Q1 2024 EQT Corp Earnings Call - Q&A

Operator: Good morning. My name is Brianna, and I will be your conference operator today. At this time, I'd like to welcome everyone to the EQT first quarter 2024 results conference call. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Brianna and I'll be your conference operator today.

At this time I'd like to welcome everyone to the EQT first quarter 'twenty 'twenty four results conference call.

All lines have been placed on mute to prevent any background noise.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question at this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. I would now like to turn the conference over to Cameron Horwitz, Managing Director, Investor Relations and Strategy. Please go ahead.

After the Speakers' remarks, there will be a question and answer session.

I would like to ask a question at this time simply press star followed by the number one on your telephone keypad.

If you would like to withdraw your question Press Star one a second time.

I would now like to turn the conference over to Cameron Horwitz, managing director of Investor Relations and strategy. Please go ahead.

Cameron Jeffrey Horwitz: Good morning, and thank you for joining our first quarter 2024 earnings results conference call. With me today are Toby Rice, President and Chief Executive Officer, and Jeremy Knop, Chief Financial Officer. In a moment, Toby and Jeremy will present their prepared remarks, followed by a question and answer session. An updated investor presentation has been posted to the investor relations portion of our website, and we will reference certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening.

Good morning, and thank you for joining our first quarter 2024 earnings results Conference call with me today are Toby Rice, President and Chief Executive Officer, Jeremy <unk>, Chief Financial Officer.

Moment, Toby and Jeremy will present their prepared remarks with a question and answer session to follow and updated investor presentation has been posted to the Investor relations portion of our website and we will reference certain slides during today's discussion.

A replay of today's call will be available on our website. Beginning this evening I'd like to remind you that today's call may contain forward looking statements actual results and future events could materially differ from these forward looking statements because of factors described in yesterday's earnings release, and our Investor presentation. The risk factors section of our Form 10-K and in subsequent filings.

Cameron Jeffrey Horwitz: I'd like to remind you that today's call may contain forward-looking statements. However, actual results and future events could materially differ from these forward-looking statements because of factors described in yesterday's earnings release, in our investor presentation, the risk 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. Today's call also contains certain non-GAAP financial measures. Please refer to our most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Toby.

With the SEC, we do not undertake any duty to update any forward looking statements. Today's call also contains certain non-GAAP financial measures. Please refer to our most recent earnings release and Investor presentation for important disclosures regarding such measures.

Including reconciliations to the most comparable GAAP financial measures.

With that I'll turn the call over to Tobi.

Toby Z. Rice: Thanks, Cam, and good morning, everyone. Last month, we announced our agreement to acquire Equitrans Midstream, a transaction that will transform EQT into America's first vertically integrated large-scale natural gas business. As we described in our conference call last month, this deal catapults EQT to the absolute low end of the North American natural gas cost curve, providing free cash flow durability in the lower parts of the commodity cycle while simultaneously unlocking unmatched price upside by mitigating defensive hedging needs, thus providing investors with peer-leading risk-adjusted exposure to natural gas prices. This combination is anticipated to drive our long-term free cash flow breakeven price to approximately $2 per million BTU, which is $0.75 below the peer average and $1.50 below the marginal cost of supply in Hainesville.

Tobi: Thanks, Cam and good morning, everyone last month, we announced our agreement to acquire <unk> midstream transaction that will transform EQT into Americas first vertically integrated large scale natural gas business. As we described on our conference call last month. This deal catapult EQT to the absolute low end of the North American natural gas.

Tobi: <unk> cost curve, providing free cash flow durability in the low parts of the commodity cycle, while simultaneously unlocking unmatched price upside by mitigating defensive hedging needs, thus, providing investors with peer leading risk adjusted exposure to natural gas prices. This combination is anticipated to drive our long term free cash flow breakeven.

Tobi: This to approximately $2 per million Btu, which is 75 below the peer average and a $1 50 below the marginal cost of supply in the Haynesville. This gap between EQT and both average and marginal natural gas producers is a sustainable advantage, which is rare to find among any commodity business and insurers.

Toby Z. Rice: This gap between EQT and both average and marginal natural gas producers is a sustainable advantage, which is rare to find among any commodity business, and ensures EQT is best positioned to create through-cycle value for shareholders while other producers are forced to either chase commodity prices with the drill bit in a similar fashion to what has led to historical industry value destruction or defensively hedge a significant amount of production, thus limiting the ability to capture value in the up cycle. Along with the material cost structure advantage, the combination of EQT and Equitrans will also create an integrated well-to-watch solution that will help enable and power growing demand associated with the data center and artificial intelligence booms that are burgeoning across the southeast and mid-Atlantic regions of the United States.

Qt is best positioned to create Bruce cycle value for shareholders. While other producers are forced to either chase commodity prices with the drill bit in a similar fashion to what has led to historical industry value destruction or defensively hedged a significant amount of production, thus limiting the ability to capture value in the up cycle.

Tobi: Along with the material cost structure advantage the combination of EQT and <unk> will also create an integrated well to walk solution that will help enable and power growing demand associated with the data center and artificial intelligence booms that our burgeoning across the southeast and mid Atlantic regions of the United States. Our base case view suggested.

Toby Z. Rice: Our base case view suggests the proliferation of data centers, along with growth in other electricity-intensive markets, such as electric vehicles, could drive an incremental 10 BCF per day of natural gas demand by 2030, while there is a plausible upside case that could take this number up to 18 BCF per day.

Tobi: Proliferation of data centers, along with growth in other electricity intensive markets such as electric vehicles to drive an incremental 10 Bcf per day of natural gas demand by 2030, while there is a plausible upside case that could take this number up to 18 Bcf per day.

Toby Z. Rice: This means growth in the power generation segment could exceed LNG exports as a bullish demand catalyst for the natural gas market this decade, and this structural baseload demand growth story resides at the doorstep of our asset base. Our 1.2 BCF a day of capacity on MVP, along with the long term firm sales arrangements we announced with investment grade utilities last year, means EQT's low emissions natural gas will be a key facilitator of the data center build out occurring in the southeastern United States, and will give us significant exposure to premium transco zones four and five price, Due to the confluence of LNG facilities pulling gas south on Transco and power demand growth in the southeast, we expect this region will become even more desirable than the Gulf Coast later this decade.

Tobi: This means growth in the power generation segment that exceed LNG exports as a bullish demand catalyst for the natural gas market. This decade, and this structural base load demand growth story resides at the door step of our asset base our.

Tobi: Our one two Bcf a day of capacity on MVP, along with the long term firm sales arrangements, we announced with investment grade utilities last year means eqt's low emissions natural gas will be a key facilitator of the datacenter both buildout occurring in the southeastern United States and will give us significant exposure to premium transco.

Tobi: <unk> four and five price points.

Tobi: Due to the confluence of LNG facilities pulling gas south on Transco and power demand growth in the southeast. We expect this region will become even more desirable than the Gulf Coast. Later this decade as a result, we intend to pursue an expansion of MVP through additional compression to increase capacity from two to two five.

Toby Z. Rice: As a result, we intend to pursue an expansion of MVP through additional compression to increase capacity from 2 to 2.5 BCF per day, which will provide additional affordable, reliable, and clean Appalachian natural gas to our downstream utility customers. On top of the tremendous opportunity to service customers in the Southeast, where we already have a first mover advantage through our record-sized physical gas supply deals with utilities we announced last fall, EQT is ideally situated to meet significant growth in power demand within PJM as well. Our analysis suggests the combination of data center build-outs and additional coal retirements could generate up to 6 BCF a day of incremental natural gas power demand in our own backyard by 2030.

Tobi: Bcf per day, which will provide additional affordable reliable and clean Appalachian natural gas to our downstream utility customers.

Tobi: On top of the tremendous opportunity to service customers in the southeast where we already have first mover advantage through our record sized physical gas supply deals with utilities, we announced last fall EQT is ideally situated to meet significant growth in power demand within PJM as well our analysis suggests that the combination of <unk>.

Tobi: Data center build outs and additional coal retirements could generate up to six Bcf a day of incremental natural gas power demand in our own backyard by 2030.

Toby Z. Rice: Whether it's in the southeast or at the doorstep of our asset base in Appalachia, EQT is well positioned to capture this thematic tailwind through our material inventory depth and integrated business model that will create a one-stop shop to provide clean, reliable, and affordable natural gas that will be foundational to meeting America's power needs as we embark on what will be a transformational journey into the age of AI. Turning briefly to first quarter results, the significant operational momentum we achieved last year has carried into 2024, which facilitated better than expected results across our drilling and completion teams in Q1.

Tobi: Whether it's in the southeast or at the door step of our asset base in Appalachia EQT is well positioned to capture this thematic tailwind through our material inventory depth and integrated business model that will create a one stop shop to provide clean reliable and affordable natural gas that will be foundational to meeting America's power needs as we embark on what we.

Tobi: B, a transformational journey into the age of AI.

Tobi: Turning briefly to first quarter results the significant operational momentum we achieved last year has carried into 2024, which facilitated better than expected results across our drilling and completion teams in Q1.

Toby Z. Rice: The continuation of highly efficient operational execution, along with strong well performance and lower than expected LOE associated with our water infrastructure investments, drove performance relative to consensus expectations across every major financial metric during the first quarter. We continue to find new, innovative ways to push the envelope of what is possible, and I want to thank our entire crew for their relentless pursuit of operational excellence.

Tobi: Continuation of highly efficient operational execution, along with strong well performance and lower than expected LOE associated with our water infrastructure investments drove outperformance relative to consensus expectations across every major financial metric during the first quarter, we continue to find new innovative ways to push the envelope of what is <unk>.

Tobi: <unk> and I want to thank our entire crew for their relentless pursuit of operational excellence.

Toby Z. Rice: Shifting gears, last week we announced an agreement with Equinor to sell a 40% undivided interest in our non-operated natural gas assets in Northeast Pennsylvania. Consideration is comprised of $500 million of cash and upstream and midstream assets worth more than $600 million, implying EQT is receiving a total value north of $1.1 billion in this transaction. For perspective, we attributed approximately $1.1 billion of value to 100% of the Northeast PA non-op assets when we originally acquired them as part of our ALTA acquisition, and the assets have already generated free cash flow in excess of that amount in the past two years.

Tobi: Shifting gears last week, we announced an agreement with <unk> to sell a 40% undivided interest in our non operated natural gas assets in northeast, Pennsylvania consideration is comprised of $500 million of cash in upstream and midstream assets worth more than $600 million in.

Tobi: Implying EQT is receiving total value north of $1 1 billion and this transaction for perspective, we attributed approximately $1 $1 billion of value to 100% of the northeast non op assets. When we originally acquired them as part of our Alterra acquisition and the assets have already <unk>.

Tobi: <unk> free cash flow in excess of that amount in the past two years. So this transaction marks an incredibly successful outcome for shareholders and a strong start to our deleveraging plan.

