Analyst Sees Volatile Future for North American Gas Prices, Upgrades Most Impacted Stock

Scotiabank analyst Cameron Bean changed the rating for a few North American Natural Gas companies following their revised forecasts about commodity price deck and industry outlook.

The analyst continues to expect congestion and low prices to prevail into the summer but sees green shoots on the horizon, with weaker U.S. production volumes in H2 FY24 and the commissioning of new North American LNG export facilities in late 2024 and 2025.

Bean continues to project a price of $4.00/mmBtu but expects significant price volatility as North America adds considerable new LNG export capacity over the next three to five years. 

Also, the analyst expects a rougher ride for AECO prices, with potential carnage during the summer, but anticipates the startup of LNG Canada, creating significant slack in the system in 2025 and 2026. 

Consequently, the analyst upgraded EQT Corporation EQT to Sector Outperform (from Sector Perform) and raised the price target to $52 (from $40).

The analyst assumes EQT's acquisition of Equitrans Midstream Corporation ETRN will close in mid-Q4/24 and expects it to be a game changer for the company.

Bean projects expected material cost structure improvements and enhanced operational control and flexibility as key wins for EQT.

On the other hand, Bean downgraded Range Resources Corporation RRC and Southwestern Energy Company SWN to Sector Perform (from Sector Outperform) and raised the price target to $45 (from $40) and $9.5 (from $9), respectively.

For SWN, the analyst sees a relatively flat or sustaining production profile in 2024 and expects a mid-Q4/24 closing date for the Chesapeake Energy Corporation CHK and Southwestern merger.

The analysts project the combined company to offer dominant exposure to Haynesville, potentially adding material international natural gas price exposure to its portfolio over the next several years.

Price Action: EQT shares are down 1.5% at $37.15, RRC shares by 1.54% at $35.77 and SWN by 2.06% at $7.36 on the last check Thursday.

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