EQT Corporation · NYSE:EQT
EQT — Q1 2019 Earnings Presentation
39 slides from EQT's earnings presentation, Apr 25, 2019
Slide 1: EQT Corporation: First Quarter 2019 Earnings Update
EQT Corporation New Company, New Leadership, New Focus First Quarter 2019 Earnings Update April 25, 2019
Slide 2: First Quarter 2019 Highlights
First Quarter 2019 Highlights Strong financial and operational performance Financial Highlights Drilling Operations ▪ Adjusted free cash flow(1) of $171 MM ▪ 95% of horizontal drilling activity at or below budget ▪ $306 MM over the last 2 quarters ▪ 25% reduction in drilling days / 1,000’ vs. Q4 201
Slide 3: EQT Has Transformed Into the Leading U.S. Pure Play Natural Gas Producer
EQT Has Transformed Into the Leading U.S. Pure Play Natural Gas Producer New company, new leadership, new focus 2018 Transformation 2019 and Beyond d Reconstituted World Class 15 to 20 Year Drilling Inventory Management and Board Asset Base in the core of the Appalachian Basin Simplified corporate
Slide 4: Measurable and Transparent Progress in Executing Our Plan
Measurable and Transparent Progress in Executing Our Plan Action Item Measure Timeline Board ▪ Added four new independent directors Q4 2018 Enhancements ▪ Created Operating & Capital Efficiency Board Committee Reconstituted ▪ New CEO, CFO, GC, Head of IR, and other senior positions Q4 2018 Managemen
Slide 5: Delivering Results and Sustainable Free Cash Flow
Delivering Results and Sustainable Free Cash Flow Q4 2018 Q1 2019 Q1 2019 Delivering $134 MM $171 MM ~$150 MM Results Adjusted Adjusted Annual cost savings identified Free Cash Flow(1) Free Cash Flow(1) Realizing Efficiencies + Driving Down Costs $300 - $400 MM ~$2.9 B Significant Upside Free Cash o
Slide 6: Announced Industry Veteran Chief Operating Officer
Announced Industry Veteran Chief Operating Officer Career driving strong results at leading shale-focused upstream energy companies Proven track record of enhancing well productivity, driving down costs, and increasing efficiencies ▪ Experience operating shale assets efficiently at scale Former Sr.
Slide 7: Management and Board Aligned to Deliver Efficiencies and Free Cash Flow
Management and Board Aligned to Deliver Efficiencies and Free Cash Flow Focused on driving cost reductions and free cash flow from our world-class asset base Transparency Accountability ▪ Senior Management focused on cost reductions, development efficiencies, and accountability Board of Directors ▪
Slide 8: World-Class Asset Base
World-Class Asset Base Large-scale position in the core of the Appalachian Basin EQT Acreage Overlays the SW Marcellus Core Market Cap(1) $ 5.3 B Utica Cumulative SW Marcellus (2) Production Heat Map Enterprise Value $ 10.3 B Cumulative Production Heat Map Ownership Interest in ETRN(3) $ 1.1 B Core
Slide 9: 2019 Plan Supports Continued Free Cash Flow Growth
2019 Plan Supports Continued Free Cash Flow Growth Approximately $300 – $400 MM of adjusted free cash flow in 2019(1) Net Development Activity (Turned in Line) Operational and Financial Detail 2019E Sales Volumes (Bcfe) 1,480 – 1,520 2019E: 19 Utica Adjusted EBITDA ($B)(1) $ 2.3 – 2.4 2019E: 101 SWP
Slide 10: Detailed 2019 Development and Capital Plan
Detailed 2019 Development and Capital Plan Transparency, accountability and results 140 14,000 140 Average Lateral Length (ft.) 13,000 120 12,000 100 111 Net Well Count 11,000 101 80 10,000 83 9,000 60 8,000 40 7,000 6,000 20 20 19 5,000 11 17 0 4,000 1 PA Marcellus 2 3 4WV Marcellus 5 6 7 OH Utica8
Slide 11: 5-Year Financial and Operating Plan
5-Year Financial and Operating Plan Generates cumulative adjusted free cash flow of ~$2.9 B(1) 160 15,000 140 Average Lateral Length (ft.) 14,000 120 Net Well Count 13,000 100 12,000 80 11,000 60 10,000 40 20 9,000 0 8,000 1 2019 2 3 42020 5 6 72021 8 9 2022 10 11 12 2023 13 14 Spud Well Count TIL W
Slide 12: Compelling Free Cash Flow Story
Compelling Free Cash Flow Story Early 2019 cost reductions positively impact 5-Year cumulative adjusted free cash flow(1) Adjusted Free Cash Flow(1) and Adjusted Free Cash Flow Yield(1,2) 2019-2023 Cumulative Adjusted FCF Yield(1,2) 55 % - 65 % $0.50 25 % $0.45 16 % - 19 % 13 % - 16 % 20 % $0.40 13