Toby Z. Rice: This transaction marks an incredibly successful outcome for shareholders and a strong start to our deleveraging plan. The upstream assets we are receiving include approximately 26,000 net acres in Monroe County, Ohio, directly offsetting EQT's existing core acreage in West Virginia. We are also receiving an average working interest of 14% in more than 200 producing wells that EQT currently operates in Lycoming County, Pennsylvania, along with a 16.25% interest in the EQT-operated Seeley and Warrensville gathering systems servicing this acreage.

Tobi: The upstream assets. We are receiving it include approximately 26000 net acres in Monroe County, Ohio directly offsetting EQT operated existing core acreage in West Virginia. We're also receiving an average working interest of 14% and more than 200, producing wells that EQT currently operates in Lycoming County, Pennsylvania, along with.

A $16 two 5% interest in the EQT operated Sealy and warrants still gathering systems servicing this acreage following the closing of this transaction EQT will own 100% of the Sealy and warrants of gathering systems, which aligns with our strategy of lowering cost structure via vertical integration.

Toby Z. Rice: Following the closing of this transaction, EQT will own 100% of the Seeley and Warrensville gathering systems, which aligns with our strategy of lowering cost structure via vertical integration. I'd also note our teams have identified significant operational synergy potential across the operated assets, as well as longer-term upside associated with the liquids-rich Marcellus in Monroe County. The non-operated assets we are selling have a forecasted 2025 net production of approximately 225 million cubic feet per day, while the operated assets we are receiving have a forecasted 2025 net production of approximately 150 million cubic feet per day.

Tobi: I would also note our teams have identified significant operational synergy potential across the operated assets as well as longer term upside associated with the liquids rich Marcellus in Monroe County.

Tobi: The non operated assets, we are selling have forecasted 2025 net production of approximately 225 million cubic feet per day, while the operated assets. We are receiving have forecasted 2025 net production of approximately 150 million cubic feet per day, comparing to $1 1 billion of total value to the 202.

Toby Z. Rice: Comparing the $1.1 billion of total value to the 225 million cubic feet per day of total production we are selling implies a roughly $4,900 per MCF flowing production multiple. While looking at metrics using net divested production and comparing this to the $500 million of cash consideration equates to roughly $6,700 per flowing MCFD production multiple.

Tobi: One 5 million cubic feet per day of total production, we are selling implies a roughly $4900 per mcf flowing production multiple while looking at metrics using net divested production and comparing this to the $500 million of cash consideration equates to roughly 6700 per flowing Mcf.

Tobi: D products and multiple.

Toby Z. Rice: We believe these attractive transaction metrics speak to the value of the high-quality natural gas assets, which are increasingly being coveted by international buyers looking to get exposure to the US natural gas market. This transaction highlights that we are wasting no time jumpstarting the deleveraging plan we laid out with the Equitrans announcement and creating additional shareholder value in the process. The sale of our remaining 60% interest in these non-operated upstream assets and the option to monetize regulated or non-core midstream assets at Equitrans gives us tremendous confidence in our ability to achieve our debt repayment goals, and we look forward to updating the market as we make additional progress on this front.

Tobi: We believe these attractive transaction metrics speak to the value of the high quality natural gas assets, which are increasingly being coveted by international buyers looking to get exposure to the U S. Natural gas market. This transaction highlights that we are wasting no time jumpstarting. The deleveraging plan, we laid out with the equity trans announcement and creating additional share.

Tobi: A holder value in the process the sale of our remaining 60% interest in these non operated upstream assets and the option to monetize regulated or non core midstream assets at <unk> gives us tremendous confidence in our ability to achieve our debt repayment goals and we look forward to updating the market as we make additional progress on this front to some.

Toby Z. Rice: To sum up, the first quarter results demonstrate a continuation of peak performance at EQT. Our announcement of the Equitrans acquisition is a once in a lifetime opportunity to vertically integrate one of the highest quality natural gas resource bases in the world, creating a one-stop shop to provide natural gas that will meet the growing data center and power generation needs at the doorstep of our asset base. And our recent transaction with Equinor illuminates significant hidden value embedded in our non-operated natural gas assets and gets us off to an extremely strong start towards achieving our deleveraging goals. I'll now turn the call over to Jeremy.

First quarter results demonstrate a continuation of peak performance at EQT, our announcement of the <unk> acquisition is a once in a lifetime opportunity to vertically integrate one of the highest quality natural gas resource bases in the world, creating a one stop shop to provide natural gas that will meet the growing data center and power generation need.

Tobi: At the door step of our asset base.

Tobi: And our recent transaction with Ecuador, illuminates significant hidden value embedded in our non operated natural gas assets and gets us off to an extremely strong start towards achieving our deleveraging goals I'll now turn the call over to Jeremy.

Jeremy Knop: Thanks, Toby, and good morning, everyone. I'll start by summarizing our first quarter results, beginning with sales volumes, which totaled 534 BCFE. As previously announced, we curtailed one BCF per day of gross production beginning in late February and through all of March in response to the low natural gas price environment resulting from warm winter weather. Along with non-operated curtailments, we estimate the total impact was 30 to 35 BCF during the quarter.

Jeremy: Thanks, Toby and good morning, everyone I'll start by summarizing our first quarter results, beginning with sales volumes, which totaled 534 Bcf.

Jeremy: As previously announced we curtailed one bcf per day of gross production beginning in late February and through all of March in response to the low natural gas price environment, resulting from warm winter weather.

Jeremy: Along with non operated curtailments, we estimate the total impact was 30 to 35 Bcf fee during the quarter.

Jeremy Knop: Thus, normalized for curtailments, first quarter production would have been toward the high end of our guidance range, underscoring strong operational efficiency and well performance during the quarter. Despite the curtailments during the quarter, our per unit operating costs still came in at the midpoint of our guidance range, at $1.36 per MCFE. A significant contributor to this was the outperformance on LOE, which came in below the low end of our guidance range.

Jeremy: Thus normalized for curtailments first quarter production would have been toward the high end of our guidance range underscoring strong operational efficiency and well performance during the quarter.

Jeremy: Despite the curtailments during the quarter our per unit operating cost still came in at the midpoint of our guidance range at $1 36 per Mcf.

Jeremy: A significant contributor to this was the outperformance on LOE, which came in below the low end of our guidance range. This LOE beat represents a continuation of the trend of low outperformance. We highlighted throughout 2023 is our strategic investments in water infrastructure continue to drive tangible cost structure.

Jeremy Knop: This LOE beat represents a continuation of the trend of LOE outperformance we highlighted throughout 2023, as our strategic investments in water infrastructure continue to drive tangible cost structure reduction. Turning to the balance sheet, recall we retired all of our outstanding convertible notes, which eliminated $400 million of absolute debt over the past two quarters. We also liquidated the capped call that we had purchased in conjunction with issuing the convertible notes for cash proceeds of $93 million. Additionally, we issued a $750 million 10-year bond and used the proceeds to reduce our term loan balance from $1.25 billion to $500 million, while extending the maturity by 12 months to June 2026.

Jeremy: Reductions.

Jeremy: Turning to the balance sheet recall, we retired all of our outstanding convertible notes, which eliminated $400 million of absolute debt over the past two quarters.

Jeremy: We also liquidated the capped call that we had purchased in conjunction with issuing the convertible notes for cash proceeds of $93 million.

Jeremy: Additionally, we issued a $750 million 10 year bond and use the proceeds to reduce our term loan balance from $1 $25 billion to $500 million, while extending the maturity by 12 months to June 2026, we.

Jeremy Knop: We exited the first quarter with total debt of approximately $5.5 billion and roughly $650 million of cash in the balance sheet, leaving a net debt position of approximately $4.9 billion at the end of the quarter, down from $5.7 billion at the end of 2023. Subsequent to quarter end, we used $205 million of our cash balance to fund the previously announced buyout of a minority equity partner in EQT-operated gathering systems in Lycoming County, Pennsylvania, which closed earlier this month.

Jeremy: We exited the first quarter with total debt of approximately $5 $5 billion and roughly $650 million of cash in the balance sheet, leaving a net debt position of approximately $4 9 billion at the end of the quarter.

Jeremy: <unk> from $5 7 billion at the end of 2023.

Subsequent to quarter end, we used $205 million of our cash balance to fund the previously announced buyout of a minority equity partner in EQT operated gathering systems in Lycoming County, Pennsylvania, which closed earlier this month.

Jeremy Knop: This acquisition is expected to add approximately $30 million to our 2025 free cash flow outlook, highlighting an attractive free cash flow yield on assets that are annuity-like and have near zero execution risk due to EQT's existing operatorship of both upstream development and the midstream system. We intend to apply the remainder of our cash balance, along with the $500 million of cash proceeds from the Equinor deal, towards debt reduction, which will allow us to make swift and significant progress on the deleveraging goals that we laid out with the Equitrans announcement.

Jeremy: This acquisition is expected to add approximately $30 million to our 2025 free cash flow outlook, highlighting an attractive free cash flow yield on assets that are annuity like and have near zero execution risk due to eqt's existing operator ship of both upstream development and the midstream system, we intend to apply the remained.

Jeremy: There are our cash balance along with a $500 million of cash proceeds from the <unk> deal towards debt reduction, which will allow us to make swift and significant progress for the deleveraging goals that we laid out with the <unk> announcement.

Jeremy Knop: We also recently added to our Q4 2024 and first half 2025 hedge book to further de-risk our deleveraging plan. We are now between 40 and 50% hedged for the remainder of 2024 with an average floor price of approximately $3.40 per MMBTU. We are also approximately 40% hedged in Q1 and Q2 of 2025, with average floor prices ranging from roughly $3.05 to $3.30 per MMBTU.

Jeremy: We also recently added to our Q4 2024, and first half 2025 hedge book to further de risk our deleveraging plans.

Jeremy: We are now between 40% and 50% hedged for the remainder of 2024 with an average floor price of approximately $3 40 per Btu. We're.

Jeremy: We are also approximately 40% hedged in Q1 and Q2 of 2025.

Jeremy: With average floor prices ranging from roughly $3 five.

Jeremy: To $3 30 per <unk> Btu.

Jeremy Knop: Upon closing the Equitrans acquisition and achieving our debt targets, we anticipate limiting defensive programmatic hedging to less than 20% of our production in a given year. Going forward, our $2 Henry Hub free cash flow breakeven price provides a structural hedge as the Equitrans acquisition strips out the operating leverage from our business, limiting our need to financially hedge. This unique dynamic provides EQTs investors differentiated upside torque to natural gas prices and peer-leading downside protection simultaneously.

Jeremy: Upon closing the <unk> acquisition, and achieving our debt targets, we anticipate limiting defensive programmatic hedging to less than 20% of our production in a given year going forward, our $2 Henry hub free cash flow breakeven price provides a structural hedge is the <unk> acquisition strips out the operating leverage from our business limiting our.

Jeremy: <unk> tip financially hedge.

Jeremy: This unique dynamic provides eqt's investors differentiated upside torque to natural gas prices and peer leading downside protection simultaneously.

Jeremy Knop: Turning to the 2024 outlook, we issued second quarter guidance and updated our full-year production outlook to reflect voluntary production curtailments in response to the current low natural gas price environment. Our second quarter production outlook and per unit metrics embed the expectation that we will continue to curtail one BCF per day of gross operated production through the end of May. Our updated full-year production guidance also captures this assumption and embeds additional optionality for further curtailment this fall should natural gas prices remain low.

