Eqt Corporation · NYSE:EQT
Eqt — Q1 2020 Earnings Presentation
33 slides from Eqt's earnings presentation, May 7, 2020
Slide 1: Analyst Presentation
ANALYST PRESENTATION May 7, 2020
Slide 2: Cautionary Statements
CAUTIONARY STATEMENTS EQT Corporation (NYSE: EQT) EQT Plaza 625 Liberty Avenue, Suite 1700 Pittsburgh, PA 15222 Andrew Breese – Director, Investor Relations – 412.395.2555 The Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only prov
Slide 3: Company Highlights
COMPANY HIGHLIGHTS FIRST QUARTER 2020 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 B; received average realized price of $2.49 per Mcfe, a $0.44 premium to NYMEX pricing • Total per unit ope
Slide 4: EQT Corporate Overview
EQT CORPORATE OVERVIEW DOMINANT POSITION IN THE CORE OF THE APPALACHIAN BASIN C U M U L AT I V E P R O D U C T I O N H E AT M AP S : ASSET PROFILE UTICA Core Net Marcellus Acres(1) 630,000 Acres SOUTHW EST MARCELLUS Core Net OH Utica Acres (1) 60,000 Acres (1,2) Core Net Undeveloped Marcellus Locati
Slide 5: Why Invest in EQT?
WHY INVEST IN EQT? UNIQUELY POSITIONED TO DELIVER SHAREHOLDER VALUE • Deepest Inventory of Tier I drilling locations in the lowest cost natural 1 World Class Asset Base gas basin in the U.S. (15+ years) • Only Appalachian company with multi-year core “combo inventory” • Lowering well cost and overhe
Slide 6: Corporate Strategy
CORPORATE STRATEGY BUILDING A LONG-TERM, DURABLE AND SUSTAINABLE BUSINESS STRENGTHEN THE MAXIMIZE SHAREHOLDER VALUE BE THE LOW COST OPERATOR BALANCE SHEET THROUGH CAPITAL ALLOCATION ✓ On-track for peer-leading well costs • Will remain disciplined with a • Management remains returns focused: maintena
Slide 7: Operational Efficiencies: Drilling
OPERATIONAL EFFICIENCIES: DRILLING CONTINUED IMPROVEMENTS DRIVE DOW N COST PER FOOT HORIZONTAL DRILLING SPEED (FT/HR) HORIZONTAL DAYS PER 1,000 FT. 180 1.00 160 140 0.80 120 100 0.60 80 0.40 60 40 0.20 20 0 0.00 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19 1Q20 Management team continues to improve o
Slide 8: Leveraging New Technology to Continue Efficiency Gains
LEVERAGING NEW TECHNOLOGY TO CONTINUE EFFICIENCY GAINS EVOLVING OUR OPERATIONS TO DRIVE DOW N COSTS ELECTRIC FLEET HYBRID DRILLING RIGS BENEFITS OF ELECTRIC FRAC FLEETS BENEFITS OF HYBRID DRILLING RIGS • High automation capacity, improving cycle times and efficiencies • Reduces fuel consumption and
Slide 9: Meaningful Reduction in Well Costs Being Realized
MEANINGFUL REDUCTION IN WELL COSTS BEING REALIZED DELIVERING W ELL COST RESULTS PA MARCELLUS WELL COSTS(1) $970 $850 $800 $745 $730 $/ft. Legacy 3Q19 4Q19 1Q20 Target (2) (FY 2019E) 1. Includes pad construction and production facilities. 2. By second half 2020 May 7, 2020 9
Slide 10: 2020E Capital Expenditures Budget
2020E CAPITAL EXPENDITURES BUDGET REDUCED BY $225 MM SINCE ORIGINAL GUIDANCE RESERVE DEVELOPMENT 2020E CAPITAL EXPENDITURES(1) ($B) $815 - $875 MM $1.6 • PA Marcellus: ~$645 MM • OH Utica: ~$130 MM $1.4 $1.30 - $1.40 • WV Marcellus: ~$70 MM $1.25 - $1.35 $1.15 - $1.25 LAND $1.2 $1.075 - $1.175 $140
Slide 11: 2020E Detailed Guidance
