EQT Corporation · NYSE:EQT
EQT — Q3 2019 Earnings Presentation
38 slides from EQT's earnings presentation, Oct 31, 2019
Slide 1: Analyst Presentation Q3 2019
ANALYST PRESENTATION Q3 2019 October 31, 2019
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: 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 A P S : ASSET PROFILE UTICA Core Net Marcellus Acres 660,000 Acres Core Net OH Utica Acres 60,000 Acres SOUTHWEST MARCELLUS Core Net Undeveloped Marcellus Locations(1) 1,685
Slide 4: 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 gas basin in the U.S. 1 World Class Asset Base • Only Appalachian company with multi-year core “combo- inventory” • Lowering well cost and overhead by 25% i
Slide 5: Corporate Strategy
CORPORATE STRATEGY MAXIMIZE SHAREHOLDER VALUE BE THE LOW COST OPERATOR DE-LEVER THE BUSINESS THROUGH CAPITAL ALLOCATION • Today: Basin-leading operating costs • Reduce absolute debt by 30+% by • Focused on generating near-term and overhead vs. peers(1) mid-year 2020 free cash flow in today’s commodi
Slide 6: The 100-Day Plan Was a Success
THE 100-DAY PLAN WAS A SUCCESS POSITIONING EQT FOR EFFICIENT EXECUTION OF LARGE -SCALE DEVELOPMENT PROJECTS Focus Area Initiative Goal 100-Day Accomplishments ORGANIZATION People Ensure we have the right people • All Evolution Leaders are in place and leading new, Develop a team that is Build a cult
Slide 7: 100-Day Plan Spotlight: Step Change in Drilling Efficiencies
100-DAY PLAN SPOTLIGHT: STEP CHANGE IN DRILLING EFFICIENCIES EXPERIENCED MANAGEMENT + FRESH EYES + LEVERAGING TECHNOLOGY MARCELLUS DRILLING SPEED (FT/HR) OHIO UTICA DRILLING SPEED (FT/HR) 250 100 90 200 80 70 150 60 50 100 40 30 50 20 10 0 0 1Q19 2Q19 3Q19 1Q19 2Q19 3Q19 October 31, 2019 7
Slide 8: Benefits of Combo-Development Built into Current Schedule
BENEFITS OF COMBO-DEVELOPMENT BUILT INTO CURRENT SCHEDULE DEVELOPING MULTIPLE WELLS AND PADS SIMULTANEOUSLY Washington County, PA Greene County, PA Wetzel County, WV • 13 wells, 185k lateral feet • 14 wells, 175k lateral feet • 25 wells, 315k lateral feet • Avg. Lateral >14k feet • Avg. Lateral >12k
Slide 9: Expected Pace of Well Cost Reductions
EXPECTED PACE OF WELL COST REDUCTIONS REDUCING WELL COSTS BY 25% FASTER THAN INITIAL EXPECTATIONS Successful completion of 100-day plan Execution stage underway • Enhanced front line leaders pushing • Large scale projects hit schedule • Bring in Evolution Leaders field performance • Technology fully
Slide 10: 2020E Capital Expenditures
2020E CAPITAL EXPENDITURES RESERVE DEVELOPMENT $1,030 - $1,090 MM • PA Marcellus: ~$685 MM • OH Utica: ~$200 MM • WV Marcellus: ~$175 MM LAND $140 - $160 MM • Leasehold Maintenance: ~$100 MM TOTAL CAPEX • In-fill Leasing: ~$50 MM $1.30 - $1.40 B OTHER $80 - $90 MM • Asset Maintenance(1): ~$55 MM • C
Slide 11: 2020E Development Highlights
2020E DEVELOPMENT HIGHLIGHTS INCREASING LATERALS UNDER MASTER OPERATIONS SCHEDULE Spud lateral lengths increase 80%+ by 2021 vs. 2019E PA MARCELLUS ACTIVITY WV MARCELLUS ACTIVITY 100 14,000 100 14,000 # of Net Wells Average Lateral (ft.) # of Net Wells Average Lateral (ft.) 80 13,000 80 13,000 12,00
Slide 12: Meaningful Reduction in Controllable Costs in 2020E
MEANINGFUL REDUCTION IN CONTROLLABLE COSTS IN 2020E DELIVERING ON CAMPAIGN PROMISES PA MARCELLUS WELL COSTS(1) GROSS G&A(2) LAND & OTHER(3) CAPEX $310 $970 $265 $850 $240 $745 $730 $200 $ MM $MM $/ft. Legacy 3Q19 (6) FY 2020E 2H 2020E Legacy FY 2020E Legacy FY 2020E (FY 2019E) (5) (FY 2019E) (5) (FY
Slide 13: 2020E Detailed Guidance
2020E DETAILED GUIDANCE PRODUCTION 2020E FINANCIAL GUIDANCE Total Sales Volumes (Bcfe) 1,450 - 1,500 NYMEX ($/MMbtu)(1) $ 2.42 Gas 95% Btu uplift (MMbtu/Mcf) 1.04 - 1.05 Liquids 5% Average Differential ($/Mcf) $(0.35) - $(0.15) Adjusted EBITDA(2,3) ($MM) 1,650 - 1,750 PA Marcellus 70% WV Marcellus 1