Jeremy: Turning to the 2024 outlook, we issued second quarter guidance and updated our full year production outlook to reflect voluntary production curtailments in response to the current low natural gas price environment.

Jeremy: Our second quarter production outlook and per unit metrics embed the expectation that we will continue to curtail one bcf per day of gross operated production through the end of May.

Jeremy: Our updated full year production guidance also captures this assumption and Embeds additional optionality for further curtailments. This fall should natural gas prices remain low.

Jeremy Knop: We believe our strategy of near-term curtailments while maintaining steady operations is the right approach to this market for EQT. In contrast to high-cost producers who need to cut activity to reduce CapEx in hopes of remaining free cash deposits, it is also important to remember that production is fungible between old wells and new wells, so it makes little sense to defer new well drilling versus simply turning off production today.

Jeremy: We believe our strategy of near term curtailments, while maintaining steady operations is the right approach to this market for EQT and contrast, the high cost producers, who needed cut activity to reduce capex and hopes of remaining free cash flow positive.

Jeremy: It is also important to remember that production is fungible between old wells and new wells. So it makes little sense to defer new well tills versus simply turning off production today.

Jeremy Knop: Our production today is a product of our investments in the last two to three years, and our CapEx investments today have little impact on the volume this year but rather drive volumes in 2025 and 2026 when the futures market suggests gas prices will be higher than they are today. EQT is positioned to take this approach as a result of our low-cost structure and strong balance sheet. And this is a good reminder of why we refer to a low-cost structure as our strategic North Star. We also embedded a June startup for MVP in our updated outlook on the heels of Equitransit's filing for in-service with the FERC this week.

Jeremy: Our production today is a product of our investments in the last two to three years and our Capex investments today have little impact on the volume this year, but rather drive volumes in 2025 and 2026 when the futures market suggests gas prices will be higher than they are today.

Jeremy: EQT is positioned to take this approach as a result of our low cost structure and strong balance sheet and this is a good reminder of why we refer to a low cost structure as our strategic North star.

Jeremy: We also embedded at June startup for MVP, and our updated outlook on the heels of <unk> filing for in service with the FERC. This week.

Jeremy Knop: This represents a meaningful milestone as MVPs in service is a contractual condition precedent to closing the Equitrans acquisition and will finally allow EQT to provide much needed natural gas to consumers in the southeast region to meet growing power demand, displace coal, and improve grid reliability. As Toby mentioned, upon the closing of the Equitrans acquisition, we intend to pursue expanding MVP from 2 BCF per day to 2.5 BCF per day to meet additional demand growth expected in the southeast region.

Jeremy: This represents a meaningful milestone as mvp's in service as a contractual condition precedent to closing the <unk> acquisition and will finally allow EQT to provide much needed natural gas to consumers in the southeast region to meet growing power demand displace coal and improve grid reliability.

Jeremy: As Toby mentioned upon closing of the <unk> acquisition, we intend to pursue expanding MVP from two Bcf per day to two five Bcf per day to meet additional demand growth expected in the southeast region.

Jeremy Knop: This expansion will be achieved through the addition of compression to the existing pipe, rather than laying new steel, and thus has a low execution and regulatory risk profile and high returns, with an estimated build multiple of just 4 to 5 times EBITDA.

Jeremy: This expansion will be achieved through the addition of compression to the existing pipe rather than laying a new steel and thus has a low execution and regulatory risk profile and high returns with an estimated build multiple of just four to five times EBITDA.

Jeremy Knop: Turning to slide seven of our investor presentation, we provided more granular details on how the Equitrans transaction is expected to impact EQT's pro forma cost structure. However, we are still working through some of the nuances of exactly how the transaction will be accounted for in our financial statements. This cost block should give investors a good framework for thinking about the pro forma impacts of the transaction. In summary, we expect the transaction to drive a pro forma unlevered cost structure improvement of approximately $0.50 per MCFE.

Turning to slide seven of our Investor presentation, we provided more granular details on Holly Echo Trans transaction is expected to impact eqt's pro forma cost structure.

Jeremy: While we are still working through some of the nuances of exactly how the transaction will be accounted for in our financial statements. This cost work should give investors a good framework for thinking about the pro forma impacts of the transaction in.

Jeremy: In summary, we expect the transaction to drive a pro forma unlevered cost structure improvement of approximately 50 per Mcf.

Jeremy Knop: Base synergies equate to approximately $0.12 per MCFE, and upside synergies provide a further $0.08 improvement. So the cost structure benefits to EQT from the Equitrans deal could total approximately $0.70 per MCFE over time. That is a tremendous impact.

Jeremy: Based synergies equate to approximately <unk> <unk> per Mcf.

And upside synergies provide a further <unk> <unk> improvement to the cost.

Jeremy: <unk> benefits to EQT from the equity trades deal could total approximately 70.

Jeremy: For <unk> over time that is a monumental impact.

Jeremy Knop: The advantage arising from this cost structure improvement is evident on slide 10 of our investor deck, where we show cumulative 2025 to 2029 free cash flow for pro forma EQT and natural gas peers at gas prices ranging from $2.75 to $5 per MMBTU. EQT's pro forma free cash flow durability is peer-leading at $2.75 natural gas prices as we project approximately $8 billion of cumulative free cash flow versus most peers who are free cash flow negative at this price stack.

Jeremy: The advantage of rising from this cost structure improvement as evident on slide 10 of our investor deck, where we show a cumulative $2025 to 2029 free cash flow for pro forma EQT and natural gas peers at gas prices ranging from $2 75.

Jeremy: To $5 per Btu.

Jeremy: Eqt's pro forma free cash flow durability as peer leading at $2 75 natural gas prices as we project approximately $8 billion of cumulative free cash flow versus most peers to our free cash flow negative at this price deck.

Jeremy Knop: At the same time, free cash flow in an upside price environment, pro forma cumulative free cash flow, generation of a staggering $26 billion. And importantly, most peers will actually have much less upside than shown here, as they are likely to defensively and programmatically hedge away much of the commodity price upside to protect the downside risk resulting from high operating leverage.

Jeremy: At the same time free cash flow and an upside price environment pro forma cumulative free cash flow generation of a staggering 26 billion.

Jeremy: And importantly, most peers will actually have much less upside than shown here as they are likely to defensively and programmatically hedge away much of the commodity price upside to protect the downside risk, resulting from high operating leverage.

Jeremy Knop: This underscores how the Equitrans acquisition drives free cash flow durability and down cycles while unlocking the ability to capture asymmetric upside in high-priced environments given limited financial hedging needs. I want to close by sharing a few observations from the more than 100 meetings we've had with EQT and Equitrain shareholders in the wake of our acquisition announcement. Well, we have already experienced a high graded growth of our shareholder base over the past several years.

Jeremy: This underscores how the <unk> acquisition drives free cash flow durability in down cycles, while unlocking the ability to capture asymmetric upside and high price environments, given the limited financial hedging needs.

Jeremy: I want to close by sharing a few observations from the more than 100 meetings, we've had with EQT and <unk> shareholders in the wake of our acquisition announcement.

Jeremy: While we have already experienced a high grading of our shareholder base over the past several years.

Jeremy Knop: The Equitrans transaction has further accelerated this trend as the merits of pairing the characteristics of a major integrated company with the superior long-term demand profile of natural gas are responding extremely well. And we have been encouraged by the near unanimous support for the transaction from some of the world's largest, most thoughtful long-term fund managers, including shareholders of Equitrans, who have expressed excitement in owning significant stakes in the new EQT. We think our easy-to-own business model will be increasingly coveted by long-term, coffee-can-style investors who are structurally bullish on natural gas for the long term. And we look forward to demonstrating this differentiated value proposition for shareholders as we navigate the volatile world ahead. And with that, we'd now like to open up the call to questions.

Jeremy: <unk> Trans transaction has further accelerated this trend as the merits of pairing the characteristics of a major integrated company with the superior long term demand profile of natural gas is resonating extremely well and we have been encouraged by the near unanimous support for the transaction from some of the world's largest most thoughtful.

Jeremy: Long term fund managers, including shareholders of <unk>, who have expressed excitement and owning significant stakes in the new EQT.

We think our easy to own business model will be increasingly coveted by long term coffee can style investors, who are structurally bullish natural gas long term.

Jeremy: We look forward to demonstrating this differentiated value proposition for shareholders as we navigate the volatile world ahead.

Speaker Change: And with that we'd now like to open up the call to questions.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via loud speaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We kindly ask that you limit yourself to one question and one follow-up. Your first question comes from the line of Neil Mehta with Goldman Sachs. Please go ahead.

Speaker Change: Thank you we will now begin the question and answer session.

If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Speaker Change: I would like to withdraw your question simply press Star one again.

Speaker Change: If you are called upon to ask your question and our listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: We kindly ask that you limit yourself to one question and one follow up.

Speaker Change: Your first question comes from the line of Neil Mehta with Goldman Sachs. Please go ahead.

Speaker Change: Okay.

Unknown Executive: This is Ati on for Neil. Guys, I'd be curious about the non-operated asset sales in the pipeline. How are you thinking about the portion that's remaining? How are the conversations going with potential buyers? And what should we expect in terms of the structure of those deals? Should it be similar to what you've announced? Or is it going to be a little bit more cash oriented?

Neil Mehta: Hey, this is at the on for Neil.

Neil Mehta: Guys.

Neil Mehta: I'd be curious on the non operated asset fans in the pipeline. How are you thinking about the portion that is remaining how the conversations are going with potential buyers and what should we expect in terms of the structure of those deals should it be similar to what you've announced or is it going to be a little bit more cash oriented.

Unknown Executive: Yeah, so we're continuing to have some really constructive conversations there and have a lot of great momentum. And I think what we're seeing is the announcement of the deal with Equinor a couple weeks ago is actually really catalyzing things to move forward even more swiftly. So we have a ton of confidence in getting that done, and there's a lot of great dialogue that's ongoing. Look, I think the deal with Equinor was a little bit unique because they had other strategic objectives, you know, in their exit from US onshore. That's why we structured that deal the way we did, but I anticipate the remaining sale of that interest to be in cash consideration as opposed to a more complex kind of mix of assets in cash.

Speaker Change: Yes, so we're continuing to have some really constructive conversations there and have a lot of great momentum and I think what we're seeing is the announcement.

Speaker Change: The deal with <unk>, a couple of weeks ago is actually really catalyzing those to move forward, even more swiftly. So we have a ton of confidence in getting that done.

Speaker Change: And a lot of great dialogue with ongoing look I think the deal with <unk> was a little bit unique because they had other strategic objectives.

Speaker Change: In their exit from U S onshore.

Speaker Change: That's why we structured that deal the way, we did but I would anticipate the remaining sale of that interest to be in the in cash consideration as opposed to a more complex mix of assets and cash.

