Energy Prospectus

At the time of this post EQT was trading for $41.24.

I have updated my forecast/valuation model for Q2 results and their updated guidance.
My forecast assumes that the Tug Hill & XcL Acquisitions will close in September, 2023.

I have lowered my valuation by $3 to $42/share. Unless you are near-term bullish on natural gas prices, I recommend selling EQT and moving the money to companies that get the majority of their revenues from oil sales. As I posted earlier, Matador Resources (MTDR) looks like a Strong Buy to me.

TipRanks: "In the last 3 months, 16 ranked analysts set 12-month price targets for EQT. The average price target among the analysts is $44.63."
Five analysts have updated their price targets since EQT released results.
Goldman Sachs 7/26/2023 $46.00 BUY
Siebert WS 7/26/2023 $45.00 HOLD
Bank of America 7/26/2023 $60.00 BUY
Piper Sandler 7/26/2023 $53.00 BUY
Citi -------- 7/25/2023 $42.00 HOLD

I've recently come to believe that natural gas and NGL prices have a lot of weather-related risk.

EQT is a solid company and the long-term outlook is extremely bullish. I just see a lot more upside for us in the companies with more crude oil production. Harvesting the gains we've gotten on EQT feels right to me, with the plan to rotate back into it mid-2024.

This is really stunning to me. Are we to take your valuations as short term target price calls? If so, why is there so much difference between your values and current pricing.

Surprisingly EQT is up 4.5% to close to your valuation of $42 after their call today. in the meantime MTDR is down 4.5% after their release. I guess the market has not yet noticed the paradigm shift yet. For me I like the oils but am not selling EQT, GPOR, RRC. Sorry but I am just a bit stunned at your sudden change in direction.

My Fair Value Estimates are what I think a stock is worth TODAY.

I agree that the long-term outlook for natural gas prices is very bullish.
My concern is short term. I was expecting market forces to reduce the surplus of natural gas in storage over the summer months, but it has yet to materialize. As we get close to the beginning of winter and there is still over 300 Bcf more gas in storage than the 5-year average, the front month NYMEX contract will pull back. The front of the NYMEX strip is based on the "paradigm" that utilities have about the near-term supply/demand balance.
If a utility takes physical delivery of gas and we have a mild winter, they will pay lots of storage fees and the interest expense to carry that excess inventory into the spring.
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Here is something that I do if am long-term bullish, but short-term worried about a company: Sell Covered Calls that expire near the end of the time period you're concerned about.

Right now you can sell $45 Calls on EQT that expire 4-19-2024 for $6.50 per share.

I also think the gassers are stuck with low NGL prices for much longer than I was expecting.

RRC and EQT are great companies with a ton of long term upside.

The gassers you have in the portfolio are in better shape than they have ever been (well maybe roll things back 10 months) and I see 2025 LNG facilities coming on line with perfect timing, when it is crystal clear to everyone that the trillions spent on the green energy spending spree was wasted.

I think we are still early in the game for realizing the reduced gas production from rigs being dropped in gas basins and delayed completions. Not only that but oil rigs are down from a year ago and with that associated gas. It is obviously an ugly quarter for gassers but hopefully this will be the worst we have to endure and no one's balance sheet got too far stressed with the hit.

I think GPOR will be a good surprise because of their fortuitous hedges. At any rate I like the oils too but I think a year to the other side is not an unreasonable time frame with so much positive future gas demand on that horizon. Covered calls is a great idea. I just can't deal with short term moves when I'm long term bullish. Took too much work to build my portfolio which incidentally is skewed to oils.