Q4 2021 EQT Corp Earnings Call

Speaker 1: 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, in the risk factor section of our Form 10-K , and in subsequent filings we make with the SEC. We do not undertake any duty to update any forward-looking statements.

Actual results and future events could materially differ from these forward looking statements because of factors described in yesterday's earnings release, and our Investor presentation, and the risk factors section of our Form 10-K and in subsequent filings we make with the SEC, we do not undertake any duty to update any forward looking statements.

Speaker 1: Today's call may also contain certain non-GAAP financial measures. Please refer to our most recent earnings release and investors' 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. Now let me ahead a few minutes to talk about some data, but I'll try majority Generators hear you.

Today's call May also contain 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 Tobi.

Thank you Andrew and good morning, everyone two.

Speaker 1: 2021 has been another transformative year for EQT, and I am excited today to reflect on the year, discuss our fourth quarter results, and reveal our 2022 financial and operational outlooks. But before I do that, I would like to take a step back and talk about the investment opportunity that EQT presents.

2021 has been another transformative year for EQT and I am excited today to reflect on the year discuss our fourth quarter results and reveal our 2022 financial and operational outlook, but before I do that I would like to take a step back and talk about the investment opportunity that EQT presents.

Speaker 1: The value opportunity for EQT has never been stronger than it is today. In two years, this team has righted the ship and set EQT on a trajectory that will allow us to benefit from and support the growing importance of natural gas in today's energy ecosystem. At January 31st, strip pricing and including the free cash flow generated in 2021, EQT is projected to generate free cash flow through 2026 in excess of $10 billion, representing 125% of our current market cap.

<unk> opportunity for EQT has never been stronger than it is today two years. This team has righted the ship and set EQT on a trajectory that will allow us to benefit from and support the growing importance of natural gas in today's energy ecosystem at January 31 strip pricing and including the free cash flow generated in 2021.

<unk> is projected to generate free cash flow through 2026 and excess of $10 billion.

Representing 125% of our current market cap.

Speaker 1: Further, our 2022 free cash flow yield is roughly 20%, and despite backwardated strip pricing, grows to 30% in 2023 as our hedges roll off. The value opportunity.

Further our 2022 free cash flow yield is roughly 20%.

Despite backward dated strip pricing growth to 30% in 2023, as our hedges roll off the.

The value opportunity goes beyond the near term EQT as a differentiated long term natural gas investment opportunity.

Speaker 1: EQT is a differentiated long-term natural gas investment opportunity. When compared to the other natural gas peers, we believe EQT has the longest runway of high quality, contiguous inventory of any operator and any gas play. In our most recent investor presentation, we have updated our inventory position.

When compared to the other natural gas peers. We believe EQT has the longest runway of high quality contiguous inventory of any operator in any gas play and our most recent investor presentation, we have updated our inventory position and as of year end. We have approximately 800 net mapped out locations in our core inventory position.

Speaker 1: And as of year end, we have approximately 1,800 net mapped out locations in our core inventory position, representing nearly 22 million lateral feet of drone.

<unk>, representing nearly 22 million lateral feet of drilling that line of sight on our operations is differentiated from any peer and with a roughly 100 well turn in line program represents more than 15 years of inventory and a maintenance production scenario. This translates to a long runway of production and sustainable free cash flow generation when it comes to <unk>.

Speaker 1: That line of sight on our operations is differentiated from any pier and with a roughly 100-well turn-in-line program, represents more than 15 years of inventory in a maintenance production scenario.

Speaker 1: This translates to a long runway of production and sustainable free cash flow generation.

Speaker 1: When it comes to increasing value for our shareholders, I'd like to now highlight several drivers to increase our free cash flow picture.

Creating value for our shareholders I'd like to now highlight several drivers to increase our free cash flow picture.

Speaker 1: First is a stronger balance sheet that we expect to be upgraded to investment grade as early as the first half of this year.

First is the stronger balance sheet that we expect to be upgraded to investment grade as early as the first half of this year investment grade status unlocks multiple benefits such as improved cost and access to capital as well as the ability to sign long term domestic and international sales contracts.

Speaker 1: Investment grade status unlocks multiple benefits, such as improved cost and access to capital, as well as the ability to sign long-term domestic and international sales contracts.

Speaker 1: Second, building on the past two years of work and our stronger financial position today, we have begun implementing an updated hedging strategy that provides downside protection while leaving large upside exposure to higher natural gas prices and what we continue to believe is a structurally bullish backdrop for the commodity.

Building on the past two years of work and our stronger financial position today, we have begun implementing an updated hedging strategy that provides downside protection, while leaving large upside exposure to higher natural gas prices and what we continue to believe is structurally bullish backdrop for the commodity.

Speaker 1: Third, we have contractually declining gathering rates that fall by around 18 cents from current levels over the coming years and provide additional free cash flow growth even without production growth.

Third we have contractually declining gathering rates that fall by around 18 from current levels over the coming years and provide additional free cash flow growth even without production growth.

Speaker 1: Fourth, our operational excellence has translated into strong efficiency improvements, which has allowed us to ramp our methodical well-designed testing program, which I will expand on in a moment. Lastly, our corporate base decline rates continue to shallow, with our current 12-month base decline equal to approximately 30 percent and declining to the low 20s, resulting in less activity and capital required to maintain production and further inflating our business from future inflationary pressures.

Fourth our operational excellence has translated into strong efficiency improvements, which has allowed us to ramp our methodical well design testing program, which I will expand on in a moment lastly.

Lastly, our corporate base decline rates continue to shallow with our current 12 month base decline equal to approximately 30% and declining to the low twenty's, resulting in less activity and capital required to maintain production and further insulates our business from future inflationary pressures.

Speaker 1: In addition to these drivers that will improve the sustainability of our business, we recognize that we can generate further value through the improvement of our price realization.

In addition to these drivers that will improve the sustainability of our business. We recognize that we can generate further value through the improvement of our price realizations.

Speaker 1: First, our hedge program now provides us with the ability to capture rising prices.

First our hedge program now provides us with the ability to capture rising prices for every 10% increase in unhedged realized price above our corporate breakeven of less than $2 30 per million Btu.

Speaker 1: For every 10 cent increase in unhedged realized price above our corporate breakeven of less than $2.30 per million BPU, we get an incremental $200 million of free cash flow, or $0.50 of free cash flow per share.

We get an incremental $200 million of free cash flow or <unk> 50 of free cash flow per share.

Speaker 1: Second, on our expansive RSC footprint, of which we've already certified approximately four BCF a day, we have signed 10 deals encompassing roughly 1.2 TCFE, in total for around $60 million in premiums to date. We expect the value of RSC will improve further as the market develops and as the cost of carbon increases.

Second on our expansive footprint of which we've already certified approximately four Bcf a day, we have signed 10 deals become to see roughly 1.2 Tcf.

In total for around $60 million in premiums to date, we expect the value of <unk> will improve further as the market develops and as the cost of carbon increases.

Speaker 1: Lastly, we are attracting interest from several LNG parties across the whole value chain to gain exposure to international prices.

Lastly, we are attracting interest from several LNG parties across the whole value chain to gain exposure to international prices.

Speaker 1: While these catalysts provide an exciting future for EQT, we have not lost sight on the value of our core business. And the way in which we operate is a key differentiator for EQT and provides meaningful, sustained value creation opportunity.

While these catalysts provide an exciting future for EQT, we have not lost sight on the value of our core business and the way in which we operate is a key differentiator for EQT and provides meaningful sustained value creation opportunities. When we campaigns have joined EQT, we introduced combo development, which is large scale simultaneous development of multiple.

Speaker 1: When we campaigned to join EQT, we introduced combo development, which is large scale, simultaneous development of multiple adjacent wells and paths.

And wells and pads comp.

Speaker 1: Comma development requires coordinated efforts to create the long-term schedule and requires a large continuous active base unconstrained by legacy parent well depletion as we see in other plays.

Combo development requires coordinated efforts to create the long term schedule and requires a large contiguous asset base unconstrained by legacy parent well depletions as we see in other place.

Speaker 1: In these two plus years, these efforts are bearing their fruit. The real results of our efforts are evident in our improving EURs, decreasing costs and limited inflationary pressures. We are now developing 20 to 30 wells sequentially from adjacent pads with 300 to 400 thousand lateral feet per combo on average.

And these two plus years. These efforts are bearing fruit the real results of our efforts are evidenced in our improvement eur's decreasing costs and limited inflationary pressures. We are now developing 20% to 30 wells sequentially from adjacent pads with three to 400000 lateral feet per commvault on average this modern approach.

Speaker 1: This modern approach to shale development leverages EGT scale to drive down costs, maximize long-term asset value, and minimize future well interference to drive multi-year consistent results.

The shale development Leverages eqt's scale to drive down costs maximize long term asset value and minimize future well interference to drive multi year consistent results.

Speaker 1: On slide 15 of our investor presentation, we show you what common development looks like. And through our long term 2026 guidance window, we expect that greater than 80% of our activity to be common development, which means sustained capital efficiency and repeatable free cash flow.

On slide 15 of our Investor presentation. We show you what combo development looks like and through our long term 2026 guidance window, we expect that greater than 80% of our activity to be combo development, which means sustained capital efficiency and repeatable free cash flow.

Speaker 1: Another contributing factor to our consistent results is our approach to well-designed.

Another contributing factor to our consistent results as our approach to well design since joining EQT, we've streamlined the number of well designs, allowing us to better forecast the performance of our wells and minimize variability with the operations humming we began weaving in small scale science pilots starting in 2020. These dollars were.

Speaker 1: Since joining EQT, we've streamlined a number of well designs, allowing us to better forecast the performance of our wells and minimize variability.

Speaker 1: With the operations humming, we began weaving in small-scale science pilots starting in 2020.

Speaker 1: These dollars were small in the past couple of years. And now with our scale, consistent development, along with the findings from our small scale piloting, we have confidence in beginning to phase in a next generation well design in 2022 that is geared towards driving further improvements in well productivity, drilling economics, leading to long-term free cash flow and value creation as we apply these learnings across our long runway of core inventory.

Small in the past couple of years and now with our scale consistent development along with the findings from our small scale piloting we have confidence and beginning to phase in a next generation while design in 2022 that is geared towards driving further improvements in well productivity drilling economics, leading to long term free cash flow.

And value creation as we apply these learnings across our long runway of core inventory.

Speaker 1: Given the standard timeframe between SPUD to turn in line in our planned phase deployment, we expect to have preliminary results by the end of 2022.

Given the standard timeframe between spud to turn in line and our planned phase deployment, we expect to have preliminary results by the end of 'twenty two.

Speaker 1: and full visibility by late 2023. The investment is roughly $50 million in 2022, which translates to approximately $90 per foot on our Southwest Pennsylvania Marcellus well costs, which we believe will be more than offset by the expected production enhancements. So understand the potential impact.

And full visibility by late 2023 investment is roughly $50 million in 2022, which translates to approximately $90 per foot on our southwest, Pennsylvania, Marcellus well costs, which we believe will be more than offset by the expected production enhancements to understand.

The potential impact <unk>.

Next generation well design could materially increase our five year free cash flow forecast by more than $300 million.

Speaker 1: could materially increase our five-year free cash flow forecast by more than $300 million.

Speaker 1: and with full implementation could offer multiples of that when applied across our entire inventory.

And with full implementation could offer multiples of that when applied across our entire inventory.

Speaker 1: We expect this next generation well design will also afford us the ability to maintain production volumes with fewer wells, increasing the capital efficiency of our operations, while also extending our core inventory runway even longer.

We expect this next generation well design will also afford us the ability to maintain production volumes with fewer wells, increasing the capital efficiency of our operations, while also extending our core inventory runway even longer.

Speaker 1: This is a great segue into what to expect from EKT in 2022. The story here is simple. Run a disciplined maintenance program to produce approximately 2 TCFE annuals.

It's a great segue into what to expect from EQT in 2022. The story here is simple one of disciplined maintenance program to produce approximately two tcf annually.

