Market Overview

EQT Announces 2019 Capital Expenditure Forecast and Actions to Enhance Shareholder Value

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  • Plan to deliver approximately $350 million of Adjusted Free Cash
    Flow (a non-GAAP measure) in 2019, and at least $2.7 billion through
    2023
  • Reports preliminary 2018 production and CAPEX; establishes forecast
    for fourth quarter free cash flow
  • Implemented actions to achieve $100 million of annual G&A and well
    development cost reductions
  • Committed to improving operations and reducing annual capital costs
    by an incremental 10% by 2020
  • Company conducting search for external COO
  • Company to host conference call today at 8:30 a.m. Eastern Time

EQT Corporation (NYSE:EQT), today, announced the Company's 2019 capital
expenditure (CAPEX) forecast of $1.9 – $2.0 billion, which includes
approximately $1.6 billion for reserve development. Based on pricing as
of January 14, 2019, EQT forecasts approximately $350 million of
Adjusted Free Cash Flow (a non-GAAP measure) in 2019.(1)

EQT forecasts 2019 production sales volume of 1,470 – 1,510 Bcfe. The
2019 drilling program anticipates a 5% increase in production sales
volume in 2020.

"Over the last 18 months, we have transformed EQT into a focused
upstream industry leader with a strong balance sheet and simplified
corporate structure," said Robert J. McNally, president and chief
executive officer. "Today, EQT is a new company with a new management
team executing a new plan. With the support of our Board, we expect to
build on our momentum from the fourth quarter, significantly enhancing
operational efficiency and accelerating adjusted free cash flow to a
cumulative $2.7 billion or more over the next five years, with potential
upside from additional ongoing initiatives. We are confident in our
ability to deliver superior shareholder value and excited for the future
as a more focused, efficient EQT."

PRELIMINARY 2018 PRODUCTION AND CAPEX; FORECASTED FREE CASH FLOW

Production for the fourth quarter was 394 Bcfe, an increase of 20 Bcfe,
or 5%, over the third quarter. Production for full year 2018 exceeded
the Company's recent guidance at approximately 1,488 Bcfe, or 1,447 Bcfe
adjusted for assets divested during 2018. Excluding volumes from
divestitures, adjusted 2018 production is approximately 1,488 Bcfe,
exceeding the Company's recent guidance.

Development CAPEX was in line with recent guidance at $2.5 billion for
the full year. Additionally, EQT is forecasting fourth quarter 2018 Free
Cash Flow (a non-GAAP measure) of approximately $100 million.(1)

MARCELLUS DEVELOPMENT

In 2019, the Company plans to spud 106 net Marcellus wells, with an
average lateral length of 12,250 feet. The program will focus on the
Company's core Marcellus acreage, which is targeting 91 net wells in
Pennsylvania, with an average lateral length of 13,200 feet, and 15 net
wells in West Virginia, with an average lateral length of 6,500 feet.
During the year, the Company plans to turn-in-line (TIL) 124 net
Marcellus wells, with an average lateral length of 10,300 feet.

OHIO UTICA DEVELOPMENT

The Company plans to spud 20 net Ohio Utica wells, with an average
lateral length of 11,200 feet and TIL 23 net Ohio Utica wells, with an
average lateral length of 12,200 feet, during the year.

$100 MILLION ANNUAL SAVINGS FROM RESTRUCTURING AND DEVELOPMENT
EFFICIENCY INITIATIVES

The Company has identified approximately $100 million of annual
reductions in administrative and well development costs.

EQT recently implemented organizational changes as part of its ongoing
effort to improve operational efficiencies and reduce costs. The recent
restructuring is expected to result in $50 million in annual cash
savings.

EQT has also identified near-term operational process improvements and
other capital reductions that will lower development costs by an
additional $50 million annually. These reductions will be driven
by optimized water handling processes, fleet rationalization and other
drilling and completion process changes.

The Company is also executing a "Target 10% Initiative" to look at the
entire development program and identify opportunities to further reduce
capital costs. The management team has identified achievable cost saving
opportunities across materials management and purchasing, optimization
of water logistics, drilling and completion processes and design, and
several other functions across the organization. The Company expects to
fully capture these opportunities in 2020.

SEARCH FOR CHIEF OPERATING OFFICER

The Company has initiated a search for a chief operating officer and is
identifying a shortlist of highly-qualified, external candidates for the
role. The Company expects to announce an appointment during the first
quarter of 2019.

