EQT Corp.'s recent $5.2 billion acquisition might have been one of the last big deals in the Marcellus and Utica shales for a simple reason: Potential buyers in Appalachia are running out of targets.
The shale gas producer's purchase of Tug Hill Operating LLC's West Virginia wet gas position was the type of transaction investors like — a bolt-on acquisition of a large, privately backed driller that is already producing and selling oil and natural gas, which makes an immediate impact on revenues and income. The other characteristic investors look for is proximity to the buyer's own leasehold.
Appalachia is getting low on drillers with operations that match those requirements, EQT executives told analysts from Goldman Sachs.
"Management noted that following the acquisition of Alta Resources by EQT last year, Chief Oil & Gas LLC by Chesapeake Energy Corp. earlier in the year and the recently announced Tug Hill acquisition, there are few private operators remaining in southwest Appalachia," Goldman Sachs analyst Umang Choudhary said after meeting with EQT management Sept. 8. "The company sees room to own more midstream/gathering assets, though noted that the large, contractually defined step-down in gathering rates with Equitrans Midstream Corp. on their legacy footprint represents a tailwind to gathering, processing and transportation costs reductions."
CreditSights analyst Charles Johnston noted that Tug Hill was one of the "few remaining private Marcellus operators of scale."
Oil, gas deal prospects
Other oil- and gas-producing regions are primed for deals as well, according to S&P Global Market Intelligence data and news reports.
Chesapeake Energy is looking to sell its Eagle Ford Shale operations for more than $2 billion. Enhanced oil recovery driller Denbury Inc. is shopping the entire company with a $4 billion price tag, according to Bloomberg, while Reuters reported that ConocoPhillips is looking to sell its 16% interest in the offshore Gulf of Mexico oil production platform Ursa and its Princess subsea well.
Exxon divesting 'nonstrategic' units
Supermajor Exxon Mobil Corp.'s continuing program of divesting "nonstrategic" oil and gas properties is helping fuel M&A for North American oil and gas producers. Exxon cut more than $3 billion in deals in summer 2022, including sales of assets offshore California and in Canada's oil sands , along with its legacy Barnett Shale operations in Texas. Exxon also sold its Utica Shale position in Ohio to the state's largest gas producer, Ascent Resources LLC, for $270 million.
CEO Darren Wood told analysts on Exxon's second-quarter earnings call that the aggressive divestment program will continue.
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