Speaker 1: Implement a hedging philosophy that provides downside protection while providing substantial upside participation.

Implement our hedging philosophy that provides downside protection, while providing substantial upside participation.

Speaker 1: generate free cash flow that we can reward our shareholders with, and improve our balance sheet and pursuit of leverage of one to one and a half times.

Generate free cash flow that we can reward our shareholders with and improve our balance sheet in pursuit of leverage of one to one five times.

Speaker 1: Slide 13 in our investor presentation highlights the continued momentum of our 2022 program, with maintenance production of approximately five and a half BCFE per day and capital expenditures of 1.3 to 1.45 billion dollars.

Slide 13 in our Investor presentation highlights the continued momentum of our 2022 program with maintenance production of approximately $5 five Bcf per day and capital expenditures of one three to $1 $45 billion we.

Speaker 1: We expect to generate $3.1 to $3.3 billion of adjusted EVA and $1.4 to $1.75 billion of free cash flow.

To generate three 1% to $3 $3 billion of adjusted EBITDA, and one four to $1 $75 billion of free cash flow as.

Speaker 1: As mentioned before, this represents a roughly 20% free cash flow yield in 2022.

As mentioned before this represents a roughly 20% free cash flow yield in 2022 or.

Speaker 1: Our 2022 capital program assumes a dollar per foot cost for Southwest PA Marcellus Wells of approximately $760 per foot, compared to our full year 2021 average of $690 per foot.

Our 2022 capital program assumes a dollar per foot cost for southwest PA Marcellus wells of approximately $760 per foot compared to our full year 2021 average of $690 per foot. This is not inclusive of our investment in our Nextgen well design program, but does reflect expected inflation of $70 per foot or about 10.

Speaker 1: This is not inclusive of our investment in our next-gen, well-designed program, but does reflect expected inflation of $70 per foot, or about 10%. However, we recognize that $1 per foot is not a fully representative picture of our capital allocation decisions, which is why we also look at our program through the lens of CapEx efficiency, or the total capital spent for the net sales volumes delivered.

Percent. However, we recognize that dollar per foot is not a fully representative picture of our capital allocation decisions, which is why we also look at our program through the lens of Capex efficiency or the total capital spent for the net sales volumes delivered slide.

Speaker 1: Slide 18 for the details of this concept. Our CapEx efficiency is inclusive of all capital costs beyond reservoir development, a nuance that dollars per foot ignores. Further, because we are investing in our next generation well-designed that is expected to deliver higher per well production, capital efficiency on a per volume metric provides a better illustration of the value being created from a capital investment.

Slide 18 for the details of this concept our capex efficiency is inclusive of all capital costs beyond reservoir development, a nuance that dollar per foot ignores further because we are investing in our next generation well design that is expected to deliver higher per well production capital efficiency on a per volumetric provides a better illustration of that.

Value being created from the capital invested.

Speaker 1: In the same vein of capital allocation, I'd like to provide you with our current view on M&A. Despite the pickup in M&A over the past nine months, we have chosen to remain disciplined as we have observed a widening divergence between the value of public equities and where assets have traded. The timing of the two significant transactions that we have already integrated could not have been better.

In the same vein of capital allocation.

I'd like to provide you with our current view on M&A. Despite the pick up in M&A over the past nine months, we have chosen to remain disciplined as we have observed a widening divergence between the value of public equities and where assets have traded.

<unk> of the two significant transactions that we have already integrated could not have been better.

Speaker 1: By closing our asset acquisition from Chevron, our team has reduced operating expenses by over 30%, and with the increase in strip pricing, we believe the value of those assets has more than doubled since closing.

Since closing our asset acquisitions from Chevron our team has reduced operating expenses by over 30% and with the increase in strip pricing, we believe the value of those assets as more than doubled since closing.

Speaker 1: Similarly, the integration of ALTA is now complete, and our operations teams are already driving cost improvements in the field, as evidenced by a 15% decrease in drilling costs on the first wells we took over despite inflationary pressure.

Similarly, the integration of Altra is now complete and our operations teams are already driving cost improvements in the field as evidenced by a 15% decrease in drilling costs on the first wells, we took over despite inflationary pressures.

Speaker 1: As a reminder, the ALTA assets included over 250 core net locations and more than 600 total net lower Marcellus locations across 300,000 net acres, and also included substantial midstream infrastructure and mineral ownership. Recent transactions imply a value of ALTA of more than double what we paid only six months ago.

As a reminder, the <unk>.

Assets included over 250 core net locations and more than 600 total net lower Marcellus locations across 300000 net acres and also included substantial midstream infrastructure and mineral ownership recent transactions imply a value volta of more than double what we paid only six months ago.

Speaker 1: As a large shareholder myself, my excitement for EKT has never been greater and their value proposition never more compelling. And as of December 2021, we now have the ability to capitalize on this opportunity through the use of our $1 billion share repurchase program.

As a large shareholder myself my excitement for EQT has never been greater and the value proposition never more compelling and as of December 2021, we now have the ability to capitalize on this opportunity through the use of our $1 billion share repurchase program.

Speaker 1: Since that announcement, we have not waited to begin repurchasing shares. In roughly one month, we repurchased 50 million dollars of our shares, representing two and a half million shares outstanding. While it's prudent to be methodical in our repurchasing efforts, we recognize the rare opportunity available to us today to buy stock in a nearly investment grade company with a 30 percent 2023 free cash flow yield at strip on top of some of the best natural gas assets in the country. We look forward to updating the market on our progress.

That announcement, we have not waited to begin repurchasing shares and roughly one month, we repurchased $50 million of our shares representing $2 5 million shares outstanding.

While it is prudent to be methodical in our repurchasing efforts, we recognize the rare opportunity available to us today to buy stock and an investment grade company with a 30% 2023 free cash flow yield that strip on top of some of the best natural gas assets in the country. We look forward to updating the market on our progress.

Speaker 1: I'd now like to pass it to Dave to discuss hedging strategy, our balance sheet, liquidity, and year-end reserve results.

I would now like to pass it to day to discuss hedging strategy, our balance sheet liquidity and year end reserve results.

Speaker 1: Thanks, Toby. I'll begin with a summary. We reported solid 4Q21 results, implemented our updated hedge strategy, announced and executed our capital allocation program, have lined the site to achieve our investment grade goals, and realized 158% proved developed reserve replacement ratio, excluding the impact of the ALTA acquisition.

Thanks, Tobey I'll begin with a summary.

We reported solid for <unk> 'twenty, one results implemented our updated hedge strategy announced and executed our capital allocation program have line of sight to achieve our investment grade goals.

And realized 158% proved developed reserve replacement ratio, excluding the impact of the <unk> acquisition.

Speaker 1: As a proxy for value, our PerforTax PV10 of 21.5 billion is 60% above our total enterprise value of 13.4 billion, which is based on drilling only 3.75 years or less than 20% of our multi-decade inventory. As Toby has laid out the sustainability of the operations, we are creating a strong balance sheet and free cash flow outlook to complement the future.

As a proxy for value.

For tax PV 10 of 21 5 billion is 60% above our total enterprise value of $13 4 billion, which is based on drilling only 375 years or less than 20% of our multi decade inventory.

As Toby has laid out the sustainability of the operations, we are creating a strong balance sheet and free cash flow outlook to complement that we are nearing completion of paying off the $3 5 billion maturity wall. We faced in early 2020, which has allowed us to shift from a defensive hedging strategy with nearly all swaps to.

Speaker 1: We are nearing completion of paying off the three and a half billion maturity wall we faced in early 2020, which has allowed us to shift from a defensive hedging strategy with nearly all swaps to a more balanced approach.

A more balanced approach.

Speaker 1: Our strategy now provides downside protection to maintain investment grade metrics while allowing us to benefit from rising natural gas prices.

Our strategy now provides downside protection to maintain investment grade metrics, while allowing us to benefit from rising natural gas prices, we designed and implemented this strategy for 2023, and we will continue to execute it in outer years as appropriate for 2023, we layered on an overall floor of approximately <unk> <unk>.

Speaker 1: We designed and implemented this strategy for 2023, and we will continue to execute it in outer years as appropriate. For 2023, we laid on an overall floor of approximately $3 and a ceiling of approximately $5. We are now about 42% hedged for 2023, which locks in free cash flow to execute on our shareholder return program.

$3 and a ceiling of approximately $5. We are now about 42% hedged for 2023, which locks in free cash flow to execute on our shareholder return program.

Speaker 1: As a result, we preserved our ability to capture 100% of the recent run-up with these additional hedges for 2023, which is a movement we have expected for some time and wanted to position ourselves to capture.

As a result, we preserved our ability to capture 100% of the recent run up with these additional hedges for 2023.

Which is a movement, we have expected for some time and wanted to position ourselves to capture.

Speaker 2: In the effort to provide more details, we provided a quarterly view of our hedging portfolio on slide 21 of our investor presentation.

And the effort to provide more details we provided a quarterly view of our hedging portfolio on slide 21 of our investor presentation.

Speaker 2: Now I'd like to talk about basis pricing and how we manage it.

Now I'd like to talk about basis pricing and how we manage it.

Speaker 2: First, we have a strong firm transportation portfolio that we always optimize. Last quarter, we added some Midwest REX capacity.

First we have a strong firm transportation portfolio that we always optimize last quarter, we added some Midwest Rex capacity.

Speaker 2: Second, we further lock in our basis with financial and physical hedges. For 2022, we only have in-basin price exposure on approximately 15% of our production. On slide 22 of our presentation, we have further laid out our exposure by market. For further transparency, we have shown that for every 10 cent move in local pricing, our 2022 free cash flow forecast would change by approximately $30 million or less than 2% of this forecast.

Second we further lock in our basis with financial and physical hedges.

For 2022, we have only have in basin price exposure on approximately 15% of our production on slide 22 of our presentation. We have further laid out our exposure by market for further transparency. We have shown that for every 10 cent move in local pricing, our 2022 free cash flow forecast, which Chad.

<unk> by approximately $30 million or less than 2% of this forecast.

Speaker 2: There are a lot of moving parts that impact Basis. First of all, the correlation between Basis and NIMAC sits between 70% and 80%. And our hedging program tightens this up further.

There are a lot of moving parts that impact basis first of all the correlation between basis in Nymex sits between 70, and 80% and our hedging program tightens. This up further.

Speaker 2: Historically, weather has been a large factor in driving volatility in local pricing, as well as storage levels, pipeline outages, and modest production growth. The fourth quarter of 2021 and the first quarter of 2022 demonstrates this volatility. The weather in fourth quarter was significantly warmer than normal. We had approximately 15% of our local exposure hoping to capture colder weather, resulting in a wider basis differential than our guidance.

Historically, whether it's been a large factor in driving volatility in local pricing as well as storage levels pipeline outages and modest production growth.

Fourth quarter 2021, and the first quarter of 2022 demonstrates this volatility the.

The weather in the fourth quarter was significantly warmer than normal we had approximately 15% of our local exposure open hoping to capture colder weather, resulting in a wider basis differential than our guidance range.

Speaker 2: However, despite pricing pressure, we still delivered solid fourth quarter free cash flow results of $422 million.

However, despite pricing pressure, we still delivered solid fourth quarter free cash flow results of $422 million.

Speaker 2: All other key production operating costs and CapEx were in line as expected in the fourth quarter.

All other key production operating cost and Capex were in line as expected in the fourth quarter.

Speaker 2: Now looking forward, our first quarter basis will be much tighter than the fourth quarter since winter weather has returned to more normal levels. The cold weather in January and the start of February has created a storage deficit, which with several other positives should add approximately 1 B. C. F. per day of year over year demand.

Now looking forward, our first quarter basis will be much tighter than the fourth quarter since winter weather has returned to more normal levels.

Cold weather in January and the start of February has created a storage deficit, which with several other positives should add approximately one bcf per day of the year over year demand.

