EQT Corporation (EQT) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining us, and welcome to the EQT Second Quarter 2026 Results Conference Call. [Operator Instructions] I will now hand the conference over to Cameron Horwitz. Cameron, please go ahead.

Good morning, and thank you for joining our second quarter 2026 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 with a question-and-answer session to follow. An updated investor presentation has been posted to the Investor Relations portion of our website, and we will reference certain slides during today's discussion. A replay of today's call will be available on our website beginning this evening. I'd like to remind you that today's call may contain forward-looking statements. Actual results and future events could materially differ from these forward-looking statements because of factors described in yesterday's earnings release and our investor presentation, the Risk Factors section of our most recent Form 10-K and the subsequent filings we make with the SEC. We do not undertake any duty to update any forward-looking statements. Today's call also contains certain non-GAAP financial measures. Please refer to our most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Toby.

Thanks, Cam, and good morning, everyone. Our second quarter results are another powerful demonstration of the value of EQT's integrated platform. While our operating teams were busy setting more industry records in the field, we continue to build on our strategic momentum through a series of transactions. Our success this quarter underscores how EQT is uniquely positioned to capture a substantial amount of Appalachia demand growth and continue to improve realized pricing. Our operational performance remains the foundation of everything we do. And this quarter, our teams once again pushed the boundaries of what is possible. During the quarter, we drilled the longest lateral in the history of shale development at more than 29,000 feet all while staying 100% in zone with 0 safety incidents. We also set a new basin, 24-hour drilling record and a new EQT 48-hour drilling record in the process. While the success of our large-scale operations is defined by averages, it's records like this that redefine what is possible. These achievements are not isolated accomplishments. They reflect the culture we've created. The direct result of years of relentless operational focus and evolution aimed at improving our capital efficiency lowering our cost structure and enhancing the returns we generate for shareholders. This strong operational execution, along with robust well performance is leading to significant production outperformance which is evident in our second quarter volumes coming in well above the high end of our guidance. A significant portion of this outperformance is coming from our base production, reflecting better-than-expected results from our midstream compression projects. which are extending flat times on new wells and shallowing base declines on older wells. As a reminder, these projects were a key piece of the synergies we projected when we acquired Equitrans and they continue to exceed even our upside forecast. We expect strong performance to continue throughout the year, and as such, we are raising our 2026 production guidance by roughly 90 Bcfe at the midpoint. Another important milestone this quarter was the receipt of FERC authorization to begin construction activities on MVP Southgate. With all key regulatory approvals now in hand, we have elected to pull forward capital spending and accelerate construction timing of MVP Southgate into 2026 to derisk project execution. The project will provide critical infrastructure needed to connect low-cost Appalachian natural gas supply with one of the fastest-growing demand regions in the country. Bringing additional supply into the Carolinas will help utilities meet growing energy needs, support system reliability and help keep energy costs affordable for consumers. MVP Southgate enhances the strategic value of EQT's integrated platform, expanding market access for Appalachian natural gas while providing an attractive combination of long-term contracted cash flow visibility and compelling risk-adjusted returns. As a reminder, neither MVP Southgate nor the MVP Boost expansion were included in our Equitrans underwriting case. Alongside this performance we're seeing from our compression projects, these successes demonstrate how our vertically integrated platform and aligned teams continue to unlock value across both our upstream and midstream businesses and drive incremental returns for shareholders. Turning to Appalachia fundamentals. Momentum continues to build for power generation and pipeline projects throughout the region with an opportunity set in front of EQT today that is significantly larger than it was even 6 months ago. As illustrated on Slide 22 of our investor presentation, our analysis suggests there are over 45 Appalachia demand and pipeline takeaway projects under construction or in evaluation totaling nearly 20 Bcf a day of potential demand. The success of even a fraction of these projects is expected to lead to significant strengthening of in-basin supply-demand fundamentals. This demand backdrop creates upstream growth optionality for EQT, thanks to our low-cost peer-leading inventory depth and strong balance sheet position. However, any future growth will be measured and directly tied to demand underpinned by our commercial agreements. We have no interest in growing for growth's sake as that is a strategy that has historically resulted in poor returns and value destruction in this industry. Instead, our focus remains on growth with durable contractual demand in a manner that is accretive to corporate returns, expands free cash flow per share and creates long-term shareholder value. Wrapping up, the broad takeaway is clear. EQT is delivering at a high level across every part of our business, stacking up wins operationally and strategically. We continue to drive operational excellence, execute commercial agreements that catalyze in-basin demand and improved price realizations for years to come and also advanced infrastructure projects that connect our low-cost supply to premium markets. As Appalachia continues to emerge as one of the epicenters for secular power-driven natural gas demand growth in North America, EQT is uniquely positioned to capture an outsized share of this opportunity. With a differentiated integrated platform, industry-leading execution and a growing portfolio of demand-driven projects, we have a clear path to creating durable long-term value for our shareholders. With that, I'll turn the call over to Jeremy.

