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EQT Corp. to acquire Rice Energy for $6.7B

Aaron Aupperlee
| Monday, June 19, 2017, 9:03 a.m.
Drilling operations at EQT’s Christen well pad in Morgan, Greene County.
Drilling operations at EQT’s Christen well pad in Morgan, Greene County.

Pittsburgh-based EQT Corporation will become the largest natural gas producer in the United States by acquiring Canonsburg-based Rice Energy Inc. for $6.7 billion, the company announced Monday morning.

EQT's acquisition of Rice's 187,000 acres of Marcellus Shale will plug holes in the company's holdings in Washington and Greene counties, EQT President and CEO Steven Schlotterbeck said during a conference call Monday.

The consolidated acreage in southwestern Pennsylvania will allow EQT to drill longer wells and put more wells on a pad, increasing the output of each well — an element of the deal that analysts believe could give EQT an edge.

"More or less, this will result in a net positive for EQT. And that's enabled by longer laterals per well. It's just more efficient," said David Holt, analyst at S&P Global Market Intelligence.

Neal Dingmann, an analyst with SunTrust Robinson Humphrey, called the deal a "long-term win for EQT," pointing to the increased efficiencies and Rice's strong portfolio of midstream assets.

Schlotterbeck said: "Rice's fit is as good as any for our acreage."

EQT will pay $1.3 billion in cash plus issue $5.4 billion in equity for Rice.

The acquisition was approved by both companies' boards of directors. The deal still needs approval from shareholders and federal regulators. EQT hopes to complete the deal by the end of 2017 and begin development of the combined acres in 2018.

If approved, EQT will have 1 million total acres of Marcellus shale and 670,000 acres in the core Marcellus area stretching from southwestern Pennsylvania into West Virginia. The company will have 681,000 total acres of Utica Shale with 616,000 acres in the core and 149,000 acres of Upper Devonian Shale.

EQT predicts it will be the top natural gas producer in the United States.

EQT employs 1,914 people, including 1,141 in Pennsylvania, according to the company's website. The company operates in Pennsylvania, West Virginia, Kentucky, Texas, Virginia and Ohio.

Rice had 467 employees in Ohio and Pennsylvania as of December.

Schlotterbeck said the acquisition of Rice's Marcellus acreage will allow EQT to drill 12,000-foot lateral wells and put 12 wells per pad in Washington and Greene counties. The company now drills 8,000-foot lateral wells with eight wells per pad on average.

"As you consolidate you get the benefit of both more wells per pad and longer laterals," Schlotterbeck said.

The increased length and number of wells could boost returns per well from 52 percent to 70 percent, Schlotterbeck said.

EQT hopes to maintain the same growth rate while spending about 7 percent less capital. Schlotterbeck expects 20 percent fewer wells because of the longer laterals.

Schlotterbeck expected the company to focus development on the Marcellus shale in Washington and Greene counties first before exploring plays in the Utica and Upper Devonian areas.

Changes to EQT's development plan will start in 2018, Schlotterbeck said.

The company hopes to save $2.5 billion through business efficiencies.

The companies' midstream gas transmission and storage businesses also will merge. EQT will have better access to markets near the Gulf of Mexico and in the Midwest through the combined transportation networks.

Schlotterbeck declined to discuss how the deal came together.

Aaron Aupperlee is a Tribune-Review staff writer. Reach him at, 412-336-8448 or via Twitter @tinynotebook. Staff writer Dillon Carr contributed.

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