Slide 14: Well Cost Reductions Fully Realized in 2021
WELL COST REDUCTIONS FULLY REALIZED IN 2021 ILLUSTRATIVE MAINTENANCE PROGRAM THROUGH 2022 Reserve Development Land Other (1) Capitalized Overhead $1.6 $1.2 Capital Expenditures ($B) $0.8 Reflects a $0.4 full-year of target well costs $0.0 2020 2021 2022 Exit-to-Exit Base Volume (24%) (21%) (15%) Dec
Slide 15: Commitment to Investment Grade Metrics
COMMITMENT TO INVESTMENT GRADE METRICS • ~$5.2 B in total long-term debt $B 9/30/19 Cash & Cash Equivalents $0.0 • $2.5 B unsecured revolving credit facility Current Portion of Debt $0.0 • Largely undrawn (~$161 MM) as of 9/30/19 Note Payable to EQM Midstream Partners $0.1 • Investment grade at all
Slide 16: Commitment to Reduce Debt by ~30% by Mid-Year 2020
COMMITMENT TO REDUCE DEBT BY ~30% BY MID-YEAR 2020 MULTIPLE LEVERS TO PULL IN ADDITION TO FREE CASH FLOW GENERATION GOAL: $1.5 B+ IN ASSET MONETIZATIONS + ADJ. FCF BY MID-YEAR 2020 FREE CASH FLOW ETRN STAKE MINERALS E&P ASSETS • 2020E Adj. FCF(1): • ~$750 MM value(2) • 50,000 core fee acres • $275 -
Slide 17: EQT Has Optionality in Downside Rating Case
EQT HAS OPTIONALITY IN DOWNSIDE RATING CASE AMPLE LIQUIDITY TO COVER MIDSTREAM LETTERS OF CREDIT (“LC”) • $2.5 B unsecured revolver: • $161 MM drawn as of 9/30/19 $2.50 • Will remain unsecured even in a downside ratings case • Not subject to semi-annual borrowing base redeterminations • Additional l
Slide 18: Firm Transportation Portfolio
FIRM TRANSPORTATION PORTFOLIO PROVIDES ACCESS, STABILITY AND OPPORTUNITY Current Gross Throughput • Diversity of delivered markets provides significant commercial ~5,000,000 dth/d optionality Midwest EQT • Portfolio offers price stability by accessing highly liquid markets 933,000 Dth/d East • Asset
Slide 19: Appendix
APPENDIX
Slide 20: Third Quarter 2019 Highlights
THIRD QUARTER 2019 HIGHLIGHTS OPERATIONAL AND FINANCIAL HIGHLIGHTS 3Q 2019 3Q 2018 CAPITAL EXPENDITURES ($mm) 3Q 2019 3Q 2018 Marcellus Bcfe 315 317 Reserve development $ 380 $ 731 Ohio Utica Bcfe 65 52 Land and lease $ 49 $ 61 Other Bcfe 1 5 Capitalized overhead $ 18 $ 36 Total Sales Volumes Bcfe 3
Slide 21: 2019E Guidance
2019E GUIDANCE PRICING AS OF 9/30/19 2019E GUIDANCE 4Q 2019 FY 2019 Production Total production sales volume Bcfe 355 - 375 1,490 - 1,510 Liquids sales volume, excluding ethane Mbbls 1,795 - 1,895 8,165 - 8,265 Ethane sales volume Mbbls 1,045 - 1,145 4,085 - 4,185 Total liquids sales volume Mbbls 2,
Slide 22: Risk Management
RISK MANAGEMENT AS OF OCTOBER 25, 2019 • Philosophy: 2019(1) 2020 2021 2022 2023 Swaps • Risk mitigation tool to de-risk cash flow Volume (MMDth) 272 1,096 166 3 2 and manage leverage Average Price ($/dth) $2.80 $2.75 $2.42 $2.72 $2.67 • Directionally more aggressive hedgers than prior management te
Slide 23: Balanced Capital Allocation Framework
BALANCED CAPITAL ALLOCATION FRAMEWORK 1 | DE-LEVER BALANCE SHEET • Manage business to < 2.0x net debt / adjusted EBITDA(1) GOAL: MAXIMIZE FCF • Maintain investment grade balance sheet metrics • Solve numerator rather than grow into target metric • 2020E operating plan expected to yield $200 – 300 MM
Slide 24: Decline Rates
DECLINE RATES INCLUDES ALL WELLS EXPECTED TO BE TURNED -IN-LINE BY YE 2019 STANDARDIZED WELL DESIGNS AND CHOKE-MANAGEMENT PROGRAM DRIVE LOWER BASE DECLINE ANNUAL 2019 BASE PRODUCTION DECLINE(1) EXIT TO EXIT BASE DECLINE 1,600 13% 1,400 24% 26% 1,200 21% 1,000 17% 15% 14% Bcfe 800 13% 600 400 200 0 2
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: Environmental, Health and Safety
ENVIRONMENTAL, HEALTH AND SAFETY E N V I R O N M E N TA L S T E WA R D S H I P SAFETY IN THE COMMUNITY • Founding partner of the Center for • Employees participated in >13,000 • EQT and the EQT Foundation — a Responsible Shale Development (CRSD) hours of safety training in 2018 separate 501(c)(3) or
