EQT Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
April 23, 2025
Skip to Participants
Operator

and welcome to the EQT Q1 twenty twenty five Quarterly Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Just a reminder, this call is being recorded. Now I would like to turn the call over to Cameron Arwitz, Managing Director of Investor Relations and Strategy.

Operator

Cameron, please go ahead.

Cameron Horwitz
Cameron Horwitz
Managing Director of Investor Relations & Strategy at EQT Corp

Good morning, and thank you for joining our first quarter '20 '20 '5 earnings results conference call. With me today are Toby Wright, President and Chief Executive Officer and Jeremy Cano, 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.

Cameron Horwitz
Cameron Horwitz
Managing Director of Investor Relations & Strategy at EQT Corp

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 ks and Form 10 Q 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 reconciliation to the most comparable GAAP financial measures.

Cameron Horwitz
Cameron Horwitz
Managing Director of Investor Relations & Strategy at EQT Corp

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

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Thanks, Cam, and good morning, everyone. 2025 is off to an exceptional start at EQT, with the first quarter generating the strongest financial results in recent company history. Production was at the high end of guidance due to robust well performance and minimal winter impact, thanks to the proactive collaboration between our upstream and midstream teams. We tactically surged our production by 300,000,000 cubic feet per day during the quarter by opening chokes into strong winter demand and capitalize on robust Appalachia pricing driving our corporate differential $0.16 tighter than expectations. Our differentiated strategy of curtailing volumes during periods of oversupply and surging production during higher price environments underscores our capital efficient approach to maximizing value amid price volatility and was a key driver behind this quarter's record setting performance.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Operating expenses and capital spending during the quarter were below the low end of guidance as efficiencies and synergies continued to outperform expectations. These stellar results drove more than $1,000,000,000 of free cash flow during the quarter with natural gas prices averaging just $3.65 per million BTU. This level of free cash flow generation is nearly two times consensus free cash flow estimates of the next closest natural gas producer and underscores the differentiated earnings power of our low cost integrated platform. These results are a tangible demonstration of the impact of our strategic decisions over the past several years, creating a peerless natural gas business that generates durable free cash flow during down cycles, while also having the greatest ability to capture upside pricing. Shifting gears, we announced our agreement for the highly accretive bolt on acquisition of Olympus Energy's upstream and midstream assets for $1,800,000,000 comprised of 26,000,000 shares and $500,000,000 of cash.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

The purchase price equates to an attractive 3.4 times adjusted EBITDA multiple and a 15% unlevered free cash flow yield at strip pricing on average over the next three years. We forecast three year cumulative free cash flow per share accretion of 4% to 8% from the acquisition at natural gas prices ranging from $2.5 to $5 per million BTU. The Olympus assets comprise a vertically integrated contiguous 90,000 net acre position offsetting EQT's acreage in Southwest Appalachia with net production of approximately 500,000,000 cubic feet per day. The assets are positioned adjacent to several proposed power generation projects in the region providing potential strategic value upside through future gas supply deals. The acreage position has over ten years of core Marcellus inventory assuming maintenance activity levels with an additional seven years of upside from the Utica.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

The integrated nature of Olympus' assets and high quality inventory drives an unlevered free cash flow breakeven price that is comparable to EQT's peer leading cost structure. Pro form a for the Olympus transaction, year end 2025 net debt at recent strip pricing is forecast to be approximately $7,000,000,000 The deal is modestly deleveraging from a credit metric perspective with pro form a 2025 net debt to adjusted EBITDA dropping by 0.1 times at recent strip pricing. We expect the transaction to close in early Q3 and plan to issue pro form a guidance as part of our second quarter earnings. Turning to our 2025 forecast, we continue to capture synergies from the Equitrans acquisition with actions taken to date resulting in approximately $360,000,000 of annual savings, an increase of $85,000,000 relative to our last update driven by CapEx savings and system and receipt point optimization. We have now captured 85% of guided total synergies and see the potential for ongoing initiatives to drive upside beyond our original forecast.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Importantly, these synergy numbers do not include the upside optionality created through integration that has allowed us to beat our differential guidance three quarters in a row, which represents additional value creation beyond our stated synergies. With robust synergy capture, ongoing operational efficiencies and strong well performance, we are raising our full year production outlook by 25 Bcfe while simultaneously lowering the midpoint of 2025 capital spending guidance by $25,000,000 both of which are prior to the impact of Olympus. It's worth noting our updated 2025 volume guidance is roughly in line with our maintenance production prior to the sale of our Northeast PA non operated assets last year, which means efficiency gains, asset outperformance and the re pressuring of wells from our curtailment strategy have backfilled nearly half a Bcf a day of production in 2025, all while reducing capital spending and activity levels. This illustrates the tremendous momentum we've experienced at EQT over the past twelve months and we see no signs of slowing down as we look ahead. As we continue to derisk our balance sheet, we expect to steadily grow our base dividend and position to opportunistically and counter cyclically repurchase shares.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

We have built a solid foundation underpinned by a peer leading cost structure, which drives durable free cash flow generation. The next leg of our strategy is built on the dual pillars of reducing cash flow risk and creating pathways for sustainable cash flow growth. Achievement of these two goals should result in both greater through cycle free cash flow generation and a higher trading multiple, driving differentiated shareholder value creation. As it relates to organic growth, we have a rapidly expanding pipeline of in basin demand opportunities, which could provide us with the option to sustainably grow both our midstream and upstream businesses to serve these new facilities. Recent media reports of sizable gas fired power generation and data center projects in Appalachia substantiate our expectations for six to seven Bcf per day of local demand growth by 2,030.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

We are in discussions with roughly a dozen proposed power projects in the region for midstream and firm gas supply solutions and see EQT exceptionally well positioned to capitalize on this setup given our production scale, inventory duration, world class infrastructure, investment grade credit ratings and low emissions credentials. As these discussions mature, we have significant supply flexibility, thanks to our nearly two Bcf per day of gross production sold locally in Appalachia. This provides volumes that we can redirect into attractive firm supply arrangements while creating a longer term growth option to partially or fully backfill this production. This opens up a differentiated avenue for EQT to drive sustainable production growth directly linked to end user demand. I'd like to remind everyone that even before any in basin supply arrangements, EQT already has a significant realized pricing tailwind from the firm sales deals we signed with the major Southeastern utilities at the end of twenty twenty three.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

