PITTSBURGH, March 16, 2020 /PRNewswire/ -- EQT
Corporation (NYSE: EQT) today announced a further reduction to its
2020 capital expenditure guidance and the execution of an agreement
to permanently release certain firm transportation capacity.
Lowering 2020 Capital Expenditures Again:
To further
enhance efficient capital deployment, EQT has reduced development
activity in its Ohio Utica operations, lowering its expected 2020
capital expenditures by approximately $75
million to $1.075 –
$1.175 billion. Through
schedule and well design optimization, this shift in activity is
not expected to impact EQT's 2020 production guidance of 1,450 –
1,500 Bcfe. EQT has now reduced its 2020 capital expenditure
guidance by approximately $200
million since it was originally published in October
2019. Adjusted free cash flow(1) for 2020 is now
expected to be $225 - $325 million.
Firm Transportation Optimization:
EQT has entered into
an agreement with a third-party to permanently release firm
transportation obligations of approximately 400 MMcf/d, or
approximately 15% of EQT's current portfolio. In conjunction
with the agreement, EQT entered into certain sales agreements to
facilitate gas deliveries to the same premium markets. EQT expects
its corporate-wide transmission expense to decrease by
approximately $0.04 per Mcfe, largely
offset by expected weakened average differentials. Additionally, in
connection with its entry into the agreement, EQT was able to
eliminate approximately $350 million
in potential collateral posting requirements, further strengthening
EQT's liquidity outlook. As such, EQT's current collateral
exposure has been reduced even further to $1.1 billion from $1.4
billion; collateral levels remain at a comfortable
$0.6 billion level in the
aggregate.
Debt Repayment:
On January
15, EQT issued $1.75 billion
in senior notes to address certain near-term maturities.
Subsequently, EQT has paid down the $0.3
billion balance on its revolving credit facility, retired
$1.0 billion of senior notes due
2020, repurchased $0.5 billion of
senior notes due 2021, and reduced its 2021 term loan balance by
$0.2 billion.
President and CEO Toby Rice
stated: "With a stronger organizational, technological and
operational foundation established, we are capable of quickly
modifying our business plans to adapt to the current environment.
Today's operational updates reflect our evolution. While
we believe the recent OPEC actions impacting the global oil
markets will drive fundamental improvements to the U.S natural gas
sector, EQT will continue to execute strategic initiatives which
position us to successfully navigate a volatile commodity
environment. With over 95% of EQT's production base comprised
of natural gas, a strong hedge position for 2020 and the continued
optimization of our internal operational and financial framework,
EQT is well positioned for near-term durability and long-term
sustainability."
(1) See the non-GAAP Disclosures section for important
information regarding the non-GAAP financial measures included in
this news release, including reasons why EQT is unable to provide a
projection of its 2020 net cash provided by operating activities,
the most comparable financial measure calculated in accordance with
GAAP, to projected adjusted operating cash flow and adjusted free
cash flow, or a projection of its 2020 net income, the most
comparable financial measure calculated in accordance with GAAP, to
projected adjusted EBITDA.
2020
GUIDANCE
|
|
Production
|
|
Q1
2020
|
|
Full-Year
2020
|
Total sales volume
(Bcfe)
|
|
360 - 370
|
|
1,450 -
1,500
|
Liquids sales volume,
excluding ethane (Mbbls)
|
|
1,900 -
2,000
|
|
7,450 -
7,550
|
Ethane sales volume
(Mbbls)
|
|
1,150 -
1,250
|
|
5,150 -
5,250
|
Total liquids sales
volume (Mbbls)
|
|
3,050 -
3,250
|
|
12,600 -
12,800
|
|
|
|
|
|
Btu uplift (MMbtu /
Mcf)
|
|
|
|
1.045 -
1.055
|
|
|
|
|
|
Average
differential ($ / Mcf)
|
|
$(0.25) -
$(0.05)
|
|
$(0.40) -
$(0.20)
|
|
|
|
|
|
Resource
Counts
|
|
|
|
|
Top-hole
Rigs
|
|
|
|
2 - 3
|
Horizontal
Rigs
|
|
|
|
3 - 4
|
Frac Crews
|
|
|
|
3 - 4
|
|
|
|
|
|
Unit Costs ($ /
Mcfe)
|
|
|
|
|
Gathering
|
|
|
|
$0.57 -
$0.59
|
Transmission
|
|
|
|
$0.51 -
$0.53
|
Processing
|
|
|
|
$0.07 -
$0.09
|
LOE, excluding
production taxes
|
|
|
|
$0.07 -
$0.09
|
Production
taxes
|
|
|
|
$0.03 -
$0.05
|
SG&A
|
|
|
|
$0.09 -
$0.11
|
Total Unit
Costs
|
|
|
|
$1.34 -
$1.46
|
|
|
|
|
|
Interest Expense ($ /
Mcfe)
|
|
|
|
$0.16 -
$0.18
|
|
|
|
|
|
Financial ($
Billions)
|
|
|
|
|
Adjusted EBITDA
(1,2)
|
|
|
|
$1.475 -
$1.575
|
Adjusted operating cash
flow (1,2,3)
|
|
|
|
$1.325 -
$1.425
|
Capital
expenditures
|
|
|
|
$1.075 -
$1.175
|
Adjusted free cash flow
(1,2,3)
|
|
|
|
$0.225 -
$0.325
|
|
Based on NYMEX
natural gas price of $2.07 per MMbtu as of January 31,
2020.
