Volume Growth of 17% Forecast Within Cash Flow
EQT Corporation (NYSE:EQT) today announced the Company’s 2018
capital expenditure (CAPEX) forecast of $2.4 billion, which
includes $2.2 billion for well development and $150 million for
acreage fill-ins and bolt-on leasing. Based on current pricing and
synergy capture, the 2018 drilling program is expected to be fully
funded through adjusted operating cash flow attributable to
EQT.
“We have already begun to realize synergies associated with
completion of the Rice Energy acquisition, which include an
estimated $100 million reduction in our projected corporate G&A
expenses," stated Steve Schlotterbeck, EQT’s president and chief
executive officer. "Initial development plans for our consolidated
acreage target a 50% increase in average lateral lengths, which is
exceeded with 12,600 foot laterals projected in Pennsylvania,
resulting in a 40% reduction in per unit LOE and production
SG&A expenses. These cost structure and capital efficiency
improvements support a more compelling investment proposition, as
we shift from maximizing volume growth to focusing on capital
returns and returning cash to shareholders.”
EQT forecasts 2018 production sales volume of 1,520 – 1,560
Bcfe. The 2018 drilling program anticipates a 15% increase in
production sales volume in 2019. It is anticipated that the 2019
development plan will be funded entirely by the cash flow provided
by EQT Production.
EQT’s 2018 CAPEX forecast excludes CAPEX for its retained
midstream assets, as well as for EQT Midstream Partners, LP
(NYSE:EQM) and Rice Midstream Partners LP (NYSE:RMP), master
limited partnerships controlled by EQT Corporation and consolidated
in EQT’s financial statements. EQM and RMP announced their 2018
CAPEX forecasts today in a separate news release, which can be
found at www.eqtmidstreampartners.com and www.ricemidstream.com,
respectively.
MARCELLUS DEVELOPMENT
In 2018, the Company plans to drill 139 Marcellus wells with an
average lateral length of 11,800 feet – all of which will be on
multi-well pads to maximize operational efficiency and well
economics. The program will focus on the Company’s core Marcellus
acreage, which is targeting 111 wells in Pennsylvania and 28 wells
in West Virginia. During the year, the Company plans to
turn-in-line (TIL) 160 –170 Marcellus wells.
OHIO UTICA DEVELOPMENT
The Company plans to drill 38 gross (25 net) Ohio Utica wells
with an average lateral length of 11,300 feet. The Company plans to
TIL 40 – 50 gross wells during the year.
UPPER DEVONIAN DEVELOPMENT
The Company plans to drill 19 Upper Devonian wells with an
average lateral length of 15,600 feet. These wells will be limited
to co-development on Marcellus pads in Pennsylvania. The Company
plans to TIL 20 – 25 wells during the year.
RICE DEBT REPLACEMENT SAVINGS
As a result of the replacement of $1.3 billion of Rice senior
notes with lower coupon investment grade debt, EQT expects to
realize annual interest savings of approximately $45 million.
HAYWOOD H18 WELL
Earlier this week, the company turned in line the longest
lateral completed to date by any operator in the Marcellus. The
Haywood H18 well in Washington County, PA has a completed lateral
length of 17,400 feet and will develop 42 Bcfe of reserves.
Laterals of this length are projected to have development costs of
$0.36 / Mcfe and will generate an IRR greater than 70% at $3.00
NYMEX. The company plans to drill 27 Marcellus wells at 17,000 feet
or longer in 2018.
2018 GUIDANCE
Based on current NYMEX natural gas prices, adjusted operating
cash flow attributable to EQT is projected to be $2,350 - $2,450
million for 2018, which includes $325 – $375 million from EQT’s
interests in EQT GP Holdings, LP (NYSE:EQGP) and RMP. See the
Non-GAAP Disclosures section for important information regarding
the non-GAAP financial measures included in this news release,
including reasons why EQT is unable to provide a projection of its
2018 net cash provided by operating activities, the most comparable
financial measure to adjusted operating cash flow attributable to
EQT and to EQT Production, calculated in accordance with GAAP.