These deals are the main driver behind the upcoming tightening of our corporate gas price differential, which is forecasted to drop from around $0.60 this year to around $0.30 in 2028. This means that EQT is projected to have a $600,000,000 pretax annual free cash flow tailwind at a time when we believe many of our peers will see free cash flow margin degradation due to core inventory exhaustion. And with that, I'll now turn the call over to Jeremy.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Thanks, Toby. Our stellar first quarter results and more than $1,000,000,000 of free cash flow generated during the quarter drove significant delevering of our balance sheet. We exited the quarter with $8,100,000,000 of net debt, down from $9,100,000,000 at year end 2024 and $13,700,000,000 at the end of the third quarter. We tendered for approximately $750,000,000 of notes during the quarter and completed a successful exchange offer for outstanding EQM Midstream notes, which simplifies our balance sheet and reporting requirements moving forward. As Toby mentioned, the accretive acquisition of Olympus Energy's upstream and midstream assets accelerates our delevering plan as pro form a net debt increases by 6%, while free cash flow increases by 8%, thus enhancing our debt to free cash flow metrics.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

The acquisition has an immaterial impact on our absolute debt balance as we forecast exiting the year at $7,000,000,000 of net debt on a pro form a basis. We continue to target 5,000,000,000 of net debt on a medium term basis in a recent strip pricing forecast achieving this goal by the middle of twenty twenty six. Turning to hedging, Rapid delevering positioned us to add no incremental hedges during the quarter, and we remain unhedged in 2026 and beyond. Our position at the low end of the cost curve acts as a structural hedge, which in turn facilitates unmatched exposure to high price scenarios by limiting our need to financially hedge. Instead of defensively hedging, we can now patiently look for opportunities to capture asymmetric skew in the options market, which positions EQT to realize higher than average gas prices through the cycle.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Turning to the macro. Amid the risk off sentiment sweeping through the markets, I want to share some thoughts on the natural gas macro landscape, which is positioned as a safe haven with strengthening fundamentals. We have talked for some time about the natural gas market being structurally tighter than pricing indicated due to the successive bearish events of LNG facilities going down and warm winters. Despite consensus thinking that this past winter was particularly cold, as measured by heating degree days, winter was in fact in line with the ten year average and inventory balances have tightened rapidly. Importantly, this occurred on the eve of a step change increase in LNG demand in 2025 and 2026.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

On the supply side, we believe U. S. Gas production needs to exit 2025 near 108 Bcf per day and approach 114 Bcf a day by the end of twenty twenty six. Given current production levels in the 104 Bcf to 105 Bcf per day range, we need to see a rapid increase in activity levels and production or pricing will reset significantly higher to suppress demand in balanced inventories. Our assumption has been that half of this growth would come from associated gas in the Permian and half from growth in the Haynesville.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

However, OPEC has decided to once again defend market share and start bringing back near record level of spare capacity, sending oil prices toward the 50s at the same time the trade war broke out. At this price level, we expect to see a slowdown in Permian activity and other less economic oil basins shifting to decline. Meanwhile, in the Haynesville, we still have not seen activity pick up and believe any activity additions will be disproportionately impacted by tariff driven inflation. Thus, we are increasingly uncertain as to where this required production growth will come from in such a short time and are increasingly bullish gas prices. On the demand side of the equation, we do not expect notable disruptions from recent macro events.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

As a reminder, natural gas demand is primarily driven by winter heating, power demand, industrial demand and LNG and pipeline exports and has a negligible correlation to macroeconomic demand cycles. Looking back at a worst case scenario from 2020, industrial demand declined by less than one Bcf per day or less than 1% of total demand, and we don't believe a modest recession would have nearly the demand impact as COVID. Further, we do not expect any impact to LNG exports in the medium term due to low inventory levels in Europe and thus expect exports to flow at full capacity. We are also observing a faster than expected ramp up from the new Plaquemines LNG facility, which is operating above nameplate capacity. If this outperformance continues and Golden Pass comes online before year end in accordance with Exxon's guidance and its recent FERC filings indicate it's possible, substantially more production will be required to keep 2026 in balance.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

All told, we are more bullish medium term gas prices today than we were last quarter. During risk off periods like we've seen recently, the market has trouble distinguishing signal from noise. However, we are convinced that when the dust settles and the fundamental picture becomes more clear, natural gas prices are positioned to move materially higher, particularly in 2026. The longer this macro uncertainty remains and the slower the activity response, the more bullish we become. To wrap it up, as demonstrated through our record breaking results, we continue to deliver on our promises, tangibly proving the power of our integrated platform and the unique earnings power of our business in all market cycles.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Our ability to quickly adapt to market conditions in a capital efficient manner, while concurrently driving operational efficiencies is fueling outsized free cash flow generation. Looking ahead, we see a clear path for sustained momentum and continuing to create differentiated value for shareholders. With that, I'd now like to open the call to questions.

Operator

And your first question comes from the line of Doug Leggate with Wolfe Research. Doug, please go ahead.

Doug Leggate
Managing Director - Senior Research Analyst at Wolfe Research

Hey, good morning guys. Nice to embarrass everyone on the free cash flow number. So thanks for that. But congrats on a strong quarter. I have two unrelated questions, I may.

Doug Leggate
Managing Director - Senior Research Analyst at Wolfe Research

Toby, first, I'm addressing it to you. It might be Jeremy wants to answer this. But on Olympus, big equity component, 1% dividend yield, cheap way of doing the deal from a cash outflow standpoint. But I'm curious what it does to your levered breakeven. To the extent you can offer any color on post deal sustaining capital and what that how you see the levered breakeven today, obviously, we're watching your progress towards debt reduction.

