Stay informed with free updates
Simply subscribe to myFT Digest for the energy sector – delivered straight to your inbox.
US natural gas producer EQT announced it will acquire the pipeline business it previously owned, creating an integrated company worth $35 billion as a wave of merger and acquisition activity continues in the local energy sector.
Pittsburgh-based EQT, one of the largest U.S. natural gas producers, spun off Equitrans Midstream in 2018 due to pressure from activist investor Jana Partners. This left the first company with a focus on gas exploration and production, while the second company focused on storage and transportation.
The all-stock deal for Equitrans, with an equity value of about $5.5 billion, represents a rare example in recent history of an oil exploration company buying assets midway. EQT said it would give the company more control over access to gas markets and could help address the expected jump in AI-driven energy use 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 centers of gas production in the United States.
Equitrans is the joint owner and operator of the controversial 303-mile Mountain Valley Pipeline project, which will transport gas from West Virginia to the more populous state of 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 ability to meet the expected increase in energy demand caused by the use of artificial intelligence in the region. The Data Center in Northern Virginia is home to the largest concentration of Internet servers in the world.
Rice told analysts on Monday that MVP is “a very important piece of infrastructure… because it is critical to the energy security of that region and the United States.”
The Equitrans acquisition should give EQT “more control in accessing its natural gas markets” to meet demand as appetite for the fuel grows around the world, according to Stratas Advisors president John Pacey. Gas prices in Appalachia were sold at a discount due to logistical constraints.
The United States is the world's largest producer and exporter of natural gas, with its production regularly breaking records.
Recommended
“As we enter the global natural gas era, it is essential for U.S. natural gas companies to evolve their business models to compete on the global stage,” Rice said.
However, US gas prices fell to their lowest level in three decades last month, barring a few days in the Covid-19 pandemic, as rising production and an unusually warm winter depressed demand for the fuel.
EQT's deal with Equitrans comes on the heels of a series of pipeline deals in the past year, including Oneok's acquisition of Magellan Midstream Partners for $19 billion, and Energy Transfer's purchase of Crestwood Equity Partners for $7.1 billion. This comes amid a broader boom in merger and acquisition activity in the US oil and gas industry, as companies bet on the future of the energy mix and appetite for building new pipelines wanes amid 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 a longer lifespan than oil given its reputation as a low-carbon fuel that would help bridge the shift from coal to renewables.
