EQT Corporation (EQT) Q2 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us and welcome to the EQT Second Quarter 26 Results Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press 1. To raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Cameron Horwitz. Cameron, please go ahead.

Good morning, and thank you for joining our second quarter 26 Results Conference Call. With me today are Toby Z. Rice, President and Chief Executive Officer and Jeremy Knop, Chief Financial Officer. In a moment, Toby and Jeremy will present their prepared remarks with a question and answer session to follow. An updated investor presentation has been posted to the Investor Relations portion of our website and we will reference certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening. I would like to remind you that today's call may contain forward looking statements. Actual results and future events could materially differ from these forward looking statements, because of factors described in yesterday's earnings release, and our investor presentation the Risk Factors section of our most recent Form 10 and subsequent filings we make with the SEC. We do not undertake any duty to update any forward looking statements. Today's call also contains certain non GAAP financial measures. Please refer to our most recent earnings release and presentation for important disclosures regarding such measures including reconciliations to the most comparable GAAP financial measures. With that, I will turn the call over to Toby.

Thanks, Cameron, and good morning, every1. Our second quarter results are another powerful demonstration of the value of EQT's integrated platform. While our operating teams were busy setting more industry records in the field, we continued to build on our strategic momentum through a series of transactions. Our success this quarter underscores how EQT is uniquely positioned to capture a substantial amount of Appalachia demand growth and continue to improve realized pricing. Our operational performance remains the foundation of everything we do And this quarter, our teams once again pushed the boundaries of what is possible. During the quarter, we drilled the longest lateral in the history of shale development at more than 29 thousand feet all while staying 100% in z1 with zero safety incidents. We also set a new basin 24 hour drilling record and a new EQT 48-hour drilling record in the process. While the success of our large scale operations is defined by averages, it is records like this that redefine what is possible. These achievements are not isolated accomplishments. They reflect the culture we have created, the direct result of years of relentless operational focus and evolution aimed at improving our capital efficiency lowering our cost structure, and enhancing the returns we generate for shareholders. This strong operational execution along with robust well performance is leading to significant production outperformance, which is evident in our second quarter volumes coming in well above the high end of our guidance. A significant portion of this outperformance is coming from our base production, reflecting better than expected results from our midstream compression projects, which are extending flat times on new wells and shallowing base declines on older wells. As a reminder, these projects were a key piece of the synergies we projected when we acquired Equitrans. And they continue to exceed even our upside forecast. We expect strong performance to continue throughout the year, and as such, we are raising our 2026 production guidance by roughly 90 Bcfe at the midpoint. Another important milestone this quarter was the receipt of FERC authorization to begin construction activities on MVP Southgate. With all key regulatory approvals now in hand, we have elected to pull forward capital spending and accelerate construction timing of MVP Southgate into 2026 to derisk project execution. The project will provide critical infrastructure needed to connect low cost Appalachian natural gas supply with 1 of the fastest growing demand regions in the country. Bringing additional supply into The Carolinas will help utilities meet growing energy needs, support system reliability, and help keep energy costs affordable for consumers. MVP Southgate enhances the strategic value of EQT's integrated platform. Expanding market access for Appalachian natural gas, while providing an attractive combination of long term contracted cash flow visibility and compelling risk adjusted returns. As a reminder, neither MVP Southgate nor the MVP Boost expansion were included in our Equitrans underwriting case. Alongside this performance, we are seeing from our compression projects these successes demonstrate how our vertically integrated platform and aligned teams continue to unlock value across both our upstream and midstream businesses and drive incremental returns for shareholders. Turning to Appalachian fundamentals. Momentum continues to build for power generation and pipeline projects throughout the region. With an opportunity set in front of EQT today that is significantly larger than it was even 6 months ago. As illustrated on Slide 22 of our investor presentation, our analysis suggests there are over 45 Appalachia demand and pipeline takeaway projects under construction or in evaluation totaling nearly 20 Bcf/d of potential demand. The success of even a fraction of these projects is expected to lead significant strengthening of in-basin supply-demand fundamentals. This demand backdrop creates upstream growth optionality for EQT, thanks to our low cost, peer leading inventory depth, and strong balance sheet position. However, any future growth will be measured and directly tied to demand underpinned by our commercial agreement. We have no interest in growing for growth's sake. As that is a strategy that has historically resulted in poor returns and value destruction in this industry. Instead, our focus remains on growth with durable, contractual demand in a manner that is accretive to corporate returns expands free cash flow per share, and creates long term shareholder value. Wrapping up, the broad takeaway is clear. EQT is delivering at a high level across every part of our business, stacking up wins operationally and strategically. We continue to drive operational excellence, execute commercial agreements that catalyze in basin demand, and improve price realizations for years to come. And also advance infrastructure projects that connect our low cost supply to premium markets. As Appalachia continues to emerge as 1 of the epicenters for secular power driven natural gas demand growth in North America, EQT is uniquely positioned to capture an outsized share of this opportunity. With a differentiated integrated platform, industry leading execution, and a growing portfolio of demand driven projects, we have a clear path to creating durable long term value for our shareholders. With that, I will turn the call over to Jeremy.

