PITTSBURGH, May 6, 2021 /PRNewswire/ -- EQT Corporation
(NYSE: EQT) today announced that it has entered into a purchase
agreement with Alta Resources Development, LLC (Alta), pursuant to
which EQT will acquire all of the membership interests in Alta's
upstream and midstream subsidiaries for approximately $2.925 billion, subject to customary closing
adjustments. The transaction is expected to close in the third
quarter of 2021, with an effective date of January 1, 2021.
Transaction Highlights:
- Attractive valuation with high-margin and robust free cash flow
generation
-
- Projected annual free cash flow(1) of $300-$400
million
- Projected annual adjusted EBITDA(1) of $550-$600
million
- Purchase price implies an ~18% unlevered free cash flow
yield(1)
- Low leverage acquisition accelerates EQT's path back to
investment grade metrics
-
- Immediately reduces leverage(2); improving 0.3x by
year-end 2022
- Establishes a leverage(2) profile comfortably below
2.0x target
- Accretive to free cash flow per share
-
- Projected to increase free cash flow(1) by 55%, or
$2.0 billion, through 2026
- Free cash flow per share(1) improves by more than
15% through 2026
- Adds highly prolific inventory with superior well economics in
the core of the Northeast Marcellus
-
- Integrated midstream assets and mineral ownership drive high
margin operated development
- Direct exposure to the geologic core through non-operated
position
President and CEO Toby Rice
stated, "Today marks another major milestone for EQT as we continue
on our path to becoming the operator of choice for all of our
stakeholders. The acquisition of Alta's assets represents an
attractive entry into the Northeast Marcellus while accelerating
our deleveraging path, providing attractive free cash flow per
share accretion for our shareholders and adding highly economic
inventory to EQT's already robust portfolio. In addition to
increasing our long-term optionality, we believe this transaction
accelerates both our path back to investment grade metrics and our
shareholder return initiatives. We look forward to applying our
differentiated modern operating model to maximize the prolific
value embedded in these premier assets."
Asset Overview: Expansive Position in the Core Northeast
Marcellus
- 300,000 core net Marcellus acres; 98% held by production
-
- 222,000 net acre operated position
- 78,000 net acre non-operated position
- 1.0 Bcfe per day of current net production, 100% dry gas
- 300-miles of owned and operated midstream gathering
systems
- 100-mile freshwater system with 255 million gallons of storage
capacity
- Attractive firm transportation portfolio to premium demand
markets
- Existing hedge book covering approximately 35% of production
through 2022
Strategic Rationale: Checks all the Boxes for
Attractive Consolidation
This acquisition fits firmly within
our strategic acquisition framework, while also establishing a
significant and strategic position in the core of the Northeast
Marcellus. We expect the acquisition to be accretive to both free
cash flow per share and net asset value (NAV) per share, while also
accelerating our deleveraging strategy and underscoring our
commitment to achieving investment grade credit metrics.
Approximately 1.0 Bcfe per day of high-margin net production is
expected to bolster our free cash flow profile by adding
approximately $300-400 million of
annual free cash flow(1) and a total of approximately
$2.0 billion of free cash
flow(1) through 2026, an improvement of approximately
55% compared to our pre-transaction outlook. As a result,
this transaction is projected to accelerate our deleveraging
strategy, comfortably pulling near-term leverage(2)
below our 2.0x target. We estimate this transaction will
improve leverage(2) by 0.3x and 0.5x by year end 2022
and 2023, respectively. Our improved leverage profile
provides a compelling case for an investment grade credit rating
and is expected to accelerate our strategy to return value to
shareholders.
This strong free cash flow contribution is a result of Alta's
low-cost structure, driven by low royalty burdens averaging 14%,
direct mineral ownership, a premium firm transportation portfolio
and an owned and operated midstream gathering system serving the
operated acreage position. We expect the transaction to reduce
EQT's pro forma annual corporate free cash flow
breakeven(3) gas price by at least $0.10 per mmbtu.
