Natural Gas

April 23, 2025

US gas demand growth to withstand potential recession, producer EQT says

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HIGHLIGHTS

Demand resilient through past slowdowns: CFO

Company lifts full-year production guidance

$1.8 billion acquisition adds inventory

Appalachian producer EQT does not expect natural gas demand to take a meaningful hit if the US enters a recession this year, executives said April 23 as they relayed a modest increase to the company's 2025 production guidance.

CFO Jeremy Knop, during EQT's first-quarter earnings conference call, told analysts that Europe's need to refill its gas storage should enable US LNG facilities to run at full bore, while he said history suggests an economic slowdown's impact on demand from other sectors would likely be limited.

"Natural gas demand is primarily driven by winter heating, power demand, industrial demand, LNG and pipeline exports, and has a negligible correlation to macroeconomic demand cycles," Knop said. "Looking back at a worst-case scenario from 2020, industrial demand declined by less than 1 Bcf per day, or less than 1% of total demand, and we don't believe a modest recession to have nearly the demand impact as COVID."

Industrial gas demand, which averaged just over 23 Bcf/d in 2019 before the pandemic lockdowns ensued, dipped to 22.3 Bcf/d the following year, according to data from S&P Global Commodity Insights. Total domestic consumption fell year over year by 1.9 Bcf, amounting to about 2% of 2020's total Lower 48 gas demand.

Since the early pandemic, the gas market has grown substantially with LNG exports more than doubling. Feedgas demand is about 16.5 Bcf/d month to date, up 4.7 Bcf/d versus the same period just a year ago, Commodity Insights data showed.

Knop said the quick ramp in deliveries to Venture Global's Plaquemines LNG facility in Louisiana means that "substantially more production" will be necessary to meet demand in 2026 should the ExxonMobil-QatarEnergy partnership Golden Pass LNG come online as planned.

Unlike with oil, some other key market participants have also said they expect gas demand and even growth to be resilient despite US tariff policies and their potential downstream effects to the global economic. In its latest Short-Term Energy Outlook published April 10, the US Energy Information Administration projected that US gas demand, inclusive of LNG exports, will grow by 4% to 116 Bcf/d this year.

"All told, we are more bullish medium-term [on] gas prices today than we were last quarter," Knop said.

Results, guidance

EQT reported first-quarter gas production of 5.95 Bcf/d. Sales volumes for the quarter came in at the high end of guidance, which executives attributed to strong well performance and operational efficiencies.

The company raised production by 300 MMcf/d during the first quarter to meet higher seasonal demand and take advantage of stronger winter pricing, and an average realized price of $3.77/Mcfe during Q1 was 55 cents better than Q1 2024. Free cash flow generated during the quarter exceeded $1 billion.

Executives also raised full-year production guidance by 25 Bcfe and reduced capital spending guidance by $25 million.

"Our updated 2025 volume guidance is roughly in line with our maintenance production prior to the sale of our Northeast PA non-operated assets last year," CEO Toby Rice told analysts. "It means efficiency gains, asset outperformance and the repressuring of wells from our curtailment strategy have backfilled nearly half a Bcf a day of production in 2025, all while reducing capital and activity levels."

EQT also announced a deal to acquire the upstream and midstream assets of privately-held Appalachian operator Olympus Energy. The acquisition involves 90,000 contiguous net acres in southwestern Pennsylvania with 500 MMcf/d of current net production.

EQT will continue to be on the lookout for ways to grow inventory and improve its cost structure, but the right kind of inorganic opportunities are increasingly scarce, Knop said.

The Olympus deal is expected to close in the third quarter.

Market assessment

The EIA's April 10 outlook also reduced its 2025 forecast for Lower 48 crude production by 110,000 b/d to 11.28 million b/d. EQT concurs with analysts expecting this projected slowdown to result in tighter gas market fundamentals as exports climb.

US dry gas production is averaging around 106 Bcf/d in April, Commodity Insights data showed. Knop said EQT believes production should rise to 108 Bcf/d by the end of 2025 and approach 114 Bcf/d by the end of 2026 to meet demand growth.

"Our assumption has been that half of this growth would come from associated gas in the Permian and half from growth in the Haynesville," Knop said.

"At this [oil] price level, we expect to see a slowdown in Permian activity and other less economic oil basins shifting to declines," he said, adding that he believes tariff-driven inflation could limit growth from the Haynesville Shale. "Thus, we are increasingly uncertain as to where this required production growth will come from in such a short time and are increasingly bullish gas prices."


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