Crude Oil ( ) Brent Crude ( ) Natural Gas ( ) S&P 500 ( ) PHLX Oil ( )
 December 7, 2015 - 6:30 AM EST
Print Email Article Font Down Font Up
EQT Announces 2016 Operational Forecast

Production sales volume increase of 18%

EQT Corporation (NYSE: EQT) today announced the Company’s 2016 capital expenditure (CAPEX) forecast of $1.0 billion, excluding business development, land acquisitions and Midstream capital associated with planned asset dropdowns in the first half of 2016; and including $820 million for well development. Production sales volume in 2016 is expected to be 700 – 720 Bcfe. Funding will be provided by cash generated from operations, cash-on-hand, and proceeds from midstream asset sales to EQT Midstream Partners, LP (NYSE: EQM).

EQT’s 2016 CAPEX forecast excludes CAPEX for EQM, a master limited partnership controlled by EQT Corporation and consolidated in EQT’s financial statements. EQM announced its 2016 financial and CAPEX forecast today in a separate news release, which can be found at www.eqtmidstreampartners.com.

MARCELLUS DEVELOPMENT

In 2016, the Company plans to drill 72 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.

DEEP UTICA DEVELOPMENT

The Company plans to drill five deep Utica wells with an average lateral length of 5,200 feet; and based on results, may drill up to an additional five wells. EQT owns approximately 400,000 net acres that the Company believes to be prospective for the deep Utica.

HURON GATHERING

Due to the declining volume and cash flow trajectory, the Huron gathering system will not be dropped into EQM. The related revenues and expenses that were historically allocated to EQT Midstream will be allocated to EQT Production following the eventual dropdown transaction.

HEDGING

The Company’s total natural gas production hedge position through 2017 is:

     

2015(3)

   

2016(4)

   

2017(4)

NYMEX Swaps                  
Total Volume (Bcfe)       62         236         101  

Average Price per Mcf (NYMEX)(1)

    $ 4.14       $ 3.88       $ 3.68  
                   
Fixed Price Physical Sales(2)                  
Total Volume (Bcfe)       13         12         2  
Average Price per Mcf (NYMEX)(1)     $ 3.89       $ 3.31       $ 3.33  
                   
Collars                  
Total Volume (Bcfe)       9                 7  
Average Floor Price per Mcf (NYMEX)(1)     $ 4.47       $ 0.00       $ 3.15  
Average Cap Price per Mcf (NYMEX)(1)     $ 7.19       $ 0.00       $ 4.03  

(1)The average price is based on a conversion rate of 1.05 MMBtu/Mcf
(2)Fixed price physical sales impact is included in recoveries on the EQT Corporation Price Reconciliation.
(3)October through December 2015
(4)For 2016 and 2017, the Company also has a natural gas sales agreement for approximately 35 Bcf that includes a NYMEX ceiling price of $4.88 per Mcf. The Company also sold 2016 and 2017 calls for approximately 11 and 17 Bcf at a strike price of $3.65 and $3.79 per Mcf, respectively.

YEAR-END EARNINGS INFORMATION

The Company intends to release full-year 2015 earnings and host a live webcast for security analysts on February 4, 2016. The webcast will be available at www.eqt.com and will begin at 10:30 a.m. ET.

2016 Guidance

Based on current NYMEX natural gas prices, adjusted operating cash flow attributable to EQT is projected to be $700 - $750 million for 2016, which includes approximately $150 million from EQT’s interest in EQT GP Holdings, LP (EQGP). See the Non-GAAP Disclosures section for information regarding the non-GAAP financial measures included in this news release.

PRODUCTION

 

Total production sales volume (Bcfe)

700 – 720
NGL & oil volume (Mbbls) 11,000 – 11,500
 
Marcellus / Utica Rigs 5
Top-hole rigs 1-2
 
Unit Cost ($ / Mcfe)
LOE, excluding production taxes $ 0.09 – 0.11
Production taxes $ 0.07 – 0.09
SG&A $ 0.16 – 0.18
DD&A $ 1.07 – 1.10
 
Average differential ($ / Mcfe) $

(0.20) – (0.30)

 

 
Midstream revenue deductions ($ / Mcfe)
Gathering to EQT Midstream $ 0.66 – 0.70
Transmission to EQT Midstream $ 0.18 – 0.22
Third-party gathering and transmission $ 0.49 – 0.53
 