Unknown Executive: Scott, I'd appreciate that. And then, as you think about the supply and demand macro for natural gas in the U.S. right now, you did mention that you would extend the cuts. How are you seeing the response, the production response that you're seeing from the latest numbers? Is that, is there an element of sufficiency there? Do you think there are additional cuts required? And what should we think about your philosophy as you think of bringing the cadence back online?

Speaker Change: Got it appreciate that and then.

Speaker Change: Do you think about the supply demand and macro for natural gas in the U S right now.

Speaker Change: You did mentioned that you will extend the cuts how are you seeing the response to the production response that youre seeing from the latest numbers is that is that an element of sufficiency. There do you think there's additional cuts required and how should we think about your philosophy as you think of bringing the cadence back online.

Unknown Executive: Yeah, we think that you're going to continue to see cuts in discipline from other operators. But I think a lot of eyes are focused on what's going to happen with summer weather. You know, with a normal summer, that could bring the, that could tighten up some of the storage overhang we have. And also, these low gas prices are going to encourage more power demand. So I mean, we think there are a couple catalysts here. But in the meantime, until those hits, I think you can continue to see more patience from operators.

Speaker Change: Yes, we think that youre going to continue to see cuts and discipline from other operators.

I think a lot of a lot of eyeballs or focus on what's going to happen with some weather with a normal summer that could bring the.

Speaker Change: If I could tighten up some of the storage overhang. We have and then also these low gas prices are going to encourage more power.

Speaker Change: Demand. So we think theres a couple of catalysts here, but in the meantime until those hit I think you can continue to see more patients from operators.

Unknown Executive: Yeah, at a high level, when you think about the macro outlook, you added about 400 BCF a day to storage and excess from the winter weather, and another 200 on top of that from production being higher than we all forecasted. So you have an overhang of about 600 BCF that has to get worked out by, call it October. And that'll happen, you know; the market mechanism forces that to happen both through curtailment, so limitations in supply, but also increases in demand from coal to gas switching.

Speaker Change: Yes at a high level when you think about the macro outlook you added about 400 Bcf a day in the storage and access from the winter weather and another 200 on top of that from production being higher than than we all forecasted. So you have an overhang of about 600 Bcf that has to get worked out by call. It October.

Speaker Change: And that will happen.

Speaker Change: <unk> mechanism forces that to happen both through curtailments, so limitations in supply, but also increases in demand from from coal to gas switching and as Toby said, certainly constructive summer weather can give that a boost as well, but look I think to maintain.

Unknown Executive: And as Toby said, certainly constructive summer weather can give that a boost as well. But look, I think to maintain that market rebalance through the summer, you probably maintain low prices; they probably can't rise all that much. But once you get through that October period, you see the inflection of LNG demand really start to pick up. We think that market starts to change pretty swiftly.

Speaker Change: That market rebalanced through the summer, you're probably maintain low prices, probably cant rise all that much but once you get through that October period, you see the inflection of LNG demand really start to pick up.

Speaker Change: We think that market starts to change pretty swiftly.

Unknown Executive: Awesome. I appreciate the answers there.

Speaker Change: Awesome I appreciate the answer thank you.

Operator: Your next question comes from Arun Jayaram with J.P. Morgan. Please go ahead.

Your next question comes from Arun Jairam with J P. Morgan. Please go ahead.

Speaker Change: Okay.

Unknown Executive: Yeah, good morning. Gentlemen, I want to get your thoughts on, you know, obviously, the data center demand you highlighted in your deck, and how you think that this could create kind of a premium opportunity for gas that's sold on the Transco zones four and five south lines. I was wondering if you could give us, you know, just your general thoughts on how differentials may play out in the Appalachian Basin over time and specifically highlight your leverage over these two zones.

Arun Jayaram: Yes, good morning.

Arun Jayaram: Gentlemen, I wanted to get your thoughts on obviously the data center demand you highlighted in your deck. How do you think that this could create kind of a premium opportunity for gas that sold on the Transco zone, four and five south.

Arun Jayaram: Lines I was wondering if you could give us.

Arun Jayaram: Just your general thoughts on how differentials may play out.

Arun Jayaram: In the Appalachian basin over time, and specifically highlight your leverage to these two zones.

Unknown Executive: Yeah, Arun. So, um, I'd start with going back to those physical gas sales deals that we announced in Q3, Q4 last year. And if you look at the way that was structured, we tranched that out across those markets. And so those were sold in tranches ranging from M2 plus $1.15 all the way up to Henry Hub plus 50 cents, right?

Speaker Change: Yes, Arun so look I'd start with going back to those.

Arun Jayaram: Physical gas sales deals that we announced at Q3 Q4 last year and if you look at the way that was structured we tranche that out across those markets and so those were sold in tranches ranging from <unk> plus a $1 15, all the way up to Henry hub plus 50.

Unknown Executive: So we gave you guys the blended, you know, pricing for how that impacts the company. But to us, that sort of keyed us off to a lot of the demand and the tailwinds that are really coming that the utilities are seeing. And effectively, the premium being paid is to lock in the reliability of supply. And so I think that's a good proxy for where that market will move in time. And if you think about what's happening between just, you know, electrification of everything, now adding data centers into that, and think about the way the Transco pipeline, you know, where it supplies gas across the country, you're going to see the LNG facilities pull gas south on that pipeline and create an even bigger deficit in that Southeast market.

Speaker Change: Right. So so we gave you guys the blended pricing for how that impacts the company, but to us that sort of keyed us off to a lot of the demand and the tailwind that are really coming that the utilities are seeing and effectively the premium being paid is is to lock in reliability of supply.

Speaker Change: And so I think that's a good proxy for where that market moves in time, and if you think about what's happening between just electric.

Speaker Change: Electrification of everything now, adding data centers into that I think about the way the transco.

Speaker Change: Pipeline, where it supplies gas across the country youre going to see the LNG facilities pull gas south.

Speaker Change: On that pipeline and create even bigger deficit in that southeast market. So so we think that market really in time becomes becomes the most premium market in the country. Because you have a combination of LNG pulling gas away.

Unknown Executive: So, we think that market really, in time, becomes the most premium market in the country because you have a combination of LNG pulling gas away and a deeper deficit from, you know, all these other factors we're talking about, whether it's the retirement of coal, whether it's data center growth. And so that's why the utilities, I think, are willing to, to, you know, pay the prices that they did to lock up a reliable gas supply.

Speaker Change: A deeper deficit from all these other factors, we're talking about whether it's retirement of coal whether it's data center growth.

Speaker Change: And so that's why the utilities I think they're willing to pay.

Speaker Change: Pay the prices that they did to lock up reliable gas supply. That's the reason, we're so excited about expanding MVP and adding additional capacity because we think there's a big demand being created in that market from both themes, but it's really the confluence of both of those big demand themes thats going to drive that market, where it is that's why we're so excited about MVP and also where are.

Unknown Executive: That's the reason we're so excited about expanding MVP and adding additional capacity because we think, I mean, there's a big demand sink being created in that market from both themes. But it's really the confluence of both of those big demand themes that's going to drive that market where it is. That's why we're so excited about MVP and also where our assets sit, you know, adjacent to, that market.

Speaker Change: Asset sits.

Speaker Change: Adjacent to to that market.

Unknown Executive: Yeah, and just to have a follow-up, you know, we had been liaising with a couple of utilities, and they mentioned how Governor Shapiro in Pennsylvania was somewhat focused on trying to keep, you know, growing demand within the state. And so I just wanted, Toby, to give you a perspective on some of the thoughts, because Pennsylvania, as you know, exports electricity and gas. Thoughts about some of that data and demand coming, you know, within the state of Pennsylvania, as well as, you know, any latest views on East Coast LNG.

Speaker Change: And just a follow up.

Speaker Change: We had been liaising with a couple of utilities and they mentioned.

Speaker Change: The Governor Shapiro in Pennsylvania was somewhat focused on trying to keep.

Speaker Change: Growth grow demand within within the state and so I'm just wondering.

Speaker Change: Toby can give you a perspective on some of the thoughts because Pennsylvania as you know exports electricity and gas thoughts about some of that data center demand coming.

Speaker Change: Within the state of Pennsylvania, as well as the.

Speaker Change: Latest views on East Coast LNG.

Toby Z. Rice: Yeah, we were certainly encouraged to hear Governor Shapiro's comments about natural gas, both on the potential for power demand and also his comments about the LNG pause and advising President Biden that this LNG pause is a bad idea. I think Governor Shapiro understands that the people of Pennsylvania understand that natural gas is the economic engine that's powering the economy here in Pennsylvania and understands that natural gas is the key to decarbonizing.

Toby: Yes, we were certainly encouraged to hear Governor Shapiro's comments about natural gas both on increasing potential for power demand, but also.

Toby: His comments about the LNG pause and advising president who bought in that this LNG pause is a bad idea I think governor Shapiro understands that the people of Pennsylvania understand that natural gas is the economic engine.

Toby: That's powering the economy here in Pennsylvania, and understands that natural gas is the key to decarbonising not only our own grids in the U S, which Pennsylvania is the poster child for how impactful.

Toby Z. Rice: Not only our own grids in the U.S., of which Pennsylvania is the poster child for how impactful you can be lowering emissions when you replace coal with gas, but also understanding how we can do that on the world stage. You know, people need to recognize that I think a lot of people don't understand how much power Pennsylvania actually generates. And with the lowest cost, cleanest source of natural gas in the country being located in Pennsylvania, we have an opportunity to really think about expanding electricity exports to other states.

Toby: You can be lowering emissions when you replace coal with gas, but also understanding how we can do that on the world stage.

People need to recognize I think a lot of people don't understand how much power, Pennsylvania actually generates and with the lowest cost cleanest source of natural gas in the country being located in Pennsylvania, we have an opportunity to really think about expanding.

Toby: Electricity exports to other states.

Toby Z. Rice: And listen, look at what's happening in the northeast part of this country. A lot of them put a lot of eggs in the offshore wind basket, and we consistently see offshore wind get knocked down, and have projects get pulled. What's going to replace that? The sure thing, the thing that's always been there, natural gas demand, and we have an opportunity here that we are pushing to make sure that natural gas can continue to give Americans affordable, reliable, clean energy.

And listen look at what's happening in the northeast part of this country a lot of them put a lot of eggs in the offshore wind basket and we consistently see offshore wind get get knocked down half projects get pulled what's going to replace that the sure thing the thing Thats always been there natural gas demand and we have an opportunity here that we are pushing to.

Toby: Sure natural gas can continue to give Americans affordable reliable clean energy.

Unknown Executive: Thank you. Thanks, Toby.

Speaker Change: Thanks Tobey.

Operator: Your next question comes from Jacob Roberts with TPH & Co. Please go ahead.

Speaker Change: Your next question comes from Jacob Roberts with Tpa <unk> Company. Please go ahead.

Unknown Executive: Looking at the second quarter production guide, I apologize if I missed it, but can you help quantify the impact of the non-op side of things on the curtailments and till deferrals, please?

Speaker Change: Morning.

Jacob Roberts: Good morning.

Jacob Roberts: Looking at the second quarter production guide I apologize if I missed it but can you help quantify the impact of the non op side of things on the curtailments until deferrals. Please.

