EQT Stock

Hello, everyone. Thank you for joining us, and welcome to the EQT and Range Strategic Combination Conference Call. [Operator Instructions]

I will now hand the conference over to Cameron Horwitz, Managing Director, Investor Relations and Strategy. Cameron, please go ahead.

Good morning, and thank you for joining today's call to discuss EQT's acquisition of Range Resources. With me today are Toby Rice, President and Chief Executive Officer of EQT; Jeremy Knop, Chief Financial Officer of EQT; and Dennis Degner, President and Chief Executive Officer of Range. In a moment, Toby, Jeremy and Dennis will present their prepared remarks with a question-and-answer session to follow. An investor presentation outlining the transaction 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'd 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 today's press release, our investor presentation, the Risk Factors section of our most recent Form 10-K and in 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 today's press release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

Lastly, in connection with the transaction, EQT intends to file with the SEC a registration statement that will include a joint proxy statement of EQT and Range and will contain important information regarding the transaction.

With that, I'll turn the call over to Toby.

Thanks, Cam, and good morning, everyone. This morning, we announced an agreement to acquire Range Resources in an all-stock transaction, creating what we believe is the undisputed leading natural gas platform in North America. This transaction comes at a pivotal moment for America's economy as the convergence of modern industry and energy ushers in a new era of growth. Nowhere is this transformation more evident than in Appalachia, which is emerging as the epicenter of the U.S. economic renaissance. With a significant inflection in natural gas demand on the horizon, driven by new power generation facilities and expanding pipeline infrastructure, we believe this combination supercharges EQT's positioning, making us the operator of choice for this next wave of demand and unlocking opportunities to create differentiated shareholder value from our combined world-class resource base that neither company could achieve independently.

The combination of EQT and Range brings together 2 of the highest quality, longest duration natural gas assets in North America, with more than 30 years of inventory served by EQT's integrated infrastructure, EQT's leading commodities marketing platform and a fortress investment-grade balance sheet. We forecast a pro forma unlevered free cash flow breakeven below $2 per million Btu, making EQT the lowest cost and highest quality natural gas producer in the country by a wide margin. The combined company's peer-leading inventory duration and unmatched cost structure provides tremendous resilience through commodity cycles while enhancing upside exposure to strengthening natural gas fundamentals. This acquisition also provides additional scale and productive capacity to dedicate to premium supply agreements, further solidifying EQT as the partner of choice for power providers and other large energy users seeking long-duration natural gas supply.

Range's assets represent some of the highest quality natural gas inventory in North America, with acreage directly offsetting EQT's core positions in both Southwest and Northeast Pennsylvania. The combined asset base gives us a broader and complementary development footprint that we can optimize as one system. This will give us greater flexibility to optimize development sequencing, infrastructure utilization and volume flows while allocating capital toward the highest return opportunities across the combined inventory. We believe this combination positions the company to capitalize on long-term demand opportunities with superior capital efficiency while providing lower cost and more reliable supply to customers than either company could independently achieve.

The strategic fit becomes even more compelling given Range's proximity to the Clarington, Ohio, delivery point, which is increasingly becoming a focal point for new power generation and pipeline takeaway projects. EQT's power pipeline open season reflects the significant demand we see emerging in that area, and this combination meaningfully strengthens our ability to serve that demand with low-cost, reliable, long-duration supply.

Turning to deal synergies. Our diligence has identified annual base synergies of $325 million, consisting largely of corporate and organizational efficiencies and operating savings with the achievability of those savings strengthened by the adjacency of the assets and our experience integrating large-scale transactions. However, the most compelling opportunity lies in unlocking the value of Range's molecules beyond the wellhead, which we believe is the next leg of value creation for this industry in an area where EQT has established itself as a clear leader. We believe there is more than $300 million of additional long-term annual synergy upside from midstream system optimization, gas, LNG and LPG marketing optimization, additional premium supply deals and partnering to accelerate inventory development into long-term demand growth.

Based on our experience and track record of capturing synergies, we are confident our team can deliver this value for our shareholders. Stepping back, the industrial logic of this combination is clear and compelling. We are bringing together 2 world-class offsetting resource positions that can be developed more efficiently as one system and pairing them with EQT's integrated infrastructure and commercial platform. The outcome is a company with superior inventory depth and duration, the lowest free cash flow breakeven in the industry, advantaged connectivity to significant power and LNG demand growth, a fortress investment-grade balance sheet and ultimately, a company best positioned to serve customers and ensure America's modern economy has access to low-cost, reliable clean natural gas for decades to come.

We believe the combination of asset quality, durability, market access and financial strength creates the strongest natural gas platform, not only in North America, but in the world. One built to thrive through the inevitable cycles, positioned to uniquely capitalize on new demand growth and compound free cash flow per share for decades to come.

I'll now turn the call over to Dennis.

Thanks, Toby, and good morning, everyone. This transaction marks a major milestone in the Range story, following the discovery of the Marcellus Shale over 20 years ago. Range's technical team transformed that world-changing discovery into a high-quality drilling inventory measured in decades. Over the years, we have showcased industry-leading technical abilities, expanded access to international markets, built a bulletproof balance sheet and created a business capable of generating free cash flow through market cycles. Of course, none of this would be possible without the incredible work of our team. Their relentless focus on innovation, commitment to operational excellence, environmental leadership and dedication to our mission enable us to make this next step in our journey.

I can confidently say that Range has never been in a stronger position than it is today. As we look to the future, the Range Board determined that partnering with EQT is the best way to accelerate value creation for shareholders, driven by a new level of enhanced scale, efficiency and operational success from this incredible resource. We believe this is a true win-win for shareholders, employees, customers and the communities where we live and work. The transaction exchange ratio represents a compelling premium for Range shareholders, and the all-stock consideration provides them with the opportunity to participate in the significant value creation opportunities of America's largest and only vertically integrated natural gas producer. We also expect our customers and partners around the world will benefit from this transaction as we gain critical scale, midstream infrastructure and expanded market access here and abroad.

Together with EQT, we believe we will be in an even better position to realize the full potential of our asset base and meet the growing global demand for reliable energy for decades to come. We share EQT's vision for the future of our industry and their conviction that the Appalachian Basin remains the crown jewel of the world's natural gas resources. We are confident that together, we will unlock the immense value of our assets to support this demand. Most importantly, we are excited to join a like-minded organization that shares similar values. Range and EQT are committed to engaging and investing in employees, working safely and efficiently, and being responsible members of the communities where we live and work. We will continue to focus on supporting and empowering our teams as a combined company and are excited for this next chapter of Range, along with the compelling opportunities that we will unlock together with EQT.

With that, I'll turn the call over to Jeremy.

Thanks, Dennis. As Toby outlined, this combination creates the undisputed leading natural gas platform in North America. The resulting scale and durability of the business, combined with our integrated platform and investment-grade balance sheet creates a differentiated investment proposition with the scale and financial relevance to compete for capital alongside the largest energy companies in the world.

Turning to deal structure. EQT will acquire Range in an all-equity transaction with a pro forma enterprise value greater than $50 billion. Range shareholders will receive 0.987 shares of EQT common stock for each Range share owned, resulting in existing EQT shareholders owning approximately 73% of the combined company and Range shareholders owning approximately 27% at closing. The all-equity nature of the transaction strengthens our balance sheet while creating an even more resilient and diverse asset base. We believe this transaction solidifies EQT's position to reach BBB or equivalent credit ratings from all agencies by early 2027. Our commitment to maintaining a bulletproof balance sheet remains unwavering. As such, we are setting a pro forma maximum debt target of 1x net debt to adjusted EBITDA and a $2.75 NYMEX natural gas price to achieve and maintain BBB or equivalent credit ratings through the cycle.

Consistent with EQT's existing strategy, we intend to allocate capital towards disciplined investments in sustainable growth, supported by new contractually linked demand while building cash, opportunistically repurchasing shares and sustainably growing our base dividend. The combination with Range both supercharges and derisks this plan and positions EQT to compound shareholder capital for the long term in a way that no peer is able to match. As Toby mentioned, we project a pro forma unlevered free cash flow breakeven below $2 per MMBtu, positioning EQT to generate material free cash flow even through the low parts of the commodity cycle.

To hammer this point home, we project 5-year cumulative pro forma free cash flow of nearly $14 billion at a $2.75 per MMBtu natural gas price, which is a level where the bulk of our peers will be free cash flow neutral or negative. Importantly, we also maintain significant exposure to upside price environments because our low-cost structure minimizes the need to defensively hedge, with cumulative pro forma 5-year free cash flow north of $38 billion under a $5 per MMBtu upside price scenario. The intrinsic value of the business is strong, but the upside optionality we have created through this large-scale integrated natural gas platform is even stronger.

Importantly, the combined sales portfolio also gives us multiple avenues to improve realizations over time. We will have approximately 3 Bcf per day of pro forma in-basin production that can be directed toward premium long-term supply agreements, providing material exposure to improving local basis over the coming years. We also have nearly 1 Bcf per day of international market exposure through EQT's existing LNG contracts. And the greater scale of the combined company gives us the option to increase that exposure as attractive opportunities emerge.

Additionally, we plan to leverage the capabilities of EQT's commodities organization across Range's production base. Recall, this team generated approximately $200 million of incremental free cash flow for EQT last year, and expanding that capability across the combined production base represents a meaningful opportunity to enhance realizations and margins without relying on higher commodity prices. Wrapping up, when we announced the Equitrans acquisition in 2024, we said our goal was to buy wonderful businesses at fair prices rather than fair businesses at wonderful prices. That same principle applies here. Range is a wonderful world-class asset. And more importantly, we believe it becomes even more valuable as part of the EQT platform. This combination takes 2 already differentiated companies and puts them in a class of their own. And we're incredibly excited about what lies ahead for EQT and our combined shareholder base.

With that, I'll turn the call back over to Toby.

Thanks, Jeremy. In closing, I want to thank everyone at EQT and Range who helped make today's announcement possible. To the Range team, I've watched firsthand over the years as you built an exceptional company with a world-class asset base. I know the work and determination behind what you've accomplished and the results speak for themselves. 20 years ago, as Range pioneered the discovery of the Marcellus, you told the world, "Drilling is just the beginning." Today, this transaction recognizes everything you've built and marks the beginning of what we can accomplish together. Now we tell the world, "This combination is just the beginning." This combination establishes EQT as the clear leader across every dimension that matters in our industry: inventory quality and duration, cost structure, financial strength, free cash flow generation and long-term growth potential.

Together, these advantages establish what we believe is the most compelling investment proposition in the energy sector, combining exceptional downside resilience with differentiated long-term upside potential. We have a tremendous opportunity ahead of us, and we look forward to working together to realize the full potential of this combination, creating lasting value for all of our stakeholders.

With that, we'll open the line up for questions.

[Operator Instructions] Your first question comes from the line of Neil Mehta with Goldman Sachs.

Toby, Dennis, congratulations to both of you. Maybe just give us a little bit of background here how this came together. Any background you can provide about the process? Was it competitive process? Is this something that you guys have been talking about potentially for a while? Just any perspective you can provide about how this all came together.

Yes. Thanks, Neil. Well, I think the investment community has identified the merits of a potential combination. I mean it makes so much sense for the reasons that we laid out in our deck. This combination creates undisputed natural gas champion that checks the box on every metric that matters for an energy business. We significantly advanced EQT with this transaction. So it's made a ton of sense. But as far as a timing perspective, I think the one catalyst for us that really opened our eyes on this opportunity, why now is the emergence of this demand that's showing up in our backyard in Appalachia. And I think the opportunity that presents for both of our companies, it just allows us to compete more aggressively to win these opportunities.

When you look at the asset base that we have at EQT, we've stated our productive capacity could be north of 12 Bcf a day. And you look at what Range brings to the table and they're 2.5 Bcf a day, they've stated in the past that they could double that production base and hold it flat for 15 years. That's a 5 Bcf a day productive capacity. Put those together, we have a productive capacity of 17 Bcf a day, looking at an opportunity set that could be 20 Bcf a day. Seeing how we can put these companies together and take a significant piece of this opportunity, I think, to me, was the compelling catalyst for us to act now.

Great. And then the follow-up, this might be for Jeremy, is just as we try to pencil out the accretion, how should we think about that as we think about '27, '28 on either free cash flow per share or EBITDA basis? And just any advice about thinking about the modeling of that dynamic?

Yes, Neil, I would take the approach of putting both businesses together from the public financials and the synergies that we've guided to are almost entirely on the operating expense side as opposed to the capital. Range, as everybody knows, is a fantastic operator. I think there are learnings from the Range operating team, and I think we'll take a best of both approach. But I would expect most of those synergies to show up on the operating expense side.

Your next question comes from the line of Betty Jiang with Barclays.

Congratulations on the deal. My first question is on the 30-year plus inventory. Clearly, that's going to be a huge differentiator. But historically, the market is just unlikely to give you full credit for resources that's super far out. So how do you think about maximizing the value of that inventory over time and how to showcase in the market to optimize that value as well?

Yes, Betty, great question. We believe that our inventory is one of the most underappreciated aspects of our companies. And the way that we're going to monetize that and show the value there is by signing up for this long-term demand and competing to capture this. These supply contracts will give us the opportunity to sustainably grow our businesses, and that's how we're going to be able to showcase the quality of this deep inventory we have is going to be converting that into demand and sustainable production growth.

If I could follow up just on that. I think historically, for EQT, that optimal level may be in the low to mid-single-digit level and then have that growth meeting, capturing a portion of demand. Does that change or philosophy change given this transaction?

No, Betty. I think one thing we want to make clear with this transaction, while this is transformative to the quality of the business and a lot of things that we're incredibly excited about, from a strategic execution standpoint, our strategy remains unchanged. We still are going to have a commitment to quality, our sustainable growth. We're still going to have a commitment to making sure that's sustainable and it follows demand. And we will have the ability now to allocate volumes that are flowing above ground to fill these contracts and look to backfill these over time. And you're on point with sort of the mid-single-digit growth, is sort of a good ballpark for how we think about the growth rate that we'll look at.

Yes, Betty, I would think about it as same strategy, same framework, just really enhancing our ability to execute that at even greater scale and capture even more opportunities. So it's really about supercharging the plan we already had and accelerating that with even more confidence than we had before. And that's really why, as Toby said a few minutes ago, why now, why the deal makes so much sense. That's really what puts it all together.

Your next question comes from the line of Arun Jayaram with JPMorgan.

Toby, Dennis, congratulations on this transaction. Toby and Jeremy, I was wondering if you could comment on how you believe this deal will help unlock the next wave of demand for EQT. And maybe you could comment on what you're seeing at the Clarington, Ohio kind of delivery point, which has kind of highlighted some of your enthusiasm about some of the power generation and other supply deal potential at this hub.

Yes, Arun. So I'd look at the productive base we have within Appalachia right now, which is the big source of the demand coming, over 3 Bcf a day exposed to local markets. That's before we think about adding the sustainable growth. So we've got a significant amount of supply that we're going to be able to support gas supply contracts. This long-duration inventory that we have is going to allow us to continue to extend that opportunity set. And I think when you mentioned the Clarington demand hub that we see rising, we're taking advantage of that with our power pipe, which, as you know, is going through an open season process right now.

We're seeing -- and we'll have some updates on that in the future, but we're seeing really strong interest in that. And to have the Range asset base next door to this type of asset, which allows us to feed even more of that supply to feed that demand is going to set the table for us to create even more gas supply opportunities with that piece of infrastructure.

Yes. I'd also think about just where the Range asset is positioned right there along the Ohio River. It's almost like beachfront real estate to where this emerging kind of epicenter of growth is really coming from, where we see that gas leaving the basin. So really, what we're trying to do is position around that, not only core resource, but around that core market egress to those new demand centers. I'd also point out that, that Shippingport deal that we have, that we announced last year that's already signed, that is in the middle of Range's acreage. So our ability to serve that even more efficiently, I think, is a great example of what you can do when you have an even larger asset base.

You can provide ultimately better service to customers really at cheaper rates, but actually capture more margin at the same time in the process. And that's really the essence of what we're trying to do here, even just when we look at it domestically. And then I think internationally, what this opens up for us to really supercharge what we're doing in LNG. And I think what we -- I think about a lot of the conversations we have in the LNG markets, it usually starts with LNG and ends with LPG. So I think taking the NGL international exposure that Range has already built up and pairing that with our LNG strategy, I think it's going to be a really powerful combination.

Great. And just a follow-up. You guys have highlighted $325 million of annualized baseline synergies. I wanted to see, Toby, if you can elaborate on the development plan optimization piece of this. I know that EQT has used a combo development scheme to efficiently develop your assets. How is the Range acreage -- how could that support, kind of, combo development in your eyes?

Yes, Arun, our approach here really is to rightsize the operations to the asset. And I think what you've seen Range do with their operating techniques on their asset base, I think, is best-in-class for that asset. So I would not look at this as us bringing combo development to an area where they've already proven exceptional operating capacity in their areas. That said, we will look for combo development opportunities where it makes sense. This is probably going to show up in the dryer gas areas. We do have some good dry gas overlap in Washington County and then the operational scale we have achieved up in Lycoming County could be some further opportunities for us to take advantage of that. But I think from an opportunity from a scheduling perspective, we don't anticipate any scheduling changes. It's going to be business-as-usual, probably for the first 12 months.

And then I think from a scheduling perspective, one of the opportunities we have is really taking advantage of some of the bigger picture opportunities, not just optimizing for the laterals or the site, but optimizing for the field. And there could be some opportunities where we can move some activity around to better serve the gathering infrastructure that we have in place. And those will be opportunities to bring greater efficiencies. But I'd say what I'm most excited about is looking at the efficiencies we're going to bring on the infrastructure level and then also the opportunities we see on the downstream capturing demand set.

Your next question comes from the line of Phillip Jungwirth with BMO.

Congrats on the deal. It looks like in the deck, you might have raised your Appalachian natural gas demand potential to 25 Bs a day, whereas I think last quarter it was around 20 Bs a day. One, I just want to confirm this. And then generally, how are you seeing momentum across in-basin power demand pipeline takeaway, especially just given some of the noise around data center construction intra-quarter across different states?

That is a good observation. We have raised it. We continue to be in dialogue with probably every party involved. I'd say that momentum continues to build and that certainly illustrates it. Look, I think we're as bullish on that opportunity as we've ever been right now, really up and down the value chain. And I think, look, the goal of this deal is to better position the business to serve these opportunities, help catalyze and bring more of these to fruition. Ultimately, it's about putting the customers first. It's kind of the philosophy in which we approach this and having a better business and platform from which to do that, I think, will help bring more of this to fruition. So we're excited.

Great. And then on the gas marketing front, you mentioned the strong commercial capabilities you've built in recent years, with Range you're increasing gas marketing capacity 25%. I was just hoping beyond the higher volumes, if you could talk about some of the nuances and how this helps you? And then longer term, do you see opportunities to optimize Range's margins through just whether it's gathering gas FT, liquids FT and optimizing those contracts given the increased scale or just over time as those contracts roll off?

Yes. Great questions. On the marketing side, a lot of the value does come down to scale. The more scale you have, the more you see in the market, the more you can optimize where those volumes flow. I think what we even do with our curtailment strategy as an example, you look at -- I think some people don't realize we gather about 600 million a day of gas on our Mako system already of Range's production. Pro forma, when you look at the returns on those wells being dry gas, but with now integrated economics, it's actually the best across Range's entire portfolio. And not only that, it unlocks the ability to pursue the same strategic curtailment strategy across that asset base that we have on our own. That's a huge value driver for us every year.

I think what we're doing in the NGL side of the business with the recent Blackline acquisition. And when you look at what we can do through the other facilities on the East Coast, I think there's further upside there, just optimizing where all those barrels flow. And then look, on the midstream side, I think our ability to replicate some of what we've done with Equitrans, with compression across Range's asset base, certainly, as you look at growing that business and pulling forward the really deep inventory they have across the Marcellus and across the deeper Utica, I think there's an enormous opportunity for us, both on the assets we already gather, but also on the other assets that are largely served by MPLX to work with them and further optimize that.

So I think there's a tremendous amount of value that we've only just started scratching the surface on. And that's really part of some of those upside synergies, why we bucketed that differently. It's hard at this juncture to say exactly what those are, but we think there's a bunch of value there to unlock and do it more efficiently, and we can certainly play a part in that.

Your next question comes from the line of Josh Silverstein with UBS.

I just wanted to ask on capital allocation post close. How do you envision free cash flow allocation between debt reduction, buybacks and organic growth? You mentioned that 1x net debt-to-EBITDA target of 2.75x. So do you first go to debt reduction and then the buybacks ramp as both companies were on that track to basically ramp buybacks meaningfully next year?

Yes. I would say our approach on the capital allocation framework is going to be largely unchanged. I would note that this transaction does accelerate our deleveraging progress. And when it comes to, it will continue to show modest growth on our dividend over time. But to the point on buybacks, if we were excited about our buyback opportunity, we're even more excited with this pro forma combination and our ability to buy back our stock. A couple of things that are really driving the acceleration. One, the deleveraging nature is going to give us more -- the ability to be more opportunistic. And then the accretion on free cash flow per share, coupled with the synergies that we've got are going to give us more capacity to be more aggressive on the buyback when those opportunities present itself.

Got it. And then just on the $300 million of strategic upside synergies, can some of this come, kind of, post close? Or is this being developed over time, that demand wave coming? Just kind of curious on the time frame for those.

Yes. I think some of it could actually be much sooner. I'll give 2 examples. One, if we just hold our same 15% of production allocated to LNG, there'll be another 2 tons (sic) [ 2 million tons ] that we could sign up for. That's something we could do sooner. Obviously, it depends on when those facilities ultimately get built to when the cash flow shows up. That's something that we don't necessarily control. Another example, if we were to replicate a deal like CPV Shay that we announced last quarter, that can be signed up sooner, but it takes 3 to 5 years for that stuff to get built. So there is value that I would say can be secured, but when it turns into cash flow is a bit of a question. So again, it's a little different than the traditional synergy that shows up in 12 to 24 months, but I think it's very real at the same time.

Your next question comes from the line of Sam Margolin with Wells Fargo.

Maybe if we could revisit growth and capital for a second. I think the context is interesting because both companies were progressing on efficiency. You weren't static. So it was becoming easier to grow. In some cases, almost impossible not to grow. And so the question is, do you see a -- maybe like a rebalancing of capital where a little bit more goes into midstream to balance out the midstream connectivity between the 2 assets? Or are you comfortable just continuing to realize upstream efficiencies and growing on your baseline activity level?

Yes. I think one thing we're excited about, midstream optimization efficiencies that we can gain from investments in compression are going to be some of the highest return investments that we can make, fastest payback. So those will be at the top of the list. It's one of the reasons why we prioritized those there since taking over E-Train. So we'll look at those opportunities. I think our growth -- our ultimate growth plans really going to be governed by the amount of demand that we have and making sure that we're not overwhelming the demand, and we're being thoughtful about how we allocate volumes into that demand as it shows up over time. But I think, like I said before, mid-single-digit growth, I think, is certainly achievable for these organizations. And our opportunities to capture more demand, I think, will govern the size of that.

