As Manchin Energy Bill Fails, An Equitrans Midstream Analyst Warns Of Risky Debt Levels

Bank of America Securities analyst Neel Mitra downgraded the rating for Equitrans Midstream Corp’s ETRN from Neutral to Underperform, while reducing the price target from $9.00 to $6.50.

The Analyst Thesis: The Pittsburgh, Pennsylvania-based company’s Mountain Valley Pipeline (MVP) is unlikely to come online before mid-2025, Mitra said.

The downgrade note was published on the heels of Sen. Joe Manchin's nixing plans to hasten the permitting process for energy projects as part of a government funding package. The West Virginia Democrat, who has lucrative ties to coal and energy companies, received bipartisan blame for complicating efforts to pass a spending bill before a Friday deadline.

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"As a result, we are embedding a higher cost of capital, especially considering the company’s leverage ratio is ~6x Net Debt/EBITDA (excluding deferred revenues), and can only meaningfully lower its leverage ratios is if MVP comes online," Mitra wrote.

“And ETRN’s elevated debt levels create a risk to equity holders, as the company has flat EBITDA and at least $150 million in carrying costs, annually, to maintain MVP right of ways,” he added.

ETRN Price Action: Shares of Equitrans Midstream had declined by 8.71% to $7.12 at the time of writing Wednesday.