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The Main Reason EQT is Buying Back Equitrans Midstream

Yesterday, the big news broke that driller EQT Corporation is reuniting with pipeline company Equitrans Midstream (see Stop Press! EQT Buying Equitrans Midstream in All-Stock Deal). It’s not a total surprise. In February, Equitrans had telegraphed to the market that it was actively considering an offer from an unnamed buyer (see Equitrans Looking at Potential Buyer; MVP Now Delayed Until 2Q). We sort of figured it would be another pipeline company doing the buying, but then EQT stepped up. Why? What is the primary motivation for EQT to want to buy back what it once owned?
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Will EQT Sell the Mountain Valley Pipeline (MVP) Crown Jewels?

Yesterday, EQT Corporation announced a deal to buy its former midstream division, now called Equitrans Midstream, for roughly $5.46 billion (see Stop Press! EQT Buying Equitrans Midstream in All-Stock Deal). Equitrans owns 1,200 miles of gathering pipelines (the main reason for the purchase) and another 940 miles of interstate pipelines. The crown jewels for Equitrans is the 303-mile Mountain Valley Pipeline (MVP), which is due to be finished and online in the next few months. Would EQT sell off the crown jewels?
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Stop Press! EQT Buying Equitrans Midstream in All-Stock Deal

We’ll be darned. We’ve been writing the MDN blog/news site since 2009, and a LOT has happened over those years. One of the more noteworthy events was when so-called activist investors forced EQT Corporation to split itself into two companies, which ultimately became EQT Corporation and Equitrans Midstream in November 2018 (see It’s Here! EQT Midstream Division Now Split into Standalone Co.). Equitrans became a new, completely separate company with its own board of directors and its own set of investors. And now, five-and-a-half years later, EQT dropped the bombshell announcement this morning that it has cut a deal to buy back Equitrans in an all-stock deal that creates a new company worth $35 billion. We wonder what the “activist” investors think of that.
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Low Prices Bite – U.S. NatGas Producers Drop Output 7% Past Mo.

Earlier this week, MDN told you that EQT, the country’s largest natural gas producer, had implemented an immediate cutback on natural gas production of 1 billion cubic feet per day (see Boom! EQT is Curtailing 1 Bcf/d of Gas Production Effective Now). Other M-U companies have announced similar reductions, including a 25% reduction by Chesapeake Energy (see Chesapeake Dropping 1 Rig in Marcellus as it Waits to Merge with SWN) and a 6% reduction by Coterra Energy (see Coterra Energy Slashing Marcellus Budget 55%, Production by 6%). Antero Resources said it will spend 26% less on drilling this year (see Antero 4Q – Production Up 6%, Profits Down 87%, 21 New Wells). So, with all of these cutbacks, when might we see a slowdown in gas production? Actually, it’s already happening.
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Boom! EQT is Curtailing 1 Bcf/d of Gas Production Effective Now

The country’s largest natural gas producer, EQT Corporation, headquartered in Pittsburgh and solely focused on drilling in the Marcellus/Utica, announced this morning it had sliced 1 billion cubic feet per day (Bcf/d) of its production because of the ongoing low price of natgas. Other companies have announced similar reductions, including a 25% reduction by Chesapeake Energy (see Chesapeake Dropping 1 Rig in Marcellus as it Waits to Merge with SWN) and a 6% reduction by Coterra Energy (see Coterra Energy Slashing Marcellus Budget 55%, Production by 6%). Going by EQT’s recent 4Q23 and full-year update, the company produced an average of 5.52 Bcfe/d in 2023. Slicing 1 Bcf/d from that represents 18% of EQT’s total production.
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13 New Shale Well Permits Issued for PA-OH-WV Feb 12 – 18

There were 13 new permits issued to drill in the Marcellus/Utica during the week of Feb. 12 – 18, versus 19 permits issued the prior week. Pennsylvania issued 11 new permits last week. Ohio issued no new permits. West Virginia issued 2 new permits last week. Chesapeake Energy landed the most new permits, with 5 issued in Bradford County, PA. Range Resources had 3 new permits issued in Washington County, PA. Coterra Energy had 2 new permits in Susquehanna County, PA. Southwestern Energy also had 2 new permits issued in Ohio County, WV. And EQT, the largest natural gas producer in the country, had a single new permit issued in Greene County, PA.
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Low Gas Price May Cause EQT to Shut-in Production, Curtail Drilling

EQT Corporation, the largest natural gas producer in the U.S. (100% focused on the Marcellus/Utica) released its fourth quarter and full-year 2023 update yesterday. According to CEO Toby Rice, 2023 was a big year for the company which “set multiple drilling world records” and achieved its highest completion efficiency pace ever. Last year, EQT closed on the purchase of Tug Hill and XcL Midstream, adding major assets to the company’s portfolio. In 2023, EQT signed 2.5 million tons per annum (MTPA) of LNG export agreements to export roughly 5% of EQT’s total natural gas production. The company produced 2,016 billion cubic feet equivalent (Bcfe) in 2023, which works out as 5.52 Bcfe per day. As for 2024, Rice says his company is ready and quite willing to throttle back on production and do less drilling than previously planned…if the price of natural gas stays low.
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20 New Shale Well Permits Issued for PA-OH-WV Jan 29 – Feb 4

