PITTSBURGH, May 7, 2020
/PRNewswire/ -- EQT Corporation (NYSE: EQT) today announced
financial and operational performance results for the first quarter
2020.
First Quarter Highlights:
- Delivered sales volumes of 385 Bcfe or 4.2 Bcfe per day, 20
Bcfe above midpoint of first quarter guidance
- Total operating revenues of $1.1 billion; received average realized
price of $2.49 per Mcfe, a
$0.44 premium to NYMEX pricing
- Total per unit operating costs of $1.33 per Mcfe, $0.07 per Mcfe below midpoint of full-year 2020
guidance
- Capital expenditures of $262 million, $93 million lower than the fourth quarter
2019
- Well costs of $745 per foot in
the Pennsylvania Marcellus, accelerating progress towards target
well costs
- Net cash provided by operating activities of $500 million; free cash flow(1) of
$251 million
- Successfully issued $1.75 billion
in senior notes to address near-term maturities
- Reduced total debt by $256
million and net debt(1) by $270 million
- Executed gas gathering agreement with EQM Midstream Partners,
LP and exchanged half of equity stake in Equitrans Midstream
Corporation, substantially reducing fee structure
Post Quarter Highlights:
- Successfully issued $500 million
in convertible senior notes to address near-term maturities
- In advanced discussions to divest certain non-strategic assets
for approximately $125 million,
expected to close during the second quarter 2020
President and CEO Toby Rice
stated, "Our team continues to deliver results that validate the
transformation strategy set in motion in July 2019. Our first quarter results represent an
acceleration towards achieving the well cost targets that
underpinned our campaign last year, as we delivered more volumes
for significantly less capital and benefited from improved
operating costs. Proving out our thesis on the operational front
has also allowed us to generate value for our stakeholders on the
strategic front, both through negotiating a successful gas
gathering arrangement with Equitrans Midstream and by de-risking
our near-term maturities.
Rice continued, "Looking forward, our focus will continue to be
on the execution of our plan to further enhance our balance sheet
and cost structure. We are excited about having addressed the
legacy governors on our business in time to capitalize on an
improving natural gas macro, allowing us to optimize our
deleveraging strategy in a manner that enhances long-term
shareholder value."
FIRST QUARTER 2020 FINANCIAL AND OPERATIONAL
PERFORMANCE
|
Three Months Ended
March 31,
|
|
|
($ millions,
except average realized price and EPS)
|
2020
|
|
2019
|
|
Change
|
Total sales volume
(Bcfe)
|
385
|
|
|
383
|
|
|
2
|
|
Average realized
price ($/Mcfe)
|
$
|
2.49
|
|
|
$
|
3.16
|
|
|
$
|
(0.67)
|
|
Net (loss)
income
|
$
|
(167)
|
|
|
$
|
191
|
|
|
$
|
(358)
|
|
Adjusted net income
(1)
|
$
|
36
|
|
|
$
|
212
|
|
|
$
|
(176)
|
|
Adjusted EBITDA
(1)
|
$
|
468
|
|
|
$
|
710
|
|
|
$
|
(242)
|
|
Diluted earnings per
share (EPS)
|
$
|
(0.65)
|
|
|
$
|
0.75
|
|
|
$
|
(1.40)
|
|
Adjusted EPS
(1)
|
$
|
0.14
|
|
|
$
|
0.83
|
|
|
$
|
(0.69)
|
|
Net cash provided by
operating activities
|
$
|
500
|
|
|
$
|
871
|
|
|
$
|
(371)
|
|
Capital
expenditures
|
$
|
262
|
|
|
$
|
476
|
|
|
$
|
(214)
|
|
Free cash flow
(1)
|
$
|
251
|
|
|
$
|
171
|
|
|
$
|
80
|
|
|
(1) A non-GAAP
financial measure. See the Non-GAAP Disclosures section of this
news release for the definition of, and other important information
regarding, this non-GAAP financial measure.
|
Net loss for the three months ended March 31, 2020 was
$167 million, $0.65 per diluted share, compared to net income
for the same period in 2019 of $191
million, $0.75 per diluted
share. The decrease was attributable primarily to the loss on
investment in Equitrans Midstream Corporation (Equitrans
Midstream), the loss on exchange of long-lived assets, decreased
operating revenues, increased impairment and expiration of leases
and the loss on debt extinguishment, partly offset by a gain
recognized on the agreements signed with Equitrans Midstream during
the quarter and decreased depreciation and depletion and selling,
general and administrative expenses.
Compared to the same quarter last year, average realized price
was 21% lower at $2.49 per Mcfe, due
to lower NYMEX prices and lower liquids prices, partly offset by
higher cash settled derivatives.
Net cash provided by operating activities decreased by
$371 million and free cash flow
increased by $80 million compared to
the same quarter last year. Free cash flow was positively impacted
by $95 million of accrued income tax
refunds as a result of the Coronavirus Aid, Relief and Economic
Security Act (the CARES Act) which was passed on March 27, 2020 by the U.S. Congress and
accelerated the Company's ability to claim federal refunds of
alternative minimum tax credits. In addition, free cash flow
increased as a result of lower capital expenditures, partly offset
by the 21% lower average realized price.
