- Creates America's only
large-scale, vertically integrated natural gas company prepared to
compete on the global stage
- All stock transaction with combined company enterprise value
over $35 billion
- Provides >2,000 miles of critical pipeline infrastructure
with extensive overlap with EQT's core upstream operations and
existing midstream assets
- Reduces EQT's long-term corporate free cash flow
breakeven(1) to less than $2 per MMBtu, ensuring
robust free cash flow generation through all parts of the commodity
cycle
- Cost structure integration materially improves economics of
EQT's remaining ~4,000 drilling locations, unlocking industry
leading terminal value
- Annual synergies of $250
million with identified upside to more than $425 million
PITTSBURGH, March 11,
2024 /PRNewswire/ -- EQT Corporation ("EQT")
(NYSE: EQT) and Equitrans Midstream Corporation ("Equitrans")
(NYSE: ETRN) today announced that they have entered into a
definitive merger agreement creating a premier vertically
integrated natural gas business, with an initial enterprise value
over $35 billion, that is well
positioned to be a globally competitive American energy
leader. The combined company will have a peer-leading cost of
supply, durable free cash flow in all price environments, and
significant synergy potential.
EQT President and CEO Toby Z.
Rice stated, "Equitrans is the most strategic and
transformational transaction EQT has ever pursued, and we see this
as a once in a lifetime opportunity to vertically integrate one of
the highest quality natural gas resource bases anywhere in the
world. As we enter the global era of natural gas, it is imperative
for U.S. natural gas companies to evolve their business models to
compete on the global stage against vertically integrated rivals.
We have identified multiple, high confidence near-term synergies,
with significant upside from future infrastructure optimization
projects that we believe will drive material value creation for
shareholders over time. Our modern, data-driven operating model,
first-hand knowledge of Equitrans' operations and successful track
record integrating $9 billion of
acquisitions, all of which included midstream assets, gives me
tremendous confidence in EQT's ability to seamlessly combine the
two companies and capture synergies."
"This strategic transaction with EQT is the culmination of an
exhaustive process conducted by the ETRN board to determine the
best strategic path forward for our shareholders, employees, and
stakeholders," said Thomas F. Karam,
Executive Chairman, Equitrans Midstream. "Combining with EQT
creates a premier vertically integrated natural gas business that
is a game changer for the natural gas industry and Appalachian
Basin. The transaction delivers full and fair value to ETRN
shareholders and provides the opportunity to participate in future
value growth as EQT executes on its strategy. We are proud of our
employees who have worked hard to build one of the leading
midstream companies in the Appalachian Basin. And we are excited
for the future with EQT."
Compelling Strategic and Financial Benefits
- Creates America's first
large-scale, integrated natural gas producer with an unrivaled
low-cost structure that provides investors with the best
risk-adjusted exposure to natural gas prices
- Provides >2,000 miles of irreplaceable pipeline
infrastructure with extensive overlap and connectivity in EQT's
core area of operations
- Combined company will have 27.6 Tcfe of proved reserves across
~1.9 million net acres with 6.3 Bcfe/d of net production and
>8.0 Bcfe/d of gathering throughput across >3,000 miles of
pipeline
- Provides pathway to reduce EQT's long-term corporate free cash
flow breakeven(1) to less than $2 per MMBtu, ensuring robust free cash flow
generation through all parts of the commodity cycle
- Unlocks upside to gas price volatility as pro forma cost
structure reduces hedging requirements, positioning EQT
shareholders for unmatched price upside
- Cost structure integration materially improves economics of
EQT's remaining ~4,000 drilling locations, unlocking industry
leading terminal value
- Mitigates operational execution risk with ~90% of operated
production flowing through EQT-owned midstream assets on a pro
forma basis
- Significantly accretive to free cash flow per share; projected
pro forma 2025 to 2029 cumulative free cash flow(1)
generation of approximately $16
billion at recent strip prices
Unlocks Meaningful Value
- Symbiotic nature of the assets is expected to drive
$250 million of annual synergies
-
- Financial and corporate costs: ~$120
million per year
- Uptime and production optimization: ~$75
million per year
- Capital and operating costs: ~$55
million per year
- Identified upside pathway to $175
million of additional per annum synergies from optimization
of system pressures, integration of water networks, and execution
of expansion projects
- Integration of contractual volume commitments eliminates $11+
billion of future liabilities, well in excess of assumed debt
- Identified low risk path to more than $5.0 billion of near-term debt repayment via
$3.5 billion of asset sales and
organic free cash flow
-
- Long-term debt target of $7.5
billion
- Unwavering commitment to investment grade credit ratings with
full vetting of pro forma balance sheet by all three credit rating
agencies
(1)
|
A non-GAAP financial
measure. See the Non-GAAP Disclosures section of this news release
for the definition of, and other important information regarding,
this non-GAAP financial measure. Free cash flow breakeven is
defined as the average Henry Hub price needed to generate positive
free cash flow.
