Market Commentary: Natural Gas is an Essential Partner

“…it will be an essential partner to the clean energy future because of its environmental qualities, reliability and economic impact and because of its vast abundance in the United States.”                                                                                – Natural Gas Supply Association

PARTNERING WITH GAS THEMED COMPANIES: EQT, LNG, and WMB 

We have been a bull on the secular growth outlook for natural gas and remain so. While the optimism surrounding artificial intelligence (AI) has elevated the valuations of technology, power producers, and infrastructure-related companies to heights that may seem lofty, the valuations of natural gas-focused energy companies appear to be a relative bargain, in our view.

Recently, we hosted fireside chats with the executive management teams of EQT Corporation (NYSE: EQT) and Cheniere Energy, Inc. (NYSE: LNG) and have an upcoming chat with Chad Zamarin, the CEO of The Williams Companies, Inc. (NYSE: WMB) on November 10^th. The common theme among these companies is that they are leading beneficiaries of the visible domestic and global secular growth in natural gas demand. More natural gas is needed to satisfy the rising power consumption from AI/data centers and onshoring, as well as to meet power needs globally via liquefied natural gas (LNG) exports.

Another commonality among these companies is their leverage to a favorable gas market and limited exposure to a potential cyclical downturn. Competitive advantages include strong balance sheets, low-cost structures and high quality/stability of cash flows backed by long-term contracts. Together these companies cover the natural gas value chain from the wellhead (EQT) and pipeline transportation (WMB) to the liquefaction and export of natural gas (LNG). They are meaningful holdings in SAM’s Infrastructure Income and Energy Transition strategies.

FAVORABLE NATURAL GAS/LNG OUTLOOK

In past commentaries, we’ve written about the growing U.S. demand for natural gas to meet the domestic power needs of AI/data centers and industry onshoring. This dynamic is also occurring globally as natural gas has gained recognition as a reliable and affordable energy source that complements renewables. The market (Europe) has adopted a more pragmatic approach to accepting natural gas as part of the solution to address growing global energy demand and at the same time decarbonization. Global LNG demand could outpace LNG supply  by the mid 2030s, according to Shell plc’s 2024–2040 forecast published in the Shell LNG Outlook 2025 presentation. However, a potential oversupply could emerge in the next couple of years as 100+ million tons per year (MTPA) enters the market.

Global LNG supply vs demand forecast range (MTPA)

Source: Shell LNG Outlook 2025 presentation. Shell interpretation of Wood Mackenzie, S&P Global Commodity Insights, Poten & Partners, Rystad Energy and FGE data

LNG FIRESIDE CHAT

Below are highlights from our fireside chat that took place on October 8th with Anatol Feygin (Chief Commercial Officer) and Zach Davis (Chief Financial Officer) of Cheniere Energy, Inc. (LNG) (watch replay of webinar). Cheniere is the premier producer and exporter of LNG in the U.S., holding an ~11% global market share—second only to Qatar.

“If you believe in LNG, you believe in Cheniere.” – Zack Davis, Cheniere CFO

KEY TAKEAWAYS:

• Disciplined approach to growth projects. Cheniere has been successful in achieving attractive project returns by minimizing construction and contracting risks. The company operates ~50 MTPA of LNG capacity across Sabine Pass (LA) and Corpus Christi (TX), growing to ~60 MTPA by 2029 and line of sight to ~75 MTPA through disciplined, brownfield expansions. Management employs lump sum turnkey engineering, procurement, and construction (EPC) contracts with Bechtel Energy Inc., which has delivered every project on budget and ahead of schedule over the past 15 years. The company signs long term contracts for at least 90% of its capacity before sanctioning a project. Assuming conservative margins of $2.50–$3.00/MMBtu, projects are expected to generate ~10%+ unlevered returns.

• Cheniere’s contracts mitigate market risk. Management actively manages market risk through long-term contracting with credit worthy customers.  The company is ~95% contracted well into the second half of the next decade. Hence, it has limited exposure to potentially an oversupplied market (2027-2029) until the market digests the surge of incremental LNG volumes.