Per Unit Operating Costs
The following presents
certain of the Company's production-related operating costs on a
per unit basis.
|
Three Months
Ended
March 31,
|
Per Unit
($/Mcfe)
|
2020
|
|
2019
|
Gathering
|
$
|
0.68
|
|
|
$
|
0.69
|
|
Transmission
|
0.38
|
|
|
0.37
|
|
Processing
|
0.08
|
|
|
0.08
|
|
Lease operating
expense (LOE), excluding production taxes
|
0.07
|
|
|
0.06
|
|
Production
taxes
|
0.03
|
|
|
0.05
|
|
SG&A
|
0.09
|
|
|
0.13
|
|
Total per unit
operating costs
|
$
|
1.33
|
|
|
$
|
1.38
|
|
|
|
|
|
Production
depletion
|
$
|
0.92
|
|
|
$
|
1.01
|
|
Adjusted SG&A per
unit (a)
|
$
|
0.09
|
|
|
$
|
0.11
|
|
|
(a) A non-GAAP
financial measure. See the Non-GAAP Disclosures section of this
news release for the definition of, and other important information
regarding, this non-GAAP financial measure.
|
Liquidity
As of March 31, 2020, the Company had
no credit facility borrowings and $0.7
billion of letters of credit outstanding under its
$2.5 billion credit facility and
$0.8 billion in borrowings under its
unsecured term loan facility. As of March 31, 2020, total debt
was $5,037 million and net debt
(1) was $5,018 million
compared to $5,293 million and
$5,288 million, respectively, as of
December 31, 2019.
Pursuant to the Company's updated deleveraging plan, the Company
anticipates that it will have sufficient funds to repay its debt
maturing in 2021 by the end of 2020, through a combination of
$125 million of projected proceeds
from the sale of certain non-core assets which are currently in
advanced negotiations, proceeds from the monetization of its
remaining equity interest in Equitrans Midstream, expected income
tax refunds of approximately $390
million and free cash flow generation. Until leverage
targets are achieved, all free cash flow and divestiture proceeds
are expected to be used to reduce the Company's debt.
As of May 1, 2020, the Company had
sufficient unused borrowing capacity under its credit facility, net
of letters of credit, to satisfy any collateral requests that its
counterparties would be permitted to seek. As of May 1, 2020,
such amounts could be up to approximately $1.1 billion, inclusive of assurances posted
of approximately $0.9 billion in
the aggregate.
OPERATIONAL UPDATE
The energy industry is currently
experiencing two significant external stimuli, COVID-19 and the
OPEC oil price war, that are impacting both day-to-day operations
and the macro environment. To date, the Company has experienced
limited operational impacts as a result of the COVID-19 work from
home restrictions or COVID-19 directly. Similarly, the Company
expects to have limited direct operational impacts from the OPEC
oil price war. The oversupply of oil and NGLs resulting from the
demand destruction attributable to COVID-19 is anticipated by some
market participants to result in a lack of storage capacity and
ultimately the shutting in of certain of the industry's oil and
NGLs production. The Company has limited direct oil and NGLs
exposure, with approximately 95% of its production being natural
gas.
During the first quarter 2020, the Company continued to deliver
results that validate the transformation strategy set in motion in
July 2019. The management team's acute focus on cost
performance, schedule design, well design and operational cadence,
has accelerated the path towards delivering on its Pennsylvania
Marcellus well cost target of $730
per foot. During the first quarter, well costs in the
Company's Pennsylvania Marcellus operations averaged $745 per foot, a 7% improvement over prior
quarter well costs of $800 per
foot.
By continuing to leverage its digital work environment to turn
business insights into value enhancing actions, and keeping at the
forefront of science and innovation, the Company will continue
driving incremental financial and operational efficiencies to
become the clear low-cost operator of choice.
Wells Drilled
(SPUD)
|
|
PA
Marcellus
|
|
WV
Marcellus
|
|
OH
Utica
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
Net Wells
|
21
|
|
22
|
|
75
|
|
—
|
|
—
|
|
21
|
|
1
|
|
1
|
|
2
|
Net Avg. Lateral
(ft.)
|
12,510
|
|
12,590
|
|
12,660
|
|
—
|
|
—
|
|
11,670
|
|
14,760
|
|
12,810
|
|
13,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wells Horizontally
Drilled
|
|
PA
Marcellus
|
|
WV
Marcellus
|
|
OH
Utica
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
Net Wells
|
19
|
|
17
|
|
74
|
|
—
|
|
—
|
|
9
|
|
3
|
|
2
|
|
6
|
Net Avg. Lateral
(ft.)
|
10,810
|
|
11,710
|
|
12,200
|
|
—
|
|
—
|
|
10,030
|
|
12,290
|
|
12,540
|
|
12,350
|
|
Wells Completed
(Frac)
|
|
PA
Marcellus
|
|
WV
Marcellus
|
|
OH
Utica
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
Net Wells
|
13
|
|
24
|
|
68
|
|
—
|
|
3
|
|
6
|
|
—
|
|
7
|
|
10
|
Net Avg. Lateral
(ft.)