Slide 13: Target 10% Initiative
Target 10% Initiative Tracking progress and line-of-sight to further cost savings Cost Reduction Initiatives Progress on Target 10% Initiative ▪ Jan 2019: $100 MM identified $800 (Million) and implemented (included in base plan) $600 ▪ Feb 2019: $50 MM of annual cost savings under Target 10% Initiat
Slide 14: Target 10% Initiative: Water Case Study
Target 10% Initiative: Water Case Study EQT’s water dynamics are complex and unique to our operations ~70,000 barrels per day of produced water Producing Well Footprint and Water Dynamics Produced Water Mix by State 2019 PA MRC Water Usage Mix OH PA WV Fresh Produced 15% 31% 35% 65% 54% EQT’s produc
Slide 15: Target 10% Initiative: Water Case Study
Target 10% Initiative: Water Case Study Water scheduling and optimization model implementation Integrated Data Communication Mathematical Programming Algorithm Optimized Logistics Scheduling Resource Requirements ▪ Forward Looking Scheduling ▪ Real-time pit, AST and production tank level monitoring
Slide 16: Delivering Development Efficiencies and Optimization
Delivering Development Efficiencies and Optimization Increasing lateral lengths and optimizing spacing generates higher single-well returns ▪ Increasing lateral well spacing optimizes Core PA Marcellus - 13,000' Lateral reservoir development Cost BTAX Well Spacing EUR ▪ Higher well costs resulting f
Slide 17: The Evolution of Well Spacing and Asset Development
The Evolution of Well Spacing and Asset Development Empirical data and deterministic modeling drive design modifications Empirical Evidence Deterministic Modeling Double-bounded Single-bounded Unbounded EUR (MMcf/ft) ▪ Statistical analysis identified meaningful performance ▪ Performed rigorous hydra
Slide 18: Test Results Support Development Strategy
Test Results Support Development Strategy Wider spacing and larger fracs optimize development Testing has been performed across our core acreage portfolio, supporting model predictions Results demonstrate the value of optimizing well spacing and completion design together Performance plots show pres
Slide 19: Technology Platform Driving Performance Efficiencies
Technology Platform Driving Performance Efficiencies Transforming the way we operate to drive efficiencies and maximize asset value Functions Benefits ▪ 24/7 monitoring of ▪ Provides consistency and operational activities operational efficiency ▪ Real-time data ▪ Implementation driving better decisi
Slide 20: Technology Platform Driving Performance Efficiencies
Technology Platform Driving Performance Efficiencies Using data, science and analytics to make better, faster decisions Functions Benefits Water ▪ Advanced logistics and resource ▪ Streamlines EQT’s complex water Scheduling scheduling logistics and Optimization ▪ Tracks and models operations and ▪ O
Slide 21: Financial Strength
Financial Strength Flexibility to further reduce leverage and return capital to shareholders Leverage – EQT vs. Marcellus Peers(1,4) ▪ Monetization of ETRN stake 3.2x ▪ Can reduce leverage(1,2) from 2.1x to 1.6x 2.5x 2.4x 2.1x 2.2x ▪ Investment grade ratings 1.4x 1.6x 1.1x ▪ Flexibility in volatile
Slide 22: Environmental, Health and Safety
Environmental, Health and Safety “The right thing to do” Environmental Stewardship(1) Safety In the Community ▪ Founding partner of the Center for ▪ Employees participated in >13,000 hours of ▪ EQT and the EQT Foundation — a Responsible Shale Development (CRSD) safety training in 2018 separate 501(c
Slide 23: Strong Fundamentals In Place to Deliver Exceptional Value to Shareholders
Strong Fundamentals In Place to Deliver Exceptional Value to Shareholders World-class asset base, sustainable free cash flow and financial strength ▪ Leading U.S. natural gas producer at >4.0 Bcfe per day World-Class ▪ 15 to 20 years drilling inventory in the core of the Marcellus Asset Base ▪ Conti
Slide 24: Appendix
Appendix
Slide 25: EQT as a Leading Environmental Steward
EQT as a Leading Environmental Steward Long-term, sustainable environmental practices aligned with investors and stakeholders Board and Environmental Methane Water Management Oversight Collaborations Emissions Initiatives Management ▪ The Public Policy and ▪ As a One Future member, EQT ▪ Conduct lea
