Appalachia E&P EQT Corp. has closed an all-stock deal to buy and Equitrans Midstream Corp. for roughly $5.45 billion.

Post transaction, EQT aims to swiftly vertically integrate Equitrans' midstream assets, the most notable of which is the Mountain Valley Pipeline.

EQT said the combined company is projected to have an unlevered NYMEX free cash flow breakeven price of approximately $2.00/ MMBtu, “which is at the low end of the North American cost curve and ensures robust free cash flow generation through all parts of the commodity cycle,” EQT said in a July 22 press release.

EQT additionally has identified more than $425 million of annual synergies associated with the combination that could drive EQT's long-term free cash flow breakeven price down even further, EQT said.

EQT will sacrifice some free cash flow to pay off Equitrans’ debt of between $7.6 billion and $8 billion. EQT will also sell assets to reduce borrowings. Including equity and debt, the deal is valued at roughly $13 billion. EQT has said it sees a clear path to $5 billion in divestitures and began a divestiture program in April with an asset swap with Equinor in the Appalachian Basin.

The integration of Equitrans' midstream assets immediately improves the economics of EQT's approximately 4,000 drilling locations, unlocking unrivaled terminal value at a time when demand for natural gas is inflecting both domestically and abroad, the company said.

Toby Z. Rice, president and CEO of EQT, said, "We are excited to complete this highly strategic transaction significantly ahead of our original timeline, and welcome both Equitrans employees and shareholders to EQT. The early close resulted in nearly $150 million of savings relative to our original forecast and brings forward our de-leveraging and synergy capture timetables." 

In conjunction with the closing, and as previously announced under the terms of the merger agreement, three former Equitrans directors, Vicky A. Bailey, Thomas F. Karam, and Robert F. Vagt, have joined the EQT’s board effective immediately.

Guggenheim Securities LLC acted as lead financial adviser and RBC Capital Markets LLC acted as a financial adviser to EQT. Kirkland & Ellis LLP served as EQT's legal counsel on the transaction.

 Barclays and Citi served as financial advisers to Equitrans and Latham & Watkins LLP served as legal counsel to Equitrans.

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