Okay. Understood. And then yes, maybe just -- Jeremy made a remark about LPGs and NGLs. If we could dive into that maybe just for a little bit more detail because Range did historically spend a lot of time talking about just the NGL macro. And I think you've expressed that you're constructive on it, but maybe if anything has changed on that front for you in the last 6 months or so, notwithstanding external events that may be induced -- the timing of this or just reengaged you in a different production mix.

Yes. This is Dennis. Maybe I'll jump in here for a quick second. And I think the NGL piece, as you said, has been a hallmark of a part of the Range story and we see this as being part of a few different aspects of this combination and one is going to add some additional durability to the pro forma business as we go forward. I think when you look at the duration also for the inventory that Range would bring into this combination and the marketing skill sets that both Range and EQT bring to this process, we think it really expands the ability to touch on something that I think you've heard both Toby and Jeremy reflect on, and that is enhancing margins.

And so we think that then enhances the durability to the business going forward. I think you've seen a real pullback in some of the inventory levels on the LPG front over the balance of the past, we'll call it, 6 to 8 months. That's been nice to see. We're still a little bit elevated on that front. But as we get ready to go into the winter months here, we're still continuing to be more and more optimistic, storage levels get renormalized. And of course, winter demand always plays a strong part in the equation. I think exports just continue to also reflect a strong output part of this conversation where you're in excess of 2 million barrels a day on a repeatable basis, again, back to the durability and supporting that for our business. So as we get into 2027, we fully expect prices to continue to show strengthening, stock levels to get renormalized. And again, as you look at this pro forma entity, we're adding some diversity in how we think about the future of meeting demand, both domestically and globally as well.

Your next question comes from the line of John Abbott with Wolfe Research.

Doug is currently traveling. I guess first question really is on potential asset sales. When you sort of think about your pro forma footprint, is everything core? Are there things, areas that you could potentially trim? How do you think about potential asset sales post the deal?

Yes. John, I'd say all of our assets are up for sale. We will rationalize the assets that we have and make sure we're putting dollars and investing in the best return projects. We have sold assets in the past. We'll continue to look at that. And I think we just pair that up with what we see as a pretty tremendous demand setup and the value of this inventory starting to become appreciated as we look to sign up for this demand and accelerate some of the growth -- the production growth from these assets.

All right. And for the second question, I did drop off for a short period of time, so I apologize if this was already asked. But do you envision any sort of FTC issues just given the size of the position that you would have in the Marcellus and getting the deal done?

No, we do not.

Your next question comes from the line of James West with Melius Research.

Congratulations. Toby, I'm curious, we've always thought your vertical integration was a competitive strength here. And so adding the midstream assets to Range is going to be, I think, a home run. Could you maybe comment a little bit in the Q&A or maybe elaborate more on how you envision that unfolding?

Yes. I mean we've got our playbook set up, and we're excited to continue the execution of what is a proven program. This will be part of just assessing the gathering system pressures, the timing of the volumes when they're coming in line and opportunities to smooth that out and optimize is sort of the standard approach that we're taking. I'll tell you, another part of our integration playbook, which doesn't get as much airtime, but one part that we're really excited with this Range integration is identifying best practices. And I think when you look at the operational skill set that Range brings to the table, I mean, super technical on the subsurface, getting every value out of every molecule of liquids that gets produced. These are all best practices that we're going to be looking to incorporate into EQT. And we're really excited about learning from who we believe is a top operator in Appalachia.

Got it. Okay. Maybe a follow-up on my side from the LNG, LPG aspect and the export aspect. Does this transaction -- would you anticipate signing up more offtake agreements in the near term?

Yes. I would say it depends on the economics. I think the trend more likely that we're seeing is that end users are the ones who are going to pick up a lot of that capacity. As we see basis tightening, taking on FT is effectively the opposite positioning for something like that. So I think we're more excited about the in-basin demand opportunities and actually maybe shedding some of that FT we have right now like our Rover capacity, which is out of the money.

I'd say the other thing that we're excited about, though, as we probably shed some of that FT and just let it roll off, which is an opportunity both we and Range have, it just takes time is it's actually just continuing to pick up more LNG capacity across the larger asset base. I mean the way we look at it at a high level is that a molecule as part of the EQT platform is just simply worth more. It's not just we can do things a little cheaper. Range is an extremely efficient operator, one of the best in the basin. But once you get that molecule out of the wellhead, what can you do with it to maximize value through the entire value chain. And that's really where our focus is right now. And LNG is a huge piece of that.

Yes, James, just [indiscernible] what that could look like. I mean our -- another part that is going to stay consistent is sort of our percentage of production that's exposed to international volumes, and we -- coming into this was about 15%. If we maintain that level of exposure to international markets, that would give us the capacity to add approximately 2 million tons per annum of incremental LNG to account for the Range volumes. So we'll see if those opportunities are worthy of executing, but that's sort of the capacity and how we're thinking about it.

Your next question comes from the line of Bob Brackett with Bernstein Research.

Congratulations. I do want to highlight that October 26 is actually the 22nd anniversary of Renz #1, the well that Range drilled that actually unlocked the Marcellus. So it's an auspicious day for the combination. My question would be talking a little bit around the mid-single-digit growth, that feels more of a forecast if there's end-user demand creation, if there's demand pull growth as opposed to a target, we're going to grow that rate to grow. Is that a fair way to think about it?

Yes, there's a bunch of ifs there. I mean that's why I think when we talk about our growth, we don't just talk about growth, we talk about sustainable growth and making sure that demand is there before we bring those volumes up is a key part of it. But Dennis, did you know that today was the 22nd anniversary?

I knew that it was in the month of October. I didn't have that specific date in my head, but I knew October was the anniversary month.

Is this destiny?

I don't know. I don't know.

Your next question comes from the line of Gabe Daoud with Truist.

Congrats, Toby and Dennis on the transaction. Super exciting. Just maybe a quick one for me. Just back to the growth commentary again. So fair to assume, and I think, Toby, you mentioned this probably everything stays the same for the next 12 months. But so Range is still executing against the growth plan through '27. Is that the way we should still think about it?

Yes. Good question. This is Dennis. Right now, we're still on track to finish the year with, we'll call it, year 2 of the multiyear growth plan. Plans are in motion and refinement on how we'll think about the execution for 2027. But at the highest level, we are executing 2027 as planned for that last leg of our multiyear growth plan.

Yes. And our plan is to continue that cadence with Range.

Okay. Got it. And then actually, just a quick follow-up on 2027. Is there any change on how we should view like the pro forma cash tax implications or position?

No, nothing as it relates to the transaction.

Your next question comes from the line of David Deckelbaum with Stifel.

Congrats, Toby and Dennis on the deal. I do want to follow up just on overall. I know you've talked about this multiple different ways about seeing the benefits of the pro forma combo. You highlighted the 20 Bcf a day of in-basin demand potential really beyond 2030. So I guess just timing-wise, we talked about sort of keeping the plan the same in '27 and perhaps building a higher sustainable level beyond that. When you're looking at the addressable demand, are you seeing the pace of that coming forward in terms of negotiations that you felt like you had to get this deal done now? And is the quantum of these deals on an individual basis now just getting larger in terms of negotiations and how much supply might be dedicated here?

Yes. It's sort of the timing of this demand. I mean this is -- the demand that we're seeing that's adding to this is showing up 3-plus years out. And so this is all about preparing today for what that future will look like. Yes, I mean, the volumes of these continue to surprise us that they continue to get bigger and just the quantity of this. And I'll tell you that the next leg here, when we look at the Range asset base being in close proximity to the Ohio River, these rivers are home to a number of brownfields, and we think there will be continued identification of opportunities, whether that's power generation or advanced manufacturing to be attracted to Appalachia brownfields.

Appreciate that. And maybe just a follow-up on just the forward plan. You talked about the $325 million synergies and the $300 million upside. I guess within that, how are you guys thinking about the impact of midstream investments, especially on the range side? That's obviously been a huge benefit to the EQT side, particularly around sort of enhancing the base decline and reducing downtime and being able to allocate towards higher return areas? And maybe how soon should we expect these kind of investments on the midstream side, particularly areas like compression on that range base?

Yes. One thing I think that's important for us to call out with these synergies, Jeremy talked to the timing of the upside synergies being a little bit longer term in nature. But even in the base synergies, we are giving ourselves time to pace that out over the next 2 to 3 years. So there will be time for us to do sort of the advanced planning today and set this infrastructure in motion to be deployed, call it, over the next 24 months. This is something where we need -- as far as how this is going to translate to capital spending and the investment opportunities, that's what we're going to be rolling up our sleeves on and one of the first answers we're going to be looking to -- first questions we're going to be looking to answer just given the high-return nature of these opportunities. So more to come on that.

Your next question comes from the line of Bertrand Donnes with William Blair.

Congrats on the deal. You kind of brushed on it, but I just want to understand this kind of more pointedly correctly. Could you talk about how much the liquids upside factored into the decision to make the acquisition? Was the rationale justified just based on the core gas business and then the liquids upside was just cherry on the top? Or was the liquids component a key pillar in the rationale? And if so, is that what we should look for after you've digested this deal maybe in a few years when you're looking for more?

The liquids are about durability and cost structure diversification. That was an added benefit that came with the deal. But make no mistake, the real goal here is around the natural gas side and the growth of that business. We're also seeing a lot of promising kind of early indications and results, especially from like the Olympus acreage, but also just under our core EQT acreage and also Range's acreage in the deep Utica. We think that is an enormous resource to be unlocked, all dry gas that's available primarily to EQT and Range in the basin. And so that's really our focus. I think the liquids are a benefit, but definitely not the strategic reason to do the deal.

Got it. And then the second one, on the marketing side, now that you guys have kind of moved into the first place slot, is it going to be a typical marketing arm where its own subsidiary with its own incentives? Or is this a more integrated version where you might be the largest, but it's just a part of the larger EQT entity?

I think that might evolve over time. I mean, certainly, once our LNG capacity comes online, I think we might have to think about accounting for it a little bit differently. But I think for 2027, I wouldn't expect any change.

Okay. So maybe just ask differently, is it going to have its own line item? I would imagine investors value a marketing multiple a little bit differently. I was just wondering if it's broken out that way for the Street?

Certainly not in 2027. But in the future, that might change.

Your next question comes from the line of John Annis with Texas Capital.

Congrats on the deal. For my first one, does the combined liquids position create sufficient scale to pursue different processing fractionation or export arrangements? And could EQT eventually consider greater ownership of liquids infrastructure?

Yes. Certainly, that's going to be one of the benefits of scale as it increases the ability to invest in infrastructure, whether that's midstream or processing. I will say one of the areas that we're looking at is with our Clearfork processing facility, we've got capacity to potentially expand that. So that will be something that we'll look for more on our side. Range has commitments in place with MarkWest, but there will still be some optimization opportunities that we'll be able to look for. And we look forward to going through those optimizations with MarkWest themselves. I mean when we took over EQT, one of our biggest focus items was working with our midstream provider, E-Train, to create a more efficient solution that creates more value for both the operator and the service providers, and that will be a big focus in this integration working with MarkWest.

I appreciate that color. Toby, maybe for my follow-up, I'm curious, as you went through diligence, where did you become more constructive on the opportunity of combining with Range than where you were at, at the start of the process?

Yes. I would say probably the most impressive thing about the Range asset base was the depth and quality of their inventory. I think that has been probably the most impressive part of the story. And I think there's things that you can see only when you get in from diligence, you're not going to see from the mile-high view you get from Enverus. So that certainly was the biggest focus for us and the asset base that Range has, I think, has exceeded our expectations. We're incredibly excited about that opportunity.

Yes. It was pretty amazing. I mean we thought we knew the Range assets well on the other side of the fence line from us, both in Southwest and Northeast Pennsylvania. Once we got under the tent, though, I think our eyes are really open. I think Dennis and the team did a great job just laying that out for us and helping us better understand it in a way that even we hadn't entirely appreciated from the outside with public data. So look, we couldn't be more excited. We think from a value standpoint, it makes all the sense in the world, and we look forward to walking everybody through that and helping tell that story so that is fully appreciated.

Your next question comes from the line of Leo Mariani with ROTH.

Yes. A quick question here for Dennis. Just wanted to get a sense if you guys kind of broadly looked at other combinations for Range? Or was this pretty much more of just a negotiation with EQT?

Leo, thanks for asking the question. I think when you take a step back and you look at the approach that our Board has taken and management team over the past several years, I think something you probably heard both Toby and Jeremy reflected on is that they understand Range pretty well. And I think we share the same view. We feel like we've understood the opportunity set in the basin at a very good level. And then, of course, when this opportunity presented itself to have a conversation about combining the organizations, I think it really presented a unique opportunity that was different than the other opportunities here in Appalachia. And again, whether it's scale, how you look at the vertical integration, upside opportunities, enhancement of margins through the marketing combination and, of course, the LNG and NGL export international market exposure.

I think all of that combination started to really separate itself versus the other opportunities in the region. But simply put, we were also comfortable in the go-it-alone case because of the inventory and the duration that we had, and we share a lot of common vision around the future demand that was coming into the basin. But as you started to really look at this combination, it presented a force multiplier type moment for our organizations as we plan for that durability and also that demand that's coming toward us. There'll be more information that comes out with the filings here in the future on kind of those details, but we saw this as just being the leading combination.

That makes a lot of sense, Dennis. And then just quickly for the team at EQT. Just curious if you can give us kind of like a high-level thumbnail sketch of kind of how you got to the roughly 21% premium versus Friday's close for Range. What were the key metrics that you guys looked at there?

Yes. I think it's important for us in looking at this premium, obviously, it needs to be attractive for a world-class organization like Range to come on board. But I think for us, we needed to stay disciplined and make sure that we're still showing accretion on value. And specifically on free cash flow per share, NAV per share, we've checked the box that this is an accretive transaction. And I think the other point that's worth mentioning is that there's not a lot of targets that we would be talking about and because we need to check the box on the strategic nature of this business and this transaction checks the box there as well. When you're talking about cost structure, this is going to be $0.10 accretive to our cost structure.

Inventory quality duration, we spoke a lot about how this complements and supports the ability for us to fill in our sustainable growth strategy. And then from a balance sheet perspective, we've got a -- I mean it is deleveraging and it's going to allow us to continue to have a fortress balance sheet, which is going to give us tremendous optionality in the future. So Range truly was unique, but that's, sort of, I would say we were disciplined, but we've checked a lot of boxes, and we feel really good about the outcome of this deal.

Your next question comes from the line of Noel Parks with Tuohy Brothers Investment Research.

A couple of questions ago, someone touched on something that had been on my mind as well. And it was the discussion of once you really got under the hood, you were able to recognize value beyond sort of what was available publicly. I just wondered if you could just give an example of that because I think the first question in my mind when I heard about the transaction was Range especially has had tiers of potential of inventory that goes so far beyond what we've been used to talking about for a decade in terms of just proved reserves. So I'm very interested to hear about maybe an example of what really made you sort of spark up about this being the deal at the time.

Yes. So on the Marcellus, I mean, you've heard the Range management team talk about their world-class inventory for a long time. I think for us to see that firsthand, see the pressure data, see the recoveries that they have, see gas in place estimates they've done. I mean, like I said, they've done an incredibly fantastic job on the technical understanding of the subsurface. These are opportunities that we're going to look to bring over on the assessment of our asset base. So the Marcellus, I think, was fairly straightforward and eye-opening. But other resources, we're both doing exploratory work on the Utica.

And so when you pair up the data that we're both capturing, put that together and you look at the leasehold positions that we have, the work that we're doing is going to translate to inventory creation on the Range side and similarly, what Range is doing is going to translate to upside from EQT. And that really is more focused on the deeper Utica, but all of this just gives us greater inventory confidence, and we're going to get value for that by signing up for this long-term demand and bringing sustainable growth to this organization. So that's the setup.

Great. And of course, Range is positioned a lot of continuous acreage. I was just wondering, overall, any thoughts on the land strategy going forward? I don't know if there are sort of overlap filling trading opportunities unlocked and just like to get a sense of maybe the scale of those?

Yes. I think we continue to be intelligent about the dollars we put towards land. I think it is important to note we have a very large HBP position with minerals. Range similarly as well has a large HBP position. So we'll continue to be opportunistic. And I'll tell you, we're going to still have to compete for the land that we pick up. Both organizations have robust land departments, and we are going to need to put those skills to work to fill in opportunities ahead of the drill bit, but this is more of just continuing the great work that we do every day on the land front.

There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for joining us, and welcome to the EQT Second Quarter 2026 Results Conference Call. [Operator Instructions]

I will now hand the conference over to Cameron Horwitz. Cameron, please go ahead.

Good morning, and thank you for joining our second quarter 2026 earnings results conference call. With me today are Toby 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'd 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-K and the 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 investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

With that, I'll turn the call over to Toby.

Thanks, Cam, and good morning, everyone. 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 continue 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 29,000 feet all while staying 100% in zone with 0 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's records like this that redefine what is possible. These achievements are not isolated accomplishments. They reflect the culture we've 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 one 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're 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 Appalachia 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 a day of potential demand. The success of even a fraction of these projects is expected to lead to 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 agreements. 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 improved price realizations for years to come and also advanced infrastructure projects that connect our low-cost supply to premium markets.

As Appalachia continues to emerge as one 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'll turn the call over to Jeremy.

Thanks, Toby. The second quarter was another outstanding one 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 approximately 90 Bcfe while also lowering full year CapEx by $25 million. As Toby mentioned, we have also decided to accelerate MVP 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, improve 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 doorstep 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.

[Operator Instructions] Your first question comes from the line of Josh Silverstein from UBS.

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

Yes, good question. I think -- look, we're going to be patient with it. We're 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 look to be more aggressive in buybacks. But it just depends on what's going on in the market. And again, I think we'll be opportunistic and aggressive when we see those opportunities, but we certainly want to be countercyclical rather than pro-cyclical.

Got it. And then on the new LNG updates here, I want to see if you can provide a little bit more details on how you're implementing the strategy and the 2028 offtake agreements here. How are you sourcing the LNG is the infrastructure in place and kind of capacity already lined up for this?

Yes. So the -- for the new agreement specifically, we were 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-win deal to where 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 2028, contractually to January, but there's 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 Leggett from Wolfe.

Jeremy, I wonder if I could -- or maybe this is for Toby. The idea that you've laid out this extraordinary volume potential. Obviously, a lot of it is post 2030. But I'm curious when Toby, when you talk about you're only going to grow on -- when you've got contractual agreements, I'm curious why if these are premium priced deals in your backyard, why would you grow at all? Why wouldn't you reallocate existing volumes and get our premium price without having to incur the additional capital and ultimately the growth. That was my first question.

Do you want to take your second question, throw it out there?

Yes. So it's a real quick one. I just -- it was for Jeremy, really the compression is really -- is obviously having an impact on capital. I'm 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.

Yes, 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're putting a lot of -- showing a lot of progress on that front. But the next question that we're going to have to ask ourselves is what part of that demand are we actually going to grow organically into.

And as you mentioned, strengthening basis is going to be one of those considerations, and that's going to 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'll step back and make that evaluation. But there will be a portion that will consider growing, but it would not be the full amount of demand.

Yes. And Doug, just to add to that and then address your second question. We have a disproportionate amount of our gas sold into first month today on a short-term basis. I think it's 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 to month market drives a little more scarcity in that market. And if all else is equal, with 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's something that we're very focused on. And look, I think if you look at Slide 22, which I'd encourage everybody to look at is really kind of the culmination of a lot of the analysis we're doing and the opportunities we're tracking in Appalachia today. We don't have to grow into this 1 for 1 day 1.

You do see a bit of -- 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're not looking to add any sort of step change in production. If you see 2 Bcf a day added in a given year, we might grow a fraction of that. And over time, we fill it. But if the market is a little tighter in the intermediate term, there's ample gas, the market will balance. But I think to your point, I think we still benefit because we're in a price times volume business.

On your second question around midstream and compression. I mean look, candidly, we're working with our reservoir team and our finance team just trying to recalibrate how we forecast some of this stuff. I think our original expectations on the impact on well performance and type curves from lower pressures have been kind of blown away. We're trying to recalibrate our hydraulic models and just how we forecast type curves in base declines, that could lead to further outperformance. But it's something we're still in the middle of the process of right now.

But obviously, we're seeing quarter after quarter of 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.

Your next question comes from Betty Jiang from Barclays.

I want to start with a bigger picture question speaking to that Slide 22. Just given where this market is going, we're seeing more midstream pipeline projects. How do you guys see these projects ultimately get supplied? And how do you think about the competitive attention to fill these incremental egress projects and how that's 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 talking to?

Yes. Betty, I'd say when we look at Slide 22, I'd say probably one 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. Those are going to be large potential projects. They're going to require supply to be brought from M2 or basically our core production region to fill those projects, and that's going to give us an opportunity to build infrastructure and with infrastructure. I think we have an edge in making sure that we supply those projects as well.

So that's sort of the dynamics that's 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 midstream fees. As we do anticipate these large egress projects, the capacity will be taken from utilities downstream.

Great. And Jeremy, a question to you on the CTV 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 for EQT to protect you? Is there any downside protection to that?

Yes. 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 flow 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, improved corporate overall differentials by like $0.05. So it is a material contract. There's a material premium. And honestly, it is a true win-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 in 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're on the right side of the bet here having that long exposure into power. And to some degree, it's almost like what you're seeing in the liquids markets today where you have a lot more tightness in the refined products market as opposed to in the crude market specifically from what's going on in the Middle East.

I think you're going to 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 one-for-one basis. So being able to, in a manner without putting any capital and get direct exposure to the other side of the generator, I think is really interesting. And again, it's our second deal like that. I'd be open to 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.

Your next question comes from Arun Jayaram from JPMorgan Securities.

I wanted to go back to the Shay Energy project Toby and Jeremy, I wondered if you could just discuss what has given EQT perhaps the right to win on this project? You mentioned the Wolf Summit that infrastructure project maybe was an enabler. And perhaps you could talk about timing here. You mentioned as early as 2031. What are some of the gating items for this project to achieve that startup 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.

Yes. So in terms of competitive dynamics, I mean, I'd say we're probably -- we are close on other projects, other projects and also including West Virginia, I think before the end of the year, you'll probably see at least one more, maybe more potentially some very large ones, too. I think it's, Arun, it's really what we've been saying for the past year. It's the power of the platform we put together and more than anything, it's the quality of the team here at EQT, working in a really collaborative aligned way. starting with 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 don't have to do the midstream. We don't have to do certain pieces of this, but we can, understanding the whole value chain, I think, adds a lot of value being comfortable doing things like we did on CPV Shay, pricing it linked to electricity, not gas and showing that flexibility because it's best for the customer and really starting out with a mindset of what's best for the customers, what's going to win the deal and how do you create that win-win solution.

I think when you put all those pieces together, we're just in a really unique spot and it's allowed us to continue building that momentum, and that momentum builds more momentum, which is why we're in the position we are today. So again, I don't think we're done. I think there's a lot more to come.

Yes. 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'd also say we've got 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 this organization is firing from top to bottom, and it's what it takes to produce these types of wins. And I think it's worth noting that EQT continue to put up these results. And we seem to be winning almost 100% of these deals that we're on, but it is a lot of work, and we are really putting the customer first.

