EQT Corp

EQT is the largest U.S. pure-play natural gas producer, possessing low-cost, long-lived assets and a management team with an excellent track record in capital allocation. Its strategic position in the Marcellus shale and ownership of pipeline assets provide a competitive edge over peers. The company maintains good margins even in low price environments. With the anticipated addition of LNG export capacity and rising U.S. electricity demand driven by datacenter expansions, we expect supply and demand dynamics to tighten, leading to significant EPS growth and a favorable free cash flow yield.

EQT is a large US natural gas producer with a leading position in the Appalachian Basin. The stock lagged as natural gas equities lost momentum after a strong start to the year. Even though EQT reported solid operating execution and continues to benefit from long-term demand themes such as liquefied natural gas (LNG) exports, data center power needs, and coal-to-gas switching, investors became more focused on a well-supplied domestic gas market and the possibility that associated gas production could limit price upside.

EQT is positioned to benefit significantly from the current dynamics in the global LNG market. The company estimates a shift from a 0.5 Bcf/d deficit to a 3.5 Bcf/d deficit for 2026, indicating a tightening supply situation. With QatarEnergy's production challenges and a multi-year timeline to restore output, the expected widening of this deficit enhances EQT's value proposition. The overall call on US hydrocarbons is clear, and the company is well-placed to capitalize on this multi-year investment cycle in energy.

Natural gas producer EQT has highlighted a significant shift in the global LNG market, estimating a move from a 0.5 Bcf/d deficit to a 3.5 Bcf/d deficit for 2026. This change is driven by reduced output from QatarEnergy and a multi-year timeline to restore production. The manager notes that the call on US hydrocarbons is clear, indicating a necessary multi-year investment cycle to support this demand. The increasing value of US energy assets in the global market enhances the attractiveness of EQT as an investment.

EQT is the largest pure play U.S. natural gas producer. The company has long-lived assets, with decades of inventory. It also has a low-cost structure due to its enviable position in the Marcellus shale and captive pipeline assets. Management has an excellent track record of making wise strategic and capital allocation decisions. Despite selling a commodity product, EQT is a high-quality business with operating margins exceeding those of 80-90% of S&P 500 companies. The combination of the inflection in U.S. electricity demand, LNG export growth, and disruption in the Middle East may narrow this discount over the next 5-10 years. We expect EPS growth in the mid-teens.

EQT has been a strong performer, benefiting from surging oil and gas prices, which drove its return close to 20% or more. The fund emphasizes sustainable businesses with low-cost reserves and strong balance sheets, which are critical in today's volatile environment. The manager believes these attributes make EQT even more valuable, especially as they continue to find value in such businesses based on normalized long-term cash flow.

We have added to the portfolio’s energy exposure through EQT, a natural gas producer in the Appalachian Basin that we believe will benefit from AI-fuelled data centre demand for reliable 'behind-the-meter' power.

We added to certain nontraditional AI beneficiaries, such as EQT Corp., which we believe could profit from increased demand for electricity. This positions us favorably as the market evolves and demand dynamics shift, particularly in the context of energy consumption driven by technological advancements.

EQT Corp's shares were boosted by natural-gas enthusiasm, reflecting a positive outlook for the company. The manager highlights EQT's strategic acquisition of Olympus Energy for $1.8B in cash and stock, indicating confidence in expanding their operational footprint and enhancing growth potential in the natural gas sector. This acquisition aligns with the broader trend of increasing demand for natural gas, which the manager believes will support EQT's performance moving forward.

EQT is positioned as an environmentally conscious natural gas supplier, focusing on efficiency and debt repayment. This strategic approach allows EQT to navigate macro-level drivers effectively, suggesting a strong foundation for future growth. The emphasis on sustainability and operational efficiency enhances its competitive advantage in the energy sector, making it a compelling investment opportunity.