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Relative Valuations: EQT, NBL, COG, and AR

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Relative valuations

Cabot Oil and Gas (COG) had the highest EV-to-adjusted EBITDA[1. enterprise value to adjusted earnings before interest, tax, depreciation, and amortization] ratio in 1Q16, at 19.4x. EV is the sum of a company’s market capitalization and net debt.

COG’s EV in 1Q16 declined by ~18% year-over-year (or YoY), while its adjusted trailing 12-month EBITDA fell by 53% in 1Q16 versus 1Q15. This pushed COG’s 1Q16 ratio higher. The forward EV-to-EBITDA multiple for COG is ~16.5x.

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EQT, COG, and Noble Energy

EQT (EQT) also reported a higher EV-to EBITDA multiple compared to its peers in 1Q16. EQT’s EV-to-adjusted EBITDA in 1Q16 was 15.4x.

COG’s EV fell by ~9% YoY in 1Q16, while its adjusted trailing 12-month EBITDA in 1Q16 was ~40% lower than its 1Q15 levels. This pushed EQT’s 1Q16 ratio above its 1Q15 levels. EQT’s forward EV-to-EBITDA multiple is ~13.3x.

Noble Energy’s (NBL) EV-to-adjusted EBITDA in 1Q16 was ~10x. Its EV in 1Q16 fell by ~12% YoY and its adjusted trailing 12-month EBITDA fell by 22%, which helped push the ratio higher than 1Q15 levels. The forward EV-to-EBITDA multiple for NBL is ~10x.

AR’s EV-to-EBITDA multiple fell in 1Q16

Meanwhile, Antero Resources’s (AR) EV-to-adjusted EBITDA in 1Q16 fell compared to 1Q15. AR’s EBITDA multiple in 1Q16 was ~11.5x.

Its EV fell by ~10% YoY, while its adjusted trailing 12-month EBITDA increased by ~1.4%. AR’s forward EV-to-EBITDA multiple is ~11.6x.

What do these ratios mean?

The slightly higher forward EV-to-EBITDA multiple for AR implies that Wall Street expects its EBITDA to fall this year compared to the last 12 months.

The lower forward EV-to-EBITDA multiples for EQT, NBL, and COG imply that Wall Street expects their respective EBITDAs to rise this year compared to the last 12 months.

All these companies make up 8.6% of the iShares US Oil & Gas Exploration & Production ETF (IEO).

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