EQT Announces 2017 Operational Forecast

Production sales volume increase of 70 Bcfe

Monday, December 12, 2016 6:30 am EST

Dateline:

PITTSBURGH

Public Company Information:

NYSE:
EQT

PITTSBURGH--(BUSINESS WIRE)--EQT Corporation (NYSE: EQT) today announced the Company’s 2017 capital expenditure (CAPEX) forecast of $1.5 billion, excluding business development and land acquisitions, and including $1.3 billion for well development. Funding will be provided by cash generated from operations, and cash-on-hand.

EQT forecasts 2017 production sales volume of 810 – 830 Bcfe, which includes volume growth of 70 Bcfe, the majority of which stems from the previous year's drilling program. The majority of the volume expected from the 2017 drilling program will be realized in 2018, at which time EQT forecasts production volume growth of 15 – 20% per year for several years.

EQT’s 2017 CAPEX forecast excludes CAPEX for EQT Midstream Partners, LP (NYSE: EQM), a master limited partnership controlled by EQT Corporation and consolidated in EQT’s financial statements. EQM announced its 2017 financial and CAPEX forecast today in a separate news release, which can be found at www.eqtmidstreampartners.com.

MARCELLUS DEVELOPMENT

In 2017, the Company plans to drill 119 Marcellus wells with an average lateral length of 7,000 feet – all of which will be on multi-well pads to maximize operational efficiency and well economics. The Marcellus drilling program will focus on the Company’s core Marcellus acreage, with 76 wells in Pennsylvania and 43 wells in West Virginia.

UPPER DEVONIAN DEVELOPMENT

The Company plans to drill 81 Upper Devonian wells with an average lateral length of 7,300 feet. These wells will be limited to co-development on Marcellus pads in Pennsylvania.

DEEP UTICA EXPLORATION

The Company plans to drill seven deep Utica exploratory wells with an average lateral length of 6,800 feet. EQT owns approximately 490,000 net acres that the Company believes to be prospective for the deep Utica.

Also announced today by EQT, is a modification to the Company’s midstream agreement with Williams Ohio Valley Midstream, LLC (Williams) related to the dedicated portion of the approximately 62,500 Marcellus acres EQT acquired from Statoil USA Onshore Properties, Inc. earlier this year. Under the new agreement, EQT has committed firm volumes of 50 MMcfe per day initially and growing to 200 MMcfe per day by the fourth year. In addition to the existing right to provide wellhead gathering services, EQM can now provide high pressure pipeline services on the volume in excess of the commitment. EQM is currently coordinating with EQT Production to design a midstream system to support the Marcellus well development plans on this acreage. The investment opportunity for EQM is estimated to be $600 million for full buildout of wellhead gathering and high pressure pipeline services.

2017 GUIDANCE

Based on current NYMEX natural gas prices, adjusted operating cash flow attributable to EQT is projected to be approximately $1,200 million for 2017, which includes approximately $200 million from EQT’s interest in EQT GP Holdings, LP (NYSE: EQGP). 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 projections of its 2017 net cash provided by operating activities and 2017 net income, the most comparable financial measures to adjusted operating cash flow attributable to EQT and EBITDA, respectively, calculated in accordance with GAAP.

PRODUCTION

 
2017
Total production sales volume (Bcfe) 810 – 830
Liquids sales volume, excluding ethane (Mbbls) 10,000 – 10,400
Ethane sales volume (Mbbls) 3,100 – 3,300
 
Marcellus / Utica Rigs 6 – 8
Top-hole rigs 5 – 7
 
Unit Costs ($ / Mcfe)
Gathering to EQT Midstream $ 0.46 – 0.48
Transmission to EQT Midstream $ 0.20 – 0.22
Third-party gathering and transmission* $ 0.40 – 0.42
Processing $ 0.15 – 0.17
LOE, excluding production taxes $ 0.13 – 0.15
Production taxes $ 0.07 – 0.09
SG&A $ 0.17 – 0.19
DD&A $ 1.10 – 1.12
 
Average differential ($ / Mcf)* $

(0.70) – (0.60

)

 
Net marketing services ($MM)* $ 20 – 30

FINANCIAL

Net income attributable to noncontrolling interest ($MM) $ 335 – 345
 
Total Production EBITDA** $ 1,080 – 1,100

*EQT will utilize Rex capacity to transport a portion of its produced gas in 2017. In 2016, EQT resold a portion of and used a portion of the capacity for marketing activities. The shift is expected to result in better differentials, higher third-party gathering and transmission expenses, and lower net marketing service revenues, all else equal.