Yes. Arun, I think what's amazing too, is we talked about -- I feel like we have a new deal every quarter. It seems like lately to talk about if you really rewind a couple of years back to the end of 2023 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'd argue today, we're still not getting credit for that. but we keep stacking up these deals, whether it's 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're going to continue stacking that margin. At the same time, you have a macro backdrop you do as we talked about in prepared remarks, as we've illustrated on Slide 22, which is a further tailwind when -- but again, it's focusing on what we control every day to differentiate EQT from the rest of the group and deliver the wins in a differentiated way.

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

Yes. So the -- with the till accelerations that we put in place, really, this just 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 compression. It's not just having an impact on improving our base production. It's also improving our wedge performance, which is the new tills that we're putting in.

So it's one of the great things when operationally, I think these wins create other opportunities for us. I'd say some of the other things that we're looking at on compression that we haven't really wrapped their heads around. But as Jeremy mentioned, we're really digging into this. We also have a number of wells that could benefit from workovers that maybe not -- would have been a price 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.

Your next question comes from Neil Mehta from Goldman Sachs.

Toby and Jeremy, thanks for the updates here. Just on your perspective on the hedging strategy here. Saw you layered in a little bit more. And how are you thinking about you have the optionality of running a little bit more on the hedge, but how are you thinking about being opportunistic around your hedging strategy?

Yes, it's a good question. I mean, look, I think, candidly, we're 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's more of just ensuring as we look into next year, the balance sheet is in a strong position. We are intending to start buying back quite a bit of stock. We want to make sure if there is a down cycle, there's 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 through a cycle like that, if there is temporary weakness that we can be aggressive and on offense.

As you look into late 2027 and beyond, though, like we really see this inflecting. Again, this 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's going on in power and LNG and 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.

We see a really strong macro backdrop. And frankly, we want to be aggressive trying to buy a lot of stock ahead of it. So that's kind of how we're thinking about the hedging strategy. I don't know if you'll see us add a bunch more at pricing levels around where the strip is right now. We don't think there's a lot more downside to come, but we're really just trying to put this in place so we can be aggressive.

Yes. That makes a lot of sense. And then maybe the follow-up is just on M2, we've 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?

Yes. I mean it's been a story we've talked about for years, and I think the market is much more aware of it now. all this demand we're talking about as we get later into this decade. I just don't think -- even if some of this doesn't happen and things get off track for some reason, I don't see a wafer basis not to continue to strengthen materially. So again, I think we're in a perfect position to benefit from a lot of that.

And again, as we think about a potential strategy to start adding mid-single-digit type of growth at some point between now and the end of the decade. I think that's going to be a market that can absorb multiples of anything we could add. So if our top line is price and volume, we can modestly add volume think we'll benefit from price all the same, and that's going to drive a lot of improvement in the bottom line as we're buying stock back at the same time. So we think it's a recipe for a lot of success.

Your next question comes from Philip Jungwirth of BMO.

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

Yes, Phil, good question. I know you and I have spent some time in the last couple of months talking about this, and I think you've done some good work on this as well. What we've done is we've tried to take a very intentional approach in listing all these out having direct dialogue with most of these customers in 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 road blocks.

When we have gone through this internally and assigned probabilities across the spectrum for each project, we come up with high single-digit Bcf a day of growth. So call it, 40-ish percent of the total potential here, we think it's probably realistic as we alluded to in our conference call last quarter. As we think about what does it take and where to focus to increase those odds. We see our role is taking what is in that navy color that hockey stick wedge and trying to understand where can we use the tools available, whether it's 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 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've done with CPV. I think the reputation we've built by doing that makes more people want to work with EQT and we've also attracted a lot of talent here that further enables our odds to be the best service provider available. And that's I think why you keep seeing us stack these winds 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 just because the top operators are talking about growth, but it still probably sums up to less than a B, if you add it all up. So just wondering if you've looked at all at an upper limit on what this could be, assuming demand growth materializes in the outer years.

Yes. I think we're confident in Appalachia's ability to meet these volumes, but what I do think you're going to 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's not the case for a number of the other operators here in Appalachia. And I think they're going to be sensitive on price and a little bit more disciplined before they think about growing. I mean the molecules are going to show up, but price will be a determination.

Yes, I would add to that. When we go with the data we have land data and understanding inventory depth of peers, when you look at the peers who have inventory versus who don't, specifically in Southwest Appalachia where most of this demand is showing up. We think about 1/3 of the basin's total supply will be challenged to hold flat actually by the time you get towards the end of this decade. And so if you have like the Ohio Utica, you have some producers in like the Panhandle of West Virginia area, and I think up in Northeast PA, struggled 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 have operators like EQT who can meet the moment and grow into that. I think other operators that are going to struggle. So I think to your point, the ability to grow year-over-year and meet this, I think you're going to have to see pricing that provides a further incentive to go into zones that are less economic so certain operators can still have the economic justification to drill.

But if you're EQT, and we actually see our cost structure falling in time, not holding flat, not rising, but falling. I think you're going to see significant margin enhancement from that as the marginal producers push pricing up our pricing falls and we grow volume into that. And that's how you create outsized value in alpha we referred to in prepared remarks.

Your next question comes from Neal Dingmann from William Blair.

Toby, maybe for you or Jeremy, just a question on the power side also. I'm just wondering specifically, given your obvious leading integrated gas company status. And when you look at these future contracts that you've been discussing, is there potential for these contracts that maybe a structure whereby you all would think about participating in some of the future data center upside? I'm just wondering on the contract structures going forward.

Yes, Neil, that would be a little bit of a jump to go from a spark spread to, I guess, token spread. It is a concept that we've thought about how I see the market opportunity right now. But yes, I mean, it is pretty insane to see the margins that are being created off of megawatt of power on the token side of things. But that -- those aren't opportunities that are available in the market right now, but we'll keep an eye on that.

Perfect. And then just quickly, what -- maybe could you all talk about what's your current reinvestment rates? It seems like it's now incredibly low. And given that how low it is. Does that imply -- would you all think now you have even more potential for M&A given how low your reinvestment rate is?

I mean, look, I think I mean it's been -- 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 is the stock price is somewhat dislocated, certainly for the quality of the business we've built. I think that is our M&A target right now. So buybacks are going to be a big part of our M&A strategy, if you want to think about it like that, buying back the best company available in the market every day.

Your next question comes from Sam Margolin from Wells Fargo.

I wanted to talk a little bit about MVP Southgate and this is an interesting delivery point. It's between a huge amount of in-basin demand in Appalachia and then sort of a big wedge of LNG capacity coming south of it, but it's got its own load growth too in the Southeast just from population movement and power.

So the question is, you have these demand spikes happen on either side of the MVP Southgate delivery point, what's going to happen to this market does it basically just have the same effects as what you'll see in Appalachia, just a 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 it.

Yes. I mean, good question. I mean we do see that Zone 5 market is actually one of the most lucrative and probably all the continental U.S. 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're building Southgate to get more gas into the Carolinas to Duke into PSNC. So yes, I mean, I think long term, it's a tremendous market to have access to, and I think we're one of the only producers that do at this point.

Yes. And I would add, just given these dynamics that we're seeing, we've announced to accelerate Southgate. We're not seeing any benefits to that right now, but the commercial teams are out there working to pair up the accelerated construction and service date of our project with the commercial terms. So maybe we'll have some progress on that in the future.

Got it. That makes sense. And then, yes, I mean, just -- this came up on the call -- it's another market question. It came up on the call last quarter. 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's changing. I wonder if you could just touch on if there's 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, in the context that you did update some thoughts last quarter?

Yes. I'd say what's changed over the last 3 months, I mean, certainly, our view coming into this pre-Iran war was that was going to be a little bit oversupplied. I think that's gone away with Iran. That's been -- that's now not going to 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 going to be restored.

I think with the current conflict extending, that's just delaying the recovery, which is deepening the hole on supply. I mean, right now, you've got Europe sitting at storage levels north of 10% below year-over-year where they were. And it's starting to hit. I mean you see spot prices internationally north of $17. I mean there's a very large spread forming. When we look at '28 on pricing, I mean, pre-Iran to where we're at today, we've seen the Henry UbCTF spread lift over $2. And it's another reason why this LNG deal that we just signed up coming in the market in 2028 is so attractive to us.

Your next question comes from Gabe Daoud from Truist.

Maybe just going back to the West Virginia comments around maybe just signing a couple more deals by year-end. One of the bigger canvases there, maybe 60 miles west is the Monarch campus. Just curious as your understanding that camp is still on track for 2 gigawatts operational next year? And has construction started on that prosperity gas line?

Yes. I mean we're in discussions with them, probably no surprise. There's 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. And then we're, again, more focused on the gas supply portion of it. But we don't see any obstacle to EQT being at least one of the gas suppliers for a site like that. And then again, there's others that I think we're very close on down there in West Virginia and in Southwest Pennsylvania, and we'll give updates as those get a definitive documents signed.

Okay. Okay. Cool. 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's anything else that you could speak to?

Yes. I would think about it kind of like Equitrans in a way. We're 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 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 investment-grade support the relationships we have, the volume we have, the capital we have to support them and going from being capital constrained to really being able to think outside the box and how they optimize the facility like that.

There's a lot of value that's created, and that's exactly what we've done with Equitrans. And I think we see similar opportunities with this platform. It's obviously a lot smaller. But again, I think it shows what you're able to do with a platform like EQT's where you just keep building through adjacencies as they become core competencies and generate a lot of value in the process.

Awesome. Awesome. And actually, a quick follow-up. [ Saska ], did Toby, did you just say you're working on accelerating in service date to '27. Is that what I heard?

Yes. Construction should be in should be available by the end of this year. And the question is going to be when can we start the commercial arrangements on that project. So those are the conversations we're having right now is taking advantage of the acceleration of construction. And this obviously would all be upside for our '27 plans.

Your next question comes from James West from Melius Research.

Obviously, the momentum in the business is extremely solid on the base business, but your strategic momentum continues despite that. I'm curious, when we think about both midstream pulling the -- accelerating the time line here, we 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, one, pull forward on maybe the midstream? And then two, other M&A, smaller M&A tuck-in opportunities like Blackline that are out there?

Yes. Great question. We I feel like our journey in driving growth of EQT really growing free cash flow per share. We've really been handicapped by the fact that we've just been so relentlessly focusing on paying down our debt. And that's prevented us from using a tool, buybacks to have 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 going to be something that's 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're capturing right now, mean these are all high-quality projects that they provide pretty healthy free cash flow yields. And so those are sort of an [indiscernible] opportunity for us. And when we think about those relative to doing buybacks, I think we can look at our stock as what's the free cash flow yield embedded. But just like we showed with Blackline, and these type of opportunities can present some healthier free cash flow yields. But I mean it's -- we want to get as many of these as we can and with high-quality opportunities, we'll have the ability to finance these in the most accretive manner possible for the business.

Yes, I'd 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. And we always try to ask ourselves the question of would we rather own or would we rather rent, would we rather buy or would we rather be a customer. We look at LNG, we see the returns in the high single digits, right?

Like the exposure we want to get is the offtake in international exposure power kind of same dynamic, right? It's so well capitalized. It doesn't need our capital but we can do things to still get that exposure like the contracts we have with Hilltop and now CPV she, 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's 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 [ risks ] in doing it and the more kind of muscle memory you build seeing everything in the market, the better the 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 the stock for sale every day and candidly having the stock for sale, not reflecting the platform value or any of these sort of value unlock on the horizon for all the deals we've signed is we get to buy that back effectively for free ahead of time. And so we don't have to put the capital in, we can get the benefit and use the capital for buybacks. And that, I think, in the long term is going to drive much better share price performance.

Your next question comes from Bob Brackett with Bernstein Research.

I'm intrigued by the record laterals. And I'm wondering, is there a limit to growth there where effectively the stage length gets too long, you're not fracking effectively or maybe there's an operational limit. What are you thinking of super long term?

Yes. So sort of the way we define these records really just showcase what's possible. We always need to have this question, is this going to be best to roll out across the organization. foot laterals. The team has shown that it's proven to do that. I think what you're going to see at EQT is we're probably going to increase our normal lateral lengths to north of 15,000 feet, maybe targeting that [ 17,500]. But again, there's other considerations that we're taking 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 so we do have some confines from an acreage perspective that we're working on.

So it's not a complete blank slate. But the team -- what's really exciting to see the teams continue to push the technical limits and that gives us a lot of optionality to access reserves that we may not have been able to access from site locations, but those are very small. The benefits of having a large contiguous exposition that EQT has is we have eliminated a lot of the strains, but we will continue to look for ways to optimize operationally.

Next question comes from Jacob Roberts from TPH & Company.

Jeremy, starting on the CPV deal, I know you guys have done 2 of these now PJM netback type deals, but I'm curious if 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?

Yes. I mean we 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 you have 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're 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. But I think right now, our bias is to keep it open. And if there's opportunities to duplicate this a couple of times, if that's what is best for the customer, we're open-minded about doing that as well.

Okay. Toby, earlier you mentioned that some of the strategic growth on the compression side investments that you've made are beneficial of course, to base declines, but also new well volumes. And this might not be the right way to think about it. But when we're 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 benefit before you need to start thinking about adding to that compression spend going forward?

So I'm not sure I totally understand the question.

Yes. I'm trying to get at the -- sure, the compression investments that you guys have made, I think you spoke to the fact that's boosting what we're seeing on these well results in terms of the new well volumes as part of -- as you proceed to the TIL program for a year. And so I'm just wondering what the -- to continue that trend, is there continued compression investment spend that we need to see as you drill 2 years out? And then maybe as a secondary, if that question doesn't make any sense as how does this translate to a lower maintenance capital going forward?

Sure. Thanks for rephrasing, I understand. Yes. So for our compression program right now, we've identified -- we've evaluated all the wells in the portfolio. Over 99% of our wells have evaluated the potential for compression projects, of which we have 6 compression projects going this year. We've identified probably another 30. Those are different sizes and scopes for those. But on average over the next few years, we're going to be deploying compression on wellbores that would have production of about 0.5 Bcf a day each year.

And so we'll space that out over time. And the timing is really going to come to the vintage of the wells and the timing of when these wells will actually benefit from compression and make space for new wells that are coming in. So we've got a pretty integrated approach that we're looking out through 2029 right now. And so hopefully, we continue to promote this capital efficiency gains that we're seeing.

And as we mentioned before, the returns that we're expecting on compression, this is one of the best bang for the buck opportunities that we can spend, and that was before we've sort of surprised ourselves to the upside with the impact that we're seeing from compression.

Your next question comes from Kevin MacCurdy with Pickering Energy Partners.

I just wanted to come back to Slide 22, which is obviously a popular slide here. That wedge in late 2029 looks massive. At your 40% risk case, how early would you expect prices to react to this increased demand. And obviously, it's not really showing up on the future markets yet, but maybe you guys have a rule of thumb on when the market starts to price that?

Yes. It's something we've talked about with our traders quite a bit. I think what we see on the ground because we're in all these discussions, both with downstream customers, the midstream customers, players like I think we have a lens into it that others don't, which is why we wanted to put this together. In our view, I mean, you'll see a wide divergence across a lot of basis points in Appalachia relative to other points.

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 syncs show up. But I think it's one of those things where like we talk about it, commodity markets not reflecting it or the equity market is not reflecting it. Stock is still trading with probably a mid-$3 gas price implied. I mean it's one of those things that we're moving to take advantage of. We're going to execute on one way or the other. And if the market's slow to react, I think you just see a more visceral reaction when it becomes obvious.

Great. And any key projects we should watch specifically for that [ '29 to '30 ]kind of demand wedge? .

Yes. I think the big ones that we're focused on right now are the big projects out of Clarington in the Ohio market that we've talked about for a couple of quarters now. I mean, that is -- that's ground 0 in our mind, where I think a lot of this gas is going to leave the basin. We're 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 done, benefits them, benefit EQT, benefits the end customer, and it's really a win-win for everybody.

I think you could see some movement on that before the end of the year, but you're talking about multiple Bcf a day of additional demand if some of that comes to fruition. These are all projects. I mean, you hear Borealis, you hear the ports facility in Ohio. I think there's a lot of legs to these. And I think the developers are making good progress to turn those into reality. So stay tuned, and we'll do our part to try to make them more all successful.

We have reached the end of the Q&A session. I'll now pass the call back to Toby 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're doing and putting these numbers up. And we're certainly excited about the path forward, and we'll 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.

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to EQT Q1 2026 Quarterly Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Cameron Horwitz, Managing Director, Investor Relations and Strategy. You may begin.

Good morning, and thank you for joining our first quarter 2026 Earnings Results Conference Call. With me today are Toby 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'd 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, in our investor presentation, the Risk Factors section of our most recent Form 10-K and in 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 investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

With that, I'll turn the call over to Toby.

Thanks, Cam, and good morning, everyone. Our historic first quarter results are tangible proof of the differentiated value of EQT's platform. We generated more than $1.8 billion of free cash flow in the first quarter, another record-high for EQT. To put this into perspective, in just 90 days, we generated roughly as much free cash flow as we did during the entirety of 2022, a year when gas prices were over $6. This is a powerful illustration of how we've strategically transformed EQT over the past several years. Our vertical integration through the Equitrans acquisition and our low-cost operating model have fundamentally enhanced the earnings power of this company. That transformation has enabled us to enter this high-price environment largely unhedged, capturing the full upside of market volatility and accelerating our deleveraging plans.

With leverage now below 1x net debt to EBITDA and our long-term $5 billion net debt target within reach by year-end, EQT has entered a new chapter, one defined by financial strength, durable free cash flow generation and sustainable growth.

Our operational performance remains the bedrock of our financial results. Despite the challenging weather conditions presented by Winter Storm Fern, our teams coordinated seamlessly to achieve production uptime that outperformed our peers by a factor of more than 2x. Given with some minor volume impacts from the storm, production for the quarter came in above the high end of our guidance range. This is a testament to the strong underlying productivity of our asset base, the durability of our infrastructure and the outstanding coordination across our upstream, midstream and marketing teams to ensure our customers had access to reliable energy when they need it at most.

Shifting to the macro environment. Recent geopolitical developments once again highlight the strategic importance of U.S. natural gas and energy independence. Recent events in the Middle East have triggered the second global energy shock of this decade. Supply disruptions across the region have pushed global natural gas prices sharply higher. In fact, European natural gas prices nearly doubled following the disruption of Qatari LNG supply and the closure of the Strait of Hormuz.

These developments underscore a clear reality. Global energy markets remain highly vulnerable to geopolitical risk. While these challenges are significant, they also reinforce the critical role of American energy and position producers like EQT to help meet the world's growing need for reliable supply.

And yet, despite this global volatility, U.S. natural gas prices have remained stable, continuing to provide affordable energy for American consumers. This divergence highlights one of the most important advantages of U.S. natural gas: energy security and affordability. While global markets are experiencing sharp price increases, American citizens and businesses continue to benefit from low-cost domestic supply, thanks to the shale revolution. In fact, in energy equivalent terms, the price of U.S. natural gas today is equal to $16 per barrel of oil, even with record U.S. LNG exports and data center-driven domestic power demand growth.

Recent events also reinforced another key takeaway: energy reliability matters. Global buyers are increasingly prioritizing secure and dependable sources of supply, and the United States has emerged as the most reliable LNG supplier in the world. This reliability is becoming increasingly valuable to global customers, and EQT is positioned to benefit from this dynamic. Our LNG contracts position us to be a supplier of choice internationally, providing secure supply to global buyers who increasingly value reliability and energy security, while at the same time providing attractive international market exposure for our investors. In fact, if our LNG portfolio was fully online today, with current TTF and JKM spreads to Henry Hub, our projected 2026 free cash flow would be approximately $6 billion. Positioning the company to materially enhance our free cash flow generation with only 15% of our volumes is a powerful illustration of the value our LNG portfolio could unlock.

As global markets continue to prioritize dependable supply, we believe EQT is well positioned to capture demand growth, improve our price realizations and further enhance the durability of our free cash flow generation. This geopolitical landscape reinforces what we've believed for a long time: low-cost, reliable U.S. natural gas is essential for both American consumers and global energy security, and EQT is uniquely positioned at the center of that opportunity.

I'll now turn the call over to Jeremy.

Thanks, Toby. As Toby mentioned, the company delivered a record first quarter with outperformance across the board. We delivered sales volumes above the high end of guidance into peak winter pricing, while our cash operating expenses and capital costs came in below the low end of guidance due to improved efficiencies. All told, we generated more than $1.8 billion of free cash flow before the effects of $475 million of working capital inflows.

As promised, we allocated post-dividend free cash flow to strengthening our balance sheet and retired more than $1.7 billion of senior notes during the quarter. We exited the quarter with net debt of just under $5.7 billion. This accelerated deleveraging has already been recognized by the credit rating agencies, with Fitch upgrading EQT to BBB during the quarter. This milestone further strengthens our brand while mitigating financial risk as we expand our gas sales portfolio.

This rapid deleveraging also enhances our capital allocation flexibility. We are well positioned to continue investing in high-return growth projects, build on our track record of base dividend growth, and accumulate cash to aggressively repurchase our shares during times of market weakness.

Turning to hedging, the benefits of our opportunistic strategy were on display as we captured nearly 100% of the surge in natural gas prices in the first quarter due to the attractive ceilings on the collars we put in place during periods of price strength in December. As prices have moderated into the spring, we are realizing the benefits with our balance of year hedge book in the money by $180 million.

Turning to fundamentals. The global market has tightened meaningfully due to the conflict in the Middle East. Lasting damage to key LNG infrastructure has reduced near-term supply and delayed the timing of Qatar's large-scale expansions. At the same time, Europe is exiting winter with natural gas storage levels at the lowest level since 2022. U.S. LNG exports should be a primary beneficiary in this environment. In the near term, we expect LNG operators will defer maintenance to capture favorable margins, boosting export demand. In the medium term, the risk of an LNG glut in volumes backing up into the U.S. market is effectively gone. This environment also serves as a good case study for our thesis of the asymmetric upside exposure to global natural gas prices that EQT will have through our LNG portfolio.

While our LNG contracts are forecasted to generate $500 million in annual free cash flow uplift when they begin in 2030 at the current strip, a repeat of the 2026 level volatility could drive that figure to $2.5 billion. This underscores the significant upside optionality for producers that can access the global markets.

Shifting to the U.S. Momentum in natural gas-fired power growth is accelerating beyond prior expectations. Recent announcements and our own discussions suggest upside to our base case power demand growth forecast of 6 Bcf per day, with our initial bull case of 10 Bcf per day looking more like the new base case. This view is informed by the swelling opportunity set in Appalachia with a notable pickup in large-scale power, midstream and data center projects where EQT is positioned as the preferred partner. This backdrop is increasing our confidence in the view that demand pull projects will further improve Appalachian fundamentals through the end of the decade and create substantial high-return upstream and midstream growth optionality for EQT.

Turning to the second quarter guidance. After surging production volumes in the peak winter pricing in Q1, we began tactically curtailing volumes this month to optimize price realizations during shoulder season and have embedded 10 to 15 Bcf of curtailments into our second quarter production guidance. Our strategic curtailments act as a form of storage. Keeping gas in the ground brings seasonally low periods of demand and surging volumes above baseline when demand rebounds. This approach allows us to leverage the flexibility of our integrated asset base to maximize value in both peak and trough demand seasons.

