David Hay — Friday POW!: EQT Corporation (EQT) — Cooking With Gas
"A pure, unlevered call option on the current gas price environment" — America's largest gas producer, fully unhedged into a Hormuz/Qatar LNG supply shock, with a rapidly deleveraging balance sheet and a breakout above all prior resistance.
One-line take: This week's POW! is EQT Corporation (EQT) — America's largest, only large-scale vertically-integrated natural-gas producer (Appalachia: Marcellus/Utica). The case: a low-cost, high-volume producer that is entirely unhedged for 2026, so every incremental dollar of gas price falls straight to FCF — "a pure, unlevered call option on the current gas price environment" — just as the Hormuz crisis (−20% of global oil) and Qatar's LNG force majeure turned the demand backdrop "from constructive to urgent in 13 days." Clean Q4 (adj EPS $0.90 vs $0.73, +22.7%; FY net income $2.04B from $231M; FY FCF $2.5B), 2026 FCF guided $3.3B (~8% yield, set at lower strip), net debt cut $9.1→$7.7B (targeting ~$4.7B by YE26 — the deleveraging unlocks the multiple). ~12–13× fwd FCF; consensus median $65, range to $80 on $5 gas; 34-analyst Strong Buy. Technically broke out above all prior resistance (eclipsed the 2014 ATH). Structural floor under gas: LNG exports (14.9→16.3 Bcf/d), data-center power demand. Buy a smaller initial position given the run-up; add on weakness. Risk: a fast Hormuz resolution + Henry Hub back toward $3 against the unhedged book.
1. Stocks & names mentioned
| Ticker | Name | Research | View | What he said | At |
|---|
| EQT | EQT Corporation | QT · SA · STK · FA | Positive | Pick of the Week — America's largest, vertically-integrated Appalachian gas producer, entirely unhedged for 2026 so every dollar of gas price falls straight to FCF: "a pure, unlevered call option on the current gas price environment," just as the Hormuz crisis + Qatar LNG force majeure made demand "urgent in 13 days." Clean Q4 (adj EPS $0.90 vs $0.73, +22.7%; FY net income $2.04B from $231M; FY FCF $2.5B), 2026 FCF guide $3.3B (~8% yield, set at lower strip), net debt $9.1→$7.7B → ~$4.7B YE26 (deleveraging unlocks the multiple). ~12–13× fwd FCF; consensus median $65 / to $80 on $5 gas; 34-analyst Strong Buy; broke out above all prior resistance (eclipsed the 2014 ATH). Buy a smaller initial position post run-up, add on weakness. | read |
| RRC | Range Resources | QT · SA · STK · FA | Positive | Previously-endorsed gas name — "pleasing to see" Range Resources also generating a multi-year upside range expansion; despite strong recent performance still well below its all-time high and trading at a thrifty P/E. US/Canadian gas producers "among our strongest, most persistent recommendations." | read |
| DVN | Devon Energy | QT · SA · STK · FA | Positive | Previously-endorsed energy name — Devon Energy, also generating a multi-year upside range expansion; still well below its ATH and trading at a thrifty P/E, cited alongside Range as confirmation of the energy-producer leadership. | read |
| XLE | Energy Select Sector SPDR ETF | QT · SA · STK | Positive | Sector context — energy is "the strongest sector in the market right now"; the XLE has hit 15 record intraday highs in 2026 and broke out of a multi-decade range in January. EQT, the largest pure-play gas producer in the index, has the most leverage to continued sector outperformance. | read |
References only (not tickers): Equitrans (the Appalachian pipeline operator EQT acquired, bringing the Mountain Valley Pipeline); Qatar (the LNG force-majeure trigger); the Plaquemines / Corpus Christi Stage 3 LNG terminals. The bottom "Buy List" / "Holds/Trims" lists render as images and are not text-readable — only the footnote ("Cost figures corrected for both UBER and CRH") is captured, noted in prose only; portfolio.json is unchanged.
2. Talking points
The setup — a compelling energy inflection
- EQT is America's largest gas producer by volume and the only large-scale vertically-integrated US gas company, operating entirely in Appalachia (Marcellus/Utica across PA, WV, OH). Shares hit a 52-wk high $65.12 on earnings (about half that at the 2024 low).
- The bull case: a low-cost, high-volume producer + rapidly deleveraging balance sheet + unhedged 2026 + a demand backdrop "from constructive to urgent in 13 days" (Hormuz removing 20% of global oil; Qatar LNG force majeure).
Strong financials & earnings momentum
- Q4-25 adj EPS $0.90 beat $0.73 by 22.7%; revenue $2.39B beat $2.1B (+13.8%); FY net income $2.04B (from $231M in 2024); FY FCF $2.5B, well above estimates.