Doug Leggate
Managing Director - Senior Research Analyst at Wolfe Research

So that's my first one. I've got a follow-up, please.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yes. Doug, I think it's

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

a great question because you can see deals get printed and show strong financial accretion. But I think what's really exciting about the Olympus deal is we're seeing that accretion and doing it with a high quality asset that has a cost structure that's equivalent to EQTs. We think that's really special about this and what makes a good deal on the accretion numbers a great deal for our shareholders in the long term. So we're really excited about that setup and being able to get that print.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

And, Doug, in terms of specifics, you know, I I would say it doesn't really have an impact on the unlevered number. It's modestly delevering, as you noted, due to the equity component. So it it marginally improves that. But on a levered basis, we see that breakeven at about $2.35 for 2025.

Doug Leggate
Managing Director - Senior Research Analyst at Wolfe Research

Guys, just a quick follow-up, Tobey, I may, when you're comparing it to EQT, would that also apply to the inventory debt? You guys have got twenty years you've talked about. What does Olympus look like?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah. So we've we've underwritten basically just the Marcellus. So, you know, the Utica out there is is all upside. And so we think that that's going to be more of the longer term play that would get an inventory depth sort of on par with what we're carrying here. But we didn't describe any value to it in underwriting this deal, and it's something that we'll work on over time.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

But this is directly adjacent to some of the Utica activity, not just that the Olympus team has done. They've done a handful of wells, but some of the some of the other activity by other operators right there. So, I mean, it it there's there's some some things to get excited about, with the deeper Utica in this area, and we think that will pull inventory levels up for the longer term.

Doug Leggate
Managing Director - Senior Research Analyst at Wolfe Research

For that. My follow-up Jeremy is definitely for you. It's pricing strategy. The reason for the question is we obviously saw T5 and other regional hubs blow out in the quarter. And you guys obviously have got a lot of you've got some constraints over how you allocate bid to be versus spot.

Doug Leggate
Managing Director - Senior Research Analyst at Wolfe Research

So I'm just curious as the balance sheet gets improved as you own the obviously you own the midstream now, you can allocate things a little differently. What are you thinking? Is there any reason to think consider whether you would change that bid week versus spot mix in your gas? And I'll leave it there. Thanks.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yes. It's an interesting question. So a lot of times we elect a first a month, because our financial hedges effectively settle against that first a month price. So for example, if you're 50% hedged, probably want to have at least 50% of your production, settled first a month to pair that up. As we move to a position where we are hedged less due to the fact that we do have the midstream cash flows and as our leverage drops lower and lower, we'll have a lot more flexibility to sell more into the dailies, we changed that seasonally.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

So so when you think about, this past quarter and some of the winter storms that came through, the amount of value you can capture selling in the in the daily price market is is pretty material. That's what you saw surge production into in the first quarter. So I think we'll have a lot more flexibility to do that, but that's really enabled by, you know, at at the core, having the midstream foundational, assets and the stability of cash flow, which then allows us to hedge less, which then gives us that flexibility. So I think the opportunity is increasing.

Doug Leggate
Managing Director - Senior Research Analyst at Wolfe Research

Great stuff. Thanks so much, guys.

Operator

And your next question comes from the line of Devin McDermott with Morgan Stanley. Devin, please go ahead. Devin, your line is now open.

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

Can you hear me?

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

Sorry about that. So I wanted to

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

ask first just building a bit on the, m and a strategy. And and, Toby, you want us to kinda think back at your tenure as CEO. You've built EQT into a premier gas company as you framed it in your opening remarks, peerless. It's been through a mix of organic improvement and strategic M and A. And I think one of the impacts of the strong portfolio you have right now is it raises the bar on any incremental acquisitions.

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

So beyond just Olympus, I guess the question is probably both for you, Toby and Jeremy, is is what strategic and financial boxes need to be checked for further m and a? And kinda how are you viewing EQT's role in additional consolidation from here?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah, Devin. I think for us I mean, our our track record, I think we've been very consistent. I think we'll continue to be consistent. And you're right. The bar has gotten higher.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

And, you know, I think for us, we're looking at value. And I'd say on the other on the other hand, we're looking at just the power of the platform. I mean, we are demonstrating an edge here, but we could be patient, and we've got a great business that we're focused on. And it's one of the reasons why we want we want to highlight. Like, our success has not been purely from the strategic M and A that we've done.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

We've transformed the operating model of this business. You're seeing us flex the asset base and continue to see operational efficiency gains. That momentum is going to continue, and it's gonna continue to give us the ability to have opportunities in the future just just working this this current asset base we have that we're pretty excited about.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Devin, a lot of it just comes down to that North Star we always talk about, which is cost structure. And that's one of the unique things about about Olympus, just that that integrated model and and actually really high quality wells out there. That that allows us to maintain the integrity of of what we've what what we've always focused on and do it in a a really value accretive manner. And and do it in a way that that preserves our balance sheet strength and, in this case, actually improved our our leverage metrics on the margin. So, you know, I I wish there were more opportunities like that.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

There's there's just fewer and fewer. So I I think it's gonna be pretty hard for us to find much much going much going forward. But look, we're we're always active. We're looking. We continue to be focused on Appalachia.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

And and if there's a way to to create outside shareholder value by taking a strategic action, I think we're always interested in that. It's just it's just becoming difficult because the opportunities, you know, they've mostly been picked up.

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

Yep. That makes a lot

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

of sense. And then I wanted to to shift and ask about the in basin demand opportunity. Toby, I think you mentioned you're currently in discussions with one dozen different, in basin demand sources and gas sales opportunities. I was wondering if you could characterize these in a bit more detail, like size, timeline, how you're thinking about potential contract structure, and also whether or not you're still expecting that first announcement in 2025.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah. I mean, Doug, I think it's in in in

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

Devin.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Devin, I think it's important yeah. Sorry, Devin. I think it's important just to step back and just look at the dynamics that have taken place in in this country. I mean, reckon and this is what's driving a lot of in basin demand. You know, we've had over five BCF a day of pipeline projects that have been blocked, canceled, or opposed that would have taken, you know, low cost, reliable, clean Appalachia gas and and delivered to other parts in the country.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

And so you see the market opportunity for for more natural gas. And with the without these pipelines, that in basin demand is going to grow, and that's what we're seeing. And, you know, specifically on the power generation front, you know, one of those pipelines was Atlantic Coast Pipeline got blocked. That would have taken gas into data center alley for the AI build out. Well, without that pipeline, people that want that power are gonna move back closer to basis in into our basin.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

So, I mean, that's the high level thing that's taking place. You know, what that's translating for us, obviously, I think EQT is well positioned just with the sprawl of our acreage position. We've got a lot of shots on goal. So we've got a lot of conversations that are taking place right now. This Olympus transaction positions us even closer to some of those opportunities, so we're excited about seeing how how that could potentially translate to to, you know, optimizing gas delivery to some of these some of these opportunities.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

You know, these are these are deals that take a lot of people putting it together. We're still confident that it's gonna we're gonna have something by this year. We've got a lot of conversations happening, but it's gonna take some time to put these through.

