EQT - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the EQT Corporation First Quarter 2018 Earnings Conference Call.

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patrick Kane, Chief Investor Relations Officer. Thank you.

You may begin.

Patrick J. Kane

Christine. Thanks, and participating everyone, conference EQT you call. thank morning in for Corporation's Good are President Midstream; Director Officer; Porges, Officer; me VP Nate Exploration David With today Tetlow, Ashcroft, Jerry Interim Chief VP President Senior Senior Commercial and and and Production; Senior President Rob VP Relations. and Jenkins, Chief of Schlosser, Financial of Investor David and and of Blue McNally, Executive Chief Officer; period today's for available will beginning this call seven-day replay The for evening. be a the for of number The XXX-XXX-XXXX code is telephone the confirmation replay XXXXXXXX. with The our call will days also be replayed website. for seven on To ticker remind are Rice you, consolidated the EQGP Partners results of EQT Midstream Midstream EQM, Partners, in results. EQT's and a Earlier there's separate this EQGP. press EQM release morning, issued and by joint us to the at will question EQGP take a XX:XX. and call have requires at earnings last EQM which joint XX:XX today, call number is dial-in for XXX-XXX-XXXX. The that moment, a In present will Rob David remarks. Dave, their prepared and

David, Dave, to and Following answer Rob, questions. will available your these Jerry, all be Blue remarks, Nate

a the regarding www.sec.gov. to documents proxy SEC obtained website, connection a file an of any include statement few proposed securities Form S-X registration not or or the or may solicitation does logistical comments. EQM EQGP, with transaction. SEC merger, SEC's EQM-RMP by proxy statement/prospectus, to charge the any the on a offer statement/prospectus In be approval. EQM sell free will with EQT, preliminary communication the when First, a filed filed, vote that a at other The This buy an solicitation proposed and with and RMP of constitute will offer of

also about description the deemed the I'd participants and of forward-looking holdings statements. that may employees the executive direct will interest of a the proposed proposed as respect and or that their respective in by and otherwise. regarding to directors, today's include information the materials call may the like review with remind contain security in indirect and to transaction filed you they should carefully be be parties You transaction, to including solicitation proxies information officers important SEC

that also on materially of cause company's disclosures under factors for press as SEC the XXXX, now I'd measures. XX-Qs, which forward-looking find turn EQT's important differ the release like Dave the file are refer December can on with statements results morning's updated to the call non-GAAP available in ended this website. contain by comparable including actual with year factors measures, XX, these XX-K financial may call You the Form our risk could to SEC measures. any subsequent such filed the listed in and financial Today's to certain today's release and over reconciliations also press from to GAAP most Please for regarding Form Porges.

David L. Porges

disclosures the Thank all get required to as only discuss transitioned like end I happy role ago, today Approximately Executive to were pertains Pat. year The Great. able to those that we you, to that my the CEO through topic as call. retired interim have one new I'm role and you CEO. And certainly of before would Chairman. to I

board resigned by begun scheduled new replacement still we to expect to give the and separation, search replacement. for assumed and in my a know, of mid-March quarter. in to has CEO is time a the That you As the I CEO have upon place which of a role decide chance the third

let or know. any to provide, please me input Kane would have Pat you you If like

separation. you that CEO commit spending our wish Until of committed be to governance composition board, you have most provide. input to topic I I'll I also to the to hired, other about matters time on overseeing as my whole board Just this I that any next ensure the the investor receives is full board input relay and that will

And leaders. fortunate well underway. are first each upstream level, members is solid. We that process businesses results, which with can separation operations will At board are strong the see board are both midstream company. quarter The of in the units as the have the go you we and determining

board we need each should evaluating task, if are works also those determine if new what members, composition board to add towards completing to the As expertise so, that we have. and people company's

On the cases, And begun. roles various the identifying management couple each have we who of side, are would searches company. a at external key fill in

assure a the both We that transition transition of for be needed nature identified have agreements companies. smooth also might service operational to

can imagine, have functioning entity in of the any separation or personnel to fully lack of way preparation prefer cannot other the systems TSAs. transition the or at agreements, you one get of while timing, not As certain allow the we service hence, would we to

that finance On that announced in have appear midstream which of Rob am craft streamlining started Rob your I four SEC the view, a and to to short, agreements as to terms pleased we prepare to transactions team over Rob. call shareholders. be were the aspects we the speak the my would with a support on able his I separation. I that turn continued with to side, required was In filings, you all for the minute. thank and will accomplishment. And In for value-accretive the are entities. all schedule noteworthy of that,

