EQT Says Range Deal Cuts Its Breakeven Below $2 Per MMBtu, With $325 Million In Base Synergies
EQT's all-stock deal for Range targets a 1x debt ceiling, nearly $14 billion in five-year free cash flow, and no FTC trouble, executives said.
EQT says its pending all-stock purchase of Range Resources should deliver $325 million in annual base synergies and a combined breakeven below $2 per million Btu, executives told analysts on Monday's joint call. CEO Toby Rice said he does not expect antitrust problems with the FTC.
Synergies and a breakeven under $2
Rice said diligence turned up the $325 million of base annual savings, largely corporate and operating efficiencies, plus more than $300 million of longer-term upside from midstream optimization, gas, LNG and LPG marketing, premium supply deals and faster inventory development. The base savings will be phased in over two to three years, he said.
CFO Jeremy Knop said most synergies should show up in operating expenses rather than capital spending. EQT forecasts an unlevered free cash flow breakeven, the gas price needed to generate positive free cash flow before interest, below $2 per MMBtu.
The terms: Range holders get 0.987 EQT shares per Range share, leaving EQT holders with about 73% of the combined company and Range holders about 27%. Pro forma enterprise value exceeds $50 billion, and closing is expected in the first quarter of 2027, subject to shareholder and regulatory approvals.
A 1x leverage ceiling
Knop said EQT is setting a pro forma maximum debt target of 1x net debt to adjusted EBITDA at a $2.75 NYMEX gas price. He projected nearly $14 billion of five-year cumulative free cash flow at that price, and more than $38 billion in a $5 per MMBtu scenario.
Asked about regulators, Rice answered "No. We do not." He said no scheduling changes are expected for roughly the first 12 months.
Why now, and who is Range
Range Resources is a Fort Worth-based natural gas, NGL and oil producer with its main operations in the Marcellus Shale in Pennsylvania. Rice said the catalyst for acting now was demand emerging in Appalachia. He put EQT's productive capacity above 12 Bcf a day and Range's at about 5 Bcf a day if it doubled output, for 17 Bcf a day combined, against a demand opportunity that could reach 20 Bcf a day.
Rice also said holding about 15% of production exposed to international markets would let the combined company add roughly 2 million tons per annum of incremental LNG capacity.
EQT still has to file its S-4 registration statement, which will include the joint proxy for both companies' shareholder votes.
Sources
- 425 — EQT Corp re: RANGE RESOURCES CORP (RRC) — SEC EDGAR
- EQT to Buy Range Resources, Creating Largest US Gas Producer (1) — news.bloomberglaw.com
- EQT Announces Strategic Acquisition of Range Resources, Creating America's Undisputed Natural Gas Champion – Company Announcement - FT.com — Financial Times
- EQT to acquire Range Resources, creating U.S. gas giant - The Globe and Mail — Reuters
- RRC Stock Surges To Over 11-Year High, RBRK Shares Hit Record Levels – What’s Fueling The Rallies Today? — Yahoo Finance
- Range Resources spikes 18% on EQT acquisition agreement (RRC:NYSE) | Seeking Alpha — seekingalpha.com