PRODUCTION
Q3 2017
2018 Difference Total production sales
volume (Bcfe) 1,520 – 1,560 Liquids sales volume, excluding ethane
(Mbbls) 13,400 – 13,800 Ethane sales volume (Mbbls) 4,900 – 5,200
Marcellus / Upper Devonian Rigs 10 Top-hole rigs 4 Frac
Crews 10 Unit Costs ($ / Mcfe) Gathering to EQM and RMP $
0.47 $ 0.48 – 0.50 4 % Transmission to EQM $ 0.23 $ 0.11 – 0.13 (48
)% Third-party gathering and transmission $ 0.45 $ 0.42 – 0.44 (4
)% LOE, excluding production taxes $ 0.13 $ 0.07 – 0.09 (38 )%
Production taxes $ 0.07 $ 0.06 – 0.08 – SG&A $ 0.19 $ 0.10 –
0.12 (42 )% DD&A $ 1.03 $ 1.16 – 1.18 14 %
Development costs ($ / Mcfe)
$
0.58*
$ 0.44
(24
)%
Average differential ($ / Mcf)
$ (0.50) – (0.30) Net marketing services ($MM) $ 50 – 65
*Full-year 2017 estimate
FINANCIAL
Adjusted operating cash flow attributable to EQT Production
($MM) $ 2,285 – 2,335
HEDGING
The Company’s total natural gas production hedge positions
through 2020 are
2018
2019 2020 NYMEX Swaps Total
Volume (Bcf) 439 174 211 Average Price per Mcf (NYMEX) $ 3.16 $
3.07 $ 3.06 Collars Total Volume (Bcf) 117 66 − Average
Floor Price per Mcf (NYMEX) $ 3.28 $ 3.15 $ − Average Cap Price per
Mcf (NYMEX) $ 3.78 $ 3.68 $ − Puts (Long) Total Volume
(Bcfe) 10 7 − Average Floor Price per Mcf (NYMEX) $ 2.91 $ 2.94 $ −
- The Company also sold calendar 2018 and
2019 calls/swaptions for approximately 75 and 45 Bcf at a strike
price of $3.48 and $3.69 per Mcf, respectively
- For 2018 the Company sold puts for
approximately 3 Bcf at a strike price of $2.63 per Mcf
- The average price is based on a
conversion rate of 1.05 MMBtu/Mcf
YEAR-END 2017 EARNINGS CALL INFORMATION
The Company intends to release full-year 2017 earnings and host
a live webcast for security analysts on February 15, 2018. The
webcast will be available at www.eqt.com and will begin at 10:30
a.m. ET.
Non-GAAP Disclosures
Adjusted Operating Cash Flow Attributable to EQT and Adjusted
Operating Cash Flow Attributable to EQT Production
Adjusted operating cash flow attributable to EQT and adjusted
operating cash flow attributable to EQT Production are non-GAAP
supplemental financial measures that are presented as indicators of
an oil and gas exploration and production company’s ability to
internally fund exploration and development activities and to
service or incur additional debt. EQT includes this information
because management believes that changes in operating assets and
liabilities relate to the timing of cash receipts and disbursements
and therefore may not relate to the period in which the operating
activities occurred. Adjusted operating cash flow attributable to
EQT is EQT’s net cash provided by operating activities, less
changes in other assets and liabilities, adjusted to exclude EQM
and RMP adjusted EBITDA (non-GAAP supplemental financial measures
described below), plus EQM and RMP interest expense plus the EQGP
and RMP cash distributions payable to EQT. Management believes that
removing the impact on operating cash flows of the public
unitholders of EQM, EQGP and RMP that is otherwise required to be
consolidated in EQT’s results provides useful information to an EQT
investor. As used in this news release, adjusted operating cash
flow attributable to EQT Production means the EQT Production
segment’s total operating revenues less the EQT Production
segment’s cash operating expense, less gains (losses) on
derivatives not designated as hedges, plus net cash settlements
received (paid) on derivatives not designated as hedges, plus
premiums received (paid) for derivatives that settled during the
period, plus EQT Production asset impairments (if applicable).