2020E DETAILED GUIDANCE PRODUCTION 2020E FINANCIAL GUIDANCE(1) Total Sales Volumes (Bcfe) 1,450 - 1,500 Btu uplift (MMbtu/Mcf) 1.045 - 1.055 Gas 95% Average Differential ($/Mcf) $(0.40) - $(0.20) Liquids 5% Adjusted EBITDA(2,3) ($MM) 1,475 - 1,575 Adjusted Operating Cash Flow(2,3,4) ($MM) 1,325 - 1,
Slide 12: Market Update: Improving Natural Gas Fundamentals
MARKET UPDATE: IMPROVING NATURAL GAS FUNDAMENTALS U.S. RIG COUNTS(1) • Declining crude oil demand related to COVID-19 Oil Rigs Gas Rigs Total 1,075 economic shutdown 788 COVID-19 & OIL PRICE WAR IMPACT • Excess crude oil supply related to the Saudi-Russia ON OIL ACTIVITY oil price war ~(62%) 406 & A
Slide 13: Debt and Capitalization Summary
DEBT AND CAPITALIZATION SUMMARY AS OF MARCH 31, 2020 $B 12/31/19 3/31/20 • $5.0 B in total long-term debt Cash & Cash Equivalents $0.0 $0.0 • $4.1 B in Notes/Bonds • $0.8 B Unsecured Term Loan Current Portion of Debt $0.0 $0.0 Note Payable to EQM Midstream Partners $0.1 $0.1 • $2.5 B unsecured revol
Slide 14: Convertible Debt Issuance
CONVERTIBLE DEBT ISSUANCE OPPORTUNISTICALLY ACCESSED THE M ARKET ON 4/23/2020 • Effectively re-opened the convertible debt market for the energy sector • De-risked near-term debt maturities: net proceeds immediately used to prepay portion of Term Loan due May 2021 • Oversubscribed orderbook and stro
Slide 15: Maturity Management Strategy
MATURITY MANAGEMENT STRATEGY STRATEGIC DECISION TO UPDATE DELEVERAGING PLAN CLEAR LINE OF SIGHT IN PROCESS $2.0 • Improving natural gas prices support 2021 and 2022 FCF • Further confidence in handling maturities Does not include 2021+ FCF $B $1.0 $0.750 $0.620 Maturity: 10/22 Carryover $0.0 2020E F
Slide 16: Net Debt Management Strategy
NET DEBT MANAGEMENT STRATEGY PATH TO LESS THAN 2.0x NET DEBT TO EBITDA (1) UPDATED DELEVERAGING PLAN Improving natural gas prices further substantiates NET DEBT(1) ($B) our net debt management strategy: $5.5 • Support 2021 and 2022 FCF generation (all FCF used to reduce total debt) $5.0 • Improves p
Slide 17: Actively Managing Liquidity Amidst Recent Downgrades
ACTIVELY MANAGING LIQUIDITY AMIDST RECENT DOWNGRADES AMPLE LIQUIDITY TO COVER MIDSTREAM LETTERS OF CREDIT (“LC”) • Current liquidity is $1.6 B(1) LIQUIDITY(1) ($B) • $2.5 B unsecured revolver: • Essentially undrawn as of 5/1/20 $2.5 • Remains unsecured through July 2022 maturity • Not subject to sem
Slide 18: Firm Transportation Portfolio
FIRM TRANSPORTATION PORTFOLIO PROVIDES ACCESS, STABILITY AND OPPORTUNITY Current Gross Throughput • Diversity of delivered markets provides significant commercial optionality ~5,000,000 dth/d • Portfolio offers price stability by accessing highly liquid markets Midwest EQT 933,000 Dth/d • Assets dir
Slide 19: Commitment to ESG Transparency
COMMITMENT TO ESG TRANSPARENCY EQT LEADS IN ENVIRONMENTAL, SOCIAL & GOVERNANCE (ESG) DISCLOSURE Bloomberg ESG Disclosure: scores above 40 demonstrate good transparency; scores 50-70 demonstrate excellent transparency CURRENT OVERALL ESG DISCLOSURE SCORES* 60.0 In peer set EQT is: 56.0 52.7 • #1 in o
Slide 20: Set Up for EQT is Compelling
SET UP FOR EQT IS COMPELLING KEEPING OUR PROMISES TO SHAREHOLDERS IMPROVING THE BALANCE SHEET & DE-RISKING NEAR-TERM MATURITIES BENEFITING FROM IMPROVING GAS MACRO ABILITY TO GENERATE SIGNIFICANT FREE CASH FLOW RADICALLY REDUCING COSTS & METHODICALLY ALLOCATING CAPITAL REINVIGORATED TEAM A
