EQT Acquires Chevron's Appalachian Assets
NYSE-listed EQT Corp. has entered into a definitive agreement with Chevron USA Inc., an affiliate of Chevron Corp., to acquire its upstream and midstream assets located in the Appalachian basin for a total consideration of US$735 million, subject to customary adjustments.
In December 2019, Chevron had impaired its Appalachian assets and expressed its intent to evaluate strategic alternatives, including divestment. EQT placed a bid worth US$750 million for the assets in September this year.
The upstream assets include approximately 335,000 net acres located in Pennsylvania, West Virginia and Ohio, of which approximately 125,000 acres are classified under core net Marcellus Shale acreage. The assets also include around 500 gross producing wells and 100 work-in-progress wells. The current net average daily production from the assets amounts to approximately 450 million cubic feet equivalent per day (MMcfe/d), of which 75% is gas.
The midstream interests includes a 31% stake in Laurel Mountain Midstream LLC, a joint venture between Williams Companies Inc., Laurel Mountain LLC and Chevron Northeast Upstream LLC. Operated by the William Companies, Laurel Mountain Midstream holds intrastate and gathering lines servicing the Marcellus shale area, and two water systems that provide both fresh and produced water handling capabilities.
According to EQT’s management, the total deal consideration is split between approximately US$635 million for the upstream assets, and about US$100 million for the acquisition of Laurel Mountain Midstream. EQT intends to fund the acquisition with cash in hand, borrowings under its revolving credit facility, the proceeds from its US$310 million public offering, and a potential notes offering of up to US$350 million.
Pittsburgh-based EQT is an independent natural gas production company with operations focused in the cores of the Marcellus and Utica Shales in the Appalachian Basin.
“This acquisition is a natural bolt-on extension of EQT’s dominant position in the core of the southwest Marcellus and supplements our already impressive asset base. With the purchase price underpinned by PDP value, the extensive work-in-progress well inventory, core undeveloped acreage and water assets provide material value upside,” said Toby Rice, President & CEO of EQT.
Jefferies is acting as financial advisor to EQT for the deal, which is expected to close in Q4-2020, with an effective date of July 1st, 2020.