|
11,050
|
|
11,020
|
|
11,600
|
|
—
|
|
4,280
|
|
6,020
|
|
—
|
|
10,460
|
|
10,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wells
Turned-in-Line (TIL)
|
|
PA
Marcellus
|
|
WV
Marcellus
|
|
OH
Utica
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
|
1Q20A
|
|
2Q20E
|
|
FY20E
|
Net Wells
|
27
|
|
20
|
|
83
|
|
4
|
|
3
|
|
7
|
|
—
|
|
6
|
|
10
|
Net Avg. Lateral
(ft.)
|
11,620
|
|
10,500
|
|
11,390
|
|
10,390
|
|
4,280
|
|
7,770
|
|
—
|
|
8,960
|
|
9,950
|
2020 GUIDANCE
|
|
|
|
|
Production
|
|
Q2
2020
|
|
Full-Year
2020
|
Total sales volume
(Bcfe)
|
|
360 - 380
|
|
1,450 -
1,500
|
Liquids sales volume,
excluding ethane (Mbbls)
|
|
1,675 -
1,775
|
|
7,300 -
7,400
|
Ethane sales volume
(Mbbls)
|
|
1,225 -
1,325
|
|
4,400 -
4,500
|
Total liquids sales
volume (Mbbls)
|
|
2,900 -
3,100
|
|
11,700 -
11,900
|
|
|
|
|
|
Btu uplift (MMbtu /
Mcf)
|
|
|
|
1.045 -
1.055
|
|
|
|
|
|
Average differential
($ / Mcf)
|
|
$(0.45) -
$(0.25)
|
|
$(0.40) -
$(0.20)
|
|
|
|
|
|
Resource
Counts
|
|
|
|
|
Top-hole
Rigs
|
|
|
|
2 - 3
|
Horizontal
Rigs
|
|
|
|
3 - 4
|
Frac
Crews
|
|
|
|
3 - 4
|
|
|
|
|
|
Operating Costs ($
/ Mcfe)
|
|
|
|
|
Gathering
(a)
|
|
|
|
$0.71 -
$0.73
|
Transmission
(a)
|
|
|
|
$0.37 -
$0.39
|
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
per unit operating costs
|
|
|
|
$1.34 -
$1.46
|
|
|
|
|
|
Interest
expense
|
|
|
|
$0.16 -
$0.18
|
|
|
|
|
|
Financial ($
Billions)
|
|
|
|
|
Adjusted EBITDA
(b)
|
|
|
|
$1.475 -
$1.575
|
Adjusted operating cash
flow (b)
|
|
|
|
$1.325 -
$1.425
|
Capital
expenditures
|
|
|
|
$1.075 -
$1.175
|
Free cash flow
(b)
|
|
|
|
$0.225 -
$0.325
|
|
Based on NYMEX
natural gas price of $2.17 per MMbtu as of April
30,2020.
|
|
(a) Certain
in-basin transportation expenses previously recorded in
Transmission have been reclassified to Gathering to provide
additional clarity into costs associated with transporting EQT's
gas outside of the Appalachian Basin and to align with the
reporting of such expenses in EQT's financial statement
disclosures.
|
(b) Non-GAAP
financial measure. See the Non-GAAP Disclosures section for the
definition of, and other important information regarding, the
non-GAAP financial measures included in this news release,
including reasons why EQT is unable to provide a projection of its
2020 net cash provided by operating activities, the most comparable
financial measure calculated in accordance with GAAP, to projected
adjusted operating cash flow and free cash flow, or a projection of
its 2020 net income, the most comparable financial measure
calculated in accordance with GAAP, to projected adjusted
EBITDA.
|
First Quarter 2020 Earnings Webcast Information
The
Company's conference call with securities analysts begins at
10:30 a.m. ET today and will be
broadcast live via the Company's web site at www.eqt.com and on the
investor information page of the Company's web site at ir.eqt.com,
with a replay available for seven days following the call.
HEDGING (as of May 1, 2020)
The Company's total
natural gas production NYMEX hedge positions are:
|
|
2020
(a)
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
Swaps:
|
|
|
|
|
|
|
|
|
|
|
Volume
(MMDth)
|
|
852
|
|
|
466
|
|
|
—
|
|
|
2
|
|
|
2
|
|
Average Price
($/Dth)
|
|
$
|
2.74
|
|
|
$
|
2.50
|
|
|
$
|
—
|
|
|
$
|
2.67
|
|
|
$
|
2.67
|
|
Calls – Net
Short:
|
|
|
|
|
|
|
|
|
|
|
Volume
(MMDth)
|
|
324
|
|
|
286
|
|
|
186
|
|
|
77
|
|
|
15
|
|
Average Short Strike
Price ($/Dth)
|
|
$
|
2.89
|
|
|
$
|
2.80
|
|
|
$
|
2.78
|
|
|
$
|
2.96
|
|
|
$
|
3.11
|
|
Puts – Net
Long:
|
|
|
|
|
|
|
|
|
|
|
Volume
(MMDth)
|
|
119
|
|
|
57
|
|
|
135
|
|
|
69
|
|
|
15
|
|
Average Long Strike
Price ($/Dth)
|
|
$
|
2.28
|
|
|
$
|
2.38
|
|
|
$
|
2.35
|
|
|
$
|
2.40
|
|
|
$
|
2.45
|
|
Fixed Price Sales
(b):
|
|
|
|
|
|
|
|
|
|
|
Volume
(MMDth)
|
|
7
|
|
|
72
|
|
|
3
|
|
|
3
|
|
|
—
|
|
Average Price
($/Dth)
|
|
$
|
2.64
|
|
|
$
|
2.50
|
|
|
$
|
2.52
|
|
|
$
|
2.38
|
|
|
$
|
—
|
|
|
|
(a)
|
April 1 - December
31, 2020.
