EQT Announces $2.9 Billion Acquisition of Alta Resources' Upstream, Midstream Subsidiaries
EQT Corporation announced Thursday it entered into a purchase agreement with Alta Resources Development for EQT to acquire all of the membership interests in Alta's upstream and midstream subsidiaries for about $2.925 billion, subject to customary closing adjustments. The transaction is expected to close in the third quarter of 2021, with an effective date of January 1, 2021.
"Today marks another major milestone for EQT as we continue on our path to becoming the operator of choice for all of our stakeholders,” President and CEO Toby Rice said. “The acquisition of Alta's assets represents an attractive entry into the Northeast Marcellus while accelerating our deleveraging path, providing attractive free cash flow per share accretion for our shareholders and adding highly economic inventory to EQT's already robust portfolio.”
This acquisition fits firmly within EQT’s strategic acquisition framework, while also establishing a significant and strategic position in the core of the Northeast Marcellus. The company expects the acquisition to be accretive to both free cash flow per share and net asset value (NAV) per share, while also accelerating our deleveraging strategy and underscoring our commitment to achieving investment grade credit metrics.
Approximately 1.0 Bcfe per day of high-margin net production is expected to bolster EQT’s free cash flow profile by adding approximately $300-400 million of annual free cash flow and about $2 billion of free cash flow through 2026, an improvement of approximately 55% compared to its pre-transaction outlook.
This strong free cash flow contribution is a result of Alta's low-cost structure, driven by low royalty burdens averaging 14%, direct mineral ownership, a premium firm transportation portfolio and an owned and operated midstream gathering system serving the operated acreage position. EQT expects the transaction to reduce EQT's pro forma annual corporate free cash flow breakeven gas price by at least $0.10 per mmbtu.
The total purchase price for the transaction is $2.925 billion, consisting of $1.0 billion in cash and approximately $1.925 billion in EQT common stock issued directly to Alta's shareholders.
The stock consideration consists of approximately 105 million shares of EQT common stock representing $1.925 billion, based on the 30-day volume-weighted average price as of May 5, 2021. The transaction was unanimously approved by EQT’s Board of Directors. EQT shares issued as part of the transaction will be distributed directly to Alta shareholders, which represent a diverse set of financial institutions and individuals. No Alta shareholder will receive more than 5% of EQT's pro forma outstanding shares of common stock in connection with the transaction.
The transaction is expected to close in the third quarter of 2021, subject to satisfaction of customary closing conditions, including the approval by EQT's shareholders of the issuance of the common stock consideration. All post effective date purchase price adjustments will be netted against the stock consideration and are expected to result in a reduction of approximately 11 million shares issued at closing.
Bank of America Securities served as financial advisor to EQT, and Latham & Watkins, LLP is serving as EQT's legal counsel on the transaction. Citi Global Markets Inc. served as exclusive financial advisor to Alta, and Kirkland & Ellis LLP is serving as Alta's legal counsel.
Assets include:
- 300,000 core net Marcellus acres; 98% held by production
- 222,000 net acre operated position
- 78,000 net acre non-operated position
- 1.0 Bcfe per day of current net production, 100% dry gas
- 300-miles of owned and operated midstream gathering systems
- 100-mile freshwater system with 255 million gallons of storage capacity
- Attractive firm transportation portfolio to premium demand markets
- Existing hedge book covering approximately 35% of production through 2022
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