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EQT’s Debt Position and Its ‘Stable” Rating

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EQT’s debt

As of September 30, 2015, EQT’s (EQT) total debt stood at ~$3.4 billion. With ~$1.7 billion in cash and cash equivalents, EQT’s net debt was ~$1.7 billion at the end of 3Q15.

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EQT’s net debt-to-EBITDA

Net debt-to-EBITDA (earnings before intererst, taxes, depreciation, and amortization) is a debt ratio that shows how many years it would take for a company to pay back its debt under the current situation. As you can see in the above graph, as of 3Q15, EQT’s net debt-to-EBITDA is low at ~1.4x. But when compared to its own net debt-to-EBITDA historical average of ~1.3x, its current net debt-to-EBITDA is slightly higher. The increase in its net debt-to-EBITDA ratio in the last two quarters can be attributed to falling EBITDA due to lower natural gas prices. In 3Q15, EQT’s EBITDA fell by ~39% year-over-year to ~$248 million.

EQT’s leverage in 3Q15

Another metric to gauge a company’s indebtedness is the debt-to-equity ratio. As of 3Q15, EQT had a debt-to-equity ratio of ~43%. That’s in the middle of the range when compared to other upstream companies.

Range Resources (RRC), Southwestern Energy (SWN), and Cimarex Energy (XEC) have debt-to-equity ratios of ~116%, ~105%, and ~44%, respectively. A higher debt-to-equity ratio usually indicates higher risk, as it indicates that a company has been aggressively financing its growth through debt. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies.

Currently, EQT’s debt has a “stable” outlook from the following three credit rating firms: Moody’s Investors Service, Standard & Poor’s, and Fitch Ratings.

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