Thanks, Toby. The second quarter was another outstanding 1 for EQT. We again exceeded expectations across virtually every financial metric. Including production, price realizations, operating costs, and capital spending. This resulted in $330 million of free cash flow attributable to EQT in Q2 despite natural gas prices averaging just $2.89 per MMBtu during the quarter. Underscoring our advantaged position at the low end of the cost curve. Operational execution is leading to sustained production outperformance, and as a result, we are raising 2026 production guidance by 90 Bcfe while also lowering full year CapEx by $25 million. As Toby mentioned, we have also decided to accelerate MVP's Southgate construction timing and are thus pulling forward $85 million of capital contributions to equity method investments from 2027 into 2026. During the quarter, we continued to build momentum across our commercial platform, We recently signed a 10-year definitive agreement with Competitive Power Ventures to provide 325 million cubic feet per day of natural gas to a new 2 gigawatt power generation facility planned in Doddridge County, in the heart of West Virginia. Which will pull gas south from EQT's core production base. This facility is expected to enter service in early 2031. Note this marks the second new combined cycle gas turbine project in West Virginia that EQT has helped catalyze following the Wolf Summit project we announced last year. Importantly, the CPV contract pricing is linked to PJM power pricing, rather than a gas price index and represents EQT's second deal incorporating the structure. At the forward strip, we expect this agreement to provide EQT a material premium to local index pricing. While also enhancing the project's ability to secure financing. This structure provides us direct exposure to strong PJM power pricing fundamentals without any capital commitment. This transaction is yet another example of how EQT is uniquely positioned to directly capture a material amount of demand growth in Appalachia. And the associated pricing benefits. Our integrated platform investment grade ratings commercial expertise, and reputation allow us to craft solutions that deliver superior value for customers while also improving returns for EQT shareholders. As power developers, data centers, and industrial customers look to secure gas supply, EQT is the clear partner of choice throughout the Appalachian region. We also announced the acquisition of BlackLine Midstream, for approximately $77 million. BlackLine owns and operates 2 strategically located propane storage and distribution terminals in New England. Representing the largest propane storage facility in the region with both rail and waterborne access. Collectively, the assets provide 46 million gallons of storage capacity. With EQT currently supplying approximately 60% of BlackLine's propane volumes. This transaction is particularly attractive as it requires essentially no incremental capital investment, while creating multiple opportunities for value creation. The assets provide physical optionality for EQT's propane production, improved flow assurance, enhance our ability to optimize pricing, and create additional commercial optionality through domestic and international supply channels. We also see opportunities to leverage our commercial relationships to drive growth, and optimize costs over time. From a financial perspective, we project a 20% free cash flow yield under our base case underwriting. With upside optionality that would roughly double this metric. BlackLine is a natural fit within EQT's integrated platform. As the acquisition complements our existing upstream and midstream businesses. Expands our commercial reach, and allows us to capture additional value from our existing production. Transactions like this demonstrate how our vertically integrated platform, and strategic and commercial expertise can unlock unique value creation opportunities while enhancing the long term earnings power of our business. Turning to our LNG portfolio, we recently executed a 5-year offtake agreement with a large Asian integrated energy company for approximately 0.5 million tons per annum of LNG sourced from various Gulf Coast LNG facilities beginning in 2028. This deal allows us to accelerate our LNG exposure and develop capabilities while reducing execution risk ahead of the planned commencement of our larger portfolio in 2030. Notably, the agreement was executed at a similar cost to our term deals, rather than current market economics. At recent strip pricing, we expect the contract will increase EQT's 2028 free cash flow by roughly $45 million This deal demonstrates our steady progress in developing our LNG business. And the relentless hustle of the team on the front lines as we develop important relationships around the world. And improve EQT's access to premium markets. Turning to capital allocation, we are on the door step of achieving our long term net debt target of $5 billion. A milestone that represents the culmination of years of commitment towards bulletproofing our balance sheet. During times of turbulence, our balance sheet will become a fortress and cash on hand a strategic tool to fund aggressive share buybacks and long term growth investments even in low price environments. To that end, in the near term, we intend to accumulate cash. Which we plan to aggressively deploy into share buybacks during the industry's episodic down cycles. As we look ahead, we believe the next chapter of value creation at EQT will be driven by the combination of disciplined growth and capital returns, primarily through share buybacks. High return midstream investments provide visible cash flow growth today and connect our production to new demand. While future upstream growth is supported by both announced supply agreements and a growing number of new demand opportunities. When combined, the ability to repurchase meaningful amounts of stock along the way we see a clear pathway to driving significant alpha due to the compounding nature of this strategy. And with that, we will now open the line for questions.

We will now begin the question and answer session. Please limit yourself to 1 and 1 follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your heads when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Joshua Silverstein from UBS. Your line is open.

Yeah. Thanks. Good morning, guys. Oh, yep. Well, Jeremy, I wanted to start with just with the last comments that you had made there. Clearly, the balance sheet continues to improve. The stock price has g1 back towards a 52-week low. How much cash do you want on hand to take advantage of some of periods of stock price weakness versus continuing to just kind of build cash? And what is the right level of cash for you guys to have on hand?

Yeah. Good question. I think, We are gonna be patient with it. We are not opposed to accumulating at certain points in the cycle up to a few billion dollars of cash. I think where the stock price is right now, I think we would look to be more aggressive in the buybacks. But it just depends on what is going on in the market. And, again, I think we will be opportunistic and aggressive when we see those opportunities. But we certainly wanna be countercyclical rather than procyclical. Got it. And then on the new LNG updates here, I wanna see if you could provide a little bit more details on how you are implementing the strategy and the 2020 the 2028 offtake agreements here. How are you sourcing the LNG? Is infrastructure in place and kind of capacity already lined up for this? Yeah. So the, for the new agreement specifically, we are we are able to pick the capacity up off a like we said in prepared remarks, an integrated Asian buyer that is, dealing with some tariff related issues. So we worked with them to alleviate that, really crafted a win deal to where that is that is in the money for us today and adds meaningfully to our 2028 cash flow. Those are, volumes that will be coming from 2 facilities that are nearing completion right now. So I would expect those to come online in early 28. Contractually, it is January, but there is slippage in project timing. It could be a little bit delayed, but we have high confidence in that, coming online, during that year and contributing to uplift in, realized pricing.