Thanks, Toby. The second quarter was another outstanding one for EQT. We again exceeded expectations across virtually every financial metric including production, price realizations, operating costs and capital spending. This resulted in $330 million of free cash flow attributable to EQT in Q2, despite natural gas prices averaging just $2.89 per MMBtu during the quarter, underscoring our advantaged position at the low end of the cost curve. Operational execution is leading to sustained production outperformance. And as a result, we are raising 2026 production guidance by approximately 90 Bcfe while also lowering full year CapEx by $25 million. As Toby mentioned, we have also decided to accelerate MVP Southgate construction timing and are thus pulling forward $85 million of capital contributions to equity method investments from 2027 into 2026. During the quarter, we continued to build momentum across our commercial platform. We recently signed a 10-year definitive agreement with competitive Power Ventures to provide 325 million cubic feet per day of natural gas to a new 2-gigawatt power generation facility planned in Doddridge County, in the heart of West Virginia, which will pull gas south from EQT's core production base. This facility is expected to enter service in early 2031. Note this marks the second new combined cycle gas turbine project in West Virginia that EQT has helped catalyze following the Wolf Summit project we announced last year. Importantly, the CPV contract pricing is linked to PJM power pricing rather than a gas price index and represents EQT's second deal incorporating the structure. At the forward strip, we expect this agreement to provide EQT a material premium to local index pricing while also enhancing the project's ability to secure financing. This structure provides us direct exposure to strong PJM power pricing fundamentals without any capital commitment. This transaction is yet another example of how EQT is uniquely positioned to directly capture a material amount of demand growth in Appalachia and the associated pricing benefits. Our integrated platform, investment-grade ratings commercial expertise and reputation allow us to craft solutions that deliver superior value for customers while also improving returns for EQT shareholders. As power developers, data centers and industrial customers look to secure gas supply, EQT is the clear partner of choice throughout the Appalachian region. We also announced the acquisition of Blackline Midstream for approximately $77 million. Blackline owns and operates 2 strategically located propane storage and distribution terminals in New England representing the largest propane storage facility in the region with both rail and waterborne access. Collectively, the assets provide 46 million gallons of storage capacity with EQT currently supplying approximately 60% of Blackline's propane volumes. This transaction is particularly attractive as it requires essentially no incremental capital investment while creating multiple opportunities for value creation. The assets provide physical optionality for EQT's propane production, improve flow assurance, enhance our ability to optimize pricing and create additional commercial optionality through domestic and international supply channels. We also see opportunities to leverage our commercial relationships to drive growth and optimize costs over time. From a financial perspective, we project a 20% free cash flow yield under our base case underwriting with upside optionality that would roughly double this metric. Blackline is a natural fit within EQT's integrated platform as the acquisition complements our existing upstream and midstream businesses, expands our commercial reach and allows us to capture additional value from our existing production. Transactions like this demonstrate how our vertically integrated platform and strategic and commercial expertise can unlock unique value creation opportunities while enhancing the long-term earnings power of our business. Turning to our LNG portfolio. We recently executed a 5-year offtake agreement with a large Asian integrated energy company for approximately 0.5 million tons per annum of LNG sourced from various Gulf Coast LNG facilities beginning in 2028. This deal allows us to accelerate our LNG exposure and develop capabilities while reducing execution risk ahead of the planned commencement of our larger portfolio in 2030. Notably, the agreement was executed at a similar cost to our term deals rather than current market economics. At recent strip pricing, we expect the contract will increase EQT's 2028 free cash flow by roughly $45 million. This deal demonstrates our steady progress in developing our LNG business and the relentless hustle of the team on the front lines as we develop important relationships around the world and improve EQT's access to premium markets. Turning to capital allocation. We are on the doorstep of achieving our long-term net debt target of $5 billion, a milestone that represents the culmination of years of commitment towards bulletproofing our balance sheet. During times of turbulence, our balance sheet will become a fortress and cash on hand a strategic tool to fund aggressive share buybacks and long-term growth investments even in low-price environments. To that end, in the near term, we intend to accumulate cash, which we plan to aggressively deploy into share buybacks during the industry's episodic down cycles. As we look ahead, we believe the next chapter of value creation at EQT will be driven by the combination of disciplined growth and capital returns primarily through share buybacks. High-return midstream investments provide visible cash flow growth today and connect our production to new demand, while future upstream growth is supported by both announced supply agreements and a growing number of new demand opportunities. When combined, the ability to repurchase meaningful amounts of stock along the way, we see a clear pathway to driving significant alpha due to the compounding nature of this strategy. And with that, we will now open the line for questions.