• Visible and sustainable cash flows—upside to guidance. Guidance provided for the current year is based on current margins (e.g., $6-7/MMBtu) for open capacity. The assumed run rate margin of $2.50-$3/MMBtu is the sustainable level if competitor’s LNG projects are cost competitive in the future. Hence, management expects to still achieve its guidance even during periods of oversupply. Upside to guidance is possible if spot margins or construction costs are better than expected.

  
  

• Access to gas supplies and pipeline connectivity are competitive advantages. Cheniere accounts for 7–8% of the U.S. gas market (i.e. ~7Bcf/d increasing to ~8 Bcf/d). The company has expansive pipeline connectivity to access diverse basins—every basin east of the Rockies. Management believes that the Permian has a robust runway for volume growth to help meet the demand from LNG exports.

• Financial flexibility is a priority—25 by 25. With regards to capital allocation, management is focused on maintaining a strong investment grade balance sheet, self-funding organic growth projects, and returning at least 50% of its distributable cash flow (DCF) to shareholders via buybacks and dividend growth of at least 10% annually. They target $25 billion of available cash flow through 2030 and $25 per share of run-rate DCF.

EQT FIRESIDE CHAT

Below are highlights from our fireside chat that took place on September 29th with Jeremy Knop, CFO of EQT Corporation (watch replay of webinar). EQT is one of the largest U.S. natural gas producers and the only fully integrated U.S. gas company (e.g. from production through pipeline infrastructure).

"We’re making EQT the easiest way to own exposure to natural gas – low cost, low leverage, and built to thrive through the cycle.” — Jeremy Knop, EQT CFO

KEY TAKEAWAYS:

• One-stop shopping for natural gas. EQT is a fully integrated natural gas company from production in Appalachia through pipeline infrastructure. Its integrated model allows it to offer one-stop solutions to end users such as LNG buyers, data centers, and utilities.

• Commodity exposure mitigated by being a low-cost producer. EQT is purposely structured to generate free cash flow through cycles via its low operating costs, low leverage (investment grade balance sheet), diversified customer base, and integrated (midstream) assets. The company can make money with natural gas prices as low as $2/MMBtu while maintaining significant upside exposure with higher prices.

• Bullish near term on natural gas prices. EQT’s CFO anticipates that natural gas prices will strengthen over the next several quarters as new LNG export facilities come into service. However, new natural gas pipelines going into service later in 2026 may dampen prices as more Permian natural gas becomes accessible. Longer-term, prices are likely to structurally settle higher given LNG exports, power demand and the maturation of production basins.

  
  

• Robust pipeline of strategic growth projects

  - Data center demand: EQT has agreements in principle to supply ~1.5 Bcf/d of natural gas to serve data center demand in Appalachia. These projects include Homer City Redevelopment and Shippingport Power Station. These natural gas agreements will be underpinned with 20-year minimum volume commitments with pricing tied to an index. At $4 gas, the projects could generate ~$700 million of annual cash flow. EQT will provide the midstream infrastructure to support gas-fired power generation in West Virginia.

  - Mountain Valley Pipeline (MVP) projects. MVP has two projects that will provide egress for ~1.2 Bcf/d of Appalachian natural gas production: MVP Boost and MVP Southgate, as shown in the graphic below.

Notes: 1. Non-GAAP measure. See appendix for definition. 2. Based on agreements in principle. Final terms, including scope, volume and duration, may be different and are subject to negotiation of definitive agreements between the parties thereto

Source: EQT Q3 2025 Earnings Presentation

• Appalachia in-basin demand could soak up ~6Bcf/d of production. Data center demand, coal plant retirements, and potential regional pipeline expansions in aggregate could increase in-basin demand by ~6 Bcf/d. On the supply side, EQT is well-positioned to grow its production by ~1–2 Bcf/d by ~2035 and benefit from higher in-basin natural gas prices.

• LNG strategy provides access to favorable global gas outlook. EQT recently secured ~5.5 MTPA of LNG capacity via long term agreements with three newbuild facilities (Rio Grande, Port Arthur, Commonwealth) that are scheduled to come online in 2030 and 2031. Management believes that the company can realize higher natural gas prices by having exposure to international markets where demand is expected to grow faster than that in the U.S. Management believes that its breakeven margin will be ~$4–$4.50/MMBtu on its LNG commitments.

