EQT’s $6.7B purchase shows benefit of longer laterals

By North American Shale magazine staff | July 14, 2017

EQT Corp. was already one of the leading natural gas producers in the U.S. before it agreed to acquire the assets of Rice Energy for nearly $7 billion. Through its acquisition, expected to close by in Q4, EQT will now be the largest natural gas producer in the U.S. A breakdown of the deal shows why EQT will remain busy for years to come and how its rates of returns for new wells should increase because of the transaction.

Because Rice’s Pennsylvania acreage is contiguous with EQT’s, the Pittsburgh-based E&P will now be able to drill longer laterals. In the Pennsylvania-counties of Greene and Washington, EQT will be able to add Rice’s technical data into its well planning and more importantly, it can drill laterals out to 12,000 feet. Longer laterals targeting the Marcellus at $3 NYMEX gas pricing will improve ROR from 52 percent to 70 percent, according to EQT. For a 12-well pad with laterals reaching 12,000 feet, the IRR can improve to 137 percent.

In addition to the benefits gained by purchasing contiguous acreage, EQT will also increase its ability to transport product to the Gulf Coast through the acquisition of Rice-controlled infrastructure. And, EQT will become the fourth largest gas gathering infrastructure operator in the U.S.

In 2018, cash flow per share could increase by 20 percent due to the deal and in 2019, it could be worth an additional 30 percent, according to the company.