EQT Gets Downgraded: Lower Prices And Drilling Activity are Negative Catalysts, Analyst Says

Truist Securities analyst Neal Dingmann lowered the rating on EQT Corp EQT to Hold from Buy and reduced the price target to $28 from $41.
The analyst believes, given the continued volatile gas price market, EQT will persist in lower drilling and completions activity along with an active choke program, resulting in volumes coming in at lower than the consensus estimate.
The analyst expects the FCF to be around $1 billion this year compared to over $4.3 billion the previous year, with expected improvement in the coming year. He continues to project FCF to reach over $12 billion in FCF in the period 2022-2027.
EQT's production is hedged at a higher price this year than the current level, and below 15% of estimated production for 2024 is presently hedged, with limited scope for the addition of solid hedges.
Truist's research shows that EQT's overall well data in 2022 is broadly in line with the seven-year average number driven by its strength in wet Marcellus wells. However, the analyst notes that overall results are significantly below 2021 wells data.
The analyst expects EQT to witness one of the lower per share production growth rates compared to its peers in 2023, while total production to be marginally lower on a sequential basis this year.
Dingmann expects EQT's Tug Hill acquisition to conclude in late 2023, resulting in increased high-return inventory, enhanced infrastructure, and strong 2023 hedges.
The analyst anticipates FCF yields of 8% in 2023 and 14% in 2024, below its peer estimates (13% and 18%, respectively). Also, he projects an EV/EBITDA multiple of 5.5x in 2023 and 4.6x in 2024, compared to its peer estimate of 4.5x in 2023 and 3.2x in 2024.
Price Action: EQT stock is down 0.55% at $33.21 during the on the last check Tuesday.

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