Transaction Financing:
The total
purchase price for the transaction is $2.925
billion, consisting of $1.0
billion in cash and approximately $1.925 billion in EQT common stock issued
directly to Alta's shareholders.
We expect to fund the $1.0 billion
of cash consideration with cash on hand, drawings under our
revolving credit facility and/or through one or more debt capital
markets transactions, subject to market conditions and other
factors. Bank of America, N.A. and JPMorgan Chase Bank, N.A. have
jointly provided $1.0 billion of
committed financing in connection with the transaction and we have
access to over $1.4 billion of
liquidity under our unsecured credit facility.
The stock consideration consists of approximately 105 million
shares of EQT common stock representing $1.925 billion, based on the 30-day
volume-weighted average price as of May 5,
2021. The transaction was unanimously approved by our Board
of Directors. EQT shares issued as part of the transaction will be
distributed directly to Alta shareholders, which represent a
diverse set of financial institutions and individuals. No Alta
shareholder will receive more than 5% of EQT's pro forma
outstanding shares of common stock in connection with the
transaction.
The transaction is expected to close in the third quarter of
2021, subject to satisfaction of customary closing conditions,
including the approval by EQT's shareholders of the issuance of the
common stock consideration. All post effective date purchase price
adjustments will be netted against the stock consideration and are
expected to result in a reduction of approximately 11 million
shares issued at closing.
BofA Securities served as financial advisor to EQT, and Latham
& Watkins, LLP is serving as EQT's legal counsel on the
transaction. Citi Global Markets Inc. served as exclusive financial
advisor to Alta, and Kirkland & Ellis LLP is serving as Alta's
legal counsel.
About EQT Corporation
EQT Corporation is a leading independent natural gas production
company with operations focused in the cores of the Marcellus and
Utica Shales in the Appalachian Basin. We are dedicated to
responsibly developing our world-class asset base and being the
operator of choice for our stakeholders. By leveraging a
culture that prioritizes operational efficiency, technology and
sustainability, we seek to continuously improve the way we produce
environmentally responsible, reliable and low-cost energy. We
have a longstanding commitment to the safety of our employees,
contractors, and communities, and to the reduction of our overall
environmental footprint. Our values are evident in the way we
operate and in how we interact each day – trust, teamwork, heart,
and evolution are at the center of all we do.
EQT Management speaks to investors from time to time and the
analyst presentation for these discussions, which is updated
periodically, is available via EQT's investor relations website at
https://ir.eqt.com.
Investor Contact:
Andrew
Breese
Director, Investor Relations
412.395.2555
ABreese@eqt.com
Important Additional Information will be Filed with the
SEC
This news release is being made in respect of the proposed
transaction involving EQT Corporation (EQT) and Alta Resources, LLC
(Alta), and one or more of their subsidiaries. The issuance of the
stock consideration for the proposed transaction will be submitted
to the shareholders of EQT for their consideration. In
connection with the proposed transaction, EQT will file with the
U.S. Securities and Exchange Commission (the SEC) a proxy statement
(the proxy statement). INVESTORS AND SHAREHOLDERS OF EQT ARE
URGED TO CAREFULLY READ THE PROXY STATEMENT, AND OTHER RELEVANT
DOCUMENTS TO BE FILED WITH THE SEC BY EQT, IN THEIR ENTIRETY WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT EQT, ALTA, THE PROPOSED TRANSACTION AND RELATED
MATTERS. Investors and shareholders will be able to obtain a
free copy of the proxy statement and other documents filed with the
SEC by EQT through the website maintained by the SEC at www.sec.gov
or through EQT's website at www.eqt.com.
Participants in the Solicitation
EQT and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from EQT's shareholders
in respect of the proposed transaction contemplated by the proxy
statement. Information regarding the persons who are, under
the rules of the SEC, participants in the solicitation of the
shareholders of EQT in connection with the proposed transaction,
including a description of their direct or indirect interests, by
security holdings or otherwise, will be set forth in the proxy
statement when it is filed with the SEC. Information
regarding EQT's directors and executive officers is contained in
its Annual Report on Form 10-K for the year ended December 31, 2020 and its Proxy Statement on
Schedule 14A, dated April 20, 2021,
which are filed with the SEC.