From a CapEx standpoint, the second quarter represents our peak capital investment period of the year, driven by the timing of growth investments. We expect to see meaningful declines in capital spending into the third and fourth quarters, which should further support free cash flow generation in the back half of the year.

In closing, this quarter is a tangible demonstration of the value creation possible through EQT's platform. With an integrated operating model, a peer-leading cost structure and a fortress balance sheet, the transformation of EQT is now complete. Our teams are now busy positioning the business to capture robust and sustainable growth opportunities, which should lock in the next leg of differentiated value creation for shareholders.

And with that, we will now open the line for questions.

[Operator Instructions] Your first question comes from the line of Doug Leggate with Wolfe Research.

I got one macro and one EQT transformation question, just to pick up on Jeremy's comments there. Toby, I'm always interested in your macro view. Sadly, it seems that with LNG full, the U.S. is back to an incremental cost of supply market, a.k.a. the Permian. The punchline is it seems that gas really hasn't benefited from all the resets that we've seen in terms of domestic demand. So my question is, what can you do to improve your realizations? And more specifically, can you accelerate your access to LNG on international markets given your current plan is post 2030? That's my first one.

My second one is specifically for Jeremy. The balance sheet you've talked about often, Jeremy, you've talked about the transformation is complete. So given your inventory depth, why are buybacks the right answer for opportunistic cash flow versus offering EQT as a competitive dividend stock?

Yes, Doug, appreciate the questions. I'll tackle the first set. So when it comes to getting better realized pricing, I think there's a couple of things we think about. One, attracting demand to our backyard I think is going to be really important that will have the impact of strengthening basis, which will benefit our business. We're really excited about the progress that we're seeing. I think if you look at the slide we put out on data center demand, there's a lot of activity happening in our backyard.

As it relates to LNG, I think this quarter and what's happening right now around the world just really shows why the strategy that we took to position the company to get exposure to LNG, why it matters, because we see the same dynamic that you're seeing. We see prices around the world rising and there's -- we're not seeing that benefit in the U.S. The only way to solve that is to get exposure to international pricing. So for us, we're proud of the decisions we've made. We're excited to start trading with LNG in the 2030 time frame.

As far as accelerating that today, we were actually talking about that this morning, but I think getting more exposure to that sooner, you're already taking into account the spreads and you're paying for that. So it's not much of an opportunity in the short term. But we're excited about how we've positioned the company in the long term.

Doug, on the second part of your question, look, our base dividend has been and will continue to be a key part of our capital allocation strategy. That is something we intend to grow annually for the foreseeable future. But when we step back and think about what creates the most value in the long term for shareholders and what compounds capital, it's not necessarily the dividend. We see the most value upside certainly on an after-tax basis for shareholders being more so in buybacks, but also bringing back top line growth to the business. And in a capital-intensive business, we need capital to be able to invest and do that.

And so what you're seeing us do this year through our midstream growth projects, I think we continue to search for opportunities, and I think we're really finding some phenomenal ones right now. We plan to lean into those in the years ahead.

And then I think at some point too there will be an element of upstream growth that I think we bring back as the low-cost producer, some sort of mid to low single-digit level of production growth. But we need to see that sustainable structural demand show up first. And that's what we are working through our midstream strategy to help enable and create and tie into.

And I think when you have a growing top line in a business, both hopefully with price structurally over time, but also with production growth, that creates an ideal situation to be buying back the stock along the way and creating outsized returns over the long run.

Your next question comes from the line of Kalei Akamine with Bank of America.

My first question is about data centers. So more and more projects are getting shovel-ready, they need gas. You were having supply conversations. How would you guys frame up the near-term opportunity set in terms of scale? And also curious if terms are evolving beyond the [indiscernible] deals that we've seen so far?

Yes. So a lot of opportunities in our backyard, as we mentioned on the call on the prepared remarks. When we look high level just what's happening in basin, there's been some big announcements in Pennsylvania, Ohio, West Virginia, Pennsylvania. NextEra has come out and said that they're going to look at putting 10 gigawatts. We've got that big facility in Ohio that just got announced at Portsmouth. That's over 9 gigawatts. And then West Virginia has come out recently with their 50x50 plans, installing 50 gigawatts by 2050 in West Virginia.

So these are big plans that are being put out in this area. So we're really excited about how Appalachia is positioned to be the home for a lot of these projects. And then for us, what that translates to EQT specifically, we've got a robust pipeline of these opportunities that are currently being negotiated. I mean we're looking at multiple Bcf a day of supply opportunities. And other opportunities range from gathering to gas supply.

The gas supply opportunity, I think it's important for people to know, we are focusing these opportunities around our asset base. So that should set the table for some pretty good returns, while also being able to offer low cost of service to these customers because we're leveraging our existing asset base.

So I think all these -- a lot of opportunities in the air right now, I think that they're going to start landing in the second half of this year. And it's a really -- it's a really great setup and we're excited about how we're positioned.

Yes, Kalei, I think to put some more numbers to that too, if you look at the projects we've announced so far between our midstream projects and the other data center projects, you're, depending on utilization levels, call it, 2 to 3 Bcf per day of demand growth that we've already partnered with other parties to help underwrite.

And then if we look at the other midstream projects that we are in discussions with people about that we think have a reasonable chance to come into fruition, I mean, that number could increase to 8, 10 Bcf a day potentially of additional egress and pull out of Appalachia for gas. Some of that goes more short haul into Ohio, as we talked about, but some of it also more down to the South and Southeast markets.

So I think the opportunity for producers, specifically in Southwest Appalachia, what we think of as like the gateway to the basin, is really tremendous. And so going back to Doug's question, as we think about capital allocation, seeing that opportunity potentially coming around the corner and seeing that demand show up in the next 2 to 3 years is a phenomenal opportunity for us to reinvest and potentially grow structurally, sustainably and create a lot of value through that.

I appreciate that. My second question is on LNG. You guys have gone beyond pure financial exposure here. As you wrap your head around the physical business, are you seeing margin opportunities that maybe have been overlooked by others? And through your conversations, what kind of contract terms are you seeing being favored by buyers at this point?

Yes. I mean I think -- so we think of our LNG business and that book being built out similar to how we had the book on our just base domestic gas business where we have some deals under longer term and some under short-term tenors. And then a little bit in the spot market too. I would expect most of that to be index-based. And then there's potential for structure around that. But look, you can also financially hedge that with structure just like we do domestically in the financial market. So I think it will be a combination of all the above.

But we really envision that portfolio, I think, geographically being split pretty equally between Asia and Europe. But it's something that we will build out over the coming years, just like we do with our domestic gas book.

Yes. And I'll just follow up with just one point here. I don't think these opportunities are being overlooked by our peers. I just think they're out of reach. And I think you need to have a large-scale, high-quality business like EQT to be able to play in this market and do it in a balanced way. I mean for us to be able to take -- to reach a level of scale to be effective in this market, but still not be betting the farm on LNG, this is still a nice part of a diversified gas portfolio, only companies of our scale, I think, can achieve that.

Your next question comes from the line of Arun Jayaram.

Jeremy, maybe for you, I was wondering if you could update us on the progress on some of your large-scale supply deals. I'm thinking Homer City shipping port and the Duke Energy and Southern Company deals, I think it's 2.6 Bcf a day of supply in total. I think we're seeing early construction at Homer City, but would love to get an update on both of those key projects.

Yes. Actually, a lot of really great progress on both. I mean the guys at Homer City are putting a lot of steel up and really moving that project forward. So we're pretty optimistic about the timing there.

There's been a lot of good progress lately on shipping ports too with the offtake. So we're very positive on that, both in terms of timing and also just the gas supply. But again, those aren't our projects, so we're going to hold off giving like specific updates. I would look towards the developers on both of those for more specifics.

But look, we remain a committed partner to anyone trying to develop anything in the region, both to midstream companies, to data center developers or power developers. And I think that's why you're seeing us [ laying ] so many demand projects.

As it relates to the in-market like power plants being built down in the Southeast, our understanding is a lot of that will probably come online in like between 2029 and 2031. So I think there will be a ramp post that Southeast supply enhancement project on Transco coming online. It won't immediately be consumed, but it will debottleneck the Appalachian markets and bring [ MVP ] up to full capacity.

But like any of these projects, it takes multiple years to get it built. So it can't happen overnight. Unfortunately, some of this has to happen sequentially given the uncertainty of timing for completion of these projects. But everything is moving ahead, we remain opportunistic. And I think the opportunity set for more of these projects to get built is today as big as ever and I think continuing to accelerate. We're feeling that in our day-to-day conversations.

And I'd say the other thing too that's really changing, it's less so I think developers and the sort of upstart outfits trying to put these projects together, but it's increasingly really well-capitalized names who you would recognize who are sort of playing catch-up but I think can put real dollars to work and give us a lot more confidence that a lot of this demand ends up showing up. So we're increasingly excited by it.

Yes. GEV had some really strong orders though. I know they raised their expectations on inbound 110 gigawatts from 100, so obviously, some good things happening in power. My follow-up, Jeremy and Toby, is just to talk a little bit about your discussions around LNG offtake. You have 6 million tonnes of capacity post 2030. How would you characterize the nature of those discussions post the war in Iran? And would it be your expectation that you could sign some offtake in this calendar year?

Yes. So the reaction with Iran, I think, reinforces the reliability of U.S. supply. And that's certainly going to -- it was valued before, I think it's even more valued now. So we think that the interest in U.S. LNG is only going to continue to grow.

We do hope to see that the international community steps up and signs up for what we view as 6 Bcf a day of available offtake from these facilities out on the Gulf Coast area. So there still is opportunity for the market to give more exposure to U.S. LNG.

And for us, with the international community, I mean, we're going to be building a portfolio. I think just you're going to see some of those agreements probably be timed closer to when that offtake will become available. So I expect those agreements to be more of a focus sort of in that '28, '29 time frame.

Yes. I'd just remind you too, Arun, and I think anyone who's just in the market looking for offtake, the international customers who have signed up for this capacity, whether it's out of Europe or out of Asia, while you see chaos in the global markets, uncertainty over security physical volumes, but also just price uncertainty, those offtakers are buying gas at Henry Hub plus 115% today. So they -- by buying U.S. gas, like they are effectively insulated from what's going on in the world.

And so I think the relative attractiveness, both for existing offtakers but also those still looking for offtake, I think the attractiveness of shifting to the U.S. just because you do have that inherent price security, being able to buy effectively at the same price that U.S. consumers are able to buy at, is really unique. And you're not going to find that anywhere else in the world.

Your next question comes from the line of Neil Mehta with Goldman Sachs.

We spent a lot of time on the last call just talking about Winter Storm Fern. But now with the clarity of the numbers and how robust the trading and marketing effort was, maybe, Toby and Jeremy, you could just talk about lessons learned and confidence about the ability to replicate this in another period of high volatility.

Yes. This is something that we do believe we are going to replicate because this was very well orchestrated. I'd also -- I mean this all starts with operations. The entire team across the board on the commercial team did a fantastic job. But it starts with operations.

The playbooks that we put in place that really the planning on this started in the summertime are things that we're going to be able to put out there and repeat that. It's hard to see that performance is going to get even better, but just look at how our performance versus our peers, I mean, we had basically half the downtime than peers did, but there will be some opportunities. But the big part for us is really just continuing to keep the teams in great collaboration and coordinating across. And this is something where our technology platforms really bring that type of sustainability as we continue to scale this business. So we'll continue to look for ways to streamline communications, and that's a normal part of our business in this large-scale organization.

Yes. I think what's also unique this time and seeing the stress in the system is it now that we have the integration with midstream complete, and we have effectively controlling visibility of the molecule from the wellhead through our own systems for 90% of our volumes down to the end markets, it allows us to have a lot more accountability and visibility into like, if something goes down, we can figure out what's happening really quickly.

Historically, a lot of our traders would find themselves in situations where all of a sudden volume is lost and volume maybe they presold and they're trying to figure out where the volume is balanced, they're not able to trade and capture arbitrage. They're trying to just minimize imbalances on the system, avoid OFO penalties.

So the amount of collaboration this time, the ability to identify issues in the field and get them resolved within hours, and allow the traders to do what they're there to do, and that's trade and create value, I think it was on full display this time. But again, it's not just because the trader is doing well or just because ops are doing well. It's a collective effort of the whole team working really well together, and that's what's important.

Very clear. Look, you guys got a ton of inventory at this point. And I know that the A&D market, it felt like the bid-ask was pretty wide and it got overheated there for a period of time. Are there opportunities to continue to opportunistically bolt-on stuff? Or is this really just an organic story given all the stuff you guys talked about earlier?

Yes. I mean, look, we were intentionally a first mover in M&A. We thought there would be a snowball effect to that and the best assets would go first. I think what's left is of much lower quality. So look, we're always opportunistic. But we see when we look at the opportunity set and where to invest capital right now, it's organically, and gets compared to where the A&D market is, I think our stock is a much better value candidly. And I think the organic reinvestment opportunity set is a significantly higher return on capital than putting cash into an acquisition of, I think, what would be an inferior asset.

So again, we're going to remain opportunistic and look around as we always have. But I think the odds of something happening in the A&D space are significantly lower.

Your next question comes from the line of James West with Melius Research.

Toby, I wanted to quickly ask about if you're looking at any opportunities outside of Appalachia at this point. There's certainly international shales where you have tons of expertise you could provide, I'm thinking [ Vaca Muerta ] which is probably 10 years on the Permian or so, maybe 7. But any expansion opportunities outside of your current market that you're at least considering at this point? I know you guys have a ton on plate and there's a ton of growth in the domestic market. But just curious how you're thinking about that.

Yes. Our view is pretty simple. We've got a massive asset base here in Appalachia that we believe will give us the ability to connect our gas to premium markets domestically around world. And the key for us to unlocking that asset base is going to be to capturing that demand. So I'm more focused on looking for demand capture opportunities as opposed to supply opportunities. So we're staying focused on what we have right now. And it's just -- it's all the great work we've done over the last 5 years, bolting on and beefing up this asset base, is where our focus is right now.

Okay. That's very clear. And then maybe a quick follow-up on the LNG strategy. I think you addressed some of this earlier, but we clearly have a tight end of the market and changing dynamics there. Pricing has moved. Anything you think you would move on earlier than that time period you've already committed to getting into LNG?

I mean I think, as Toby said earlier, I mean, if you're going to take out capacity sooner, you're effectively buying it at the current strip in spread. So it's not like you're able to buy it at the same terms. Look, if we have the opportunity, we'd obviously take advantage of it. It would be free money. But I think the odds of that are pretty low.

Your next question comes from the line of Bob Brackett with Bernstein Research.

I'm curious around your comments of attracting demand to your backyard. And one way to do that is simply commercially you're low-cost operator, you're well plumbed up there. And the other is with some judicious midstream capital. Can you talk about what might be inbounds and out of bounds for the source of capital projects you've put to work to attract that demand?

Yes. I would say what's inbounds right now is our goal is to make sure that we're giving customers the best energy. That's the lowest cost energy, most reliable. And the key for us doing that is leveraging our existing asset base, the over 3,000 miles of pipeline infrastructure we have, and building off of that and extending that to be able to service these new the demand hubs that we're talking about. So I'd say that's really our big focus.

And I'd say we'd stay in that zone until we've exhausted all the opportunities and then we could look out more broadly. But right now, just given the opportunity set we have in front of us, the cup is full and now we're just looking to land some of these big opportunities.

Your next question comes from the line of Sam Margolin with Wells Fargo.

First one is on the shape of the CapEx that you referenced. We're at a peak in 2Q for the growth side. Are there going to be any immediate returns with the start-up of those projects, whether it's in sales mix and realizations or costs that we can expect?

No, I wouldn't say it necessarily correlates with that. I think it just depends -- it comes down to the lumpiness of large-scale operations and just the timing of some of our growth capital.

Okay. Got it. So nothing in second half to point to. And then just on the operational side, within liquids, we got this inbound. There was a little bit of a mix shift from C3 to ethane away from guidance. Was that just market-driven, natural gas price contracts? Or was there anything else to call out that's worth noting?

Yes. I mean just slight tweaks based on GPM assumptions we're making. But I wouldn't say there's anything material to read into on that one.

Your next question comes from the line of Lloyd Byrne with Jefferies.

Toby. I just wanted to know if you give me an update on the regulatory standpoint with U.S. infrastructure, whether electricity pricing is finally going to get us over the home there with respect to probably the Northeast?

I hope that perm reform happens, and I think it needs to happen in the near term, so in the next few months. I do think that there's a lot of focus on this. And I think the pressure is only ratcheting up on our leaders to take action and create a win for themselves going into midterms, that they're actually doing something the lower Americans' energy bills that have been up over 40% since 2020.

So -- and I think that -- we saw just a couple of days ago, Trump put out the executive determinations that just continue to reinforce the critical need to get energy infrastructure built. So all the signals are there and I think the issues going on around the world, I mean, our energy independence, the value of that is on full display with international prices being up $10 and the natural gas price here in the U.S. not moving. We've insulated Americans, but we can't take that for granted. We need more infrastructure to make sure we can preserve this really valuable opportunity we create for Americans. The American energy advantage is sort of at the end of its rope unless we get more infrastructure built. So I think people are recognizing this, but I hope they act.

Yes. It feels like we're finally making some progress there.

Your next question comes from the line of Phillip Jungwirth with BMO Capital Markets.

Last quarter, you guys talked about industry having limited Ohio Utica dry gas inventory left than the last month. We saw a 9-gigawatt gas plant announced to power data centers in Southern Ohio. So just as you see projects like this or others in the Midwest announced, how do you see these projects securing gas? And is there an appetite to either expand existing pipelines? Or how much momentum do you think there is around proposed new builds right now?

So we think we do see that as a big source of some of the gas supply opportunities we're looking at. And yes, while our view is the dry gas portion of the Utica play in Ohio may be light, all it takes to get back to deep, high-quality inventory in the Marcellus region in Pennsylvania and West Virginia is a 20-mile pipeline. So that is a very short bridge to build. And these are going to be some opportunities for us to be able to connect to those opportunities.

Yes. We see that Ohio market and that Clarington market as one of the greatest opportunities for us. I think there's a lot of low-risk pipe builds of significant size backfilling those Utica dry gas declines. But also I think a lot of the demand maybe that gets built in Ohio or some of the egress that gets built out of that market through both brownfield or also greenfield expansion.

So again, I think if you're sitting in Southwest Appalachia with a lot of inventory like EQT is, you're kind of first-row, beachfront real estate, get ready for that theme to really pick up. But that's something, as we said last quarter, we're super excited about based on the conversations we're having.

Okay. Great. And then one of the things you haven't talked about in the past is distributed power. It's smaller scale than what you've announced to date, but just wondering how you view this demand opportunity. And is it something that EQT could look to partner with or is it just adding another tool to the toolkit?

Yes. Look, I think there are so many companies and there's so much capital chasing that right now. I'd say it kind of falls in the same vein as like LNG and some of the other things that are tangential to our business. We looked at it all, we've studied it. And it ultimately comes back to do we as EQT have an edge? Is the need capital? Is it expertise? Is it equipment?

I think what we come back to is there's plenty of money to finance it, return is inferior, I think, to what we can generate just being a partner to those projects in our base business, and we can create a lot of value by doing what we do best. So look, we see our position in the market as a partner both to midstream companies to power companies to some of these developers of distributed power, the data center developers. I mean we're really an ally and partner on everybody. We're not really a competitor with anybody. We're just trying to help enable and to facilitate all that gas demand to get built.

So I think that's really one of the key reasons we're seeing so much opportunity right now.

Your next question comes from the line of Josh Silverstein with UBS Financial.

For the 2Q guide, you said you have about 10 to 15 Bcf of strategic curtailments and it kind of acts like storage. I was curious what kind of price point drove this decision? Maybe how much more you could curtail? And then potentially if prices go back the other way, how much more could you potentially say bring it out of your synthetic storage?

Yes, good question. It changes depending on the season and the shape of the forward curve. We make those decisions really through the lens of a marketer and trader rather than necessarily operations in today's world. And so it's informed by a lot of different factors. We can curtail a lot, a whole lot more than what we are planning to curtail based on the guidance we gave. We just don't see the need for that, at least at this juncture. There's a chance that later this year in the fall, we could choose to shut in a lot more. Economically, it's a lot easier to shut in large quantities right ahead of winter because you have so much contango in the curve, and the value and effectively storing gas in September, October is a whole lot higher versus storing it going into summer where the forward curve for the next 6 to 9 months is flat.

So look, we adapt and evolve with the market, but that's kind of the framework through which we think about it.

Got it. Okay, and that kind of goes to the next question I had, because I was curious if you had strategic curtailments planned for the back half of this year. Because the number of TILs is kind of even in kind of the mid-30s number throughout the course of this year, but the production guide is much higher for the first half versus the back half of the year. So are you planning more of these curtailments? And this is kind of the game plan going forward where first half volumes might be higher than second half volumes?

I wouldn't say it really comes down to planning for curtailments. I mean our ops plan, we map that out regardless of things like curtailments. Curtailments are what we consider to be an optimization action. I mean even if we were in growth mode, from like a base ops standpoint, we would still choose to curtail based on the factors I mentioned previously. So they're related but also not dependent on each other. .

Your next question comes from the line of Jacob Roberts with TPH.

Jeremy, we spent some time on data centers, but I'm just curious, when I look at Slide 16, can you talk about how internally you guys derisk some of those numbers as to what might actually happen? And then you spent quite a bit of time talking about the partner capability of EQT, I'm just you could remind us what the guardrails are on that in terms of the type of counterparty risk you're willing to take or size or scale on the potential project.

Yes. I mean, I guess, Slide 16 first, this is data that we bought recently as we're analyzing where these projects are and trying to understand what markets we're seeing the most pull. I mean, look, we don't really see it is our role to sort of derisk this. I think the best thing we can do to help enable these projects to go forward is be a reputable, highly creditworthy, reliable supplier of gas. And the best thing we can do is provide a simple, comprehensive solution, which we, from our platform, see as being one where we can provide midstream if it's needed, we can provide the gas supply, we can manage daily gas volumes and balancing. And we can participate in owning a midstream project. We can let someone else build the midstream and just manage the gas and capacity. It doesn't really matter that much to us.

I think for us, it's really about helping enable creating that demand and then tying that back to our operational and production base so that it effectively stimulates growth for our base business in the years ahead. So again, I think taking that approach and being a flexible partner is really, like I said before, what's driving a lot of the inbounds we have right now.

I appreciate that. And Toby, I think you briefly mentioned you see the potential for long-haul egress needed out of the Northeast maybe down to the Gulf Coast. And I think we generally agree as we look across the other basins and their staying power in terms of volume growth. So I'm curious if those conversations are happening now. And potentially, if you could opine on whether or not you think the cost of those types could be borne by the end user? Or do we see something similar to in the past where you guys might have to pay for that?

There are conversations right now about some of those pipelines.

And then as far as who will bear the shipping rate for those, I think you look at the open season we had with MVP Boost as an indication of the market that we're in. MVP Boost Utility signed up for 100% of that. And it did not require operators to sign up and take on those liabilities. We think that we're in a demand pull for these type of projects. And certainly, the demand that's being created in the Gulf Coast region, people are waking up and looking for where am I going to get the supply and how can we get the infrastructure built to make sure reliable supply is delivered?