|
(b)
|
The difference
between the fixed price and NYMEX price is included in average
differential presented in the Company's price
reconciliation.
|
For 2020 (April 1 - December 31),
2021, 2022, 2023 and 2024, the Company has natural gas sales
agreements for approximately 10 MMDth, 18 MMDth, 18 MMDth, 88 MMDth
and 11 MMDth, respectively, that include average NYMEX ceiling
prices of $3.68, $3.17, $3.17,
$2.84 and $3.21, respectively. The Company has also entered
into derivative instruments to hedge basis. The Company may use
other contractual agreements from time to time to implement its
commodity hedging strategy.
NON-GAAP DISCLOSURES
Adjusted Net Income and Adjusted Earnings per Diluted Share
(Adjusted EPS)
Adjusted net income is defined as net
(loss) income, excluding 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 EPS
is defined as adjusted net income divided by diluted weighted
average common shares outstanding. Adjusted net income and adjusted
EPS are non-GAAP supplemental financial measures used by the
Company's management to evaluate period-over-period earnings
trends. The Company's management believes that these measures
provide useful information to external users of the Company's
consolidated financial statements, such as industry analysts,
lenders and ratings agencies. Management uses adjusted net income
and adjusted EPS to evaluate earnings trends because the measures
reflect only the impact of settled derivative contracts; thus, the
measures exclude the often-volatile revenue impact of changes in
the fair value of derivative instruments prior to settlement. These
measures also exclude other items that affect the comparability of
results or that are not indicative of trends in the ongoing
business. Adjusted net income and adjusted EPS should not be
considered as alternatives to net (loss) income or diluted EPS
presented in accordance with GAAP.
The table below reconciles adjusted net income and adjusted EPS
with net (loss) income and diluted EPS, respectively, the most
comparable financial measures calculated in accordance with GAAP,
each as derived from the Statements of Condensed Consolidated
Operations to be included in the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2020.
|
Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
(Thousands, except
per share information)
|
Net (loss)
income
|
$
|
(167,139)
|
|
|
$
|
190,691
|
|
Add
(deduct):
|
|
|
|
Loss on exchange of
long-lived assets
|
48,852
|
|
|
—
|
|
Impairment and
expiration of leases
|
53,768
|
|
|
29,534
|
|
Proxy, transaction and
reorganization
|
—
|
|
|
4,089
|
|
(Gain) loss on
derivatives not designated as hedges
|
(389,436)
|
|
|
131,996
|
|
Net cash settlements
received (paid) on derivatives not designated as hedges
|
245,736
|
|
|
(63,634)
|
|
Premiums (paid)
received for derivatives that settled during the period
|
(3,555)
|
|
|
2,437
|
|
Litigation
expense
|
—
|
|
|
8,000
|
|
Gain on Equitrans
Share Exchange
|
(187,223)
|
|
|
—
|
|
Loss (gain) on
investment in Equitrans Midstream Corporation
|
390,628
|
|
|
(89,055)
|
|
Loss on debt
extinguishment
|
16,610
|
|
|
—
|
|
Tax impact of non-GAAP
items (a)
|
27,652
|
|
|
(2,185)
|
|
Adjusted net
income
|
$
|
35,893
|
|
|
$
|
211,873
|
|
Diluted weighted
average common shares outstanding
|
255,435
|
|
|
255,226
|
|
Diluted
EPS
|
$
|
(0.65)
|
|
|
$
|
0.75
|
|
Adjusted
EPS
|
$
|
0.14
|
|
|
$
|
0.83
|
|
|
|
(a)
|
The tax impact of
non-GAAP items represents the incremental tax benefit (expense)
that would have been incurred had these items been excluded from
net (loss) income, which resulted in blended tax rates of (15.8%)
and 9.4% for the three months ended March 31, 2020 and 2019,
respectively. The 2020 rate differs from the Company's statutory
tax rate due primarily to valuation allowances provided against
federal and state deferred tax assets for additional unrealized
losses on the Company's investment in Equitrans Midstream
Corporation that, if sold, would result in capital
losses.
|
Adjusted EBITDA
Adjusted EBITDA is defined as
net (loss) income, excluding interest expense, income tax expense,
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 used by the Company's management to
evaluate period-over-period earnings trends. The Company's
management believes that this measure provides useful information
to external users of the Company's consolidated financial
statements, such as industry analysts, lenders and ratings
agencies. Management uses adjusted EBITDA to evaluate earnings
trends because the measure reflects only the impact of settled
derivative contracts; thus, the measure excludes the often-volatile
revenue impact of changes in the fair value of derivative
instruments prior to settlement. The measure also excludes other
items that affect the comparability of results or that are not
indicative of trends in the ongoing business. Adjusted EBITDA
should not be considered as an alternative to net (loss) income
presented in accordance with GAAP.