[Operator Instructions] Your first question comes from the line of Josh Silverstein from UBS.

Well, Jeremy, I wanted to start with just the last comments that you had made there. Clearly, the balance sheet continues to improve. The stock price has gone back towards a 52-week low. How much cash do you want on hand to take advantage of some of these periods of stock price weakness versus continuing to just kind of build cash? And what's the right level of cash for you guys to have on hand?

Yes, good question. I think -- look, we're going to be patient with it. We're not opposed to accumulating at certain points in the cycle up to a few billion dollars of cash. I think where the stock price is right now, I think we look to be more aggressive in buybacks. But it just depends on what's going on in the market. And again, I think we'll be opportunistic and aggressive when we see those opportunities, but we certainly want to be countercyclical rather than pro-cyclical.

Got it. And then on the new LNG updates here, I want to see if you can provide a little bit more details on how you're implementing the strategy and the 2028 offtake agreements here. How are you sourcing the LNG is the infrastructure in place and kind of capacity already lined up for this?

Yes. So the -- for the new agreement specifically, we were able to pick the capacity up off a -- like we said in prepared remarks, an integrated Asian buyer that is dealing with some tariff-related issues. So we worked with them to alleviate that, really crafted a win-win deal to where that is in the money for us today and adds meaningfully to our 2028 cash flow. Those are volumes that will be coming from 2 facilities that are nearing completion right now. So I would expect those to come online in early 2028, contractually to January, but there's slippage in project timing, it could be a little bit delayed, but we have high confidence in that coming online during that year and contributing to uplift in realized pricing.

Your next question comes from Doug Leggett from Wolfe.

Jeremy, I wonder if I could -- or maybe this is for Toby. The idea that you've laid out this extraordinary volume potential. Obviously, a lot of it is post 2030. But I'm curious when Toby, when you talk about you're only going to grow on -- when you've got contractual agreements, I'm curious why if these are premium priced deals in your backyard, why would you grow at all? Why wouldn't you reallocate existing volumes and get our premium price without having to incur the additional capital and ultimately the growth. That was my first question.