|
Transaction Details
Under the terms of the merger agreement, unanimously approved by
the Boards of both companies, EQT will acquire Equitrans in an
all-stock transaction. Each outstanding share of Equitrans common
stock will be exchanged for 0.3504 shares of EQT common stock,
representing an implied value of $12.50 per Equitrans share based on the volume
weighted average price of EQT common stock for the 30 days ending
on March 8, 2024. As a result of the
transaction, EQT's existing shareholders are expected to own
approximately 74% of the combined company and Equitrans'
shareholders are expected to own approximately 26%.
The transaction is expected to close during the fourth quarter
of 2024, subject to required regulatory approvals and clearances,
approval of the transaction by shareholders of both EQT and
Equitrans, and other customary closing conditions. The transaction
closing is contingent on FERC authorizing MVP to commence service.
Upon the closing of the transaction, three representatives from
Equitrans will join EQT's Board of Directors. EQT's executive
management team will lead the combined company with headquarters
remaining in Pittsburgh,
Pennsylvania.
Advisors
Guggenheim Securities, LLC acted as lead
financial advisor and RBC Capital Markets, LLC acted as a financial
advisor to EQT. Kirkland & Ellis LLP is serving as EQT's legal
counsel on the transaction. Barclays and Citi served as financial
advisors to Equitrans, and Latham & Watkins LLP is serving as
legal counsel to Equitrans.
Conference Call and Webcast Information
EQT and
Equitrans will hold a joint conference call to discuss the details
of the transaction at 8:00 AM ET
today, March 11, 2024, which will be
broadcast live via webcast. The live audio webcast and accompanying
presentation is available on EQT's investor relations website,
www.ir.eqt.com, under "Events & Presentations" and the live
audio webcast is available on Equitrans' investor relations
website, ir.equitransmidstream.com, under "Presentations &
Events." A replay will be archived in the same locations after the
conclusion of the live event.
EQT Investor Contact
Cameron
Horwitz
Managing Director, Investor Relations & Strategy
412.395.2555
Cameron.Horwitz@eqt.com
EQT Media Contact
Kelly
Kimberly
FGS Global
EQT@fgsglobal.com
Equitrans Investor Contact
Anthony DeFabio
Treasurer and Director, Investor Relations
412.518.7193
adefabio@equitransmidstream.com
Equitrans Media Contact
Natalie Cox
Vice President, Communications and Corporate Affairs
ncox@equitransmidstream.com
About EQT Corporation
EQT Corporation is a leading
independent natural gas production company with operations focused
in the Appalachian Basin. We are dedicated to responsibly
developing our world-class asset base and being the operator of
choice for our stakeholders. By leveraging a culture that
prioritizes operational efficiency, technology and sustainability,
we seek to continuously improve the way we produce environmentally
responsible, reliable and low-cost energy. We have a longstanding
commitment to the safety of our employees, contractors, and
communities, and to the reduction of our overall environmental
footprint. Our values are evident in the way we operate and in how
we interact each day – trust, teamwork, heart, and evolution are at
the center of all we do.
EQT Management speaks to investors from time to time and the
analyst presentation for these discussions, which is updated
periodically, is available via EQT's investor relations website at
ir.eqt.com.