Speaker 2: First, FT out of the basin is flowing at increased utilization compared to prior years, and new capacity has been added to the Appalachian region.

First FTE out of the basin is flowing and increased utilization compared to prior years and new capacity has been added to the Appalachian region.

Speaker 2: Second, we are witnessing growing in-basin power and industrial demand, bolstered by approximately 2.7 gigawatts of coal retirement and tightness of Appalachian coal supply. As a result, coal contracted prices in the fourth quarter have nearly tripled, setting a much higher bar for switching dynamics.

We are witnessing growing in basin power and industrial demand bolstered by approximately $2 seven gigawatts of coal retirements and tightness of Appalachian coal supply.

As a result coal contracted prices in the fourth quarter have nearly tripled setting a much higher bar for switching dynamics.

Speaker 2: we will keep track of invasive production, which will offset some of these positive fundamental trends.

We will keep track of in basin production, which will offset some of these positive fundamental trends.

Speaker 2: I'd like to now shift gears and discuss our balance sheet and liquidity.

I'd like to now shift gears and discuss our balance sheet and liquidity.

Speaker 2: Having a strong balance sheet and liquidity underpins our valuation and ability to execute our capital allocation plan. As of December 31st, 2021, our net debt position was roughly $5.4 billion, representing a last 12-month leverage of 2.3 times.

A strong balance sheet and liquidity underpins, our valuation and ability to execute our capital allocation plan as of December 31, 2021, our net debt position was roughly $5 4 billion, representing a last 12 month leverage.

Up to three times over.

Speaker 2: Over the next 12 months, we plan on meaningfully paying down additional debt, repurchasing a significant amount of stock and distributing our above average dividends.

Over the next 12 months, we plan on meaningfully paying down additional debt repurchasing a significant amount of stock and distributing our above average dividend.

Speaker 2: Our 2022 and now 2023 hedge position support our free cash flow outlook and confidence to be able to execute our plan.

Our 2022, and now 2023 hedge position support our free cash flow outlook and confidence to be able to execute our plan.

Speaker 2: Based on the strip and our stated capital allocation plan, we forecast our year end 2022 and 2023 net leverage to be around 1.4 and 0.5 times respectively, which includes a buildup in cash reserves that we can use for retained flexibility.

Based on the strip and our stated capital allocation plan, we forecast our year end 2022, and 2023 net leverage to be around one four.

And five times, respectively, which includes a buildup in cash reserves that we can use for retain flexibility.

Speaker 2: Our balance sheet plans are straightforward. We're committing to paying down 1.5 billion of absolute debt by year in 2023 and expect to benefit from a rising interest rate environment. With this, we believe that we are on the doorstep and investment grade rating, which will unlock multiple benefits such as interest cost savings and the ability to secure attractive long-term cluster contracts.

Our balance sheet plans are straightforward, we're committing to paying down $1 $5 billion of absolute debt by year end 2023, and expect to benefit from a rising interest rate environment.

With this we believe that we are on the doorstep and investment grade rating, which will unlock multiple benefits such as interest cost savings and the ability to secure attractive long term customer contracts.

Speaker 2: Our conversations with the rating HDs are frequent and have been positive, and we are confident about the strength of our balance.

Our conversations with the rating agencies are frequent and has been positive and we are confident about the strength of our balance sheet.

Speaker 2: A recent tailwind that is benefiting our near-term cash position and enabling our ability to repurchase shares is our improving liquidity position. As of December 31, 2021, our liquidity position was $2.2 billion, an improvement of $1.1 billion from the third quarter.

A recent tailwind that is benefiting our near term cash position and enabling our ability to repurchase shares is are improving liquidity position.

As of December 31, 2021, our liquidity position was $2 2 billion, an improvement of $1 1 billion from the third quarter.

Speaker 2: During the fourth quarter, we pay down approximately $700 million outstanding on our revolver and reduced our letters of credit posted by approximately $200 million. In addition, we reduced our collateral and margin deposits by $566 million, which positively impacted our working capital and operating cash flows for the quarter.

During the fourth quarter, we paid down approximately $700 million outstanding on our revolver and reduced our letters of credit posted by approximately $200 million. In addition, we reduced our collateral and margin deposits by $566 million, which positively impacted our working capital and operating cash flows for the quarter.

Speaker 2: In January of 2022, we also paid down an additional $206 million of long-term debt.

In January of 2022.

So pay down an additional $206 million of long term debt.

Speaker 2: Lastly, I would like to conclude by providing some insight on our reserves. At year end 2021, we reported 25 TCFE and total approved reserves, up 26% from 2020 and up 6%, normalizing for the reserves associated with the ALTA acquisition.

Lastly, I would like to conclude by providing some insight on our reserves at year end 2021, we reported 25, Tcf and total proved reserves up 26% from 2020 and up 6% normalizing for the reserves associated with the <unk> acquisition.

Speaker 2: Our total before tax PB10 for the year ending 2021 was $21.5 billion, an increase of $17.5 billion from 2020.

Total before tax PV 10 for the year, ending 2021 was 21 $5 billion, an increase of $17 $5 billion from 2020.

Speaker 2: This increase was driven by a substantially higher SEC price step. As previously noted, our total before tax PV10 is over approximately 60% higher than our current enterprise value despite only reflecting 3.75 years of PUD bookings.

This increase was driven by a substantially higher SEC price deck as previously noted our total before tax PV 10 is over approximately 60% higher than our current enterprise value. Despite only reflecting 375 years of pud bookings for reference the year over year pricing.

Speaker 2: For reference, the year-over-year pricing difference used in the calculation was $1.31 per MCS, representing NIMEX plus regional adjustments. I will now let Toby conclude our prepared marks before we open up for Q&A.

Difference used in the calculation was $1 31 per Mcf, representing Nymex less regional adjustments.

Now, let Toby conclude our prepared remarks before we open up for Q&A.

Speaker 1: Thanks, Dave. To conclude, I want to take us back to what I said at the beginning of the call. EQT is a differentiated long-term natural gas investment opportunity.

Thanks, Dave to conclude I want to take us back to what I said at the beginning of the call EQT as a differentiated long term natural gas investment opportunity.

Speaker 1: Everything we have done to date has been focused on being able to make this assertion. And I believe we've checked this box.

Everything we've done to date has been focused on being able to make this assertion and I believe we have check this box by substantially reducing our operational and financial risk organically. We can now play to what we see is the medium and long term strength of our company and unparalleled core natural gas inventory our base business with a cost structure that will decline.

Speaker 1: By substantially reducing our operational and financial risk organically, we can now play to what we see as the medium and long term strengths of our company, an unparalleled core natural gas inventory, a base business with a cost structure that will decline over time, an ability to access differentiated pricing markets, and a macro pricing dynamic with greater upside skew.

Over time and ability to access differentiated pricing markets and a macro pricing dynamic with greater upside SKU.

Speaker 1: Underpinning our excitement about the medium and long term investment opportunity is the growing appreciation of the role of natural gas in addressing climate change.

Underpinning our excitement about the medium and long term investment opportunity is a growing appreciation of the role of natural gas in addressing climate change in particular as it relates to U S. LNG as we and others continue to do more work on the best way for the United States to influence global climate change. It is apparent that a ramping of U S.

Speaker 1: in particular as it relates to U.S. LNG. As we and others continue to do more work on the best way for the United States to influence global climate change, it is apparent that a ramping of U.S. LNG is an emissions reduction opportunity that can be executed at scale, with speed, at a low cost, and here in America. This opportunity cannot be replicated anywhere else in the world.

LNG is an emissions reduction opportunity that can be executed at scale with speed at a low cost and here in America.

Opportunity cannot be replicated anywhere else in the world.

Speaker 1: The macro events that we are seeing are forcing a conversation grounded in reality. We believe that conversation will end with a significant call on US Nat gas and EQT, America's natural gas champion, will be ready to answer that call. I'd like to now open the call up to questions.

The macro events that we're seeing are forcing a conversation grounded in reality.

We believe that conversation will end with a significant call on U S. Nat gas and EQT America's natural gas champion will be ready to answer that call.

I'd like to now open the call up for questions.

Speaker 3: Thank you. If you would like to ask a question please press star followed by one on your telephone keypad. If for any reason you'd like to remove your question please press star followed by two. Again to ask a question it is star followed by one. As a reminder if you are using a handset please pick it up before asking your question.

Thank you if you would like to ask a question. Please press star followed by one on your telephone keypad.

Any reason you'd like to remove your question. Please press star followed by <unk>.

Again to ask a question to start followed by one as a reminder, if you are using.

Handset please pick a top before asking your question.

Our first question.

Speaker 3: is from Aaron Jayram from JP Morgan.

Is from Aaron.

From JP Morgan.

Your line is now open. Please go ahead.

Speaker 4: Yeah, good morning, gentlemen. My first question is on your thoughts on return of capital. As you know, investors continue to differentiate the E&Ps on return of capital yields.

Yes. Good morning, gentlemen, My first question is on your thoughts on return of capital as you know investors continue to differentiate.

The e&ps on return of capital yields.

Speaker 4: you have about a 2.5% dividend and a billion dollar buyback authorization through year-end. And I wanted to get your thoughts on any urgency on flexing the buyback given you outlined 20% free cash flow yields under your guide this year going to 30% next year.

About a two 5% dividend.

And a $1 billion buyback authorization through year end and I wanted to get your thoughts on any urgency on flexing the buyback given you outlined 20% free cash flow yields in your guidance. This year go into 30%.

Next year.

Speaker 1: Hey, good morning Arun. This is Toby. So yeah, great question on buyback and pace. Certainly is an exciting opportunity.

Hey, good morning, Arun. This is Toby so yes, great question on buyback and pace.

Certainly is an exciting opportunity in front of us just a little bit about what we've done to date.

Speaker 1: Just a little bit about what we've done today to sort of help you understand the pace that we've been working at. You know, the $50 million over the first month, if you ran that forward 12 months, that would put us at about $600 million annualized on the buyback.

To help you understand the pace that we've been working at the.

$50 million over the first month, if you ran that for 12 months that would put us at about $600 million annualized on the buyback.

Speaker 1: Couple things influencing that pace. One, I think that we started off with a pretty warm winter, and given the fact that it seems the market is very short-term focused, I've been a little bit disciplined to see how the weather.

Couple of thing influencing that pace, one I think that we started off with a pretty warm winter and given the fact that it seems the market is very short term focused.

<unk> been a little bit disappointed to see how the weather played out.

Speaker 1: And that may have had us been a little bit more conservative because obviously if we had a warmer winter that would have created an even more compelling opportunity for us to buy back our stock.

And that may have been a little bit more conservative because obviously, if we had a warmer winter that would've created an even more compelling opportunity for us to buyback our stock.

Speaker 1: But you know, we're here now, we're sort of through winter, and I think you can see us look to accelerate the pace going forward on the buyback.

But we're here now we're sort of through winter and I think you can see us look to accelerate the pace going forward on the buyback as far as the dividend is concerns while we haven't really talked too much about it I mean, the ultimate game plan for our dividend is to position. This company to be a consistent dividend grower and that's the I'd say the last part of our capital allocation.

Speaker 1: As far as the dividend is concerned, while we haven't really talked too much about it, I mean, the ultimate game plan for our dividend is to position this company to be a consistent dividend grower. And that's the, I'd say the last part of our capital allocation plan that we'd like to provide some color on in the future.

Patient plan that we'd like to provide some color on in the future.

Speaker 4: Great. In my follow-up, you outlined a $1.6 billion free cash flow target this year. It is a bit below what you outlined in mid-December, so I was wondering if you could kind of walk us through the delta and perhaps a frequent question is how the impact or the delay on MVP is affecting your 2022 and 2023 free cash flow forecast.

Great and my follow up you outlined a $1 6 billion free cash target this year.

It is a bit below what you outlined in mid December . So I was wondering if you could kind of walk us through.

The Delta and perhaps.

A frequent question is how the impact or the delay on MVP is affecting your 2022 and 2023 free cash flow forecast.