Your next question comes from Doug Leggate from Wolfe. Line is open. Please go ahead.

Thank you. Good morning, everybody. Jeremy, I wonder if I could maybe this is for Toby. The idea that you have laid out this extraordinary volume potential, obviously, a lot of it is post 2030. Excuse me. But I am curious when Toby, when you talk about you are only gonna grow on contract when you have got contractual agreements, I am curious why if these are premium priced deals, in your backyard, why would you grow at all? Why would not you reallocate existing volumes and get a premium price without having to incur the additional capital and ultimately the growth? that is my first question and my--yep.

But You wanna take your second question, throw it out there?

Yeah. So it is a real quick 1. I just it was for Jeremy, really. The compression is really is obviously having an impact on capital. I am just curious how much lower do you think how much better do you think your sustaining capital can become as a consequence of those compression projects? And that is it.

Thank you.

Doug, I think your first question, I think, hits on something that we spend a lot of time thinking about The first step and our first focus is to get direct connections to this demand, and I think we are we are putting a lot of showing a lot of progress on that front. But the next question that we are gonna have to ask ourselves is what part of that demand are we actually gonna grow organically into? And as you menti1d, strengthening basis is gonna be 1 of those considerations, and that is gonna have an impact of lifting all EQT volumes, not just the volumes that would be exposed to growth. So our first focus is capture as many of these opportunities as we can, and then we will step back and make that evaluation. But there will be a portion that we will consider growing, but it would not be the full amount of demand. Yeah.

And, Doug, just to add to that and then address your second question, You know, we have a disproportionate amount of our gas sold into first month today. On a short term basis. I think it is about 30% of our volumes are sold on more medium and longer term contracts. So there certainly is the ability to reallocate And, effectively, what happens is less volumes that are sold into that first month market drives a little more scarcity in that market. And if all else is equal, would lift index pricing, Most of those longer term deals being indexed to first of month you get that price benefit. So there certainly is flexibility around that. And I think the way you structure those and where you index it back to Liquid Hubs is really critical to make sure that you are able to have the flexibility in supplying those volumes over the longer term. So it is something that we are very focused on. And, look, I think if you look at that Slide 22, which I would encourage everybody to look at, is really kind of the culmination of a lot of the analysis we are doing the opportunities we are tracking in Appalachia today. We do not have to grow into this 1-for-1 day 1. You do see a bit of a it almost looks like a hockey stick ramp around the end of this decade. A lot of that is really just due to the fact that it takes 3 to 5 years to build most of this large scale infrastructure. We are not looking to add any sort of step change in production. If you see 2 Bcf/d added in a given year, we might grow, you know, a fraction of that. And over time, we fill it. But if the market's a little tighter in the in the in the intermediate term, there is ample gas, the market will balance. But I think to your point, I think we still benefit because we are in a price times volume business. On your second question around midstream and compression, I mean, look, candidly, we are we are working with our reservoir team and our finance team just trying to recalibrate how we forecast some of this stuff. Think our original expectations on the impact on well performance and type curves from lower pressures have been kind of blown away. We are trying to recalibrate our hydraulic models and just how we forecast type curves and base declines. That could lead to further outperformance. it is something we are it is still in the middle of the process of right now. But, obviously, you know, we are we are seeing quarter after quarter these big beats that continue to surprise us too. And I think that if that trend continues, which it feels like it is, that will lead to continued capital efficiency in the years ahead. that is great. Thanks, fellas. Appreciate it.

Operator, we have the next question.

Yes. Your next question comes from Betty Jiang from Barclays. Your line is open. Please go ahead.

I want to start with a bigger picture question speaking to that slide 22. Just given where this market is going, we are seeing more midstream pipeline projects, how do you guys see these projects ultimately get supplied And how do you think about the competitive tension to fill these incremental egress projects. And how that is creating tension against the in-basin power projects. And when you and related to EQT, your ability to be able to leverage better pricing in these supply agreements that you are you are talking to?

Yeah. Betty, I would say when we look at slide 22, I would say probably 1 of the bigger moves that has become a lot clearer over the past few months. As we referenced in our last quarterly update was just the number of pipeline takeaway opportunities that are showing up largely in that Clarington area. You know, those are gonna be large potential projects. They are gonna require supply to be brought from M2 or basically our core our core production region. To fill those to fill those projects, and that is gonna give us an opportunity to build infrastructure. And with infrastructure, I think we have an edge in ensuring that we supply those projects as well. So that is sort of the dynamics that is really exciting to see materialize, and I think EQT will be able to continue to play a role in creating win-win solutions for our customers while giving our shareholders access to some premiums in the meantime. And those will come in the form of a midstream fees. As we do anticipate these large egress projects, the capacity will be taken from utilities downstream. Great. Thank you.

