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US natural gas producer EQT announced that it will acquire its previously owned pipeline business to create a US$35 billion integrated company, and the wave of mergers and acquisitions in the domestic energy industry continues to sweep across the country.
Pittsburgh-based EQT, one of the largest U.S. natural gas producers, spun off Equitrans Midstream in 2018 under pressure from activist investor Jana Partners. This leaves the former's upstream business focused on natural gas exploration and production, and the latter's upstream business focused on storage and transportation.
Equitrans' all-stock deal, with an equity value of about $5.5 billion, is a rare example of an upstream company acquiring midstream assets in recent years. EQT said this would give the company more control over access to the natural gas market and help address an expected surge in electricity use in the region.
The combined entity is worth approximately $35 billion, including net debt, and EQT has more than 4,000 drilling sites in Pennsylvania, West Virginia and Ohio, including 2,000 miles of pipeline infrastructure. The region is one of the centers of natural gas production in the United States.
Equitrans is a co-owner and operator of the controversial 303-mile Valley Pipeline project, which would transport natural gas from West Virginia to the more populous state of Virginia.
Construction of the pipeline has been delayed for years due to legal challenges from environmentalists and landowners, but EQT CEO Toby Rice said on Monday it has the potential to meet the demand for electricity from artificial intelligence use in the region Demand is expected to grow. “Data Center Alley” in northern Virginia is home to the largest concentration of Internet servers in the world.
Rice told analysts on Monday that MVP “is an extremely important part of the infrastructure.” . . Because it is critical to the energy security of the region and the United States.”
John Paisie, president of Stratas Advisors, said the acquisition of Equitrans should also give EQT “more control over access to its natural gas markets” to meet surging global fuel demand. Natural gas prices in Appalachia have been discounted due to logistical constraints.
The United States is the world's largest natural gas producer and exporter, with output regularly breaking records.
“As we enter the global era of natural gas, U.S. natural gas companies must evolve their business models to compete on the global stage,” Rice said.
However, U.S. natural gas prices fell to nearly three-decade lows last month (excluding a handful of days during the Covid-19 pandemic) as a surge in production and an unusually warm winter dampened demand for the fuel.
EQT's acquisition of Equitrans follows a series of pipeline deals last year, including Oneok's $19 billion acquisition of Magellan Midstream Partners and Energy Transfer's $7.1 billion acquisition of Crestwood Equity Partners. This comes amid a broader surge in M&A activity in the U.S. oil and gas industry, as companies bet on the future of the energy mix and interest in building new pipelines wanes amid a tough legal environment.
Although the International Energy Agency expects global demand for fossil fuels to peak this decade, many analysts expect natural gas to have a longer life than oil because it is touted as a low-carbon fuel that helps bridge the gap from coal to renewable energy. The transition to renewable energy.
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