Devin Mcdermott
Devin Mcdermott
Executive Director at Morgan Stanley

Great. Thanks so much.

Operator

And your next question comes from the line of Arun Jayaram with JPMorgan. Arun, please go ahead.

Arun Jayaram
Arun Jayaram
Analyst at JPMorgan Chase

Good morning, gentlemen.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Good morning.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Good morning.

Arun Jayaram
Arun Jayaram
Analyst at JPMorgan Chase

Yes. Quick question here. Toby, there's a lot you control as an E and P company, but ultimately, you're a price taker. And so I wanted to see if you could maybe address, you know, some of the benefits to EQT from, you know, having conversations with with call it data center, you know, kinda counterparties. You know, from from their standpoint, I could see they get a the benefit of a guarantee of supply, supply surety.

Arun Jayaram
Arun Jayaram
Analyst at JPMorgan Chase

Sort of if you make it help us think about some of the benefits to EQT from doing, quote unquote, a data center deal. Obviously, it'd probably help local basis, but what are the opportunity sets from a marketing standpoint to to to benefit your margins?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah. So, you know, I think it's important for everybody to understand, you know, in a in a a world where where it's energy short and you're planning on building billions and billions of dollars in these data centers, You know, having security of supply is critical, and and that's what's having people come and and look to go full path on their energy solutions, not just buy natural gas on the spot market. So that's what's creating the opportunity for us to to come in and talk. But I'd say the the what are we looking to deliver? I mean, these are competitive situations.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

There's gonna be lots of options for EQT to be successful. We have to provide the best combination of cost, reliability, and carbon footprint of the emissions associated with that energy. We're certainly very well positioned. Our location is in proximity to some of these opportunities. Think it's tough to replicate.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

And what will that ultimately will translate to, I think, will be opportunities like we've already shown the ability to capture. You know, the the the deal we did back in '23, which will really start hitting in '27, '20 '8 with MVP off the tailpipe, I mean, as an example, I mean, it will be just I would look at it simply as just an uplift to just selling our gas locally. And we've got, call it, around a couple BCF a day of that gas that's already flowing above ground being sold in basin. That is an amount of gas that's ready today, that our commercial team is using to connect to some of these opportunities, and then we will have a decision strategically whether we want to backfill those volumes that we that we supply, and that will create the opportunity for us to get, you know, sustainable growth. So it's really exciting opportunity, not just for the margin enhancements we can we can get, but also triggering the sustainable growth opportunities for our massive inventory base.

Arun Jayaram
Arun Jayaram
Analyst at JPMorgan Chase

Great. That's super helpful. Maybe my follow-up is maybe, Jeremy, Slide 11, you highlighted the ability for your basis differentials to narrow by zero three zero dollars six hundred million dollars uplift. Can you give us a sense of maybe break that out between what portion of that is just from m two tightening versus the benefits or uplift from the long term sales agreements?

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. It's a great question. So if you think about the 600,000,000 that Toby mentioned in in some of the prepared remarks, that that, you know, about half of that is coming from those sales deals, and and the other half is coming from these these in basin, dynamics, what what you're seeing on the forward curve right now. So I'd call half of that more or less contractually locked in in the other half just due to these fundamentals that we keep talking about.

Arun Jayaram
Arun Jayaram
Analyst at JPMorgan Chase

Great. Thanks a lot, gentlemen.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Alright. Thanks, Arun.

Operator

And your next question comes from the line of Neil Mehta with Goldman Sachs. Neil, please go ahead.

Neil Mehta
Neil Mehta
Head of Americas Natural Resources Equity Research at Goldman Sachs

Yes. Thanks so much, Tobey, Jeremy for the comments. And we agree with your view that the front month of the gas curve looks a little oversold here. One of the questions that we've been getting is how do you think about what that marginal molecule cost curve is? And if we ultimately need to price the Haynesville, how do you think about the price breakeven of it?

Neil Mehta
Neil Mehta
Head of Americas Natural Resources Equity Research at Goldman Sachs

I'm curious if you guys have done some work around that. And is there a scenario where you need to actually price through noncore Haynesville and go higher? Just your your framework as you think about the upside of the volatility, Ben.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. We spent a lot of time on that. And I saw your team put out a note last last night on that too, Neil. Look. I I think our view is that with the dwindling inventory in the Haynesville and in some of the more recent wells having much less, productive results than what we saw a couple years ago, that that's at least in the mid fours.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

And then with the volatility you're seeing in the market right now and even really over the last month and a half, seeing how much pricing swings around, I think I think the bar to make that capital allocation decision towards growth where you don't see the return on those dollars for a year and a half, two years, I think you need to see the back end of the curve rise more to really incentivize that. And and you're just not there yet. I mean, Cal 26 right now is just over $4 and you're seeing cal 27 below that. From our perspective, I don't think that's nearly enough to get the level of activity back that's that's required to meet some of these, demand growth estimates and what's effectively locked in with these LNG exports. So look.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

That that's why we're being patient in terms of how we think about hedging if we hedge it all. You know, near term, it it's really about balancing the March 26 inventory balance in different winter scenarios. But then beyond that, as you get into mid twenty twenty six, unless you see that activity response and take take production volumes materially higher, I think the market just gets upside down pretty quick. And it takes a little while, as as you well know, between activity coming back and that production showing up. So if if you I think if we go a couple more months and we don't see a material increase, it's almost gonna get it's gonna become too late.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

And and you almost crystallize that that bullish inflection in 2026 where you kind of have to you have to hope winter is warm to keep the market balanced.

