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Could Jana Partners Foil the EQT–Rice Energy Acquisition?

PART:
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Part 7
Could Jana Partners Foil the EQT–Rice Energy Acquisition? PART 7 OF 14

EQT’s Implementation Strategies to Achieve EQT-RICE Synergies

EQT’s implementation strategies

Let’s summarize what we’ve covered in the previous parts. Following the completion of the Rice Energy (RICE) acquisition, EQT (EQT) believes that capital efficiencies brought about by drilling longer laterals and lower costs along with savings on G&A (general and administrative) expenses and several other synergies could result in total synergies of $7.5 billion for the combined company.

EQT’s Implementation Strategies to Achieve EQT-RICE Synergies

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In its July presentation, EQT noted that it had an implementation strategy in place to achieve these synergies.

Expected activity levels

In 2017, expected activity levels and production guidance remain unchanged. We’ll look at this in more detail in a later part of this series. The company would focus on integrating the acquired acreage so it could optimize and develop a long-term plan focused on realizing higher returns.

EQT believes it will begin to realize capital, operational, and administrative efficiencies in 2018. It believes it will also start seeing gathering system synergies as its midstream business is integrated. The company might also drop down retained midstream assets to EQT Midstream Partners (EQM). By the end of 2018, EQT expects to have a plan to address its sum-of-the-parts discount (read Part 1).

EQT believes that in 2019 it will completely start realizing its synergies. The company is targeting to achieve positive free cash flow by 2019.

EQT’s management noted in the 2Q17 earnings conference, “We continue to make strong progress towards completing the transaction and recently received antitrust clearance from the Federal Trade Commission, one of the customary closing conditions of the transaction. Rice is an outstanding, strategic and operational fit for us and we’re excited to complete the transaction in the fourth quarter.”

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