Your next question comes from the line of Gabe Daoud with Truist.

Maybe just a follow-up on that last question. Maybe from your perspective, what's the latest on the Borealis project? Is there still an open season? Or any kind of update you could share as far as incremental egress side of the basin?

Yes. I would just call that one of many projects that is in the works in counterparties who we are in discussions with. In any of these pipes, I think the answer is going to be just it depends on who the shippers are and what EQT's role is. On many of these pipes, I think it's probably reasonable to assume that we probably build back into basin from certain supply hubs and gather the production and deliver it there. And there is a host of other companies either that are looking at projects like the one you mentioned or other brownfield expansions of existing interstate pipes that would probably take care of things from there.

But again, it's a lot easier to get those built when you have a business like EQT on the supplying end of those pipes. If you even just look at the Southeast supply enhancement project on Transco expansion that was needed there, that was effectively paired up. I mean the shippers -- the name shippers on that pipe effectively paired those agreements up with the gas supply deals we did with them to enable that to happen. And again, it goes back to what I've said a couple of times already, I mean, our goal is to be a partner of choice, whether that's with utilities, midstream companies, power companies or whoever it might be -- not really a competitor. We're helping trying to play our role in helping this market develop. And I think whether it's Borealis or any of these other pipes in discussion, we're going to continue playing that role the best we can.

Got it. That's helpful. And then just a quick follow-up, I think you alluded to this earlier, but just around growth expectations and maybe what governs that. You have some pretty big projects coming on '27 [ and '28] -- when we can get a little bit of that growth wedge materializing in those?

Yes. The midstream -- the growth for -- CapEx growth on midstream, I mean that's in progress right now. And I think we have visibility through '27, '28, where these projects will ultimately come online. The conversations we're having right now, the opportunities we have would allow us to extend that runway in that '28 through '30 time frame. And then that's been the big focus right now on the midstream side, and that will create optionality for us on the upstream side if and when we decide that makes sense.

Your last question comes from the line of Leo Mariani with ROTH.

I just wanted to follow up a little bit on your guidance here in 2026. So obviously, great start to the year, very, very strong volumes here in 1Q. Also your second quarter guide, while production is down a little bit, also looks very strong. Just relative to kind of your full year guide, certainly starting to make maybe the rest of the year look a bit conservative. You did talk about some more potential shut-ins during the fall to capture that winter premium, but certainly it seems like you guys are trending pretty well versus the guide at this point. So should people think that you might be a little towards the higher end of the range on production here for the year?

Yes. Look, I think 2 months after setting our initial guidance, in our view, it's a little early to update something like full year guidance without a material change otherwise. But look, I think the business is humming as evidenced by our Q1 results. I think if there's a reason to update, we'd probably look typically to do that by midyear. But all else equal, yes, I think we're at least at midpoint of guide so far through the year. And as we see how the market develops and the likelihood of curtailments this fall, we'll adjust accordingly if it's merited.

Appreciate that. And then obviously, I would love a discussion on the macro here. Gas market has been a little bit weaker of late. Liquids markets have been robust. Does EQT see any optionality of trying to maybe shift activity to slightly more liquids-rich areas? Is that something you guys might consider here?

Yes. I mean just so you understand how our operations scheduling works, I mean, we developed the most economic projects first. So if there's opportunity for us to develop more liquids, that's already been taken into account. Just given the size of our asset base, it's going to be hard for us to see -- to materially change our liquids mix in our production portfolio. But it is something that is taken into account in our normal operations.

Sorry, operator.

That concludes our Q&A session. I thank you all for joining, and you may now disconnect. Everyone, have a great day.

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome you to the EQT Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions]

I would now like to turn the conference over to Cameron Horwitz, Managing Director, Investor Relations and Strategy. Cameron, please go ahead.

Good morning and thank you for joining our fourth quarter and year-end 2025 Earnings Results Conference Call. With me today are Toby 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'd 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, in our investor presentation, the Risk Factors section of our most recent Form 10-K and in 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 investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures.

With that, I'll turn the call over to Toby.

Thanks, Cam, and good morning, everyone. 2025 was another stellar year for EQT, one in which we were able to clearly demonstrate the power of our platform. Over the past several years, we've been intentionally building scale, vertical integration, operational excellence and financial strength. That work is showing up in measurable ways, in our well performance, in our cost structure, in our free cash flow generation and in how we performed under pressure.

This morning, I'll walk through 4 areas that highlight that platform strength. First, our operating performance is the foundation of our platform. In 2025, we saw continued structural improvements across operational drivers, reinforcing the durability of our maintenance capital program. Second, our financial strength brings power to the platform. In 2025, we translated operational outperformance directly into meaningful free cash flow generation, allowing us to fortify our balance sheet and increase financial flexibility, providing a strong foundation to capture value opportunistically through market dislocations. Third, Winter Storm Fern. Recent extreme weather events provide an opportunity for us to showcase both the operational strength of our platform and the value creation power that our scale and integration delivers for our stakeholders.

I'll wrap up by discussing the future of our platform with our 2026 plan. Our budget is underpinned by a disciplined maintenance capital program while beginning to invest the first dollars of post-dividend free cash flow into selective, high-return growth investments. It's a continuation of the strategy that has driven our transformation staying laser focused on capital efficiency and cost structure while making smart investments at the right time to maximize per-share value creation.

Now let me dive deeper into our operating results. Production consistently topped expectations throughout 2025, driven by compression project outperformance and robust well productivity. Compression projects executed last year generated 15% greater-than-expected base production uplift and positively impacted well productivity. In fact, third-party data shows that EQT saw the strongest improvement in well performance of any major operator in Appalachia last year. Our tactical approach to volume curtailments and marketing optimization resulted in price realization outperformance throughout 2025. The cumulative benefits of our marketing optimization resulted in more than $200 million of free cash flow uplift last year relative to guidance, highlighting the tangible benefit to shareholders from this effort.

EQT's position as the second largest marketer of natural gas in the U.S. ahead of all upstream and midstream peers, coupled with persistent price volatility means our marketing optimization efforts should have recurring positive impacts on financial performance going forward. Operating costs and capital spending also beat expectations last year, which represents the return on our water infrastructure investments, midstream cost optimization and upstream efficiency gains. Our team set multiple EQT and basin-wide operational records yet again during the fourth quarter, including our fastest quarterly completion pace on record in the most lateral footage drilled in a 24- and 48-hour period. Efficiency gains resulted in our average 2025 well cost per lateral foot coming in 13% lower year-over-year and 6% below our internal forecast coming into the year.

Additionally, per unit LOE was nearly 15% below our expectations last year and approximately 50% lower than the peer average. The cumulative result of our operational outperformance delivered $2.5 billion of free cash flow attributable to EQT in 2025 with NYMEX natural gas prices averaging approximately $3.40 per million Btu for the year. Our free cash flow generation significantly outperformed both consensus and internal expectations, underscoring the power of our low-cost integrated platform and our ability to consistently deliver differentiated shareholder value. Importantly, our ability to deliver wasn't just visible in our financial results. It was demonstrated operationally in one of the most challenging environments in recent times during Winter Storm Fern.

I want to take a moment to recognize our upstream, midstream and marketing teams for their outstanding coordination and execution during the storm. The team's effort helps keep millions of American homes heated and businesses running, while also allowing us to capture peak cash market pricing during periods of elevated demand. This is a great example of how EQT's integrated operations resilient infrastructure and commercial alignment come together to deliver differentiated value for both our customers and our shareholders. Winter Storm Fern also provides a stark reminder for just how important natural gas infrastructure is to the reliability of the U.S. energy system.

During the storm, our Mountain Valley pipeline slowed above its 2 Bcf per day nameplate capacity, which effectively backstopped 14 gigawatts of power generation across the Southeast region or enough energy to heat more than 10 million homes. And yet, even with this capacity flowing full, cash prices at Transco Station 165 spiked to over $130 per million Btu, highlighting a system that remains structurally constrained. These price signals are unmistakable. The country needs more pipeline infrastructure and a permitting framework that allows the industry to get back to building critical infrastructure again. Expanding natural gas infrastructure isn't optional. It's essential to delivering reliable, affordable energy to U.S. consumers and support long-term economic growth.

However, when supply is constrained due to lack of infrastructure, prices rise and affordability suffers. Luckily, the solution is simple. We need to get back to building and connecting low-cost natural gas supply to the demand centers that need it most. Simply put, if we build more, America pays less. At EQT, we're not just advocating for infrastructure, we're investing in it. We recently elected to exercise our option to purchase additional interest in MVP mainline and MVP Boost from an affiliate upon Edison. The interest in MVP mainline will be purchased by EQT's midstream joint venture with Blackstone and the interest in the MVP Boost expansion will be acquired directly by EQT. EQT is expected to fund approximately $115 million of the total consideration for the acquisition. Upon close, our ownership in MVP mainline and EP Boost will increase to approximately 53%. We estimate purchase price equates to roughly 9x adjusted EBITDA and delivers a low-risk 12% IRR to EQT inclusive of MVP Boost growth CapEx and expansion, which is highly attractive given the long duration annuity cash flow stream underpinned by 20-year contracts.

Shifting to our 2026 outlook. We are initiating a production forecast of 2.275 to 2.375 Tcfe with continued outperformance of operational efficiency and well productivity likely to drive upside bias to this range. As it relates to our investments, we have established a maintenance capital budget of $2.07 billion to $2.21 billion, which includes a full year impact from the Olympus acquisition. With our balance sheet deleveraging nearly complete and total debt rapidly approaching $5 billion, we are electing to ramp up investments in our high-return growth projects. We are allocating the first $600 million of post-dividend free cash flow to these projects in 2026, which is largely comprised of compression projects water infrastructure, the Clarington Connector pipeline into Ohio and strategic leasing.

Our investments in these growth projects are expected to strengthen our platform, lowering future maintenance capital, reducing LOE, improving price differentials, replenishing inventory at attractive prices and setting the stage for sustainable upstream growth in the future. Not only do our growth projects generate attractive returns, but they continue to fundamentally improve the characteristics of our business and provide EQT a differentiated way to compound capital for shareholders. At recent strip pricing, we expect to generate 2026 adjusted EBITDA attributable to EQT of approximately $6.5 billion and 2026 free cash flow attributable to EQT of $3.5 billion, which includes the impact of approximately $600 million in growth investments. Prior to the investments in these elective projects, free cash flow attributable to EQT would be over $4 billion. Cumulative free cash flow attributable to EQT over the next 5 years is projected to total more than $16 billion, highlighting the tremendous value proposition embedded in EQT stock.

I'll now turn the call over to Jeremy.

Thanks, Toby. Our strong execution resulted in nearly $750 million of free cash flow attributable to EQT in the fourth quarter, approximately $200 million above consensus expectations. This marks the sixth quarter in a row where we have exceeded consensus free cash flow estimates with an average beat of 40%. We outperformed across every financial metric during the fourth quarter, with strong price differentials, again, underscoring the recurring value created by our gas marketing capabilities.

We exited the year with net debt just under $7.7 billion, inclusive of $425 million of working capital usage during the quarter. Recent gas price strength on the back of winter storm firm, combined with our opportunistic approach to hedging, should drive historic results for EQT in the first quarter. The potential for free cash flow in the month of February alone to approach $1 billion. After we sold approximately 98% of our production at first-of-month pricing, which settled at $7.22 per MMBtu for M2 and $7.46 per MMBtu for Henry Hub. We estimate January and February performance already exceeds consensus Q1 free cash flow expectations by more than 30%, setting the stage for record free cash flow generation in the first quarter and for full year 2026. As a result, we expect to exit the first quarter with less than $6 billion of net debt. This rapid deleveraging enhances our capital allocation flexibility.

We are well positioned to fund high-return infrastructure growth projects, continue our track record of base dividend growth and accumulate cash to opportunistically repurchase our shares. The benefits of our opportunistic hedging strategy were on display as we came into the fourth quarter with minimal production hedged, purposely leaving significant upside optionality into winter, given the likelihood of asymmetric upside if cold weather materialized. We tactically added colors and captured call option skew into sharp price rallies in the fourth quarter and over the past few weeks, including adding a company record amount of hedges in a single day in December as the market peaked.

With these tactical ads, we are now nearly 40% hedged in the first quarter of 2026, with an average floor price of roughly $4.30 per MMBtu and an average ceiling of $6.30. For Q2 and Q3, we're approximately 20% hedged with $3.50 floors and nearly $5 ceilings. And we are also roughly 20% hedged for Q4 with $3.75 floors and $5.15 ceilings. This hedge position provides downside protection, ensuring we can execute on all of our capital allocation priorities, while maintaining upside exposure should prices continue to strengthen in the summer.

Turning to fundamentals. The natural gas market has tightened significantly over the past 6 weeks. Winter to date is 5% colder than normal, driving significant demand on top of production disruptions. This cold weather tightened inventories by 225 Bcf compared to prior expectations and reduced inventories below the 5-year average. We forecast storage exiting winter around 1.65 Tcf under normal weather conditions through March. With LNG exports continuing to grow, the U.S. gas storage situation in 2027 looks even tighter. As a result, we anticipate seeing both 2026 and 2027 prices rising further to ensure inventories remain within a comfortable range.

Importantly, for EQT, cold weather this winter has been concentrated in the East. Eastern storage levels are now 13% below the 5-year average. Basis differentials later this decade continue to strengthen on the back of growing in-basin demand. With 2029 basis, as an example, now trading at a $0.70 discount to Henry Hub, which is a $0.50 improvement compared to the last few years. From a global perspective, fundamentals are also improving more than consensus realizes. European storage levels are well below normal following robust winter withdrawals. Current projections point to Europe exiting winter, with storage at the lowest level since 2022 and that is despite the surge in LNG supply since then.

Beyond LNG, power demand is accelerating faster than previously anticipated. Natural gas turbine orders have increased meaningfully. And once units or since 2023 are fully commissioned, they represent roughly 13 Bcf per day of demand in the United States alone, providing clear visibility to substantial incremental gas burn moving towards startup. While not all these turbines are tied directly to data centers, meaningful portions are connected to new large load projects, including AI and cloud infrastructure. Separately, we have line of sight to approximately 45 gigawatts of data center capacity currently under construction, including 12 gigawatts in our core operating footprint. Together, turbine backlogs and data center construction activity reinforce the structural demand growth that is building across the power sector. Given the location of this load and the depth of our resource base, we believe EQT is positioned to capture an outsized share of this incremental demand.

To wrap up, I want to provide additional color on the growth projects that we chose to include in our 2026 budget, which will be funded with the first dollars of post dividend free cash flow. Starting with compression, the well outperformance we've seen since acquiring Equitrans motivated us to accelerate compression investments in 2026. The benefits of these investments show up as stronger base production and improved well productivity. Over time, these benefits compound reducing decline rates and improving capital efficiency.

On water infrastructure, our investments in 2026 will connect EQT's legacy water systems with the water network we acquired from Tug Hill. This interconnection will create an integrated water system throughout EQT's operating footprint in one of the largest water networks in the country. This expanded connectivity is projected to improve uptime, reduce reliance on trucking, lower LOE and improved frac efficiency. The Clarington Connector is a 400 million cubic feet per day pipeline that will move natural gas from Pennsylvania into Ohio, allowing more of our gas to reach data center demand and the receipt points of several interstate pipelines. We expect the Ohio dry gas Utica inventory to be largely depleted by the end of this decade, driving stronger pricing in the Ohio region. This pipeline perfectly positions EQT to begin backfilling these volumes and creates another avenue to capture premium pricing.

On land acquisitions, we plan to continue expanding our leasehold position at attractive prices. Since 2020, we have leased approximately 100,000 net acres, effectively replacing 60% of our development and perpetuating our runway of core inventory. The return on these investments will show up in our financial statements through higher production, lower capital spending and LOE, higher third-party revenue and better price realizations, driving top line growth while continuing to reduce our cost structure. The financial performance we saw in 2025 was a direct result of similar investments we made in prior years, giving us confidence that our growth initiatives will translate to tangible free cash flow generation and differentiated shareholder value creation.

In closing, 2025 was a stellar year for EQT and a clear demonstration of the power of the platform that we've strategically constructed. We delivered record operational results drove material free cash flow outperformance and significantly strengthened balance sheet. Winter Storm Fern demonstrated the power of EQT's integrated model in real time as our teams worked seamlessly across operations, midstream and commodities trading functions to keep natural gas flowing and provide heat for millions of Americans during one of the most challenging winter events in recent history. Our strong results are not just incremental, they compound over time to create exponential value. Every element of our business is feeding and other, driving steady and significant performance gains. We are extremely proud of what our teams delivered in 2025, but we are only getting started and the momentum we've built across the organization gives us tremendous confidence in what lies ahead for EQT.

With that, I'd now like to open the call to questions.

[Operator Instructions] Your first question comes from Doug Leggate with Wolfe Research.

Thanks for all the updates. I guess, I'd like to focus to try and summarize everything you've said today to one issue, which is the trend in your portfolio breakeven and sustaining capital. Can you give us an idea where you think that sits on a levered basis for 2026? And my follow-up is the deleveraging comment you made, Toby, is about -- I think you said, as we get to the end of our -- I don't prorated about deleveraging process. But it seems that you're potentially generating a ton of free cash flow, as you've indicated for 2026. What's the priority for that free cash flow, does that continue to go balance sheet as well? And by the way, go a quick shot to your tremendous videos over the store. We enjoyed those.

All right. Thanks, Doug. Yes, on the last question, the capital allocation, the deleveraging has been rapid, and we're in a great position right now where we sit, and I think we're all the confidence in the world will bust through our $5 billion long-term target. I think we're going to continue to look to pay down debt over and above that. But as we mentioned and you see with our 2026 plan, first, free cash flow is going to be going towards the sustainable growth projects that we have on the infrastructure. That will be a theme as long as we have high-quality projects to put on the schedule. We'll continue to do that. But certainly, leverage is still the priority. We'll continue to expand on that. And I think the punchline is we can be -- we can start thinking about being opportunistic in the future. And that day has come a lot sooner than what people expected. .

Were you going to do color on the cost structure, 26?

Yes, Doug, if you want to think about breakeven cost structure, I mean we -- just like we're doing with our capital expenses, you have the maintenance side of our CapEx and you have this growth side. I think for comparability purposes, as we think about free cash flow really compared to peers in the market and also as it relates to breakeven, we look at it really after that maintenance level. Everything beyond that is elective. So when we assess that, we're around 220 on a levered basis, that levered number is coming down rapidly this year, and you'll see us soon repay a bunch of debt we have outstanding in the market. So that lever number is falling towards the unlevered number pretty quickly.

Your next question comes from the line of Neil Mehta with Goldman Sachs.

Yes. Toby and Jeremy, your perspective on Fern was helpful. I mean, maybe you could talk about quantifying the uplift associated with that, you gave us some disclosures in the release in your comments. And then just lessons learned from Fern because I think volatility is going to be constant on the go forward. So how are you ensuring that your marketing team is going to continue to be on the right side of these type of events?

Yes. So Firm really was a great example of the culture we built here at EQT and our ability to respond to stimulus, our company value evolution on full display, executing the environment we're in. It's important for people to know we started planning for Winter Storm Fern back in the summer, and we were making preparation for winter storms. Reliability is going to be a big feature, a big attribute that people are focused on, and we're excited that the teams all stepped up and knocked it out of the park, not just operationally, but on the commercial side as well and being able to capture this opportunity that was presented to us.

Just to quantify some of the uplift, I mean, we look at -- we were excited about our performance during the storm. The way we look at it, our normal routine operation uptime is 98%. That's our target. During the storm, it was 97.2%. We got even more excited when we saw how that benchmarked versus Appalachian peers, and we saw a 2x factor outperformance on that front. So it's certainly been an area of the organization where we really wanted to dial up the intensity and this team proven that they actually delivered.

Here's my takeaway on what we see. Volatility is here in natural gas. And I think people can have an attitude that they try and shy away from volatility and try and protect against it. We are trying to take advantage of volatility, and we think the results that we generated in Winter Storm Fern are going to be future opportunities that we see going forward, and this is a sign, and this will persist until we get back to getting infrastructure built to debottleneck these markets. Until then, we're going to be able to be opportunistic and take advantage of this world-class commercial team we have here at EQT.

Yes. Neil, I would add to that, too. I mean, our commodities team is focused on 2 things primarily. First, focused on balances or really minimizing imbalances is probably the best way to put it. And that really comes down to extreme coordination with our operations teams and our control centers to make sure that we know exactly how much volume is coming into the system so we can keep our sales in balance.

The second is arbitrage capture. A really good commodities team is not able to focus on things like arbitrage capture if they're constantly trying to figure out where volumes are. And during winter events like storm, when our operations teams are delivering and we have good visibility into both the midstream operations and upstream operations, they're able to dedicate their time to capturing that opportunity. But I mean, look, some of the trades that we executed during the end of January and early February were, I mean, absolutely outstanding, making sure volumes got to where they needed to be, shutting down all of our Gulf capacity and reselling it in basin when prices were $30, $45, making sure we had full deliverability through our MVP capacity, selling it at $130 MMBtu for certain days, making sure that we have confidence in the volumes that will show up in February and being able to nominate at levels like we did at 98%, which is probably an all-time high for EQT. But again, when we see the opportunity to sell gas on a month forward basis in the mid- to low 7s or to sell into Station 165 at over $11 for a month, you have to be able to depend on your operating teams to do that and capture the value presented. And that's what we're able to do uniquely at EQT through the platform we've put together.

And then the follow-up is just on the gas macro. I wonder if you could address 2 parts of it. One is we've seen production surprise. I think relative to consensus expectations, Toby, something that you outlined was likely to happen at our conference in January. I think that is materializing. Has that affected the way you're thinking about the outlook for U.S. gas?

And then the follow-up is around M2 basis. You guys have a differentiated point of view that M2 basis futures need to continue to tighten up, something that we are seeing some evidence of. So if you could talk about the U.S. profile for gas, but then specifically the M2 basis profile as well, that would be helpful.

Yes. We got a lot of questions when we said that we saw U.S. supply exiting closer to that 114, 115 Bcf a day range. And that's still our view. I think things we're looking at are going to be these Permian [ pipelines ] when they come online and how much they'll be full on the supply side. And obviously, people are pretty well read into what's going to happen on the demand side with LNG and the power story is going to show up. I'd say probably what's new for us on a macro perspective, the biggest catalyst that's hitting energy markets right now is the public concern over energy prices and affordability. And we think that this narrative is only going to continue to strengthen, and that's going to create even more opportunities to get infrastructure built and with our platform that will create opportunities for EQT.

Yes. And I guess your question on M2 basis, we've been talking about this for like a year. If you look back at our we put out quarterly. And that has continued to move our direction. We came into this year with only about 35% of our local sales hedged because we have had this broader thematic view that basis should improve. Historically, we probably would have had about 90% hedged. That's something we normally don't openly disclose. But again, it's a tactical repositioning that we've intentionally executed on over the past year or so. And again, we're also leaning more on our physical curtailments in those down markets. as opposed to feeling like we need to financially protect ourselves. And that just provides a better sort of all-in market solution and allows EQT to save its volumes for when the market really needs them like during the wintertime.

