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EQT Receives Shareholders’ Approval for Rice Energy Buyout

Zacks

EQT Corporation EQT has received consent from majority of its shareholders at the company’s special meeting relating to its acquisition of Rice Energy Inc.

Of the total votes cast, about 84% were in favor of the proposal. Having received approval from shareholders, EQT expects the transaction to close by Nov 13, 2017.

On Jun 19, 2017, the upstream energy player decided to acquire rival Rice Energy for a total consideration of $6.7 billion. It was the largest accord signed in the U.S. upstream industry in three years.

Terms of the Deal

Per the agreement, stockholders of Rice Energy will get 0.37 EQT shares and $5.30 in cash. Additionally, EQT will refinance Rice Energy’s long-term debt worth $1.5 billion. In the combined entity, the shareholders of EQT will hold around 65%.

Benefits

EQT and Rice Energy are among the leading producers of natural gas in the Marcellus and Utica shale plays. Hence, with the completion of the deal, the upstream companies will create the largest natural gas producer in the country. Most importantly, the acquisition will significantly raise EQT’s core acreage positions in the Marcellus and Utica shale plays.

Higher Foot Print in Marcellus & Utica Shales

According to the company, the acquisition is expected to increase the footprint of Marcellus shale play to 670,000 net acres from 187,000 net acres. Also, total undeveloped locations in the region will jump to 3,700 from the previous count of 980.

In the Pennsylvania & West Virginia Utica resources, the acquisition is anticipated to raise the core presence of EQT from 105,000 net acres to 616,000 net acres. Moreover, undeveloped areas will increase to 3,680 from 630.

Post acquisition, the average sales volumes of natural gas for EQT will rise to 3.6 billion cubic feet equivalent per day (Bcfe/D) from 1.3 Bcfe/D.

Cost Synergy

EQT and Rice Energy are among the low-cost producers of natural gas in the U.S. shale resources. The buyout is likely to aid the combined entity lower operating cost and might also realize cost synergy of $2.5 billion.

About the Companies

EQT, based in Pittsburgh, PA, is primarily involved in the production of natural gas, natural gas liquid and oil in the Appalachian Basin. The company is also engaged in the gathering and transmission of commodities.

Rice Energy, based in Canonsburg, PA, also exploits oil and natural gas resources in the Appalachian Basin.

Price Movement

Year to date, the company’s shares have returned 0.8% as against the industry’s decline of 18.9%.



Zacks Rank & Key Picks

EQT currently carries a Zacks Rank #3 (Hold). A few better-ranked players in the energy sector are Braskem SA BAK, Statoil STO and ExxonMobil Corporation XOM. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The largest petrochemical operator in Latin America, Braskem, delivered a positive earnings surprise of 68.54% in the preceding quarter.

Statoil, based in Norway, is a major international integrated oil and gas company. It saw average negative earnings surprise of 8.44% in the last four quarters.

ExxonMobil, headquartered in Irving, TX, is engaged in exploration and production of crude oil and natural gas in the United States, Canada/South America, Europe, Africa, Asia, and Australia/Oceania. The company delivered average positive earnings surprise of 8.81% in the last four quarters.

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