Neil Mehta
Neil Mehta
Head of Americas Natural Resources Equity Research at Goldman Sachs

Alright. That that's really helpful. And that as you think about the production that we've seen out out of Appalachia to to start the year. It has come in a little probably faster than some people expected. And I'd be curious as you think about the production path for The U.

Neil Mehta
Neil Mehta
Head of Americas Natural Resources Equity Research at Goldman Sachs

S. From here, particularly in the basin that you operate in. And was that just a pull forward in response to strong pricing and we stabilized production from here so demand catches up and then we drive inventory?

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yes. I would characterize it the same way you just did. I think it's a bit of a pull forward. But I think for the next two quarters at least, we we don't see that growing much beyond where it's at, certainly in in the Northeast. I think it's easy to extrapolate where you're at.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

I think what we're seeing every single year it's it's funny. I feel like we had this conversation year after year. You see Northeast production surge in the winter, and then it comes back off at some point in q two. I I think due to some of the deferred tills and ducts, you probably have more of a flat scenario, but but I do again, I don't I don't see that rising beyond where it is today. So, again, it it just kinda underpins part part of the part of the reason we're so constructive.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

In addition to, you know, what's happening on on the liquid side of the space right now, I think, you know, we said this in the prepared remarks, but half the volume we assumed was coming from the Haynesville in terms of growth and half from the Permian. And and it's harder and harder for us to see that showing up in the time frame you need it to show up. '25 and '26 is, really is is it it's a it's a unique time period because you do have that step change increase in demand so quickly. And you normally never have events like that, and it's just it's very hard for production to keep up at that rapid of a pace. So in the same way in 2023 and '24, you didn't have enough demand and you had enough supply.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

That that's that's that's gonna flip on you, and and put the market into under applied undersupplied scenario pretty quickly. So we we again, we we think that macro backdrop is really attractive. And if if we're sitting here having the same conversation three months from now on our on our q two earnings call, it's gonna feel like, I think, in in our view, how we model it, like, it's a little too late, and and you're really crystallizing that bullish setup in 2026.

Neil Mehta
Neil Mehta
Head of Americas Natural Resources Equity Research at Goldman Sachs

Great. Thanks, Jeremy.

Operator

And your next question comes from the line of Kalle Akamene with Bank of America. Kalle, please go ahead.

Kalei Akamine
Kalei Akamine
Analyst at Bank of America

Hey, good morning, guys. I've got two follow ups, both on Olympus here. I guess, first, it's a good deal. We think it's accretive on multiple measures and the industrial logic is there. Maybe first, can you talk a little bit about Olympus Midstream?

Kalei Akamine
Kalei Akamine
Analyst at Bank of America

We understand that business is integrated in the upstream and the midstream. Wondering if there are any opportunities to link that system into Equitrans. So differently, are there any synergies from linking into Equitrans? And do you see any compression opportunities which have been a big driver of gains in your legacy assets?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah. So, great question. And and the answer is yes. We will be looking to tie this midstream system into our our Equitrans base base set of pipes we got out there. I mean, I think the the picture on slide 10 just shows the proximity that we've got there.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

So that will definitely create opportunities for us to optimize delivery points. I I think the thing that's that's most interesting, though, is gonna be seeing how we can leverage this asset base to service some new in basin demand opportunities that we're working with. So that certainly would be, you know, a nice synergy upside, however you wanna categorize it. But we'll be looking our our midstream team will will be looking maximize value from this asset base we have here.

Kalei Akamine
Kalei Akamine
Analyst at Bank of America

Got it. Thanks, Tobey. The second one is we looked at the legacy Olympus wells, and their well design looks a little bit different than yours, in fact, very different. Can you talk about whether you're baking any upside in from your own best practices onto the Olympus assets?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yes. No. We've been pretty conservative in underwriting the type curves here. So there there will be opportunities for us to tweak the well designs, but that is not factored into our our our math right now. So, you know, things like well things like well spacing and some of the completion intensity, you know, maybe some tweaks, but that would be considered upside.

Kalei Akamine
Kalei Akamine
Analyst at Bank of America

Got it. Thank you, Tobey.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

You got it.

Operator

And your next question comes from the line of Roger Read with Wells Fargo. Roger, please go ahead.

Roger Read
Roger Read
Senior Energy Analyst at Wells Fargo Securities

Yeah. Good morning. Of the big stuff's been hit here, but I think one of the questions we get kinda consistently is, you know, what are the out of basin opportunities that we're not necessarily thinking upfront page, but we should consider? I know, you know, long time, we've talked about LNG in the Northeast. That seems unlikely, but what's what are some of the other opportunities we should be paying attention to there?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Well, I I think it's just important to note, like, we've got, I think, the hottest trend happening in our backyard with the power gen. I mean, a lot of the focus on LNG was really driven by the fact that that was a big source of demand for natural gas. But now, you know, we we've got a more bullish opportunity happening in our backyard with this AI data center thing. So I I mean, I would say I I'd be focusing on on that. That's certainly where we're spending, you know, most of our time.

Roger Read
Roger Read
Senior Energy Analyst at Wells Fargo Securities

Appreciate that. The other question I have, you've done a lot of acquisitions. You know, there've been some dispositions along the way, maybe a little premature with Olympus here. But are there things we should think about that will be, you know, paired at different times, to bring, you know, a little more focus to the operations? Obviously, as you get the opportunity to really review everything, determine what is, you know, truly low cost and advantage within your portfolio.

Roger Read
Roger Read
Senior Energy Analyst at Wells Fargo Securities

But is is that part of the process we should presume? Or, you know, is there still just a lot more to grow within the Marcellus that we should you know, in other words, it it's too early to to be taking any steps back.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Roger, it's a good question. We're always looking at that. I think our divestitures of our non op interest last year in those two transactions are a a tangible example of that. And there's a number of things that we're we're always evaluating as a way to just continue to refocus on our core asset base, and reallocate capital to what generates the highest returns. So we're we're not gonna we're gonna talk not gonna talk about specifics at this time, but there's always things that we are looking at like the non op last year.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

And and I think that'll be a a a continuous thing that we explore, as we grow the business. It's not all about growth and acquisitions. It's it's just simply about reallocating capital to maximize, shareholder value.