Robert J. McNally

morning Thanks, everyone. good Dave, and

purchase morning, in XX% the brief I transaction. System will streamlining releases. quarter of Strike $XXX Force EQM a in in million in the appeared Gulfport sale reviewing Gathering This units. Rice transaction assets the like and billion on in this Before to acquired approximately Ohio for Energy release transaction press for cash. $X.X and EQGP items results, EQT's first that ownership to update a would EQM RMP a cash includes This in EQM, Energy's common gathering also separate morning's give announced news several EQM the

and value the proceeds sale $XXX units. which gathering immediately the in based IDRs distributable of forecast flows EQM in merger an at of billion, company's and EBITDA. of to for about transaction RMP XXXX of XXXX Second, from to bring transactions a EQM and The to a flow this EQGP assumed and to $XXX ratio debt. of of forecast the EQGP third, $XXX $XXX EQGP approximately common the And are XXXX. target both to per Ohio exchange debt E&P million sale approximately the $X.X accretive EQGP's unit. X.XXXX, in RMP's approximately including cash Relative million transaction provided EQM unit-for-unit million implies expect in have cash X.X% a of closer RMP leverage approximately million on net the of cash the NewCo EQT, we assets and for

X% cash be flows. of period, same the to taxes cash we During expect these X between and

the related filed we're separation made the line July. separation and we've on by mid-May remain that the will track merger in announced to in progress that EQM for Form with our separation, pleased XX. and file the we time anticipate EQM-RMP S-X to September Regarding intends be XX the with of a the

to those this on full are sell million. results, morning quarter the X.XX sale to for assets Because moving announced process X.XX Tcfe a the Now quarterly guidance of we to Permian asset of our Tcfe. year ran to adjusting this the we during production $XX and our noncore divestiture,

and first Plays an for related recorded Permian the with proved unproved associated was the of in and pipeline of attributable of XXXX. in the quarter. noncore items, impairment we impairment Adjusting this the first the quarter billion million EQT Additionally, $XXX.X properties approximately compared of to XXXX. $X.X Adjusted and million for quarter EQT in Huron share and to charge assets diluted per earnings $X.XX first cash operating to adjusted quarter for $XXX.X compared announced other $X.XX

$XXX was result the EQT million million increased GP attributable Midstream of EQT LLC. at of EQT reminder, Midstream in are $XX.X XXXX first The Holdings in a Partners, EQM inclusion non-controlling to quarter of million net XXXX. a of of Partners income into consolidated and primarily first RMP compared As EQT and Force quarter results. and to the Strike recorded interest Rice the income Corporation's Midstream $XX.X increase

expenses were first $XXX differential. in were billion The higher impairments to the quarter we range first XX% move fell guidance per on price actual differential was were to than quarter stated Rice of volumes first we the When gave the lower-than-forecasted DD&A, for first last increased of in realized Mcfe, merger volumes The its first with the $XXX at than Now of Bcfe. XXX amortization sales due production lower the operating in a below higher Rice of price, the the of derivatives, $X.X the totaled quarter primarily were coldest million first XX% year-over-year lease the due our higher a and and decrease for associated Production, quarter forward to within $X.XX. operating X% in EQT including segment quarter year-over-year. to highest. XXXX Operating point Average XXXX, transmission, quarter than results. Total the Starting winter of first processing primarily million higher $X.XX guidance with the with XXX average or differential expenses consistent billion excluding was better to the and Rice was revenues XX% but came of the the to cash-settled production of curve the XXXX XXXX all quarter year. of resulting it settlements $X.X Bcfe due for increases to $XX.X gathering, merger. million XXX the $X.XX average was range guidance compared positive of asset and production quarter merger.

cost XXXX first RMP quarter million briefly EQM $XX to XXXX. first to income like than Water. volumes. cash of conclude, XXXX Importantly, Operating $X than XX% the were reported $XX Transmission quarter quarter cash million than reported million. And million, first Gathering the $X.X of results. Mcfe for first and Water while costs. were on of first income on first Operating was for of $XX.X income and quarter EQM higher were moving higher of first for Gathering the was to of revenues quarter the of To increased $X.X $XX million EQM Gathering primarily for per discuss $X were flow our Operating $XX XXXX. SG&A $XX were higher due year. income Gathering lower million, quarter higher the million quarter liquidity RMP $XX higher I'd quarter higher operating million expenses than Midstream last RMP million capacity to than million first the the of due lower than lower gathering revenues the moving Gathering primarily an XXXX. EQM position. expenses contracted Operating XXXX. and an than operating to $XX.X million, RMP And million, operating

XXXX XX, credit cash million $XXX approximately adjusted facility. XXXX and $X.XX to of borrowings and credit outstanding flow of operating had EQT $X.X from of March in the $X.X quarter million We of and for on fund cash the balance EQT's includes anticipate the We XXXX, to to under hand, billion our that, sheet billion with EQM, which our With liquidity on cash letters the of no forecasted $XXX With at will EQT, approximately the As billion and $X.X $X.XX billion to our turn excluding EQT's over to of fully further expect approximately We we RMP. I'll forecast operating add David. adjusted plan closed position. flow billion. expenditure EQGP cash currently billion EQM, balance EQGP of forecasted sheet, drop interest $XXX $X.X cash call improving million capital RMP.

