(Bloomberg) — US natural gas producer EQT Corp. agreed to buy back former unit Equitrans Midstream Corp. for about $5.5 billion in stock, the latest in a flurry of deals in the oil and gas pipeline industry.
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Equitrans owns the controversial Mountain Valley Pipeline venture, which is years behind schedule after facing legal battles and local opposition. The project, due to be completed in the second quarter, will take gas from the Marcellus shale basin in Appalachia — the biggest US source of the fuel — to markets in the Southeast.
The deal is expected to close in the fourth quarter and will create annual cost savings of $250 million, EQT said Monday in a statement.
“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,” EQT Chief Executive Officer Toby Rice said in the statement.
Rice has previously said the firm was evaluating liquefied natural gas export projects along the East Coast. Gas companies in the US have seen great potential for making money out of LNG, which involves shipping the fuel from the US — where supply is plentiful — to other parts of the world.
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Equitrans was spun out of EQT — the largest US natural gas producer — in 2018 following a campaign by activist investment firm Jana Partners.
Equitrans shares jumped 7.5% in US premarket trading as of 8:06 a.m. in New York. EQT fell 4.3%.
Monday’s deal adds to a string of recent pipeline transactions announced in North America, including ONEOK Inc.’s purchase of Magellan Midstream Partners LP in September and Energy Transfer LP’s takeover of Crestwood Equity Partners LP in November.
Each outstanding share of Equitrans will be exchanged for 0.3504 of a share of EQT, representing an implied value of $12.50 per Equitrans share, EQT said.
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As a result of the deal, EQT shareholders are expected to own about 74% of the combined company, EQT said. Guggenheim Securities LLC is lead financial adviser to EQT on the transaction and RBC Capital Markets is financial adviser to the company. Barclays Plc and Citigroup Inc. are financial advisers to Equitrans.
(Updates with context in fifth paragraph, stock prices in seventh.)
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