EQT Corp. (EQT) Valuation Update - Apr 5

[dan_s]

I have updated my forecast for EQT Corp. based on my current oil & gas price deck.

EQT is the largest "Gasser" that I follow. My valuation declines by $1.25 to $41.75 per share.

The natural gas prices now being used in all of my forecast models are below current NYMEX strip prices for HH natural gas. Until the U.S. natural gas market is rebalanced and ngas in storage gets back to the 5-year average, I think we will see strip prices in Q3 and Q4 pull back this summer.

That said, EQT is not at risk of going bankrupt. Based on my operating cash flow forecast, which is $337 million below the TipRanks' cash flow forecast, EQT will still generate enough cash flow to fully fund their 2024 capex program.

To give you an idea of EQT's long-term potential, here are TipRanks' CFPS forecasts for the next four years. 2023 actual CFPS was $7.34.
TR Forecasts
> 2024: $6.35, which compares to my forecast of $5.54. My forecast shows operating cash flow over $2.3 Billion.
> 2025: $8.56
> 2026: $20.10
> 2027: $27.17

Based on the low end of EIA's electricity demand forecast, the outlook for U.S. natural gas demand is extremely bullish. There is no way to meet that level of electricity demand growth without building a lot more natural gas fired power plants.

The current natural gas prices are $8.36/MMBtu in Europe and $9.55/MMBtu in Asia.

If I raise EQT's natural gas price to $7.50/MMBtu in my 2025 forecast, their operating cash flow goes of $26.00 per share, so those TipRanks' CFPS forecasts above are not "Way out there".

BTW we had natural gas prices in the U.S. over $9.00/MMBtu as recently as August, 2022.

Today's U.S. natural gas prices are not sustainable. Market forces will rebalance the U.S. natural gas market. The question is when?