EQT Files Investor Presentation and Reiterates Commitment to Generate Sustainable Free Cash Flow
Operational Update Demonstrates Continued Successful Execution of New
Management Team’s Strategic Plan
Implemented Cost Saving Actions that Reduced Annual Cash Costs by
Approximately $150 Million
EQT Corporation (NYSE: EQT) today announced that it has released an
investor presentation outlining its ongoing strategic plan to drive cost
reductions across the business and generate sustainable free cash flow
growth.
Highlights of the presentation, which is available at ir.eqt.com,
include:
-
EQT has substantially reconstituted its Board of Directors and
management team
-
Refreshed Board: EQT appointed four new independent directors in
November of 2018. The Board established an Operating and Capital
Efficiency Committee in December; Committee members have strong
reputations as efficient operators and substantial financial
expertise.
-
New Team: EQT’s management team includes a new Chief Executive
Officer, Chief Financial Officer, General Counsel and Head of IR.
Chief Operating Officer Gary Gould will assume his role in April.
-
EQT is committed to realizing efficiencies and driving down costs
-
Operational Achievements: EQT is achieving the operational targets
set out for the first quarter of 2019. The Company has made
significant progress across drilling and completion operations.
Highlights include approximately 90% of wells drilled over 12,000
feet on-time and on-budget and a 35% improvement in stages per
crew per month. Stabilized operations and sustained focus on
operational efficiencies are expected to continue driving
improvements throughout 2019.
-
Cost reductions: EQT has already implemented cost saving actions
that reduced annual cash costs by approximately $150 million. This
includes approximately $50 million of annual cost savings under
EQT’s “Target 10% Initiative,” which aims to reduce cash costs by
10%. Continued successful execution of this initiative is expected
to yield cost savings of $800 million over the next five years,
$250 million of which has already been identified.
-
EQT’s team is demonstrating its ability to achieve and exceed
financial objectives
-
Fourth Quarter 2018: EQT delivered approximately $134 million of
adjusted free cash flow (a non-GAAP measure) in the fourth quarter
of 2018, above prior guidance. These strong results underscore
EQT’s focus on enhancing operational efficiency to drive
accelerated cash flow growth and shareholder value creation.
-
Building on Strong Performance: EQT’s strong operational
performance underpins the Company’s confidence in its financial
forecast. EQT anticipates generating adjusted free cash flow (a
non-GAAP measure) of approximately $300 to $400 million in 2019
and $2.9 billion over the next five years, up from the $2.7
billion announced in January – with the Company’s ongoing Target
10% Initiative providing incremental upside.
-
First Quarter 2019 In-Line with Expectations: EQT expects first
quarter 2019 sales volumes to come in at the high-end of the
guidance range of 360 to 380 Bcfe while anticipating first quarter
2019 capital expenditures in-line with expectations. This supports
the ongoing operational and capital efficiency efforts implemented
by senior management.
“The new team at EQT is energized by our significant progress and the
opportunities ahead of us, and we are working with urgency to unlock the
enormous potential of the new EQT,” said Rob McNally, EQT’s president
and chief executive officer. “We are turning EQT into a free cash flow
machine and remain on track to deliver another quarter of strong
financial and operational performance. The operating efficiencies we
have implemented across EQT are allowing us to do more with less,
including increasing lateral lengths across our program and increasing
production. We are confident we will achieve our targets for 2019 and
beyond. With world-class assets, a sound plan and a strong team
committed to operational excellence, we look forward to building on our
progress and delivering significant value to shareholders.”
NON-GAAP DISCLOSURES
Adjusted Free Cash Flow
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 operations (a non-GAAP supplemental
financial measure defined herein), plus interest expense attributable to
discontinued operations and cash distributions from discontinued
operations. Adjusted free cash flow is defined as adjusted operating
cash flow less accrual-based capital expenditures attributable to
continuing operations. Adjusted operating cash flow and adjusted free
cash flow are non-GAAP supplemental financial measures that EQT's
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 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 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 has not provided projected net cash provided by operating activities
or reconciliations of projected adjusted operating 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. EQT is unable to project net cash provided by
operating activities for any future period 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 months in advance.
Furthermore, EQT does not provide guidance with respect to its average
realized price, among other items, that impact reconciling items between
net cash provided by operating activities and adjusted operating cash
flow and adjusted free cash flow, as applicable. 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
reconciliations of projected adjusted operating cash flow and adjusted
free cash flow to projected net cash provided by operating activities,
without unreasonable effort.
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 with GAAP, as
derived from the Statements of Consolidated Cash Flows to included in
EQT’s report on Form 10-K for the year ended December 31, 2018.
$ in thousands
|
|
Three Months Ended December 31, 2018
|
|
Year Ended December 31, 2018
|
Net cash provided by operating activities
|
|
$
|
530,866
|
|
|
$
|
2,976,256
|
|
Add back / (deduct) changes in other assets and liabilities
|
|
|
261,216
|
|
|
|
119,495
|
|
Operating cash flow
|
|
|
792,082
|
|
|
|
3,095,751
|
|
(Deduct) / add back:
|
|
|
|
|
EBITDA attributable to discontinued operations (a)
|
|
|
(118,934
|
)
|
|
|
(988,291
|
)
|
Interest expense attributable to discontinued operations
|
|
|
19,452
|
|
|
|
88,300
|
|
Cash distributions from discontinued operations (b)
|
|
|
—
|
|
|
|
280,401
|
|
Adjusted operating cash flow
|
|
|
692,600
|
|
|
|
2,476,161
|
|
(Deduct):
|
|
|
|
|
Capital expenditures attributable to continuing operations
|
|
|
(558,351
|
)
|
|
|
(2,739,103
|
)
|
Adjusted free cash flow
|
|
$
|
134,249
|
|
|
$
|
(262,942
|
)
|
(a)
|
|
As a result of the separation of Equitrans Midstream Corporation,
the results of operations of Equitrans Midstream Corporation are
presented as discontinued operations in EQT's Statements of
Consolidated Operations. EBITDA attributable to discontinued
operations is a non-GAAP supplemental financial measure reconciled
herein.
