EQT Corporation. Oil Gas & Consumable Fuels

18 Jul

Key arguments in support of the idea.

▪ Rising natural gas prices.

▪ Undervaluation.

Investment Thesis

EQT Corporation is one of the largest natural gas producers in the US. Natural gas
constitutes over 90% of the Company's hydrocarbon revenues, with LPG sales
comprising 8% and oil contributing 2%. EQT Corporation operates solely in the US
market, which accounts for 100% of its revenue.

In our view, the Company's stock could face potential gains in the coming months
due to several positive factors.

Rising natural gas prices. In the US, power generation companies are gearing up
for peak gas demand as summer temperatures drive up the need for cooling. Based
on the latest data from the US Department of Energy, gas consumption by power
facilities is set to climb 9% m/m in July, hitting 45.2 billion cubic feet per day
(Bcf/d), followed by a further 2% uptick expected in August. Overall gas
consumption in the US could rise by 4% and 2% m/m in July and August,
respectively. The anticipated increase in demand could push gas prices to $3 per
MMBtu (+30% from current levels), which would likely have a positive effect on the
financial performance of gas producers.

Undervaluation. At present, gas-producing companies are undervalued based on
multiples, primarily due to higher debt levels and lower shareholder payouts
compared to oil companies. Debt reduction and increased payouts could lead to a
significant revaluation in favor of gas producers. EQT's estimated EV/EBITDA ratio
for 2024 is 6.8. Notably, the Company has been progressively enhancing its
dividends, with a potential dividend yield of 1.7% by the end of 2024 based on
current prices.

We maintain a Buy rating on EQT stock with a price target of $39.8. A stop-loss
order is recommended at $34.4.