About Equitrans Midstream Corporation
Equitrans
Midstream Corporation has a premier asset footprint in the
Appalachian Basin and, as the parent company of EQM Midstream
Partners, is one of the largest natural gas gatherers in
the United States. Through its
strategically located infrastructure assets in the Marcellus and
Utica regions, Equitrans has an
operational focus on gas transmission and storage systems, gas
gathering systems, and water services that support natural gas
development and production across the Basin. With a rich 140-year
history in the energy industry, Equitrans was launched as a
standalone company in 2018 with a vision to be the premier
midstream services provider in North
America. While working to meet America's growing need for
clean-burning energy, Equitrans is proud of its environmental,
social, and governance (ESG) practices, striving every day to
preserve and protect the environment, provide an engaging workplace
for its employees, support and enrich its local communities, and to
deliver sustained value for customers and shareholders.
Visit www.equitransmidstream.com; and to learn more about our
ESG practices visit
www.equitransmidstream.com/sustainability-reporting/
Cautionary Statements Regarding Forward Looking
Statements
This press release contains "forward-looking
statements" within the meaning of the federal securities laws.
Forward-looking statements may be identified by words such as
"anticipates," "believes," "cause," "continue," "could," "depend,"
"develop," "estimates," "expects," "forecasts," "goal," "guidance,"
"have," "impact," "implement," "increase," "intends," "lead,"
"maintain," "may," "might," "plans," "potential," "possible,"
"projected," "reduce," "remain," "result," "scheduled," "seek,"
"should," "will," "would" and other similar words or
expressions. The absence of such words or expressions does
not necessarily mean the statements are not forward-looking.
Forward-looking statements are not statements of historical fact
and reflect EQT Corporation's ("EQT") and Equitrans Midstream
Corporation's ("Equitrans") current views about future events.
These forward-looking statements include, but are not limited to,
statements regarding the proposed transaction between EQT and
Equitrans, the expected closing of the proposed transaction and the
timing thereof and the pro forma combined company and its
operations, strategies and plans, integration, debt levels and
leverage ratio, capital expenditures, cash flows and anticipated
uses thereof, synergies, opportunities and anticipated future
performance, expected accretion to earnings and free cash flow and
anticipated dividends. Information adjusted for the proposed
transaction should not be considered a forecast of future results.
Although EQT believes EQT's forward-looking statements are
reasonable, statements made regarding future results are not
guarantees of future performance and are subject to numerous
assumptions, uncertainties and risks that are difficult to predict.
Actual outcomes and results may be materially different from the
results stated or implied in such forward-looking statements
included in this press release.
Actual outcomes and results may differ materially from those
included in the forward-looking statements in this press release
due to a number of factors, including, but not limited to: the
occurrence of any event, change or other circumstances that could
give rise to the termination of the merger agreement; the
possibility that shareholders of EQT may not approve the issuance
of EQT common stock in connection with the proposed transaction;
the possibility that the shareholders of Equitrans may not adopt
the merger agreement; the risk that EQT or Equitrans may be unable
to obtain governmental and regulatory approvals required for the
proposed transaction, or required governmental and regulatory
approvals may delay the merger or result in the imposition of
conditions that could cause the parties to abandon the merger; the
risk that the parties may not be able to satisfy the conditions to
the proposed transaction in a timely manner or at all; risks
related to disruption of management's time from ongoing business
operations due to the proposed transaction; the risk that any
announcements relating to the proposed transaction could have
adverse effects on the market price of EQT's common stock or
Equitrans' common stock; the risk of any unexpected costs or
expenses resulting from the proposed transaction; the risk of any
litigation relating to the proposed transaction; the risk that the
proposed transaction and its announcement could have an adverse
effect on the ability of EQT and Equitrans to retain and hire key
personnel, on the ability of EQT or Equitrans to attract
third-party customers and maintain their relationships with
derivatives and joint venture counterparties and on EQT's and
Equitrans' operating results and businesses generally; the risk
that problems may arise in successfully integrating the businesses
of EQT and Equitrans, which may result in the combined company not