The table below reconciles adjusted EBITDA with net (loss)
income, the most comparable financial measure as calculated in
accordance with GAAP, as reported in the Statements of Condensed
Consolidated Operations to be included in the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020.
|
Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
(Thousands)
|
Net (loss)
income
|
$
|
(167,139)
|
|
|
$
|
190,691
|
|
Add
(deduct):
|
|
|
|
Interest
expense
|
62,374
|
|
|
56,573
|
|
Income tax
expense
|
32,822
|
|
|
38,234
|
|
Depreciation and
depletion
|
357,526
|
|
|
391,113
|
|
Amortization of
intangible assets
|
7,478
|
|
|
10,342
|
|
Loss on exchange of
long-lived assets
|
48,852
|
|
|
—
|
|
Impairment and
expiration of leases
|
53,768
|
|
|
29,534
|
|
Proxy, transaction and
reorganization
|
—
|
|
|
4,089
|
|
(Gain) loss on
derivatives not designated as hedges
|
(389,436)
|
|
|
131,996
|
|
Net cash settlements
received (paid) on derivatives not designated as hedges
|
245,736
|
|
|
(63,634)
|
|
Premiums (paid)
received for derivatives that settled during the period
|
(3,555)
|
|
|
2,437
|
|
Litigation
expense
|
—
|
|
|
8,000
|
|
Gain on Equitrans
Share Exchange
|
(187,223)
|
|
|
—
|
|
Loss (gain) on
investment in Equitrans Midstream Corporation
|
390,628
|
|
|
(89,055)
|
|
Loss on debt
extinguishment
|
16,610
|
|
|
—
|
|
Adjusted
EBITDA
|
$
|
468,441
|
|
|
$
|
710,320
|
|
The Company has not provided projected net income (loss) or a
reconciliation of projected adjusted EBITDA to projected net income
(loss), the most comparable financial measure calculated in
accordance with GAAP. Net (loss) income includes the impact of
depreciation and depletion expense, income tax 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 (loss), and a
reconciliation of projected adjusted EBITDA to projected net income
(loss), are not available without unreasonable effort.
Adjusted Operating Cash Flow and Free Cash Flow
Adjusted operating cash flow is defined as net cash provided by
operating activities less changes in other assets and liabilities.
Free cash flow is defined as adjusted operating cash flow less
accrual-based capital expenditures. Adjusted operating cash flow
and free cash flow are non-GAAP supplemental financial measures
used by the Company's management to assess liquidity, including the
Company's ability to generate cash flow in excess of its capital
requirements and return cash to shareholders. The Company's
management believes that these measures provide useful information
to external users of the Company's consolidated financial
statements, such as industry analysts, lenders and ratings
agencies. Adjusted operating cash flow and 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 table below reconciles adjusted operating cash flow and free
cash flow with net cash provided by operating activities, the most
comparable financial measure calculated in accordance with GAAP, as
derived from the Statements of Condensed Consolidated Cash Flows to
be included in the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2020.
|
Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
(Thousands)
|
Net cash provided by
operating activities
|
$
|
500,262
|
|
|
$
|
871,287
|
|
Decrease (increase) in
changes in other assets and liabilities
|
12,385
|
|
|
(223,934)
|
|
Adjusted operating cash
flow
|
$
|
512,647
|
|
|
$
|
647,353
|
|
Less: capital
expenditures
|
262,132
|
|
|
476,022
|
|
Free cash
flow
|
$
|
250,515
|
|
|
$
|
171,331
|
|
The Company has not provided projected net cash provided by
operating activities or reconciliations of projected adjusted
operating cash flow and 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 payments and its 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 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 free cash flow to projected net cash
provided by operating activities, without unreasonable effort.
Adjusted Operating Revenues
Adjusted operating
revenues is defined as total operating revenues, less the revenue
impact of changes in the fair value of derivative instruments prior
to settlement and net marketing services and other revenues.
Adjusted operating revenues (also referred to as total natural gas
& liquids sales, including cash settled derivatives) is a
non-GAAP supplemental financial measure used by the Company's
management to evaluate period-over-period earnings trends. The
Company's management believes that this measure provides useful
information to external users of the Company's consolidated
financial statements, such as industry analysts, lenders and
ratings agencies. Management uses adjusted operating revenues to
evaluate earnings trends because the measure reflects only the
impact of settled derivative contracts; thus, the measure excludes
the often-volatile revenue impact of changes in the fair value of
derivative instruments prior to settlement. The measure also
excludes net marketing services and other revenues because it is
unrelated to the revenue for the Company's natural gas and liquids
production. Adjusted operating revenues should not be considered as
an alternative to total operating revenues presented in accordance
with GAAP.
