EQT (NYSE:EQT) reported first-quarter financial results on Wednesday. The transcript from the company’s first-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/694204138
Summary
EQT reported a record $1.8 billion in free cash flow for Q1 2026, matching the total free cash flow of 2022, despite lower gas prices.
The company’s strategic initiatives, including vertical integration and a low-cost operating model, have significantly enhanced earnings and allowed EQT to capture market volatility benefits.
EQT’s leverage is now below 1x net debt to EBITDA, and the company is on track to meet its long-term $5 billion net debt target by year-end.
Operationally, EQT outperformed peers during Winter Storm Fern, achieving production uptime two times higher than competitors, with Q1 production exceeding guidance.
EQT’s LNG contracts position the company for international growth, projecting a potential $6 billion free cash flow if the LNG portfolio was fully online today.
Management highlighted the strategic importance of U.S. natural gas amid global geopolitical tensions, positioning EQT as a reliable supplier.
The company plans to continue investing in high-return projects, grow its base dividend, and repurchase shares during market weaknesses.
EQT sees strong demand growth potential, particularly from data centers and power projects in Appalachia, which could lead to 8-10 BCF/day of additional demand.
EQT is strategically curtailing production to optimize pricing during low demand seasons, leveraging its integrated asset base.
Management remains optimistic about permitting reform to support necessary infrastructure development despite current regulatory challenges.
Full Transcript
Bella (Operator)
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. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session we request for today’s session that you please limit to one question only and one follow-up. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. To withdraw your question, press Star one again. I would now like to turn the conference over to Cameron Horowitz, Managing Director, Investor Relations and Strategy. You may begin.
Cameron Horowitz (Managing Director, Investor Relations and Strategy)
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 Jeremie Knopes, 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 10K 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 1 times 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 two times. Even 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 needed it most. Shifting to the macro environment, Recent geopolitical developments once again highlight the strategic importance of US 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 in 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 equity to help meet the world’s growing need for reliable supply. And yet, despite this global volatility, US 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 US natural gas today is equal to $16 per barrel of oil. Even with record US LNG exports and data center driven domestic power demand growth, recent events also reinforce 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 PTF 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 and 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.
Toby Rice (President and Chief Executive Officer)
This geopolitical landscape reinforces what we believe for a long time low cost, reliable US 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.
Jeremy Knope (Chief Financial Officer)
Thanks Toby. As Toby mentioned, the company delivered a record first quarter without performance 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 your 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 blasting 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. US 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 US 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 US Momentum in natural gas fired power growth is accelerating beyond prior expectations. Recent announcements in our own discussions suggest upside to our base case power demand growth forecast of 6bcf per day with our initial bull case of 10bcf 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 into peak order 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 during 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
At this time I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We do request for today’s session that you please limit to one question only and one follow up. We will pause for just a moment to compile the Q and A roster. Your first question comes from the line of Doug Leggate with Wolf Research. Please go ahead.
Doug Leggate
Good morning guys. Thanks for having me on. 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 US is back to an incremental cost of supply market, also known as 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 we’ve talked about often, Jeremy, you’ve talked about. The transformation is complete. So when given your inventory depth, why are buybacks the right answer for opportunistic cash flow versus offering equity as a competitive dividend stock? Yeah, Doug, appreciate the questions.
Toby Rice (President and Chief Executive Officer)
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, you know,, one, you know,, 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. You know, I think 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. You know, 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 we’re not seeing that benefit in The US the only way to solve that is to get exposure to international pricing. So you know,, for us we’re, we’re proud of the decisions we’ve made. We’re excited to start trading with LNG in the 2030 timeframe. You know, as far as accelerating that today we were actually talking about this, 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 position the company in the long term.
Jeremy Knope (Chief Financial Officer)
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 you know, 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. You know, 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 …
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