And, Jeremy, a question to you on the on the CPV contract being linked to power price. How do you think about the upside downside risk around that contract structure? And is there a floor price in for EQT to protect you if there is any downside risk protection to that? Yeah. Great question, Betty. So just to frame this and put it into perspective, this is a deal that if just say, hypothetically, this contract came online for the full year of 2027, and just flowed at full capacity. Obviously, there will be a lower utilization so you can make your assumptions there. It would improve our free cash flow by about $100 million a year improve corporate overall differentials by, like, 5¢. So it is a material contract. it is a material premium. And, honestly, it is a true win for us and the developer. We can hedge it if we would like to, But if you look at the way electricity prices and gas prices in PJM, specifically, are correlated just due to where gas is and the dispatch, they are tightly correlated. And as the cost of building new generation continues to rise, I would expect that spark spread to widen. as there needs to be more and more of a market signal long term for more generation to be built. So we actually think we are on the right side of the bet here having that long exposure. In into power And to some degree, it is almost like what you are seeing in the liquids markets today where you have a lot more tightness, in the refined products market as opposed to in the market specifically from what is going on in The Middle East. I think you are gonna see a lot of the same dynamics in power where that power market gets tighter and tighter. It will trickle through to gas, but not on a 1-for-1 basis. So being able to--in a--you know, a manner without putting any capital in, get direct exposure to the other side of the generator. I think is really interesting. And, again, it is our second deal like that. I would be open to you know, doing more deals like that. But, again, I think it speaks to just the structural creativity and what our team is capable of. To provide solutions for all these types of projects and play a lot of different roles to make them come to fruition. Alright. that is helpful. Thank you.

Your next question comes from Arun Jayaram from JPMorgan Securities. Your line is open. Please go ahead.

Yeah. Good. Yeah, good morning, team. I wanted to go back to the, CPV project. Toby and Jeremy, wondered if you could just discuss what has given EQT perhaps the right to win on this project. You mentioned the Wolf Summit you know, that in infrastructure project maybe was enabler. And perhaps you could talk about timing here. You menti1d as early as 2031. What are some of the gating items for this project to achieve that start up time including permit approvals, which has been some of the question from investors on some of these large data center or power projects in the basin.

Yeah.

So in terms of competitive dynamics, I mean, I would say we are probably I--and we are close on other projects and also including West Virginia. You know, I think before the end of the year, you will probably see at least 1 more, maybe more potentially some very large ones too. I think it is Arun, it is really what we have been saying for the past year You know, it is the power of the platform we put together, and more than anything, it is the quality of the team. Here at EQT. Working in a really collaborative aligned way starting with, you know, our commercial team, on our with our commodity traders out there structuring this stuff, the depth of relationships, the trust we have, the balance sheet, the integrated platform, We do not have to do the midstream. We do not have to do certain pieces of this, but we can. Understanding the whole the whole value chain, I think, adds a lot of value. Being comfortable doing things like we did on CPV, pricing it linked to electricity, not gas, and showing that flexibility because it is best for the customer. And really starting out with a mindset of what is best for the customer is what is gonna win the deal. And how do you create that win-win solution. I think when you put all those pieces together, we are just in a really unique spot. And it is allowed us to continue building that momentum, and that momentum builds more momentum. Which is why we are in the position we are today. So I again, I do not think we are done. I think there is a lot more to come. Yeah.

Arun, I just put some comments here. I mean, certainly have a mentality to help the customers and be creative, and we certainly have a number of capabilities from being an integrated producer. I would also say, you know, we have got, you know, great support with the board. I mean, the governance on this, the ability to work through these issues, ask the questions that we need to be asked, allows us to stretch strategically and make, we think, a really high quality decision. So, I mean, this organization is firing from top to bottom. And, it is it is what it takes to produce these type of wins. And I think it is it is worth noting that, you know, EQT continues to put to put up these results. We are and we seem to be, you know, winning almost 100% of these deals that we are on, but it is a lot of work, and we are really putting the customer first.

Arun, I think what is amazing too is, you know, we talked about you know, feel like we have a new deal every quarter. It seems like lately to talk about. If you really rewind a couple years back to the end of 23 when we first announced those sales deals to some of the big utilities in the Southeast. Those deals start to come online now at the end of next year. And into 2028. Those deals alone are $300 million a year of uplift of value. At the time, and I would argue today, we are still not getting credit for that. But we keep stacking up these deals whether it is LNG deals or power deals or whatever it might be, and that value continues to build. From our perspective, EQT is really the only platform with that. And as that momentum grows, we are gonna continue stacking that margin. At the same time, you have a macro backdrop you do, as we, you know, talked about in prepared remarks, as we have illustrated on slide 22. Which is a further tailwind when but, again, it is it is focusing on what we control every day to differentiate EQT from the rest of the group and deliver the wins in a in a differentiated way.

Got it. A quick follow-up. Is I wanna refer to slide 7 You guys have highlighted your first-half 2026 TIL performance where you are beating your type curve by 8%. I was wondering if you could, Toby, maybe unpack what is going on. Is are you drilling better rock? Is there different flowback procedures? Wondering if you could maybe help us determine what is maybe driving this outperformance?

Yeah. So the with the till accelerations that we put in place, really, this comes down to extending flat times, and this is a byproduct of producing into optimal pressures on the gathering side. So this is just another benefit from the compressions, not just having impact on improving our base production. it is also improving our wedge performance, which is the new TILs that we are putting in. So, know, it is 1 of the great things when you know, operationally, these wins create other opportunities for us. I would say some of the other things that we are looking at on compression that we have not really wrapped their heads around. But as Jeremy menti1d, we are we are really digging into this. We also have a number of wells that could benefit from workovers that may not would have been a prize in a high pressure system, but now with the pressures lowered, those workovers make sense. I mean, all of these things are incremental. And are just continue to strengthen the operational story that we have here at EQT. Great.

Your next question comes from Neil Mehta from Goldman Sachs. Your line is open. Please go ahead.

Yeah. Good morning, Toby and Jeremy. Thanks for all the updates here. Just wanted your perspective on the hedging strategy here. Sam you layered a in a little bit more and how are you thinking about you have the optionality of running a little bit more on hedge, but how are you thinking about being opportunistic around your hedging strategy?

