EQT's purchase of Rice Energy just created a new energy powerhouse

  • EQT Corp. is poised to become the largest U.S. natural gas producer after announcing it will buy Rice Energy.
  • The deal is valued at $6.7 billion.
  • EQT and Rice have neighboring natural gas assets in the Marcellus and Utica shale regions.
Rice Energy
Lucas Jackson | Reuters

Pittsburgh-based EQT Corp. is poised to become the largest producer of natural gas in the United States after announcing it will acquire fellow shale driller Rice Energy.

EQT announced on Monday it will buy all of Rice Energy's shares in a deal worth $6.7 billion. After closing, EQT's output will total 3.6 billion cubic feet per day of natural gas, topping U.S. production by oil major Exxon Mobil and shale drilling pioneer Chesapeake Energy.

Shares of EQT Corp. were down about 9 percent to $53.51 on Monday. Rice Energy's stock price soared nearly 25 percent to $24.57 a share.

The acquisition extends EQT's footprint in the Marcellus and Utica shale regions. The area underlying Pennsylvania, Ohio and West Virginia is the epicenter of a boom in American natural gas produced through hydraulic fracturing, the process of injecting water, minerals and chemicals underground to free oil and gas from rock formations.

"This transaction brings together two of the top Marcellus and Utica producers to form a natural gas operating position that will be unmatched in the industry," EQT President and CEO Steve Schlotterbeck said in a statement.

EQT expects the deal to close in the final quarter of this year.

Most of the acreage EQT will acquire from Rice is contiguous to its existing holdings, so it will be able to produce more efficiently through horizontal drilling, the company said. This means EQT needs to drill fewer vertical wells because it can drill sideways into neighboring pockets of natural gas.

EQT appears to be "empire building," and it's unlikely another driller will submit a successful bid for Rice, according to Mizuho Securities. That is because EQT's footprint overlaps with Rice's in southwestern Pennsylvania and the two companies have similar midstream operations, which focus on transporting natural gas through the Appalachian region, according to Mizuho.

As part of the deal, EQT will acquire Rice's 92 percent interest in Rice Midstream GP Holdings. EQT already owns a 90 percent limited partner interest in EQT GP Holdings, which also operates transportation infrastructure through EQT Midstream Partners.

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