Rice Merger and Other Acquisitions

12 Months Ended

Dec. 31, 2019

Business Combinations [Abstract]

Rice Merger and Other Acquisitions

Rice Merger and Other Acquisitions

Rice Merger

On November 13, 2017, the Company completed its acquisition of Rice Energy (the Rice Merger). Total consideration for the Rice Merger was approximately $7.8 billion, consisting of approximately 91 million shares of EQT common stock and approximately $1.6 billion in cash, net of cash acquired and inclusive of amounts payable to Rice Energy employees for severance and other termination benefits and $555.5 million of aggregate cash payments made to affiliates of EIG Global Energy Partners to redeem the EIG Global Energy Partners' respective interests in Rice Midstream Holdings LLC (Rice Midstream Holdings) and Rice Midstream GP Holdings, LP. The Company accounted for the Rice Merger as a business combination using the acquisition method.

The fair value assigned to liabilities assumed was approximately $3.9 billion and was related primarily to long-term debt. In connection with the closing of the Rice Merger, the Company repaid $508.5 million of outstanding principal and $1.7 million of interest and fees under Rice Energy's credit facilities, and the credit agreements were terminated. In addition, in connection with Rice Energy's redemption and cancellation of its outstanding senior notes, the Company paid an aggregate $1.4 billion, including make whole call premiums of $63.8 million and interest payments of $13.4 million.

The fair value assigned to assets acquired was approximately $9.7 billion and was related primarily to acquired net property, plant and equipment, which included approximately 205,000 net Marcellus acres, approximately 65,000 net Ohio Utica acres and Upper Devonian and Utica drilling rights in Pennsylvania. In addition, the Company identified intangible assets associated with non-compete agreements for former Rice Energy executives. In 2019, the Company recognized impairment of these intangible assets. See Note 1.

The fair values of the acquired natural gas and oil properties were measured using discounted cash flow valuation techniques based on inputs that are not observable in the market and, as such, are considered Level 3 fair value measurements. Significant inputs include estimates of recoverable reserves, production rates, future operating and development costs, future commodity prices and market-based weighted average cost of capital. The fair value of undeveloped property was based on a market approach of comparable transactions using Level 3 inputs. The fair value of the identified intangible assets was determined using the income approach based on inputs that are not observable in the market and, as such, are considered Level 3 fair value measurements. Significant unobservable inputs include estimates of future production levels, future revenues, future costs, the probability that former executives would compete in the absence of such non-compete agreements and customer retention rates.

The Company recorded approximately $2.0 billion in goodwill as a result of the Rice Merger. During the year ended December 31, 2018, the Company recorded impairment of goodwill of $0.5 billion from continuing operations and $0.3 billion for discontinued operations and allocated $1.2 billion of goodwill to discontinued operations, including $387.1 million in unamortized carryover tax basis of tax-deductible goodwill. See Note 1 for a discussion of the 2018 goodwill impairment test.

For the year ended December 31, 2018 and 2017, the Company recorded transaction costs related to the Rice Merger of $25.4 million and $152.2 million, respectively, from continuing operations and $13.5 million and $85.1 million, respectively, from discontinued operations. For the year ended December 31, 2017, the Company recorded debt issuance costs related to the Rice Merger of $5.1 million from continuing operations and $2.9 million discontinued operations.

Other 2017 Acquisitions

In addition to the Rice Merger, the Company completed other acquisitions with third parties during the year ended December 31, 2017, through which the Company acquired, in the aggregate, approximately 158,500 net Marcellus acres, located primarily in West Virginia, and drilling rights on Ohio Utica acres.

In 2017, the Company paid, in the aggregate, net cash of $740.1 million in connection with the other 2017 acquisitions. The fair value assigned, in the aggregate, to the acquired property, plant and equipment was $750.1 million. In connection with the other 2017 acquisitions, the Company assumed $5.3 million of net current liabilities and $4.7 million of non-current liabilities.

In 2017, as a result of post-closing adjustments on acquisitions completed in 2016, the Company paid $78.9 million for additional undeveloped acreage and recorded $14.3 million in other non-cash adjustments, which reduced the fair value assigned to the acquired property, plant and equipment.

The Company accounted for the other 2017 acquisitions as business combinations using the acquisition method. The fair value of undeveloped property was based on a market approach of comparable transactions using Level 3 inputs.