Roger Read
Roger Read
Senior Energy Analyst at Wells Fargo Securities

Appreciate that answer. Thank you.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Got it.

Operator

And your next question comes from the line of Jake Roberts with DPH. Jake, please go ahead.

Jake Roberts
Director - E&P Research at TPH&Co

Good morning.

Scott Gruber
Scott Gruber
Director - Oilfield Services & Equipment Research at Citi

Good morning, Jake.

Jake Roberts
Director - E&P Research at TPH&Co

To start out with, on the increase of the third party revenue guidance relative to last quarter, if you could speak a little bit about what's driving that as well as if you see the the update as kind of the upper bound on the potential.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. So one of the things that that we've done, it it it's effectively an accounting reallocation. So some of what we had captured in the gathering line item before has been reallocated to, that revenue line item, just a little more little bit more consistent apples to apples. And if you look back to how Equitrans accounted for that as well, it's more consistent there too. So, that that's effectively what's going on, but I wouldn't say it's a fundamental change in the business.

Jake Roberts
Director - E&P Research at TPH&Co

Okay. Great. And then a as a second question, maybe a follow-up to Devin's earlier question. Jeremy, you mentioned the limited opportunity set there for M and A. I was wondering if that applies to other vertically integrated businesses or if there's a case to be made for looking at the pure play midstream market and what could be applied to those businesses that you've done to e train in the future.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. I mean, across anything we do strategically, it it really starts with where do we have an edge. We're we're not looking to just buy things for the purpose of buying and growing and getting bigger. Equitrans was was special in that sense because there's so many synergies, between the two businesses, and and we're seeing that on full display. I think if you look back at really each of the quarters that we've reported since closing that deal, we beat each each quarter pretty handily.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

And it's kinda funny when, you know, when we're forecasting and and giving guidance out, it it's hard to account for, you know, the thirty, forty very small things individually that we're doing better. But I think what you're seeing in these beats is is the collective result of all of those small things coming through and and positioning us to outperform what we said we would do. I think that will continue. But it's hard to look at other midstream assets and say we can we can we can have the quite the same result. So look.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

We're we're open minded about it, But I I think our focus is, you know, at the core, you know, we're an upstream business, but we wanna be the best version of of what we can with the lowest cost structure. If there was an opportunity like Equitrans with the same benefits and synergies, I think we'd love to love to explore it for the right value. But it it's hard for me at at this juncture to think about what that really would be.

Jake Roberts
Director - E&P Research at TPH&Co

Great. Appreciate the time.

Operator

Your next question comes from the line of Scott Gruber with Citigroup. Scott, please go ahead.

Scott Gruber
Scott Gruber
Director - Oilfield Services & Equipment Research at Citi

Yes, good morning. A couple of questions upfront. The last call, you guys talked about behind the meter deals, likely seeing contracts signed at premiums to either a regional marker or Henry Hub. We've heard recent interest in potentially signing a fixed price sales agreement since it will help lock in the spark spread for the power producer, which in turn can help then secure financing for the plant. And then given hyperscalers' desire for line of sight to power, it could be positive economics all the way down the value chain.

Scott Gruber
Scott Gruber
Director - Oilfield Services & Equipment Research at Citi

Are you hearing about an interest in fixed price deals? Is that picking up? And obviously, it's all price dependent. But if these types of deals are possible, just any color on the price point that tips you to be more interested in fixed price over a premium to a regional marker or hub pricing?

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. I think so what's unique about each one of these power deals is that they all have different considerations. Some need help with siding, some need midstream, some need gas, some need all of it. There's different counterparty credit qualities of of these different whether it's a developer or hyperscaler, whoever might we might be talking to. So I wouldn't say there's a one size fits all approach.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Every one of these is gonna be different. We and we have the flexibility to structure around that. I I think in the long run, what I would love to see is some sort of portfolio approach to this, over the long term as they come together where you have some of all of it. I think where you have to be somewhat careful on a fixed price deal, though, is if it is priced at a level to factor in the upside asymmetry gas prices. And if you fast forward ten years from now, just say you do a twenty year deal, where gas prices probably need to be, you know, to incentivize the marginal molecule is the Haynesville is fully depleted.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

The Utica is probably fully depleted. And and a lot of these legacy oil basins don't have a lot of inventory left or in decline. I I think that gas price needs to look different. So what might look good today for a fixed price deal halfway through your contract, you might not like very much. So I I think one of the things we like about the index plus style deals that we've done with these Southeast utilities is it insulates you from that while also providing you a bit of a a extra margin, for that reliability of long term supply.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

So I think we're open to all of it, but but that's kinda where we gravitate to just as we think about it over the long term. But but, look, we'll see. We're having a lot of really fascinating discussions with different parties up and down the chain. And like Toby said, I I think we're pretty optimistic we get something done, this year, and I think Olympus advances our our ability to do that.

Scott Gruber
Scott Gruber
Director - Oilfield Services & Equipment Research at Citi

Great. That was it for me. Thanks for all the color, Jeremy.

Operator

Your next question comes from the line of Kevin McCurdy with Pickering Energy. Kevin, please go ahead.

Kevin MacCurdy
Managing Director at Pickering Energy Partners

Hey, good morning guys. I wanted to ask another one on the Olympus acquisition. It looks like the deal came with a nice EBITDA contribution and what looks like high implied margins. Can you talk about the midstream assets that you acquired and the effect on the OpEx and any information on the sales points for the acquired gas?

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. So if if you think about the total EBITDA of the business, about 15% of that, if you were to break it out, is attributable to midstream, so about $80,000,000 roughly. You know, I I think one of the big benefits in terms of why the margins are so high is, again, that integrated nature of it. It's being sold effectively all at m two right now, but we do see opportunities to probably improve that. And, certainly, if we're to link it to some of the adjacent, data center power projects that they're right there, in that area, that could obviously be huge improvement beyond that.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

It kinda sits right at the, junction between the m two and m three markets. So we're probably gonna explore whether there's a way to move some volumes into that into that more premium market along TETCO. But but that's something that, you know, I'd the synergy that could develop in in the coming years, but it's not a it's not a tomorrow type of event.