Speaker 2: Yeah, hi, so this is Dave. So, so, first and foremost, when we provided guidance, you'll notice that we provided wider ranges for free cash flow and our basis just given the fact that gas is very volatile. You know, we started and put the guidance out prices were actually 80 cents higher. And so what we did was we put some conservatism into our guidance ranges so that we have a cushion here. So that we can handle that volatility. So that's.

Yes, hi, so this is Dave so.

So first and foremost when we provided guidance youll notice that we provided wider ranges for free cash flow and our basis just given the fact that gas is very volatile we started put the guidance out.

Prices were actually <unk> is higher and so what we did was we put some conservatism into our guidance ranges. So that we have a cushion here. So that we can handle that volatility. So that's part one.

Speaker 2: Part 1, so the, the other part of the delta is, if you noticed our.

So the other part of the Delta is if you noticed our capex.

Speaker 2: Is up about 75 million versus what we've put out before at 1.3 million billion.

<unk> is up about $75 million.

Versus.

What we've put out before $1 3 billion.

Speaker 2: 50 of it, actually a touch above it is actually tied to our new well design and so that's going to bear a lot of fruit for us.

<unk>.

<unk> 50 of it.

Actually a touch above it is actually tied to our new well design and so that's going to bear a lot of fruit for us.

Speaker 2: I'll also note that within our guidance is about 20M dollars of incremental year, every year pneumatics, which will get paid back in RSP and then some. So so those are called 2 things. And then obviously we dealt with a little inflation. So, when you factor that in, I would say that along with the fact that basis was wider.

Note that our guidance is about $20 million of incremental year over year, Pneumatics, which will get paid back in RFP and then some so so those are called two things and then obviously, we dealt with the low inflation. So when you factor that in.

I would say.

That along with the fact that basis was wider.

Speaker 2: And with MVP coming up being pushed. Those are probably the majority of the items that drive the delta between what we put out before and what we're putting out now.

And then with MVP coming up being pushed those are probably the majority of the items that drive the delta between what we put out before and what we're putting out now.

Great. Thanks, a lot.

Youre welcome.

Speaker 3: Thank you. Our next question comes from Scott Arnold from RBC Capital Markets. Your line is now open, please go ahead.

Thank you. Our next question comes from Scott.

From RBC capital markets. Your line is now open. Please go ahead.

Speaker 2: Yeah, thanks. Just maybe staying on the MVP subject, obviously, it's very topical. I'd be interested to get your views on where you think that goes if you can provide some color. But also, you know, related to that, there were obviously some fee relief, but some payments that could occur in the event that it gets delayed. Can you just discuss, you know, like, what is your positioning on, you know, how you look at that and what we should assume going forward?

Yes. Thanks.

Just maybe staying on the MVP subject, obviously, it's very topical.

Just to get your views on where you think that goes if you can provide some color but also.

Related to that there were obviously some fee relief, but some some payments that could occur in.

In the event that it gets delayed can you just discuss.

What is your positioning on how you look at that and what we should assume going forward.

Speaker 2: Yeah, so if you notice in the slides, because we had a, we have something on our FT portfolio and how our gas moves around, we probably did for 22 and 23. We had to pick a spot and where we thought MVP. Was going to come online.

Yes, so if you noticed in the slides.

Because we had a.

We have something on our ft portfolio and how our gas moves around we provide it for 'twenty two and 'twenty three we had to pick a spot and where we thought MVP was going to come online.

Speaker 2: And we did that as a placeholder before E-Train puts out their update in about a week or so. So we picked midyear 2023. So effectively, we say to set about a year delay. But again, I think that is a placeholder that will adjust once E-Train puts out their updated guidance. So.

And we did that as a placeholder before E train puts out their update.

About a week or so so we pick midyear 2023, so effectively we say to set about a year delay.

But again I think that as a placeholder that will adjust once E train puts out there.

Got it so.

Speaker 2: When you look at the impact to us, I would say, you know, basis widened in 22, basis widened in 23.

When you look at the.

The impact to us.

I would say basis widened in 'twenty two it basis wide in 'twenty three.

Speaker 2: We lose the benefit of the fee relief, but we also don't pay.

We lose the benefit of the fee relief, but we also don't pay.

Speaker 2: The high seventies costs on on the portion that we retained and we also don't pay. We'll call it the Henry hub kicker piece as well. So when you net it out, it's a, I'll call it a modest negative for 22. It's a little bit bigger negative 23.

The the high Seventy's.

Costs on the portion that we retained and we also don't pay we'll call. It the Henry hub kicker piece as well so when you net it out it's a I'll call. It a modest negative for 'twenty two it's a little bit bigger negative 23, but if you look out actually over the six year period or so.

Speaker 2: But if you look out actually over the six-year period or so, actually it's an overall net benefit from a total free cash flow perspective, regardless of what basis then moves.

Overall net.

Benefit from a total free cash flow perspective, irregardless of what basis. Then does yes. Scott. This is this is Toby just some high level comments, just what's going on in the world right now and really just the read through on how important pipeline infrastructure is in this country specifically MVP.

Speaker 1: Yeah, Scott, this is this is Toby, just some high level comments, just what's going on in the world right now. And really just the read through how important

Speaker 1: Pipeline infrastructure is in this country, specifically MVP.

Speaker 1: Listen, two weeks ago, we got a letter from senators in New England.

Listen two weeks ago, we got a letter from Senators and new England, saying.

Speaker 1: Saying that they're basically looking for more supply into their into their areas. And the reason why they're looking why they're paying extreme prices in New England is because of lack of pipeline infrastructure, plain and simple. And, you know, without these pipelines, we're going to continue to see these extreme pricing scenarios, which. By the way, we don't like it as energy providers.

Saying that they're basically looking for more supply into their into their areas and the reason why theyre looking while theyre paying extreme prices in new England is because of lack of pipeline infrastructure plain and simple and without these pipelines, we're going to continue to see these extreme pricing scenarios, which by the way we don't like <unk>.

Providers.

Speaker 1: We want to provide low cost, reliable energy to every American. And why is what's happening in New England relevant? It's relevant to the people in southeastern United States. You need to understand that there is a pipeline that is going to allow you to benefit from low cost, reliable, clean energy.

We want to provide low cost reliable energy to every American and why is what's happening in new England relevant it's relevant to the people in south Eastern United States you need to understand that there is a pipeline that is going to be allow you to benefit from low cost reliable clean energy.

Speaker 1: And this is something that people need to be aware of because you know what's happening in Europe , what's happening in New England, you know is

And this is something that people need to be aware of because.

Whats happening in Europe , whats happening in new England is starts with things like that's happening right now with MVP in the southeastern part of the United States and we really are looking forward to getting that pipeline project.

Speaker 1: starts with things like that's happening right now with MVP in the southeastern part of the United States and we really are looking forward to getting that pipeline project completed.

Completed.

Speaker 2: appreciate the color. And as my follow up, you identified I think 1800 core locations that you all have left. And I think Toby, you mentioned it's about 100 tills for maintenance. But this new well design could kind of cut into that a little bit. Can you give us a sense of like, what kind of productivity uplift can you get from these well designs? And like, what could that till count look like? You know, if it works?

I appreciate the color.

Follow up you identified the <unk> hundred core locations.

<unk> lift and I think Toby you mentioned its about 100 pills for maintenance, but this new well design could kind of cut into that a little bit can you give us a sense of like what kind of productivity uplift can you get from these well designs in like what could that til count look like.

If it works.

Sure so.

Speaker 1: Yep, so the EOR uplifts we're looking at right now are going to be double-digit increases on a percentage basis.

Yes, so the EUR uplift. So we're looking at right now are going to be double digit increases on a percentage basis.

Speaker 1: We're not able to say exactly what that will be dialed in. You know, we have, just to give you some color on what we're doing, you know, our small scale science testing program that we've done over the last couple of years was testing, you know, different pieces of our 37 different well-designed parameters.

We're not able to say exactly what that will be dialed. Then we have just to give you some color on what we're doing.

Small scale science testing program that we've done over the last couple of years was testing.

Different pieces of our 37 different well design parameters.

Speaker 1: Each of those well-designed parameters that we picked have shown uplifts, and now we're combining all of those, the best well-designed parameter uplifts, putting those together, and that's making up our next-gen well design.

Each of those well design parameters that we fix have shown uplifts and now we're combining all of those the best well design parameter uplifts, putting those together and that's making up our next gen well designed so.

Speaker 1: If we assume that we got the uplift from all of those pieces that we're putting together, it would be, you know, pretty, pretty exciting. We're taking a conservative approach right now. So I think by the end of 22, we'll have we'll have a full assessment of what the total impact for all 3 of these. But, I mean. Each of these individual tests were exciting by themselves and putting them together is something that we're looking forward to assessing in 2022.

If we assume that we got the uplift from all of those pieces that we're putting together it would be.

Pretty.

Citing we're taking a conservative approach right now so I think by the end of 'twenty. Two we'll have we'll have a full assessment of what the total impact for all three of these but each of these individual tests were exciting by themselves and putting them together is something that we're looking forward to assessing in 2022.

Speaker 1: You know, and that percentage increase that we get in the EORs will dictate the amount of activity reductions we'll need.

And that percentage increase that we get and that <unk> will will dictate the amount of activity reductions will need.

Understood appreciate it.

Yes.

Thank you.

Speaker 3: Our next question comes from Holly Stewart from Societa Howard-Wale. Your line is now open, please go ahead.

Our next question comes from Holly Stewart.

Howard.

Howard Weil.

Line is now open. Please go ahead.

Speaker 5: Good morning, gentlemen. Maybe first Dave just take it a step further on MVP. You know, how are you thinking about that cash option that expires at the end of 2022 and then as well as your current stake in e-trains.

Good morning, gentlemen.

Maybe let me first Dave just taking it a step further on MVP.

How are you thinking about that that cash option that expires.

At the end of 2022, and then as well as your your current stake in E train.

Speaker 2: Yeah, Holly, it's a great question, you know, just to make sure everybody knows we have all of 2022 to determine whether we want to.

Yes, Holly it's a great question.

Just to make sure everybody knows we have all of 2022 to determine whether we want to.

Speaker 2: take back the fee relief that we put in place for, we'll call it, through the next three years, subject to when MVP comes online.

Take back the fee relief that we that we put in place for we'll call. It through the next three years subject to when MVP comes online and that fee relief was about we'll call it $250 million roughly we could.

Speaker 2: That fee relief was about we'll call it 250M dollars. Roughly we could. Take that back as a, as a check of cash, but for approximately 200M dollars. So. The determination really will be when do we think MVP come online? Right? That's going to be the question mark and and so we'll sit and wait.

Take that back.

As a check of cash.

But for approximately $200 million, so the determination really will be.

When do we think MVP come online right, that's going to be the question Mark and so we will sit and wait.

Speaker 2: and look and see what E-Train says as sort of the timing and then we'll think about whether we pulled the trigger on pulling that cache.

And look and see what E. Train says is sort of the timing and then we'll think about whether we.

We'll pull the trigger on deploying that cash.

Yes.

Okay, and then Youre your stake in the shares.

Speaker 2: Yeah, we'll, you know, we actually sold some shares in the 4th quarter and we'll be thoughtful and when we want to sell them again. And so I think with the.

Yes.

<unk>.

We actually sold some shares in the fourth quarter, and and we'll be thoughtful and when we want to sell them again, and so I think with the with the specter of timing unknown.

Speaker 2: with the specter of timing unknown on MVP, we'll probably be a little patient here given the stock is now below 8 and so we'll wait until.

On MVP.

Probably pay a little patient here given the stock is now below eight and so we'll wait until.

Speaker 2: We get the view on MVP and the timing because I think that's creating a obviously a cloud over each train stop.

We get the view on MVP and the timing because I think thats, creating a obviously a cloud over it and train start.

