EQT's Explosive Q1 2025 Performance: A Record-Setting Quarter Driven by Strategic Decisions
EQT, the leading natural gas producer, has kicked off its fiscal year 2025 with a bang. The company's first quarter results have shattered previous records, with production soaring to unprecedented heights.
According to EQT's CEO, Toby Rice, the quarter was marked by 'exceptional' performance, with the company generating the strongest financial results in its recent history. Production levels were at the high end of guidance, thanks to robust well performance and minimal winter impact. The proactive collaboration between EQT's operating teams played a crucial role in achieving these results.
One of the key highlights of the quarter was the tactical surge in production by 300 million cubic feet per day during the quarter. This was achieved by opening chokes into strong winter demand and capitalizing on robust Appalachian pricing, driving core parental earnings to $0.16 tighter than expectations. EQT's differentiated strategy of volumes during periods of oversupply and surge in production reprice environment underscores its capital-efficient approach to utility.
The company's operating expenses and capital spending were below the low end as efficiencies and synergies continued to perform expectations. These stellar results drove more than $1 billion of free cash flow during the quarter, with natural gas prices averaging just $3.60 per million Btu. This level of free cash flow generation is nearly 2x consensus free cash flow estimates of the next closest natural gas producer.
Another significant development was EQT's announcement of its agreement for the highly accretive bolt-on acquisition of Olympus Energy's upstream and midstream assets for $1.8 billion. The purchase price equates to an attractive 3.4x adjusted EBITDA and a 15% unlevered free cash flow yield at strip pricing on average over the next 3 years.
The Olympus assets comprise a vertically integrated contiguous 90,000 net acre position offsetting EQT's acreage in Southwest Appalachia, with net production of approximately 500 million cubic feet per day. The assets are positioned adjacent to several proposed power generation projects in the region, providing potential strategic value upside through future gas supply deals.
The integrated nature of Olympus' assets and high-quality inventory drives an unlevered free cash flow breakeven price that is comparable to EQT's peer-leading cost structure. Pro forma for the Olympus transaction, year-end 2025 net debt at recent strip pricing is forecast to be approximately $7 billion.
EQT expects the transaction to close in early Q3 and plans to issue pro forma guidance as part of its second quarter earnings. The company continues to capture synergies from the Equitrans acquisition, with actions taken to date resulting in approximately $360 million of annual savings, an increase of $85 million relative to its last update driven by CapEx savings and system and receipt optimization.