David E. Schlosser

good Thanks, morning Rob, everyone. and

start sales volume. a XXXX on providing by me quick update Let

sequential XXX in QX of followed Pennsylvania a a year are to volume this expect the for Rob XXX comes was QX Bcfe. guiding end midstream online As guidance new infrastructure in at moderate the summer. increase We growth by larger remainder still at QX the mentioned, high of and as Bcfe, increase quarterly at XXX for

Moving operations. on to

we second drilling to the improve engineering well fully Pittsburgh. our of improve technical Downtown During have teams, and efficiency. located implemented idea project year, consistent from our group The behind in team and Plaza, our developing amongst offices XXXX, to results our operations last idea been at in an this thought the horizontal half drilling this the now process. was The drilling provide EQT collaboration more has real-time manage our in tested

and directional is at drilling, or engineering geosteering operations real-time Pittsburgh. drilling done of our center, RTOC our in All now

significant formation feet per and showing seen its target from in the already to RTOC, of we have lateral XX% Since have early implementation, is in we implementing increased in Although stages of day, concept our percent XX%. drilled XX% drilled this a increase returns.

footage XX-hour assembly have bottom We world also a run. EQT for records record set drilled in hole

will our gas the gains in this have lateral real-time Harvison and Bcfe Washington and lastly, little X.X want The In addition, in XX,XXX example in type our PA. PA. color lateral was date well construction X.X County, completed pilot our of model May. well RTOC a logistics Based the that been length the X,XXX the XX,XXX Washington This I centers laterals. we scheduled well April feet currently and water and performance feet These in new standard set of days, XX producing the HXX centers record This a produced implemented is completion of on result real-time XX, EQT's to a for Marcellus drilled longest stages. cost Bcfe operations it (XX:XX) at year. real-time XXX relates over have located feet to of lateral has provide HXX by we per on completed processes. in a are efficiency ultra-long our length of for field centers will streamlining also of a control for on And well with hauling believe has operating Haywood on completions, for online we will lateral Currently, and and drilling, to well is curve as these and longest fracked for for producing success later has lateral. reductions great manufacturing County, is

the Pat. results now Our ultimate the estimate XX,XXX to expectation for Based and on Bcfe. completion our recovery over this close length in to will of of is technical I XX production well lateral limit is the Marcellus current drilling, an approximately feet. turn date, call to

Patrick J. Kane

portion Christine, you call. can comments of questions? call the This the you, Thank for open please completes the David.

Operator

session. Thank you. question-and-answer a We'll be now conducting

Our Singer with Sachs. Goldman of first comes from question the line your with proceed Brian question. Please

Brian Singer

Good you. morning. Thank

David E. Schlosser

morning. Good

Robert J. McNally

morning, Good Brian.

Brian Singer

you'd Rice the Maybe announced I'll that start regards with with to regards transaction. synergies to the

we So the us noted and could run through definitely be progressing that's the but how next you're G&A over that the and looking you milestones looking that on for should is just side, key maybe for year.

Robert J. McNally

is Rob. Yeah. Sure, Brian. This

G&A it's side, straightforward. pretty the on So,

the numbers G&A reported, and the $XXX we exceed the We million. what of was at look XX to worth think going merger had years by savings next to be $XXX maybe that that as can You prior estimated million. that now G&A would value as are we're number the of worth present much

gone lateral and lengths was that thought X,XXX as that's proxy see the So lengths. And well. drilling for foot what in we Washington probably XX,XXX. proxy the capital lateral we savings approximately improve best when and And could is Greene completion, a transaction Counties announced on from to the we

feet that. Now our beyond current XXXX estimates are that improve we'll be will and at for XX,XXX it

to the And hundred so reasonable a amount, several that going dollars. capital we expect we're $X.X of by synergies million billion exceed PV

those that So we're deliver and synergies. track I'd on exceed to well say

Brian Singer

then the what on you structure? be And shares which just would any just lengths you. would that follow comment on Marcellus. made part actually in the to And Thank acquisition follow-up us EQT types on acreage if of view EQM One in you keeping able taking the just XX,XXX-foot to those sustainability of refresh Great. two the small is of number restructuring, limit technical the Can need wells the then of questions. as spending with I related lateral is a the up to the that think portfolio? my you regards you on increase ongoing EQT EQM the on, long-term could be is