Do you want to take your second question, throw it out there?

Yes. So it's a real quick one. I just -- it was for Jeremy, really the compression is really -- is obviously having an impact on capital. I'm just curious how much lower do you think -- how much better do you think your sustaining capital can become as a consequence of those compression projects.

Yes, Doug, I think your first question, I think, hits on something that we spend a lot of time thinking about. The first step and our first focus is to get direct connections to this demand. And I think we're putting a lot of -- showing a lot of progress on that front. But the next question that we're going to have to ask ourselves is what part of that demand are we actually going to grow organically into. And as you mentioned, strengthening basis is going to be one of those considerations, and that's going to have an impact of lifting all EQT volumes, not just the volumes that would be exposed to growth. So our first focus is capture as many of these opportunities as we can, and then we'll step back and make that evaluation. But there will be a portion that will consider growing, but it would not be the full amount of demand.

Yes. And Doug, just to add to that and then address your second question. We have a disproportionate amount of our gas sold into first month today on a short-term basis. I think it's about 30% of our volumes are sold on more medium and longer-term contracts. So there certainly is the ability to reallocate. And effectively, what happens is less volumes that are sold into that first to month market drives a little more scarcity in that market. And if all else is equal, with lift index pricing most of those longer-term deals being indexed to first of month, you get that price benefit. So there certainly is flexibility around that. And I think the way you structure those and where you index it back to liquid hubs is really critical to make sure that you are able to have the flexibility in supplying those volumes over the longer term. So it's something that we're very focused on. And look, I think if you look at Slide 22, which I'd encourage everybody to look at is really kind of the culmination of a lot of the analysis we're doing and the opportunities we're tracking in Appalachia today. We don't have to grow into this 1 for 1 day 1. You do see a bit of -- almost looks like a hockey stick ramp around the end of this decade. A lot of that is really just due to the fact that it takes 3 to 5 years to build most of this large-scale infrastructure. We're not looking to add any sort of step change in production. If you see 2 Bcf a day added in a given year, we might grow a fraction of that. And over time, we fill it. But if the market is a little tighter in the intermediate term, there's ample gas, the market will balance. But I think to your point, I think we still benefit because we're in a price times volume business. On your second question around midstream and compression. I mean look, candidly, we're working with our reservoir team and our finance team just trying to recalibrate how we forecast some of this stuff. I think our original expectations on the impact on well performance and type curves from lower pressures have been kind of blown away. We're trying to recalibrate our hydraulic models and just how we forecast type curves in base declines, that could lead to further outperformance. But it's something we're still in the middle of the process of right now. But obviously, we're seeing quarter after quarter of these big beats that continue to surprise us, too. And I think that -- if that trend continues, which it feels like it is, that will lead to continued capital efficiency in the years ahead.

Your next question comes from Betty Jiang from Barclays.

I want to start with a bigger picture question speaking to that Slide 22. Just given where this market is going, we're seeing more midstream pipeline projects. How do you guys see these projects ultimately get supplied? And how do you think about the competitive attention to fill these incremental egress projects and how that's creating tension against the in-basin power projects. And when you -- and related to EQT, your ability to be able to leverage better pricing in these supply agreements that you are talking to?

Yes. Betty, I'd say when we look at Slide 22, I'd say probably one of the bigger moves that has become a lot clearer over the past few months. As we referenced in our last quarterly update was just the number of pipeline takeaway opportunities that are showing up largely in that Clarington area. Those are going to be large potential projects. They're going to require supply to be brought from M2 or basically our core production region to fill those projects, and that's going to give us an opportunity to build infrastructure and with infrastructure. I think we have an edge in making sure that we supply those projects as well. So that's sort of the dynamics that's really exciting to see materialize. And I think EQT will be able to continue to play a role in creating win-win solutions for our customers while giving our shareholders access to some premiums in the meantime, and those will come in the form of midstream fees. As we do anticipate these large egress projects, the capacity will be taken from utilities downstream.

