INTERVIEW: US producer EQT unlocks growth option with 1.4 Bcf/d in firm gas supply deals

A pair of firm natural gas supply deals afford Appalachian shale producer EQT the prospect of a decade of growth and some measure of protection against a "broken" regional gas market, CEO Toby Rice said in an interview.

EQT has been telegraphing its intent to grow only where it draws in new firm customers, particularly those developing power and data center projects, rather than increasing production and selling more gas on an uncontracted spot basis. The company now has those buyers for approximately 1.4 Bcf/d of gas supply, enabling 2%-3% base growth and a rerating of the business, Rice told Platts, part of S&P Global Energy, on July 18.

"We've now set our sights on finding sustainable growth, and sustainable growth being getting direct to consumer -- to connect directly with the demand and then pairing that with volume growth," Rice said. "That's exactly what these deals do."

New supply deals, terms

Litigation and cancellation of Northeast gas pipeline projects, as well as the massive scale of data center and power projects, created this market for bilateral dealmaking between gas producers and developers, Rice said.

"It's still hard to just go to the market and say, 'Hey, I need energy from Pennsylvania to where you want it to go,'" Rice said. "That's caused people to move back into our backyard here in Pennsylvania."

EQT and its partners announced agreements on July 15 providing for the producer to supply approximately 1.4 Bcf/d to fuel two former coal plants and connected artificial intelligence-powering data center facilities in Pennsylvania.

Under one agreement with developer Frontier Group, EQT will supply around 800 MMcf/d to the site of the former 2.7 GW coal-fired Bruce Mansfield Power Plant in Shippingport. The new gas-fired plant will power a "prospective data center" on site, and excess power will be sold into the PJM Interconnection.

A second "in principle" agreement provides for EQT to supply approximately 665 MMcf/d to the Homer City Energy Campus, which will host AI computing facilities and a 4.4 GW gas plant at the site of what was once Pennsylvania's largest coal-fired generator.

The Homer City plant is expected to start up in 2027.

Both offtake agreements price the gas supply under an "index-plus" arrangement and are tied to Appalachia's Texas Eastern, M-2 location, with the "plus" accounting for the cost of midstream infrastructure needed transport the gas, Rice said.

"We're just more exposed to this local index," he said. "The security that we get is really knowing that when we're bringing demand to that market, that should be helpful for price because you have that volume of buyers there."

Over time, the structure of supply agreements between producers and developers could be expected to evolve to include fixed price mechanisms, Rice also said, but for now, bid-ask spreads are wide.

Cash prices at benchmark Henry Hub averaged $2.24/MMBtu in 2024, according to Platts data. Spot gas sold at Texas Eastern, M-2 cost the buyer $1.71/MMBtu on average.

"Some gas buyers may be a little biased towards gas prices looking at the past. We obviously are a little bit more bullish," said Rice. "I think it's going to take some time for the buyers to get comfortable with that."

On future deals, contract structure could also involve collars, with the floor justifying investments for the producer and the ceiling providing price security to buyers, Rice said.

"They've got the security of supply, but the ultimate security is when they get security of supply with security on pricing," he added.

Meeting the demand

EQT reported first-quarter 2025 gas production of 5.95 Bcf/d and total production of 6.34 Bcfe/d.

To meet the new firm demand from Homer City and Shippingport, the company could pull from and then backfill the seasonally-adjusted 1-2 Bcf/d that it sells in basin, a strategy that could improve the M-2 cash basis, Rice said.

However, he stressed that the 1.4 Bcf/d should be seen as EQT's option to grow.

"And so that needs to sort of be the default plan is that we will grow to meet these volumes, but we do have the ability to reallocate," he said.