Yeah. it is a good question. Mean, look, I think candidly, we are seeing some of the same, very near term risks that others are seeing around Permian growth potential and some of the super El Nino weather patterns. I think for us, it is more of just ensuring as we look into next year, the balance sheet's in a strong position. You know, we are intending to start buying back quite a bit of stock. We wanna make sure if there is a down cycle, there is nothing that holds us back from leaning in pretty aggressively and deploying a lot of cash into that. If that does happen, our hedging has been focused specifically on next summer where we would expect more of the weakness to show up. Making sure that through a cycle like that, if there is temporary weakness, that we can be aggressive and, on offense, As you look into late 27 and beyond, though, like, we really see this in inflecting again. This is feels to us like potentially a very short term soft spot. But I think the structural case for gas as you get into 2028 and 2029, with what is going on in power and LNG and, you know, production beyond this near term potential bump from the Permian, looks lackluster, increasingly lackluster to us. When you look at the Haynesville and some of the rest of these plays. You know, we see a really strong macro backdrop. And, frankly, we wanna be aggressive trying to buy a lot of stock ahead of it. So that is kind of how we are thinking about the hedging strategy. I do not know if you will see us add a bunch more at price levels around where the strip is right now, do not think there is a lot more downside to come. But we are really just trying to trying to put this in place so we can be aggressive. Yeah. That makes a lot of sense. And then maybe the follow-up is just on M2. We have seen local pricing in Appalachia strengthen here in part because of in basin demand Can you talk about your conviction around that story? And how are you seeing some of the moving pieces through the curve? Yeah. I mean, it is been a story we have talked about for years, and I think the market's you know, much more aware of it now. You know, all this demand we are talking about as we get, you know, later into this decade, I just do not think even if some of this does not happen and things get off track for some reason, I do not see a way for basis not to continue to strengthen materially. So, again, I think we are we are in a perfect position to benefit from a lot of that. And, again, as we think about a potential you know, strategy to start adding mid single digit type of growth at some point between now and the end of the decade, I think that is gonna be a market that can absorb multiples of anything we could add. So you know, our top line is price and volume can modestly add volume. I think we will benefit from price all the same. And that is gonna drive a lot of improvement in the bottom line. As we are buying stock back at the same time. So we think it is a recipe for a lot of success. Thanks, Jeremy.

Your next question comes from Philip Youngworth of BMO. Your line is open. Please go ahead.

Yes. Thanks. Good morning. Coming back to the Appalachia growth wave slide, I know this is unrisked, but is there a good way to think about just risking a project I mean, you do list a lot of the parties behind these, but what do you see as the biggest challenges to this demand materializing? And then also from EQT's side, what are the things that you typically look for when deciding who to partner with on some of these? Yeah.

Phillip, good question. I know you and I have spent some time in the last couple of months talking about this, and I think you have d1 some good work on this as well. What we have done is we have tried to take a very intentional approach in listing all these out, having direct dialogue with most of these customers, and understanding what exactly their needs are and what their obstacles are to getting these projects to FID, and finance and coming up with solutions to help alleviate some of those roadblocks. When we have gone through this internally and assigned probabilities, you know, across the spectrum, for each project. We come up with high single digit BCF a day of growth. So, you know, call it percent of the total potential here, we think is probably realistic. As we alluded to in our conference call last quarter. You know, as we think about what does it take and where to focus to increase those odds. We see our role as is taking what is in that in that navy color of that hockey stick wedge and trying to understand where can we use the tools available, whether it is midstream, or is it volumetric? Is it something else working with the downstream customers on gas supply? Or whatever it might be, to use EQT platform and help actually improve this the odds of success for these projects. So really just trying to be that partner of choice and work with them so there are win-win solutions just like we have done with CPV. I think the reputation we have built by doing that makes more people want to work with EQT. And we have also attracted a lot of talent here that further enhances our odds to be the best service provider available. that is, I think, why you keep seeing us stack these wins up.

Okay. Great. And then, on the supply side, is there an upper limit on what you think Appalachia production can grow in any given year, just given inventory depth? Also just logistics around gathering water. Because the top operators are talking about growth, but it still probably sums up to less than a Bcf, if you add it all up. So just wondering if you have looked at an upper limit on what this could be assuming demand growth materializes in the outer years.

Yeah. We are confident in Appalachia's ability to meet these volumes, but what I do think you are gonna see price sensitivity from operators while you hear some of the larger operators talking about their ability to grow, those operators typically have inventory to support that growth. that is not the case for a number of the other operators here in Appalachia. And I think they are gonna be you know, sensitive on price and a little bit more disciplined before they think about growing. I mean, the molecules are gonna are gonna show up. But it price will be a determination. Yeah. I would add to that.

You know, when we go with the data we have, data and understanding inventory depth of peers, When you look at the peers who have in inventory versus who do not, specifically in Southwest Appalachia where most of this demand is showing up, we think about a third of the basins total supply will be challenged to hold flat by the time you get to towards the end of this decade. And so if you have like, the Ohio, Utica, you have some producers in the in, like, the Panhandle or West Virginia area, And, you know, I think up in Northeast PA, you know, struggle to hold flat. While you have demand showing up, I think you get to this inflection point, what we keep referring to as a paradigm shift that happens towards the end of this decade. Where the demand in these long term infrastructure projects come online they will pull gas right at the time where I think you know, you have operators like EQT who can meet the moment and grow into that. I think other operators that are gonna struggle I think to your point, the ability to grow year over year and meet this I think you are gonna have to see pricing that provides a further incentive to go into zones that are less economic so certain operators can still you know, have the economic justification to drill. But if your EQT and we actually see our cost structure falling in time, not holding flat, not rising, but falling, I think you are gonna see significant margin enhancement from that as the marginal producers push pricing up while our pricing falls and we grow volume into that. And that is how you create you know, outsized value in the alpha we referred to in prepared remarks. Great. Thanks, guys.

