Writing in “Oil Voice”, Julia Weiss with Norwegian consulting firm, Rystad Energy, reports on the structure of the recent combination of EQT Corporation and Rice Energy, and her firm’s evaluation of the transaction.
As part of the $8.2 billion deal, EQT will provide Rice shareholders with $5.4 billion of EQT stock, $1.3 billion in cash and relieve Rice of $1.5 billion in debt and preferred stock obligations. The combined entity will be the leading natural gas producer in the Marcellus shale, and in the U. S., with 2017 production of approximately 3.17 billion cubic feet of gas per day. As a result of the merger, EQT will own 670 thousand net acres in the core of Pennsylvania’s Marcellus shale. This will include 149 thousand in the Upper Devonian zone and 681 thousand in the Utica. Apparently, at least some of the acquired acreage is contiguous as Rystad sees the deal making it possible for EQT to drill longer laterals and thereby reducing operational costs per well.
Rystad is impressed with the high productivity of Rice’s recently drilled wells in Green and Washington counties. EQT plans to invest heavily in this area to achieve even higher productivity per well post acquisition. However, Rystad conends that this will result in a diversion of capital from EQT’s own acreage for the next two years. This should result in synergies which will benefit the company by 2019.
The market’s reaction would indicate that the deal is perceived as overpriced. Rice’s stock value jumped and EQT’s plummeted on the announcement of the merger. However, with a gas price of $3.20 per billion cubic feet of gas, the deal has a positive net present value according to Rystad. While not impressive on the face of it, Rystad feels that the strategic benefits of the deal make it economic in the long term.
To read the article by itself, please go to https://oilvoice.com/Opinion/5978/EQTs-acquisition-of-Rice-Energy-creates-the-leading-US-and-Appalachian-natural-gas-producer?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+OilvoiceHeadlines+%28OilVoice+Headlines%29 .
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