EQT Corp (EQT) Update - Jan 6
Posted: Wed Jan 06, 2021 10:49 am
As you read this keep in mind that proved reserves are based on very conservative SEC guidelines.
> Prices used for net asset values are commodity prices over the last twelve months, which are much lower than the forward strip prices.
> Proved Undeveloped reserves only includes wells that EQT plans to drill in the next five years. < This is why the Proved Undeveloped reserves for large-caps like EQT, AR and RRC never seem to go down; as one year is dropped, another year of development wells are added.
> Over the last two years, EQT has taken over $5 Billion of non-cash impairment charges (lowering book value). Despite a much better outlook for natural gas and NGL prices today, those impairment charges cannot be reversed. Lower book value of their oil & gas fixed assets does reduce DD&A expense going forward.
> Also note that a big increase in Proved Reserves lowers the DD&A rate going forward, which increases reported net income.
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EQT Reports 2020 Proved Reserves Of 19.8 Tcfe And Provides Update On 2021 Hedge Position
PITTSBURGH, Jan. 5, 2021 /PRNewswire/ -- EQT Corporation (NYSE: EQT) today reported year-end 2020 total proved reserves of 19.8 Tcfe, an increase of 2.3 Tcfe or 13% compared to year-end 2019. The increase was driven by the efficiencies realized from the execution of EQT's combo-development strategy, and reserve additions associated with EQT's acquisition of Chevron's upstream Appalachian assets, which closed on November 30, 2020 (the Chevron Acquisition).
EQT actively hedged throughout 2020 and now sits with approximately 80% of its expected 2021 production hedged, an increase of approximately 60% as compared to the hedge position at the beginning of 2020.
Year-End Proved Reserves:
Proved developed reserves increased by 1.2 Tcfe year-over-year, or 10%, to 13.6 Tcfe. This increase was driven by 1.2 Tcfe of reserve additions associated with the Chevron Acquisition.
During 2020, EQT continued its digital transformation, which included undergoing a reliable technology study of its reserves. In conjunction with an independent consultant, EQT performed this study to document the technologies in place that provide reasonable certainty of the future performance and economics of EQT's wells. A combination of statistical methods and geologic evaluations were employed, resulting in an increase to EQT's proved reserves area. The outcome of the study provides a high degree of qualitative and quantitative confidence in EQT's premier reserve base.
Proved undeveloped reserves increased by 1.1 Tcfe year-over-year, or 23%, to 6.2 Tcfe, primarily as a result of reserve enhancements driven by a more efficient and optimized future development cadence, with 0.2 Tcfe of the increase attributable to the Chevron Acquisition. These reserves include 279 wells planned to be developed over the next five years, in accordance with US Securities and Exchange Commission (SEC) Regulation S-X Rule 4-10(a). EQT has an additional 13 Tcfe of reserves that meet the definition of proved reserves, except they are planned to be developed beyond five years and are therefore not included in the current estimate of proved reserves.
Over the past 18 months, EQT has realized improvements in well performance driven by a combo-development focused operations schedule and the application of standardized well designs. However, approximately 60% of the year-end 2020 proved developed reserve conversions were subject to sub optimal legacy management development, impacting the expected ultimate recovery (EUR) applied to the proved undeveloped reserves. Over the next 5 years, EQT expects approximately 80% of the proved undeveloped locations are set for highly efficient combo-development. As these reserves are developed, the application of the improving EUR's is expected to enhance the remaining proved undeveloped reserve portfolio.
Future development costs for proved undeveloped reserves are estimated to be approximately $2.26 billion, or $0.37 per Mcfe, a 29% improvement as compared to 2019.
Year-end 2020 reserves are based on a $1.99 per MMBtu natural gas price (NYMEX), which is $0.59 lower than the price used to estimate the 2019 reserves. Prices are determined in accordance with the SEC requirement to use the unweighted arithmetic average of the first-day-of-the-month price for the preceding twelve months without giving effect to derivative transactions.
Netherland Sewell and Associates, Inc. an independent consulting firm hired by management, reviewed 100% of the total net natural gas, NGLs and oil proved reserves attributable to EQT's interests as of December 31, 2020.
Hedging Update (as of January 1, 2021)
During the fourth quarter of 2020, EQT continued executing on its hedge strategy to protect against downside commodity risk in 2021. As a result, EQT currently has approximately 80% of its expected 2021 production hedged, assuming maintenance level production, pro forma for the Chevron Acquisition. This represents an increase of approximately 15% as compared to the third-quarter 2020 hedge position.
EQT has also entered into derivative instruments to hedge basis. EQT may use other contractual agreements from time to time to implement its commodity hedging strategy.
About EQT Corporation
EQT Corporation is a leading independent natural gas production company with operations focused in the cores of the Marcellus and Utica Shales in the Appalachian Basin. We are dedicated to responsibly developing our world-class asset base and being the operator of choice for our stakeholders. By leveraging a culture that prioritizes operational efficiency, technology and sustainability, we seek to continuously improve the way we produce environmentally responsible, reliable and low-cost energy. We have a longstanding commitment to the safety of our employees, contractors, and communities, and to the reduction of our overall environmental footprint. Our values are evident in the way we operate and in how we interact each day – trust, teamwork, heart, and evolution are at the center of all we do.
