EQT Corp (EQT) 2025 Q4 法說會逐字稿

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 four 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 during 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 US 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 and 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 helped 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 US energy system. During the storm, our Mountain Valley pipeline flowed 6% 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 US 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. And 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 of Con 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 MVP Boost will increase to approximately 53%. We estimate the 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 five 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 of 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 Fern, combined with our opportunistic approach to hedging should drive historic results for EQT in the first quarter, with 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 collars 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 adds, 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 six 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 five-year average. We forecast storage exiting winter around 1.65 Tcf under normal weather conditions through March.

With LNG exports continuing to grow, the US 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 five-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 ordered 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 and one of the largest water networks in the country. This expanded connectivity is projected to improve uptime, reduce reliance on trucking, lower LOE and improve 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 outperformance 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 our 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 another, 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) Doug Leggate, Wolfe Research.

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 want to put words in your mouth at the end of our 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 grow the balance sheet as well? And by the way, I got a quick shout out to your tremendous videos over the storm. 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 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 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 breakevens, we look at it really at 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 levered number is falling towards the unlevered number pretty quickly.

Neil Mehta, Goldman Sachs.

Toby and Jeremy, your perspective on F was helpful. I mean maybe you could talk about quantifying the uplift associated with that. You gave us some disclosures in the release and in your comments. And then just lessons learned from Fern because I think volatility is going to be a 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 Fern 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 two 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 US 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 US 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 US supply exiting '26 closer to that 114, 115 Bcf a day range. That's still our view. I think things we're looking at are going to be these Permian pipes when they come online and how much they'll be full on the supply side.

And then 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's 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 to your question on M2 basis, we've been talking about this for like a year, if you look back at our -- what we put out quarterly. And that's 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 winter time.

Arun Jayaram, 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 Arun, why we were 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 of 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, 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 project -- 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. There's 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 doing 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 classic 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.

Betty Jiang, Barclays.

I want to start with a question on your gas sales strategy. Jeremy, you mentioned that you're selling 98% of 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 where 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, Betty, 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 never trying to pick price. What we're really trying to understand is where the asymmetry sit and the potential outcome.

If you think about effectively what first-to-month pricing means coming out of bidweek, 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 to 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, 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 if 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 balance a month pricing is, I mean, you're averaging like it's about $390 million at Henry Hub and 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 of, 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 were able to really take advantage of awesome opportunities to 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 the demand, and then that will be an option for us in the future.

Kalei Akamine, Bank of America.

My first question is on MVP. Going back to slide number 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 the 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 there right on the doorstep to it 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 big time ways for us to win on both pricing and also volume to drive top line growth in the coming years.

Lloyd Byrne, 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 ports, coal retirements, manufacturing plants, et cetera?

Yes, what was the first question on growth was 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 two 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. And 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 with demand. But we believe that 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 could create on the midstream and infrastructure side of things and still be able to take advantage of the benefit of 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 be -- 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 two, so much of growth comes down to companies really irresponsibly chasing price signals that are fleeting. I think as we think about growth, it comes back to those three 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 about it. I don't think any company gets rewarded for that. If 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 Bcf a day that we are really underpinning. And if we grow it, it probably looks more so like we grow 3% for the next five years on like a CAGR basis. And we have a business, a balance sheet, a cost structure and 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 lean in back the capital depending on the broader price environment. I think the way we think about it is at the 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.

Phillip Jungwirth, 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 think purchases are looking at Henry Hub versus oil-linked 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 gas with recent M&A?

Yes. We've -- 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 firsthand 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 gas 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 US, all of them is like liquefaction facilities are set up to be like short Henry Hub and the offtakers are 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 US, it's not that, for example, Asian buyers are coming 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 mismatch 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 volumes 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've 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 energy 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 we have in Appalachia. Really what the market needs, though, is not 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 with the seasonal swings and 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, like as 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 is 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 to 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 a buffer in the system.

Nitin Kumar, 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?

Yes. On the infrastructure we have for '26, we can look at a free cash flow yield like holistically, some between 20% and 30% across the projects is how we 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. Nitin, just remember, too, I mean, we're focused on returns on shareholder capital. I think a lot of just classic upstream companies get 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 that 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, you probably need something like 100% well return. So companies are out there talking about like 15% 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 that 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 a 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. It's 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 plays 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 have proved the value of what you embarked on two 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 the balance sheet going forward?

Yes. I mean, just consistent with what we've said in the past, Nitin, $5 billion we see as 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 three to four years, just how volatile even 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 opportunistic buyer when there's big pullbacks, 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 our net debt to fall.

We're not afraid at all to hold several billion dollars of cash on the balance sheet opportunically. And we've really been encouraged by our top shareholders to actually do that because they understand just the nature of the cyclicality. And when those options come, they're tremendous. And it's really one of the best long-term things we can invest in, but you have to be patient.

Neal Dingmann, William Blair.

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 get that extra $100 million, and 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 in '25 and sort of 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 produced 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 will 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 and the backside, too.

Neal, one thing I'd add to that 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 just the level of efficiencies Toby is 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 a be back, so you're at 62 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, two years.

I think that's being missed just due to the kind of the noise year-to-year. But I do think that's important tangible evidence to just like the volumetric results of what we're doing that are 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 six years ago, moving -- taking full advantage of our large-scale asset base moving from drilling, call it, one or two wells off the site. They're now drilling 6 to 10 wells off of a site and doing that across three or four 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.