Unknown Executive: Are you talking about from the sale, or what are you talking about specifically?

Speaker Change: You talked about from the Salar, which are you talking about specifically.

Unknown Executive: I believe the guide includes the one BCF off a day from your side and then also notes some non-op TIL deferrals and curtailments as well, so I was just wondering on that non-op side of things

Jacob Roberts: I believe the guide includes the one Bcf a day from your side and then also note some non op till deferrals and curtailments as well. So I'm just wondering on that non op side of things.

Unknown Executive: Yeah, so net to the non-op interest, what's baked in there is about 10 to 15 Bs, and the rest of it is operating deferrals that we, you know, have a direct impact on our decision.

Jacob Roberts: Yes, so net to the non op interest what's baked in there is about 10 to 15 bps.

Jacob Roberts: And the rest of it is operated deferrals that we.

Jacob Roberts: The direct impact of our decisions.

Unknown Executive: Okay, great, thank you. And then, as a second question, I think our work would have us agreeing with you on the outlook for southeast and Mid-Atlantic demand growth as we progress through the decade. I just wanted to get your views on the potential to send more gas that way beyond MVP and the expansion, and maybe related to that, how should we think about third-party volumes on MVP over time?

Speaker Change: Okay, great. Thank you.

Speaker Change: The second question.

Speaker Change: I think our <unk>.

Speaker Change: <unk> help us agreeing with you on the outlook on the southeast and mid Atlantic demand growth as we progress through the decade I just wanted to get your views on the potential to send more gas that way beyond MVP and the expansion.

Speaker Change: And maybe related to that how should we think about third party volumes on MVP overtime.

Unknown Executive: Yeah, so I think what's unique about MVP is that it is a pipe or EQT owns 60% of the capacity today, and we're the only producer shipper on that pipe. So there's no other producers who can access that market through MVP.

Speaker Change: Yes, so I think what's unique about MVP is that it is a it's a piper EQT owns 60% of the capacity today and we are the only producer shipper on that pipe. So theres no other producers, who actually can access that market through MVP.

Unknown Executive: The other 40% is held by utilities on the other end. And so I think we are very uniquely positioned in that sense; the expansion will be will be part of a FERC open season. So you know, who ends up with that capacity is just under that regulated process. But it's certainly something that we think we are positioned to benefit from either way. I mean, there's value to be created through the expansion; there's value to be added for the utilities by supplying them new gas in that market.

Speaker Change: The other 40% is held by utilities on the other end.

Speaker Change: And so I think we are very uniquely positioned in that sense. The expansion will be will be part of a FERC open season, So who ends up with that capacity is just under that regulated process.

Speaker Change: But it's certainly something that we think we are positioned to.

Speaker Change: It's a benefit from either way I mean, there is value to be created through the expansion. There is value to be added for the utilities by supplying them new gas in that end market. I mean, we're all aligned and wanting to have that happen. Even if we're not the ones to take the capacity out not when that auction I think we benefit either way, we get to sell more gas producers collectively in Appalachia get to sell more.

Unknown Executive: I mean, we're all aligned and wanting to have that happen. Even if we are not the ones to take the capacity out, not win that auction, I think we benefit either way; we get to sell more gas, or producers collectively in Appalachia get to sell more gas to the utilities on the other end of that pipe. So it's no matter how you look at it, I think it's a big net benefit to EQT.

Speaker Change: Gas to the utilities on the other end of that pipe. So it's no matter. How you look at it I think a big net benefit Tiki team.

Unknown Executive: Thanks, appreciate the time guys.

Speaker Change: Thanks appreciate the time guys.

Operator: Your next question comes from Michael Scialla with Stevens. Please go ahead.

Speaker Change: Your next question comes from Michael <unk> with Stephens. Please go ahead.

Unknown Executive: Good morning, everybody. I want to see a little bit more detail on your curtailments in terms of the price level you would need to see before you change your decision on the PCF per day of curtailments.

Michael: Hey, good morning, everybody wants to know who's a little bit more detail on your curtailments.

Michael: In terms of <unk>.

Michael: Price level, you would need to see before you change your decision there.

Michael: The Bcf per day of curtailments.

Unknown Executive: Yeah, at a high level, we think about it as cash costs plus F&D costs. You know, we do want to recover the sunk cost of drilling the wells. So that's why we think about it like that. So I mean, it depends on the area, but I call it around $1.50 a barrel.

Speaker Change: Yes at a high level, we think about it as cash cost plus F&D costs.

Speaker Change: We do want to recover the sunk cost of drilling a well. So that's why we think about it like that so I mean, youre I mean, it depends on the area, but call it around $1 50 in basin.

Unknown Executive: Okay, and Jeremy, so say, you know, you expect a pretty good step up in price when you get to sort of the October timeframe. If you were to see that $1.50 price persist through the summer before you see that step up, would that suggest you're going to likely extend those curtailments through the summer?

Speaker Change: Okay Jeremy.

Jeremy: So youre sounds like you expect a pretty good step up in price. So when you get to sort of the October time frame.

Jeremy: If you were to see that $1 50 price persists through the summer before you see the step up would that suggest youre going to <unk>.

Jeremy: Likely extend those curtailments through the summer.

Unknown Executive: I mean, look.

I mean look we'll always do what's best to create long term value.

Unknown Executive: I mean, look, we'll always do what's best to create long-term value. So look, we're always watching the market. There are always events that happen that, you know, we will change our decisions if the facts change. So it depends, but what we've mapped out right now is our current expectations.

Jeremy: So look we're always watching the market, there's always events that happened.

Jeremy: We will change our decisions if the facts change so it depends but what we've mapped out right now is our current expectation.

Unknown Executive: And then I just want to follow up on MVP. You talked about the demand growth you see in the Southeast U.S. and your plans to expand the pipeline. Also, you know, a lot of focus on the integrated upstream-midstream model for you in your lower cost structure. How do you think about that with, you know, your divestiture plan and your potential to lay off some interest in that pipeline? Is it important to maintain control there? Sell off all your interests there. I guess just how you are thinking about marrying those two, those two things.

Speaker Change: Got you.

Speaker Change: And then just one follow up on.

Speaker Change: MVP.

Speaker Change: You talked about the demand growth you see in the South South East U S.

Speaker Change: And your plans to expand the pipeline.

Speaker Change: Russell.

Russell: A lot of focus on the integrated upstream midstream model for you in Europe.

Russell: Lower cost structure, how do you think about that with you.

Russell: Divestiture plans.

Russell: Potential to lay off some interest in that pipeline is it important to maintain control there.

The sell off all your interest there I guess.

Russell: Thinking about marrying those two.

Those two things.

Unknown Executive: Yeah, so we have a tremendous amount of optionality, first of all. If you think about, I mean, look. I think if you back in, first of all, on the non-op asset sale side, the $1.1 billion, you know, value level that we called out for what we did with Equinor, if you gross that up, that implies about $2.75 billion to that whole package, right? So if the rest of it is a cash sale, you end up with, call it, $2 to $2.5 billion of cash coming in the door from that side, right?

Yes, so we have a tremendous amount of Optionality first of all if you think about I mean look I think if you back and first of all on the non op asset sale side, the $1 $1 billion.

Russell: Value level that we called out for what we did with <unk> gross that up that implies about $275 billion of that whole package right. So if the rest of it is a cash sale you end up with call. It two two to two 5 billion of cash coming in the door from that side right. That's already call. It two thirds of the of the $3 $5 billion.

Unknown Executive: That's already, call it, two-thirds of the $3.5 billion asset sale target we talked about a month or two ago when we announced the Equitrans deal. So we don't have to really divest a lot or many assets on the Equitrans side if we don't want to. So again, it gives us a lot of optionality.

Russell: Cell target, we talked about a month or two ago, when we announced the <unk> deal. So we don't have to really divest a lot or many assets on the <unk> side. If we don't want to so again it gives us a lot of Optionality. If you think about some of the other deals done in the market and like in the regulated space recently Tc energy.

Unknown Executive: If you think about some of the other deals done in the market and in the regulated space recently, you know, TC Energy did a pretty interesting deal with CIP. It was a deal done for assets not as high quality as MVP at about 11 times EBITDA. BlackRock did a deal with Portland Gas recently, also at about 11 times EBITDA, again, not as good of a quality asset as MVP.

Russell: Deep did a pretty interesting deal with GIC.

Russell: Deal done for assets not as high quality as MVP at like 11 times EBITDA Blackrock and did a deal with Portland gas recently also about 11 times EBITDA again, not as good of a quality asset as MVP.

Unknown Executive: And when you think about just the regulated assets overall at Equitrans, let's call it a $7 billion bucket of value. We could sell off some of those. We could sell off a minority interest, maintain control, and maintain operatorship. There are a lot of different ways to structure it. And that is, you know, that is something we're working through right now. But I think our confidence level in getting something done that maintains optionality, both near term and long term, while still ensuring we de-lever the balance sheet rapidly in a really efficient way is very, very high.

Russell: And when you think about just the regulated assets overall.

Russell: <unk> call it a $7 billion bucket of value, we could sell off some of those we can sell off of minority interest maintain control maintain operator ship.

Russell: There's a lot of different ways to structure. It and that is that is something we're working through right now, but I think our confidence level in getting something done that maintains optionality, both near term and long term, while still ensuring we delever the balance sheet rapidly in a really efficient way is very very high.

Unknown Executive: Good. Thanks for the detail.

Russell: Okay.

Speaker Change: Sure Thanks for the detail.

Operator: Again, if you would like to ask a question, please press star 1 to join the queue. Your next question comes from Bert Donnes with Truist Securities. Please go ahead.

Speaker Change: Again, if you would like to ask a question. Please press star one to join the queue.

Speaker Change: Your next question comes from Brian <unk> with <unk> Securities. Please go ahead.

Unknown Executive: Hey, good morning, guys. Just had a question on the potential divestitures. You know, as you reduce debt, how price sensitive are you? Is this kind of a "highest bidder wins" situation? Or is this, you know, if the bids aren't up to your expectations, you just kind of walk away?

Brian: Hey, good morning, guys.

Brian: A question on the potential divestitures as you.

Our reduced debt how price sensitive are unit.

Brian: One of the highest bidder wins or that they have the bids aren't up to your your expectations, you're just kind of walk away.

Unknown Executive: Yeah, as Jeremy mentioned, I mean, we have a ton of optionality. And that means, you know, we're going to continue to be really value focused on these things. So while there's certainly a lot of interest here, which gives us a lot of confidence in completing this plan, I think you look at the Equinor transaction, you know, we're going to be getting some pretty good values for these assets.

Speaker Change: As Jeremy mentioned I mean, we have a ton of optionality and that means we're going to continue to be really value focused on these things so.

Speaker Change: While there is certainly there's a lot of interest here, which gives us a lot of confidence in completing this plan.

Speaker Change: I think you look at the Ecuador transaction.

Speaker Change: We're going to be getting some pretty good values for these assets, yes, if you step back and think about the timeline the rating agencies guided us towards its call. It 12 months to 18 months post closing we have guided closing to be probably a Q4 event. So we think about it as like we need to get through the deleveraging clean by the end of 2025 right I.