**Excludes non-cash derivative losses.

HEDGING

The Company’s total natural gas production hedge position through 2019 is:

  2017   2018   2019
NYMEX Swaps
Total Volume (Bcf) 343 117 19
Average Price per Mcf (NYMEX) $ 3.34 $ 3.13 $ 3.12
 
Collars
Total Volume (Bcf) 17
Average Floor Price per Mcf (NYMEX) $ 2.98 $ $
Average Cap Price per Mcf (NYMEX) $ 3.92 $ $
  • The Company also sold calendar 2017 and 2018 calls for approximately 32 and 16 Bcf at a strike price of $3.53 and $3.48 per Mcf, respectively
  • For 2017 and 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 2016 EARNINGS CALL INFORMATION

The Company intends to release full-year 2016 earnings and host a live webcast for security analysts on February 2, 2017. 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

Adjusted operating cash flow attributable to EQT is a non-GAAP supplemental financial measure that is presented as an indicator 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 adjusted EBITDA (a non-GAAP supplemental measure described below), and to include the EQGP cash distribution payable to EQT. Management believes that removing the impact on operating cash flows of the public unitholders of EQM and EQGP that is otherwise required to be consolidated in EQT’s results provides useful information to an EQT investor. Adjusted operating cash flow attributable to EQT should not be considered as an alternative 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 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. 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 to projected net cash provided by operating activities, without unreasonable effort.

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

As used in this news release, EBITDA is defined as earnings before interest, taxes, depreciation, and amortization expense. EBITDA is not a financial measure calculated in accordance with GAAP. EBITDA is a non-GAAP supplemental financial measure that EQT’s management and external users of EQT’s financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: (i) EQT’s performance versus prior periods; (ii) EQT’s operating performance as compared to other companies in its industry; (iii) the ability of EQT’s assets to generate sufficient cash flow to make distributions to its investors; (iv) EQT’s ability to incur and service debt and fund capital expenditures; and (v) the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

EQT has not provided projected net income (loss) or reconciliations of projected EBITDA to projected net income (loss), the most comparable financial measure calculated in accordance with GAAP. EQT does not provide guidance with respect to its average realized price or income taxes, among other items, that are reconciling items between EBITDA and net income (loss). 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. Further, management believes a reliable forecasted effective tax rate is not available because small fluctuations in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate for 2017. Consequently, EQT is not able to provide a projected net income (loss) that would be useful to investors. Therefore, projected net income (loss) and reconciliations of projected EBITDA to projected net income (loss) are not available without unreasonable effort.

EQT Midstream Partners Adjusted EBITDA

As used in this news release, EQT Midstream Partners (EQM) defines adjusted EBITDA as EQM’s net income plus EQM’s interest expense, depreciation and amortization expense, income tax expense (benefit) (if applicable), payments received by EQM from its preferred interest in EQT Energy Supply LLC, and non-cash long-term compensation expense less EQM’s other non-cash adjustments (if applicable), equity income, AFUDC-equity, capital lease payments and adjusted EBITDA of acquisitions prior to the acquisition dates. 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.

About EQT Corporation

EQT Corporation is an integrated energy company with emphasis on Appalachian area natural gas production, gathering, and transmission. With more than 125 years of experience, EQT continues to be a leader in the use of advanced horizontal drilling technology – designed to minimize the potential impact of drilling-related activities and reduce the overall environmental footprint. Through safe and responsible operations, the Company is committed to meeting the country’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 also owns a 90% limited partner interest in EQT GP Holdings, LP. EQT GP Holdings, LP owns the general partner interest, all of the incentive distribution rights, and a portion of the limited partner interests in EQT Midstream Partners, LP.

Visit EQT Corporation at www.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.

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, deep Utica and other reserves; drilling plans and programs (including the number, type, feet of pay and location of wells to be drilled, the number and type of drilling rigs and the number of multi-pad wells); projected production sales volume and growth rates (including liquids sales volume and growth rates); technology, (including drilling and completion techniques); projected unit costs, average differential and net marketing services revenue; projected adjusted operating cash flow attributable to EQT, projected EBITDA, including projected EQM adjusted EBITDA, and projected net income attributable to noncontrolling interests; projected capital expenditures, capital budget, and sources of funds for capital expenditures; future Company plans for volumes in excess of the Company’s commitments to Williams; and projected cash flows resulting from the Company’s limited partner interests in EQGP. 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, 2015, 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, is derived from publicly available information published by the partnerships.

Contact:

EQT analyst inquiries please contact:
Patrick Kane – Chief Investor Relations Officer, 412-553-7833
pkane@eqt.com
or
EQT Midstream Partners analyst inquiries please contact:
Nate Tetlow – Investor Relations Director, 412-553-5834
ntetlow@eqt.com
or
Media inquiries please contact:
Natalie Cox – Corporate Director, Communications, 412-395-3941
ncox@eqt.com

Media Contacts

(For credentialed news media)

Natalie Cox
Corporate Director,
Communications
ncox@eqt.com
Tel. 412.395.3941

Linda Robertson
Manager,
Media Relations
lrobertson@eqt.com
Tel. 412.553.7827

Investor Relations

Patrick J. Kane, CFA
Chief Investor Relations Officer
pkane@eqt.com
Tel. 412.553.7833

Nate Tetlow, CFA
Investor Relations Director
ntetlow@eqt.com
Tel. 412.553.5834

Corporate Communications

(For general inquiries)

Deborah Collier
Communications Assistant
dcollier@eqt.com
Tel. 412.395.3546