Speaker 5: Yep, indeed. Okay, thank you. And then, you know, Toby, maybe you mentioned kind of the two big acquisitions that certainly you've done as CEO . Maybe touch on both those deals, you know, what you've learned.

Yes indeed.

Okay. Thank you and then.

Toby maybe you mentioned kind of the two big acquisitions that certainly you've done as CEO , maybe touch on on both of those deals what you've learned.

Speaker 5: And why I guess having those in your asset base kind of excites you as you move into 22, it looks like about 10% of your kills will be in that Alta area. Chevron obviously isn't as easy to separate, but just thinking about those deals specifically.

And why I guess, having those in your asset base kind of excite you as you move into 'twenty two it looks like about 10% of your Youre kills will be in that Alta area, Chevron, obviously isn't as hard isn't as easy to separate but.

Yes, just just thinking about those those deals specifically.

Speaker 1: Yeah, number one, you know, lessons learned, I think.

Yes number one.

Lessons learned I think.

Speaker 1: We're pretty excited about the fact that we've taken a pretty disciplined approach to underwriting these deals.

We're pretty excited about the fact that we've taken a pretty disciplined approach to underwriting these deals.

Speaker 1: We've learned that we, you know, we're conservative and proven to be conservative, seeing the operational up, the operational performance improvements.

Learn that.

We're conservative and proven to be conservative.

On the operational up the operational performance improvements on Chevron with the opex dropping by over 30%.

Speaker 1: on Chevron with the OPEX dropping by over 30 percent. The drilling efficiencies we're seeing in ALTA, hopefully we continue to see more efficiencies as we step more into completion.

The drilling efficiencies, we're seeing and also hopefully we continue to see more efficiencies as we as we step more completions. So I think it's a really great example of this modern operating model, we've built and the teams here.

Speaker 1: I think it's a really great example of this modern operating model we've built and the teams here can unlock the value that we conservatively underwrite. So that's number 1 number 2 again, just being disciplined. We.

Unlock the value that we conservatively underwrite so thats number one.

Number two again just being disciplined.

Speaker 1: Didn't pay we didn't under we didn't pay for any of the, we consider that the lesser quality inventory. We always said, you know, they're in these both these packages, which is a significant amount of tier 2 acres that we always said.

We didn't we didn't we didn't pay for any of the when you consider that.

Lesser quality inventory.

We always said.

And these both these packages.

Significant amount of tier two acreage that we always said.

Speaker 1: If gas prices ever get to 275, there's going to be a tremendous amount of option value unlocked. Well, this is where we're at today. So again, all to say, just to be conservative in our in our approach there. So, you know, that that's been great. I think we're always looking at deals in the future. But anything we do, whether it's M and a or buybacks, I mean, it's all about.

If gas prices ever get to $2 75 is going to be a tremendous amount of option value unlocked well. This is where we're at today. So.

Again, all to say just to be conservative in our approach there so.

That's been great I think we are always looking at deals in the future.

But anything we do whether it's M&A or buybacks I mean, it's all about.

Speaker 1: putting our dollars to the best investments, best rate of return. And given the market today on the M&A landscape...

Putting our dollars to the best investments.

Rate of return.

Given the market today for on the M&A landscape.

Speaker 1: You know, nothing competes with buying our stock and that's been our focus.

Nothing competes with with buying our stock and that's been our focus.

That's great color. Thank you guys.

Thank you.

Speaker 3: Thank you. Our next question comes from Neil Mehta from Goldman Sachs. Your line is now open. Please go ahead.

Yes.

Our next question.

It comes from Neil Mehta from Goldman Sachs. Your line is now open. Please go ahead.

Speaker 2: Thank you, team. The first question is just on unit cash costs. They do move higher in 2022 versus 2021. And just wanted to get your perspective, are we seeing some signs of inflation there? How much of that is a function of higher natural gas prices? Any color around that would be great. How much of that is a function of higher natural gas prices? Any color around that would be great.

Yes.

Thank you team.

First question is just on unit cash cost they do move higher in 'twenty two versus 2021, and just wanted to get your perspective or are we seeing some signs of inflation. There how much of that's a function of higher natural gas prices any color around that would be great.

Speaker 2: Yeah, so we have some, a little bit of midstream impact that went up. We have a little bit of non-op, some non-op costs went up. And then we also signed our gas.

Yes.

So we have some some a little bit of midstream impact that.

That went up.

We have a little bit of non op some non op.

Our costs went up and then we also signed our our gas.

Speaker 2: I'm sorry, a water agreement with E train and PA. Those are probably the 3 pieces that really drove the increase. So and so those are I can even classify a little bit as inflation, but I think it's also some. Updated contracting that we did with the. With the train on the.

I am sorry, a water agreement with E train and those are probably the three pieces that really drove the.

The increase so.

And so those are.

You can classify a little bit of that as inflation, but I think it's also some.

Updating contracting that we did with the with the E train on the on the water deal.

Speaker 2: Dave, it sounds like you have a pretty high confidence interval that's not moving around a ton, despite some of the inflationary environments that we're seeing.

David It sounds like you have it.

Pretty high confidence interval that that's not moving around a ton.

Despite some of the inflationary environment that we're seeing.

Speaker 2: Yeah, I know just an overall view on guidance. You know, when we provide guidance, we do with very high confidence and our goal is to beat guidance and move it up. And so, so just, you know, look at our last 2 years track record. You know, that's been our goal is when we said guidance, we want to, you know, we want to beat our guidance.

Yes.

On an overall view on guidance when we provide guidance.

Do with very high confidence in our goal is to beat guidance and move it up and so so just look at our last two years' track record.

That's been our goal is that when we set guidance, we want to we want to beat our guidance.

Okay.

Speaker 2: And the follow-up is just can you take us into the room for your conversations with the ratings agencies and so is everything on track to get to investment grade and are your credit ratings agencies comfortable with you guys taking an aggressive posture on share repurchases as you've indicated you'll take on this call.

Follow up is just can you take us into the room.

Through your conversations with the ratings agencies.

So.

Is everything on track to get to investment grade and are your credit ratings agencies comfortable with you guys taken an aggressive posture on share repurchases as you've indicated you will take on this call.

Speaker 2: Yeah, so we try to, just like we try to with all our investors, our commercial banks, we have lots of conversations with the rating agencies and we want to make sure they're very comfortable in our glide path back to investment grade. So we've had multiple conversations about our

Yes, so we try to just like we try to work with all our investors our commercial banks, we have lots of conversations with the rainy season.

We want to make sure they are very comfortable in.

Our glide path back to investment grade. So we've had multiple conversations about our our shareholder and capital allocation plan and if you notice.

Speaker 2: our shareholder and capital allocation plan. And if you notice, you know,

Speaker 2: our buyback is very much paired with our debt reduction, right? And we feel that's very prudent from our standpoint to how we manage our balance sheet. And I think they feel comfortable that where we're setting our balance sheet, our goals and our long-term leverage. So it's not about just taking leverage down because that'll happen with higher prices. It's really about taking absolute debt down and that's very important to them and it's very important to us.

Our buyback is very much paired with our debt reduction right and we feel that's very prudent from our standpoint to how we manage our balance sheet.

And I think they feel comfortable that where we're sitting our balance sheet, our goals and our long term leverage. So it's not about just taking leverage down because that will happen with higher prices, it's really about taking absolute debt down and thats very important to them is very important to us.

Thanks, Dave.

Thank you.

Speaker 3: Our next question is now from Neil Dingman from Trustis Securities. Your line is now open, please go ahead.

Our next question is now from Neal Dingmann from trusted Securities. Your line is now open. Please go ahead.

Speaker 6: Good morning, Toby. Guys, question, I'm sure who would like to take it. Just could you talk a bit about, Toby, I love the 10 billion you laid out in pre-cash flow. Could you just talk about some of the assumptions that longer term, such as what you're expecting on pipelines or efficiencies, costs, pay, you or Dave, maybe that's sort of the highlighted item.

Good morning Tobey.

Guys question I'm, not sure who wants to take it just could you talk a bit about there'll be loved the $10 billion you laid out.

Cash flow can you just talk about some of the assumptions that longer term such as what you expected on pipelines or efficiencies cost base.

Your days, maybe that sort of on the high end of the highlighted items of that.

Speaker 1: I'll let Dave put some color on some of the cost assumptions. But I think one of the key things to call out, and probably one of the long-term forecast, the forecast we have is assuming strip pricing, which we know is backwardated. So you're talking about $3.25, $26. Obviously, this business is.

I'll, let Dave put some color on some of the cost assumptions, but I think one of the key things to call out and probably one of the.

Is the long term.

Free cash flow forecast, we have is assuming.

Strip pricing, which we know is backward dated.

So you are talking about $3 $25 26, obviously this business is can.

Speaker 1: can generate a ton more free cash flow in a higher price environment. So I think that that really is probably going to be a big mover. And, you know, I think the, the call on clean energy and the demand for reliable clean energy has never been greater. And we think that, um, what we're seeing with prices here can, can be, is a read through to what we can see in the future. I mean, Neil, I think, I think energy prices have gone a little.

Can generate a ton more free cash flow in a higher price environment.

So I think that that really is probably going to be a big mover in.

The call on clean energy and the demand for reliable clean energy has never been greater and we think that.

What we're seeing with prices here.

<unk> can be.

As a read through to what we can see in the future I mean, Neil I think I think energy prices have gone a little.

Speaker 1: I think have gotten pretty extreme pretty very quickly over this past winter season. But let me remind you this was not a cold winter.

<unk> had gotten pretty extreme pretty very quickly over this past winter season, but let me remind you this was not a cold winter.

Speaker 1: So, what solves, you know, what keeps prices, you know, sustainable and still low cost, but not so volatile is going to be infrastructure and commitment and investment and call on natural gas. We've got the resources to do it, and I think it's going to be a compelling macro setup for us in the longer term of our free casual forecast. Dave, you want to talk about some of the costs?

So what solves.

What keeps prices.

Sustainable and still low costs, but not so volatile is going to be infrastructure and a commitment and investment in call on natural gas. We've got the resources to do it and I think it's going to be a compelling macro setup for us.

And the longer term of our free cash flow forecast, Dave you want to talk about some of the costs we have in there.

Speaker 2: Yeah, so first and foremost, know that embedded into 22.

So first and foremost no that.

Embedded in into into 'twenty two.

Speaker 2: is the new well design cost, we'll call it slightly over 50 million. We really don't have any benefit, material benefit of that new well design in our production. So, just know that as a starting point. We have embedded into our 10 year free cash flow picture cash taxes rising over time.

Is the new well design cost, we'll call it slightly over $50 million, we really don't have any benefit material benefit.

Of that with new well design in our production and so.

So just know that as a starting point.

We have embedded into our 10 year free cash flow picture.

Cash taxes rising over time.

Speaker 2: Basis actually narrowing because of an expectation not only just of MPV coming online, but also the forward curve for Basis improving as well.

Basis actually narrowing because of an expectation not only just of MPV coming online, but also the forward curve for basis, improving as well.

Speaker 2: We have a modest amount of inflation built in there. We have maintenance capital, which declines over time based on our underlying decline rate, as well as having the lower gathering rate.

We have a modest amount of inflation built in there we have maintenance capital.

Which declines over time based on our.

Underlying decline rate as well as having the lower gathering rates.

Speaker 2: that we've highlighted are also due to the gathering agreement that we saw with each range. So it tries to accomplish basically, we'll call it a static picture.

<unk> highlighted are also is due to the gathering agreement that we signed with <unk>. So it's it tries to accomplish basically.

We will call it a static picture.

Speaker 2: with improvement declines and gathering rates with offset with a little bit of inflation and rising cash taxes.

With improvements or declines in gathering rates with offset with a little bit of inflation and rising cash taxes.

Great and then just.

One follow up.

Speaker 1: Go ahead, Tony. Sorry. I was just going to wrap up. I mean, all those things that Dave mentioned are going to be represented in what we're calling our break-even costs to run the business. Which is sub 230. Yeah, which is sub 230 today and going lower.