Unknown Executive: Yeah, if you step back and think about the timeline the rating agency's guided us towards, it's called 12 to 18 months post-closing. We have guided closing to be probably a Q4 event.

Unknown Executive: So we think about it as, we need to get through the deleveraging plane by the end of 2025, right? I think most of us expect the market for gas in 2025 to be a lot more robust than it is today. So because we're taking an opportunistic approach, you know, we have good momentum right now, I feel very good that we get things done near term at very attractive values. But if something happens, and we decide, hey, let's be a little more patient, wait six months, wait nine months, there's no issue doing that to make sure we maximize value.

Speaker Change: I think most of US expect a market for gas in 2025, it would be a lot more robust than it is today. So because we are taking an opportunistic approach.

We have good momentum right now I feel very good that we get things done near term at very attractive values, but if we if something happens and we decided hey, let's be a little more patient wait six months wait nine months. There is no issue doing that to make sure we maximize value.

Unknown Executive: That makes sense. And then, switching to the LNG agreement you announced, I just wanted to make sure I understood the strategy right. This puts you at 45% of your Gulf Coast exposure. Are you approaching the limit? Or maybe there's some understanding that, hey, you could go to 75% or so if you, you know, in the future plan to add some volumes that maybe have Gulf Coast exposure through a bolt-on or something like that? Or is there some number you guys have in your head of where you kind of call it off? Or is it 100% fine?

Speaker Change: That makes sense and then switching to the LNG agreement you announced I just wanted to make sure I understood. The strategy right. This puts you at 45% of kind of your Gulf Coast exposure.

You're approaching the limit or is maybe there some understanding that you could go to 75% or so.

Speaker Change: In the future plan to add some volumes that maybe had Gulf coast exposure through a bolt on or something like that or is there. There is some number you guys have in your head where you kind of call. It offers 100% bonds.

Unknown Executive: Yeah, I think stepping back at a very high level, just from a market diversification perspective, we sort of soft circled around 10% of our volumes being exposed to international pricing. It feels about right.

Speaker Change: Yeah, I think stepping back at a very high level just from a market diversification perspective, we sort of soft circled around 10% of our volumes being exposed to international pricing feels.

Speaker Change: Feels about right.

Unknown Executive: And depending on the discussions with end buyers, we could toggle that number up or down. You know, where we're at right now, we've got about 10% of our numbers here, but keep in mind, these agreements are non-binding, and there's some work to do to get to terms that allow us to achieve our objectives. So we have that level here, but maybe not all of those agreements will make it to the finish line, but we've got a lot of flexibility to give us the ability to make sure we get the terms that we need.

Speaker Change: And depending on the.

Speaker Change: Discussions with and buyers, we could toggle that number up or down where we're at right now we've got about 10% of our of our numbers here, but keep in mind. These agreements are nonbinding and there's some work to do.

Speaker Change: To get the terms that allow us to achieve our objective so.

Speaker Change: We have that level here, but maybe not all of those agreements will make it to the finish line, but we've got.

Got a lot of Optionality optionality it gives us the ability to make sure we get the terms that we need.

Unknown Executive: Gotcha. And then this is a shot in the dark, and it's related, but I wouldn't call it an extra question. Is there any push because of data center demand that maybe you would take your foot off the pedal of LNG? Are there balancing forces there, or are there just kind of two positive outlooks that you're looking at? That's all I've got. Thanks.

Speaker Change: And then this is a shot in the dark and it is related I wouldn't call. It an extra question is there any push because of the.

Speaker Change: Data center demand that maybe you would take your foot off the pedal of LNG is there are there balancing forces. They are there. They are just kind of too positive outlooks that you are looking at that's all I've got thanks.

Speaker Change: Yes, it's certainly another dynamic that we're putting into consideration and when we step back and we look at the opportunity.

Unknown Executive: Yeah, it's certainly another dynamic that we're putting into consideration. And when we step back and we look at the opportunity, you know, servicing the emerging market of LNG, we have the capacity to do that with our existing pipes.

Speaker Change: Servicing the emerging market of LNG.

Speaker Change: We have capacity to do that with our existing pipes, but.

Unknown Executive: But one of the great things about data center demand is Appalachia has proximity to that. And so, you know, when we talk about advocating for LNG, this is more of a tide that is going to raise all ships and be constructive for long-term natural gas demand in the US. But when it comes to data centers, our view is really how can we get more direct exposure to that rising demand.

Speaker Change: One of the great things about data Center data center demand is Appalachia as proximity to that and so when we talk about advocating for LNG. This is more of a tide is going to raise all ships and.

Speaker Change: And be constructive for long term demand of natural gas.

Speaker Change: Demand in the U S, but when.

Speaker Change: When it comes to data centers.

Speaker Change: Our view is really how can we get more direct exposure to that rising demand and so we positioned the company extremely favorably to be able to make sure that we.

Unknown Executive: And so we positioned the company extremely favorably to be able to make sure that we can get differentiated access to this new opportunity set. Things like positioning with MVP are great, showing the willingness to be the first mover on doing large transformative gas supply deals that deliver reliable clean energy to customers. We're fielding calls on that front, and so we're really taking a much more targeted approach and leveraging our operation and commercial footprint to capture these opportunities in front of us. Yeah, I think it's really important to remember.

Speaker Change: We can get differentiated access to this new opportunity set things like positioning with MVP is great showing the willingness to be first mover on doing large transformative gas supply deals that.

Speaker Change: To deliver reliable clean energy to customers, we're fielding calls on that front and so.

Speaker Change: We're really taking a much more targeted approach and leveraging our operation.

Speaker Change: And commercial footprint to capture these opportunities in front of us.

Unknown Executive: Yeah, I think it's really important to remember if you step back and think about these LNG deals, I mean, they're very long-term agreements. And if you just look at the time when the US became an exporter of LNG from 2015 to 2020, that ARB was actually negative, right? So we expect, over the long term, LNG to be a very positive catalyst that can add a lot of value. But if you sign up for too much LNG, and that ARB is negative for a couple of years, it's like a very, very expensive pipeline contract, right? You can get yourself into trouble with that.

Speaker Change: Yes, I think it's really important to remember if you step back and thinking about these LNG deals I mean, they are very long term agreements and if you just look at the time when the U S became in export of LNG from 2015 to 2020 that Arb was actually negative right. So we expect over the long term LNG to be a very positive catalyst can add a lot of value, but if you sign up for too much.

Speaker Change: LNG and that Arb is negative for a couple of years, it's like a very very expensive pipeline contract rate you can get yourself into trouble with that you saw that happened in the past decade, and so we think about it from you learned from the past this is.

Unknown Executive: You saw that happen in the past decade. And so, you know, we think about it from, you know, we learn from the past. This isn't the same as pipelines, but it is, it is similar. So we are taking a very, you know, prudent approach to it. And when we step back and compare and contrast LNG versus data center demand, I think what's happening in the data centers will create a lot more like structural baseload demand not subject to whether the ARB is open or closed for different periods of time.

Speaker Change: It's not the same as pipelines, but it is it is similar and so we're taking a very.

Speaker Change: Prudent approach to it and when we step back and compare and contrast, LNG versus data center demand I think what's happening the data centers will create a lot more like structural base load demand not subject to is the arb open as they are closed for different periods of time and that sort of stability.

Unknown Executive: And that sort of stability, you know, is something that we really try to focus on in our business as we build it for the long term. So we'll have exposure to both, right? So in certain periods, one will be better than the other. But, you know, I think that, you know, the growing data center demand theme on the doorstep of our asset base is something that, you know, has really surprised us. And the more we study it, the more excited we get.

Speaker Change: Is something that we really try to focus on in our business as we build it for the long term. So we will have exposure to both right. So at certain periods, one will be better than the other but.

Speaker Change: Think that that.

Growing data center demand theme on the doorstep of our asset base is something that has really surprised us and the more we study it the more excited we get.

Speaker Change: Thanks, guys.

Operator: Your next question comes from Roger Reed with Wells Fargo. Please go ahead.

Roger Read: Your next question comes from Roger read with Wells Fargo. Please go ahead.

Unknown Executive: Yeah, thank you. Good morning. Um, just wanted to follow up. Is there any update on any of the regulatory hurdles related to the Acquisition, VTRN?

Roger Read: Yes. Thank you good morning.

Roger Read: Just wanted to follow up is there any update on any of the regulatory hurdles related to the.

Roger Read: The acquisition of <unk>.

Unknown Executive: Yeah, par for the course; we pulled and refiled with the FTC. And, you know, this is standard operating procedure.

Roger Read: Yes, par for the course, we pulled and refiled.

Roger Read: With the FTC and this is standard operating procedure. So we've continued to work alongside the FTC and provide updates along the way we are really encouraged about the opportunity to talk to the FCC about how this transaction.

Unknown Executive: So we've continued to work alongside the FTC and provide updates along the way. You know, we're really encouraged about the opportunity to talk to the FTC about how this transaction makes America's natural gas champion EQT a lower-cost energy provider, delivering more reliable energy, and also helping customers acquire cleaner energy sources. So a lot of great things for us to talk about with the FTC, and we're excited about the process.

Roger Read: America's natural gas champion EQT are lower cost energy provider delivering more reliable energy and also helping helping customers.

Roger Read: Acquire cleaner energy sources, so lot of great things for us to talk about with the FTC and we're excited about the process.

Speaker Change: Understood and along those lines.

Unknown Executive: Understandable, and along those lines, the long-term demand here on the AI side is, is there anything the data centers, let's call them that, have you seen recently or heard recently or any sort of direct outreach from consumers to EQT?

Speaker Change: The long term demand here on the AI side is is there anything the datacenters, let's call. It is there anything else you've seen recently or heard recently or any sort of direct outreach from consumers to EQT.

Unknown Executive: Yeah, I think there's a new dynamic that's really taken center stage here. You know, everybody understands the energy that they consume; they want it affordable, they want it reliable, they want it clean. And certainly, with data centers, reliability is at the top of the list. But the other dynamic at play is going to be speed. And there's only one energy source that has shown the proof of track that we're going to be able to meet any sort of demand from America, and that is natural gas. Speed matters.

Speaker Change: Yes, I think there is a new dynamic that's really taken center stage here everybody understands the energy that they acquire they wanted affordable they want it reliable and they want it clean and certainly with data centers with liability.

Speaker Change: The top of the list, but the other dynamic at play is going to be speed and Theres only one energy source that is shown.

Speaker Change: <unk> track record of being able to meet any sort of demand from America and that is natural gas speed matters and at a very high level.

Unknown Executive: And at a very high level, there are a couple things that's going to allow natural gas to service this new demand quickly. Number one is leveraging existing power infrastructure. You know, understanding that natural gas power plants are only running on average around a 60% utilization factor. There's an opportunity to leverage that underutilized capacity. And that could increase natural gas demand in the very near short term. And then stepping back, I think people are getting, you know, looking at how are they going to service this new demand.