Your next question comes from the line of Arun Jayaram with JPMorgan.

Jeremy and Toby, I wanted to see if you could talk about how you see your strategic growth CapEx evolving over the next couple of years as we think about projects like MVP Boost, Southgate, the Clarington Connector. But how do you see that evolving over the next couple of years?

Yes, it's a great question. And that is a room why we are so intentionally trying to bifurcate maintenance capital, which I think is the true measure of year-over-year performance and just efficiency in the base business versus where we're choosing to elect to reinvest capital and create additional value. We're trying to create more and more of these opportunities, again, across our integrated platform. I think we see more than most companies do across the value chain. .

A year ago, I probably couldn't have told you about half these projects that we have in our budget this year. So I have no doubt the teams will continue to originate a lot more really good deals. But right now, I think beyond what we have in the queue for this year, the focus is really on the Mountain Valley projects that we've talked about, both Southgate and Boost. Those are probably the biggest spend items as we move into 2027. There's a number of things we're working on that I think are pretty exciting, but that's all got to come to fruition. But look, our goal is when we have not a lot of debt if we're generating $3 billion, $4 billion of free cash flow before growth CapEx, say we invest the first $450 million, $500 million to a base dividend, the next $500 million of that or so maybe more like this year, depending on the quality of the opportunity, we think it's important for that to go into some sort of organic growth projects.

And importantly, and I think to differentiate against what you hear from some of our more direct upstream peers, there's a way to grow value and free cash flow that doesn't include just drilling more wells or drilling less wells, a lot more to it than that, and that's really what we're trying to underscore and emphasize and how we're trying to differentiate how we reinvest capital. And when you step back and think about the right way to really, in our view, step into something like upstream growth at some point down the road, there are certain prerequisites to that. In our mind, you have to be the lowest cost producer, which is box we've certainly checked. It's getting down to a very low to no leverage profile, which, again, we're very rapidly executing on.

But I think most critically, it's partnering and creating real structural demand for those volumes. And that's what you see us do through the MVP expansion through the Clarington Connector project, through the in-basin just demand opportunities that we're connecting to with our midstream platform. And once all those boxes are checked, that's when we would think about growth potentially beyond the infrastructure. But this infrastructure is really paving the road for us to get there. And at the same time, I mean, it's the type of returns that get us really excited where we're not taking your class commodity price risk and chasing prices.

And just a follow-up is in terms of your investments in compression, it looks like this year, you're going to be investing about $180 million in terms of pressure reduction projects and gathering. Where are you in terms of the life cycle of investments kind of in compression?

Yes, Arun, these projects will get us pretty close to catching up and getting our systems operating at pressure that would be steady state. So future compression projects would probably show up in the maintenance CapEx portion of our budgeting.

Your next question comes from the line of Betty Jiang with Barclays.

I want to start with a question on your gas sales strategy. Jeremy, you mentioned that you're selling 98% first of month. Can you just unpack like how much would be the ideal amount that you sell first of month? How much you want to sell into the cash market. I'm asking this because, as you said, the volatility gas market is only going to get more volatile, which means that you want to get more exposure to cash markets or prices were as we have seen this winter. So how does that influence your how you sell your gas and how much of the gas gets dedicated to first of month versus cash market?

Yes, it's a great question. So we have a fundamentals team internally, and we -- I mean, we try to always have a view. We're not ever trying to pick price. We're really trying to understand is where the asymmetries sit and the potential outcome. If you think about effectively what first-of-month pricing means coming out of midweek, it's really the market's best estimate of what those 31 days over the next month will average out to in the cash market. Over the long term, there shouldn't really be a statistical advantage electing to one or the other, but one provides more stability when you elect most of the volume first a month. Otherwise, your traders are having to be in the market and clear a lot of volume every day. .

But look, when we looked at February, as an example, and this was a very conscious decision we made, and we assessed what was going on in the market and effectively said fundamentally, in our view, you probably would have had to have one of the coldest Februaries in the past 100 years to justify pricing being at that level. And so we simply said, is that really a bet we're willing to make and leave that open exposure? Or are we willing to take off an amount of value that we're producing, call it, 200 Bcf a month, and we have $5 to $6 of margin baked in, do we just take the money and derisk it. I think your typical producer is selling probably 75% to 80% first a month and the rest of it is left open as operational flexibility for downtime. I think EQT is unique in the sense that we have so much control over the value chain and visibility into operations through the vertical integration, we can dial that up to a higher level. And so when you see opportunities like this, we can take that value off the table.

But just for perspective, if you look at where gas daily has settled month-to-date and where balanced a month pricing is, I mean, you're averaging like -- it's about [ 3 90 ] Henry Hub in mid-3s at M2. So if we had not made that election, our average pricing for the month would be several dollars below where we elected it to be. So there is hard to overemphasize how much value there is to be able to take off the table if you can be on top of this sort of stuff and have the visibility that we do. And again, going back to what Toby said, our real goal is to be more I guess, more like an anti-fragile philosophy where we benefit from when there's more volatility. You saw it in Q4 in October. What we did with our curtailment strategy, we're able to really take advantage of awesome opportunities, squeeze extra margin out and then the market got volatile on the other end of the spectrum in January, February. And we, again, I think you'll see us squeeze an immense amount of value out of the market by positioning around volatility and profiting from that rather than just playing defense.

Very helpful context. My follow-up is on growth. In Toby's comments, you guys talked about the midstream investments setting the stage for sustained upstream growth. And I just want to ask about your philosophy around that because we are seeing more volumes and growth from other operators growing into the local market. EQT has one of the lowest cost production basin. If you don't grow effectively, you're ceding market share to others. So how do you think about balancing growth? And I'm a bit conflicted myself on thinking about how much you should be growing in this environment, too.

Yes. I think philosophically, it's important to note that I think we've learned what happens when you set activity levels chasing price signals that hasn't typically worked out too well. So philosophically, we've shifted more towards, we will respond to demand. And then as far as seating market share is concerned, a lot of this demand that we're meeting, actually all of it is going to be connected through EQT infrastructure with EQT gas supply deals. So I feel like we've got a really good look at what the market needs and our ability to supply that. But the infrastructure needs to get built. These projects need to get built that demand needs to show up, and that's probably a '27, '28 time frame for us. So we're focused on the infrastructure right now, securing demand and then that will be an option for us in the future.

Your next question comes from the line of Kalei Akamine with Bank of America.

My first question is on MVP. Going back to Slide #10. It shows really strong performance on the main line above nameplate capacity. Just kind of curious what you guys are learning about the effect of the capacity on that system and if there are any learnings that we can extrapolate to the expansion projects.

Yes. As far as learning on like total flow potential, I mean, it will be dependent on weather conditions. I mean colder weather will be able to flow more volumes there. So I mean, this new record of over 2.1 Bcf a day sort of shows where that limit is. But I think more importantly is looking at the price on that chart, there's a tremendous amount of demand there needs to be more volume brought into this area, and we think Boost is going to be a great project for us to address that market need. And we anticipate these projects having pretty high utilization.

The follow-up is on Clarington Connector. That project was upsized from 300 million cubic feet per day to 400 million cubic feet per day. Just kind of curious what's behind that design decision. Is it demand pull? And then once at Clarington, can you talk about what market options you have to clear that gap? Should we think about Rex somewhere in the Midwest? And are there any opportunities for premium pricing, maybe a direct supply agreement on top of that? .

Yes, Kalei, I think you're on to something -- I mean, it's a couple of things. And I really think that Ohio market opportunity in the next 5 to 10 years is one of the greatest ones for us. Not only is it the new demand you're talking about, you have a lot of the FT contracts on like Rover, on Rex, on Nexus rolling over in the next 5 to 10 years. And at the same time, in our view, I mean, also owning Ohio Utica gas assets, we really don't see much inventory there beyond like 2030. So we view that as a gas play that will go into structural decline. And so we're sitting in the right on doorstep too with a huge infrastructure footprint.

And I think the ability to build pipes directly into that region and allow those pipes to pull gas back from our much deeper inventory base. on the Pennsylvania side, will not only help us capture premium pricing, but actually set the stage for us to grow volumes and do so in a structurally like sustainable way like Toby just talked about. So I think this is part of us kind of looking ahead with a longer-term view and positioning around that longer-term opportunity. But I think there's a big time ways for us to win on both pricing and also volume to drive top line growth in the coming years.

Your next question comes from the line of Lloyd Byrne with Jefferies.

Congrats on capturing the volatility. I know it's been a focus for you guys. I want to circle back to Betty's comment on growth a little bit. And I know Toby, you've talked about what a Bcf means to your free cash. But if I look at consensus, there's just no growth that people have in the model. And I was just wondering like when do we start to see this growth emerge? And we're looking at almost 5 to 8 Bs of in-basin demand. I don't know if you guys feel the same way, but when do we hear more on Homer City shipping for coal retirement manufacturing plants, et cetera?

Yes, what was the first question on growth? What?

Yes. Just like when -- it looks like consensus just has no growth, and it's super important to your free cash and going forward. And so when do we get more details with respect to that? Is that in a year? Is that in 2 years? Is that when the infrastructure is built out?

Yes. Well, first thing I'd say about '26, I think our track record of beating production estimates. There is risk embedded in that production forecast. We keep that risk on it as the year evolves and things play out, we update that accordingly. So I'd say that just look at the track record as far as thinking about sustainable upstream growth in the future. I think that's probably a story that we start talking about maybe '27, we start thinking about it once we get a more clear picture on some of the start times, some of the projects that you mentioned like Homer City and some of the in-basin data center, we don't see the world any differently than you on what we're seeing for in-basin demand. On Slide 22, we laid out our estimates of 6 to 7 Bcf a day. What's changed a little bit. power demand for data centers has gone up. Coal retirements has been pushed back a little bit. But net-net, it's still a healthy source of in-basin demand.

Okay. And let me just follow up to be a little bit on -- given your resource depth and your breakeven. Just how much production are you comfortable with going forward? Could you add 2 Bs, could you add 3 Bs and still be comfortable?

Yes. I mean this is a question we've asked here. I mean, realizing the full potential of EQT when we came in here, we think about what's the full potential of this, almost 2 million-acre resource base we have here. Obviously, we're super disciplined to making sure that we're pairing up a demand. But we believe we have a productive capacity of about 12.5 Bcf a day. Think about that for -- when we think about the amount of opportunities that we can create on the midstream and infrastructure side of things and still be able to take advantage of the benefit that integrated platform and capturing the margins on the upstream side, which is where we feel like the largest source of value capture is going to occur. That's sort of how we look at it. But I mean, that's aspirational for us. And this is one of the reasons why we're pushing so hard with our growth engines to capture this demand and create these infrastructure opportunities for us.

Lloyd, I'd add to that, too. I think when you look back at our industry over the last decade or 2, so much of growth comes down to companies, really, you're responsibly chasing price signals that are fleeting I think as we think about growth, it comes back to those 3 prerequisites I mentioned earlier. And as we think about it, it's not something where you'll probably ever hear us come out and say like, hey, we're just going to grow for the next 12 months. right? Or hey, we think if prices are higher, we're going to add a little bit of volume. That's not how we think that. I don't think any company gets rewarded for that. Anything you're just introducing uncertainty and sort of gambling on price.

The way we think about it is when that demand is structurally showing up, whether it's the MVP projects coming online, like Clarington, data centers, whatever it might be, that is structural demand of multiple Bcfs a day that we are really underpinning. And if we grow it, it probably looks more so like 3% for the next 5 years on like a CAGR basis. And we have a business, a balance sheet, a cost structure an integrated platform that allows us to do that really no matter what gets thrown into the macro mix. So if you're an investor, you can capitalize that and count on it happening as opposed to having to pull back on capital then relining back the capital depending on the broader price environment.

I think the way we think about it is at a point in time when we do that, if you do see a down cycle in the middle of that growth, long-term structural growth profile, you'll see us buying back stock during the pullback and curtailing volumes during the weak period, but not having to change our operational cadence. It's a totally different position than I think any other company is really in that has talked about growth to date, but that's because they don't have the attributes that we've built into our business to date. So again, when we do it, we will do it very intentionally. We'll do it with a lot of discipline with a long-term focus, but you're not going to see us come out and chase price signals.

Your next question comes from the line of Phillip Jungwirth with BMO Capital Markets.

It might be early, but can you update us on any discussions or plans this year around placing LNG offtake between Asia and Europe or securing regas and just how you purchase or looking at Henry Hub versus oil link deals beyond 2030? And just because you're having discussions with counterparties, are you surprised at all by international buyer motivation to own physical Henry Hub-linked gaps with recent M&A?

Yes. We -- our team has been super active on this front. It's actually been, I mean, really educational at the same time just building out those international relationships. I mean, the demand, I think, is a lot more real than what you read about. I think that market is very opaque. I think what you learn on a first-hand basis interacting with the marketing teams and the executives of some of these international businesses just gives you a different perspective on this. But I would say -- I'd just characterize it as I think that demand is a lot more real than people realize. I think there's a lot more demand for volumes, especially when LNG prices are not $20, they're, call it, $8 to $12.

I think you're going to see a lot of that gas picked up and it goes back a little bit to my -- what we said in our prepared remarks around just where European balances are right now despite all the gas added in the last couple of years, you're still looking at really low inventory levels. So I think that is -- I think that's indicative of just how that gap globally is being absorbed. But look, I'd say there's been a unique level of interest in our volumes and buying from a producer. When you look at the existing LNG players in the U.S., all of them is like liquefaction facilities are set up to be like short Henry Hub and the offtakers or short Henry Hub.

And when you work with EQT, you actually -- I mean, effectively like vertically integrate through the chain through that purchasing pipeline. What you're seeing with buyers coming to the U.S., it's not that -- for example, Asian buyers are coming in and wanting to grow a bunch of Haynesville volumes or East Texas volumes. It's just to own that physical molecule so they're not short anymore. So I wouldn't expect to see them chasing price signals either in the same way, but it is leading to just so much interest in our resource base. And I think there's been a lot of realization from both European really like super majors all the way to buyers across Asia that the Gulf Coast, in particular, the Haynesville is just super short inventory.

And if you're looking at securing physical molecules for 2030 and beyond, you just don't have it, right? And so it's like a mismatched maturity for the liability you have when you sign up for offtake. And so we're increasingly actually seeing a lot more interest in molecules coming out of Appalachia or the Permian. I think from our standpoint, that's really where long-term gas supply will come from to feed the LNG demand. It's not the Haynesville. And I think everyone is really starting to realize that internationally as well.

That's great. And then you guys have over 40 Bcf of gas storage, which came from Equitrans. I mean it doesn't get a lot of airtime and you're effectively managing the reservoir storage at times. But do you see value in adding storage further from the wellhead as part of a broader gas marketing strategy? And really just a quick one. Now that your own 53% of MVP with the bolt-on, are you planning to consolidate that venture?

Yes. Just high level on storage and how it fits into our strategy, and I'll let Jeremy expand on some of the details here. One of the biggest focuses that we see is going to be on the reliability of energy, and that simply means delivering volume that to the market when the market needs it at the level that the market needs it. So storage is going to be a big part of the focus. We're doing that right now with our strategic curtailment. That is a really big lever that we pull and we pulled that pretty consistently over the past couple of years. That's a really great tool for us. And we'll look for other tools out there that will enhance the reliability of the [ antigen ] that we produce at EQT.

Yes. I mean, look, it all comes down to returns for us just like these growth projects. We have storage capacity on the Gulf Coast already. In addition to the storage cabin Appalachia, really what the market needs though is don't necessarily storage in Appalachia. It needs salt storage along the Gulf Coast region to really help balance and buffer what I think of as like ground zero volatility over the long term, the seasonal swings in maintenance cycles of those LNG facilities just because it's so concentrated geographically. So it's something we're studying and spending more time thinking about.

I do think you have to, as an operator, I guess, much value as I think our team has and could squeeze out of a lot of storage capacity. If I'm an investor, that's a hard thing to model and understand. I think that's the type of cash flow that's going to get a pretty low multiple on it. So we're trying to be cognizant of that at the same time and make sure however we go about expressing a view of like long volatility through storage, whether it's an operator like we are today or someone leasing capacity, which we also do. We do it in a way that actually converts the value for shareholders. So it's an area we're spending more time, but it's probably one of also the greatest opportunities for infrastructure investment in the country right now and really the world overall, just to help make sure there is the buffer in the system.

Your next question comes from the line of Nitin Kumar with Mizuho.

Congrats on a great quarter. One follow-up on Arun's question around growth CapEx. I know sometimes in an integrated model, the spending on infrastructure can dilute the ROE, but your investments are very tied to your upstream portfolio. Have you -- is there a way for you to quantify what is your ROE on this growth CapEx or anticipated ROE on this growth CapEx?

On the infrastructure, we have for '26, we can look at a free cash flow yield like holistically, something between 20% and 30% across the projects is how I think about it. So typically, when you think of infrastructure, you think of returns lower than that. And I think part of this -- while these returns are so good are just investing within our operating footprint. And so those are the type of opportunities we're looking for organically on the infrastructure side. That being said, it pales in comparison to developing upstream Marcellus with a $3.50, $4 gas price. But we've got to be very thoughtful about that and make sure the demand is set up before any upstream volumes are brought in.

Yes. And Nitin, just remember, too, I mean we're focused on returns on shareholder capital. I think a lot of just classic upstream companies gets so focused on things like single-well IRRs, and that's just apples and oranges versus what creates stable annuity-like cash flow streams for investors that drive things like free cash flow and free cash flow yields. So when you think about it, if you're drilling a well, it gets you a 100% IRR to get a return on your enterprise value equal to your WACC, like that's generally kind of -- it's like a 10:1 sort of ratio. So if you want a 10% return, you probably need to -- on enterprise value, probably need something like 100% well return.

So companies are out there talking about like wellhead return breakeven, you're probably generating like a 1% return for shareholders relative to your WACC. That doesn't make any sense. I think it's just missed in the equation overall. When we think about it, you have to look at something like infrastructure cash flows, which are annuity-like in nature. All the capital we're putting in here is recurring cash flow that comes out of this over the long term. And if we're yielding, just call it, 10% on average on enterprise value, but we're investing in other annuity like cash flow projects at 20%, 30% cash flow yields that's driving real sustainable value uplift for shareholders even though that headline IRR is just -- is not the same.

Just to give you another example of that, like to earn the same multiple on your investment drilling a Marcellus well versus the Haynesville well, your Haynesville well needs double the IRR to get the same multiple of invested capital, right? You're not really creating value, but that hyperbolic decline really skews that calculation. And so again, for us, like we don't really focus on the IRR so much is apples and oranges. For us, it's really about what drives cash flow uplift to shareholders and how to do it durably. And that's really what's going to drive value over the long term. And look, when you step back and think about all the infrastructure investments we've made, even buying Equitrans when we did, it really comes down to that as like a foundational sort of insight we had years ago and also what kept us out of going into places like the Haynesville. But again, like a lot of people look at our stock and say, well, you trade at a higher multiple than peers. Well, we did a couple of years ago, we've outperformed virtually every peer since then, and we still trade at a similar level, right? So I think you have to parse this apart to really understand like where is value coming from and why?

Yes. I think you certainly approved the value of what you embarked on 2 years ago with the Equitrans acquisition. My follow-up, Jeremy, is on the balance sheet. You have some very impressive goals, which do seem achievable for balance sheet reduction, how do you think of the balance sheet beyond '26? Typically, it's seen as a buffer against volatility, but you've designed the organization to actually ride volatility a little bit better than peers. So how should we think about he balance sheet going forward?

Yes. I mean just consistent with what we've said in the past, Nitin, $5 billion we see is our long-term MAX debt level. I would expect our net debt level to fall below that I don't think you're -- again, as we've said for years now, I don't think you'll ever see us come out with a programmatic buyback. I think the way we think about it is while in theory in a spreadsheet, your return on cash sitting on the balance sheet is very low, it's hard to overemphasize how valuable that is on just the optionality of that in a very cyclical volatile industry. You've seen that, if you just look back the last 3 to 4 years, just how volatile in our equity has been.

I think beyond limiting the volatility in our equity by having low debt. I think being able to step in and be an opportunity rent when there's big pull back, whether it's related to natural gas or whether it's broader in just the macro environment, that's what we're trying to set up for. So I would expect net debt to fall. We're not afraid at all to hold several billion dollars of cash on the balance sheet opportunistically, and we've really been encouraged by our top shareholders to actually do that because they understand that just the nature of the cyclicality and when those options come they are tremendous. And it's really one of the best long-term things we can invest in, but you have to be patient.

Your next question comes from the line of Neal Dingmann with William Blair.

Toby, that's [indiscernible] again. Toby, my first question just on the '26 guide. It seems looking at that Slide 6, no question, your operational efficiencies continue to lead to production growth on less capital spend. So I'm just wondering are you seeing anything different for this year when you look at those '26 expectations? Or is the guide more just kind of being conservative given the bottle gas tape?

Yes. We're adding -- on a maintenance perspective, probably you get that extra $100 million, that's largely due to Olympus. So I mean there's some conservatism baked in here. We're taking the momentum that we've established operationally at '25 and so we're baselining that. Some of the opportunities we're going to be working on to improve that. There's a couple of small science tests that are coming out that could tweak some of our well design. I mean, as you know, we do invest in science. So there could be some opportunities on that front. .

On the water logistics side of things, we're going to continue to build that out. That will continue to bear fruit and give opportunities for us to streamline logistics and operational efficiencies going forward just for perspective, we pipe about 80% of our water right now. So that's the opportunity for us to continue to increase the logistics support on the completion side. And on the produced water side, we're only piping about 40% of our price water. So these investment in water systems, I think, are going to be value-add for years to come.

And then I'd say on the service side, we're going to be really aggressive in rebidding a lot of our services. It's -- I think there's some tools that we have from an AI perspective that would allow us to pinpoint some of those efforts. And we think there could be some opportunity for us to grind costs down probably low single digits on the procurement side. But we're not just focused in the field. We're also focused on the procurement of the backside too.

[indiscernible], one thing I'd add to that just on the upstream side. Yes, just on the upstream side of things, I think it's tangible evidence to this. There is some noise in our numbers year-over-year because we were so transactional in 2024 and then also with the midyear Olympus close in '25. If you really step back and think about it and get a level of efficiencies Toby's alluding to, that we also continue to expect going forward. We're producing about 6.3 Bcfe a day in 2024. We sold our non-op interest down to Equinor. That was about 600 a day, so we were at 5.7. We buy Olympus, you add about half of be back at 6.2 as a baseline.

The production forecast we've given for this year is about 6.4 Bcfe a day. So in effect, while we don't talk about it, we, through our operational improvements and efficiency gains have actually grown about 200 million a day over the past, call it, 2 years, I think that's being missed just due to the kind of the noise year-to-year. I do think that's important tangible evidence to just like the volumetric results of what we're doing they're easy to miss. So I'd take that into account. And again, like Toby said, I would expect that to continue.

Great. And then just very quickly, Telly, on the power projects opportunities going forward, do you anticipate those being structured any differently than Homer City now any of your previous deals, it seems you've got now more of a competitive advantage. I'm just wondering should we think about potentially further power deal structure any differently?