Robert J. McNally

Yeah.

be take interest. what that of under first question assets, plan EQT own or longer of by then be that no XX. your shares, any that's we to at spun units, out would midstream will as EQM and So is all NewCo the September SpinCo. midstream on our that EQGP point, will will the And EQM our And and

the given blocking of we've we're spending previously for guidance still a We year terms between acreage, protecting acreage going to on stands. and spend the and somewhere that million $XXX that $XXX think and In up leases. fill-ins million

Brian Singer

you. Thank

Robert J. McNally

Sure.

Operator

Our of Please next Jayaram proceed your line with from comes the question Arun question. JPMorgan. with

Arun Jayaram

Yes.

bit one on just choose thinking is about did just maybe this my step could a elaborate you guess, I point, contemplating down you've And streamlining if of simplification And the a road? that you GP/LP two? this this are Why structure? at transactions follow-up, morning. could you wondering little Just articulated the some be

Robert J. McNally

Yeah.

of underneath Arun, have to it when with the will spin be the still IDR the structure. So, EQGP we next going this NewCo, and NewCo, place. We'll have is still step spin and EQM in

that team. So what and the on opinion NewCo in NewCo I so going you up my decision something our simplification it But think it's is a that of to long-term the putting ultimate decision structure happens potential and the minds give with emphasize management will any and it's probably would IDR directors I not viable and be on start market the to that board again, this simplification. that management of we'll timing to. I Board be would

Arun Jayaram

Perfect.

David L. Porges

say, to Rob Back Dave. completely is had This agree. I what to

in what about of Rob's and the IDRs, talked is. that's going be one that NewCo and timing see a to and think team I management board priorities first to earlier with our comments of he's shelf life

Arun Jayaram

follow-up. Great, just great. And to

laterals, guys Just your about does these just of are it I spacing continue as think the you technical and as thinking on you push was how about you assumptions of foot, you're XX,XXX that using lateral change as limits between completions beyond to especially lengths, you between spacing about the wells? wondering push types

David E. Schlosser

is going think because This time is assumptions, over pointing. where general, changes we're leaning I but spacing increasing David. technology in just our longer I don't that's spacing towards think, the

becoming And over time the think and our think see we ultimately which probably fracturing increasing, sort them. think efficient cost. boundaries in more spacing we will you'll technique, of lower I our I know we're with development result of

cost development or per Mcf. it do we'd why that's So

thinking So on on that our will that. be forefront

Arun Jayaram

bit a you or to little that from progressing. is wells around color going Are just how a that? little bit four give around more just you of five us per Can section thinking color

David E. Schlosser

we spacing XXX wish right sections would XXX-foot we now. here, that I the had say have range we don't unfortunately. in I but them to are

you'll X,XXX-foot see the in range industry think I and going us the time. over more

Arun Jayaram

Great. That's lot. helpful. Thanks a

Operator

Our with question. of Please Morgan from next your Venker comes Drew the Stanley. line with proceed question

Drew Venker

guys. morning, Good

cash you can of free to inflection just of the material any spin? maybe Just hoping that and talk post changes pretty through cash free flow use priorities potential of timing flow

Robert J. McNally

Yes.

prior So I think still that stands. guidance our

But the generate will flow little it expect we of low-teens We growth a five that. rate next can years. to to with $X.X over maybe free to billion have, add billion clarity a cash $X.X just

about you next production production maintenance the keep CapEx at over $X.X our level, to the on level, XXXX cost years, If think about flat billion. average this would five

And to leaves return billion EBITDA significant cash to so flow in leaves or when shareholders that reduce I cash cash about $X that debt. you grow being flow. mean, billion production range, to $X.X and the think significant to

So bit of you little that. on to give just color a

Drew Venker

Rob, include would Thanks, the and does acreage you ongoing spend that have?

Robert J. McNally

Yes.