Great. And Jeremy, a question to you on the CTV contract being linked to power price. How do you think about the upside downside risk around that contract structure? And is there a floor price for EQT to protect you? Is there any downside protection to that?

Yes. Great question, Betty. So just to frame this and put it into perspective, this is a deal that if just say hypothetically, this contract came online for the full year of 2027 and just flow at full capacity. Obviously, there will be a lower utilization, so you can make your assumptions there. It would improve our free cash flow by about $100 million a year, improved corporate overall differentials by like $0.05. So it is a material contract. There's a material premium. And honestly, it is a true win-win for us and the developer. We can hedge it if we would like to, but if you look at the way electricity prices and gas prices in PJM specifically are correlated just due to where gas is in the dispatch. They are tightly correlated and as the cost of building new generation continues to rise, I would expect that spark spread to widen as there needs to be more and more of a market signal long term for more generation to be built. So we actually think we're on the right side of the bet here having that long exposure into power. And to some degree, it's almost like what you're seeing in the liquids markets today where you have a lot more tightness in the refined products market as opposed to in the crude market specifically from what's going on in the Middle East. I think you're going to see a lot of the same dynamics in power, where that power market gets tighter and tighter, it will trickle through to gas but not on a one-for-one basis. So being able to, in a manner without putting any capital and get direct exposure to the other side of the generator, I think is really interesting. And again, it's our second deal like that. I'd be open to doing more deals like that. But again, I think it speaks to just the structural creativity and what our team is capable of. to provide solutions for all these types of projects and play a lot of different roles to make them come to fruition.

Your next question comes from Arun Jayaram from JPMorgan Securities.

I wanted to go back to the Shay Energy project Toby and Jeremy, I wondered if you could just discuss what has given EQT perhaps the right to win on this project? You mentioned the Wolf Summit that infrastructure project maybe was an enabler. And perhaps you could talk about timing here. You mentioned as early as 2031. What are some of the gating items for this project to achieve that startup time, including permit approvals, which has been some of the question from investors on some of these large data center or power projects in the basin.

Yes. So in terms of competitive dynamics, I mean, I'd say we're probably -- we are close on other projects, other projects and also including West Virginia, I think before the end of the year, you'll probably see at least one more, maybe more potentially some very large ones, too. I think it's, Arun, it's really what we've been saying for the past year. It's the power of the platform we put together and more than anything, it's the quality of the team here at EQT, working in a really collaborative aligned way. starting with our commercial team on our -- with our commodity traders out there structuring this stuff, the depth of relationships, the trust we have, the balance sheet, the integrated platform. We don't have to do the midstream. We don't have to do certain pieces of this, but we can, understanding the whole value chain, I think, adds a lot of value being comfortable doing things like we did on CPV Shay, pricing it linked to electricity, not gas and showing that flexibility because it's best for the customer and really starting out with a mindset of what's best for the customers, what's going to win the deal and how do you create that win-win solution. I think when you put all those pieces together, we're just in a really unique spot and it's allowed us to continue building that momentum, and that momentum builds more momentum, which is why we're in the position we are today. So again, I don't think we're done. I think there's a lot more to come.

Yes. Arun, I just put some comments here. I mean certainly have a mentality to help the customers and be creative and we certainly have a number of capabilities from being an integrated producer. I'd also say we've got great support with the Board. I mean the governance on this, the ability to work through these issues, ask the questions that we need to be asked allows us to stretch strategically and make, we think, a really high-quality decision. So this organization is firing from top to bottom, and it's what it takes to produce these types of wins. And I think it's worth noting that EQT continue to put up these results. And we seem to be winning almost 100% of these deals that we're on, but it is a lot of work, and we are really putting the customer first.

