EQT Corp. (EQT) Q1 Results - Apr 25

[dan_s]

First Quarter 2024 and Recent Highlights:

> Adjusted Net Income of $365 million beat my forecast of $153 million. < due to much higher realized ngas prices than my forecast and lower LOE. Net differential was only -$0.17/mcf compared to my forecast of -$0.50/mcf. Increasing their realized gas price: EQT got a $0.13/mcf BTU uplift and $0.86/mcf cash settlement on their hedges. Net of all this, EQT's realized ngas price in Q1 was $3.08/mcf compared to my forecast of $2.59/mcf. EQT obviously has an outstanding marketing team that was able to get their ngas to higher paying markets. AR and RRC also have outstanding marketing teams.
> Adjusted Operating Cash Flow of $951 million beat my forecast of $684 million.
> Free Cash Flow from Operations of $402 million.
> Net cash provided by operating activities of $1,156 million; generated $402 million of free cash flow(1) and exited the quarter with approximately $650 million of cash on the balance sheet
> Total sales volume of 534 Bcfe, towards the high-end of guidance adjusted for curtailments, reflecting continued operational efficiency gains and strong well performance < Q1 production of 5,868,100 Mcfepd beat my forecast of 5,681,000 Mcfepd.
> Lease operating expenses of $0.10 per Mcfe, below the low-end of guidance despite curtailments, driven by water infrastructure investment benefits
> Total debt and net debt down from $5.8 billion and $5.7 billion at year-end 2023 to $5.5 billion and $4.9 billion, respectively, at quarter-end; $500 million of cash proceeds to be received from the non-operated asset sale to Equinor set to further strengthen balance sheet
> Signed second non-binding Heads of Agreement with Texas LNG to upsize liquefaction tolling capacity from 0.5 million tonnes per annum to 2 million tonnes per annum beginning in 2028(2)
> Announced transformative acquisition of Equitrans Midstream Corporation (Equitrans Midstream), which will create a premier vertically integrated natural gas business that is well positioned to be a globally competitive American energy leader
> Recent MVP in-service filing with FERC significantly de-risks path to Equitrans Midstream deal consummation and EQT's ability to serve growing power generation demand in the Southeast region
> Announced agreement with Equinor to sell 40% of EQT's non-operated natural gas assets in Northeast Pennsylvania for total value of more than $1.1 billion, inclusive of expected synergies

President and CEO Toby Z. Rice stated, "The strong operational momentum we achieved last year has carried over into 2024, with our drilling team continuing to perform at exceptional levels, and our completions team again setting a new company record for pumping hours in the month of March. We also saw LOE come in below our forecast, as the benefits of our strategic water infrastructure investments are becoming increasingly tangible to shareholders. These factors contributed to free cash flow generation coming in above internal expectations and we exited the quarter in a strong financial position with nearly $650 million of cash on the balance sheet."

Rice continued, "We also announced the transformational acquisition of Equitrans Midstream during the first quarter. The combination of EQT and Equitrans Midstream will create America's first large-scale integrated natural gas business, with assets uniquely positioned to create a well-to-watt solution that will power growing baseload demand associated with the data center and artificial intelligence booms that are burgeoning at the doorstep of our asset base. The global power market is at a key inflection point as we embark on a transformational journey into the age of artificial intelligence and EQT's clean, reliable and affordable natural gas will be foundational to meeting growing power needs both domestically and abroad."

I will be updating my forecast/valuation model this morning.

[dan_s]

2024 Outlook
The Company updated its expectation of 2024 total sales volume to 2,100 – 2,200 Bcfe, which assumes 1 Bcf/d of operated production curtailments through May and embeds future curtailment optionality dependent on market conditions. < Midpoint is 100 Bcfe below previous guidance.
The Company reiterates its maintenance capital expenditures of $1,950 – $2,050 million in 2024 and strategic growth capital expenditures, which target opportunistic, high-return water, midstream and other infrastructure and land opportunities, are expected to total $200 – $300 million in 2024.

During the second quarter of 2024, the Company plans to turn-in-line (TIL) 28 – 42 net wells. Total sales volume in the second quarter of 2024 is expected to be 455 – 505 Bcfe, which assumes 1 Bcf/d of operated production curtailments through May and expected non-operated production curtailments and TIL deferrals.

All guidance items exclude the impact of the pending Equitrans Midstream Acquisition and non-operated asset transaction with Equinor.

The all stock merger wth Equitran Midstream (ETRN) is expected to close late in 2024. At 12-31-2023 ETRN had ~ 433,505,000 shares outstanding. ETRN shares will convert to 0.3504 shares of EQT. Total of 151,900,152 shares of EQT.