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EQT Corp (EQT) to Divest Pennsylvania Natural Gas Assets

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EQT Corporation (EQT - Free Report) has announced a significant transaction involving its non-operated natural gas assets in northeast Pennsylvania. Under the deal, valued at $500 million in cash, EQT Corp will divest a 40% interest in these assets to Equinor ASA (EQNR - Free Report) .

As part of the deal, EQT Corp will not only receive cash but also acquire additional assets from Equinor. These include 26,000 net acres in Monroe County, OH, and about 10,000 net acres in Lycoming County, PA. The newly acquired assets are projected to yield considerable production volumes by 2025, estimated at 135 million cubic feet equivalent per day (MMcfe/d) and 15 MMcfe/d, respectively.

The transaction will significantly enhance Equinor’s presence in the region. Following the completion of the deal, Equinor’s average working interest in certain Northern Marcellus gas units will increase from 15.7% to 25.7%. This marks a strategic increase in EQNR’s stake and its commitment to expanding its operational footprint in the United States.

The deal includes a gas buy-back agreement, wherein Equinor will purchase gas from EQT Corp at a premium to in-basin pricing until the first quarter of 2028, providing a stable and potentially lucrative revenue stream for EQT Corp.

The latest transaction is part of EQT’s broader strategy to optimize its asset portfolio and strengthen its financial position. By divesting a portion of its non-operated assets, EQT Corp aims to reduce its significant debt burden, which stands at $5.9 billion, and enhance shareholder returns. The company anticipates the assets acquired in this transaction to generate nearly $75 million in free cash flow in 2025.

EQT Corp’s decision to sell these assets comes at a time when natural gas prices have hit three-year lows, prompting many producers to reduce production and cut back on drilling, especially in the Marcellus and Utica shale regions. The company is also exploring opportunities to divest the remaining portion of its non-operated assets in northeast Pennsylvania.

The transaction is expected to be finalized in the latter part of the second quarter of 2024. This represents a significant reshaping of EQT Corp’s investment strategy and operational focus, aiming to streamline operations and bolster financial health amid challenging market conditions.

Zacks Rank & Stocks to Consider

Currently, EQT carries a Zack Rank #3 (Hold).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy Company (SM - Free Report) is an independent oil and gas company engaged in the exploration, exploitation, development, acquisition and production of oil and gas in North America. SM currently has a Momentum Score of A and a Value Score of B.

The Zacks Consensus Estimate for SM’s 2024 and 2025 EPS is pegged at $5.99 and $6.44, respectively. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.

MPLX LP (MPLX - Free Report) is a master limited partnership engaged in providing a wide range of midstream energy services, including fuel distribution solutions. MPLX currently has a Momentum Score of A.

The Zacks Consensus Estimate for MPLX’s 2024 and 2025 EPS is pegged at $4.10 and $4.35, respectively. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past 60 days.


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