CREATION OF OPERATING AND CAPITAL EFFICIENCY COMMITTEE

EQT also announced today the formation of a new standing Board committee
tasked with an ongoing review of the Company's operations and capital
deployment. The Operating and Capital Efficiency Committee was formed on
December 4, 2018, and is composed of Philip G. Behrman, Anita M. Powers,
Stephen A. Thorington and Christine J. Toretti. Ms. Powers serves as
committee chair.

2019 GUIDANCE

Based on current NYMEX natural gas prices, Adjusted Operating Cash Flow
(a non-GAAP measure), which includes dividends from Equitrans Midstream
Corporation, is projected to be $2.2 – $2.3 billion for 2019.(1)

PRODUCTION   2019
Total production sales volume (Bcfe)   1,470 – 1,510
Liquids sales volume, excluding ethane (Mbbls) 8,130 – 8,330
Ethane sales volume (Mbbls) 5,780 – 5,980
Total liquids sales volume (Mbbls) 13,910 – 14,310
     
Resource Counts    
Marcellus / Utica Rigs 6 – 8
Top-hole Rigs 2 – 4
Frac Crews 5 – 7
     
Unit Costs ($ / Mcfe)    
Gathering $ 0.55 – 0.57
Transmission $ 0.48 – 0.50
Processing $ 0.08 – 0.10
LOE, excluding production taxes $ 0.06 – 0.08
Production taxes $ 0.05 – 0.07
SG&A $ 0.11 – 0.13
     
Average differential ($ / Mcf) $ (0.45) – (0.25)

Adjusted EBITDA (NYSE:B)(1)

$ 2.4 – 2.5
     
Adjusted Operating Cash Flow (NYSE:B)(1) $ 2.2 – 2.3
Capital Expenditures (NYSE:B) 1.9 – 2.0
     
Adjusted Free Cash Flow(1) (NYSE:B) $ 0.3 – 0.4

Based on current NYMEX natural gas prices of as of 01/14/2019

(1)  

See the Non-GAAP Disclosures section of this news release for
definitions and 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 net cash
provided by operating activities, the most comparable financial
measure calculated in accordance with GAAP, to Adjusted Operating
Cash Flow, Free Cash Flow and Adjusted Free Cash Flow, or a
projection of its net income, the most comparable financial
measure calculated in accordance with GAAP, to Adjusted EBITDA.

 

HEDGING (AS OF 12/31/2018)

The Company's total natural gas production NYMEX hedge positions
through 2023 are:
2019   2020   2021   2022   2023
Swaps
Volume (MMDth) 699 452 303 136 61
Average Price ($/Dth) $ 2.96 $ 2.82 $ 2.78 $ 2.75 $ 2.74
 
Calls – Net Short
Volume (MMDth) 304 89 55 40 26
Average Short Strike Price ($/Dth) $ 3.43 $ 3.29 $ 3.23 $ 3.19 $ 3.17
 
Puts – Net Long
Volume (MMDth) 42 0 10 0 0
Average Long Strike Price ($/Dth) $ 2.97 $ - $ 2.71 $ $
 
Fixed Price Sales*
Volume (MMDth) 123 7 0 0 0
Average Price ($/Dth) $ 3.01 $ 2.87 $ $ $
*  

The difference between the fixed price and NYMEX are included
in average differential on the Company's price reconciliation
.

 

CONFERENCE CALL

As previously announced, EQT will discuss the Company's 2019 capital
program today at 8:30 a.m. Eastern Time. The conference call will be
broadcast live and will be accessible via the EQT investor information
page at ir.eqt.com,
with a replay available for seven days following the call. EQT's updated
analyst presentation, which will be referenced on the conference call,
will also be accessible at ir.eqt.com.

About EQT Corporation:

EQT Corporation is a natural gas production company with emphasis in the
Appalachian Basin and operations throughout Pennsylvania, West Virginia
and Ohio. With 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 our nation's demand for clean-burning energy, while continuing to
provide a rewarding workplace and support for activities that enrich the
communities where its employees live and work. Visit EQT Corporation at www.EQT.com;
and to learn more about EQT's sustainability efforts, please visit csr.eqt.com.

NON-GAAP DISCLOSURES

Adjusted Operating Cash Flow, Free Cash Flow and Adjusted Free Cash
Flow

As used in this news release, Adjusted Operating Cash Flow is defined as
EQT's net cash provided by operating activities less changes in other
assets and liabilities plus dividends received from Equitrans Midstream
Corporation (ETRN). Free Cash Flow is defined as EQT's net cash provided
by operating activities less changes in other assets and liabilities,
less accrual-based capital expenditures. Adjusted Free Cash Flow is
defined as Free Cash Flow plus dividends received from ETRN. Adjusted
Operating Cash Flow, Free Cash Flow and Adjusted Free Cash Flow are
non-GAAP supplemental financial measures that management and external
users of EQT's consolidated financial statements, such as industry
analysts, lenders and ratings agencies use to assess EQT's liquidity.