No, it will just depend on what services the specific site requires. I mean, gas supply across the board. And then the opportunity on the midstream side will be a unique factor on a case-by-case basis.

We have time for one more question, and that question comes from the line of Kevin MacCurdy with Pickering Energy Partners.

Great. And I'll just keep it to one question. Kind of coming back to the production growth, we noticed that the 2026 turning line count is higher year-over-year. And just curious on the cadence of those turning lines throughout the year? And does that level give you some flexibility or optionality to grow in 2027?

Yes. Right now, we're not -- we haven't tried to see up growth into 2027. I mean, to some degree, I think what you're seeing is just lumpiness as you would expect from a company our size when we're pursuing combo development. But this is not setting up for 2027 growth right now if we come out and intentionally mean to grow beyond what I'd call like the accidental growth of being -- just getting so much more efficient of the $200 a day I referenced in the prior response, we'll come out and say that, but we're not ready to pursue that. We don't think the market is ready for it yet.

And you alluded to combo development. Can you kind of expand a little bit on that?

Yes. I mean, combo development has been the core operational pivot that we instituted here when we took over 6 years ago, moving -- taking full advantage of our large-scale asset base moving from drilling, call it, 1 or 2 wells off the site. They're now drilling 6 to 10 wells off of a site and doing that across 3 or 4 sites sequentially. So we're developing 20, 30 wells at a time, that's been the change in operational efficiencies and the logistics that supports that. So that's a core part of our program that we'll continue to execute going forward.

Ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may now disconnect.

Good morning, and welcome to the EQT Third Quarter 2025 Quarterly Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Cameron Horwitz, Managing Director, Investor Relations and Strategy. Please go ahead.

Good morning, and thank you for joining our third quarter 2025 earnings results conference call. With me today are Toby 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'd 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, in our investor presentation, the Risk Factors section of our most recent Form 10-K and Form 10-Q and the subsequent filings we make with the SEC. We do not undertake any duty to update forward-looking statements. Today's call also contains certain non-GAAP financial measures. Please refer to our most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Toby.

Thanks, Cam, and good morning, everyone. Third quarter results built upon EQT's strong track record of operational and financial outperformance. Our performance this quarter resulted in $484 million of free cash flow attributable to EQT, which is net of $21 million of onetime costs associated with the Olympus transaction. We have now generated cumulative free cash flow attributable to EQT of more than $2.3 billion over the past 4 quarters with natural gas prices averaging just $3.25 per million Btu, highlighting the differentiated cash flow generation capabilities of EQT's low-cost integrated business model.

Production was near the high end of guidance despite price-related curtailments as we continue to benefit from robust well productivity and compression project outperformance. Our tactical approach to volume curtailments in response to volatile local pricing resulted in another quarter of significant price realization outperformance with our corporate differential coming in $0.12 tighter than the midpoint of guidance despite local basis widening after we provided Q3 guidance.

Operating costs were also lower than expected across the board, driving record low total cash cost per unit and underscoring ongoing benefits from water infrastructure investments and midstream cost optimization. Capital spending came in roughly $70 million below the midpoint of guidance, supported by further upstream efficiency gains and midstream optimization. Our team set multiple EQT and basin-wide records during the quarter, including our highest pumping hours ever in a month, our fastest quarterly completion pace on record and the most lateral footage drilled and completed in a 24-hour period. Simply put, our execution machine is firing on all cylinders.

Turning to our acquisition of Olympus Energy. We closed the transaction on July 1 and completed the full integration of all upstream and midstream operations in just 34 days. This marks the fastest operational transition in EQT's acquisition history. Our teams have already achieved significant operational improvements since taking control of the assets. An example of this is in the Deep Utica, where we drilled two wells during the third quarter at a pace that was nearly 30% faster than Olympus' historic performance, driving an estimated $2 million of per well cost savings. Deep Utica inventory represents significant long-term upside optionality on the Olympus assets, which we ascribed 0 value to in the purchase price.

Olympus' production also provides a significant supply source to feed the Homer City data center project that we announced last quarter, underscoring how assets can become more valuable once they are part of EQT's platform and our ability to unlock sustainable growth. Shifting to our growth project pipeline. We have made significant progress with the various in-basin power projects that we announced last quarter and are seeing additional opportunities to provide natural gas supply and infrastructure to service new load growth in Appalachia.

We also completed an exceptionally strong and oversubscribed open season on our MVP Boost expansion project. Demand far exceeded our initial expectations. And as a result, we collaborated with our vendors and partners to upsize the project by 20%, increasing capacity to over 600,000 [ dekatherms ] per day. Even with the additional capacity, the region's appetite for Appalachian natural gas remains greater than what we can currently provide, a clear signal of continued market strength and long-term demand growth.

The MVP Boost project is 100% underpinned by 20-year capacity reservation fee contracts with the leading Southeastern utilities, highlighting the depth and durability of these customer commitments. We estimate a 3x adjusted EBITDA build multiple for the expansion project, highlighting how strong the economics are for low-risk infrastructure investments in our midstream business. Once expanded by the Boost project, MVP will have a total capacity of 2.6 Bcf per day of gas, which is more than 1 Bcf per day greater than current flow rates on the MVP mainline due to downstream bottlenecks, which will be solved when the Transco Southbound and northbound expansion projects are completed in 2027 and 2028. This additional takeaway should come online at the same time that in-basin power demand is inflecting higher, which we expect will drive improvement in Appalachian pricing over the coming years. In fact, the futures market is already starting to take note with M2 bases futures in 2029 and 2030, tightening by more than $0.20 over the past few months.

In summary, our third quarter performance once again demonstrates the power of EQT's integrated model and our relentless drive for continuous improvement. From record-setting operational efficiency through seamless acquisition integration and advancement of strategic growth projects, all aspects of our business are performing at a high level. The strength and consistency of our results, even in a moderate gas price environment reflects the quality of our company, the durability of our low-cost structure and depth of our opportunity set. The foundation we've built at EQT is strong. Our strategy is working, and our future has never been brighter. I'll now turn the call over to Jeremy.

Thanks, Toby. Our strong financial results and free cash flow outperformance left our balance sheet in a stronger-than-expected position during the third quarter. Despite approximately $600 million of cash outflows from closing the Olympus transaction, the previously disclosed legal settlement and working capital impacts, our net debt balance ended the quarter just under $8 billion.

We continue to target a maximum of $5 billion of total debt, which is 3x unlevered free cash flow before strategic growth CapEx at a $2.75 natural gas price. With $19 billion of forecasted cumulative free cash flow attributable to EQT over the next 5 years at recent strip pricing, we have plenty of capacity to execute on our capital allocation priorities. Which include investing in high-return strategic growth projects, further deleveraging, steadily growing our base dividend and building cash to opportunistically buy back shares.

Last week, we increased our base dividend by 5% to $0.66 per share on an annualized basis as we begin returning permanent cost structure improvements and synergy capture to shareholders. Now that our credit ratings are stabilized, and we are on a glide path of further balance sheet strengthening. We have now grown our base dividend at an approximate 8% compound annual growth rate since 2022. This is a testament to our confidence in the sustainability of our business and a corporate free cash flow breakeven price that is among the lowest in North America. We will continue to look for ways to recycle structural cost savings into future growth. Ensuring that our base dividend is bulletproof through commodity cycles.

Turning to LNG. We signed offtake agreements with [ Cimpress Port Arthur next decades, Rio Grande and Commonwealth LNG ] beginning in the 2030 and 2031 time frame. These SPAs represent patient execution of the LNG strategy that we began formulating in 2022. We as we waited for the right time to gain exposure to high-quality facilities with geographic diversification, competitive pricing and favorable credit terms. We intentionally positioned our exposure to begin after the 2027 to 2029 window, which we have flagged for several years as a potential period of global oversupply. This oversupply should result in a trough period of new LNG FID activity and lower prices should stimulate new international demand, setting the stage for tightening fundamentals concurrent with the commencement of our contracts.

While we remain bullish on domestic demand growth, we believe that international growth will increase even faster, and it is important to have the right exposure in our portfolio to these markets. Our strategy of signing SPAs on tolling arrangements provide with less downside risk and greater upside optionality than netback deal structures. Our structures give us complete end market flexibility. Allowing us to provide tailor-made solutions to in-market customers globally with varying contract tenors and price benchmarks over the 20-year lives of these contracts. We are taking the same direct-to-customer approach to LNG that we have deployed domestically with utilities and data centers.

We expect to enter into sales agreements and regasification capacity covering a large portion of our LNG exposure in the coming years, leaving us with a geographically diversified portfolio of customers and pricing exposure.

Our recent discussions with international buyers give us confidence in the long-term LNG demand outlook and suggest the desire to contract with an integrated U.S.-based natural gas producer that can offer greater flexibility than legacy LNG suppliers due to their short exposure at Henry Hub.

It's worth noting that EQT is the second largest marketer of natural gas in the U.S., ahead of all upstream and midstream peers as well as the super majors. LNG marketing is a natural bolt-on to our existing capabilities, and we've been building our expertise over the past several years. While the U.S. market has significant demand tailwinds over the near and medium term, global growth in natural gas demand should far outpace the domestic market over the long term. We expect natural gas demand outside the U.S. to rise by 200 Bcf per day between now and 2050. And highlighting the tremendous opportunity for U.S. producers that can directly access international markets. However, that access will only be available to producers that have a combination of scale, low-cost structure, multiple decades of quality inventory and investment-grade balance sheet and strong environmental attributes, all of which are hallmarks of the differentiated platform we have built at EQT.

Turning to natural gas macro. We see a supportive setup emerging as we head into year-end with a tightening balance driven by factors, including surging LNG demand and slowing associated gas supply growth as crude oil prices weaken.

On the demand side, the U.S. is on track to exit 2025 with over 4 Bcf per day of incremental LNG demand compared to year-end 2024, the largest annual increase since the U.S. began exporting LNG almost 10 years ago. The start-up of Golden Pass and continued ramp-up of the Corpus Christi Stage 3 expansion are expected to add another 2.5 to 3 Bcf per day of demand by year-end 2026, providing a further tailwind for U.S. natural gas prices.

Looking ahead to winter weather, several major forecasters are calling for one of the coldest winners in over a decade as early indications suggest a transition from El Nino to a moderate lamina phase. This transition tends to produce below normal temperatures across key U.S. consuming regions, including the Midwest and Northeast. A return to sustained cold could drive a meaningful rebound in residential and commercial heating demand tightening inventories and accelerating the drawdown pace by late Q1.

Finally, on the supply side, we anticipate flat associated gas volumes through the first half of 2026. The rig reductions in capital discipline we've seen across major oil basins this year are beginning to translate into lower associated gas growth, particularly from the Permian. Should Brent and WTI prices remain in the 50s as OPEC increases production and geopolitical tensions in the Middle East ease, oil prices could approach breakeven economics for many producers and further discourage incremental oil activity. Together, these trends point to a tighter supply picture emerging into 2026 and 2027, supporting a more durable recovery in U.S. gas prices.

In sum, the U.S. gas market is entering a critical inflection point. rapidly growing LNG demand and slowing associated gas production going to a constructive setup in 2026, which could be bolstered further should a cold winter manifest. That said, we remain vigilant over the medium term due to the wave of new Permian pipeline scheduled to be completed by the end of 2026 and an increasing risk of LNG oversupply later this decade, which we believe could temporarily back up gas supply into U.S. storage and set up another short down cycle.

Wrapping up, I want to point out a couple of items on our updated guidance and provide a few thoughts as we think ahead to 2026. Our fourth quarter production and operating expense guidance includes the impact of 15 to 20 Bcfe of strategic curtailments during October as our teams continue to optimize around in-basin pricing volatility.

Additionally, recent IRS guidance suggests that we will not be subject to AMT in 2025, and thus, we now expect to pay minimal cash taxes this year, which will save nearly $100 million relative to our prior forecast.

Looking ahead to 2026, we expect to maintain production volumes at a level consistent with our 2025 exit rate. We expect maintenance CapEx in line with 2025 plus the full year impact of the Olympus acquisition. As our compression projects are completed and base decline shallow, we expect maintenance CapEx to decline towards $2 billion later this decade.

As we highlighted last quarter, we have an expanding backlog of high-return infrastructure growth projects, which will unlock sustainable growth for our upstream business. We are excited to allocate the first dollars of our free cash flow after maintenance CapEx and to these opportunities, which we believe will create more long-term shareholder value than any other reinvestment opportunity available to us today.

Our total capital spend in the years ahead will be based on the quality of the investment opportunity set in a given year, and we hope to continue sourcing opportunities and unlocking differentiated value across our integrated platform. Our pipeline of projects provides a low-risk, high-return reinvestment opportunity that is unique to EQT, allowing us to drive sustainable cash flow per share growth and compound capital for shareholders for years to come. And with that, I'd like to open the call to questions.

[Operator Instructions] Our first question will come from Arun Jayaram from JPMorgan.

Jeremy, Toby, I was wondering if maybe you could start with the open season and talk about some of the key demand takeaways that you saw from the utilities during that process?

Yes, Arun, I think it's really interesting just to look at the -- what took place with compared to what took place with this MVP boost. I mean I think the most significant signal is the fact that to get project going. It required a producer, EQT to sign up for over 60% of the capacity to make sure that volumes were spoken for to get that pipeline built. .

In contrast with MVP Boost, 100% of the shipping capacity is taken by the utilities. It just represents the fact that we're in a pole environment and should not be surprising just given the tremendous amount of demand that we're all seeing -- we're seeing that show up in our projects with utilities.

Great. And then maybe just a follow-up. Jeremy, you provided some soft 2026 outlook commentary. I guess one question is how are you thinking about strategic midstream capital in '26 and over the next -- maybe through 28, do you have any visibility on those -- on that spending in the midstream bucket?

Yes. Arun, we're still working through that. We're not going to give any specific guidance on that today. But I would say it's going to be something at our discretion based on the quality of projects. We certainly don't need to spend any of it if we don't want to. But I think when we look at the full cycle returns, both on those projects, but also the demand it unlocks for our product from our upstream business. the holistic return is so attractive and allows us to grow in a really differentiated way. We're going to be pretty disciplined about how we invest in those, but we also recognize it's a key differentiator for EQT to be able to bring those online. So we're going to keep it in balance. But we're continuing to see that opportunity set grow, which is pretty exciting.

Our next question comes from Devin McDermott from Morgan Stanley.

I wanted to start on the commercial side that's already been a big year for you guys on the commercial solidifying some of the power opportunity. I think Toby, you mentioned in your prepared remarks that you're seeing additional opportunities still here. And I believe you just headlines since the last call, I think there was another large data center site van project in Greene County, Pennsylvania that actually did call out a new supply contract with EQT. So I'm not sure if you can comment on that, but maybe broadly, the kind of trends you're seeing on incremental opportunities, any updated thoughts on price structure and how this all fits into your views on in-basin demand growth through decade end?

Yes, so we have a robust opportunity pipeline. I mean what we've announced to date has been pretty large. Our midstream growth teams is working multiple opportunities I expect us to have more announcements in the future, can't say when. But I'll tell you this, I mean, the focus still is on scale and speed. That has been the factor. So as these projects are still trying to get as large as they can, figuring out exactly what they need once schedules get put in -- that baseline gets put in place, then people will be working on moving things to the lab.

As far as structuring on gas prices here I think on that Robina site, specifically, you talked about some structure and gas prices we talked about. We think that entering into conversations about structure on pricing, like specifically getting into more fixed nature is an opportunity down the road, but the focus right now is on the scale and the speed. But I do anticipate once the dust settles, that will be a great optimization opportunity for these hyperscalers to solidify that a part of their cost structure, and we'd be open to having those conversations. All of this would be a tool for us to continue to bring more durability to the cash flows at EQT. So it's a good strategic fit for us.

Got it. Makes a lot of sense. And then sticking with the commercial side, but shifting over to LNG is an active quarter for LNG deals for you all. I mean Jeremy, maybe could you comment on what you've done so far kind of solidifies your strategic goal of diversifying price exposure and giving some direct access to international markets? And then a little bit more clarity on how you think about terming this out and the evolution of your direct-to-customer sales strategy as you place these volumes over time?

Yes, absolutely. So look, we've been talking about LNG as a company for several years now. And we've been laying the groundwork in terms of team and expertise in negotiating with a lot of projects for that duration of time. we've been very intentional about the time of these projects coming online. If you look back at our prior commentary over the last couple of years, we've been pretty eyes wide open about what we think will be a relatively well-supplied LNG market between, call it, 2027, 2029, so we've intentionally tried to partner with and take capacity out on projects that come online after that window. That's one of the reasons we've been so patient. But it's not only that. It's getting the right credit terms making sure the right EPC is building these contracts, you have the right financial sponsor behind the facility itself.

We think we got that with all of these facilities. We think they're really some of the best really along the Gulf Coast. I think with what we signed up for today, our bucket is full now. We moved really swiftly once we saw that opportunity come up. I wouldn't anticipate we sign anything else near term. And our focus really going forward is getting our team fully built out, finishing the build out of our systems, which we've been working on for really about a year now on the LNG side. And then working on those long-term sale agreements with customers around the world, and we're having a lot of really productive conversations there, seeing a lot of good traction in those discussions, and it's going to give us a lot of flexibility to diversify that exposure around different markets in the world. while giving us that direct-to-customer model that we've been talking about and developing domestically. So it's going according to plan, and we're really excited about the momentum.

Next question comes from Doug Leggate from Wolfe Research.

Thanks for having me on. I guess, Toby or Jeremy, whoever wants to take this. My first question is on marketing because obviously, you guys had a phenomenal quarter in terms of marketing optimization. I'm trying to understand is, is this kind of a new normal for you guys? And I wonder if I could bolt on to that. When you pivot into LNG, I mean, guys like Shell or your competition on this. Give us some color. I know it's some way off, but give us some color as to how you're confident on how that domestic gas marketing translates to a successful international marketing business? That's my first one. And my follow-up very quickly, Jeremy. You mentioned buybacks again, you know what I'm going with this. We're heading into a much more volatile gas price environment one suspects I think you've acknowledged that yourself. Where is the priority on the net debt balance sheet sit versus the priority for getting back to buybacks. And I'll leave it there.

All right. I count that as three questions, Doug. Yes. Let me just state, I think one of the things coming into this year, we were most excited about at this company is seeing Jeremy really spend a lot more time and attention on the commercial front. And I think you're seeing the results of that. So we'll save the comments on marketing for him. But as it relates to just our positioning on the LNG marketplace, we think that we're going to be very competitive in this space. We've got the scale to be able to be meaningful here. I mean, just to give you some perspective, some of these customers with us being able to deliver up to over 800 million cubic feet of gas a day in LNG form. We are relevant. We've been networking in the LNG space for years now. You all remember the unleased U.S. LNG campaign, we've been part of the global conversation about energy. We've made a ton of contacts and had a lot of meetings with energy leaders around the world. And now as we've solidified our offtake agreements. Those conversations are now advancing and we're excited about keeping people up to speed with how that portfolio shapes up over time.

Yes. Doug, I'll hop in on the other part of your question, too, on marketing. Look, I think we're in the early innings of the potential of the team here. We have the right leadership in place. We're redeveloping some systems internally. It's giving a lot of visibility to the team of -- I mean our total trading team size today is about 45 people. So they're getting really dialed in, taking advantage of a lot of great opportunities. I mean even stuff we've done in the past week and the amount of money we're making doing that's really exciting to watch. I would correlate the performance of that team with volatility.

So for example, winter volatility and like winter fall shoulder season volatility, I think you'll see the most benefit in realizations relative to where you would just assume basis shapes out first to month as the team optimizes around what we're seeing in the daily markets and capturing those spreads. And again, as you and I have talked about the more volatility we see develop in the markets over the coming years, the more profitable that business will become I expect it to be pretty consistent. It's not trading so much in a speculative sense. It's really just optimization very proactively in the markets. So I hope it becomes something that is more and more consistent. But again, I think we're in the early innings of the potential that, that team has.

And then your final question as it relates to balance sheet, capital allocation. Look, as we said in the prepared remarks, we see $5 billion as our maximum total debt level going forward. We don't really have a view that when you look at valuation in the industry today that companies get any benefit from having much debt on the balance sheet. In fact, I would argue there's really a ding in valuation that comes from that. So we're very focused on converting that liability into equity value and reducing that equity volatility. And at the same time, what that does is it opens up the optionality for us to take aggressive and decisive action when you see pullbacks in our stock price.

Just look at what our stock has done over the course of this year. I mean, we've traded between the DeepSeek pullback, Liberation Day, what's happened over the summer, between a range of like $45 and $60 a share, there's a lot of really great opportunities for us to step in and buy the stock once we have the capacity to do so. So that's what we intend to do as we go about executing that buyback once we have the capacity to do it. And I think a core tenet of our strategy is having low leverage and being able to act with conviction during down cycles and pullbacks like that. And we think over the long term, that creates the most value for shareholders.

Our next question comes from Betty Jiang from Barclays.

Good morning, team. I wanted to ask about the growth capital and how you guys thinking about allocation of capital there. Jeremy, you mentioned earlier that you're looking at full cycle returns and not just the midstream but the demand unlock for the upstream business. So can you just expand on how you assess the value of these opportunities? And is the flow-through to upstream benefits coming from pricing uplift or volume growth? And is that like -- and are you looking at opportunities above and beyond the $1 billion investment identified last year -- sorry, last quarter?

Yes. Great question. So whether it's LNG or whether it's power, our teams have done a lot of work over the last couple of years to understand where along that value chain, a lot of the value is accruing to. And I think the one thing that really jumps out to us is that the most value really comes back to being able to grow sustainably our base volumes and ideally into premium markets or premium contracts. And so what we're trying to do is use our midstream business to connect our upstream production to those markets and opportunities where you have a really good low-risk return which is a foundation for then allowing us to steadily and methodically increase our base upstream business by increasing volumes into that over time when the market needs it.

So that's in essence what we're trying to do, just create this virtuous cycle sort of a flywheel effect there. But I would argue the majority of that long-term value uplift comes from unlocking are multiple decades of upstream high-quality inventory and being able to pull that forward. But again, doing it in a sustainable way. So that is really what we're trying to unlock through those opportunities. And yes, I would say that growth pipeline, specifically on the midstream side, which is what then unlocks the upstream side. That continues to grow. We're working a number of really high-quality opportunities right now. We're not ready to talk about them yet, but we're trying to increase the number of shots on goal to see what shakes loose and continue to increase that optionality in the amount of value we can create by growing the business in the years ahead.

Got it. That's helpful. And then my follow-up is actually on the MVP boost. Just talking about that flywheel effect. You got the utilities signing up for the pipe FT, but do you see opportunity to sign separate sales agreement on the upstream side for you guys to lock in premium pricing similar to what you have done in the past?

Yes. Look, we'll see where those negotiations go. But if you think about where MVP connects to, it's really fed by our pipeline systems in Appalachia upstream. So I think there's opportunity both on further pipeline expansions upstream as well as sales deals. So I think this is set in the stage for that next stage of negotiations for our business holistically.

Our next question comes from Josh Silverstein from UBS.