Cautionary Statements Regarding Forward-Looking
Information
This news release contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995 and other federal securities laws. Forward-looking
statements can be identified by words such as "anticipates,"
"believes," "forecasts," "plans," "projects", "estimates,"
"expects," "should," "will" or other similar expressions.
Statements that do not relate strictly to historical or current
facts are forward-looking. Without limiting the generality of the
foregoing, forward-looking statements contained in this news
release specifically include plans, expectations, goals,
projections, and statements about the benefits of the proposed
transaction involving EQT and Alta, including projected impacts on
EQT's free cash flow, deleveraging, and production volumes; EQT's
plans, objectives, strategies, expectations and intentions; and the
expected timing of completion of the proposed transaction. The
forward-looking statements included in this news release involve
risks and uncertainties that could cause actual results to differ
materially from projected results. Accordingly, investors should
not place undue reliance on forward-looking statements as a
prediction of actual results. EQT has based these forward-looking
statements on current expectations and assumptions about future
events, taking into account all information currently available to
EQT. While EQT considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks and
uncertainties, many of which are difficult to predict and beyond
EQT's control and which include, but are not limited to, volatility
of commodity prices; the costs and results of drilling and
operations; access to and cost of capital; uncertainties about
estimates of reserves, identification of drilling locations and the
ability to add proved reserves in the future; the assumptions
underlying production forecasts; the quality of technical data;
EQT's ability to appropriately allocate capital and other resources
among its strategic opportunities; inherent hazards and risks
normally incidental to drilling for, producing, transporting and
storing natural gas, natural gas liquids and oil; cyber security
risks; availability and cost of drilling rigs, completion services,
equipment, supplies, personnel, oilfield services and water
required to execute EQT's exploration and development plans; risks
associated with operating primarily in the Appalachian Basin and
obtaining a substantial amount of EQT's midstream services from
Equitrans Midstream Corporation; the ability to obtain
environmental and other permits and the timing thereof; government
regulation or action; negative public perception of the fossil
fuels industry; increased consumer demand for alternatives to
natural gas; environmental and weather risks, including the
possible impacts of climate change; disruptions to EQT's business
due to acquisitions and other strategic transactions; and
uncertainties related to the severity, and the magnitude and
duration of the COVID-19 pandemic. These and other risks and
uncertainties are described under Item 1A, "Risk Factors," of EQT's
Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on
February 17, 2021, as updated by any
subsequent Form 10-Qs, and those set forth in other documents EQT
files from time to time with the SEC.
Any forward-looking statement speaks only as of the date on
which such statement is made, and EQT does not intend to correct or
update any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by
law.
NON-GAAP DISCLOSURES
Adjusted EBITDA
Adjusted EBITDA is defined as net loss, excluding interest
expense, income tax (benefit) expense, depreciation and depletion,
amortization of intangible assets, (gain) loss on sale/exchange of
long-lived assets, impairments, the revenue impact of changes in
the fair value of derivative instruments prior to settlement and
certain other items that impact comparability between periods.
Adjusted EBITDA is a non-GAAP supplemental financial measure used
by the Company's management to evaluate period-over-period earnings
trends. The Company's management believes that this measure
provides useful information to external users of the Company's
consolidated financial statements, such as industry analysts,
lenders and ratings agencies. Management uses adjusted EBITDA to
evaluate earnings trends because the measure reflects only the
impact of settled derivative contracts; thus, the measure excludes
the often-volatile revenue impact of changes in the fair value of
derivative instruments prior to settlement. The measure also
excludes other items that affect the comparability of results or
that are not indicative of trends in the ongoing business. Adjusted
EBITDA should not be considered as an alternative to net loss
presented in accordance with GAAP.
