Energy Prospectus

Highly attractive, low-risk, strategic bolt-on acquisition

PITTSBURGH, Oct. 27, 2020 /PRNewswire/ -- EQT Corporation (NYSE: EQT) today announced that it has entered into a definitive purchase and sale agreement with Chevron U.S.A. Inc. under which EQT will acquire Chevron's upstream and midstream assets located in the Appalachian Basin for $735 million, subject to customary adjustments at closing. The transaction is expected to close late in the fourth quarter of 2020, subject to customary closing conditions, with an effective date under the purchase and sale agreement of July 1, 2020. EQT intends to finance the acquisition, subject to market conditions and other factors, with cash on hand, drawings under its revolving credit facility and/or one or more capital markets transactions.

Asset Highlights:

Current net production of approximately 450 MMcfe per day; 75% gas / 25% liquids

Approximately 100 work-in-progress wells

Approximately 125,000 core net Marcellus acres; 335,000 total net Marcellus acres

31% ownership interest in Laurel Mountain Midstream

Two water systems and associated infrastructure located in PA and WV


Transaction Highlights:

Low-risk, strategic bolt-on acquisition

Valuation underwritten by PDP value and protected through hedging

Extensive work-in-progress inventory enables capital efficient development

Favorable operating cost structure immediately improves margins and boosts free cash flow profile

Expected to be accretive to leverage, free cash flow per share and NAV per share

President and CEO Toby Rice stated, "This acquisition is a natural bolt-on extension of EQT's dominant position in the core of the southwest Marcellus and supplements our already impressive asset base. With the purchase price underpinned by PDP value, the extensive work-in-progress well inventory, core undeveloped acreage and water assets provide material value upside. Our unique knowledge of these assets, coupled with our superior operating model, puts these assets in the right hands to maximize the embedded value."

Rice continued, "The digital work environment and business processes that we have created will allow for the seamless integration of these assets into our existing portfolio, while the favorable financial impacts will benefit both equity and debt holders. This transaction represents another strategic step this team is taking to create value for all stakeholders, while enhancing the durability and sustainability of our business."
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PITTSBURGH, Oct. 27, 2020 /PRNewswire/ -- EQT Corporation (NYSE: EQT) (the Company or EQT) announced today that it has commenced an underwritten public offering of 20,000,000 shares of its common stock (the Offering). The Company intends to grant the underwriters a 30-day option to purchase up to an additional 3,000,000 shares of its common stock. The Offering is subject to market and other conditions, and there can be no assurance as to whether or when the Offering may be completed.

The Company intends to use the net proceeds from the Offering to partially fund the purchase price of the Company's recently announced acquisition of certain upstream and midstream assets located in the Appalachian Basin from Chevron U.S.A. Inc. (the Chevron Acquisition). The consummation of the Offering is not conditioned upon the completion of the Chevron Acquisition and the consummation of the Offering is not a condition to the completion of the Chevron Acquisition. If the Chevron Acquisition is not consummated, the Company intends to use the net proceeds of the Offering to repay or redeem outstanding indebtedness, including those with near-term maturities, and for general corporate purposes.

I've added the impact of the assets being acquired from Chevron to my 2021 forecast. Here is how 2021 now compares to First Call's forecasts. NONE of the forecasts submitted to Reuters (the First Call database) have been updated since the Chevron acquisition has been announced

FC Estimates / My updated forecast
2021
Revenues: $4,100 million / $5,217 million
Earnings per share: $0.50 / $1.41
Operating CFPS: $6.17 / $8.65

EQT is trading for $15.88 at the time of this post. My valuation is now $25.00

TipRanks: "In the last 3 months, 11 ranked analysts set 12-month price targets for EQT of $16.50 to $24.00. The average price target among the analysts is $19.10."

Note from Scotiabank:

OUR TAKE: Positive. EQT has been a rumored acquirer for months, from asset
packages to corporate deals. The last handful of upstream transactions in the natural
gas space continue to point to a buyers’ market, with deal flow at sub-$1,500/flowing
mcfe. EQT’s $735mm purchase of Chevron’s Appalachian business appears to be
checking most (if not all the boxes) and given the rumors, it’s a deal that should not be a
surprise to the market. Sector Outperform rating intact.

TRANSACTION POSITIVES
• Adds significant flowing production of 450 mmcfe/d, or less than $1,500/flowing assuming 5x-7x midstream multiple
• Includes a high well count of work in process inventory of ~100 wells (50 PA / 50 WV)
• Asset overlap across SWPA and WV
• Adds only $75mm in maintenance capex to keep production flat
• No firm commitments allowing for EQT’s overall cost structure to come down
• Incremental FCF helps reduce leverage (i.e., paying down the 2022 maturity) and allows them to potentially hold on to their ETRN stake

Assets include both upstream and midstream infrastructure in the Appalachian
basin. The transaction includes 335,000 net acres in the Marcellus, including 55% in
SWPA/Marshall County, WV, or 70,000 core net undeveloped acres. See asset map
on Exhibit 1 on page 2. In addition to 450 mmcfe/d of net production and ~100 wells in
progress, the exchange includes a 31% interest in Laurel Mountain Midstream, CVX’s
midstream provider. The LTM has generated $15mm of EBITDA to CVX. While this
business has likely been on the decline, it is a nice addition, and could potentially be
used in a negotiation with ETRN.