Speaker Change: There's a couple of things is going to allow natural gas to service. This new demand quickly number one is leveraging existing power infrastructure understanding that now.

Speaker Change: Natural gas power plants are only running on average around 60% utilization.

Speaker Change: Utilization factor there is an opportunity to leverage that underutilized capacity and that could increase.

Speaker Change: Gas demand.

Speaker Change: In the near short term and then stepping back I think people are getting.

Speaker Change: Looking at how are they going to service this new demand and all the challenges it takes to build any infrastructure.

Unknown Executive: And, you know, all the challenges it takes to build any infrastructure, you know, even looking at natural gas, which requires, you know, a 20 acre footprint and all the permits associated with making that happen. You know, compare that to a 3000 acre footprint if you're going to do solar, or a 5000 acre footprint if you're going to do wind, and you can understand that the best bet and the fastest option most proven is going to be leveraging natural gas to fill this demand. I think it's so.

Speaker Change: Even looking at natural gas, which will require a 20 acre footprint and all the permits associated need to make that happen compare that to a 3000 acre footprint, if youre going to do solar or a 5000 acre footprint, if youre going to do when.

Speaker Change: And you can understand that the best bet in the fastest and most proven is going to be leveraging natural gas to fill this demand.

Unknown Executive: I think it's super important to remember here, too, in terms of, like, or, you know, consumers reaching out wanting to buy gas. If there is a first mover advantage in this, like, we already have it, right? We already sold 1.2 BCF a day on a 10-year basis to the two biggest utilities in this region, right? And so when you think about where all the demand for data centers is right now in the country, you know, today, you have about 20 gigawatts of demand; 13 of that is in the Southeast market, right? So a tremendous amount.

Speaker Change: I think it's super important to remember here too in terms of like or in.

Speaker Change: And consumers, reaching out wanting to buy gas.

Speaker Change: If there is a first mover advantage in this like we already have it right. We already sold one two Bcf a day on a 10 year basis to the two biggest utilities in this region right and so when you think about where all the demand for data centers is right now in the country. Today you have about 20 gigawatts of demand 13 of that is in the <unk>.

Southeast market right. So.

Speaker Change: A tremendous amount so when these utilities reach out and they say we need long term reliable gas from a stable producer like EQT as is the first name on the list that is why we are the only ones to have already done a deal like this and done it at a scale that I think dwarfs, what most people could do because.

Unknown Executive: So when these utilities reach out, and they say, we need long-term, reliable gas from a stable producer, like EQT is the first name on the list, that is why we are the only ones to have already done a deal like this and done it at a scale that I think dwarfs what most people could do because we're the preferred supplier of gas. And you have to have a lot of characteristics in your business to be able to be that preferred supplier.

Speaker Change: The preferred supplier of gas and you have to have a lot of characteristics in your business to be able to be that preferred supplier.

Unknown Executive: You know, part of its scale, part of its depth of inventory, its credit ratings, it's having a really creative team that can work with utilities and buyers of gas to structure deals like this. So, look, we think we're really, really well positioned to leverage what we've already done and accelerate that. And look, like we've already done, we're taking molecules that anyone can produce and selling them at a premium. I mean, that's the essence of what we're doing. And I think we can do that and unlock sustainable demand in the process.

Speaker Change: Part of its scale part of its depth of inventory its credit ratings, it's having a really creative team that can work with utilities and buyers of gas to structure deals like this.

So look we think we're really really well positioned to leverage what we've already done and accelerate that and looked like we've already done.

Taking molecules that anyone can produce and selling them at a premium I mean, as we absolutely what we're doing.

Speaker Change: We can do that and unlock sustainable demand in the process.

Unknown Executive: No argument for me. Thank you, gentlemen.

Speaker Change: No argument for me, Thank you gentlemen.

Operator: Your next question comes from Noel Parks with the Kiwi Brothers. Please go ahead.

Yes.

Speaker Change: Your next question comes from Noel Parks with Tuohy Brothers. Please go ahead.

Unknown Executive: Hi, I've got a couple questions sort of on some of the same ground you've just been discussing. One of them was, well, maybe sort of a broader question.

Noel Augustus Parks: Hi, I've got a.

Noel Augustus Parks: Couple of questions sort of on some of the same curve you've just been discussing.

<unk>.

Noel Augustus Parks: One of them was or maybe sort of a broader question you guys have clearly done a lot of thinking about risk reward in LNG timing and I just wondered if you had any thoughts sort of in hindsight.

Unknown Executive: You guys have clearly done a lot of thinking about risk and reward and LNG timing, and I just wondered if you had any thoughts, sort of in hindsight, on the Freeport LNG outage of a couple of years ago. As we have LNG taking up a greater percentage of consumption, your possibility of events like that seems to loom a little larger. And I was wondering what your thoughts are on that, whether that's something that's best addressed through hedging or whether it's just gonna be another source of potential volatility in the gas market.

Noel Augustus Parks: On the Freeport LNG outage of a couple of years ago.

Noel Augustus Parks: As we have.

Noel Augustus Parks: <unk> LNG, taking up a greater percentage of the consumption.

Noel Augustus Parks: Profitability of events like that seems to loom over a large I was wondering.

Noel Augustus Parks: What are your thoughts on that whether that's something that's best addressed through hedging or whether it's just going to be.

Noel Augustus Parks: Another source of potential volatility in the gas market.

Unknown Executive: Yeah, I think the free port outage is just an example of the uncertainties that exist in any market, natural gas not excluded. And, you know, the Ukraine war, who saw that happening in the cat, the positive catalyst that created in our market? I think, you know, how do we deal with these types of uncertainties? One is to understand that these uncertainties will exist. And part of the way we handle that in the business world is to take a steady, measured approach when we're thinking about accessing new markets. I think, you know, we're certainly the first ones to get excited.

Speaker Change: Yes, I think the rip.

Report outages, just an example of the uncertainties that exist in any market natural gas.

Speaker Change: Not excluded and the Ukraine War, who's who saw that that happening in the count the positive catalyst that created on our market I think how do we deal with with these types of uncertainties. One is understand that these uncertainties will exist and.

Speaker Change: Part of the way, we handle that and position the business.

Speaker Change: Is to take a steady measured approach when we're thinking about accessing new markets I think.

Speaker Change: We certainly the first ones to get excited but when it comes to translate that into action, we are very strategic and very methodical.

Unknown Executive: But when it comes to translating that into action, we are very strategic and very methodical in the steps that we're taking to do that. And I think you look at these uncertainties, this volatility that we're going to see in the natural gas market. We've positioned our business at a very high level to be able to thrive in a volatile commodity price environment. You know, and you can hedge, you can pay down debt, but we think the most impactful thing you can do to de-risk your business is to lower your cost structure.

Speaker Change: On the steps that we're taking to do that and I think you look at.

Speaker Change: These uncertainties this volatility that we're going to see in the natural gas market.

Speaker Change: We've positioned our business at a very high.

Speaker Change: High level to be able to thrive in a volatile commodity price environment.

Speaker Change: <unk>.

Speaker Change: You can hedge you can.

Speaker Change: Pay down debt, but we think the most impactful thing you can do to Derisk. Your business has to lower your cost structure and having a cost structure at $2 is not only going to derisk. Our business. It's also going to increase our exposure to higher pricing by mitigating our need to defensively hedge so.

Unknown Executive: And having a cost structure at $2 is not only going to de-risk our business, but it's also going to increase our exposure to higher prices by mitigating our need to defensively hedge. So, you know, I think we're pretty good with the strategy right here. It's just keeping an eye on all the different moving parts and pieces, but that's sort of the general framework that we're deploying. Noel, thank you.

Speaker Change: <unk>.

Speaker Change: I think we're pretty good with the strategy right here.

Speaker Change: Just keeping in keeping a track on all the different moving parts of the pieces, but thats what are the general framework that we are.

Speaker Change: Deploying here.

Unknown Executive: Noel, think about how much LNG export capacity is being built just in Calcasieu Pass, as an example. Right? I mean, that dwarfs just Freeport alone.

Speaker Change: I'll think about how much how much LNG export capacity is being built just in Calcasieu pass as an example, right that dwarfs just freeport alone so.

Unknown Executive: So, say there's a hurricane or a barge that sinks, or, I mean, come up with any scenario, say that is shut in even for a month. The amount of volume that backs up in U.S. storage from just one event like that could be pretty tremendous. So, when you think about LNG, I think there is certainly risk where, like, the pull could be to the upside, but in terms of what happens really quickly, you don't expect, it's probably more, you know, skewed to the downside. Right? So, what we're trying to do with our business, I mean, we make money at price times volume less cost. Right? It's pretty easy.

Speaker Change: A hurricane or a barge is seeing sorry, I mean come up with any scenario say that is shutting even for a month the amount of volume and that backs up and use storage from just one event like that can be pretty tremendous.

Speaker Change: So when you think about LNG I think there is certainly risk where like the pool could be to the upside but in terms of what happens really quick you don't expect its probably more skewed to the downside right. So what we're trying to do with our business I mean, we make money is price times volume less cost right. It's pretty simple we want to make sure that no matter what that cost is so low.

Unknown Executive: We want to make sure that, no matter what, that cost is so low that we don't have to be chasing after price, right? Because it's easy to cut production. That's what we've done right now. Increasing production is a lot harder, right?

Speaker Change: That we don't have to be chasing after price right because it's easy to cut production and that's what we've done right now increasing production is a lot harder right. So if you run a business model where.

Unknown Executive: So, if you run a business model where, you know, a bad thing happens, you have to decline production a significant amount to remain cash flow positive. But then when prices go up, it takes you 12 to 18 months to ramp production back up sustainably. I mean, prices don't hang high that long, right? It's a bit of chasing after the wind.

Speaker Change: Bad thing happens you have to decline production has significant amount to remain cash flow positive.

Speaker Change: But then when prices go up it takes you 12 to 18 months to ramp production back up sustainably.

Speaker Change: <unk> don't hang high that long rates, it's a bit of a chasing after the wind. So we're trying to run our business in a much more stable way, where the downside is not really a big deal we can still generate durable cash flow and in the upside case, we've got the same volume times, the higher price and we don't have the huge hedge loss right. One of the things that I think it was remarkable to us when.

Unknown Executive: So we're trying to run our business in a much more stable way, where the downside is not really a big deal, we can still generate durable cash flow. And in the upside case, we've got the same volume times a higher price, and we don't have a huge hedge loss, right? One of the things that I think, you know, is remarkable to us when we step back and look at the last five years. Even, you know, the winners in 2020 were the big integrated companies, right? They didn't really sweat COVID as much because they had high quality, low cost businesses.

Speaker Change: We step back and look at the last five years even.

Speaker Change: The winners in 2020 or the big integrated companies right. They didn't really sweat COVID-19 as much because they have high quality low cost businesses. The winners in 2022, when you had windfall pricing, but oil and gas where again integrators because they were unhedged right. That's why stock prices are at all time highs are sitting on a lot of cash we lost more money.

Unknown Executive: The winners in 2022, when you had windfall pricing, but oil and gas were, again, integrated because they were unhedged, right? That's why stock prices are at all-time highs. They're sitting on a lot of cash.

