EQT Corp Boosts Activity Levels As Commodity Price Recovers

On Aug 8, 2016, we issued an updated research report on energy company, EQT Corporation (NYSE:EQT) .

EQT Corp. is a low-cost producer with a strategic midstream presence. The company's superior cost structure and above-average growth may ease concerns about struggling natural gas prices.

EQT Corp. is the general partner of EQT Midstream Partners, L.P. (NYSE:EQM) . The formation of the partnership has benefited EQT Corp. as it has been able to transfer lower yielding midstream assets, maintain control over distribution, speed up acreage development and reallocate its capital to produce superior returns. Thus, the partnership has been indirectly acting as a funding vehicle for the company.

EQT Corp. has halved its exploration and production (E&P) capital spending from the 2015 levels owing to reduced well costs. The company now estimates E&P capital spending of $1 billion. In spite of this, the company has increased its production guidance to 730–740 billion cubic feet equivalent (Bcfe) from 710–730 Bcfe projected earlier. This reflects its efficiency and we expect the company’s increased production to further support growth.

EQT CORP Price and Consensus

EQT CORP Price and Consensus | EQT CORP Quote

EQT Corp. acquired 62,500 acres in the core Marcellus development area of West Virginia from Statoil (OL:STL) in Jul 2016. Most of the newly purchased acreage connects with the company’s current acreage and would facilitate acceleration of production. This in turn should boost revenues.

However, EQT Corp. lacks geographical diversification as its resources are concentrated in the Appalachian Basin. This increases the risk exposure of the company as any disruption in the region will affect its financials.

Due to its upstream operations, EQT Corp.’s profit is influenced by commodity price fluctuations. Low realizations affected the company’s revenues and earnings, which declined sharply from the prior-year quarter levels. With natural gas prices remaining weak, this trend is likely to continue.

Though EQT Corp. has increased its activity level for second half of 2016, the take by the company to boost activity in the Upper Devonian area instead of the more prolific and economic Marcellus wells was startling. This is the first time the company will be drilling Upper Devonian wells since abandoning it in late 2015.

Zacks Rank and Stocks to Consider

EQT Corp. holds a Zacks Rank #2 (Buy). Other well-ranked players from the energy sector are Enbridge, Inc. (NYSE:ENB) and Total SA (TO:TOT) . Both of these stocks sport a Zacks Rank #1 (Strong Buy).