|
|
(1) See the
non-GAAP Disclosures section for important information regarding
the non-GAAP financial measures included in this news release,
including reasons why EQT is unable to provide a projection of its
2020 net cash provided by operating activities, the most comparable
financial measure calculated in accordance with GAAP, to projected
adjusted operating cash flow and adjusted free cash flow, or a
projection of its 2020 net income, the most comparable financial
measure calculated in accordance with GAAP, to projected adjusted
EBITDA.
|
(2) Includes ~$35
million of ETRN dividends
|
(3) Includes ~$85
million of cash tax refund
|
NON-GAAP DISCLOSURES
Adjusted EBITDA
Adjusted EBITDA is defined as loss
from continuing operations, plus interest expense, income tax
benefit, depreciation and depletion, amortization of intangible
assets, impairments, proxy, transaction and reorganization costs,
the revenue impact of changes in the fair value of derivative
instruments prior to settlement and certain other items that impact
comparability between periods. Adjusted EBITDA is a non-GAAP
supplemental financial measure that management and external users
of the Company's consolidated financial statements, such as
industry analysts, lenders and ratings agencies use to assess the
Company's earnings trends. The Company believes that adjusted
EBITDA is an important measure used by investors in evaluating
period-over-period comparisons of earnings trends. Adjusted EBITDA
should not be considered as an alternative to the Company's net
(loss) income presented in accordance with GAAP. Adjusted EBITDA
excludes the revenue impact of changes in the fair value of
derivative instruments prior to settlement and other items that
affect the comparability of results and are not trends in the
ongoing business. Management utilizes adjusted EBITDA to evaluate
earnings trends because the measure reflects only the impact of
settled derivative contracts and thus the income from natural gas
is not impacted by the often-volatile fluctuations in fair value of
derivatives prior to settlement.
The Company has not provided projected net income or a
reconciliation of projected adjusted EBITDA to projected net
income, the most comparable financial measure calculated in
accordance with GAAP. Net (loss) income includes the impact of
interest expense, income tax expense, depletion and depreciation
expense, the revenue impact of changes in the projected fair value
of derivative instruments prior to settlement and certain other
items that impact comparability between periods and the tax effect
of such items, which may be significant and difficult to project
with a reasonable degree of accuracy. Therefore, projected net
income, and a reconciliation of projected adjusted EBITDA to
projected net income, are not available without unreasonable
effort.
Adjusted Operating Cash Flow and Adjusted Free Cash
Flow
Adjusted operating cash flow is defined as the
Company's net cash provided by operating activities less changes in
other assets and liabilities, less EBITDA attributable to
discontinued operations, plus interest expense attributable to
discontinued operations and cash distributions from discontinued
operations. Adjusted free cash flow is defined as adjusted
operating cash flow less accrual-based capital expenditures
attributable to continuing operations. Adjusted operating cash flow
and adjusted free cash flow are non-GAAP supplemental financial
measures that the Company's management and external users of its
consolidated financial statements, such as industry analysts,
lenders and ratings agencies use to assess the Company's liquidity.
The Company believes that adjusted operating cash flow and adjusted
free cash flow provide useful information to management and
investors in assessing the Company's ability to generate cash flow
in excess of capital requirements and return cash to shareholders.
Adjusted operating cash flow and adjusted free cash flow should not
be considered as alternatives to net cash provided by operating
activities or any other measure of liquidity presented in
accordance with GAAP.
