Scotiabank Analyst Cameron Bean changed his ratings on some North American natural gas companies following their revised forecasts on commodity prices and industry prospects.
The analyst continues to expect congestion and low prices to prevail through the summer, but sees positive signs on the horizon, with weaker U.S. production volumes in H2FY24 and the commissioning of new plants North American LNG exports between late 2024 and 2025.
Bean continues to forecast a price of $4.00/mmBtu, but expects significant price volatility as North America adds significant new LNG export capacity over the next three to five years.
Additionally, the analyst expects a tougher run for AECO prices, with potential carnage over the summer, but anticipates the start-up of LNG Canada, creating significant slack in the system in 2025 and 2026.
As a result, the analyst upgraded EQT Corporation EQT TO Sector Outperform (from Sector Perform) and raised its price target to $52 (from $40).
The analyst hypothesizes the acquisition of EQT Equitrans Midstream Corporation ETRN will close mid-Q4 ’24 and is expected to be a turning point for the company.
The Bean projects featured improvements in the material cost structure and greater operational control and flexibility as key benefits for EQT.
On the other hand, Bean was demoted Gamma Resources Corporation RRC AND Southwestern Energy Company NOISE TO Sector Perform (from Sector Outperform) and raised its price target to $45 (from $40) and $9.5 (from $9), respectively.
For SWN, the analyst expects a relatively flat to sustained production profile in 2024 and expects a close date in the middle of the fourth quarter of 2024. Chesapeake Energy Corporation CHK and southwestern fusion.
Analysts expect the combined company to offer dominant exposure to Haynesville, potentially adding substantial exposure to international natural gas prices to its portfolio in the coming years.
Price action: EQT shares fell 1.5% to $37.15, RRC shares fell 1.54% to $35.77 and SWN shares fell 2.06% to $7.36 during the last check on Thursday.
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