Next question comes from Neal Dingmann from William Blair. Your line is open. Please go ahead.

Morning, guys. Thanks for the time. Toby, maybe for you or Jeremy, just on the power side also. I am just wondering, specifically, given, you know, you are obviously leading integrated gas company status, and when you look at these future contracts that you have been discussing, is there potential for these contracts that is maybe structured whereby you all would think about participating in some of the future data center upside? I am just wondering on the contract structures going forward.

Yeah, Neil. That would be a little bit of a jump to go from, Spark spread to, I guess, token spread. It is a concept that we have we have we have thought about. Do not see the market opportunity right now, but, yeah, I mean, it is it is pretty insane to see the, the margins that are being created off of megawatt of power from on the token side of things. But that those are not opportunities that are available in the market right now. But we will keep we will keep an eye on that.

Perfect. And then just quickly, you know, what maybe could you all talk about what is your current reinvestment rate? It seems like it is now incredibly low. And given that how low it is, does that imply, you know, you all think now you have even more potential for M and A given how low your reinvestment rate is?

I mean, look. I think I mean, it is been 2 I mean, call it 2 years since we did any sort of big M&A. I think our focus right now is on what we feel like the stock price is somewhat dislocated certainly for the quality of the business we have built. I think that is that is our M&A target right now. So, you know but buybacks are gonna be a big part of our M&A strategy if you wanna think about it like that. You know, buying back the best company available in the market every day. That makes sense. Thanks, Jeremy.

Your next question comes from Sam Margolin from Wells Fargo.

Hey, good morning. Thanks for taking the question. Hi. Sorry. Good morning. Thanks for the question. Wanna talk a little bit about MVP Southgate and, you know, this is an interesting delivery point it is between, you know, a huge amount of in basin demand Appalachia and then, you know, sort of a big wedge of LNG capacity coming south of it, but it is got its own load growth too. The Southeast just from population movement and power So the question is, as you have these demand spikes happen on either side of the MVP Southgate delivery point. You know, what is gonna happen to this market Does it just have the same effects as what you will see in Appalachia just little bit extended or does it actually could it develop kind of a unique deficit just given the fact that nobody else but you seems to be really focused on Yeah.

I mean, it is good question. I mean, we do see that Z1 5 market is 1 of the most lucrative in probably you know, all the Continental US because you have the demand pull south from LNG down Transco. Which is pulling gas out of that market. While at the same time, you have the dynamics you just described locally in that market. So you really have the dual benefits That is why we are so attracted to it. And why we are you know, we are we are building Southgate to get more gas into The Carolinas to Duke and the PS and C. So, yeah, I mean, I think long term, it is a it is a tremendous market to have access to, and I think we are 1 of the only producers that do at this point. Yeah.

On and I would add, just given these dynamics that we are seeing, you know, we have announced to accelerate Southgate We are not seeing any benefits to that right now, but the commercial team are out there working to pair up the accelerated construction and service date of our project with the commercial terms. So maybe we will have some progress on that in the future. Got it. That makes sense.

And then yeah. I mean, just I this up in the call. it is another market question. It came up on the call last quarter, you know, maybe a little bit of an evolution in the outlook for the LNG market where at 1 point there was obviously a lot of concern for a multiyear glut and now just given geopolitical conditions that is changing. I wonder if you could touch on if there is been any changes to your LNG market in terms of either the shape of it or even the long term kind of addressable market size just in the last 3 months, again, the context that you did update some thoughts last quarter?

Yeah. I would say what is what is changed over the last 3 months, mean, certainly, our view coming into this pre Iran war was that 2028-2030 was going to be a little bit of a glut. I think that is gone away with Iran. that is been that is now not gonna be the situation. I think in the last 3 months, people were anticipating when the recovery was going to take place. And when that LNG capacity was gonna be restored. Think with the current conflict extending, that is just delaying the recovery, which is deepening the, the hole in supply. I mean, right now, you have got Europe sitting at storage levels north of 10% below, year over year where they where they were. And it is starting to hit. I mean, you see spot prices internationally north of $17. I mean, there is a there is a very large spread forming. When we look at 28 on pricing, I mean, pre Iran to where we are at today, we have seen the, Henry Hub ETF spread, you know, lift over $2, and it is 1 other reason why, you know, this LNG deal that we just signed up coming in the market in 2028 is so attractive to us. Awesome. Thanks so much.

Your next question comes from Gabe Daoud from Truist. Your line is open. Please go ahead.

Thanks. Hey, morning, everyone. Maybe just going back to the West Virginia comments around maybe signing a couple more deals by year end. 1 of the campuses there, maybe 60 miles west, is the Monarch Campus. Just curious. Is your understanding that campus is still on track for 2 gigawatts operational next year and has construction started on that Prosperity Gas Line?

Yeah. I mean, we are we are in discussions with them. Probably no surprise. You know, there is a lot of work to be done on that campus, but I think progress continues to be made. But I leave it up to the projects to give the specific updates. I mean, we are, again, more focused on the gas supply portion of it. But we do not see any obstacle to EQT being at least 1 of the gas suppliers for a site like that? And then, again, there is there is others that I think we are we are very close on down there in West Virginia, and Southwest Pennsylvania. And we will give updates as those get a definitive document signed. Okay. Okay. Cool. Thanks, Jeremy. Maybe just a quick follow-up would be, some more comments around the BlackLine Midstream acquisition. Maybe strategically, could you just talk about how that maybe makes sense for you guys? I know you highlighted it in the prepared remarks, but curious if there is anything else that you could speak to.