Yes. Arun, I think what's amazing too, is we talked about -- I feel like we have a new deal every quarter. It seems like lately to talk about if you really rewind a couple of years back to the end of 2023 when we first announced those sales deals to some of the big utilities in the Southeast, those deals start to come online now at the end of next year and into 2028, those deals alone are $300 million a year of uplift of value. At the time, and I'd argue today, we're still not getting credit for that. but we keep stacking up these deals, whether it's LNG deals or power deals or whatever it might be, and that value continues to build. From our perspective, EQT is really the only platform with that. And as that momentum grows, we're going to continue stacking that margin. At the same time, you have a macro backdrop you do as we talked about in prepared remarks, as we've illustrated on Slide 22, which is a further tailwind when -- but again, it's focusing on what we control every day to differentiate EQT from the rest of the group and deliver the wins in a differentiated way.

Got it. A quick follow-up is I wanted to refer to Slide 7. You guys have highlighted your first half performance where you're beating your type curve by 8%. I was wondering if you could, Toby may unpack what is going on? Are you drilling better rock? Is there different flowback procedures. I wondering if you could maybe help determine what is maybe driving this outperformance?

Yes. So the -- with the till accelerations that we put in place, really, this just comes down to extending flat times, and this is a byproduct of producing into optimal pressures on the gathering side. So this is just another benefit from the compression. It's not just having an impact on improving our base production. It's also improving our wedge performance, which is the new tills that we're putting in. So it's one of the great things when operationally, I think these wins create other opportunities for us. I'd say some of the other things that we're looking at on compression that we haven't really wrapped their heads around. But as Jeremy mentioned, we're really digging into this. We also have a number of wells that could benefit from workovers that maybe not -- would have been a price in a high-pressure system, but now with the pressures lowered those workovers make sense. I mean all of these things are incremental and are just continue to strengthen the operational story that we have here at EQT.

Your next question comes from Neil Mehta from Goldman Sachs.

Toby and Jeremy, thanks for the updates here. Just on your perspective on the hedging strategy here. Saw you layered in a little bit more. And how are you thinking about you have the optionality of running a little bit more on the hedge, but how are you thinking about being opportunistic around your hedging strategy?

Yes, it's a good question. I mean, look, I think, candidly, we're seeing some of the same very near-term risks that others are seeing around Permian growth potential and some of the super El Nino weather patterns I think for us, it's more of just ensuring as we look into next year, the balance sheet is in a strong position. We are intending to start buying back quite a bit of stock. We want to make sure if there is a down cycle, there's nothing that holds us back from leaning in pretty aggressively and deploying a lot of cash into that. If that does happen, our hedging has been focused specifically on next summer, where we would expect more of the weakness to show up making sure through a cycle like that, if there is temporary weakness that we can be aggressive and on offense. As you look into late 2027 and beyond, though, like we really see this inflecting. Again, this feels to us like potentially a very short-term soft spot. But I think the structural case for gas as you get into 2028 and 2029 with what's going on in power and LNG and production beyond this near-term potential bump from the Permian looks lackluster, increasingly lackluster to us when you look at the Haynesville and some of the rest of these plays. We see a really strong macro backdrop. And frankly, we want to be aggressive trying to buy a lot of stock ahead of it. So that's kind of how we're thinking about the hedging strategy. I don't know if you'll see us add a bunch more at pricing levels around where the strip is right now. We don't think there's a lot more downside to come, but we're really just trying to put this in place so we can be aggressive.

Yes. That makes a lot of sense. And then maybe the follow-up is just on M2, we've seen local pricing in Appalachia strengthen here in part because of in-basin demand. Can you talk about your conviction around that story? And how are you seeing some of the moving pieces through the curve?