operating as effectively and efficiently as expected; the risk that
the combined company may be unable to achieve synergies or other
anticipated benefits of the proposed transaction or it may take
longer than expected to achieve those synergies or benefits and
other important factors that could cause actual results to differ
materially from those projected; the volatility in commodity prices
for crude oil and natural gas; Equitrans' ability to construct,
complete and place in service the Mountain Valley Pipeline project;
the effect of future regulatory or legislative actions on EQT and
Equitrans or the industry in which they operate, including the risk
of new restrictions with respect to oil and natural gas development
activities; the risk that the credit ratings of the combined
business may be different from what EQT and Equitrans expect; the
ability of management to execute its plans to meet its goals and
other risks inherent in EQT's and Equitrans' businesses; public
health crises, such as pandemics and epidemics, and any related
government policies and actions; the potential disruption or
interruption of EQT's or Equitrans' operations due to war,
accidents, political events, civil unrest, severe weather, cyber
threats, terrorist acts, or other natural or human causes beyond
EQT's or Equitrans' control; the combined company's ability to
identify and mitigate the risks and hazards inherent in operating
in the global energy industry; and other factors detailed in EQT's
and Equitrans' Annual Reports on Form 10-K for the year ended
December 31, 2023 and subsequent
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. All
such factors are difficult to predict and are beyond EQT's and
Equitrans' control. Additional risks or uncertainties that are not
currently known to EQT or Equitrans, that EQT or Equitrans
currently deem to be immaterial, or that could apply to any company
could also cause actual outcomes and results to differ materially
from those included in the forward-looking statements in this press
release. EQT and Equitrans undertake no obligation to publicly
correct or update the forward-looking statements in this press
release, in other documents or on their respective websites to
reflect new information, future events or otherwise, except as
required by applicable law. All such statements are expressly
qualified by this cautionary statement. Readers are cautioned
not to place undue reliance on these forward-looking statements
that speak only as of the date hereof.
Important Information For Investors And Shareholders;
Additional Information And Where To Find It
In connection
with the proposed transaction between EQT and Equitrans, EQT
intends to file with the U.S. Securities and Exchange Commission
(the "SEC") a registration statement on Form S-4 (the "registration
statement") that will include a joint proxy statement of EQT and
Equitrans and that will also constitute a prospectus of EQT (the
"joint proxy statement/prospectus"). EQT and Equitrans also intend
to file other documents regarding the proposed transaction with the
SEC. This document is not a substitute for the joint proxy
statement/prospectus or the registration statement or any other
document that EQT or Equitrans may file with the SEC. BEFORE
MAKING ANY VOTING DECISION, INVESTORS ARE URGED TO CAREFULLY READ
THE REGISTRATION STATEMENT, THE JOINT PROXY STATEMENT/PROSPECTUS,
AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT MAY BE FILED WITH
THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, AS THEY BECOME
AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT
INFORMATION ABOUT EQT, EQUITRANS, THE PROPOSED TRANSACTION, THE
RISKS THERETO AND RELATED MATTERS. After the registration
statement has been declared effective, a definitive joint proxy
statement/prospectus will be mailed to the shareholders of EQT and
the shareholders of Equitrans. Investors will be able to obtain
free copies of the registration statement and joint proxy
statement/prospectus and other relevant documents filed or that
will be filed with the SEC by EQT or Equitrans through the website
maintained by the SEC at www.sec.gov. Copies of the documents filed
with the SEC by EQT may be obtained free of charge on EQT's website
at www.ir.eqt.com/investor-relations. Copies of the documents filed
with the SEC by Equitrans may be obtained free of charge on
Equitrans' website at www.ir.equitransmidstream.com.
Participants In Solicitation
EQT and Equitrans and
their respective directors, executive officers and other members of
management and employees may be deemed to be participants in the
solicitation of proxies in connection with the proposed transaction
contemplated by the joint proxy statement/prospectus.
Information regarding EQT's directors and executive officers and
their ownership of EQT's securities is set forth in EQT's filings
with the SEC, including EQT's Annual Report on Form 10-K for the
fiscal year ended December 31, 2023
and its Definitive Proxy Statement on Schedule 14A that was filed
with the SEC on March 1, 2024.