Slide 21: Appendix
APPENDIX
Slide 22: First Quarter 2020 Results
FIRST QUARTER 2020 RESULTS OPERATIONAL AND FINANCIAL RESULTS 1Q 2020 CAPITAL EXPENDITURES ($mm) 1Q 2020 Marcellus Bcfe 334 Reserve development $ 223 Ohio Utica Bcfe 49 Land and lease $ 22 Other Bcfe 2 Capitalized overhead $ 11 Total Sales Volumes Bcfe 385 Capitalized interest $ 4 Other production in
Slide 23: Impact of Gas Gathering Agreement
IMPACT OF GAS GATHERING AGREEMENT SIGNIFICANT SHORT-TERM FEE RELIEF & LONG-TERM LOW COST FEE STRUCTURE CORPORATE GATHERING RATES ($/MCFE)(1,2) MINIMUM VOLUME COMMITMENT FOR EQM GGA MVC Agreement Status Quo PRESENT SHORT-TERM LONG-TERM 4,500 RELIEF SUSTAINABILITY $1.00 4,000 $535 MM in fee relief ove
Slide 24: Risk Management
RISK MANAGEMENT AS OF MAY 1, 2020 • Philosophy: 2020(1) 2021 2022 2023 2024 Swaps • Risk mitigation tool to de-risk cash flow and manage leverage Volume (MMDth) 852 466 - 2 2 Average Price ($/dth) $2.74 $2.50 - $2.67 $2.67 • Directionally more aggressive hedgers than prior management team Calls - Ne
Slide 25: Experienced, Diverse Board to Oversee EQT's Transformation
EXPERIENCED, DIVERSE BOARD TO OVERSEE EQT’S TRANSFORMATION DIRECTOR PRINCIPAL EXPERIENCE UNIQUE CONTRIBUTIONS ▪ Expertise in public company governance in the context of the energy industry LYDIA BEEBE* Former Corp Secretary, Chevron ▪ Commitment to shareholder engagement and transparency Former SVP,
Slide 26: ESG Underpins EQT's Success
ESG UNDERPINS EQT’s SUCCESS • As a ONE Future Coalition member, EQT exceeded the methane intensity sector level target of 0.28% with a rate of 0.15% (methane emissions per gross COLLABORATIONS production) • Joined API’s Environmental Partnership methane management program • Conduct leak detection an
Slide 27: Non-GAAP Financial Measure: Adjusted Net Income
NON-GAAP FINANCIAL MEASURE ADJUSTED NET INCOME Adjusted net income is defined as net 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 comparabi
Slide 28: Reconciliation of Adjusted Net Income
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF ADJUSTED NET INCOME The table below reconciles adjusted net income with net income, 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
Slide 29: Non-GAAP Financial Measure: Adjusted EBITDA
NON-GAAP FINANCIAL MEASURE 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 fa
Slide 30: Reconciliation of Adjusted EBITDA
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF ADJUSTED EBITDA 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 Compan
Slide 31: Adjusted Operating Cash Flow and Free Cash Flow
NON-GAAP FINANCIAL MEASURE 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 expenditu
Slide 32: Reconciliation of Adjusted Operating Cash Flow and Free Cash Flow
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF ADJUSTED OPERATING CASH FLOW AND FREE CASH FLOW 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
Slide 33: Reconciliation of Net Debt
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF 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 i