The Company has not provided projected net income (loss) or a
reconciliation of projected adjusted EBITDA to projected net income
(loss), the most comparable financial measure calculated in
accordance with GAAP. Net income (loss) includes the impact of
depreciation and depletion expense, income tax (benefit) expense,
the revenue impact of changes in the projected fair value of
derivative instruments prior to settlement and certain other items
that impact comparability between periods and the tax effect of
such items, which may be significant and difficult to project with
a reasonable degree of accuracy. Therefore, projected net income
(loss), and a reconciliation of projected adjusted EBITDA to
projected net income (loss), are not available without unreasonable
effort.
Free Cash Flow, Free Cash Flow Yield and Free Cash Flow Per
Share
Free cash flow is defined as net cash provided by operating
activities, less changes in other assets and liabilities, less
accrual-based capital expenditures excluding capital expenditures
attributable to noncontrolling interests. Free cash flow yield is
defined as free cash flow divided by market capitalization. Free
cash flow per share is defined as free cash flow divided by the
Company's outstanding shares of common stock. Free cash flow, free
cash flow yield and free cash flow per share are non-GAAP
supplemental financial measures used by the Company's management to
assess liquidity, including the Company's ability to generate cash
flow in excess of its capital requirements and return cash to
shareholders. The Company's management believes that these measures
provide useful information to external users of the Company's
consolidated financial statements, such as industry analysts,
lenders and ratings agencies. Free cash flow, free cash flow yield
and free cash flow per share should not be considered as
alternatives to net cash provided by operating activities or any
other measure of liquidity presented in accordance with GAAP.
The Company has not provided projected net cash provided by
operating activities or a reconciliation of projected free cash
flow, free cash flow yield or free cash flow per share to projected
net cash provided by operating activities, the most comparable
financial measure calculated in accordance with GAAP. The Company
is unable to project net cash provided by operating activities for
any future period because this metric includes the impact of
changes in operating assets and liabilities related to the timing
of cash receipts and disbursements that may not relate to the
period in which the operating activities occurred. The Company is
unable to project these timing differences with any reasonable
degree of accuracy without unreasonable efforts such as predicting
the timing of its payments and its customers' payments, with
accuracy to a specific day, months in advance. Furthermore, the
Company does not provide guidance with respect to its average
realized price, among other items, that impact reconciling items
between net cash provided by operating activities free cash flow.
Natural gas prices are volatile and out of the Company's control,
and the timing of transactions and the income tax effects of future
transactions and other items are difficult to accurately predict.
Therefore, the Company is unable to provide projected net cash
provided by operating activities, or the related reconciliation of
projected free cash flow, free cash flow yield or free cash flow
per share to projected net cash provided by operating activities,
without unreasonable effort.
Net Debt
Net debt is defined as total debt less cash and cash
equivalents. Total debt includes the Company's current portion of
debt, credit facility borrowings, senior notes and note payable to
EQM Midstream Partners, LP. Net debt is a non-GAAP supplemental
financial measure used by the Company's management to evaluate
leverage since the Company could choose to use its cash and cash
equivalents to retire debt. The Company's management believes that
this measure provides useful information to external users of the
Company's consolidated financial statements, such as industry
analysts, lenders and ratings agencies. Net debt should not be
considered as an alternative to total debt presented in accordance
with GAAP.
The Company has not provided a reconciliation of projected net
debt to projected total debt, the most comparable financial measure
calculated in accordance with GAAP. The Company is unable to
project total debt for any future period because total debt is
dependent the timing of cash receipts and disbursements that may
not relate to the periods in which the operating activities
occurred. The Company is unable to project these timing differences
with any reasonable degree of accuracy and therefore cannot
reasonably determine the timing and payment of credit facility
borrowings or other components of total debt without unreasonable
effort. Furthermore, the Company does not provide guidance with
respect to its average realized price, among other items that
impact reconciling items between certain of the projected total
debt and projected net debt, as applicable. Natural gas prices
are volatile and out of the Company's control, and the timing of
transactions and the distinction between cash on hand as compared
to credit facility borrowings are too difficult to accurately
predict. Therefore, the Company is unable to provide a
reconciliation of projected net debt to projected total debt,
without unreasonable effort.
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SOURCE EQT Corporation (EQT-IR)