The Company has not provided projected net cash provided by
operating activities or reconciliations of projected adjusted
operating cash flow and adjusted free cash flow to projected net
cash provided by operating activities, the most comparable
financial measure calculated in accordance with GAAP. The Company
is unable to project net cash provided by operating activities for
any future period because this metric includes the impact of
changes in operating assets and liabilities related to the timing
of cash receipts and disbursements that may not relate to the
period in which the operating activities occurred. The Company is
unable to project these timing differences with any reasonable
degree of accuracy without unreasonable efforts such as predicting
the timing of its and customers' payments, with accuracy to a
specific day, months in advance. Furthermore, the Company does not
provide guidance with respect to its average realized price, among
other items, that impact reconciling items between net cash
provided by operating activities and adjusted operating cash flow
and adjusted free cash flow, as applicable. Natural gas prices are
volatile and out of the Company's control, and the timing of
transactions and the income tax effects of future transactions and
other items are difficult to accurately predict. Therefore, the
Company is unable to provide projected net cash provided by
operating activities, or the related reconciliations of projected
adjusted operating cash flow and adjusted free cash flow to
projected net cash provided by operating activities, without
unreasonable effort.
Cautionary Statements
This news release contains certain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as
amended. Statements that do not relate strictly to historical or
current facts are forward-looking. Without limiting the generality
of the foregoing, forward-looking statements contained in this news
release specifically include the expectations of plans, strategies,
objectives and growth and anticipated financial and operational
performance of EQT Corporation and its subsidiaries (collectively,
the Company), including guidance regarding the Company's strategy
to develop its reserves; drilling plans and programs (including the
number and type of drilling rigs, the number and type of frac
crews, and the availability of capital to complete these plans and
programs); projected production and sales volumes and growth rates
(including liquids production and sales volumes and growth rates);
the Company's ability to reduce its drilling and completions costs,
other costs and expenses, and capital expenditures, and the timing
of achieving any such reductions; monetization transactions,
including asset sales, joint ventures or other transactions
involving the Company's assets, and the Company's planned use of
the proceeds from any such monetization transactions; acquisition
transactions; the projected capital efficiency savings and other
operating efficiencies and synergies resulting from the Company's
monetization transactions and acquisition transactions; the amount
and timing of any repurchases of the Company's outstanding debt
securities or other debt maturities; projected cash flows, adjusted
operating cash flow and adjusted free cash flow; projected capital
expenditures; projected adjusted EBITDA; liquidity and financing
requirements, including funding sources and availability; the
Company's ability to maintain or improve its credit ratings,
leverage levels and financial profile; and the Company's hedging
strategy.
The forward-looking statements included in this new release
involve risks and uncertainties that could cause actual results to
differ materially from projected results. Accordingly, investors
should not place undue reliance on forward-looking statements as a
prediction of actual results. The Company has based these
forward-looking statements on current expectations and assumptions
about future events, taking into account all information currently
available to the Company. While the Company considers these
expectations and assumptions to be reasonable, they are inherently
subject to significant business, economic, competitive, regulatory
and other risks and uncertainties, many of which are difficult to
predict and beyond the Company's control and which include, but are
not limited to, volatility of commodity prices; the costs and
results of drilling and operations; access to and cost of capital;
uncertainties about estimates of reserves, identification of
drilling locations and the ability to add proved reserves in the
future; the assumptions underlying production forecasts; the
quality of technical data; the Company's ability to appropriately
allocate capital and resources among its strategic opportunities;
inherent hazards and risks normally incidental to drilling for,
producing, transporting and storing natural gas, natural gas
liquids and oil; cyber security risks; availability and cost of
drilling rigs, completion services, equipment, supplies, personnel,
oilfield services and water required to execute the Company's
exploration and development plans; the ability to obtain
environmental and other permits and the timing thereof; government
regulation or action; environmental and weather risks, including
the possible impacts of climate change; and disruptions to the
Company's business due to acquisitions and other significant
transaction. These and other risks and uncertainties are described
under Item 1A, "Risk Factors," of the Company's Annual Report on
Form 10-K for the year ended December 31, 2019 as filed with
the SEC, as updated by any subsequent Form 10-Qs, and those set
forth in the other documents the Company files from time to time
with the SEC.
Any forward-looking statement speaks only as of the date on
which such statement is made, and the Company does not intend to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise, except as
required by law.
Analyst inquiries please contact:
Andrew Breese - Director, Investor Relations
ABreese@eqt.com
412.395.2555
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SOURCE EQT Corporation