Go ahead Doug.

I was just going to just going to wrap up I mean, all of those things that Dave mentioned are going to be representative of what we're calling our our breakeven cost to run the business with substitute yes.

Which is sub 230 today and going lower.

Speaker 6: Great, great ad and then just one follow up Toby. Could you just talk about your how you think about sort of the cost benefits of a number of your environmental initiatives? I mean, obviously a lot of your gas to talk about becoming R. G. most recently you have a low carbon initiative and you have. Many other nurses, I mean, to me, it seems like you all seem to be leaning more than these and nearly all your peers and just wondering how you think about this, maybe on a on a cost benefit.

Okay.

Great Great AD and then just one follow Toby could you just talk about how you think about sort of the cost benefits of the number of your environmental initiatives. I mean, obviously a lot of you guys talked about becoming RFG. Most recently you have a low carb initiative.

Many other niches I mean to me it seems.

Seems like you all seem to be leaning more disease and nearly all of your peers and just wondering how you're thinking about this maybe on a cost benefit analysis.

Speaker 1: Yeah, I mean, I think there's real value here with our ESG initiative, specifically on the environmental front.

Yeah, I mean, I think there's real value here.

With with our ESG initiatives, specifically on the environmental front.

Speaker 1: You know, where's the value? The value is in restoring the reputation of natural gas as the solution for the lowest cost, most reliable, cleanest form of energy.

Where's the value the value is and.

Restoring the reputation of natural gas as the solution for the lowest cost most reliable cleanest form of energy there is a major market opportunity for natural gas as we've outlined on one of our slides here.

Speaker 1: There is a major market opportunity for natural gas as we've outlined on one of our slides here. You know globally there's over 400 BCF a day of natural gas demand that's currently being filled.

Internet globally Theres over 400 Bcf a day of natural gas demand. That's currently being filled by burning coal and in a world that cares about climate change the number one thing we can do.

Speaker 1: by burning coal. And in a world that cares about climate change, the number one thing we can do is

Speaker 1: replace foreign coal with clean burning natural gas. Hands down, full stop, the biggest impact we can make on arresting climate change is arresting coal. The answer to do that is with natural gas. How are we going to get on the playing field and play a leading role in this? Is we've got to improve our status and showcase how great we produce and how great we operate from an environmental perspective?

<unk> replace foreign call with clean burning natural gas hands down full stop the biggest the biggest impact we can make an arrest and climate change is arresting coal the answer to do that is with natural gas how are we going to get on the playing field.

And play a leading role in this as we've got it we've got to improve.

Improve our status and showcase how great we produce and how great. We operate from an environmental perspective, if you look at slide 23, one of the simple ways. We can do that is by saying that we're net zero let's.

Speaker 1: If you look at slide 23, one of the simple ways we can do that is by saying that we're net zero. Let's take methane emissions off of the table, which has been a question that we've been getting a lot.

Take methane emissions offer the table, which gets which has been.

A question that we've been getting a lot, but this is great because methane emissions is something that this industry is going to knock out of the park. We've laid out our pneumatic device program. That's the biggest thing we can do across the country at EQT as Dave mentioned.

Speaker 1: But this is great because methane emissions is something that this industry is going to knock out of the park. We've laid out our pneumatic device program. That's the biggest thing we can do across the country at. As Dave mentioned, we're accelerating our pneumatic device retirement program. We're going to be eliminating over 8,000 pneumatic devices this year for a cost of less than $20 million.

Accelerating our pneumatic device retirement program.

We're gonna be eliminating over 8000 nomadic devices this year for a cost of less than $20 million.

Speaker 1: That's going to be a big step towards us getting to be net zero. And by doing

That's going to be a big step towards us getting to be net zero.

And by doing that.

Speaker 1: That's stage 1 for our reputation is eliminating the methane emissions. We're going to do that. The next step is illuminating the performance and that's coming with our certification programs.

That's the stage stage one for our reputation is eliminating the methane emissions, we're going to do that the next step is illuminating the performance and thats coming with our RSV certification programs.

Speaker 1: EQT is one of the largest or is the largest producer of certified natural gas with over 4 Bcf a day.

EQT is one of the largest or is the largest.

Producer of certified natural gas with over four Bcf a day.

Speaker 1: That's over 5% of US net gas volumes are now certified just from EQT alone. And you look at the rest of industry and everybody's.

That's over 5% of U S. Nat gas volumes are now certified just from EQT alone and then you look at the rest of industry and everybody's.

Speaker 1: picking up their part of it and being transparent and rushing to do the RC certification. So the transparency is going to be there.

Picking up their part of it and being transparent and rushing to do the RFC certifications. So the transparency is going to be there.

Speaker 1: And then with eliminating the methane emissions, illuminating how good we are, then we can start talking about the alternating coal with natural gas around the world. What is this ultimately going to do for us, Neil? There are higher price markets.

And then.

Eliminating the methane emissions illuminating how good we are then we can start talking about the alternating.

With natural gas around the world.

What is this ultimately going to do for Us Neal.

There are higher price markets, where people are paying.

Speaker 1: Higher prices for energy, and if we can get infrastructure in place, then we can connect low cost net Pennsylvania, Marcellus, West Virginia, Ohio. Low cost Appalachia gas to these higher price markets.

Higher prices for energy and if we can get infrastructure in place then we can connect low cost net Pennsylvania, Marcellus West, Virginia, Ohio, low cost Appalachia gas to these higher price markets.

Speaker 1: And that's going to create a tremendous opportunity for our investors and also a tremendous cost-saving opportunity for millions of Americans and billions of people around the world.

That's going to create a tremendous opportunity for our investors and also a tremendous cost savings opportunity for millions of Americans and billions of people around the world.

Speaker 1: So I mean, it's a process, but really, really excited about the opportunity in front of us.

So I mean, it's it's a <unk>.

Process, but really really excited about the opportunity in front of us.

Well thanks, Bob.

Got it.

Okay.

Speaker 3: Thank you. Our next question comes from John Abbott from Bank of America. Your line is now open. Please go ahead. Good morning and thank you for taking our questions.

Thank you.

Question comes from John .

From Bank of America.

Line is now open. Please go ahead.

Good morning, and thank you for taking our questions.

David I'm going to direct the first question at you.

Are you one of your hedging strategy in the opening remarks, and then you just discussed the volatility that we're seeing with gas prices.

Speaker 6: And then you just discussed the volatility that we're seeing with gas prices.

Speaker 6: Now, if you look at the cumulative free cash flow through 2026, you're talking about $10 billion.

If you look at the cumulative free cash flow through 2026, you are talking about $10 billion.

Speaker 6: Do you take a more offensive view on hedging at this point in time just to lock in more of that cash flow just given gas volatility?

Do you take a more offensive view on hedging at this point in time just to lock in more of that cash flow just given gas volatility.

Speaker 2: Yeah, so I think the way we approach it now, and really it's, I'll call it an evolution of what we've done before, you know, we look at our balance sheet and our needs, and so we put in hedges with protection that give us a better understanding of what we're doing.

Yes so.

Yes, so I think the way we approach it now and really it's I'll call. It.

And evolution of what we've done before we look at our balance sheet and our needs and and so we put in hedges.

With protection that gives us.

Speaker 2: the needs that we need to cover. What are those? One is we want to cover our CapEx, we want to cover our dividend, we want to cover our debt retirement, we want to cover our stock buyback.

The needs that we need to.

Covering what are those one is we want to cover Capex, we want to cover a dividend we want to cover our debt retirement, we want to cover our stock buyback.

Speaker 2: But in the past, we would use swaps to do it. Now with the market, we can use collars. Soible chat work takes time and we can do whatever we tend

But in the past, we would use swaps to do it now.

With the market, we can use collars so.

Speaker 2: And so by having a strong balance sheet, we don't need to go and hedge at a much higher percentage. So we can hedge or call it a regional percentage to give us that protection.

And so by having a strong balance sheet.

We don't need to go and hedge at a much higher percentage. So we can hedge at a call. It a regional percentage to give us that protection.

Speaker 2: The risk of going too far out into the future is that volatility and we can see how that volatility caught us in 2021. And so I think for us, we're going to go out and we're going to add hedges.

The risk of going too far out into the future is that volatility and and we can see how that volatility caught us in 'twenty, one and so I think for US we're going to go out and we're going to add hedges methodically and we're not going to go out beyond or call. It two years.

Speaker 2: methodically and we're not going to go out beyond or call it two years because we think that volatility will create opportunities for us in the future to be able to lock it in when we want to lock it in and not put us in a position where we feel like we hedge too early and too much. In the case of unconditional volatility something became consistent with the global economic calmscétique.

Because we think that volatility will create opportunities for us in the future to be able to walk in and when we want to lock it in and not and not put us in a position where we feel like we hedged too early and too much.

Speaker 6: Appreciate it. And the other question here is for you, Toby, just going back to the new completion design. Just want to clarify. So this the 50Million dollars, this is being spent in Southwest PA. Is this across a portion of the wells? Is this across all the wells? And have you tested this up in the Northeast or in West Virginia at this point in time? Or is this really applicable to Southwest PA?

Appreciate it and the other question here is for you Toby just going back to the new completion design just wanted to clarify so the $50 million. This is being spent in southwest PA.

Is this across a portion of the wells is it across all of the wells and have you tested this up in the northeast or in West Virginia. At this point in time or is this really a quick applicable to southwest VA.

Speaker 1: Yeah, this is this is applicable to Southwest PA. It's around 30% of our wells are going to have this have this new next generation well design. But the the really the thing we're looking forward to is.

Yes. This is this is applicable to southwest PA.

It's around 30% of our wells are going to have this.

Have this new next generation while design, but.

Really the thing we're looking forward to is applying this next gen design.

Speaker 1: applying this next-gen design across the entire portfolio. And that would mean West Virginia, that would mean Northeastern Pennsylvania. And that's really exciting for us. And I think, you know, we talk a lot about how can EQT leverage our scale? We say, well, scale gives us the ability to invest in two things, infrastructure and technology.

Across the entire portfolio.

And that would mean west Virginia that would mean northeastern Pennsylvania.

And that's that's really exciting for us and I think we talk a lot about how can EQT leverage our scale and we say well scale gives us the ability to invest in <unk> infrastructure and.

In technology.

Speaker 1: And while we've shown you what we've done on the infrastructure side with the big water network in West Virginia, technology is being showcased here. To get these answers and make these design improvements, it's going to cost any company, call it the $50 million. And we're all helped make green water better.

And while we've shown you what we've done on the infrastructure side with the Big water network in West Virginia Technology is being showcased here.

This gift these answers and make these these design improvements, it's going to cost any company call it the $50 million.

Speaker 1: to get these answers. The difference with scale is that that $50 million investment for us is going to translate to many, many, many multiples of value creation because when it's applied to our scale. So, you know, that's, we're excited about looking forward to the results here in 22, and we'll keep everybody updated on the progress as it comes in.

To get these answers the difference with scale is that that $50 million investment for us is going to translate to many many many multiples of value creation, because when its applied to our scale.

So we're excited about looking looking forward to the results here in 'twenty, two and we'll keep everybody updated on the progress as it comes in.

Thank you for the color I appreciate you taking our questions.

Got it thanks John .

Speaker 3: Thank you. Our next question comes from Jeffrey Lambejian from Tudor Pickering Holt & Co. Your line is now open. Please go ahead.

Thank you. Our next question comes from Jeffrey lung. Thank.

The young from Tudor Pickering Holt. Your line is now open. Please go ahead.

Speaker 2: Good morning and thanks for taking my questions. If I could ask maybe 1 follow up to the new well design, maybe on the technical aspects. I appreciate the color on the expected free cash flow improvement. Across the plan, and what the testing entail pulling all from all the different well design to use historically, but is there anything more you can share just on what some of those parameters are that are moving around in these new designs and maybe what the improvement at the well level could look like? You know, just assuming things play out in line with how you are modeling internally.

