EQT Corp. (EQT) Q4 Results & 2024 Guidance - Feb 13

[dan_s]

Fourth Quarter and Recent Highlights:

Fourth quarter production of 564 Bcfe, toward the high-end of guidance driven by continued operational efficiency gains and strong well performance. < Production of 6,130,435 Mcfepd beat my forecast of 5,978,000 Mcfepd.

KEY STAT: Adjusted Operating Cash Flow of $775 million beat my forecast of $689.2 million.
Capital expenditures of $539 million, near the low-end of guidance

Cash operating expenses of $1.27 per Mcfe, near the low-end of guidance, as lease operating expense continues to outperform expectations, reflecting benefits of EQT's West Virginia water assets

Net cash provided by operating activities of $624 million; generated $236 million of free cash flow < FCF beat my forecast by more than $50 million.

Retired all outstanding convertible notes, eliminating more than $400 million of debt and simplifying capital structure

Monetized capped call associated with convertible notes, generating $93 million of cash proceeds

Priced $750 million of 10-year senior notes at 1.65% spread to comparable U.S. treasury rates; proceeds used to pay down term loan, eliminating ~$10 million of interest expense per annum

Entered into an agreement with a minority equity partner to acquire their ~34% ownership in EQT-operated gathering systems for $205 million; purchase price equates to double-digit free cash flow yield

Full Year 2023 Highlights:

Generated ~$3.2 billion of net cash provided by operating activities and $879 million of free cash flow, with NYMEX natural gas price averaging $2.74 per MMBtu for the year

Retired $1.1 billion of debt and increased base dividend by 5% < Very Good Year.

Achieved all-time high operational efficiencies, with drilling and completion pace up 6% and 16% year-over-year, respectively

Improved environmental, health and safety (EHS) intensity(3) by 22% year-over-year, outperforming corporate goal of 15% improvement

Closed on the strategic acquisitions of Tug Hill and XcL Midstream and integrated the assets at an EQT record pace; recent drilling performance suggests additional synergy upside potential

Total proved reserves of 27.6 Tcfe, up 10% year-over-year; total standardized measure of discounted future net cash flows of $9 billion at SEC pricing or $23 billion PV-10 at recent strip pricing < Over $55/share.

Low-cost, peer-leading core inventory depth and environmental attributes facilitated signing the largest long-term physical supply deals ever executed in North America, which are anticipated to improve corporate differentials by $0.15–$0.20 per Mcfe beginning in late 2027

Continued on path toward differentiated LNG strategy leveraging significant Gulf Coast firm transportation portfolio by signing non-binding heads of agreements covering 2.5 million tons per annum of LNG tolling capacity

Signed first-of-its kind forest management partnership with the State of West Virginia, supporting EQT's path to net zero by 2025

President and CEO Toby Z. Rice stated, "Coming into 2023, we set our overarching corporate mission and goal for the year with two simple words, 'Peak Performance.' I wanted our fourth year at EQT to be our best one yet, and the Qrew certainly came through in delivering on that mission."

Rice continued, "On the operations front, we set multiple drilling world records and achieved our highest completion efficiency pace ever, while simultaneously improving our EHS intensity by 22% year-over-year. This stellar execution allowed us to generate roughly $880 million of free cash flow in 2023 despite natural gas prices averaging just $2.74 per MMBtu, which speaks to our advantaged position at the low end of the North American natural gas cost curve. We also integrated the Tug Hill and XcL Midstream assets at a company record pace while driving incremental upside to synergies by leveraging our best-in-class operating model. Additionally, we signed the largest long-term physical supply deals ever executed in North America, highlighting EQT's unique ability to meet significant growth in U.S. gas-fired power demand while generating differentiated margin opportunities. This impressive list of achievements is a showcase of what is possible when you combine a world class asset base with an industry-leading, digitally-enabled operations team underpinned by a culture that deeply values trust, heart, teamwork and evolution."

[dan_s]

Great Quarter. I need to spend more time on this one and I want to listen to their conference call. Realized prices for dry gas and crude oil almost hit my forecast on the nose. Realized NGL prices came in much higher than my forecast.

The assets acquired from Tug Hill & TcL in August had a lot to do with the good Q4 results.