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EQT Gears Up for Huron Play Acres' Divestment to Reduce Debt

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EQT Corporation (EQT - Free Report) recently agreed to divest around 2.5 million non-core Huron Play acres for $575 million, to Diversified Gas and Oil Plc. The net acres are located in Southern Appalachia. The transaction is expected to conclude in July 2018.

Divestment Package

The all-cash deal enabled the company to sell net acreages in Kentucky, Virginia, and southern West Virginia. In the last reported quarter, net production from around 12,000 wells in the area came in about 200 million cubic feet of gas equivalent per day. Per the company, the assets consist of net proved developed reserves of 1.6 trillion cubic feet of gas equivalent.  Around 250 employees, currently working at the site, will be transferred to Diversified Gas and Oil.

The financial and operational guidance for 2018 will be revised as a result of the divestment, which the company plans to disclose in the April-June earnings report that is slated to be announced on Jul 26.

Divestment Rationale

Liability Reliever: The transaction enables the company to get rid of the liabilities related to the properties, which includes around $200 million plugging costs. Moreover, per the deal, the properties’ deep drilling rights will stay with EQT Corporation.

Debt Reduction: The deal is expected to help the company reduce debt burden, which surged in the last two reported quarters primarily due to the $6.7-billion Rice Energy acquisition. At the end of the first quarter of 2018, EQT Corporation had a long-term debt of $7,457 million.

 

Price Performance

Pittsburgh, PA-based EQT Corp. has lost 4.7% in the past year against the 21.7% rise of its industry.

 

Zacks Rank and Stocks to Consider

Currently, EQT Corp. has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for better-ranked stocks like Continental Resources, Inc. , Delek US Holdings, Inc. (DK - Free Report) and HollyFrontier Corp. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oklahoma City, OK-based Continental Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 57.7% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 80.5%.

Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 293.7%.

Dallas, TX-based HollyFrontier is an independent refining company. For 2018, its bottom line is likely to be up 153%. In the last four reported quarters, the company delivered an average positive earnings surprise of 41.3%.

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