Good morning, and thanks for taking my questions and if I could ask maybe one follow ups and new well design, maybe on the technical aspects and I appreciate the color on the expected free cash flow improvement.

Across the plan and you know what the testing entail pulling all from all the different logos onto your used historically, but is there anything more you can share just on what some of those parameters are that are moving around.

Signs and maybe what the improvement at the well level could look like just assuming things play out in line with how you are modeling it internally.

Speaker 1: Yeah, I don't want to get too much into the details, but I will tell you this. One of the biggest factors to improve well design is spacing, and we're not touching spacing. So the things that we are doing are going to be things where we still have flexibility. So we're not setting ourselves up to completely commit to this. We are preserving a lot of flexibility in the design parameters that we selected as this next chance.

Yes, I don't want to get too much into the details, but I will tell you. This.

One of the biggest factors to improve well design and spacing.

And we're not touching spacing so.

The things that we are doing are going to be things, where we still have flexibility.

We're not setting ourselves up to.

To completely commit to this we are preserving a lot of flexibility in the design parameters that we selected as this nextgen.

Speaker 1: design. So I think that's really, really important.

Design, So I think that's really really important.

Speaker 1: We're confident it's going to be favorable, but we've got that flexibility baked in. And there's still other, like I said, other big parameters like spacing or other levers we can pull. Those are more prone to the gas environment you expect, but that's another lever that's in the back of our heads that we're evaluating as well.

We're confident is going to it's going to it's going to be favorable, but we've got that flexibility baked in.

There are still other like I said other big parameters like spacing or other levers we can pull.

Those are more.

Prone to gas environment, you expect but that's another lever that's in the back of our heads that we're evaluating as well.

Speaker 7: Okay, great. That's helpful. And then maybe just on the service outlook and understanding that inflation is the main driver of the year of year increase as well cost before considering that new design. I was just hoping to get a sense for what you're seeing today. If it's below that 760 level on well cost and something you expect to trend higher throughout the year to kind of average at that level. Or if you're already there and looking forward to kind of steady from here and then longer term would just be great to hear what kind of inflation is embedded in the multi year outlook at this point.

Okay, Great. That's helpful. And then maybe just on the service outlook and understanding that inflation as the main driver of the ERP or increase in well cost before considering that new design I was just hoping to get a sense for what youre seeing today.

Below that.

760 level on well cost and it's something you expect to trend higher throughout the year to kind of average at that level or if you're already there and looking forward to kind of steady from here and then longer term, we'll just be great to hear what kind of inflation is embedded in the multi year outlook at this point.

Speaker 1: Sure, so with inflation, we've got a lot of our services locked in. So.

Sure so with inflation, we've got a lot of our services locked in so.

Speaker 1: feel like that's pretty much there. There are some things that we think will hopefully alleviate in the back half of this year or towards the end of the year and that's largely one of the bigger drivers in inflation that you're seeing across the country and that's steel.

I feel like that that's pretty much there there are some things that we think will hopefully alleviate in the back half of this year or towards the end of the year and that's largely one of the bigger drivers of inflation that you're seeing across the country and Thats steel.

Speaker 1: So, we are hopefully optimistic that that will correct towards the end of this year. And then just sort of the other stuff that, you know, is the constant grind every day is just making sure we have the right access to the right amount of materials, logistics, and those are things that we can do proactively hustling every day to stay ahead of it and hopefully mitigate some of the inflation impacts that we're seeing.

So we are hopefully optimistic that that will correct towards the end of this year.

And then just sort of the other stuff that that is the constant grind every day.

Just making sure we have the right access to the right amount of materials logistics and.

Those are things that we can do proactively hustling every day to stay out of it and hopefully mitigate some of the inflation that impacts that we're seeing.

Speaker 1: And to your last question, yeah, to your last question going forward, I mean, we are anticipating that inflation will abide, but we do have inflation baked into our forecast.

And to your last question, Yes, it's your last question.

Going forward I mean, we are anticipating that inflation will abide by.

But we do have we do have inflation baked into our forecast.

Okay I appreciate it.

Thank you.

Speaker 3: Our next question is from Nitin Kumar from Wales Fargo. Your line is now open, please go ahead.

Our next question is from Milton <unk> from Wells Fargo. Your line is now open. Please go ahead.

Speaker 8: Hi, good morning and thanks for squeezing in. I guess I want to start with a big picture question for you guys. Toby, you've mentioned the opportunity for the US and any QD in particular. But you are kind of landlocked and it's hard to access those international markets. Some of your peers took a different approach last year going outside the base. And I heard you talk about M&A in your prepared remarks. But just what is your sense of

Hi, good morning, and thanks for squeezing me in.

I guess I'm going to start with a big picture question for you guys Adobe you mentioned.

The opportunity for the U S and EQT in particular.

But you kind of landlocked and it's hard to access those international markets. Some of your peers took a different approach last year.

Going outside the basin I heard you talk about M&A in your prepared remarks, but just.

What is your sense of <unk>.

Speaker 8: comfort that things might open up, if not this year, next year, but in some foreseeable future? Or does that force you to maybe look outside the basin for that growth?

<unk> that things might open up.

Not this year next year in some foreseeable future or does that force you to maybe look outside the basin for that growth.

Speaker 1: Well, one thing I would say is LNG exports.

Well, one thing I would say as LNG exports.

Speaker 1: and whether it's in Gulf Coast or anywhere in the United States, is going to benefit natural gas producers, just serving as an outlet for.

And whether it's in Gulf coast or anywhere in the United States.

Is going to benefit natural gas producers.

Serving as an outlet for.

Speaker 1: by creating new demand for every operator. So while we do have access to Gulf Coast through our FT portfolio, we do have the opportunity to touch that. As far as your question about being landlocked.

By creating new demand for every operator so.

While we do have access to Gulf coast through our ft portfolio.

We do have the opportunity to touch that.

Far as your question about being landlocked.

Speaker 1: This definitely is going to require more than EQT. It's going to require more than just this industry. It's going to require leadership.

This definitely is going to be it's going to require more than EQT, it's going to require more than just this industry, it's going to require leadership.

Speaker 1: to use their voice and claim their energy security. This means we need to take a look at pipeline projects and people that are concerned about rising energy prices in New England.

To use their voice and claim their energy security.

This means we need to take a look at pipeline projects and.

People that are concerned about rising energy prices in new England.

Speaker 1: Let's remind them that there's 8 B. C. F. a day of pipeline projects out of the Northeast that have been canceled or canceled or opposed. Those are projects that we can revive breathe life into. Bring those back in line and give the energy security to places like New England. 1 thing that that's really. Key to understand though, is our biggest natural gas fields in the country and in the world. The Marcellus.

Let's remind them that theres eight Bcf a day of pipeline projects out of the northeast that have been canceled or canceled or oppose those are projects that we can revive breathe life into bring those back in line and give the energy security to places like New England.

One thing that's really key to understand though is our biggest natural gas fields in the country and in the world The Marcellus.

Speaker 1: is going to be the answer for

<unk> is going to be the answer for.

Speaker 1: for doing more, supplying more LNG to the world and to the rest of America. And so getting pipeline access out of Appalachia has got to be a...

For doing more supplying more LNG to the world and to the rest of America, and so getting pipeline access out of Appalachia has got has got to be a.

Speaker 1: very big focus for us, just given the amount of reserves that we have here in Appalachia. And just to put this in perspective for everybody, Appalachia has more reserves in place than Russia. So it's incredibly important that we focus on this. I think people have identified the issues with the energy ecosystem. And the answer is the Marcellus, the answer is more pipelines out of New England. It really is that simple. And the prize is absolutely tremendous, both here domestically and for the world being able to get off a foreign coal.

Very big focus for us just given the amount of reserves that we have here in Appalachia and just to put this in perspective for everybody Appalachia has more reserves in place then Russia. So it's incredibly important that we focus on this I think people have identified the issues with the energy ecosystem.

And the answer is the Marcellus the answer is more pipelines out of new England. It really is that simple.

Enterprise is absolutely tremendous both here domestically and four.

The world being able to get off of foreign Cole.

Speaker 8: Great, yeah, and from, I guess, for my follow up question is a little bit narrower focus. And when you get the oil to deal pro forma production was about 5.6 PCFE a day.

Great.

I guess for my follow up question is a little bit narrower focus when you dip deal to deals pro forma production was about five six Bcf a day.

Speaker 8: Guidance for this year is not too terribly different, but it is a little bit weaker despite 30% of the wells having this new technology. Just want to understand the puts and takes here. Is this just timing? Is it risking? Just if you can help us understand the slight decline in production despite a maintenance program.

Guidance for this year it is not too terribly different but it is a little bit weaker.

Despite 30% of the wells, having this new technology.

Understand the puts and takes here.

Is this just timing is it risking.

You can help us understand dislikes.

Decline in production, despite a maintenance program.

Speaker 2: Yeah, Nitin, we actually do risk our production, but I would just say, again, we put guidance out there. Hopefully, we're going to meet or beat. And so I think just stay tuned and you'll see how we execute this year. So, you know, last couple years as we've...

Yes.

We actually do risk our production, but I would just say.

Again, we put guidance out there hopefully we're going to meet or beat and so I think.

Just stay tuned and you'll see how we.

Execute this year so.

Last couple of years as we've.

As we showed the productivity and efficiency improvements.

Speaker 2: show the productivity and the efficiency improvements in our wells.

And our wells, we effectively instead of growing production, we've actually taken capex down so.

Speaker 2: We effectively, instead of growing production, we've actually taken capex down. So. You know, so we'll we can we can decide if we want to grow a little bit this year and not take that efficiency or we'll continue to solve for a call it. Reducing our capex, which is probably what we'll end up doing. So. I wouldn't read too much into our production guidance.

So we will we can we could decide if we want to grow a little bit this year and not take that efficiency or will continue to solve for a call it reducing our capex, which is probably what will end up doing so.

I wouldn't read too much into our production.

Guidance.

Great. Thanks for the answers guys.

You won't get it.

Speaker 3: Thank you. Our next question comes from Noel Park from TUI Brothers. Your line is now open. Please go ahead.

Thank you. Our next question comes from Noel Parks from Tuohy Brothers.

Line is now open. Please go ahead.

Hey, good morning.

Good morning.

Speaker 4: Just had a couple things. On the ESG fund, I very much resonate with your comments about the industry's role in...

Good morning.

Just had a couple of things.

On the ESG front.

It's Ben.

Very much resonate with your comments about the industry's role in.

Speaker 9: educating policymakers, the public on the importance of natural gas while on the road to

Educating policymakers the public on the importance of natural gas.

While on the road to alternatives.

Speaker 9: And something I've heard from some time is that in Europe , they're just there. They're having been more aggressive on climate goals over the past decade or so, that there is more realism there, even within the environmental lobby about the need for natural gas. And I just wonder if you see signs of...

And.

Something I've heard from some time is that.

In Europe there.

Just with their having been more aggressive on climate goals over the past decade, or so that there is more realism there.

Within the environmental lobby about the need for natural gas.

And I just wonder if you see signs of.

<unk>.

Speaker 9: that awareness moving or making its way over here, either in terms of the rhetoric or even more concretely in terms of international European concerns approaching you trying to talk about long-term supply.

Awareness, moving or making its way over here either in terms of.

The rhetoric or even more concretely in terms of.

Internationally European concerns.

Approaching you.

Trying to talk about long term.

The supply agreement.

Speaker 1: Yes, we have seen a lot of movement and change favorably towards natural gas happening in Europe . I think most significantly is marking nuclear and natural gas as green energy options. That's really exciting. In my perspective, Europe is probably five years ahead of the United States when it comes to how they think about climate and influencing policies.

Yes, we have seen a lot of movement and change.

<unk> towards natural gas happening in Europe , I think most significantly is marking nuclear and natural gas as green energy options Thats really exciting.

And my perspective, Europe is probably five years ahead of the United States and it comes to how they think about climate and influencing policies.

