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Could Jana Partners Foil the EQT–Rice Energy Acquisition?

PART:
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Part 3
Could Jana Partners Foil the EQT–Rice Energy Acquisition? PART 3 OF 14

Impact of Rice Deal on EQT’s Upstream and Midstream Operations

Impact on upstream business

EQT’s (EQT) press release noted that most of the acquired acreage from Rice Energy (RICE) is contiguous to its existing acreage. The acreage includes 187,000 net acres in the Marcellus and 65,000 net acres in the Utica. As we saw in the previous part, Rice’s assets are expected to add 1.3 Bcfe (billion cubic feet equivalent) per day to EQT’s natural gas volumes.

EQT expects the number of undeveloped locations in its portfolio to increase from 775 to 1,200 following the close of the transaction. It also expects its average lateral length to increase from 8,000 feet to 12,000 feet. The company expects its returns per well to increase from 52.0% currently to 70.0% once the transaction is complete at $3 NYMEX (New York Mercantile Exchange) natural gas prices.

Impact of Rice Deal on EQT’s Upstream and Midstream Operations

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Impact on midstream business

EQT also noted that the Rice deal would complement the infrastructure footprint of EQT Midstream Partners (EQM), EQT’s limited partnership. According to EQT, natural gas gathering systems controlled by the combined company will be the fourth largest in the United States. The company expects to see increased access to the Gulf and Midwest markets through the acquisition.

EQT also expects growth opportunities through drop-downs and additional projects through its access to Rice Energy’s midstream assets. The deal also includes a 92.0% interest in Rice Midstream GP Holdings.

We’ll elaborate on the upstream and midstream benefits in the following parts of this series.

As a result of this acquisition, EQT expects the transaction to be immediately accretive to cash flow per share.

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