Barclays: EQT Corp Worth $100/Share And A Buy

June 22, 2015

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In a report published Monday, Barclays analyst Richard Gross reinitiated coverage of EQT Corporation (NYSE: EQT) with a Buy rating and $100 price target. The formation of EQT GP Holdings LP (NYSE: EQGP) provides a benchmark for market expectations of what the general partner is worth, as well as its IDR cash flows.

If the stock continues to trade at a discount to peers, the analyst expects the management to “to evaluate strategic alternatives for a potential split later down the line, especially as the team has always been focused on creating shareholder value and has discussed this option on recent earnings conference calls.” The structure of EQT GP Holdings does not preclude a tax-free spinoff for EQT Corp in future.

EQT Corp’s balance sheet is strong, following the IPO of EQT GP Holdings. However, the management intends to maintain disciplined capital allocation, going forward. “With the current challenging commodity price backdrop, it has already scaled back well development in the Marcellus vs. their original plans and suspended drilling in the Huron and Permian,” Gross reported.

These revisions in the drilling plans indicates that EQT Corp is likely to see E&P growth in the mid-teens in 2016, with 26 percent growth in 2015. “As the number of wells that will be developed this year is down over last year, we expect the impact to be felt next year and we expect year/year growth more along the lines of ~15 percent in 2016,” the Barclays report added.