MIDSTREAM

Unit Cost ($ / Mcfe)
Gathering and transmission $ 0.16 – 0.18
SG&A $ 0.12 – 0.14
 

FINANCIAL

Cash-on-hand at year-end 2015 ($MM), excluding EQM $ 1,200 – 1,250
 
EBITDA ($MM)
EQM adjusted EBITDA $ 530 – 550
Huron gathering 35 – 40
Other EQT Midstream     40 – 45  
Total Consolidated Midstream $ 605 – 635
Total Production EBITDA     600 – 620  
Total EBITDA   $ 1,205 – 1,255  

NON-GAAP DISCLOSURES

EBITDA, adjusted Operating Cash Flow Attributable to EQT, adjusted EQT Midstream Partners EBITDA and noncontrolling interest portion of adjusted EQT Midstream Partners 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 generally accepted accounting principles (GAAP). EBITDA is a non-GAAP supplemental financial measure that the Company’s management and external users of the Company’s financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: (i) the Company’s performance versus prior periods; (ii) the Company’s operating performance as compared to other companies in its industry; (iii) the ability of the Company’s assets to generate sufficient cash flow to make distributions to its investors; (iv) the Company’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.

As used in this news release, adjusted operating cash flow attributable to EQT means net cash provided by operating activities, less changes in other assets and liabilities, adjusted to exclude the noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA. As used in this news release, adjusted EQT Midstream Partners EBITDA means EQT Midstream Partners, LP’s (EQM) net income plus EQM’s interest expense, depreciation and amortization expense, income tax expense (if applicable) and non-cash long-term compensation expense, less EQM’s equity income, other income and capital lease payments. As used in this news release, noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA means the portion of adjusted EQT Midstream Partners EBITDA attributable to the noncontrolling interest unitholders of EQM and EQT GP Holdings, LP (EQGP).

Adjusted operating cash flow attributable to EQT is not a financial measure calculated in accordance with GAAP. 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. The Company 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. 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 the Company’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.

Adjusted EQT Midstream Partners EBITDA and noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA are non-GAAP supplemental financial measures that management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess the effects of the noncontrolling interests in EQM and EQGP in relation to: (i) the Company’s operating performance as compared to other companies in its industry; (ii) the ability of the Company’s assets to generate sufficient cash flow to make distributions to its investors; (iii) the Company’s ability to incur and service debt and fund capital expenditures; and (iv) the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Adjusted EQT Midstream Partners EBITDA and noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA should not be considered as alternatives to EQM’s net income, operating income or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EQT Midstream Partners EBITDA and noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA have important limitations as analytical tools because they exclude some, but not all, items that affect EQM's net income. Additionally, because adjusted EQT Midstream Partners EBITDA and noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA may be defined differently by other companies in the Company's or EQM's industries, the definition of adjusted EQT Midstream Partners EBITDA and noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The Company is unable to provide a reconciliation of projected EBITDA, projected adjusted EQT Midstream Partners EBITDA or noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA to projected operating income, the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing and potential significance of certain income statement items. Similarly, the Company is unable to provide a reconciliation of its 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, because of uncertainties associated with projecting future net income and changes in assets and liabilities.

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.

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, Utica and other reserves; projected adjusted operating cash flow attributable to EQT; projected EBITDA, including projected EQT Midstream Partners EBITDA and projected noncontrolling interest portion of adjusted EQT Midstream Partners EBITDA; drilling plans and programs (including the number, type, feet of pay and location of wells to be drilled, number and type of drilling rigs and number of multi-pad wells); projected unit costs, projected average differential and projected midstream revenue deductions; projected production sales volume and growth rates (including liquids sales volume and growth rates); projected revenues; projected capital expenditures, capital budget, and sources of funds for capital expenditures, including asset sales (dropdowns) to EQM; the timing of, and the assets to be included in, asset sales (dropdowns) to EQM; the expected effects of allocating the revenues and expenses of the Huron gathering system to EQT Production; and expected cash on hand at the end of 2015. 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, 2014, 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 EQM is derived from publicly available information published by EQM.

Source: EQT Corporation

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


Source: Business Wire (December 7, 2015 - 6:30 AM EST)

News by QuoteMedia
www.quotemedia.com