Yeah.

I would think about it kind of like Equitrans in a way where we are we are their largest customer, and we saw it as a way to effectively buy that contract in at a really attractive rate. And then through the integrated platform squeeze even more value out of it. The guy who ran, BlackLine is actually a former EQT employee from our NGL. Team, on our on our in our trading business. So we have a lot of great relationships there already. Happy to welcome him back. And we see it as an opportunity where when you get an asset like that and then you give them access to you know, investment grade support, the relationships we have, the volume we have, the capital we have, to support them in going from being capital constrained to you know, really being able to think outside the box and how they optimize a facility like that. there is a lot of value that is created, and that is exactly what we have done with Equitrans. And I think we see similar opportunities, with this platform. it is obviously a lot smaller, but, again, I think it shows what you are able to do with a platform like EQTs where you just keep building through adjacencies as they become core competencies and generate a lot of value in the process.

Awesome. Awesome. Thanks. And actually, a quick follow-up. The It was Southgate, did Toby, did you say you are working on accelerating in service date to 2027? Is that is that what I heard? Thanks, guys.

Yeah. Construction should be in should be available by the end of this year, and the question's gonna be when can we start the commercial arrangements on that. That project. So those are the conversations we are having right now is taking advantage of the acceleration of construction. And this obviously would all be upside for our 2027 plans. Thanks.

Your next question comes from James West from Melius Research. Your line is open. Please go ahead.

Hey. Thanks. Good morning, guys. Obviously, the momentum in the business is extremely solid on the, you know, the base business, but your strategic momentum continues despite that. I am curious, when we think about both midstream pulling the accelerating the timeline here and think about the storage acquisition. How are you guys thinking about balancing capital allocation to that? And then, secondarily, if you could touch on kind of what are the additional opportunities to, 1, pull forward on maybe the midstream and, 2, other M and A, smaller M and A tuck in opportunities like BlackLine? That are out there?

Yeah. Great question. You know, we I feel like our journey in driving growth of e really growing free cash flow per share you know, we have really been handicapped by the fact that we have just been so relentlessly focusing on paying down our debt, and that is prevented us from using a tool you know, buybacks. To help drive free cash flow per share. Having such strong strategic momentum I think, gives us even more excitement about ramping into buybacks. And so that certainly is gonna be something that is more top of mind for us and allow us to continue this great momentum that we have in driving free cash flow per share. As it relates to the sort of organic opportunities that we are capturing right now, I mean, these are all high quality projects. You know, they provide pretty healthy free cash flow yields And so those are sort of an all you can eat opportunity for us. And when we think about those, relative to doing buybacks, I think we can look at our stock as you know, what is the free cash flow yield embedded. But just like we showed with BlackLine, you know, and these type of opportunities can present some healthier free cash flow yields. But, I mean, it is it is we wanna get as many of these as we can and with high quality opportunities, we will have the ability to finance these in the most, accretive manner possible for the business.

Yeah. I would also add to that. I mean, we look at a ton of stuff out there, and we kind of--I mean, power, LNG, I mean, gas storage, I mean, in this case, propane storage, We also always try to ask ourselves the question of would we rather own or would we rather rent? Would we rather buy or would we would we rather be a customer? You know, we look at LNG. We see the returns in the high single digits. Right? Like, the exposure we wanna get is the off take in international exposure. Kind of the same dynamic. Right? it is it is so well capitalized. It does not need our cap capital but we can do things to still get that exposure like the contracts we have with Hilltop and now CPV. We were where we are getting that exposure to spark spreads widening, without putting capital BlackLine was a deal where we said the returns are so strong, and it is smaller, let's buy this. Let's own it, and let's do what we did with Equitrans all over again. We look at everything through that lens, and we get a lot of reps in doing it. And the more kind of muscle memory you build seeing everything in the market, the better the decisions. Decisions you can make. Our goal, though, is to reduce our capital base while improving our profitability to drive our return on capital higher. So, again, like, the beauty of being a public company and having stock for sale every day and, candidly, having the stock for sale not reflecting the platform value or any of these sort of, value unlocks on the horizon for all the deals we have signed is we get to buy that back effectively for free ahead of time. And so do not have to put the capital in can get the benefit and use the capital for buybacks. And that, I think, in the long term is gonna drive much better share price performance. that is great color. Thanks, guys.

Your next question comes from Bob Brackett with Bernstein Research. Your line is open. Please go ahead.

Good morning. I am intrigued by the laterals, and I am wondering is there a limit to growth there where effectively the stage length gets too long, you are not fracing effectively, or maybe there is an operational limit. Are you thinking of super long term?

Yeah. So sort of the way we define these records really just showcase what is possible. The we always need to ask question, is this gonna be best to roll out across the organization? You know, 30 thousand foot laterals, the team has shown that it is proven to do that. I think what you are gonna see at EQT is we are probably gonna increase our normal lateral lengths to north of 15 thousand feet, maybe targeting that 15 thousand But, again, there is other considerations that were taken into place. I mean, the ultimate question in our development plan while longer is better, we are looking to maximize the recovery from every acre, and we do have some confines from an acreage perspective that we are working in. So it is not a complete blank slate. But the team what is really exciting to see is the teams continue to push the technical limits and that gives us a lot of a lot of optionality to access reserves that we may not have been able to access. From our site locations, but those are very small. You know, the benefits of having a large contiguous exposition that EQT has is know, we have eliminated a lot of constraints, but we will continue to look for ways to optimize operationally. Very cool. Thanks.