The table below reconciles adjusted operating revenues to total
operating revenue, the most comparable financial measure calculated
in accordance with GAAP, as reported in the Statements of Condensed
Consolidated Operations to be included in the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020.
|
Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
(Thousands, unless
noted)
|
Total operating
revenues
|
$
|
1,107,057
|
|
|
$
|
1,143,173
|
|
Add
(deduct):
|
|
|
|
(Gain) loss on
derivatives not designated as hedges
|
(389,436)
|
|
|
131,996
|
|
Net cash settlements
received (paid) on derivatives not designated as hedges
|
245,736
|
|
|
(63,634)
|
|
Premiums (paid)
received for derivatives that settled during the period
|
(3,555)
|
|
|
2,437
|
|
Net marketing services
and other
|
(2,420)
|
|
|
(3,556)
|
|
Adjusted operating
revenues
|
$
|
957,382
|
|
|
$
|
1,210,416
|
|
|
|
|
|
Total sales volume
(MMcfe)
|
385,070
|
|
|
383,470
|
|
Average realized
price ($/Mcfe)
|
$
|
2.49
|
|
|
$
|
3.16
|
|
Adjusted SG&A Per Unit
Adjusted SG&A per unit
is defined as SG&A less litigation expense, divided by total
sales volumes. Adjusted SG&A per unit is a non-GAAP
supplemental financial measure used by the Company's management to
evaluate period-over-period earnings trends. The Company's
management believes that this measure provides useful information
to external users of the Company's consolidated financial
statements, such as industry analysts, lenders and ratings
agencies. Management uses adjusted SG&A per unit to evaluate
earnings trends because the measure excludes items that affect the
comparability of results or that are not indicative of trends in
the ongoing business. Adjusted SG&A per unit should not be
considered as an alternative to SG&A presented in accordance
with GAAP.
The table below reconciles adjusted SG&A per unit with
SG&A, the most comparable financial measure calculated in
accordance with GAAP, as derived from the Statements of Condensed
Consolidated Operations to be included in the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2020.
|
Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
(Thousands, unless
noted)
|
Selling, general and
administrative
|
$
|
34,938
|
|
|
$
|
48,978
|
|
Less: Litigation
expense
|
—
|
|
|
8,000
|
|
Adjusted
SG&A
|
$
|
34,938
|
|
|
$
|
40,978
|
|
|
|
|
|
Total sales volume
(MMcfe)
|
385,070
|
|
|
383,470
|
|
Adjusted SG&A per
unit ($/Mcfe)
|
$
|
0.09
|
|
|
$
|
0.11
|
|
Net Debt
Net debt is defined as total debt less cash
and cash equivalents. Total debt includes the Company's current
portion of debt, credit facility borrowings, term loan borrowings,
senior notes and note payable to EQM Midstream Partners, LP. Net
debt is a non-GAAP supplemental financial measure used by the
Company's management to evaluate leverage since the Company could
choose to use its cash and cash equivalents to retire debt. The
Company's management believes that this measure provides useful
information to external users of the Company's consolidated
financial statements, such as industry analysts, lenders and
ratings agencies. Net debt should not be considered as an
alternative to total debt presented in accordance with GAAP.
The table below reconciles net debt with total debt, the most
comparable financial measure calculated in accordance with GAAP, as
derived from the Statements of Condensed Consolidated Balance
Sheets to be included in the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2020.
|
March 31,
2020
|
|
December 31,
2019
|
|
(Thousands)
|
Current portion of
debt
|
$
|
16,256
|
|
|
$
|
16,204
|
|
Credit facility
borrowings
|
—
|
|
|
294,000
|
|
Term loan facility
borrowings
|
799,574
|
|
|
999,353
|
|
Senior
notes
|
4,117,256
|
|
|
3,878,366
|
|
Note payable to EQM
Midstream Partners, LP
|
103,778
|
|
|
105,056
|
|
Total debt
|
5,036,864
|
|
|
5,292,979
|
|
Less: Cash and cash
equivalents
|
18,651
|
|
|
4,596
|
|
Net
debt
|
$
|
5,018,213
|
|
|
$
|
5,288,383
|
|
About EQT Corporation:
EQT Corporation is a natural
gas production company with emphasis in the Appalachian Basin and
operations throughout Pennsylvania, West
Virginia and Ohio. With 130
years of experience and a long-standing history of good corporate
citizenship, EQT is the largest producer of natural gas in
the United States. As a leader in
the use of advanced horizontal drilling technology, EQT is
committed to minimizing the impact of drilling-related activities
and reducing its overall environmental footprint. Through safe and
responsible operations, EQT is helping to meet our nation's demand
for clean-burning energy, while continuing to provide a rewarding
workplace and support for activities that enrich the communities
where its employees live and work. Visit EQT Corporation at
https://www.EQT.com; and to learn more about EQT's sustainability
efforts, please visit https://csr.eqt.com.
