US Gas Firm EQT Nears Deal to Buy Appalachia Producer, Midstream Assets

(Bloomberg) -- EQT Corp., the largest US natural gas producer, is in advanced talks to acquire THQ Appalachia I LLC to expand in the Marcellus shale, according to people with knowledge of the matter.

THQ Appalachia, backed by Tug Hill Operating and Quantum Energy Partners, and some midstream assets would be valued in the deal at about $5.2 billion, the people said, asking not to be identified discussing private information. The transaction will include Tug Hill’s XcL Midstream, a pipeline firm that moves gas in Appalachia to market.

An announcement could come as soon as Tuesday, the people said. A final agreement hasn’t been reached and talks could still end without one, the people said.

A spokesperson for EQT declined to comment. Representatives for Tug Hill, Quantum and XcL didn’t immediately respond to requests for comment.

EQT, led by Chief Executive Officer Toby Rice, has been expanding in recent years via a series of acquisitions to consolidate holdings across the Marcellus in the northeast US. The company last year acquired assets from Alta Resources Development LLC for about $2.9 billion. It bought Chevron Corp.’s assets in Appalachia for $735 million in 2020. 

The move has largely paid off as a global supply crunch has sent natural gas prices to the highest levels in more than a decade. While the driller’s ability to profit from the rally has been curbed by hedges against the possibility of a gas slump, the company is still set to generate record amounts of cash from its operations while slashing debt and boosting returns to shareholders. Its shares have more than doubled over the past year. 

“EQT’s previous acquisitions have worked in its favor,” said Vincent Piazza, a Bloomberg Intelligence analyst. “While near-term prices seem stretched to us, we still favor consolidation for scale and size in Appalachia.”

THQ Appalachia is an exploration and production company operating in West Virginia, according to its website. Private equity firm Quantum Energy invested in Fort Worth, Texas-based Tug Hill in 2014 and also has an equity commitment in THQ Appalachia, which is operated by Tug Hill.

“THQ would be a good fit for EQT, given the proximity of the lands, solid recent well results from THQ and EQT’s recent positive comments about its own West Virginia assets,” Scotiabank analyst Cameron Bean said in a note to clients. 

EQT fell 2.4% to $46.15 as of 10:54 a.m. in New York, which compares with a 1.2% drop in the S&P Supercomposite Oil & Gas Exploration & Production Index. 

(Updates with analyst comments beginning in seventh paragraph)

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