Your next question comes from Jacob Roberts from TPH and Company. Your line is open. Please go ahead.

Good morning. Hey, Starting on the Hey. Good morning. Starting on the CPV deal, you know, I know you guys have done 2 of these now, PJM, net back type deals, but I am curious as you think about managing spark spread risk over these long term contracts. Is there a desire to have a mixed portfolio of perhaps fixed premium deals alongside these? Yeah.

I mean, we look at look at it like a portfolio. I mean, the beauty of the electricity linked pricing is you do have instead of gas where you have your peak demand period in the winter, and in power markets, have it in the summer and the winter, And so you do get that uplift, which should improve our seasonal pricing. And just like I said earlier, due to the correlation of gas and power in PJM, which is where gas sits in the generation stack, We think we think we are in a favorable position to probably leave this exposure open right now and just have further diversification. We can hedge it financially, if we want to. I think right now, our bias is to keep it open. And if there is opportunities to duplicate this a couple times, if that is what is best for the customer, we are open minded about doing that as well. Okay. Thank you.

And, Toby, earlier, you menti1d that some of the strategic growth on the compression side investments that you have made are beneficial of course, to base the clients, but also new well volumes. And this might not be the right way to think about it, but when we are considering that strategic growth capital for this year, what is the time line in terms of like new wells or wedge volumes that this year's spend could theoretically handle or fit before you need to start thinking about, you know, adding to that compression spend going forward?

So I am not sure I totally understand the question. Yeah. Well, I am trying to get at the strategic--sure, the compression investments that you guys have made, I think you spoke to the fact that is boosting what we are seeing on these well results in terms of the new well volumes. As part of as you, you know, proceed to the till program for a year. And so I am just wondering what the to that trend, is there continued compression investment spend that we need to see as you, you know, drill 2 years out? And then maybe I maybe as a secondary, if that question does not make any sense, is how does this translate to a lower maintenance capital going forward?

Sure. Thanks for rephrasing that. I understand. Yes. So for our compression program right now, we have identified we have evaluated all the wells in the portfolio. Over 99% of our wells have evaluated the potential for compression projects, of which you have 6 compression projects going this year. We have identified probably another 30 Those are different size and scopes, for those. But on average over the next few years, we are gonna be deploying compression on, wellbores that would have production of about 0.5 Bcf/d each year. And so we will we will space that out over time. And the timing is really gonna to the vintage of the wells and the timing when these wells will actually benefit from compression and make space for new per new wells that are coming in. So we have got a pretty integrated approach know, that we are looking out you know, through 2029 right now. And so, hopefully, we can continue to promote this capital efficiency gains that we are seeing. And as we menti1d, before, the returns that we are expecting on compression, this is 1 of the best bang for the buck opportunities that we can spend, and that was before we have sort of surprised ourselves to the upside with the impact that we are seeing from compression. Alright. Thanks a lot. Sorry for the rough question. Appreciate the time as always.

Alright. Thanks.

Your next question comes from Kevin McCurdy with Pickering Energy Partners. Your line is open. Please go ahead.

Hey. I appreciate you taking my question. I just wanted to come back to Slide 22, which is obviously a popular slide here. That wedge in late 29 looks massive. At your 40% risk case, how early would you expect prices to react to this increased demand? And obviously, it is not really showing up in the future markets yet, but maybe you guys have a rule of thumb on when the market starts to price that.

Yeah. it is something we have talked about with our traders quite a bit. I think what we see on the ground because we are in all these discussions, both with downstream customers, the midstream customers, you know, players like CPV, I think we have a lens into it that others do not, which is why we wanted to put this together. In our view, I mean, you will see a wide divergence across a lot of basis points. In Appalachian Appalachia relative to other points. You know, I think in the next year or so, I think that this will become more and more real. As I think what we see behind the scenes starts becoming more public. And you see where those demand sinks show up, But, you know, I think 1 of those things where, like, we talk about it, commodity market's not reflecting it. Or the equity market's not reflecting it. Stock's still trading with probably a mid $3 gas price implied. I mean, it is it is 1 of those things that we are moving to take advantage of We are gonna execute on 1 way or the other. And if the market's slow to react that you just see a more visceral reaction when it when it becomes obvious. Great. And any, any key projects we should watch specifically for that 29 to 30 kind of demand wedge? Yeah. I think the big 1s that we are focused on right now are the big projects out of Clarington. The Ohio market that we have talked about for a couple of quarters now. I mean, that is that is ground zero in our mind. Where I think a lot of this gas is gonna leave the basin. We are focused on making sure we get EQT gas to that point to the receipt point on those pipelines. Where all that gas needs to be delivered to. And work with the end customers both on our own projects and other companies' projects being a great partner to them to help get their projects d1. Benefits them, benefits EQT, benefits the end customer, and it is really a win for everybody. I think you could see some movement on that before the end of the year, but you are talking about multiple Bcf a day of additional demand if some of that comes to fruition. And these are all projects. I mean, that you hear Borealis, you hear the PTTG facility in Ohio. I think I think there is a lot of, there is a lot of legs to these, and, I think the developers are making good progress to turn those into reality. So stay tuned, and you know, we will do our part to try to try to make them all successful. Great answer. Thanks, Jeremy.

We have reached the end of the Q&A session. I will now pass the call back to Toby Z. Rice for closing remarks.

Thank you, operator. It was another fantastic quarter for EQT. I just want to thank our shareholders for your support and really thank the crew for all the great work that they are doing in putting these numbers up. And we are certainly excited about the path forward, and we will look forward to updating you guys on what looks to be a pretty bright future in front of us. Thank you.

This concludes today's call. Thank you for attending. You may now disconnect.