Barclays starts EQT at "overweight," citing sub-$2/Mcf breakeven by 2028

Investing.com -- Barclays (LON:BARC) initiated coverage of EQT (ST:EQTAB) Corporation (BIT:1EQTC) with an "overweight" rating and a $65 price target, representing a 17.5% upside from the July 3 closing price of $55.31.

The brokerage cited EQT’s reintegration with Equitrans Midstream (NYSE:ETRN), reduced breakeven costs, and exposure to demand-driven gas opportunities as key reasons for the initiation.

EQT’s corporate free cash flow breakeven is estimated at $2.31/Mcf in 2025, with a projected decline to below $2/Mcf by 2028.

Barclays attributes this $0.38/Mcf improvement to midstream synergies, financing cost reductions, and firm sales agreements with utilities.

The integration with ETRN, despite adding $7.6 billion in debt, lowered gathering costs and provided control over infrastructure, enabling optimized gas marketing and cost savings.

By the end of 2024, EQT had reduced net debt by $5.6 billion through asset sales, including a $3.5 billion midstream JV with Blackstone (NYSE:BX) and the divestiture of Northeast PA non-operated assets.

Barclays expects net debt to fall to $7.8 billion by year-end 2025 and under $5 billion by the end of 2026. A net cash position is projected by 2028 at $4 gas.

The brokerage estimates EQT’s 2025 free cash flow at $2.6 billion, rising to $4.2 billion in 2026, supported by gas price strip assumptions of $3.84 and $4.50, respectively.

Barclays forecasts 2025 EBITDX of $6.1 billion and $8.3 billion in 2026. Estimated CFPS is $8.25 in 2025 and $11.00 in 2026.

EQT’s valuation is supported by its NAV of $59 per share. The $65 price target reflects a blended valuation of 6.5x 2026E EV/EBITDX and 1x NAV.

The stock trades at 6.0x and 5.9x 2026/2027 EV/EBITDX, respectively, versus peer averages of 5.5x and 5.0x.

The company is also pursuing long-term gas sales agreements tied to regional power demand. Two deals totaling 1.29 Bcfd on the Mountain Valley Pipeline are expected to add $600 million in annual free cash flow starting in 2027.

EQT is in discussions with more than a dozen proposed power projects, aided by its integrated midstream platform and 2 Bcfd of in-basin production.

Barclays noted that EQT’s capital intensity is expected to decline by 1% annually from 2025 to 2028.

Estimated capex for 2025 is $2.58 billion, rising to $2.78 billion in 2026. The firm projects 2025 production at 6.56 Bcfd and sees sustained growth potential through 2030.

EQT’s dividend yield stands at 1.14%, with cash returns currently limited to dividends. Management expects to resume buybacks after further deleveraging.

Barclays said EQT’s positioning allows it to capitalize on gas price volatility while maintaining downside protection through a low-cost structure.