Paralleling the merger and acquisition activity of the Permian Basin, Appalachia is experiencing its own wave of development. Although no deal has been finalized yet, EQT Corporation is in the hunt and has sent a takeover proposition to CNX Resources.
“A combination of EQT and CNX makes strategic sense given the significant overlap that can enhance operational and financial synergies,” said Scott Harold, RBC Capital Markets analyst.
CNX background
Based in Pittsburgh and founded in 1860 as Consolidation Coal Company, the firm began as a coal mining operation. More than 100 years later, it started extracting coalbed methane. Continuing its trend of diversification, the company split into CNX and Consol Energy.
Operating in the Appalachian Basin, they were the first company to utilize an electric hydraulic fracturing fleet, thereby reducing diesel, emissions and traffic. This process is simply accomplished by harnessing gas straight from the well to serve as a power source for an electric turbine.
Ranked in 2018 as the 9th largest natural gas company, CNX serves as the majority owner of CNX Midstream, which holds assets in the Marcellus Shale in Pennsylvania and West Virginia. Acquisitions include Dominion Resources and CONE Gathering LLC.
What makes CNX attractive?
- They are focused on Appalachia, where the majority of the United States’ natural gas operations occur.
- CNX stock recently increased 11%.
- According to the Natural Gas Supply Association, CNX produced 1.4 billion cubic feet a day of natural gas in the first quarter of 2020.
EQT gains
Closing this deal could account for significant increases in stature for EQT. Of the Northeast region, EQT would essentially control approximately 20% of the gas production.
As a result, the company would establish itself as the price setter in the area. Touted as potentially becoming North America’s OPEC of natural gas production, their 6.6 Bcf/d will represent approximately 7.7% of U.S. natural gas production.
The future landscape of natural gas production
“Acquiring CNX would expand EQT’s scale, industry concentration remains in focus with capital efficiency and productivity key beneficiaries. Adding about 564,000 net acres would boost EQT’s leading position in the Marcellus, but CNX’s Utica and coal-bed methane assets may not be vital,” said Vincent G. Piazza, BI energy analyst. “ Moreover, CNX Water and CNX Midstream units could be dropped into EQT’s midstream vehicle to help fund a purchase.”
Strategic increasing in assets appears part of EQT growth matrix. According to the company’s Chief Executive Officer, Toby Rice, EQT’s interest in CNX ranks as his first deal since he filled his current position. This path, however, seems to have been previously laid as EQT acquired Rice Energy in 2017 for $6.7 billion. The end game consists of a larger gas field portfolio, which would reduce costs and ultimately strengthen EQT’s power within the market.
Nick Vaccaro is a freelance writer and photographer. Besides providing technical writing services, he is an HSE consultant in the oil and gas industry with eight years of experience. He also contributes to Louisiana Sportsman Magazine and follows and photographs American Kennel Club field and herding trials. Nick has a BA in Photojournalism from Loyola University and resides in the New Orleans area. 210-240-7188 [email protected]