To the extent such person's ownership of EQT's securities has
changed since the filing of such proxy statement, such changes have
been or will be reflected on Statements of Changes in Beneficial
Ownership on Form 4 filed with the SEC. Information regarding
Equitrans' directors and executive officers and their ownership of
Equitrans' securities is set forth in Equitrans' filings with the
SEC, including Equitrans' Annual Report on Form 10-K for the fiscal
year ended December 31, 2023 and its
Definitive Proxy Statement on Schedule 14A that was filed with the
SEC on March 4, 2024. To the
extent such person's ownership of Equitrans' securities has changed
since the filing of such proxy statement, such changes have been or
will be reflected on Statements of Changes in Beneficial Ownership
on Form 4 filed with the SEC. Additional information regarding the
interests of those persons and other persons who may be deemed
participants in the proposed transaction may be obtained by reading
the joint proxy statement/prospectus and other relevant materials
that will be filed with the SEC regarding the proposed transaction
when such documents become available. You may obtain free copies of
these documents as described in the preceding paragraph.
No Offer Or Solicitation
This press release relates to
the proposed transaction between EQT and Equitrans. This
press release is for informational purposes only and shall not
constitute an offer to sell or exchange, or the solicitation of an
offer to buy or exchange, any securities or a solicitation of any
vote or approval, in any jurisdiction, pursuant to the proposed
transaction or otherwise, nor shall there be any sale, issuance,
exchange or transfer of the securities referred to in this document
in any jurisdiction in contravention of applicable law. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended.
Non-GAAP Disclosures
Adjusted Operating Cash Flow,
Free Cash Flow, Free Cash Flow Yield and Free Cash Flow Per
Share
Adjusted operating cash flow is defined as net cash provided by
operating activities less changes in other assets and liabilities.
Free cash flow is defined as adjusted operating cash flow less
accrual-based capital expenditures, excluding capital expenditures
attributable to noncontrolling interests. Free cash flow yield is
defined as free cash flow divided by market capitalization. Free
cash flow per share is defined as free cash flow divided by EQT's
weighted average common shares outstanding. Adjusted operating cash
flow, free cash flow, free cash flow yield and free cash flow per
share are non-GAAP supplemental financial measures used by EQT's
management to assess liquidity, including EQT's ability to generate
cash flow in excess of its capital requirements and return cash to
shareholders. EQT's management believes that these measures provide
useful information to external users of EQT's consolidated
financial statements, such as industry analysts, lenders and
ratings agencies. Adjusted operating cash flow, free cash flow,
free cash flow yield and free cash flow per share should not be
considered as alternatives to net cash provided by operating
activities or any other measure of liquidity presented in
accordance with GAAP.
EQT has not provided projected net cash provided by operating
activities or a reconciliation of projected adjusted operating cash
flow, free cash flow, free cash flow yield or free cash flow per
share to projected net cash provided by operating activities, the
most comparable financial measure calculated in accordance with
GAAP. EQT is unable to project net cash provided by operating
activities for any future period because this metric includes the
impact of changes in operating assets and liabilities related to
the timing of cash receipts and disbursements that may not relate
to the period in which the operating activities occurred. EQT is
unable to project these timing differences with any reasonable
degree of accuracy without unreasonable efforts such as predicting
the timing of its payments and its customers' payments, with
accuracy to a specific day, months in advance. Furthermore, EQT
does not provide guidance with respect to its average realized
price, among other items, that impact reconciling items between net
cash provided by operating activities and adjusted operating cash
flow, free cash flow, free cash flow yield and free cash flow per
share. Natural gas prices are volatile and out of EQT's control,
and the timing of transactions and the income tax effects of future
transactions and other items are difficult to accurately predict.
Therefore, EQT is unable to provide projected net cash provided by
operating activities, or the related reconciliation of projected
adjusted operating cash flow, free cash flow, free cash flow yield
or free cash flow per share to projected net cash provided by
operating activities, without unreasonable effort.
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SOURCE EQT Corporation (EQT-IR)