cash portion partly by drawing on its credit facilities and new debt.
The deal will add around 1 billion cubic feet equivalent gas production to EQT’s portfolio and is expected to be accretive to free cash flow and net asset value per share, according to the company. The transaction is expected to close in the third quarter of 2021, with an effective date of 1 January 2021.
Assets acquired in the deal include 300,000 core net Marcellus acres; 98% held by production—222,000 net acre operated position and 78,000 net acre nonoperated position—300 miles of owned and operated midstream gathering systems, and a 100-mile freshwater system with 255 million gallons of storage capacity. Alta’s existing hedge book covers about 35% of production through 2022.
“The acquisition of Alta's assets represents an attractive entry into the northeast Marcellus while accelerating our deleveraging path, providing attractive free cash flow per share accretion for our shareholders and adding highly economic inventory to EQT's already robust portfolio,” said Toby Rice, president and chief executive of EQT. “In addition to increasing our long-term optionality, we believe this transaction accelerates both our path back to investment grade metrics and our shareholder return initiatives. We look forward to applying our differentiated modern operating model to maximize the prolific value embedded in these premier assets.”
The stock consideration consists of approximately 105 million shares of EQT common stock representing $1.925 billion, based on the 30-day volume-weighted average price as of 5 May 2021. The transaction was unanimously approved by EQT’s board of directors. No Alta shareholder will receive more than 5% of EQT’s pro forma outstanding shares of common stock in connection with the transaction.
The deal continues to feed EQT’s appetite for Marcellus assets. Last October, the company purchased Chevron’s upstream and midstream assets located in the Appalachian Basin for $735 million. The deal included 450 MMcf/D of net production, 100 work-in-progress wells, and about 125,000 core (335,000 net) Marcellus acres.
Calls for consolidation among the shale players have grown louder in recent weeks. Earlier this week, Pioneer Natural Resources boss Scott Sheffield told investors that the shale industry needs more consolidation to curb volume increases from smaller producers into a well-supplied market.