• EQT adopts a dynamic capital allocation strategy. The three legs of its framework include:

1. Debt reduction to very low/near-zero levels

2. Growth of its durable base dividend and

3. Counter-cyclical stock buybacks (buy during dips, not peaks).

PORTFOLIO RESULTS: SINCE INCEPTION & ONE YEAR

• SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 140.3% and 17.3% for the periods since 11/10/20 inception and 1-year, respectively. This compares to a total return of 137.5% and 15.6%, respectively, for its customized benchmark and 102.9% and 17.6%, respectively, for the S&P 500 as of 9/30/25.

• SAM’s Energy Transition Portfolio generated a return (net of fees) of 29.0% and 14.0% for the periods since 4/29/21 inception and 1-year, respectively. This compares to a total return of 36.9% and 12.3%, respectively, for its customized benchmark and 69.6% and 17.6%, respectively, for the S&P 500 as of 9/30/25.

SEPTEMBER REVIEW: ENERGY HOLDS STEADY

The rundown:

• In September, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 0.5% compared to 3.6% for the S&P 500 and 3.3% for its customized benchmark. The underperformance relative to benchmark reflect our lower weights in the utilities and clean energy sectors. Year-to-date, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 4.4% compared to 14.8% for the S&P 500 and 14.9% for its customized benchmark.

  
  

• In September, SAM’s Energy Transition Portfolio generated a return (net of fees) of 1.7% versus 4.9% for its customized benchmark. Year-to-date, SAM’s Energy Transition Portfolio generated a return (net of fees) of 4.3% versus 23.6% for its customized benchmark.

  
  

• SAM’s portfolios are more heavily weighted in Midstream, which underperformed relative to the clean energy and utilities sectors in September and these sectors year-to-date.

  
  

• Midstream underperformed the overall market and was up in September and year-to-date with a total return of 1.6% and 6.5%, respectively, as measured by the AMNAX.

  
  

• In September, the clean energy sector outperformed the overall market, generating a total return of 7.5% as measured by the S&P Global Clean Energy Index (SPGTCLTR). For the month, utilities also outperformed with a total return of 4.0% as measured by the Philadelphia Stock Exchange Utility Index (XUTY). Year-to-date, SPGTCLTR and XUTY generated total returns of 37.4% and 17.7%, respectively.

  
  

• Sector performance in the S&P 500 was largely positive with seven out of eleven sectors posting positive performance. Information Technology was the best performer and Materials was the worst. Energy delivered a -0.4% monthly total return. September month-end WTI crude oil and Henry Hub natural gas prices were $63.17 Bbl and $3.12 per MMBtu, down ~-2% and up ~8%, respectively from last month.

 2025 Year-to-Date Total Return as of 9/30/25

Source: Bloomberg, NASDAQ and S&P Global

Sam Partners’ Infrastructure Income and Energy Transition Strategies seek to provide sustainable income and growth with capital preservation. This is accomplished by investing in a concentrated portfolio of high-quality midstream energy companies, utilities and clean energy companies that are well positioned to participate in the energy transition to a net zero carbon future. A diversified approach to investments across these sectors should optimize risk-adjusted returns, in our view. Our Infrastructure Income Strategy offers investors a current yield of ~4.5% and growth potential of ~5-7%; while the Energy Transition Strategy that is more heavily weighted with clean energy stocks and aligns with favorable ESG ratings, offers investors a current yield of ~3.5%. In a world searching for yield, we believe these Strategies offer a compelling value proposition.

IMPORTANT DISCLOSURES

Siegel Asset Management Partners is a registered investment adviser located in Plainview, New York. The views expressed are those of Siegel Asset Management Partners and are not intended as investment advice or recommendation. This material is presented solely for informational purposes, and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. Information is obtained from sources deemed reliable, but there is no representation or warranty as to its accuracy, completeness, or reliability. All information is current as of the date of this material and is subject to change without notice. Third-party economic, market or security estimates or forecasts discussed herein may or may not be realized and no opinion or representation is being given regarding such estimates or forecasts. Certain products and services may not be available in all jurisdictions or to all client types. Unless otherwise indicated, Siegel Asset Management Partners' returns reflect reinvestment of dividends and distributions. Indexes are unmanaged and are not available for direct investment. Investing entails risks, including possible loss of principal. Past performance is no guarantee of future results.