Sam Margolin

Sam Margolin asked about the impact of TMX barrels on West Coast crude values, the overall availability picture for 2026, and the dynamics of quality differentials. He also inquired about the global capacity additions scheduled for next year, their expected timing, reliability, and the potential shift in supply-demand balances.

Answer

Gary Simmons, Executive Vice President and COO, expressed disappointment with TMX's impact on West Coast crude values and noted the widening of quality differentials for WCS, Maya, and medium sours. He discussed OPEC+ production, increased Iraqi crude offers, and the influence of Canadian production and Chinese SPR demand. Regarding capacity, Mr. Simmons indicated that net capacity additions for 2026 are expected to be less than light product demand growth, suggesting tighter balances, and highlighted that new capacity often doesn't reach nameplate production quickly, with Russian capacity being a significant wild card.

Sam Margolin inquired about the global refining capacity additions scheduled for 2026, seeking insights into their timing, expected reliability, and the potential changes in supply-demand balances after several years of lagging demand.

Answer

Gary Simmons, Executive Vice President and COO, projected tighter supply-demand balances for 2026, with light product demand growth exceeding net capacity additions. He noted that new capacity often fails to reach nameplate production and anticipated delays in Russian capacity ramp-ups, suggesting a tighter market than many forecasts.

Sam Margolin asked if the shift in turbine customer mix (hyperscalers directly ordering turbines) is a catalyst for changing gas supply pricing structures, with hyperscalers preferring stable pricing. He also inquired if basis hedging would be reduced given the marketing team's success and tightening diffs.

Answer

Toby Rice (President and CEO, EQT) suggested hyperscalers might prefer simplified, fixed-rate power costs, creating opportunities for EQT to offer structured pricing and increase cash flow durability. Jeremy Knop (CFO, EQT) confirmed that EQT will likely reduce basis hedging significantly in 2026 and beyond, shifting to an opportunistic strategy through tactical curtailments, which effectively hedges basis.

Sam Margolin asked about the potential for data center customers to prefer fixed gas pricing structures and how EQT's basis hedging strategy might evolve given the marketing team's success and tightening diffs.

Answer

Toby Rice, President and CEO, suggested that hyperscalers might prefer fixed gas pricing to simplify their cost structure, creating opportunities for EQT to increase cash flow durability. Jeremy Knop, CFO, indicated a reduction in traditional basis hedging (previously up to 90%) due to the marketing team's optimization capabilities and the ability to tactically curtail production, shifting from a defensive to an opportunistic strategy.