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:
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2015(3)
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2016(4)
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2017(4)
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NYMEX Swaps
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Total Volume (Bcfe)
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62
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236
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101
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Average Price per Mcf (NYMEX)(1)
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$
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4.14
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$
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3.88
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$
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3.68
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Fixed Price Physical Sales(2)
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Total Volume (Bcfe)
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13
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12
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2
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Average Price per Mcf (NYMEX)(1)
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$
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3.89
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$
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3.31
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$
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3.33
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Collars
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Total Volume (Bcfe)
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9
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–
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7
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Average Floor Price per Mcf (NYMEX)(1)
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$
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4.47
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$
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0.00
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$
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3.15
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Average Cap Price per Mcf (NYMEX)(1)
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$
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7.19
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$
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0.00
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$
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4.03
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(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 $150 million from EQT’s interest in EQT GP
Holdings, LP (EQGP). See the Non-GAAP Disclosures section for
information regarding the non-GAAP financial measures included in this
news release.
PRODUCTION
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Total production sales volume (Bcfe)
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700 – 720
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NGL & oil volume (Mbbls)
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11,000 – 11,500
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Marcellus / Utica Rigs
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5
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Top-hole rigs
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1-2
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Unit Cost ($ / Mcfe)
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LOE, excluding production taxes
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$
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0.09 – 0.11
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Production taxes
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$
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0.07 – 0.09
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SG&A
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$
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0.16 – 0.18
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DD&A
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$
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1.07 – 1.10
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Average differential ($ / Mcfe)
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$
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(0.20) – (0.30)
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Midstream revenue deductions ($ / Mcfe)
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Gathering to EQT Midstream
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$
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0.66 – 0.70
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Transmission to EQT Midstream
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$
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0.18 – 0.22
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Third-party gathering and transmission
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$
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0.49 – 0.53
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MIDSTREAM
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Unit Cost ($ / Mcfe)
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Gathering and transmission
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$
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0.16 – 0.18
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SG&A
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$
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0.12 – 0.14
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FINANCIAL
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Cash-on-hand at year-end 2015 ($MM), excluding EQM
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$
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1,200 – 1,250
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EBITDA ($MM)
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EQM adjusted EBITDA
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$
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530 – 550
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Huron gathering
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35 – 40
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Other EQT Midstream
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40 – 45
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Total Consolidated Midstream
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$
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605 – 635
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Total Production EBITDA
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600 – 620
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Total EBITDA
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$
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1,205 – 1,255
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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
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