Slide 27: EQT as a Leading Environmental Steward
EQT AS A LEADING ENVIRONMENTAL STEWARD MORE THAN A LICENSE TO OPERATE BOARD & MANAGEMENT E N V I R O N M E N TA L METHANE EMISSIONS WAT E R M A N A G E M E N T OVERSIGHT C O L L A B O R AT I O N S I N I T I AT I V E S • Strong water sourcing and • As a One Future Coalition • Conduct leak detection a
Slide 28: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE ADJUSTED NET (LOSS) INCOME FROM CONTINUING OPERATIONS Adjusted net (loss) income from continuing operations is a non-GAAP supplemental financial measure that is presented because it is an important measure used by the Company's management to evaluate period-to-period compa
Slide 29: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF ADJUSTED NET (LOSS) INCOME FROM CONTINUING OPERATIONS The table below reconciles adjusted net (loss) income from continuing operations and adjusted EPS from continuing operations with loss from continuing operations and diluted EPS from continuing operati
Slide 30: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE ADJUSTED EBITDA Adjusted EBITDA is defined as loss from continuing operations, plus interest expense, income tax benefit, depreciation and depletion, amortization of intangible assets, impairment/loss on the sale/exchange of long-lived assets, impairment of intangible asse
Slide 31: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF ADJUSTED EBITDA The table below reconciles adjusted EBITDA with loss from continuing operations, the most comparable financial measure as calculated in accordance with GAAP, as reported in the Statements of Condensed Consolidated Operations to be included
Slide 32: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE 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 (a non-GAAP supplem
Slide 33: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF ADJUSTED OPERATING CASH FLOW AND ADJUSTED FREE CASH FLOW The table below reconciles adjusted operating cash flow and adjusted free cash flow with net cash provided by operating activities, the most comparable financial measure calculated in accordance wit
Slide 34: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE EBITDA ATTRIBUTABLE TO DISCONTINUED OPERATIONS EBITDA attributable to discontinued operations is a non-GAAP supplemental financial measure defined as income from discontinued operations, net of tax plus interest expense, income tax expense, depreciation and amortization of
Slide 35: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE ADJUSTED SG&A PER UNIT Adjusted SG&A per unit is a non-GAAP supplemental financial measure that is presented because it is an important measure used by the Company's management to evaluate period-to-period comparisons of earnings trends. Adjusted SG&A per unit is defined a
Slide 36: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE RECONCILIATION OF ADJUSTED SG&A PER UNIT 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
Slide 37: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE NET DEBT Net debt is a non-GAAP supplemental financial measure that is presented because it is an important measure used by the Company's management to determine the Company's outstanding debt obligations that would not be readily satisfied by cash and cash equivalents on
Slide 38: Non-GAAP Financial Measure
NON-GAAP FINANCIAL MEASURE LAST TWELVE MONTHS (LTM) ADJUSTED EBITDA BY QUARTER The table below reconciles adjusted EBITDA with loss from continuing operations, the most comparable financial measure as calculated in accordance with GAAP, as reported in the Statements of Condensed Consolidated Operati