Slide 26: Detailed 2019E Activity
Detailed 2019E Activity 2019 $/ft Details 2019 Total CapEx Details PA WV OH Total / Total Reserve Development PA WV OH 2019E Total Marcellus Marcellus Utica Average CapEx ($MM) Marcellus Marcellus Utica # of Net Wells Total Spud $55 $7 $25 $87 Spud 83 11 17 111 Horizontally Drilled $206 $42 $35 $283
Slide 27: 5-Year Annual Volumes and Decline Rates
5-Year Annual Volumes and Decline Rates 2,000 35% 32% 30% 1,600 Annual Volumes (Bcfe) YE 2018 Exit Rate Decline 25% 22% 1,200 20% 17% 16% 14% 15% 800 11% 28% 10% 20% 400 15% 12% 5% - 0% 2018 2019 2020 2021 2022 2023 Base Volumes Growth Volumes 2018 Annual Base Volume Decline YE 2018 Exit Rate Declin
Slide 28: Unit Cost Comparison
Unit Cost Comparison(1) Peer-leading unit costs for LOE and G&A Lease Operating Expense ($/Mcfe)(2) Selling, General & Administrative ($/Mcfe) Peer Mean (excl Peer 5): $0.15 $0.19 $0.93 $0.17 $0.14 $0.09 $0.06 (3) EQT Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 (1)Peers include AR, CNX, COG, RRC, SWN; Unit c
Slide 29: 2019 Guidance
2019 Guidance Approximately $300 - $400 MM of adjusted free cash flow(1) Q2 2019 Full-Year 2019 Production Total production sales volume (Bcfe) 355 - 375 1,480 - 1,520 Liquids sales volume, excluding ethane (Mbbls) 2,015 - 2,115 8,350 - 8,550 Ethane sales volume (Mbbls) 1,110 - 1,210 4,470 - 4,670 T
Slide 30: Firm Transportation Portfolio
Firm Transportation Portfolio Provides access, stability and opportunity ▪ Diversity of delivered markets provides significant commercial optionality ▪ Portfolio offers price stability by accessing 933,000 933,000 Dth/d Dth/d EQT EQT 520,000 520,000 Dth/d Dth/d highly liquid markets ▪ Assets directl
Slide 31: Risk Management
Risk Management NYMEX Hedge position as of April 22, 2019 2019* 2020 2021 2022 2023 Swaps Volume (MMDth) 591 553 306 136 61 Average Price ($/dth) $ 2.91 $ 2.82 $ 2.78 $ 2.75 $ 2.74 Calls - Net Short Volume (MMDth) 261 187 37 22 7 Average Short Strike Price ($/dth) $ 3.11 $ 3.15 $ 3.25 $ 3.20 $ 3.18
Slide 32: Cautionary Statements
Cautionary Statements EQT Corporation (NYSE: EQT) EQT Plaza 625 Liberty Avenue, Suite 1700 Pittsburgh, PA 15222 Blake McLean – Senior Vice President, Investor Relations and Strategy – 412.395.3561 The Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the S
Slide 33: Non-GAAP Financial Measure
Non-GAAP Financial Measure Adjusted EBITDA As used in this presentation, adjusted EBITDA is defined as net income from continuing operations, plus interest expense, income tax expense (benefit), depreciation and depletion, amortization of intangible assets, long-lived asset and goodwill impairments,
Slide 34: Reconciliation of Adjusted EBITDA
Non-GAAP Financial Measure Reconciliation of Adjusted EBITDA The table below reconciles adjusted EBITDA with income (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
Slide 35: Adjusted Operating Cash Flow and Adjusted Free Cash Flow
Non-GAAP Financial Measure Adjusted Operating Cash Flow and Adjusted Free Cash Flow As used in this presentation, adjusted operating cash flow is defined as EQT’s net cash provided by operating activities less changes in other assets and liabilities, less EBITDA attributable to discontinued operatio
Slide 36: Reconciliation of Adjusted Operating Cash Flow and Adjusted Free Cash Flow
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 37: Reconciliation of Adjusted Operating Cash Flow and Adjusted Free Cash Flow
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 38: EBITDA Attributable to Discontinued Operations
Non-GAAP Financial Measure EBITDA Attributable to Discontinued Operations The table below reconciles EBITDA attributable to discontinued operations with income from discontinued operations, net of tax, the most comparable financial measure calculated in accordance with GAAP, as reported in the State
Slide 39: Adjusted SG&A per unit
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 EQT’s management to evaluate period-to-period comparisons of earnings trends. Adjusted SG&A per unit is defined as SG&A l