Speaker 1: Europe is put over 25% of their grid on renewables and they're seeing the impacts of sacrificing reliable clean energy and just prioritizing the green stuff. So it's a good.

Europe has put over 25% of their grid on.

<unk>.

And they are seeing the impacts of of sacrificing reliable clean energy and just prioritizing the green stuff. So it's a good.

Speaker 1: It's a good lesson for us to look at here. And yeah, I mean, there's issues that are showing up here in the United States, specifically New England, but

It's a good lesson for us to look at here.

And yes, I mean, theres issues that are showing up here in the United States, specifically, new England, but.

Speaker 1: Not just the new 1, but I mean, energy outages are a thing across the country. I think last call I talked about. You know, there being over 19,000 blackouts in the United States over the last 10 years, the blackout happening every 3 hours. So. We clearly need more reliability, more energy security here in the United States.

Not just in new England.

Energy outages are a thing across the country I think last call I talked about there being over 19000 blackouts in the United States over the last 10 years of blackout happening every three hours so.

We clearly need more reliability more energy security here in United States and the good news is we've got a solution in its U S natural gas and we've got a lot of it when.

Speaker 1: And the good news is we've got a solution and it's U.S. natural gas and we've got a lot of it. We can provide the lowest cost, most reliable clean energy in the world here. So, yeah, I mean, we've got a really credible solution. I think people are opening their eyes to, you know, that this needs to be a balanced approach. We need to do more renewables. We need to do more natural gas.

And we can provide the lowest cost most reliable clean energy in the world here. So yeah. We've got a really credible solution I think people are opening their eyes to this needs to be a balanced approach we need to do more renewables, we need to do more natural gas.

Speaker 1: And it's got to be a complete team effort here. And we're definitely going to be, I think Natural Gas is the best player we can put on the field. But total, it's definitely going to be a team effort.

And it's going to.

It's got to be a complete team effort here and we're definitely going to be I think natural gas is the best player. We can put on the field.

Total definitely going to be a team effort.

Yes.

Speaker 9: Great, thanks a lot. I just wanted to ask about inflation and a higher interest rate environment.

Great. Thanks, a lot.

And then I just wanted to.

Ask about inflation and a higher interest rate environment.

Speaker 9: just wondered what sort of impact that might have on your thinking strategically either.

Just wondered what sort of impact that might have on your thinking strategically.

Either in terms of.

Speaker 9: M&A or in terms of maybe, you know, divestment of some of your less core areas.

M&A or Oregon comes with maybe divestment of.

Some of your less core.

Which areas.

Speaker 9: But I mean, thinking about the difference between say whether inflation and higher rates are going to be like a one year story, essentially just a ripple off of COVID, or we're looking for more like a five year story of

But I mean thinking about the difference between say whether inflation and higher rates are going to be like a one year story essentially just.

A rip off of Covid over there we're looking for more like.

Our five year story of.

Speaker 9: of inflation and higher rates. Just wondering in your modeling how you look at that cost of capital impact.

Of inflation and higher rates I'm, just wondering in your modeling how you how you look at that cost of capital impact.

Yes, so it's actually a very Ensing question, you ask because obviously people are looking at inflation and everybody is very aware of the accelerating inflation.

Speaker 2: Yeah, so it's actually a very interesting question you asked because obviously people are looking at inflation and everybody's very aware of the accelerating inflation.

Speaker 2: So on one hand, you think about it, commodities are the natural net beneficiary of a rising inflationary environment and

So on one hand, you'd think about it <unk>.

Commodities are natural net net beneficiary of rising inflationary environment and the underinvestment across all commodities.

Speaker 2: the underinvestment across all commodities is driving some of that. And so that means as

Is driving some of that and so that means as demand continues to grow supply is not keeping up and so we're going to get the net beneficiary of rising natural gas prices.

Speaker 2: Demand continues to grow supply is not keeping up and so we're going to get the net beneficiary of rising natural gas prices and and also exacerbated. But this inflation by the rise in the cost of carbon. And the, and the impacts it has on coal and and more we'll call it.

And and it's also exacerbated this inflation by the rise in the cost of carbon and the impacts it has on coal in.

More.

We'll call it.

Speaker 2: polluting fuels from a carbon basis. So we'll, you know, gas will be the net benefit. On the flip side, we're generally rising free cash flow and we're going to retire our debt. And so.

Polluting fuels from our carbon basis, so gas will be the net beneficiary on the on the flip side, we're generally rising free cash flow and we're going to retire our debt and so.

Speaker 2: when you have a rising interest rate environment, that will cost, that will drive our yields a little bit higher, our

When you have a rising interest rate environment that will cost that will drive our.

Our our yields a little bit higher.

<unk>.

Speaker 2: Our principal payments down a little bit as well and so we'll be able to retire our debt a little bit cheaper as well. And so, and then, you know, the way we effectuate our cost of capital is by buying back our stock. We can meaningfully.

Our principal payments down a little bit as well and so we will be able to retire our debt a little bit cheaper as well and so and then the way we effectuate our our cost of capital is by buying back our stock we can meaningfully close the gap on what R. R.

Speaker 2: close the gap on what our equity cost of capital is, and we can actually lower our cost of debt by retiring our debt. So our capital allocation program is absolutely.

Our equity cost of capital is and we can actually lower our cost of debt by retiring our debt. So our capital allocation program is absolutely.

Speaker 2: helping us drive our weighted average cost of capital down over time. So it's a really good question. It's really good theoretical question that we're trying to make sure that we catalyze it into real value.

Helping us drive our weighted average cost of capital down over time. So it's a really good question is really good theoretical question that we're trying to make sure that we capitalize it into real value.

Great. Thanks, a lot.

Okay.

Thank you.

Speaker 3: Our next question comes from Josh Silverstein from Wolf Research. Your line is now open, please go ahead.

Our next question comes from Josh Silverstein from Wolfe Research. Your line is now open. Please go ahead.

Speaker 4: Yeah, thanks. Good morning guys. Maybe just sticking to the investment grade question here, but what happens right away when that trigger happens? Like how much working capital can come off? Do the letters of credit go right away? And then on the same subject, you mentioned the slide that you need investment grade for potentially doing something related to LNG pricing. What is that referring to? Are you able to track something as CTF or JKM pricing? So just a little bit more detail there.

Yeah. Thanks, Good morning, guys, maybe just sticking to the investment grade.

A question here.

Right away.

When that trigger happens.

How much working capital can come up with orders of critical right away and then on the same subject you mentioned in the slide.

You need investment grade for potentially doing something related to LNG pricing.

Referring theatre, Youre able to inject something ETF ridiculous pricing just a little more detail there.

Yes so.

Speaker 2: So when we get upgraded by Invest with Grade.

So when we get upgraded by investment grade.

Speaker 2: We'll call it materially, if not all of our letters of credit, the four in a million will go away. And so that means our liquidity will pop by another, we'll call it four in a million. I'll call some other things that will happen. So for each

We'll call it materially if not all of our letters of credit to 400 million will go away and so that that.

That means our liquidity will equal pop by another we'll call it $400 million.

We have some I'll call some other things that will happen so.

Four.

Each upgrade we get.

Speaker 2: upgrade, we get 25 basis improvements on our 2025 and 2030 debt. So our interest expense will come down. I think we have another 50 or 75 basis point improvement there. So interest expense will improve.

25 basis improvements on our on our 2025 and 2030 debt. So our interest expense will come down I think we have another 50 or 75 basis point improvement there. So interest expense will will improve.

Speaker 2: And you know and at some point we're going to redo our revolver and that obviously that'll be a net beneficiary for Extending out a revolver. We'll call it four or five years.

And at some point, we're going to redo our revolver.

Obviously that'll that'll be a net beneficiary for extending out our revolver.

Or five years so.

Speaker 2: So that's what we'll call the capital act part of it.

So that's called the capital part of it.

Speaker 2: We're having lots of conversations right now with LNG players across the whole chain. Our goal would be to have something locked up for 2022.

We're having lots of conversations right now with LNG player.

Players across the whole chain and so our goal would be to have something locked up for 2022, and obviously our goal would not be to sign something up for call. It with the Henry hub price it would be to tie it to international prices and so that would be something that help us drive our.

Speaker 2: Our goal would not be to sign something up or call it with a Henry Hub price. It would be to tie it to international prices. And so that would be something that help us, you know, drive our realizations up pretty meaningful when we do it.

<unk> up pretty meaningful when we do it.

Got it and then second for me.

You mentioned kind of the herculean effort, that's needed to get new infrastructure, Bill, but what happens if nothing gets like Dubai access into the pipelines like you did with the <unk> deal how do you work around that.

Speaker 1: Yeah. What happens is, is, you know, the, the potential of the Marcellus, you know, stays throttled and that's going to, that's going to mean a continued maintenance, this discipline maintenance program. And EQT will be generating a lot of free cash flow in that situation. You know, one of the unique things about EQT is let's always think about how can companies grow? One of the unique things about EQT is.

Yeah.

It happens as the the.

The potential of the Marcellus stays throttled and that's going to that's going to mean a continued maintenance.

Disciplined maintenance program and EQT will be generating a lot of free cash flow in that situation.

One of the unique things about EQT.

I always think about how can companies grow one of the unique things about EQT is.

Speaker 1: we are going to grow our free cash flow per share even in a maintenance mode.

We are going to grow our free cash flow per share even in a maintenance mode.

Speaker 1: I think that is incredibly unique for us and even with gas prices going down at 23, our free gas flow is going to grow and our yield is going to go from 20% to 30% from 22 to 23.

I think that is incredibly unique.

For us and even with gas prices going down in 'twenty three our free cash flow is going to grow and where our yield is going to go from 20% to 30% from 'twenty two to 'twenty three.

Speaker 1: So listen, I hope we have the opportunity to, I would love to see.

So listen I hope, we have the opportunity to I would love to see sustainable demand, where we can secure.

Speaker 1: sustainable demand where we can secure higher prices than what we're getting locally here.

Higher prices.

Then what we're getting locally here.

Speaker 1: and we can secure that supply with the long-term demands so we're not throwing the supply demand fundamentals out of whack. That opportunity I hope presents itself and we'll be pushing for it.

And we can secure that supply with the long term demand. So we're not throwing the supply demand fundamentals out of whack that opportunity.

Hope presents itself and we will be pushing for it.

Speaker 1: But, you know, up until then, we're sort of just out here being a letting everybody know the solution that's here and we're more than willing to go out there and help. But we definitely have growth in our business, but it's not going to be from production without the sustainable demand signal.

But.

Up until then we're sort of just out here being a letting everybody know the solution. That's here and we're more than willing to go out there and help but we definitely have growth in our business, but it's not going to be from production without the sustainable demand signal.

Okay.

Okay.

Speaker 3: Thank you. There are no additional questions waiting at this time so I'll pass the conference over to Toby Rice for closing remarks.

Thank Keith.

There are no additional questions waiting at this time, so I'll pass the conference over to Toby.

<unk> for closing remarks.

Speaker 1: Thank you. You know, over the past couple years, I got a question a lot, you know, told why are you doing this, you know, the takeover, the turnaround of this business, it was incredibly a lot of work. The reason why we went through this is to be in this position today. This is the prize, the momentum that this company has built over the years.

Thank you.

Over the past couple of years I got a quick question a lot. So why are you doing this.

To take over the <unk>.

Turnaround of this business it was incredibly a lot of work.

The reason why we went through this is to be in this position today. This is the price the momentum that this company has built over the years.

Speaker 1: is tremendous. The free cash flow momentum we have is really starting to show up and we're really excited about continuing this rate of change story and delivering for our shareholders. Thank you.

Is tremendous the free cash flow momentum we have.

Is really starting to show up and we're really excited about continuing this rate of change story and delivering for our shareholders. Thank you.

Okay.

Speaker 3: That concludes today's conference call. Thank you for your participation. You may now disconnect your line.

That concludes today's conference call. Thank you for your participation you may now disconnect your line.

Okay.

Okay.