EQT Shows Operational Strength and Debt Progress, but Key LNG and Pipeline Milestones Remain Elusive

What happened

EQT reported strong Q4 2025 results with production above guidance and capital expenditures below target, driven by operational efficiencies that boosted free cash flow to $744 million. The company increased its 2026 hedge coverage from 7% to 25% and raised its MVP ownership to 53%, enhancing control over infrastructure assets. Debt reduction is on track, with net debt projected to fall below $6 billion in Q1 2026, aligning with investment-grade objectives and prior targets. However, the LNG commercialization strategy, critical for reducing Appalachia basis exposure, remains dependent on counterparty final investment decisions, with no updates on Commonwealth LNG or Port Arthur progress in this release. Filings continue to underscore basis volatility and curtailment risks, highlighting that EQT's cash flow stability still hinges on external project timelines beyond its immediate control.

Implication

The robust free cash flow generation supports near-term capital returns and further debt reduction, strengthening the balance sheet. Increased hedging provides some price protection for 2026, yet basis risk remains a persistent vulnerability given Appalachia's takeaway constraints. Enhanced MVP ownership offers midstream optionality, but the MVP Boost expansion still lacks a clear FERC authorization path, delaying potential basis relief. LNG project delays could compress valuation multiples, as the stock already prices in growth from downstream exposure that is not yet bankable. Overall, while financial discipline is evident, the investment case requires observable progress on key catalysts to justify a shift from the current 'WAIT' rating.

Thesis delta

The DeepValue report emphasized waiting for LNG FID and MVP Boost milestones by mid-2026; this update shows EQT is executing well on operations and balance sheet, partially de-risking the investment case. However, the core catalysts—Commonwealth LNG FID and MVP Boost regulatory progress—remain unresolved, so the 'WAIT' stance and reliance on a $52 entry point for better risk-adjusted returns are still warranted. No fundamental shift in the thesis has occurred, as the company's ability to monetize structural demand themes continues to depend on external factors beyond its immediate operational control.