|
(b)
|
|
Cash distributions from discontinued operations represents the cash
distributions payable from EQM Midstream Partners, LP, EQGP
Holdings, LP and RM Partners LP (EQT's former midstream affiliates)
to EQT for the year ended December 31, 2018.
|
EBITDA Attributable to Discontinued Operations
EBITDA attributable to discontinued operations is a non-GAAP
supplemental financial measure defined as net income from discontinued
operations, plus interest expense, income tax expense, depreciation,
amortization and impairment of goodwill attributable to discontinued
operations for the three months and years ended December 31, 2018.
The table below reconciles EBITDA attributable to discontinued
operations with (loss) income from discontinued operations, net of tax,
the most comparable financial measure calculated in accordance with
GAAP, as reported in the Statements of Consolidated Operations included
in EQT’s report on Form 10-K for the year ended December 31, 2018.
$ in thousands
|
|
Three Months Ended December 31, 2018
|
|
Year Ended December 31, 2018
|
(Loss) income from discontinued operations, net of tax
|
|
$
|
(163,911
|
)
|
|
$
|
373,762
|
Add back / (deduct):
|
|
|
|
|
Interest expense
|
|
|
19,425
|
|
|
|
88,300
|
Income tax (benefit) expense
|
|
|
(31,575
|
)
|
|
|
61,643
|
Depreciation
|
|
|
22,243
|
|
|
|
160,701
|
Amortization of intangible assets
|
|
|
4,847
|
|
|
|
36,007
|
Impairment of goodwill
|
|
|
267,878
|
|
|
|
267,878
|
EBITDA attributable to discontinued operations
|
|
$
|
118,934
|
|
|
$
|
988,291
|
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.
Cautionary Statements
This news release contains 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 projected sales volumes; projected
reductions in expenses, capital costs and well costs; 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; and projected adjusted free cash
flow. 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, taking into account all information currently available
to the Company. 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, 2018, as updated by any subsequent Form 10-Qs,
and those set forth in the other documents the Company files from time
to time with the SEC. 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, except as
required by law.
Important Information
EQT Corporation (the Company) intends to file a proxy statement and
associated GOLD proxy card with the Securities and Exchange Commission
(the SEC) in connection with the solicitation of proxies for the
Company’s 2019 Annual Meeting of Shareholders (the 2019 Annual Meeting).
Details concerning the nominees of the Company’s Board of Directors for
election at the 2019 Annual Meeting will be included in the proxy
statement. BEFORE MAKING ANY VOTING DECISION, INVESTORS AND SHAREHOLDERS
OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH OR
FURNISHED TO THE SEC, INCLUDING THE COMPANY’S DEFINITIVE PROXY STATEMENT
AND ANY SUPPLEMENTS THERETO, IF AND WHEN THEY BECOME AVAILABLE BECAUSE
THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and shareholders can
obtain a copy of the relevant documents filed by the Company with the
SEC, including the definitive proxy statement, when it becomes
available, free of charge by visiting the SEC’s website, www.sec.gov.
Investors and shareholders can also obtain, without charge, a copy of
the definitive proxy statement, when available, and other relevant filed
documents by directing a request to Blake McLean, Senior Vice President,
Investor Relations and Strategy at EQT, at BMcLean@eqt.com,
by calling the Company’s proxy solicitor, Innisfree M&A Incorporated,
toll-free, at 877-687-1866, or from the Company’s website at https://ir.eqt.com/sec-filings.
Participants in the Solicitation
The Company, its directors and certain of its executive officers will be
deemed participants in the solicitation of proxies from shareholders in
respect of the 2019 Annual Meeting. Information regarding the names of
the Company’s directors and executive officers and their respective
interests in the Company by security holdings or otherwise is set forth
in the Company’s Current Report on Form 8-K filed on March 7, 2019, the
Company’s Annual Report on Form 10-K for the fiscal year ended December
31, 2018, filed with the SEC on February 14, 2019, the Company’s Current
Reports on Form 8-K filed on November 13, 2018, October 25, 2018
(Accession No. 0001104659-18-063798), October 25, 2018 (Accession No.
0001104659-18-063732), September 4, 2018, and August 9, 2018 and the
Company’s definitive proxy statement for the 2018 Annual Meeting of
Shareholders, filed with the SEC on April 27, 2018. To the extent
holdings of such participants in the Company’s securities have changed
since the amounts described in (or are not set forth in) the proxy
statement for the 2018 Annual Meeting of Shareholders, such changes (or
initial ownership information and subsequent changes) have been
reflected on Initial Statements of Beneficial Ownership on Form 3 or
Statements of Change in Ownership on Form 4 filed with the SEC. These
documents can be obtained free of charge from the sources indicated
above. Additional information regarding the interests of these
participants in any proxy solicitation and a description of their direct
and indirect interests, by security holdings or otherwise, will also be
included in any proxy statement and other relevant materials to be filed
with the SEC, if and when they become available.
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