(Bloomberg) -- EQT Corp., the largest U.S. natural gas producer, agreed to acquire assets in Appalachia for $2.9 billion in cash and stock from closely held Alta Resources Development LLC.

The deal will give EQT Alta’s interests in upstream and midstream businesses and add 300,000 acres in the Marcellus Shale, the company said Thursday in a statement. The transaction, expected to close in the third quarter, will add about 1 billion cubic feet per day equivalent of gas production and boost EQT’s annual free cash flow by as much as $400 million.

EQT, led by Chief Executive Officer Toby Rice, has been looking to expand via acquisitions in order to achieve economies of scale as gas prices remain subdued. The Pittsburgh-based company agreed to buy Chevron Corp.’s assets in Appalachia for $735 million in October and also approached CNX Resources Corp. about a combination that same month, Bloomberg News reported.

The Alta deal “represents an attractive entry into the Northeast Marcellus while accelerating our deleveraging path, providing attractive free cash flow” and adding to EQT’s inventory, Rice said in the statement. EQT’s shares dropped 1.1% to $19.96 at 7:49 a.m. in pre-market trading in New York.

“We think this is consistent with management’s aim to accretively add scale to its core competencies,” Scott Hanold, an analyst with RBC Capital Markets, wrote in a note to clients. The acquisition was likely a much more competitive process than the deal to buy Chevron’s assets, “and the higher price paid could be indicative of that,” Hanold said.

Closely held Alta, led by Chief Executive Officer Joseph Greenberg, has Blackstone Group Inc.’s credit arm among its backers.

BofA Securities is financial adviser to EQT on the deal, and Latham & Watkins LLP is its legal counsel. For Alta, Citi Global Markets Inc. is financial adviser and Kirkland & Ellis LLP is legal counsel.

(Updates with EQT CEO quote in fourth paragraph)

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