Adjusted operating cash flow attributable to EQT and adjusted
operating cash flow attributable to EQT Production should not be
considered as alternatives to net cash provided by operating
activities presented in accordance with GAAP.
EQT has not provided projected net cash provided by operating
activities or a reconciliation of projected adjusted operating cash
flow attributable to EQT or projected adjusted operating cash flow
attributable to EQT Production to projected net cash provided by
operating activities, the most comparable financial measure
calculated in accordance with GAAP. EQT is unable to project net
cash provided by operating activities 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.
EQT 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, three or more months in advance. Furthermore,
EQT does not provide guidance with respect to its average realized
price or income taxes, among other items, that are reconciling
items between net cash provided by operating activities and
adjusted operating cash flow attributable to EQT and adjusted
operating cash flow attributable to EQT Production, as applicable.
Natural gas prices are volatile and out of EQT’s control, and the
timing of transactions and the income tax effects of future
transactions and other items are difficult to accurately predict.
Therefore, EQT is unable to provide projected net cash provided by
operating activities, or the related reconciliation of projected
adjusted operating cash flow attributable to EQT and projected
operating cash flow attributable to EQT Production to projected net
cash provided by operating activities, without unreasonable
effort.
EQT Midstream Partners Adjusted EBITDA
As used in this news release, EQT Midstream Partners (EQM)
adjusted EBITDA means EQM’s net income plus EQM’s net interest
expense, depreciation and amortization expense, income tax expense
(benefit) (if applicable), preferred interest payments received
post-conversion, and non-cash long-term compensation expense less
EQM’s equity income, AFUDC-equity, pre-acquisition capital lease
payments for Allegheny Valley Connector, LLC (AVC), and adjusted
EBITDA of assets prior acquisition. EQM adjusted EBITDA is a
non-GAAP supplemental financial measure that management and
external users of EQT’s consolidated financial statements, such as
industry analysts, investors, lenders and rating agencies, use to
assess the effects of the noncontrolling interests in relation
to:
- EQT's operating performance as compared
to other companies in its industry;
- the ability of EQT's assets to generate
sufficient cash flow to make distributions to its investors;
- EQT's ability to incur and service debt
and fund capital expenditures; and
- the viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
EQT believes that EQM adjusted EBITDA provides useful
information to investors in assessing EQT's financial condition and
results of operations. EQM adjusted EBITDA should not be considered
as an alternative to EQM’s net income, operating income, or any
other measure of financial performance or liquidity presented in
accordance with GAAP. EQM adjusted EBITDA has important limitations
as an analytical tool because it excludes some, but not all, items
that affect EQM's net income. Additionally, because EQM adjusted
EBITDA may be defined differently by other companies in EQT's or
EQM's industries, the definition of EQM adjusted EBITDA may not be
comparable to similarly titled measures of other companies, thereby
diminishing the utility of the measure.
Rice Midstream Partners Adjusted EBITDA
As used in this news release, Rice Midstream Partners (RMP)
adjusted EBITDA means RMP’s net income (loss) plus RMP’s net
interest expense, depreciation expense, amortization of intangible
assets, non-cash equity compensation expense, amortization of
deferred financing costs and other nonrecurring items. RMP adjusted
EBITDA is a non-GAAP supplemental financial measure that management
and external users of EQT’s consolidated financial statements, such
as industry analysts, investors, lenders and rating agencies, use
to assess the effects of the noncontrolling interests in relation
to:
- EQT's operating performance as compared
to other companies in its industry;
- the ability of EQT's assets to generate
sufficient cash flow to make distributions to its investors;
- EQT's ability to incur and service debt
and fund capital expenditures; and
- the viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
EQT believes that RMP adjusted EBITDA provides useful
information to investors in assessing EQT's financial condition and
results of operations. RMP adjusted EBITDA should not be considered
as an alternative to RMP’s net income, operating income, or any
other measure of financial performance or liquidity presented in
accordance with GAAP. RMP adjusted EBITDA has important limitations
as an analytical tool because it excludes some, but not all, items
that affect RMP's net income. Additionally, because RMP adjusted
EBITDA may be defined differently by other companies in EQT's or
RMP's industries, the definition of RMP adjusted EBITDA may not be
comparable to similarly titled measures of other companies, thereby
diminishing the utility of the measure.
