Episode Details

EQT Corporation (EQT) Q2 2026 — EQT Corporation (EQT), the largest U.S. natural-gas producer, reported Q2 2026 results that LOOK like a miss but tell a more nuanced story. GAAP EPS fell 74% YoY to $0.34 (missing the ~$0.43 estimate) and net income dropped to $211M from $784M — but last year's number was inflated by one-time derivative gains; adjusted EPS was $0.39 (vs $0.45). OPERATIONALLY the quarter was strong: sales volume rose 12% to 634 Bcfe (above the high end of guidance), capex came in 9% under guidance at $666M, per-unit operating costs hit the low end (~$1.03/Mcfe), and free cash flow attributable to EQT rose 38% YoY to $330M (on $1,048M of operating cash flow). Net debt was slashed from $7.7B to $5.5B in six months, and EQT RAISED full-year production guidance (~90 Bcfe) while CUTTING capex $25M. The catch: realized gas fell to $2.65/Mcfe and the ~$3.5B free-cash-flow thesis is levered to mid-cycle Henry Hub. The stock (~$50) sits just above its 52-week low, ~27% below its ~$68 spring high. On a mid-cycle FCF DCF (net of ~$5.5B net debt) our probability-weighted fair value is ~$50 — right at today's price. Our call: HOLD, 3/5 — more cautious than the Street's Buy / ~$68 target. EQT Corporation is the largest natural-gas producer in the United States — a pure-play on Appalachian shale (the Marcellus and Utica) that, after acquiring Equitrans Midstream, is now vertically integrated across the wells AND the pipelines that gather and move the gas, giving it a structural low-cost edge (per-unit operating costs ~$1.03/Mcfe). Q2 2026 looked ugly at the headline: GAAP diluted EPS fell 74% YoY to $0.34, missing the ~$0.43 estimate, and net income dropped to $211M from $784M. But that comparison is dominated by last year's one-time/derivative gains, NOT an operational decline — adjusted EPS was $0.39 (vs $0.45). Operationally the quarter was strong: sales volume rose 12% to 634 Bcfe (above the high end of guidance), capex came in 9% under guidance at $666M, per-unit costs hit the low end, and free cash flow attributable to EQT rose 38% YoY to $330M — which actually EXCEEDED GAAP net income of $211M. The balance-sheet story is the real one: net debt was cut from $7.7B to $5.5B in six months (with a $115M debenture repaid after quarter-end, and guidance to exit 2026 near $4.7B), and EQT RAISED full-year production guidance ~90 Bcfe while CUTTING capex. The bull case adds a structural LNG-export demand tailwind (EQT signed a 5-year, 0.5-mtpa offtake SPA with a large Asian energy buyer, first gas 2028) and ~$3.5B of 2026 free cash flow at recent strip. So why only a HOLD? Because EQT is a price-taker: realized gas fell to $2.65/Mcfe, and the entire cash-flow thesis is levered to mid-cycle Henry Hub. Valuing a cyclical on mid-cycle (not spot) owner earnings — normalized FCF attributable of ~$2.3–3.0B/yr, discounted at 8/9/10% and net of ~$5.5B net debt — our two-scenario DCF spans ~$43–$61 (mid-cycle, ~$3.25 gas) and ~$62–$90 (up-cycle, ~$4 gas + LNG pull), with a genuine ~$28 low-gas downside. Probability-weighted (45% mid-cycle / 25% up-cycle / 30% low-gas), fair value is ~$50 — essentially equal to the ~$50 price. That's no margin of safety, with a fat left tail if gas stays soft. Notably, the Street's ~$68 average target is almost exactly our up-cycle case — it assumes mid-cycle gas holds and LNG tightens the market. We give real weight to a softer-gas world, so we're more cautious. Our verdict: HOLD, 3/5 — a best-in-class, deleveraging, low-cost gas producer with real LNG optionality, but a price-taker trading right at fair value. A company to respect and a price to wait on. Not financial advice. THE CALL: HOLD (3/5, A BEST-IN-CLASS, DELEVERAGING GAS PRODUCER — STRONG OPERATIONAL QUARTER AND REAL LNG OPTIONALITY, BUT A PRICE-TAKER TRADING RIGHT AT MID-CYCLE FAIR VALUE WITH NO MARGIN OF SAFETY AND A REAL LOW-GAS DOWNSIDE) — base-case value ~$50 vs ~$50 today. What to watch: Watch the natural-gas price (mid-cycle Henry Hub) abo