EQT Beats Q2 Volumes, Ups Guidance, But FCF Drops Sharply

What happened

EQT reported Q2 sales volumes of 634 Bcfe, above the high end of guidance, driven by strong well performance and lower-than-expected curtailments, while capital expenditures of $666 million came in 9% below the low end due to efficiency gains. The company raised its full-year 2026 production guidance by approximately 90 Bcfe and reduced capex guidance by $25 million, signaling operational confidence. Management also signed a 10-year power supply deal with CPV linked to PJM prices, a 5-year LNG offtake agreement adding ~$45 million in 2028 FCF, and is accelerating MVP Southgate with $85 million in capital contributions to de-risk completion by year-end 2026. However, free cash flow attributable to EQT plunged to $330 million from nearly $2.5 billion in Q1, highlighting the cyclicality of earnings even as the company generated $1.048 billion in operating cash flow. While the quarter's operational beats and long-term deals strengthen the narrative, the steep sequential FCF decline and ongoing curtailments keep the near-term risk profile elevated.

Implication

The CPV power deal, LNG offtake, and accelerated MVP Southgate enhance EQT's market access and post-2027 cash flow visibility, supporting a higher valuation as these contracts convert to income over the next 2-3 years.

Thesis delta

The prior thesis cautioned on near-term curtailments and unproven demand drivers. Q2 results show better-than-expected volumes and cost control, raising confidence in 2026 guidance, but the 85% sequential FCF drop and ongoing curtailments reinforce the cautious stance. New long-term deals accelerate the narrative but do not shift near-term risk; the stock still lacks catalysts for material upside in the next 6-12 months.