Kevin MacCurdy
Managing Director at Pickering Energy Partners

Great. I appreciate all that detail. And for my next question, I wanted to ask on the change on MVP capital contribution guidance. Is that just timing of spending, or is there something on the cost of that project that isn't increasing?

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. I'm glad you asked that. That's an important clarification. So it's actually an accounting change. There's actually no difference.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

If you look at the change to distributions and the change to contributions, they actually offset each other. It's just a difference, between how we we assumed we would just recycle capital within the MVP JV before, so there wouldn't be an actual contribution. That's unchanged. Except from an accounting perspective, we still have to book it as a distribution out and a contribution in effectively. But net net, I wouldn't I I don't think at the bottom line, there's any real difference in how how we forecast the, the contributions or or what MVP will generate for us or our partners.

Kevin MacCurdy
Managing Director at Pickering Energy Partners

Appreciate that. Thanks, Jeremy.

Operator

Your next question comes from the line of John Annes with Dexus Capital. John, please go ahead.

Analyst

Hey, good morning guys and thanks for taking my questions. For my first one, just on the synergy front, can you elaborate on the specifics that drove that $85,000,000 in savings since the last update and the ongoing initiatives that could drive additional upside that you've highlighted in the presentation?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Sure. Great question. Happy to provide some more color. So since last quarter, we've obviously revised our synergy capture up. Some of that is going to be on water disposal costs, CapEx synergies from us to seeing if we can optimize some of the spend that's happening on CapEx projects.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

But really the larger chunk really just comes on the receipt point system optimization efforts that we're doing. So this is just us moving volumes to optimize the receipts of the receipt points and capture some spreads there. So those are going be some of the opportunities that we're going be looking for also on the to recreate on the Olympus asset. Going forward, what we really are looking at on the upside there is going to be really more in the discrete projects bucket. Are there going be some projects that we can identify that would allow us to continue this momentum is what would be making up the remainder of the upside there.

Analyst

Makes sense. For my follow-up, one of the questions we get most often is what market conditions would cause you to accelerate production growth? How would you frame your thought process in deciding to grow volumes if the market is calling for it?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah. I think it's pretty simple. I think the market calling for it is not just price signal. It's going to be a demand signal. So we're going to have a firm supply deal, and and we will make sure we grow volumes to meet that firm supply.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Think it'll be pretty simple. So that's sort of how we're looking at it right now. And I think that's that's where we're going to be for a little bit until we get back to a place where we get a market that is more well connected with more pipeline infrastructure. I think we need to be more prudent in making sure that we see the demand before we bring volumes.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. John, I I think I I would distinguish the difference between growing to sell to the market versus sell to a customer. And we're trying to pivot our business to sell to a customer in a large scale way. And and that's very different than, I think, the way a lot of our peers look at it. And I think the the way operators have been approached this in the past, and it's really only possible just due to the platform we've we've built in the scale of EQT, the investment grade balance sheet, and all the other attributes we talk about.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

So that that that's why we're we're so focused on these different power data center and other industrial opportunities, because that that's really what we're trying to turn the business more into as opposed to one that just chases price, and has to float up and down on on the waves of volatility quite so much, trying to transform the business in in a sense. We think that's just a much more durable, higher quality, way to manage the company over the over the long term.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah. And and I think it's worth worth pointing out too. I mean, to take advantage I mean, price signals, we are gonna be taking advantage of that with our existing asset base. I mean, if you look at, I think, slide seven, you know, we're we're showing a two b over two Bcf a day of volumes swing. So we are being responsive to price and giving more volumes when the market is calling for it.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

But having that trip into activity levels, it's going to be more of the dynamics that Jeremy just put color on.

Analyst

Makes sense. Thanks guys.

Operator

Your next question comes from the line of David Deckelbaum with TD Cowen. David, please go ahead.

David Deckelbaum
Managing Director: Sustainability & Energy Transition at TD Cowen

Thanks for the time, guys. Toby, I'm I'm curious just as as a data center opportunity develops here in Basin, how do you square those opportunities or put it in context relative to your LNG strategy and those opportunities as it relates to contracting and the ability to improve commerciality of your your products going forward?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Well, I think those, opportunities are are gonna be a much lower cost access to get there. So I think that's the first consideration. These are going to be happening in our backyard, not on the other side of the country, ultimately with gap consumers across the world. So I think it's it's really easy for us to to know the parties and and create custom tailored solutions that gives them the best combination of affordable, reliable, and clean energy. And there's just a lot of them over here.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

So, I mean, you know, we've gone from a period where we we're having to think we're gonna be need to needing to stretch the the commercial footprint of our of our business, which is fine. We sell gas across the country. But having these opportunities in our backyard, I think, is going be a little bit easier. The cost associated to connect those opportunities is a much lower bar. And we're not going to be needing to sign up for big tolling fees to get access to these opportunities and margin uplifts.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. I think, David, too, remember, we have 1.2 BCF a day down in that Gulf into the Gulf market, net LNG corridor as it is. That's probably more than we would ever look to sign up And those LNG contracts, for the reasons Toby said, it just creates too much financial risk for the company, which is why we we've set that limit around 5%, for the amount of LNG that we'd probably like to sign up for exports, at least the size and and and scope of our business today. We think beyond that, it it just creates too much financial risk. So that's why, you know, beyond that, we're looking back towards where that that demand is domestically and, you know, to effectively take a very high priced Feet style commitment to export gas around the world to sell to a utility when we have utilities calling us virtually every day to supply their power plants adjacent to our operating footprint.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

I I think for us, we can grow, more quickly with less financial risk, supplying that market domestically right now, than we necessarily would be able to on a much longer term basis through the LNG market. So it's it's gonna be, you know, all the above. We're obviously looking to serve any demand that shows up. But if we can serve the same in the market in essence and do it a lot more efficiently, cheaper, and faster, I think we're gonna look to do that, before trying to chase an an LNG project that takes years and years to even come online.

David Deckelbaum
Managing Director: Sustainability & Energy Transition at TD Cowen

Makes plenty of sense. And perhaps just for my follow-up, on a clarification, on how you view the Olympus assets strategically. You highlighted, obviously, you're picking up half a Bcf a day in an area where there's some emerging demand on the power side. I guess, how do you square those opportunities on the eastern portion of your acreage versus sort of the Ohio side? Is this more responding to what you see as a more compressed timeline in the Westmoreland area from maybe some brownfield projects?