There were 20 new permits issued to drill in the Marcellus/Utica during the week of Jan. 29 – Feb. 4, versus 27 permits issued during the prior week. Pennsylvania issued 12 new permits last week. Ohio issued 6 new permits. West Virginia issued 2 new permits last week. We had a tie for the company receiving the most permits. Seneca Resources received 4 permits to drill in Tioga County, PA, and Ascent Resources received 4 permits to drill in Harrison County, OH.
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27 New Shale Well Permits Issued for PA-OH-WV Jan 22 – 28

There were 27 new permits issued to drill in the Marcellus/Utica during the week of Jan. 22 – 28, versus 20 permits issued during the prior week. Pennsylvania issued 19 new permits last week. Ohio issued 5 new permits. West Virginia issued 3 new permits last week. Olympus Energy scored the most new permits with 7, all of them in Westmoreland County, PA. Apex Energy came in second with 6 new permits, also in Westmoreland. In fact, Westmoreland County, in southwestern PA, received 15 new permits last week, by far the most of any county.
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20 New Shale Well Permits Issued for PA-OH-WV Jan 15 – 21

There were 20 new permits issued to drill in the Marcellus/Utica during the week of Jan. 15 – 21, versus 24 permits issued during the prior week. Pennsylvania issued 11 new permits last week. Ohio issued 9 new permits. West Virginia had a big, fat zero new permits last week. Ascent Resources scored the most new permits issued, with 5 permits across two counties, Jefferson and Harrison, in Ohio. Encino Energy (EAP in the list) had the second most new permits issued with 4 permits in Harrison County, OH.
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23 New Shale Well Permits Issued for PA-OH-WV Jan 8 – 14

There were 23 new permits issued to drill in the Marcellus/Utica during the week of Jan. 8-14, versus 18 permits issued for the prior week. Pennsylvania issued 13 new permits last week. Ohio issued just 2 new permits. West Virginia issued 8 new permits — for the second week in a row. EQT scored the top slot for new permits, receiving 7 permits to drill in Lycoming and Greene counties in PA.
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DC Circuit Dismisses Case Against TGP Brought by Antero & EQT

Shippers, including drillers, utility companies, and others that buy and sell natural gas, are now free to buy and sell producer-certified gas (PCG) or responsibly sourced gas (RSG) at all pooling points across the Tennessee Gas Pipeline (TGP) system following a decision by the U.S. Court of Appeals for the District of Columbia (DC Circuit). The judges of the DC Circuit dismissed a case brought by Antero Resources and EQT Corporation attempting to block TGP’s plan. We will explain.
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EQT Announces Deal to Send 66 MMcf/d to LNG Export Plant in S. Texas

Port of Brownsville, TX, on the border with Mexico (click for larger version)

Somewhat lost in yesterday’s big news of the Chesapeake/Southwestern merger (which sucked up most of the news oxygen) was an announcement by EQT Corporation, the current largest natural gas producer in the U.S. EQT unveiled a new 15-year deal with Glenfarne Energy’s Texas LNG export facility to liquefy 0.5 million tons per annum (MTPA) for EQT, which works out to be roughly 66 million cubic feet per day (MMcf/d) of EQT’s Marcellus/Utica molecules hitching a ride to South Texas.
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EQT CEO Toby Rice: NatGas Price Below $3.50 Means Less Production

EQT CEO Toby Rice appeared on CNBC’s ‘Money Movers’ program last Friday to discuss what he expects for natural gas prices this year, what lower natural gas production means for EQT, and more. It was an interesting segment (watch it below; it is just four minutes long). Rice said, among other things, that a key issue for people to understand is that the marginal cost (i.e., the breakeven cost) in the U.S. to produce natural gas is around $3.50/MMBtu, which will hold production levels flat. Prices lower than that lead to lower production.
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24 New Shale Well Permits Issued for PA-OH-WV Dec 18 – 31

We are catching up on permits issued…for the last two weeks of December. Normally we cover permits issued for a single week. This report covers permits issued for the two weeks covering Dec. 18 – 31. Perhaps it’s a good thing we’re reporting on two weeks as Ohio’s ODNR seems to have taken the last two weeks of the year off, issuing just a single permit. There were 24 new permits issued for the final two weeks of the year, cumulatively, versus 35 permits issued for Dec. 11 – 17. Pennsylvania issued 19 new permits for the final two weeks of last year. Ohio issued just 1. And West Virginia issued 4 permits. Range Resources took the top spot with 9 permits issued in Washington County, PA.
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Stock Performance for Gas-Focused E&Ps (M-U Drillers) in 2023

How was 2023 with respect to the return on investment (ROI) in the stocks of gas-focused (largely Marcellus/Utica) drillers? Of the three classes of O&G companies — oil-focused, diversified, and gas-focused — it was the gas-focused drillers who had the best stock returns in 2023, according to an analysis by RBN Energy. Gas-weighted E&Ps posted a 7% median gain last year, according to RBN. Most of the companies in RBN’s list of gas-focused drillers have major operations in the M-U. Let’s have a look at how each one did.
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