EQT Management speaks to investors from time to time and the
analyst presentation for these discussions, which is updated
periodically, is available via the Company's investor relationship
website at https://ir.eqt.com.
Cautionary Statements
Total sales volume per day (or
daily production) is an operational estimate of the daily
production or sales volume on a typical day (excluding
curtailments).
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, type, spacing, average lateral length and location of wells
to be drilled or turned-in-line, the number and type of drilling
rigs and, the number of frac crews); projections of wells SPUD,
horizontally drilled, completed and turned-in-line; projected
natural gas prices, basis and average differential; potential
impacts to the Company's business and operations resulting from the
COVID-19 pandemic; the effects of the COVID-19 pandemic and actions
taken by the Organization of the Petroleum Exporting Countries and
other allied countries (collectively known as OPEC+) as it pertains
to the global supply and demand of, and prices for, natural gas,
NGLs and oil; the impact of commodity prices on the Company's
business; total resource potential; projected production and sales
volume and growth rates (including liquids sales volume and growth
rates); projected drilling and completions (D&C) costs, other
well costs, unit costs and G&A expenses; projected reductions
in expenses, capital costs and well costs, the projected timing of
achieving such reductions and the Company's ability to achieve such
reductions; infrastructure programs; the Company's ability to
successfully implement and execute the executive management team's
operational, organizational and technological initiatives, and
achieve the anticipated results of such initiatives; the projected
reduction of the Company's gathering and compression rates
resulting from the Company's consolidated gas gathering and
compression agreement with EQM Midstream Partners, LP, and the
anticipated cost savings and other strategic benefits associated
with the execution of such agreement; monetization transactions,
including asset sales, joint ventures or other transactions
involving the Company's assets, the timing of such monetization
transactions, if at all, the projected proceeds from such
monetization transactions and the Company's planned use of such
proceeds; the amount and timing of any redemptions or repurchases
of the Company's common stock or outstanding debt securities; the
Company's ability to reduce its debt and the timing of such
reductions, if any; projected free cash flow, adjusted operating
cash flow, and 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; the Company's hedging
strategy; the Company's tax position and projected effective tax
rate; and the expected impact of changes in tax laws. These
forward-looking statements 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. The risks and uncertainties that may affect
the operations, performance and results of the Company's business
and forward-looking statements 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, NGLs 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; uncertainties related to the severity, magnitude and
duration of the COVID-19 pandemic; and disruptions to the Company's
business due to acquisitions and other significant transactions.
These and other risks are described under Item 1A, "Risk Factors,"
and elsewhere in the Company's Annual Report on Form 10-K for the
year ended December 31, 2019, as
updated by Part II, Item 1A, "Risk Factors" in the Company's
subsequently filed Quarterly Reports on Form 10-Q and other
documents the Company files from time to time with the Securities
and Exchange Commission. In addition, the Company may be subject to
currently unforeseen risks that may have a materially adverse
impact on it.
Analyst inquiries please contact:
Andrew Breese
Director, Investor Relations
ABreese@eqt.com
412.395.2555
EQT CORPORATION
AND SUBSIDIARIES
STATEMENTS OF
CONDENSED CONSOLIDATED OPERATIONS (UNAUDITED)
|
|
|
|
Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
(Thousands, except per share amounts)
|
Operating
revenues:
|
|
|
|
Sales of natural gas,
natural gas liquids and oil
|
$
|
715,201
|
|
|
$
|
1,271,613
|
|
Gain (loss) on
derivatives not designated as hedges
