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Pittsburg-based EQT Corp confirmed the purchase of Rice Energy for a $6.7 billion sum on Monday – a union that would create the largest natural gas producer in the United States, according to a new report by Argus Media.
The board of directors of both EQT and Rice have approved the transaction, but shareholders will have to vote in favor of the merger as well. Rice stock-owners can expect $1.3 billion in payouts.
The move will expand EQT’s hold on the U.S. natural gas sector as the American fossil fuel reaches new markets internationally. Energy Secretary Rick Perry spent a week in Japan in early June to promote U.S. LNG sales in Asia.
"This transaction brings together two of the top Marcellus and Utica producers to form a natural gas operating position that will be unmatched in the industry," EQT CEO Steve Schlotterbeck said. The company will now focus its efforts on decreasing per-unit costs to make exports more competitive.
Seeking Alpha reported that prices must rise above the $3 per Mcf range to benefit EQT shareholders the most.
Rice Energy stocks jumped 24 percent to $24.47 after the announcement – still below the $27.05 per-share value EQT offered in the buyout. EQT shares traded down 9.4 percent Monday.
“EQT is a decade behind in fracking technology used by industry leaders in Marcellus/Utica," Dallas Salazar of Atlas Consulting told Reuters. "EQT needs a lot - and Rice offers a lot of what it needs."
EQT’s average natural gas sales volume will rise by 1.3 billion cubic feet per day once the acquisition, part of corporate “empire building”, is complete. After all is said and done, EQT will be responsible for 5 percent of the nation’s natural gas production.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…