EQT Corp (EQT) Update - June 29

[dan_s]

EQT closed on June 29 at $21.16. I am increasing my valuation by $4 to $36.

Since May 24th four analysts have updated their price targets on EQT. They all rate the stock a BUY and their price targets are $24 to $28. It is clear to me that their valuations are based on much lower gas prices than we see today on the NYMEX strip.
They also seem to be missing the incredible upside that EQT has in 2H 2021 once the acquisition of Alta Resources closes. The acquisition will add 1 Bcfe per day of additional production putting EQT on the path to a 2021 exit rate of 5.7 Bcfe per day of production with a production mix of 94.7% dry gas, 5.0% NGLs and 0.3% crude oil.

EQT is the largest producer of natural gas in the U.S. by a wide margin.

EQT is on track to FCF from operations of $1.4 Billion in 2021.

Assuming a realized natural gas price of $3.00/mcf in 2022, net of regional differentials and cash settlements on their hedges, EQT should generate revenues of more than $5.3 Billion and operating cash flow of more than $3.2 Billion ($8.33/share).

My current valuation is $36.00 for EQT, but a reasonable 12-month price target is 6X operating cash flow per share. For those of you that are "mathematically impaired" that means $50.00 per share is a justified long-range price target for this large-cap.

My updated forecast/valuation model for EQT will be posted to the EPG website this evening.

I have now updated my forecast/valuation models for all four of the gassers in the Sweet 16 (AR, CRK, EQT and RRC). All four are trading at a deep discount to my valuations. CRK seems to have the most upside based on my models, but it is way off the Wall Street Gang's Radar Screen. They need to spend more time and money getting their story out there. As winter approaches investors will take more interest in the natural gas producers. If Q4 gas prices are near the current NYMEX strip prices ($3.60 to $3.74), this quartet should be 50% higher within six months.