The deal places the combined company ahead of Exxon Mobil Corp.
On Monday, EQT Corp, a U.S. oil and gas company disclosed it would be acquiring its peer, Rice Energy for $6.7 billion and create the biggest natural gas producer in the U.S.
The deal underscores EQT’s efforts to expand its footprint in the natural gas business.
With the news of the deal hitting the market, Rice Energy’s shares surged up by almost 27% to $24.95 in afternoon trading. However, it did not break EQT’s offer price of $27.05 per share.
As a result of the deal, EQT-Rice has surpassed Exxon Mobil Corp as the United States’ biggest gas producer.
U.S. energy companies are sinking in huge funds in gas-rich states, including Ohio, Pennsylvania and West Virginia, as a result, country could soon become the world’s No. 1 natural gas exporter.
“EQT appears to be empire building,” said analysts at Mizuho in a report, while noting that they expect EQT to begin monetizing Rice’s midstream assets by dropping them down to EQT Midstream Partners, which could result in raising $1.3 billion.
On its part, EQT has stated it would be drilling longer horizontal wells in Pennsylvania once the deal is done since most of the acreage acquired is next to either existing drills or lands it owns.
“EQT is a decade behind in fracking technology used by industry leaders in Marcellus/Utica,” said Dallas Salazar, CEO of energy consulting firm Atlas Consulting. “EQT needs a lot, and Rice offers a lot of what it needs.”
While EQT has been gradually buying acreages in the Marcellus shale field, more recently it has picked up 53,400 acres from Stone Energy Corp.
EQT has stated the deal would result in boosting its average sales volume by 1.3 billion cubic feet equivalent per day (bcfe/d) for 2017. Its core acres in the Marcellus field will also increase from 187,000 to 670,000.
The deal would also provide EQT access to Rice Energy’s midstream assets, including a 92% interest in Rice Midstream GP Holdings. The deal also sees EQT taking on debts worth nearly $1.5 billion.
The merger will see Rice Energy’s shareholders receiving $5.30 per share in cash and 0.37 EQT shares for each share they hold, said EQT.
EQT’s offer translates to $27.05 per Rice Energy share, which represents a premium of 37.4% to Friday closing price.
While Citigroup acted as EQT’s financial adviser, Rosen & Katz, Wachtell and Lipton were its legal advisers.
Vinson & Elkins LLP and Barclays Capital Inc were Rice Energy’s financial adviser and its legal adviser.