Unknown Executive: We lost more money hedging in 2022, nearly six billion dollars than the market cap we just paid for Equitrain. So just put that in perspective and think about you going through that sort of cycle again in a world we expect to be more volatile that looks more and more like that more frequently. If a deal like this puts us in a position where we can emulate the sort of success that those bigger companies actually achieved over that time period, the amount of shareholder value unlocked by doing that is tremendous.

Speaker Change: Hedging in 2020 to nearly $6 billion.

Speaker Change: And the market cap, we just paid for Atwood trends. So just put that in perspective and think about new go through that sort of cycle again.

Speaker Change: In a world, we expect to be more volatile that looks more and more like that more frequently.

Speaker Change: If a deal like this puts us in a position where we can emulate the sort of success that those bigger companies actually achieved over that time period, the amount of shareholder value unlocked by doing that is tremendous it's a very hard thing to model right, but in reality, when you overlay psychology and risk management, having to protect against operating leverage on top of that.

Unknown Executive: It's a very hard thing to model, right? But in reality, when you overlay psychology and risk management, having to protect against operating leverage on top of that, that's the result that plays out, right? And so that's how we positioned ourselves. We think there will be a lot more events like that that happen again, whether it's from LNG or something else; prices will go very low. You're seeing it this year.

Speaker Change: That's the result that plays out right and so that's how we positioned ourselves we think theres a lot more events like that that happen again, whether it's from LNG or something else prices will go very low youre seeing it this year. Conversely, all of a sudden demand gets pulled you have full utilization you can drain use storage very rapidly and it will take production, although while to respond right. So.

Unknown Executive: Conversely, all of a sudden, demand gets pulled, you have full utilization, you can drain US storage very rapidly, and it will take production a little while to respond, right? So we want to be in a position where you are best able to weather the downside and capture that upside. And over the long term, that value will compound in a very differentiated way.

Speaker Change: We want to be in a position, where we are best able to weather the downside and capture that upside and over the long term that value will compound in a very differentiated way.

Unknown Executive: Great, thanks a lot. And I totally understand your framing of the factors of data center demand growth, coal retirement, and sort of on the issue of grid-fed fragility; I was thinking, in particular, about the micro grid market. I was thinking back to your deal with Bloom Energy a couple years ago for RSV certificate sales, and I just wondered if you saw similar opportunities, whether deals like that are, you know, kind of a good investment in company time in terms of just what you can capture in terms of the [inaudible] Yeah, specifically on our

Speaker Change: Great. Thanks, a lot.

Speaker Change: Totally understand your renewable sources of data for their own growth coal retirement.

Speaker Change: And.

Speaker Change: Sort of on the issue of the fed.

Speaker Change: Jody I think in particular.

Speaker Change: Micro grid market.

Speaker Change: I was thinking back to your your deal with <unk>, a couple of years ago for RSV certificate sales.

Speaker Change: I just wondered if.

Speaker Change: You saw similar opportunities whether deals like that.

Speaker Change: Kind of a good industrial and couple of times in terms of just what you can capture in terms of.

Speaker Change: Sort of economics of those so any thoughts around that would be great.

Unknown Executive: Yeah, specifically on RSG and making investments there, we think, you know, producing clean energy and having the transparency backed up with certificates to prove that you're just going to be a normal operating procedure going forward. But, you know, if your questions are about, you know, Power Generation and partnering with power generating companies like Bloom Energy, you know, there's really two different worlds that are going to be servicing this data set and this power demand.

Speaker Change: Yes, specifically on RFG.

Speaker Change: And making investments there, we think producing clean energy and having the transparency backed up with certificates to prove that.

Speaker Change: B normal operating procedure going forwards, but.

Speaker Change: If your question is about.

Speaker Change: Power generation and partnering with power generating companies like Bloom energy.

Speaker Change: There is really two different worlds that are going to be servicing. This data set this power demand one is going to be on the grid and in if you wanted to use that get in line you've got long queues that you need to work through to get interconnect connected to the grid.

Unknown Executive: One is going to be on the grid, and if you want to use that, get in line. You've got long queues that you need to work through to get interconnected, connected to the grid. But this other world, which is one of the ones we're being a little bit more direct with, with our partnerships, to bring solutions to market, is behind the grid power generation solutions. That's where we can leverage our operational footprint, our existing assets, the pipelines, and develop, you know, behind the grid energy, energy solutions for customers.

Speaker Change: But this other world which is.

One of the ones, we're being a little bit more direct with our partnerships to bring solutions to market is behind the grid power generation solution, that's where we can leverage.

Speaker Change: Our operational footprint, our existing assets the pipelines and develop behind the grid energy energy solutions for customers, we think that could offer a much faster pathway to meeting their energy demand that as I mentioned before speed matters and I think behind the grid solutions will be.

Unknown Executive: We think that could offer a much faster pathway to meeting their energy demands. And as I mentioned before, speed matters. And I think behind the grid solutions will be ways that we can leverage some of those partnerships.

Speaker Change: So we can flex some of those partnerships.

Operator: Your next question comes from Josh Silverstein with UBS. Please go ahead.

Speaker Change: Terrific. Thanks, a lot.

Speaker Change: Okay.

Speaker Change: Your next question comes from Josh Silverstein with UBS. Please go ahead.

Unknown Executive: Yeah, thanks. Good morning, guys.

Josh Silverstein: Yes. Thanks. Good morning, guys. So you provided a lot of good details on the lower breakeven price.

Unknown Executive: So you provided a lot of good details on the lower break-even price. I just had a couple questions there. First, I think these exclude the non-investor impacts. Can you give us what the pro forma numbers would be? And then just around the third-party revenues, you know, it's big at $0.27 here. Does this change over time, or are these under, you know, 10-, 15-year, 20-year agreements that should be pretty consistent through the 2030s? Thanks.

Josh Silverstein: A couple of questions there.

Josh Silverstein: First I think.

Josh Silverstein: Glued the non op investor impacts can you give us what the pro forma numbers would be and then just around the third party revenues.

Josh Silverstein: 2027 cents here.

Josh Silverstein: Does this change over time or these under 10 15 year on year agreements.

Josh Silverstein: Pretty consistent.

For the 2030.

Unknown Executive: Yeah, so I guess, first of all, on the cost walk, I don't anticipate much of a change from the non-op sales. You know, they are high-quality assets, but it's not going to move the needle all that much. I think there are other variables in the mix that'll have a more outsized impact on that in terms of like recapturing synergies, and other projects we're investing in around the So I wouldn't. I think that's still a pretty good direction walk as to where we expect.

Speaker Change: Yes, So I guess first of all on the cost work I don't anticipate much of a change from the non op sales.

Speaker Change: Yes.

Speaker Change: They are high quality assets, but it's not going to move the needle all that much.

Speaker Change: I think theres other variables in the mix.

Speaker Change: More outsized impact of that in terms of like you're capturing synergies other projects, we're investing in around the asset footprint.

Speaker Change: So I wouldn't I think thats still a pretty good directional work as to where we expect that to end up.

Unknown Executive: Yeah, and then as far as the third-party opportunity set, yeah, we look at that as a way to, you know, reduce our cost structure. Listen, we're rolling up our sleeves and understanding what the opportunity set looks like there. You know, like what we did when we came in here with EQT, we wanted to realize the full potential of EQT's assets. It's the same playbook being a mentality being applied to the E-train assets.

Speaker Change: And then as far as the third party.

Speaker Change: Opportunities that we look at that as a way to reduce our cost structure.

Speaker Change: Listen, we're rolling up our sleeves and understanding what the opportunity set looks like there.

Speaker Change: Like what we did when we came in here with EQT, we wanted to realize the full potential of Eqt's assets. It's the same playbook and mentality being applied to the E train assets in one of the ways that we can realize the full potential of those assets is increasing the utilization of those midstream assets.

Unknown Executive: And one of the ways that we can realize the full potential of those assets is by increasing the utilization of those midstream assets. And one of the ways that we can do that is with our own volumes, but there will also be opportunities where there are opportunities for us to increase utilization using third-party volumes. So that's something that we're mapping out the leadership at EQT that's going to be running these assets with a track record of maximizing the utilization of our pipe systems.

Speaker Change: One of the ways that we can do that is with our own volumes, but also there's going to be opportunities, where there is opportunities for us to increase utilization using third party volumes. So that's something that we're mapping out the leadership at EQT that is going to be running these assets as a track record of maximizing.

Speaker Change: The utilization of our pipe systems just for reminder.

Unknown Executive: Just for a reminder, you know, at Rice Energy, we're producing 2bcf a day gross. Our midstream team is gathering almost 3bcf a day. So this is a part of the DNA, and it's aligned with our core strategy of lowering our cost structure.

Speaker Change: At Rice energy producing two Bcf a day gross our midstream team was gathering almost three Bcf a day. So this is part of the DNA and it's aligned with our core strategy of lowering our cost structure.

Unknown Executive: Got it, that's helpful. And then you touched on just the hedges before.

Speaker Change: Got it that's helpful and then.

Speaker Change: You guys reported on the hedges.

Unknown Executive: Just going back to the prior call, I thought the view was that eTrain would now be the new hedge, but you guys have added hedges into the first half of next year, pretty similar to it looks like to what the second half of 24 is. Was this just a view of maybe some potential weakness or uncertainty this winter before we, you know, have the, you know, rising demand outlook going forward? Or is this a change in strategy? In the past few months? Thanks. No, Josh, it's consistent with what we talked about.

Speaker Change: Just going back to the prior call I thought the view was that.

Speaker Change: Training would that will be the new hedge but you guys have added hedges into the first half of next year pretty similar to it looks like the second half of 'twenty. Four is was this just a view of maybe some potential weakness or uncertainty. This winter before you have the rising demand outlook going going forward or is this a change in strategy.

Speaker Change: Over the past few months.

Unknown Executive: No, Josh, it's consistent with what we talked about before. I mean, step one is deleveraging. So, you know, we need to protect the balance sheet first and foremost. By the time we get through that, you know, we will hit our targets by the end of 2025. I think you will see the post 2025 hedge strategy look very different. But look, the next 12 to 18 months is all about bulletproofing that balance sheet. But in 2026 and beyond, I think you're going to see us have differentiated upside to, you know, higher gas prices in volatility.

Speaker Change: No Josh it's consistent with what we talked about before I mean step one is deleveraging. So we need to protect the balance sheet first and foremost by the time, we get through that we hit our targets by the end of 2025, I think you see the post 2025 hedge strategy look very different.

Speaker Change: But look the next 12 to 18 months is all about the balance sheet bulletproof bullet proofing that plan.

Speaker Change: In 2026, and beyond I think youre going to see us have differentiated upside too.

Speaker Change: Gas prices.

Speaker Change: The volatility.

Speaker Change: Sure.

Operator: There are no other questions in the queue. This will conclude today's conference. Thank you for your participation. You may now disconnect.

Speaker Change: Got it thanks guys.

Speaker Change: There are no other questions in the queue. This will conclude today's conference. Thank you for your participation you may now disconnect.

Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.