Yes. I mean it's been a story we've talked about for years, and I think the market is much more aware of it now. all this demand we're talking about as we get later into this decade. I just don't think -- even if some of this doesn't happen and things get off track for some reason, I don't see a wafer basis not to continue to strengthen materially. So again, I think we're in a perfect position to benefit from a lot of that. And again, as we think about a potential strategy to start adding mid-single-digit type of growth at some point between now and the end of the decade. I think that's going to be a market that can absorb multiples of anything we could add. So if our top line is price and volume, we can modestly add volume think we'll benefit from price all the same, and that's going to drive a lot of improvement in the bottom line as we're buying stock back at the same time. So we think it's a recipe for a lot of success.

Your next question comes from Philip Jungwirth of BMO.

Coming back to the Appalachia growth wave slide, I know this is unrisked, but is there a good way to think about just risking of projects? I mean you do list a lot of the parties behind these. But I guess, what do you see as the biggest challenges to this demand materializing? And then also from EQT, what are the things that you typically look for when deciding who to partner with on some of these.

Yes, Phil, good question. I know you and I have spent some time in the last couple of months talking about this, and I think you've done some good work on this as well. What we've done is we've tried to take a very intentional approach in listing all these out having direct dialogue with most of these customers in understanding what exactly their needs are and what their obstacles are to getting these projects to FID and finance and coming up with solutions to help alleviate some of those road blocks. When we have gone through this internally and assigned probabilities across the spectrum for each project, we come up with high single-digit Bcf a day of growth. So call it, 40-ish percent of the total potential here, we think it's probably realistic as we alluded to in our conference call last quarter. As we think about what does it take and where to focus to increase those odds. We see our role is taking what is in that navy color that hockey stick wedge and trying to understand where can we use the tools available, whether it's midstream or is it volumetric? Is it something else working with the downstream customers on gas supply or whatever it might be, to use EQT platform and help actually improve the odds of success for these projects. So really just trying to be that partner of choice and work with them, so there are win-win solutions just like we've done with CPV. I think the reputation we've built by doing that makes more people want to work with EQT and we've also attracted a lot of talent here that further enables our odds to be the best service provider available. And that's I think why you keep seeing us stack these winds up.

Okay. Great. And then on the supply side, is there an upper limit on what you think Appalachia production can grow in any given year just given inventory depth also just logistics around gathering water just because the top operators are talking about growth, but it still probably sums up to less than a B, if you add it all up. So just wondering if you've looked at all at an upper limit on what this could be, assuming demand growth materializes in the outer years.

Yes. I think we're confident in Appalachia's ability to meet these volumes, but what I do think you're going to see price sensitivity from operators, while you hear some of the larger operators talking about their ability to grow. Those operators typically have inventory to support that growth. That's not the case for a number of the other operators here in Appalachia. And I think they're going to be sensitive on price and a little bit more disciplined before they think about growing. I mean the molecules are going to show up, but price will be a determination.

Yes, I would add to that. When we go with the data we have land data and understanding inventory depth of peers, when you look at the peers who have inventory versus who don't, specifically in Southwest Appalachia where most of this demand is showing up. We think about 1/3 of the basin's total supply will be challenged to hold flat actually by the time you get towards the end of this decade. And so if you have like the Ohio Utica, you have some producers in like the Panhandle of West Virginia area, and I think up in Northeast PA, struggled to hold flat while you have demand showing up. I think you get to this inflection point, what we keep referring to as a paradigm shift that happens towards the end of this decade where the demand in these long-term infrastructure projects come online, they will pull gas right at the time where I think you have operators like EQT who can meet the moment and grow into that. I think other operators that are going to struggle. So I think to your point, the ability to grow year-over-year and meet this, I think you're going to have to see pricing that provides a further incentive to go into zones that are less economic so certain operators can still have the economic justification to drill. But if you're EQT, and we actually see our cost structure falling in time, not holding flat, not rising, but falling. I think you're going to see significant margin enhancement from that as the marginal producers push pricing up our pricing falls and we grow volume into that. And that's how you create outsized value in alpha we referred to in prepared remarks.

Your next question comes from Neal Dingmann from William Blair.