04. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 45
EQT Corporation (NYSE:EQT) is a leading natural gas production company in the United States, well-positioned in the Appalachian Basin. With its recent acquisition of Equitrans Midstream, EQT Corporation (NYSE:EQT) has transformed into a vertically integrated natural gas business, controlling substantial natural gas assets. As of Q2 2024, EQT was held by 45 hedge funds, up from 41 in the previous quarter, demonstrating strong institutional interest.
EQT Corporation (NYSE:EQT) acquisition of Equitrans Midstream is a key strategic move, giving the company control over nearly 2 million acres of leasehold and production of over 6 billion cubic feet equivalent (Bcfe) per day. This acquisition significantly enhances EQT Corporation (NYSE:EQT) ability to deliver low-cost, high-volume natural gas, making it a top candidate for investors seeking exposure to the natural gas sector. With over 2,000 miles of gathering lines, 43 Bcfe of natural gas storage, and a newly commissioned 300-mile Mountain Valley Pipeline (MVP), EQT Corporation (NYSE:EQT) is well-positioned to meet growing U.S. and global demand for natural gas. The integration of these assets is expected to save the company around $150 million, and early synergy gains suggest further upside potential.
Operationally, EQT Corporation (NYSE:EQT) continues to outperform. In Q2 2024, the company set records in drilling efficiency, reducing well costs by 14% and achieving significant gains in completed footage per day, which is expected to lead to future capital efficiency improvements. The company’s focus on reducing system pressures via compression has also shown strong results, boosting well production by 50% in key projects.
Financially, EQT Corporation (NYSE:EQT) cost structure is a major strength. The company’s unlevered free cash flow breakeven price is projected at $2 per million BTU, making it highly competitive in the natural gas industry. Additionally, EQT reduced its net debt to $4.9 billion in Q2 2024, down from $5.7 billion at the end of 2023, thanks to operational efficiencies and strategic deleveraging efforts. Overall, EQT Corporation (NYSE:EQT) combination of scale, low-cost structure, and improving operational efficiency makes it one of the best natural gas stocks to invest in, offering a strong risk-adjusted return potential.
Legacy Ridge Capital Management stated the following regarding EQT Corporation (NYSE:EQT) in its Q2 2024 investor letter:
“In addition to Vistra’s performance compelling us to reorder the top of the portfolio, two other positions had news warranting brief updates: Summit Midstream Partners (SMLP) continues restructuring the business and balance sheet, and Equitrans Midstream (ETRN) is getting acquired by EQT Corporation (NYSE:EQT).
Lastly, we wrote about Equitrans Midstream (ETRN) in the 2023 mid-year letter, primarily discussing that company’s long and expensive journey completing the Mountain Valley Pipeline and the short-term opportunity we took advantage of. After all the hand wringing and stress with respect to that one project the whole business will end up right where it started, as part of EQT Corp. (EQT). In March, EQT announced they are acquiring each ETRN share for .3504 EQT shares. The transaction should close within the next several weeks.
EQT is the top natural gas producer in the United States with a dominant position in the Appalachian Basin and will become one of the lowest cost gas producers in the US, if not the lowest, after consummating this merger. Our fund is going to exchange the ETRN shares and become EQT owners. The investment checks important boxes for us: 1) a disciplined management team focused on tangible value creation; 2) an ability to generate significant FCF that gets returned to shareholders; 3) exposure to a commodity with strong secular demand trends, which gives us a call-option on higher prices. At only 5% of our assets it will start as a small position for us, but with natural gas prices volatile and back in the low-$2’s we should have ample opportunity to exploit the volatility over time and hopefully make it bigger.”
