EQT Corp (EQT) Update - April 27
Posted: Tue Apr 27, 2021 1:21 pm
As I have mentioned several times here and during my podcasts, there is nothing that I can see which justifies Antero Resources (AR) and EQT Corp. (EQT) continuing to trade below book value. Range Resources (RRC) reported Q1 results that beat my forecast and I now expect AR and EQT to do the same. RRC is trading slightly above book value but still 50% below my valuation. IMO AR and EQT are both stronger companies. RRC does produce a higher percentage of liquids (~30%), which might support the higher share price for some investors.
Below is a note I received this morning from BofA Equity Research, a first class outfit. They rate EQT a BUY with a price target of $20. My valuation is $26 and likely to increase if their Q1 results and update guidance confirm my model assumptions.
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EQT is expected to report results on May 5th after market. For 1Q21, we are modeling adjusted EPS of $0.26, matching consensus of $0.26, and production of ~420 Bcf , near the high end of guidance (405-425 bcfe). Key items to watch include the following:
• Outlook . For 2021, EQT has guided to spending of $1.2 -$1.3bn with FY production 1,620 -1,700 Bcfe. Over a six-year horizon (2021-2026), it estimates it can generate cumulative free CF of ~$3.5bn. Supporting this is that maintenance capex is expected to drop by $50 -$100mm annually over the next several years, potential fee relief if the Mountain Valley Pipeline (MVP) comes online as well as a lower long-term gathering rate. As for debt reduction, it has set an initial target of $3.8 - $3.9bn in absolute debt as it aims to achieve a 2x net debt to EBITDA ratio. By our estimates, it could obtain this in 2022.
• West Virginia. EQT is allocating ~30% of D&C capital this year to WV as it shifts to combo development to lower well costs . It has set an initial target of $775 per lateral ft this year which it expects to improve as water infrastructure is added.
Longer term, it expects to get costs down to ~$735 per lateral foot.
• M&A & MVP. There has been some press speculation that EQT, as well as other companies, have put in bids for privately owned Alta Resources in Northeast PA.
Given this, we look for management’s latest thoughts on potential M&A. EQT continues to look at opportunities to offload its MVP firm transportation commitments. So far, as previously announced at 4Q20 results, it has reduced its initial capacity on the pipeline of ~1.29 Bcfe/d by ~10%. Look for a possible update at results.
We reiterate our Buy rating on EQT as we continue to see it as a rate of change story after the Rice brother took control in July of 2019.
Below is a note I received this morning from BofA Equity Research, a first class outfit. They rate EQT a BUY with a price target of $20. My valuation is $26 and likely to increase if their Q1 results and update guidance confirm my model assumptions.
-------------------------------
EQT is expected to report results on May 5th after market. For 1Q21, we are modeling adjusted EPS of $0.26, matching consensus of $0.26, and production of ~420 Bcf , near the high end of guidance (405-425 bcfe). Key items to watch include the following:
• Outlook . For 2021, EQT has guided to spending of $1.2 -$1.3bn with FY production 1,620 -1,700 Bcfe. Over a six-year horizon (2021-2026), it estimates it can generate cumulative free CF of ~$3.5bn. Supporting this is that maintenance capex is expected to drop by $50 -$100mm annually over the next several years, potential fee relief if the Mountain Valley Pipeline (MVP) comes online as well as a lower long-term gathering rate. As for debt reduction, it has set an initial target of $3.8 - $3.9bn in absolute debt as it aims to achieve a 2x net debt to EBITDA ratio. By our estimates, it could obtain this in 2022.
• West Virginia. EQT is allocating ~30% of D&C capital this year to WV as it shifts to combo development to lower well costs . It has set an initial target of $775 per lateral ft this year which it expects to improve as water infrastructure is added.
Longer term, it expects to get costs down to ~$735 per lateral foot.
• M&A & MVP. There has been some press speculation that EQT, as well as other companies, have put in bids for privately owned Alta Resources in Northeast PA.
Given this, we look for management’s latest thoughts on potential M&A. EQT continues to look at opportunities to offload its MVP firm transportation commitments. So far, as previously announced at 4Q20 results, it has reduced its initial capacity on the pipeline of ~1.29 Bcfe/d by ~10%. Look for a possible update at results.
We reiterate our Buy rating on EQT as we continue to see it as a rate of change story after the Rice brother took control in July of 2019.