Drew Venker

Could for number. just on is That refresh use flow? us you a good cash of actually Okay. free pretty priorities

Robert J. McNally

going both mean, in and the the I EQM. immediate EQT with balance realign the future, sheets so Well separation, of to we're

of based projections, is teens does, guys upper clearly, subject think six past growth And in the and over months moderated move that, from then does, have have that what transportation I a now the does projections out We seen but gas to on teens. to pricing cash market that low priority. the shareholders you the returning low XXs to But what is the industry. what

of have sheets. growth be used moderate some it's think proceeds of realign So cash a transactions the from to returning to shareholders balance these streamlining the once going to I and we mix

Drew Venker

Okay. follow-up that, And just Rob. on one

David E. Schlosser

going capital it's Any against cetera, Everything return is to the of to viewed returning going always against standard. be et be bias of to to is always that the shareholders. Drew, type the shareholders. to possibility giving, else viewed money growth,

Drew Venker

Okay. That's clear. very

go to be I there debt be comment any any recoursed and just you go to would last One follow-up about Do the sheets. aligning Is now recoursed the debt think, to midstream? to the that's to for there's EQM. EQM? transferred Thanks. the currently about, You debt guys will think to RMP Okay. talked on one, additional that balance parent the the potential potential over

Robert J. McNally

will Well, no. is a RMP we take debt out. revolver The that

it become will EQM but So just recoursed EQM, won't that to out. take

about EQT recourse We $X.X There be maturities, drop down the XXXX. to are the taking become we EQT used up in are pay relatively EQT do some billion at EQM, in revolver. that to will cash near-term at have and will but not transaction, bonds some that

EQM's the funds EQT so some line we EQT down effectively, put additional and both to which two EQM, to debt. EQT both for EQM four moving in of so will cash X.X us in more well. with grade billion below businesses will will that somewhere and and profile very we use debt pay at over think will range, towards targets, of investment at fits three $X that But move times times. to leave comfortably And And leverage times which that well level their flow I was

Drew Venker

you. That's very Okay. all clear, Thank guys.

Robert J. McNally

Drew. thanks, Okay,

Operator

Our line the Please Holt. question. comes of Tudor, your next from with Pickering, proceed question Sameer Panjwani with

Sameer Panjwani

morning. on drop-down. Hey, guys. the Quick question Good

going I It of like, is through near EBITDA the kind term think million quickly you that of million. to looks closer $XXX previously implied $XXX guys numbers had about talked EBITDA.

what's So provide color some difference can driving there? the you on

Robert J. McNally

Yes.

number gave So merger. we that $XXX of about the the that guidance ago I the that at or year think a was Rice time million

towards of two. can't million a $XXX if XXXX number, The good XXXX remember is next bigger. $XXX I for And pushing but on $XXX you're to XXXX. one million $XXX months number the XX was in the then it million was number million or million, $XXX was so is a And it the XXXX.

steep, that's we valuation So the profile that is growth negotiate asset. are but for the to able that pretty allowed what

Sameer Panjwani

left assets guys should of? that? Perfect. be monetizing so like the then really assets looks on And you any is only And Huron the thoughts remaining Any other your the sold level, Permian upstream non-core at I Okay. aware assets. non-core think we

Robert J. McNally

of acquisitions. going not as M&A a or on to do don't any or just matter we're Sameer, divestitures comment We course it.

Sameer Panjwani

thank you. Okay,

Operator

with line of with your the Howard Weil. question. Holly question Our Please from proceed next Stewart comes Scotia

Holly Barrett Stewart

Dave. Thank you. Welcome back,

David L. Porges

gingerly. says She

Holly Barrett Stewart

macro a micro. and a Maybe just

like in we amount Is XXXX. added how on structurally swaps or a the hedge of First book basis? you've looks maybe go-forward a there hedges, should about kind on anything of here it fair think the

Robert J. McNally

book I our light compared think, where the where of proximity we hedge XXXX on given to we would historically XXXX to we were are. be fairly

into just course. anything more than So read it. Don't normal it's that

Holly Barrett Stewart

the Okay, strip, any backwardation we're a maybe you returning you growth seems outlined growth cash lower that kind there mean of kind to then great. through rate years I Is level? And strip that in it even shareholders. sort forever. talk lower then just and have of out like rate of moderate sort think with there Is – the lower moderating thought the in of teen think further, which guys I about as

Robert J. McNally

about It's will something and certainly about think ongoing. that a here to board consideration. internally be we the talk obviously It's and

Holly Barrett Stewart

that's Thank Okay, you, guys. clear.

Robert J. McNally

thanks, Okay, Holly.

Operator

you. Thank

have to would further to management floor for turn I like questions We back now closing this no time. comments. at the over

Patrick J. Kane

Thank all you, for thank and you Christine, participating.

Operator

Ladies conclude and gentlemen, this today's does teleconference.

wonderful your You have And a time. day. Thank your for may at lines you disconnect participation. this

EQT (EQT) 26 Apr 182018 Q1 Earnings call transcript