EQT to pay $6.7 bln for Rice, creating biggest U.S. natgas producer


UPDATE 3-EQT to pay $6.7 bln for Rice, creating biggest U.S. natgas producer

* EQT's $27.05 offer represents 37.4 pct premium
    * Rice Energy shares at $24.47, below offer
    * EQT shares down 9 pct
    * Deal expected to close in 4th-qtr 2017
    * Deal would create biggest U.S. natural gas producer

 (New throughout, adds analyst comment and fact that deal would
create the biggest U.S. natural gas producer)
    By Yashaswini Swamynathan and Arathy S Nair
    June 19 (Reuters) - U.S. oil and gas company EQT Corp
<EQT.N> said on Monday it would buy Rice Energy <RICE.N> for
$6.7 billion, a deal that would create the biggest natural gas
producer in the United States.
    This would be the biggest deal ever for EQT  as it looks to
expand its natural gas business.
    Rice Energy's shares surged almost 27 percent to $24.95 in
afternoon trading, but below the $27.05 per share offered by
EQT. EQT's shares were down 7.6 percent.
    The deal would put the combined EQT-Rice ahead of Exxon
Mobil Corp <XOM.N> as the nation's biggest gas producer. U.S.
energy firms are pumping money into gas-rich states like
Pennsylvania, West Virginia and Ohio. The United States should
soon become the world's top natural gas exporter.
    "EQT appears to be empire building," analysts at Mizuho said
in a report, noting they expect EQT to begin monetizing Rice's
midstream assets by dropping them down to EQT Midstream Partners
<EQM.N>, which could raise $1.3 billion.
    EQT said it would be able to drill longer horizontal wells
in Pennsylvania after the deal as most of the acquired acreage
is next to where EQT already drills or owns land.
    "EQT is a decade behind in fracking technology used by
industry leaders in Marcellus/Utica," said Dallas Salazar, CEO
of energy consulting firm Atlas Consulting. "EQT needs a lot,
and Rice offers a lot of what it needs."
    EQT has been buying acreage in the Marcellus shale field,
with some of the cheapest gas in the country. Most recently it
picked up 53,400 acres in the field from Stone Energy Corp.
    EQT said the acquisition would increase its 2017 average
sales volume by 1.3 billion cubic feet equivalent per day
(bcfe/d) and core acres in the Marcellus field by 187,000 to
    The deal would also give the company access to Rice Energy's
midstream assets, including a 92 percent interest in Rice
Midstream GP Holdings. EQT will take on about $1.5 billion in
    Rice Energy shareholders will receive $5.30 per share in
cash and 0.37 EQT shares for each share they hold, EQT said.
    The offer translates to a price of $27.05 per Rice Energy
share, representing a premium of 37.4 percent to the stock's
Friday closing price, according to Reuters calculations.
    Citigroup was EQT's financial adviser, while Wachtell,
Lipton, Rosen & Katz were its legal advisers. Barclays Capital
Inc was Rice Energy's financial adviser and Vinson & Elkins LLP
its legal adviser.

FACTBOX-Top 40 U.S. natural gas producers -NGSA    [nL1N1JG10U]
 (Additional reporting by Scott DiSavino in New York; Editing by
Sai Sachin Ravikumar, Saumyadeb Chakrabarty and David Gregorio)
 ((yashaswini.swamynathan@thomsonreuters.com; within U.S. +1 646
223 8780, outside U.S. +91 80 6749 2405; Reuters Messaging:


This article appears in: World Markets , Stocks , Economy , Oil
Referenced Symbols: EQM , EQT , RICE , XOM

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