EQT Corp. and Range Resources Corp. on Tuesday rebuffed an investment firm's end-of-the-year pitch urging the companies to merge in a deal that it argued would create "the largest and best-positioned natural gas producer in the United States."
In a letter and presentation sent last week to EQT, W. Barnes Hauptfuhrer, managing partner of Charlotte-based Chapter IV Investors LLC, encouraged the company's board to strongly consider an all-stock merger with either Range or Antero Resources Corp.
"We think now is the logical time to ask the threshold question -- is EQT better off as one of many comparably sized independent producers in the Marcellus/Utica or would the company and its shareholders be better off combining with another large southwest Appalachia producer, capturing the significant synergies associated with either potential merger and becoming the dominant producer and gatherer of natural gas in southwest Appalachia for years to come?" wrote Hauptfuhrer.
According to the letter, Chapter IV has been an EQT shareholder for more than six years, and it also owns stakes in Range and Antero. While the firm said none of the companies need to acquire, sell or merge with another entity, praising each management team for its work in recent years, it argued that if such a deal were completed, it could create a $25 billion company.
"We have consistently stated and continue to believe that consolidation in the Marcellus and Utica makes good business sense, as longer laterals can considerably increase well economics," said EQT spokeswoman Natalie Cox. "That said, however, smaller transactions are more likely and can be accomplished more quickly than larger deals."
Both EQT and Range said they don't often speculate on the market, but the companies made clear Tuesday that no such transaction is being considered.
Range "has not been contacted by EQT Corp. regarding a potential merger of the two companies, nor does Range plan to initiate any such discussions," the company said in a statement. "If EQT or any other entity were to contact Range regarding a potential transaction, Range's board will evaluate any such potential transaction considering the best interests of its stockholders given the circumstances at the time."
Chapter IV noted that EQT’s stock is trading about 37% below where it was at the beginning of the commodities downturn in mid-2014. It said the time is right for more consolidation in the Appalachian Basin. Range Resources acquired Memorial Resource Development Corp. in a $4.4 billion all-stock deal last year, while EQT said in October that it would acquire West Virginia pure-play Trans Energy Inc. for $513 million. Antero was also active last year spending hundreds of millions of dollars to block up its acreage in the Northeast.
Antero could not be reached to comment about the proposal. All three companies have amassed leading asset positions in the Appalachian Basin in recent years and are among its top producers.