Investing.com -- Citi analysts upgraded EQT Corporation (NYSE:EQT) to Buy from Neutral on Thursday, citing a more favorable outlook for the U.S. gas market in 2025.
According to the bank, the macro backdrop for natural gas appears to be improving, with tightening supply and demand dynamics setting the stage for higher gas prices.
"We think low-cost producers stand to be winners within Energy," Citi stated, adding that EQT (ST:EQTAB) is particularly well-positioned to capitalize on this shift.
Citi highlighted several catalysts that could drive EQT's growth, including asset sales and deleveraging in the near term, as well as improving base decline rates and lower maintenance capex over the longer term.
The analysts noted that EQT is targeting two asset sales, which could raise approximately $4 billion in cash, helping the company reduce its debt load.
The note also points to the ramp-up of two liquefied natural gas (LNG) facilities, Plaquemines and CCIII, which are expected to contribute to 3-4 billion cubic feet per day (bcfd) of gas demand growth in 2025.
With power generation on a "secular growth path," Citi foresees steady demand for natural gas in the coming years, supporting their forecast of $4.20 per MMBtu for 2025.
In addition to these market tailwinds, Citi highlighted EQT's investment in compression technology, which is expected to drive down base decline rates and reduce maintenance capital expenditures by up to $450 million in 2025.
"A 5–7.5 p.p. reduction in base decline rate could reduce EQT’s annual capex by $300-450mm," Citi said.
With a price target of $44 (up from $37), Citi believes EQT's strong cash flow generation potential and scale position it as a leader in the U.S. natural gas market heading into 2025.