(Reuters) – EQT Corp  has decided to buy back its former unit Equitrans Midstream in an all-stock deal to create an integrated natural gas provider valued at more than $35 billion, the companies said on Monday.
Shares of Equitrans jumped more than 8% in premarket trading, while EQT was down about 1%.
Under the terms of the merger agreement, each outstanding share of Equitrans common stock will be exchanged for 0.3504 shares of EQT stock, representing a value of $12.50 per Equitrans share.
The transaction is expected to close during the fourth quarter of 2024.
The deal comes at a time when U.S. natural gas producers are curbing their output and spending on drilling activity as an oversupplied market has brought the prices of the commodity down to multi-decade lows.
The transaction closely follows rival Chesapeake Energy’s  $7.4 billion bid for Southwestern Energy in January.
“As we enter the global era of natural gas, it is imperative for U.S. natural gas companies to evolve their business models to compete on the global stage against vertically integrated rivals,” EQT CEO Toby Rice said in a statement.
Equitrans is the lead partner and operator of the Mountain Valley natural gas pipeline, the only big gas pipeline under construction in the U.S. Northeast. It has encountered numerous regulatory and court fights that have stopped work several times since construction began in 2018.
It is the former pipeline business of EQT which was spun out when the company in 2018 split into two, separating its midstream operations from the gas production business.
EQT is the largest U.S. natural gas producer, which has operations focused in the cores of the Marcellus and Utica Shales in the Appalachian Basin.
The deal was first reported by Wall Street Journal earlier on Monday.
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