The deal mainly involves Equinor transferring its 100% stake and operatorship in Ohio's Marcellus and Utica shale formations to EQT in exchange for a non-operational 40% interest from the latter in the Northern Marcellus formation in Pennsylvania
Equinor will divest 100% interest in and operatorship of its onshore asset in the Appalachian Basin to EQT as part of the deal. (Credit: Stuart Conway / Equinor)
Norwegian energy company Equinor and American natural gas producer EQT have signed an asset swap deal pertaining to certain onshore assets in the US.
The deal mainly involves Equinor transferring its 100% stake and operatorship in Ohio’s Marcellus and Utica shale formations in the Appalachian Basin, situated in southeastern Ohio, to EQT. This will be in return for a non-operational 40% interest from EQT in the Northern Marcellus formation in Pennsylvania.
To balance the transaction, Equinor will provide a cash payment of $500m to EQT.
Equinor said that the asset swap deal is aimed at bolstering resources contributing to increased cash flow and further decreasing the CO2 emissions intensity within the firm’s international portfolio.
After the transaction, the Norwegian energy major will raise its average working interest from 15.7% to 25.7% in specific Northern Marcellus gas units operated by Chesapeake. In order to fulfill prior gas sales obligations, Equinor will engage in a gas buy-back arrangement with EQT.
Equinor exploration and production international executive vice president Philippe Mathieu said: “With this transaction, we continue to high-grade the US portfolio and improve profitability by strengthening our gas position in the most robust part of the Appalachian Basin. These assets are well positioned to leverage anticipated positive developments in the US gas market.
“The proposed swap improves portfolio robustness with an expected reduction in well break-evens and upstream carbon intensity. This also means that we have now fully exited all operated positions onshore US.”
Through the agreement, Equinor will acquire an estimated 225 million cubic feet per day (MMcf/d) of projected 2025 net production from the Northern Marcellus shale formation.
On the other hand, EQT will receive approximately 26,000 net acres in Monroe County, Ohio, with an estimated 2025 net production of 135 million cubic feet equivalent per day (MMcfe/d) directly offsetting its operated acreage.
Additionally, EQT will gain around 10,000 net acres in Lycoming County, Pennsylvania, with a projected 2025 net production of approximately 15MMcfe/d from its existing operated assets.
Furthermore, EQT will obtain the remaining 16.25% ownership in the company-operated gathering systems that serve core operated acreage in Lycoming County, Pennsylvania.
EQT president and CEO Toby Rice said: “This transaction marks an extremely positive start to our divestiture program, bringing in over $1.1bn of value, including synergies and development plan optimisation, for 40% of our non-operated assets, while retaining gas price upside.
“We plan to opportunistically divest the remaining portion of our non-operated assets in Northeast Pennsylvania and have tremendous confidence in being able to achieve our de-leveraging goals.”
Contingent on customary closing adjustments, the mandated regulatory approvals and clearances, the deal is anticipated to close in late Q2 2024.
Last month, EQT signed a deal to acquire Equitrans Midstream in a move to create a major vertically integrated natural gas enterprise in the US, with an initial enterprise value of over $35bn.