U.S. energy explorer EQT Corp. is buying $407 million worth of acreage and natural gas production from Statoil ASA, becoming the latest driller to take advantage of historically low gas prices by buying land in shale plays on the cheap.
The assets are primarily in Wetzel, Tyler, and Harrison counties, West Virginia, adding a “sizeable amount of acreage” to EQT’s core area, the company said in a statement Monday. The acquisition, expected to close in July, includes existing gas output in the Marcellus formation of the eastern U.S.
The rout in oil and natural gas prices amid a glut of supply is allowing some explorers to boost market share by snapping up acreage from struggling peers. Rice Energy Inc. said last month that it would buy assets in the Marcellus and Utica basins in Pennsylvania for $200 million from bankrupt coal producer Alpha Natural Resources Inc.
“We’re definitely going to see more consolidation,” Neal Dingmann, managing director for equity research at SunTrust Robinson Humphrey Inc. in Houston, said by phone Monday. “EQT has more cash than just about any other E&P company, so this is a deal that makes sense for them.”
EQT said in a separate statement that it’ll hold a public offering of 9.5 million shares of common stock to pay for the acquisition from Statoil USA Onshore Properties Inc. and “other potential acquisitions.” The company said it also expects to grant the underwriters an option to purchase as many as 1.425 million more shares of common stock.
EQT didn’t change its capital spending for 2016 or operating cash flow guidance. The deal boosts EQT’s core undeveloped Marcellus acreage by 29 percent, the company said. Assets include 31 Marcellus wells, 24 of which are already producing.
Acquiring additional acreage may allow drillers like EQT to become more efficient by drilling longer horizontal segments of a well, Dingmann said. EQT already has an extensive network of pipelines in the Marcellus, making it easier for the company to send supplies to market, he said.