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EQT to create $35bn integrated gas group with pipeline business deal

by SuperiorInvest

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US natural gas producer EQT has announced it will acquire a pipeline business it previously owned, creating a $35 billion integrated company as a wave of mergers and acquisitions continues to sweep through the domestic energy sector.

Pittsburgh-based EQT, one of the largest U.S. natural gas producers, was spun off from Equitrans Midstream in 2018 due to pressure from activist investor Jana Partners. That left the former with the upstream business focused on gas exploration and production and the latter on storage and transportation.

The Equitrans stock deal, with an equity value of around $5.5 billion, represents a rare case in recent history of an upstream company buying midstream assets. EQT said it will give the company more control in gaining access to gas markets and could help address the expected increase in energy use by artificial intelligence in the region.

The combined entity, valued at about $35 billion including net debt, will have 2,000 miles of pipeline infrastructure added to EQT's portfolio of more than 4,000 drilling sites in Pennsylvania, West Virginia and Ohio. The region is one of the gas production centers of the United States.

Equitrans is co-owner and operator of the controversial 303-mile Mountain Valley pipeline project, which would deliver gas from West Virginia to more populous Virginia.

Construction of the pipeline has been delayed for years due to legal challenges from environmentalists and landowners, but EQT CEO Toby Rice spoke Monday of its potential to meet an expected surge in energy demand stemming from the use of AI in the region. Northern Virginia's “data center alley” is home to the largest concentration of Internet servers in the world.

Rice told analysts Monday that the MVP “is an incredibly important piece of infrastructure. . . because it is of vital importance for the energy security of that region and of the United States.”

The acquisition of Equitrans should also give EQT “more control in gaining access to markets for its natural gas” to meet demand as appetite for the fuel increases around the world, according to Stratas Advisors president John Paisie. . Gas prices in the Appalachian region have been selling at a discount due to logistical constraints.

The United States is the world's largest producer and exporter of natural gas, and its production periodically breaks records.

“As we enter the global natural gas era, it is imperative that American natural gas companies evolve their business models to compete on the global stage,” Rice said.

However, US gas prices fell to a near three-decade low last month, excluding a handful of days of the Covid-19 pandemic, as rising production and an unusually warm winter depressed demand. of the fuel.

The EQT deal for Equitrans follows a series of deals in the pipeline over the past year, including Oneok's $19 billion acquisition of Magellan Midstream Partners and Energy Transfer's $7.1 billion purchase of Crestwood Equity Partners of dollars. It comes amid a broader surge in merger and acquisition activity in the U.S. oil and gas industry, as companies make bets on the future of the energy mix and appetite for building new pipelines wanes. in the midst of a difficult legal environment.

While the International Energy Agency expects global demand for fossil fuels to peak this decade, many analysts expect gas to have greater longevity than oil, given its reputation as a low-carbon fuel that will help to close the transition from coal to renewable energy.

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