David Deckelbaum
Managing Director: Sustainability & Energy Transition at TD Cowen

Or is this just more of a matter of of balancing, the the production footprint between those two areas?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

I think this is more of just increases our ability to get to get more more opportunities closer in our operating footprint. You know, we're gonna be look we're we're looking at opportunities across our entire operational footprint. You know, Olympus is is pretty special in the fact that it's close to the industrial corridor in Pittsburgh where a lot of people are looking at at So it puts us right next to to some of these opportunities. So we'll we'll be exploring those.

David Deckelbaum
Managing Director: Sustainability & Energy Transition at TD Cowen

Thanks guys.

Operator

Your next question comes from the line of Noel Parks with Tuohy Brothers. Noel, please go ahead.

Noel Parks
Managing Director - Energy Research at Tuohy Brothers Investment Research Inc

Hi, good morning. Actually, that last question was something I had been wondering about. So is it fair to say then that the timing of Olympus was just a because I'm assuming that these are assets you've been aware of for a long time, was sort of uniquely because of your anticipation of in Mason Power, the Pittsburgh Industrial Corridor?

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

I think this deal would have made sense without the upside opportunities that the data center potential data center opportunities would would present. So we look at this as as pure upside. And when we think about the volumes here with the Olympus asset base, I mean, when we are if we can tie in our systems, it'll be a way for us to connect our entire asset base in Southwestern Pennsylvania

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

up

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

to this industrial corridor. So that $500,000,000 a day of gas that's flowing today will be connected, will be supported with a huge amount of inventory that we could use to flex the service volumes way more than the 500,000,000 a day that's coming from the Olympus asset base today. So, I mean, all to say, like, people that are thinking about putting data centers in the Pittsburgh region, we're gonna make sure that you have all the the energy you need to to achieve the, power demand goals that you have.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

You know what? I mean, we we look at we

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

look at Olympus as it was a value buy, right asset, right time. It was a win win deal for both sides. I think Blackstone sees a lot of upside in our stock at the same time. And and look, I I think the the the optionality created both on the ground leasing in that area, which which is pretty inexpensive, can add some really attractive runway, just like what we already do in our base business every year, to really extend that inventory depth, beyond, you know, the, call it, fifteen years of of really high quality inventory that we already see right there. What we think is really competitive and and, again, like Toby alluded to, I mean, two of them probably higher probability power data center opportunities that we're in discussions with are located effectively right there, one of which could be one of the largest largest projects in the country.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

So I think it positions us really, really well as we continue that dialogue. And, again, as we just think about the region in total, and the way we're positioned, whether it's in the Ohio market, whether it's Pennsylvania market, or even parts of West Virginia where we're in discussions on projects, I I think we we should really be looked at as as the go to supplier choice for for any gas needs for any of these any of these facilities. So it's really just, you know, improving our positioning in those conversations.

Noel Parks
Managing Director - Energy Research at Tuohy Brothers Investment Research Inc

Great. Thanks. And, I was wondering, I wanted to

Noel Parks
Managing Director - Energy Research at Tuohy Brothers Investment Research Inc

take your

Noel Parks
Managing Director - Energy Research at Tuohy Brothers Investment Research Inc

temperature on with the macro commentary you've made and looking at the setup with LNG over the next few years. Do you have a sense or a stance on whether we are heading into effectively a net greater volatility in gas and maybe also reflected in the Or do you think that sort of the reduced seasonality net net is going to lead to more stability? And just to follow on that, was just sort of wondering if you have any appetite as your balance sheet improves for investing in puts as far as your hedge hedging strategy?

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

Yeah. I I think as we've been talking for a couple years now, we think volatility is only gonna increase that and that's the reason we're trying to position and scope the business how we have. I mean, if you look back at early November, we had curtailed and we have a really interesting slide on this in our deck that that you should look at because because we give some pretty good granularity on this and what our curtailment programs allowed us to do. But we curtailed at least 1.6 Bcf a day in the November. '2 '2 months later, we not only had all that back, but we had actually surged production, you know, above our baseline.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

So you you saw effectively a two Bcf a day swing to make sure that we can actually capture the volatility, not be harmed by it on the downside, and and actually, be positioned to to capture more of that upside value, when you see those price spikes. If you're in a position where you're having to get completion crews out there and frac wells chasing pricing I mean, look. If you would have done that two months ago, all of a sudden, you're bringing wells online now, a pricing that's $2 below actually, more than that if you look at just Appalachian pricing. Right. Below where those price levels are.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

So we can be very prescriptive, very tactical as we optimize around that volatility. And and, again, having the the foundational assets of Equitrans, with the operational flexibility of EQT to maximize profitability. It's it's it's sort of like this extrinsic value that doesn't get picked up easily in financial models. But as I noted before, it's important to just observe that every quarter since we have acquired Equitrans, we consistently beat. Part of that is operational, and part of that is what we're able to do on the commercial side of things.

Jeremy Knop
Jeremy Knop
Chief Financial Officer at EQT Corp

So we hope that continues. We expect it to continue, and and that is just more and more important as we go through these ups and downs of volatility that we expect to probably get more extreme in the coming years.

Toby Rice
Toby Rice
President, CEO and Director at EQT Corp

Yeah. Jeremy, I think that was very well said. And if I had to say it very simply, EQT is a business that is designed to evolve and align our operations with the current environment, and EQT is a business that's gonna thrive in volatility. And I think everything we've done that Jeremy just put color on is an example of that.

Noel Parks
Managing Director - Energy Research at Tuohy Brothers Investment Research Inc

Great. Thanks a lot. There

Operator

are no further questions at this time. That concludes today's conference call. You may now disconnect.

Executives
    • Cameron Horwitz
      Cameron Horwitz
      Managing Director of Investor Relations & Strategy
    • Toby Rice
      Toby Rice
      President, CEO and Director
    • Jeremy Knop
      Jeremy Knop
      Chief Financial Officer
Analysts
Powered by Quartr
Earnings Conference Call
EQT Q1 2025
00:00 / 00:00

Transcript Sections