|
389,436
|
|
|
(131,996)
|
|
Net marketing services
and other
|
2,420
|
|
|
3,556
|
|
Total operating
revenues
|
1,107,057
|
|
|
1,143,173
|
|
Operating
expenses:
|
|
|
|
Transportation and
processing
|
439,834
|
|
|
439,246
|
|
Production
|
40,380
|
|
|
43,408
|
|
Exploration
|
923
|
|
|
1,007
|
|
Selling, general and
administrative
|
34,938
|
|
|
48,978
|
|
Depreciation and
depletion
|
357,526
|
|
|
391,113
|
|
Amortization of
intangible assets
|
7,478
|
|
|
10,342
|
|
Loss on exchange of
long-lived assets
|
48,852
|
|
|
—
|
|
Impairment and
expiration of leases
|
53,768
|
|
|
29,534
|
|
Proxy, transaction and
reorganization
|
—
|
|
|
4,089
|
|
Total operating
expenses
|
983,699
|
|
|
967,717
|
|
Operating
income
|
123,358
|
|
|
175,456
|
|
Gain on Equitrans
Share Exchange
|
(187,223)
|
|
|
—
|
|
Loss (gain) on
investment in Equitrans Midstream Corporation
|
390,628
|
|
|
(89,055)
|
|
Dividend and other
income
|
(24,714)
|
|
|
(20,987)
|
|
Loss on debt
extinguishment
|
16,610
|
|
|
—
|
|
Interest
expense
|
62,374
|
|
|
56,573
|
|
(Loss) income before
income taxes
|
(134,317)
|
|
|
228,925
|
|
Income tax
expense
|
32,822
|
|
|
38,234
|
|
Net (loss)
income
|
$
|
(167,139)
|
|
|
$
|
190,691
|
|
|
|
|
|
Earnings per share of
common stock:
|
Basic:
|
|
|
|
Weighted average
common stock outstanding
|
255,435
|
|
|
254,879
|
|
Net (loss)
income
|
$
|
(0.65)
|
|
|
$
|
0.75
|
|
Diluted:
|
|
|
|
Weighted average
common stock outstanding
|
255,435
|
|
|
255,226
|
|
Net (loss)
income
|
$
|
(0.65)
|
|
|
$
|
0.75
|
|
EQT CORPORATION
AND SUBSIDIARIES
PRICE
RECONCILIATION
|
|
|
|
Three Months
Ended
March 31,
|
|
2020
|
|
2019
|
|
(Thousands, unless
noted)
|
NATURAL
GAS
|
|
|
|
Sales volume
(MMcf)
|
369,742
|
|
|
363,717
|
|
NYMEX price ($/MMBtu)
(a)
|
$
|
1.95
|
|
|
$
|
3.15
|
|
Btu uplift
|
0.10
|
|
|
0.15
|
|
Natural gas price
($/Mcf)
|
$
|
2.05
|
|
|
$
|
3.30
|
|
|
|
|
|
Basis ($/Mcf)
(b)
|
$
|
(0.22)
|
|
|
$
|
(0.02)
|
|
Cash settled basis
swaps (not designated as hedges) ($/Mcf)
|
0.05
|
|
|
(0.12)
|
|
Average differential,
including cash settled basis swaps ($/Mcf)
|
$
|
(0.17)
|
|
|
$
|
(0.14)
|
|
Average adjusted price
($/Mcf)
|
$
|
1.88
|
|
|
$
|
3.16
|
|
Cash settled
derivatives (not designated as hedges) ($/Mcf)
|
0.60
|
|
|
(0.06)
|
|
Average natural gas
price, including cash settled derivatives ($/Mcf)
|
$
|
2.48
|
|
|
$
|
3.10
|
|
Natural gas sales,
including cash settled derivatives
|
$
|
915,411
|
|
|
$
|
1,129,201
|
|
|
|
|
|
LIQUIDS
|
|
|
|
Natural gas
liquids (NGLs), excluding ethane:
|
|
|
|
Sales volume (MMcfe)
(c)
|
10,820
|
|
|
12,549
|
|
Sales volume
(Mbbl)
|
1,803
|
|
|
2,091
|
|
Price
($/Bbl)
|
$
|
18.58
|
|
|
$
|
29.86
|
|
Cash settled
derivatives (not designated as hedges) ($/Bbl)
|
—
|
|
|
1.65
|
|
Average NGLs price,
including cash settled derivatives ($/Bbl)
|
$
|
18.58
|
|
|
$
|
31.51
|
|
NGLs sales
|
$
|
33,511
|
|
|
$
|
65,903
|
|
Ethane:
|
|
|
|
Sales volume (MMcfe)
(c)
|
3,329
|
|
|
5,938
|
|
Sales volume
(Mbbl)
|
555
|
|
|
990
|
|
Price
($/Bbl)
|
$
|
4.05
|
|
|
$
|
7.23
|
|
Ethane
sales
|
$
|
2,245
|
|
|
$
|
7,152
|
|
Oil:
|
|
|
|
Sales volume (MMcfe)
(c)
|
1,179
|
|
|
1,266
|
|
Sales volume
(Mbbl)
|
197
|
|
|
211
|
|
Price
($/Bbl)
|
$
|
31.63
|
|
|
$
|
38.67
|
|
Oil sales
|
$
|
6,215
|
|
|
$
|
8,160
|
|
|
|
|
|
Total liquids sales
volume (MMcfe) (c)
|
15,328
|
|
|
19,753
|
|
Total liquids sales
volume (Mbbl)
|
2,555
|
|
|
3,292
|
|
Total liquids
sales
|
$
|
41,971
|
|
|
$
|
81,215
|
|
|
|
|
|
TOTAL
|
|
|
|
Total natural gas and
liquids sales, including cash settled derivatives (d)
|
$
|
957,382
|
|
|
$
|
1,210,416
|
|
Total sales volume
(MMcfe)
|
385,070
|
|
|
383,470
|
|
Average realized
price ($/Mcfe)
|
$
|
2.49
|
|
|
$
|
3.16
|
|
|
(a) The
Company's volume weighted NYMEX natural gas price (actual average
NYMEX natural gas price ($/MMBtu)) was $1.95 and $3.15 for the
three months ended March 31, 2020 and 2019,
respectively.
|
(b) Basis
represents the difference between the ultimate sales price for
natural gas and the NYMEX natural gas price.
|
(c) NGLs, ethane
and oil were converted to Mcfe at the rate of six Mcfe per
barrel.
|
(d) Also
referred to in this report as adjusted operating revenues, a
non-GAAP supplemental financial measure.
|
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SOURCE EQT Corporation