About EQT Corporation:
EQT Corporation is an integrated energy company with emphasis on
Appalachian area natural gas production, gathering, and
transmission. With nearly 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 the nation’s growing
demand for clean-burning energy, while continuing to provide a
rewarding workplace and enrich the communities where its employees
live and work. EQT owns a 90% limited partner interest in EQT GP
Holdings, LP, which owns the general partner interest, all of the
incentive distribution rights, and a portion of the limited partner
interests in EQT Midstream Partners, LP. EQT also owns a 28%
limited partner interest and all of the incentive distribution
rights in Rice Midstream Partners LP.
Visit EQT Corporation at www.EQT.com and to learn more about
EQT’s sustainability efforts, please visit https://csr.eqt.com.
About EQT Midstream
Partners:
EQT Midstream Partners, LP is a growth-oriented limited
partnership formed by EQT Corporation to own, operate, acquire, and
develop midstream assets in the Appalachian Basin. The Partnership
provides midstream services to EQT Corporation and third-party
companies through its strategically located transmission, storage,
and gathering systems that service the Marcellus and Utica regions.
The Partnership owns approximately 950 miles of FERC-regulated
interstate pipelines; and also owns approximately 1,800 miles of
high and low pressure gathering lines.
Visit EQT Midstream Partners, LP at
www.eqtmidstreampartners.com.
About EQT GP Holdings:
EQT GP Holdings, LP is a limited partnership that owns the
general partner interest, all of the incentive distribution rights,
and a portion of the limited partner interests in EQT Midstream
Partners, LP. EQT Corporation owns the general partner interest and
a 90% limited partner interest in EQT GP Holdings, LP.
Visit EQT GP Holdings, LP at www.eqtmidstreampartners.com.
About Rice Midstream
Partners:
Rice Midstream Partners LP is a fee-based, growth-oriented
limited partnership formed to own, operate, develop and acquire
midstream assets in the Appalachian basin. RMP provides midstream
services to EQT Corporation and third-party companies through its
natural gas gathering, compression and water assets in the rapidly
developing dry gas cores of the Marcellus and Utica Shales.
Visit Rice Midstream Partners LP at www.ricemidstream.com.
Cautionary Statements
Disclosures in this news release contain 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 the Company
and its subsidiaries, including guidance regarding the Company's
strategy to develop its Marcellus, Ohio Utica, Upper Devonian and
other reserves; drilling plans and programs (including the number,
type, average lateral length and location of wells to be drilled or
turned-in-line, the number and type of drilling rigs, the number of
frac crews and the number of multi-pad wells); projected production
sales volume and growth rates (including liquids sales volume and
growth rates); projected unit costs, G&A expenses, expense
reductions, average differential and net marketing services
revenue; projected adjusted operating cash flow attributable to EQT
and projected adjusted operating cash flow attributable to EQT
Production; projected capital expenditures, capital budget, and
sources of funds for capital expenditures; return on capital; and
projected cash flows, including the ability to fund the 2018
drilling program through cash from operations, and projected cash
flows resulting from the Company’s partnership interests in EQGP
and RMP. These 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. 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, those
set forth under Item 1A, "Risk Factors" of the Company's Form 10-K
for the year ended December 31, 2016, as updated by any subsequent
Form 10-Qs.
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.
Information in this news release regarding EQGP and its
subsidiaries, including EQM, and RMP and its subsidiaries, is
derived from publicly available information published by the
partnerships.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171213005289/en/
EQT analyst inquiries:Patrick Kane, 412-553-7833Chief
Investor Relations Officerpkane@eqt.comorEQT Midstream Partners
or Rice Midstream Partners analyst inquiries:Nate Tetlow,
412-553-5834Investor Relations Directorntetlow@eqt.comorMedia
inquiries:Natalie Cox, 412-395-3941Corporate Director,
Communicationsncox@eqt.com
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