- Operationally: Q4 volume 609 BCF above the high end, capex $655M (4% below midpoint), per-unit costs at the low end — "spending less than expected to produce more than expected," the recipe for sustained FCF.
The unhedged call option
- 2026 FCF guided ~$3.3B at recent strip — set before Qatar's force majeure and the Hormuz LNG-price spike. With EQT entirely unhedged for 2026 and beyond, every incremental dollar of realized gas price drops straight to FCF: "a pure, unlevered call option on the current gas price environment, and that environment just got significantly more constructive."
Demand tailwinds — structural, not cyclical
- US LNG exports ~14.9 Bcf/d (2025) → EIA-projected 16.3 Bcf/d (2026), with Plaquemines / Corpus Christi Stage 3 pulling Appalachian gas to the Gulf. Data-center/AI buildout needs dispatchable power wind/solar can't provide. EQT is signing in-basin contracts with utilities and data-center operators.
- The Iran conflict crystallized that energy-supply concentration is a strategic vulnerability; Qatar's force majeure removed substantial LNG on no notice, and Europe/Asia now compete for replacement — making the US-LNG / Appalachian-feedstock diversification trade urgent. EQT, the largest/lowest-cost basin producer, is the primary beneficiary.
Valuation — deleveraging unlocks the multiple
- Net debt $7.7B (from $9.1B at the start of 2025, $13B+ at the Equitrans deal), targeting ~$4.7B by YE26 — a ~$3B reduction in one year, accelerating at higher gas prices. With ~67% EBITDA margins, as debt comes off, equity's claim on FCF grows; the market is "only beginning to re-rate EQT for what it will look like at $4-5B net debt."
- ~12–13× fwd FCF on the $3.3B guide (set at lower strip); consensus median PT $65, range to $80 on a $5/MMBtu scenario; P/E "very undemanding," below most slower-growing utilities that lack the gas kicker.
Technicals — a breakout above all prior resistance
- 52-wk high $67.12 on the Q4 print (+2.7% gap, 3.9M shares); basing since the mid-2025 ~$46 lows, higher-lows/higher-highs intact, broke $60 resistance. The longer-term chart took out resistance back to 2015 and eclipsed the 2014 ATH — "broken out above all prior resistance levels," extremely bullish with the modest valuation, accelerating earnings and clean balance sheet.
- Energy is the strongest sector (XLE 15 record intraday highs in 2026, a January multi-decade breakout); EQT has the most leverage as the largest pure-play gas name. Previously-endorsed Range Resources (RRC) and Devon Energy (DVN) also in multi-year range expansions, still below their ATHs at thrifty P/Es.
Arguing the other side & sizing
- The bear case is simple: gas comes back down — a fast Hormuz resolution, Qatar lifts force majeure, Henry Hub retreats toward $3, and the unhedged 2026 book becomes a vulnerability; $7.7B net debt + MVP permitting/legal risk add uncertainty. Mitigant: EQT still made $879M FCF in 2023 with Henry Hub at $2.74, and LNG/data-center/electrification demand is a structural floor.
- Given the run-up, buy a smaller initial position — but "we wouldn't be too cute"; use even a minor retracement to add. Support $58–60; a sustained break below $55 would prompt reassessment.
3. In plain English
EQT — EQT Corporation Positive
EQT is the biggest natural-gas producer in the United States, drilling in the Appalachian gas fields of Pennsylvania, West Virginia and Ohio. The heart of Haymaker's pitch is that EQT has chosen not to lock in (hedge) the price it sells its gas for in 2026 — so if gas prices rise, essentially all of that extra money flows straight to the company's cash flow. That makes the stock behave like a leveraged bet ("a call option") on rising gas prices. And prices are rising fast: the Middle East conflict has choked off oil supply and Qatar has declared it can't deliver its contracted liquefied natural gas (LNG), so Europe and Asia are scrambling for alternatives — and U.S. Appalachian gas is the obvious replacement.
Underneath the gas-price bet is a quietly improving business. EQT just posted a big earnings beat, generates billions in free cash, and is rapidly paying down debt (from $9.1 billion to a targeted ~$4.7 billion in two years) — and as debt shrinks, more of the company's value belongs to shareholders. It trades cheaply (~12–13× cash flow), pays a growing dividend, and the chart has broken above every prior high going back over a decade — a signal Haymaker treats as very bullish. Two other gas/energy names they already like, Range Resources and Devon Energy, are doing the same. The obvious risk is that the Middle East calms down quickly and gas prices fall back, which would hurt the unhedged bet — so Haymaker suggests starting with a smaller position and adding on any dip. Longer term, they argue LNG exports and AI data-center power demand put a floor under gas.
Summary derived from the paid Haymaker newsletter (text in transcript.txt) for personal study. Not investment advice. © Haymaker / David Hay for source material.