EQT believes that Adjusted Operating Cash Flow, Free Cash Flow and
Adjusted Free Cash Flow provide useful information to management and
investors in assessing the impact of EQT's ability to generate cash flow
in excess of capital requirements and return cash to shareholders.
Adjusted Operating Cash Flow, Free Cash Flow and Adjusted Free Cash Flow
should not be considered as alternatives to net cash provided by
operating activities or any other measure of liquidity presented in
accordance with GAAP.

EQT is unable to project net cash provided by operating activities for
any of the forecasted periods presented and has not provided a related
reconciliation of projected Adjusted Operating Cash Flow, Free Cash Flow
and Adjusted Free Cash Flow to projected net cash provided by operating
activities, the most comparable financial measure calculated in
accordance with GAAP, because net cash provided by operating activities
includes the impact of changes in operating assets and liabilities.
Changes in operating assets and liabilities relate to the timing of
EQT's cash receipts and disbursements that may not relate to the period
in which the operating activities occurred, and EQT is unable to project
these timing differences with any reasonable degree of accuracy to a
specific day in advance of finalizing its financial results for the
applicable period.

Adjusted EBITDA

As used in this news release, Adjusted EBITDA is defined as net income
plus interest expense, income tax expense, depreciation depletion and
amortization expense, amortization of intangible assets, long-lived
asset and goodwill impairments, lease impairments and expirations, loss
(gain) on derivatives not designated as hedges, net cash settlements
received (paid) on derivatives not designated as hedges, premiums
received (paid) for derivatives that settled during the period, and
unrealized loss (gain) on EQT's investment in ETRN. Adjusted EBITDA is a
non-GAAP supplemental financial measure that management and external
users of EQT's consolidated financial statements, such as industry
analysts, lenders and ratings agencies use to assess EQT's earnings
trends.

EQT believes that Adjusted EBITDA is an important measure used by EQT's
management and investors in evaluating period-over-period comparisons of
earnings trends. Adjusted EBITDA should not be considered as an
alternative to EQT's net income presented in accordance with GAAP.
Adjusted EBITDA excludes the revenue impact of changes in the fair value
of derivative instruments prior to settlement and other items that
affect the comparability of results and are not trends in the ongoing
business. Management utilizes Adjusted EBITDA to evaluate earnings
trends because the measure reflects only the impact of settled
derivative contracts and thus the income from natural gas is not
impacted by the often-volatile fluctuations in fair value of derivatives
prior to settlement.

EQT has not provided projected net income or a reconciliation of
projected Adjusted EBITDA to projected net income, the most comparable
financial measure calculated in accordance with GAAP, because EQT does
not provide guidance with respect to depletion and amortization expense
beyond the current year, income tax expense, the revenue impact of
changes in the projected fair value of derivative instruments prior to
settlement or unrealized gains and losses on its investments in equity
securities. EQT does not provide projections for its year-end reserves,
as they are impacted by SEC prescribed pricing that is not known until
the end of a given year, along with other factors such as drilling and
completion costs in future periods. As reserves are a key component of
the depletion calculation, EQT cannot project depletion and amortization
expense within a reasonable range. Therefore, projected net income and a
reconciliation of projected Adjusted EBITDA to projected net income, are
not available without unreasonable effort.

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 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, and the
number of frac crews); projected production sales volumes and growth
rates (including liquids sales volume and growth rates); projected
drilling and completions (D&C) costs, other well costs, unit costs and
G&A expenses; projected reductions in expenses, capital costs and well
costs and the projected timing of achieving such reductions; projected
capital efficiency and cash savings and other operating efficiencies
associated with the Company's shift to a steady operating cadence and
the Company's ability to achieve such efficiencies; the projected timing
of appointing a chief operating officer for the Company; the Company's
ability to mitigate curtailments; dividend amounts and rates; projected
cash flows, including the ability to fund the 2019 drilling program
through cash from operations; projected Free Cash Flow, Adjusted Free
Cash Flow, Adjusted Operating Cash Flow, and net income attributable to
noncontrolling interests, including the Company's ownership of 19.9% of
ETRN's common stock; projected capital contributions and capital
expenditures; projected Adjusted EBITDA; liquidity and financing
requirements, including funding sources and availability; and the
Company's hedging strategy. 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, 2017, 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.

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