EQT Corp. (EQT) has decided to purchase approximately 58,000 net acres in the Marcellus Shale from a group of private operators and landowners in a stock and cash deal. The acreage is located primarily in Cameron, Clearfield, Elk and Jefferson counties in Pennsylvania.
The total consideration for this deal is about $280 million. Of this, 90% ($252 million) will be paid through EQT shares and 10% ($28 million) will be paid in cash. The acquired properties also include a 200 mile gathering system and approximately 100 producing vertical wells.
Following the completion of the deal, which is expected on or before Apr 30, EQT will have more than 500,000 net acres in this play. Most importantly, about 88% of the acquired acreage will be held in fee or by production from existing vertical wells.
We view this transaction as a prudent step by the company as EQT already has extensive midstream assets and firm contracts to gather and transport natural gas to the lucrative eastern markets.
The company continues to deliver consistent production growth on the back of its E&P segment. The company’s sizable acreage position in the Huron Shale and Marcellus Shale provides a large number of low-risk drilling locations, which should sustain its production growth for many years.
We believe that this acquisition coupled with an attractive Appalachian resource potential and an extensive drilling program will help the company achieve its target of 20% hike in gas sales this year.
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