Just on the Energy side, you had highlighted the $40 million to $50 million cash flow breakeven on pricing there. I was curious, could you not get the spread with the tolling agreement versus an offtake agreement? And maybe the suggestion is tolling agreements are more like a $5 to $7 range and so the cash flow breakeven there would be much higher. I was curious about that.

Yes. Good question. Just to give us a chance to clarify this. So economically, they're I mean, virtually the exact same. I would argue that the spread is the same needed to break even on the contracts. The difference in tolling is that we are responsible for delivering the physical molecules to the facility. So in that case, we need to take out additional FT and probably take out storage capacity nearby just to help us balancing with an offtake agreement, we don't have to worry about any of that. So it just makes it a bit more of a pure expression on the international spread in diversifying into that pricing market.

But that's why -- look, we're open to both. I think something like tolling we're more open-minded about in the on the Texas coast market just because you have so much long-term Permian supply. I think as you move towards Louisiana, our appetite for offtake increases because we do have concerns about long-term just gas supply in the region because you have so much demand pool relative to a Haynesville play, which is pretty short inventory at this point. So we're trying to sort of match contract structure with where we see the risk long term to make sure we have the best exposure for EQT. But I would say in both situations, whether it's the tolling agreement we have at Texas LNG, which again is on the Texas Coast side. versus something more like Commonwealth on the Louisiana side, the spreads we need to breakeven are virtually the same.

Got it. And then you had highlighted tighter Appalachia pricing a few years out from now. given that you see this -- and that you have the ability to further ramp supply into that market, how do you think about your consolidation strategy in the basin as part of this? You've obviously had a lot of integration success with recent transactions and that could provide a further uplift to you guys beyond tightening dips. So I was just curious how you're thinking about that going forward.

Yes, I'll make a comment or soon basis and let Toby talk about future strategic moves. I would encourage you to look at what has happened to M2 basis if you look at like CAL '29, 2030, that is tightened by, call it, $0.30. I mean you're trading in the 60s now over the past 6 months. It's been a material move in response to these demand projects getting built, discussion of new pipeline capacity out of basin. So I think you're already seeing the impact of that effectively around the time frame and beyond after these projects come into service. That is accruing entirely to the value of our asset base. in a way that's not been factored in historically and is not really factored into our forecast today. So that tailwind is already in full effect, and we hope continues.

Yes. And as it relates to acquisitions and strategically expanding what is a pretty remarkable story that we have right here. I think you got to start with the remarkable story that we've created. Strategically, when we look at what we're doing, I mean it's very simple getting access to the best markets and supplying the best energy. With our asset base we have right now, we've got a lot of runway across all of those fronts that we can do organically. So it's easy for us to stay disciplined here, but there are -- I think we're seeing the opportunities of scale. You're seeing that with our capture of these data center demand opportunities within our footprint. You're seeing the scale coming from our more robust trading platform that we're leveraging. You're seeing scale -- you're seeing the benefits of scale with our operations teams, the number of reps that they're getting they're exceeding execution capabilities on the operational front.

So I mean, there's wins across the board from this company firing all cylinders. So you can look and see the opportunity for us to replicate that in other assets. But we'll continue to make sure we make the best decisions and stay disciplined to value creation with what we have now.

Our next question comes from Neil Mehta from Goldman Sachs.

I just wanted to talk a little bit more about the 4Q outlook here. And you elected to take some curtailment in the quarter. And so I just talk about what the mechanism or what would the trigger to lower that near-term production is and what you're looking to bring some of that supply back on? And then any comments around CapEx as well, where -- it did come in a little bit hotter than we expected in the quarter, but I think some of that just probably reflected timing.

Yes. Great questions. So first of all, on curtailment. So we went into the quarter assuming we baseload Bcf a day curtailments. When you look at where pricing was a week ago, $1.50, we were effectively fully curtailed where we sit today with pricing in basin, at call it 250, we're fully online. So we have been very tactical about shifting production on and off in response to this. That is also what drives, in many ways, our improved realizations that you saw in Q3 and hopefully in Q4 as well. So we're very responsive to market conditions and making sure we're a reliable supplier.

As it relates to CapEx in Q4, I mean, look, there's just some lumpiness in there to some degree. But you're also approaching the end of the year where typically, when there are dollars that have been allocated, we and we have, call it, 2 to 3 months left in the year. We typically don't trim those back. We believe the option open for teams to spend that and finish up projects for the year. Some of that might not get spent or might get pushed, but we've left it in the budget for now. So look, there is a chance for being conservative, but we feel good about the guidance we've given and hope to consistently beat that.

The follow-up is just around 2027. And I know, Jeremy, you've been very consistent in your view that LNG markets could flip the U.S. gas market oversupply potentially as well if there's any backup as well. So I know you're leaving 26 more open, and that's been a really good call as the curve has strengthened up. But does this make you want to be more aggressive around hedging '27 now that the '27 curve rally as well?

Look, we're going to -- all options are open. Again, our approach to hedging is to be opportunistic and tactical right now. We don't have a specific plan in place, but we're watching the markets as always. And we continue to be patient. And look, I think what we're doing with actual price realizations and optimizing how every physical molecule is sold right now also should continue to provide a big uplift there. And again, the more volatility that we see, the more we can optimize. So we'll see. And if we decide to add some hedges, you'll see it in our quarterly results. But right now, we remain pretty bullish over the near term. .

Our next question comes from Kalei Akamine from Bank of America.

I want to come back to 2026. There has obviously been some portfolio changes over the last 12 months with Northeast not upcoming out, Olympus coming in, strategic curtailments here in 4Q. So that's quite a few moving parts. And I appreciate the call out for maintenance CapEx, but for clarity, can we also get your view on maintenance production.

Yes, Kalei, good question. We expect next year to be approximately flat to where we are exiting 2025, so you could extrapolate forward our Q4 guidance adjusted for the curtailments.

Got it. I appreciate that. Next, I want to ask on data centers. So Homer City and Shipping 4 were obviously big wins, and there's more in development, and there's some attention on Ohio. Some would say that you don't have the same presence in Ohio as you do in Southwest PA. And therefore, those projects might be out of reach. But you guys do have FT and the ability to build lateral pipelines. So I'm wondering if that expands our range for those kind of sales agreements.

Yes, I think you're exactly right. We look at these opportunities that come to EQT sort of across three different tiers, our upstream footprint across our midstream footprint, the 3,000 miles of pipeline network that we have. And then also looking at opportunities across our commercial footprint, which factors into all the pipelines that we have, selling gas anywhere east of the Mississippi, which includes Ohio opportunities. So we're engaged in conversations on that now that I think the biggest focus has been around our midstream footprint, but we are having conversations around the commercial footprint as well.

Toby, a while back, you guys called out several smaller projects on the XL midstream system, Ferti Connector, OakGate and the purpose was to get more gas over to Rex from West Virginia. Just what's the latest on those projects?

So on Clarington, that's a project that we're planning on putting in place in the next -- 2026 budget. So hopefully, we'll have -- we'll do a little bit of spend here in '25 and then that will be bigger in '26, so that will get completed. Our Midstream team is going to continue to look inside the operational footprint we have to look for ways to continue to debottleneck the system. I mean when you look at where we're optimizing the energy systems, what started with the sites has now evolved to the gas systems and now obviously with FT and debottlenecking some of those points like this Clarington Connector we'll continue to look for more of those opportunities because those will be really great, high rate of return, low capital type projects. .

Next question comes from Phillip Jungwirth from BMO Capital Markets.

With the very successful open season for MVP Boost, wondering if you could give us an update on MVP Southgate here. And whether the changes in the marketplace, greater pull on gas demand, more favorable permit regime, provide any reason to maybe revisit the projects goal.

Yes. So Southgate, I think the results of MVP Boost specifically, the fact that we're seeing a strong pull environment gives us more excitement over the future potential of Southgate and the opportunity to potentially expand that pipeline system in the future. But when you look at this region here, I mean, there are some big things that are happening. Obviously, the customers are demanding more gas supply into this area. You see what happened in this region, this last winter with MVP flowing above max rate. So the demand is there. MVP Boost oversubscribed. And then on a federal level, you're seeing the drive for more reliable, lower-cost energy systems. So I mean, I think all the factors are there. So we're going to be looking at ways to optimize just like we did and taking advantage of upsizing the MVP Boost project by increasing that by over 20%. So we're studying that right now, we'll report back. .

Yes. I would just say for the sake of clarity, though, I mean, we're moving ahead on Southgate. I mean, that's a project that we are counting on happening. And I think the -- as Toby said, the Boost open season, I think, just further underscores how important that is. And there is I would expect there to be overlap in customers there as well. So it's just further highlights how much that gas is needed in that region.

Okay. Great. And then you guys had talked about an LNG strategy for a couple of years now, really, that only recently had announced some numerous agreements. Just wondering if you could talk about how offtake terms have evolved maybe before and after the export pause? And are you generally seeing a lot more favorable deals and structures than you would have a couple of years ago if you had signed up some of these arrangements.

Yes. Look, I think the one thing that held us back in a major way were some of the credit conditions that we were going to have to sign up for with some of these projects in the past. And it was very much a seller's market, where if you wanted to be an offtaker or have tolling capacity, it was very difficult to get it on terms that we were comfortable with. As you saw that LNG pause get released, and a lot of these projects move rapidly towards FID. In our mind, it shifted to be more of a buyer's market shifting in the favor of the likes of EQT. And so that's why we try to move pretty quickly in response to this.

We also have a view that the contracts of this quality at this cost, the LNG build out, it kind of happens in waves, and so once you get beyond this wave, if you do see a period of oversupply, that will probably put a chill on new FIDs for a couple of years. That next wave that comes up, I would expect the pricing on those projects to probably increase another level as well. So what we're trying to do is get in at the tail end of this wave, capacity comes online post any sort of risk of LNG glut. We have the right credit terms, the right and the right partners on the LNG facilities. And then I think we will be structurally advantaged long term as the cost of building equipment and facilities like this inevitably just goes up over time. So that -- I mean, there's a culmination of factors leading to why we made the decisions we did at the time we did. But we -- again, we feel really good about just the totality of the terms we've got.

Our next question comes from Bob Brackett from Bernstein Research.

You guys highlight that you're the #2 gas marketer in the U.S. If you look at your peers, they use that scale and that market insight to extend into gas trading, gas storage, even power marketing, there's a lot of adjacencies. What's your appetite to explore some of those adjacencies? And maybe what time frame?

Yes. Look, we're not looking to get into like speculative trading and things away from our base business. We're looking at optimizing the value of our production. So again, we're sticking to our knitting and where we really have an edge. That's why we're able to produce the results we did and realized pricing this quarter as an example. As it relates to LNG too, because there's been a lot of questions around the overlap between that business and LNG, where you have a lot of big players like Shell internationally.

In our view, you need to have a minimum of about 4 mtpa of LNG capacity on the water to where you can really start to optimize and be a real player and be competitive. That's part of what also held us back signing in the past is we didn't think that the cost structure and the balance sheet and everything else was lined up with an EQT with enough scale to be able to do that. We thought we might be overextending ourselves by doing it. So we are very patient until we could get to the point we could sign up for at least four. But we do think there's a lot of synergies between the two. And I think the discussions we've been having with international buyers of gas are proving that out.

Yes. And I would just say when we think about just strategically what we're trying to do with the best energy, making it cheaper, making it more reliable, making it cleaner. We've spent a lot of time focusing on making our energy more affordable lowering the cost structure of this business. That's been a huge focus. We focused a lot of making energy cleaner all the work we've done to become the first company of scale to achieve net zero Scope 1 and 2 emissions. And on the -- I think now you're seeing a little bit more focus for us on the reliability of the energy that we produce. And that simply put is just making sure the market gets the energy when it needs it and trading will be a big function there. And it's a part of the story here that we're spending a little bit more time improving the reliability of the energy systems we develop and work in.

Our next question comes from Sam Margolin from Wells Fargo.

A question on commercial, and it kind of relates back to an earlier comment Toby made. One of the things that turbine manufacturers are talking about is a shift in customer mix. and data center customers, hyperscalers directly ordering turbines. And I wonder if that's catalyst to change pricing structure around gas supply deals. Utilities are comfortable with variable pricing, maybe the hyperscalers directly would prefer something a little more bracketed or stable. I just -- maybe if you could elaborate on that comment you made earlier, that would be great.

Yes. What we're seeing on the turbine side of things is we're actually seeing some opportunities for turbines that have been put on order locked up that are actually looking for homes. Hyperscalers, I think, are going to be looking to relieve whatever constraints that they're facing for them getting into actually developing the power themselves. Would be an interesting move for them. I wouldn't put it past just given the cost, but that is outside the area of expertise. I mean our perspective is that if hyperscalers had it their way, they'd be able to sign up and just pay and pay a rate for every kilowatt that they use and keep it very simple because they've got so many other bigger things to focus on. But in the spirit of simplifying the story for them, yes, I think that could create opportunities for EQT and creating more structure on pricing, increasing the durability of our cash flow. So we're certainly willing to entertain those conversations.

Yes. I think from what I've heard in the market, whether it's -- and I know Amazon has done a little bit of this Meta might have. Some of these big facilities, specifically down along like the Louisiana, Mississippi corridor. There's -- you have to order a lot of this equipment multiple years ahead of time, and it's very costly. Utilities are not in the business of speculating like that. And so whether it's done through like a PPA offtake or whether it's one of the hyperscalers stepping in and making the order basically guaranteeing the cost. I think that kind of has to happen for these mega projects.

So I wouldn't say that means the hyperscaler is building or owning the power themselves. I think it's more so inherently providing the credit support one way or the other for what are very large capital expenditures. But again, it really just speaks to the demand for power and the necessity for all the stuff to get built as quick as possible. So it's all positive either, right?

Got it. And then just on the marketing side, you pointed out that on the curves, dips are tightening. And I guess, in the past, that might have compelled you to hedge basis if not the flat price. And I guess the question is like with the evolution of this marketing team and the success it had should we expect basis hedging to really be reduced and deemphasized just given what your capabilities are now?

Yes. In the past, I mean, we never provide a lot of clear disclosure on what we do in basis just because we don't want to influence the markets in any indirect way. But we, in the background, have usually hedged up to about 90% of our in-basin sales just to provide that stability. We are not doing that anymore. We will hedge basis and we do have some basis hedged, but it will be likely far less than that in 2026 and beyond just due to those dynamics.

And if you think about it, we can also effectively hedge basis by just shutting gas in. And that is kind of a new paradigm shift in the ability to coordinate between our traders, our production control center, midstream control center and make sure we're not just selling gas at the price that doesn't make sense when you can shut in for a month and sell it into winter, then provide that reliability during the winter months when you can surge above your baseline of production capacity.

So it is an evolution for us, but the need to hedge basis to protect that downside is just not there in the same way and instead, we're turning it from like a defensive strategy to more of an opportunistic proactive strategy through what we're doing with curtailments.

Our next question comes from Scott Hanold from RBC.

Yes. On MVP Boost and potentially Southgate, can you talk about -- do you expect that EQT will be the supplier for those pull volumes? And if so, how do you think about where you source that? Is it pulling it from in-basin Appalachia? Or would you grow into that? And just give us a sense of if it's a grow option kind of the time frame at which that starts?

Yes. Great question. So MVP, again, pulls off EQT Systems and comes out of the Mobley plant. So I would expect it to be at least majority EQT volumes, that's not all of it. And that provides us the opportunity to grow. We are not committing to growing to fill that yet. We have to ultimately see how the markets balance out. But whether it's the data center projects or whether it's more egress out of basin, what that is doing is teeing up the opportunity for us to grow with confidence and do so in a sustainable way.

Yes, to quantify that, from where MVP's flowing today through end of Boost coming online, that we see over a Bcf a day of greater takeaway from the MVP complex and you pair that up with another 1.5 bin a day of data center demand to a pretty attractive demand set up.

Yes. That's right. Okay. And then real quickly, you talked that you feel you're good with the LNG offtake right now, which I think is circa 10% of your production. And you've obviously done some of these power deals. Can you talk a little bit about like industrial types of deals? Have you seen any interest in there? And how much are you willing to allocate towards those initiatives?

Yes. I mean, look, we're seeing opportunities across the board. I think our sort of reinvigorated commodities team and our gas origination efforts are turning up a ton of opportunities, whether that ultimately manifests in a midstream deal or a supply deal we're open-minded about both. We're trying to be a sort of one-stop shop solution for gas supply. But we're -- look, we're pretty flexible and open lined about it. .

Our next question comes from Jacob Roberts from Tudor Pickering, Holt & Company.

On LNG, you've laid out some thoughts on demand through 2050. And Jeremy, you touched on this a few questions ago, but we were curious if you could comment on global supply over that time frame. And maybe more specifically, your assumptions on the cyclicality of the global LNG market over the contract pipe with respect to the outcomes on Slide 12.

Yes. Great question. So what's interesting when a lot of people are focused on the risk of LNG oversupply right now. And I think rightly so, it is a short window where I think that is at risk. But just say, haircut our assumptions in half if you want to, right, the amount of new LNG that has to get built to serve that market means that, that spread needs to be in excess of 450 at a minimum, to justify new projects getting built. And as the cost of those projects goes up in time with inflation, that just means that spread has to widen out. So that spread has to structurally stay wide as long as you do have additional demand growth. Otherwise, the demand growth cannot be served.

So that's why like structurally, we're really bullish on that set up long term. ultimately, it just comes down to what that export arb incentive is for new projects to get built, though, and ultimately a question of where does the gas come from. We think the U.S. is advantaged in many ways, whether it's gas from Appalachia or gas from the Permian that really will be the biggest source of demand over the next 2 decades. We are certainly bullish the domestic opportunity. But when you think about the, call it, 20 Bs of growth we could see from domestic demand, not including LNG over that time period, we think that global market is going to dwarf even what that -- what a really bullish domestic outlook will be. And that's why we're so excited about getting into that LNG market even in a small way because even a small increase in that export ARB can have meaningful impacts on our profitability and realized pricing. So it's a really good way for us to extend our exposure and further improve the profitability of EQT over the long term.

Great. And then a quick follow-up. On the Olympus results, the two deep Utica wells you point to in the presentation, would you classify those as having met the EQT standard in terms of efficiencies and cost? And then how are those results shaping thoughts about development going forward?

Yes. I would classify that as early innings for us. I mean we have not got a ton of reps on deep Utica. So it's really encouraging to see the teams come out the gate and cut drilling times by over 30%, shave $2 million per well. In that area, we've got a pretty hefty amount of acreage, hundreds of potential sticks. So that's a starting point is the way we'd look at it. Where we're going to get to is going to be where we're at with Marcellus relative to peers, and that's going to be peer-leading setting operational records, both on the CapEx side and peer-leading LOE. I think the table is set. We just need to get some more reps. And it's something that will sprinkle and give the teams the opportunity to lightly touch and prove themselves over time. But in the meantime, the core story is going to be continuing on the success that we've had with our core Marcellus in Pennsylvania and West Virginia.

Our next question comes from Bert Dunes from William Blair.

I'll keep pretty short. I just want to follow up on the potential for the data center fixed gas price agreements. It sounds like your view is that the structure might ultimately fit better for both parties involved. But is there also a discussion to potentially take some equity in a power project? Or is that not even on the table?

Yes. Right now, I mean, our strategy is the same when it comes to vertical integration, whether it's LNG or power plants. We're taking a very capital-light approach towards creating value in these arenas. The infrastructure continues to get funded by others, returns to not compete with our core business, and we're able to access the value potential of these arenas without taking the equity stake. So that's the situation right now. We'll continue to be capital light, but those are the factors that we're watching that drives our decision.

Perfect. That makes sense. And then on the same topic, at a time, there was an idea that maybe a consortium of smaller E&Ps to potentially piece together a power deal. Is that no longer the case, you really need the midstream side of things in order to sign these deals? Or is there room for maybe smaller projects to work that way?

I mean, every project that we look at that the projects are only getting bigger. I mean if we were in a situation where 50-megawatt data centers make sense, I guess you could say that would be an opportunity. We're talking about gigawatts, multiple gigawatts at a time. You're going to need large-scale mean 1.5 Bcf a day is a tremendous amount of natural gas. EQT is unique in the sense that we can say we've already got that gas flowing above ground in local markets, so we could just allocate that to you when you're ready. The credit requirements here, again, investment-grade balance sheets matter. That's something that's not available to smaller peers. So I look at this as sort of a big player opportunity, and it's a big responsibility for EQT to make sure that we get our tech customers all the energy they can.

Yes. I would also just add that I think one of the biggest obstacles to getting all these data centers specifically built out is you have too many parties already involved when you think about the needs for a $80 billion, $100 billion project. adding more chefs in the kitchen doesn't improve efficiency. I think one of our edges at EQT is really simplifying this and being a one-stop shop. So I think a strategy like that would actually be moving the wrong direction and make it even more challenging to get something done. And it doesn't solve the credit quality either. So I don't think that really holds water.

Our last question today will come from David Deckelbaum from TD Cowen.

I did want to just ask on the margin. You guys have seen some outsized performance on the well productivity side, but we've seen like we've seen an increase in liquids recovery. Is that happening from benefits on the midstream side? Or is that something that's more geologically driven, perhaps if you could speak to that going into next year?

Yes. I think that will be more driven from just where we've been developing. If I'm being honest with you. And on that front, we have been reassessing some of our parts of our asset base and looking at the opportunities we see from the Equinor trade, we just got done looking at that. Probably not a lot of running room from the Ohio Utica there, but have identified the prospect of the Ohio Marcellus could be very prospective over 80,000 acres. This would be a big upside. It would give us even more exposure to liquids. So I mean, it's something that we're looking at and how we're shaping it. But just given the size of our base, we're going to be a dry gas story.

I appreciate that, Toby. And then maybe, Jeremy, just -- at a high level, I think there's been a lot of questions around firm sales and LNG and data centers. And I guess as you see all the market forces progressing here, do you see a long-term target? Obviously, you guys give guidance all the way out to 2050 on demand. As you went through into like the next decade, do you have an expectation for -- or a target for what percent of total EQT gas volumes will be sold on firm sales agreement in the direct-to-customer model?

Yes. I mean if I'm honest with you, we're seeing more opportunities pop up like literally every single week. I consider it to be a bit of what we call internally like an all-you-can-eat opportunity we can grow volumes, if there's really that much demand that comes up, we can market it, whether it's third-party gas. I wouldn't say there really is a limit our job as it relates to just what's best for EQT shareholders is just to capture as much of that growth opportunity as possible. And I would say that continues to ramp up, and I think the teams are doing an amazing job just increasing the frequency of conversations and getting in front of every potential customer and making sure we capture it.

We are out of time for questions today. I would like to turn the call back over to Toby Rice for any closing remarks.

Thanks for your time, everybody. This quarter, stepping back just thinking about is probably one of my favorite quarters just because of the fact that every -- this is a really great example of the total team effort that's taking place here we're seeing wins across the board from every department. CapEx, OpEx, volumes. The back office team is getting in the mix with lightning fast strategic integrations of Olympus our commodities team grinding wins on the trading front. It's a really great example of the culture we've built of teamwork and trust and delivering for our stakeholders. So we look forward to continuing the success going forward. Thank you, guys.

This concludes today's conference call. Thank you for your participation. You may now disconnect.