EQT Management speaks to investors from time to time and the analyst presentation for these discussions, which is updated periodically, is available via EQT's investor relations website at https://ir.eqt.com.
> Prices used for net asset values are commodity prices over the last twelve months, which are much lower than the forward strip prices.
> Proved Undeveloped reserves only includes wells that EQT plans to drill in the next five years. < This is why the Proved Undeveloped reserves for large-caps like EQT, AR and RRC never seem to go down; as one year is dropped, another year of development wells are added.
> Over the last two years, EQT has taken over $5 Billion of non-cash impairment charges (lowering book value). Despite a much better outlook for natural gas and NGL prices today, those impairment charges cannot be reversed. Lower book value of their oil & gas fixed assets does reduce DD&A expense going forward.
> Also note that a big increase in Proved Reserves lowers the DD&A rate going forward, which increases reported net income.
---------------------------------------------
EQT Reports 2020 Proved Reserves Of 19.8 Tcfe And Provides Update On 2021 Hedge Position
PITTSBURGH, Jan. 5, 2021 /PRNewswire/ -- EQT Corporation (NYSE: EQT) today reported year-end 2020 total proved reserves of 19.8 Tcfe, an increase of 2.3 Tcfe or 13% compared to year-end 2019. The increase was driven by the efficiencies realized from the execution of EQT's combo-development strategy, and reserve additions associated with EQT's acquisition of Chevron's upstream Appalachian assets, which closed on November 30, 2020 (the Chevron Acquisition).
EQT actively hedged throughout 2020 and now sits with approximately 80% of its expected 2021 production hedged, an increase of approximately 60% as compared to the hedge position at the beginning of 2020.
Year-End Proved Reserves:
Proved developed reserves increased by 1.2 Tcfe year-over-year, or 10%, to 13.6 Tcfe. This increase was driven by 1.2 Tcfe of reserve additions associated with the Chevron Acquisition.
During 2020, EQT continued its digital transformation, which included undergoing a reliable technology study of its reserves. In conjunction with an independent consultant, EQT performed this study to document the technologies in place that provide reasonable certainty of the future performance and economics of EQT's wells. A combination of statistical methods and geologic evaluations were employed, resulting in an increase to EQT's proved reserves area. The outcome of the study provides a high degree of qualitative and quantitative confidence in EQT's premier reserve base.
Proved undeveloped reserves increased by 1.1 Tcfe year-over-year, or 23%, to 6.2 Tcfe, primarily as a result of reserve enhancements driven by a more efficient and optimized future development cadence, with 0.2 Tcfe of the increase attributable to the Chevron Acquisition. These reserves include 279 wells planned to be developed over the next five years, in accordance with US Securities and Exchange Commission (SEC) Regulation S-X Rule 4-10(a). EQT has an additional 13 Tcfe of reserves that meet the definition of proved reserves, except they are planned to be developed beyond five years and are therefore not included in the current estimate of proved reserves.
Over the past 18 months, EQT has realized improvements in well performance driven by a combo-development focused operations schedule and the application of standardized well designs. However, approximately 60% of the year-end 2020 proved developed reserve conversions were subject to sub optimal legacy management development, impacting the expected ultimate recovery (EUR) applied to the proved undeveloped reserves. Over the next 5 years, EQT expects approximately 80% of the proved undeveloped locations are set for highly efficient combo-development. As these reserves are developed, the application of the improving EUR's is expected to enhance the remaining proved undeveloped reserve portfolio.
Future development costs for proved undeveloped reserves are estimated to be approximately $2.26 billion, or $0.37 per Mcfe, a 29% improvement as compared to 2019.
Year-end 2020 reserves are based on a $1.99 per MMBtu natural gas price (NYMEX), which is $0.59 lower than the price used to estimate the 2019 reserves. Prices are determined in accordance with the SEC requirement to use the unweighted arithmetic average of the first-day-of-the-month price for the preceding twelve months without giving effect to derivative transactions.
Netherland Sewell and Associates, Inc. an independent consulting firm hired by management, reviewed 100% of the total net natural gas, NGLs and oil proved reserves attributable to EQT's interests as of December 31, 2020.
Hedging Update (as of January 1, 2021)
During the fourth quarter of 2020, EQT continued executing on its hedge strategy to protect against downside commodity risk in 2021. As a result, EQT currently has approximately 80% of its expected 2021 production hedged, assuming maintenance level production, pro forma for the Chevron Acquisition. This represents an increase of approximately 15% as compared to the third-quarter 2020 hedge position.
EQT has also entered into derivative instruments to hedge basis. EQT may use other contractual agreements from time to time to implement its commodity hedging strategy.
About EQT Corporation
EQT Corporation is a leading independent natural gas production company with operations focused in the cores of the Marcellus and Utica Shales in the Appalachian Basin. We are dedicated to responsibly developing our world-class asset base and being the operator of choice for our stakeholders. By leveraging a culture that prioritizes operational efficiency, technology and sustainability, we seek to continuously improve the way we produce environmentally responsible, reliable and low-cost energy. We have a longstanding commitment to the safety of our employees, contractors, and communities, and to the reduction of our overall environmental footprint. Our values are evident in the way we operate and in how we interact each day – trust, teamwork, heart, and evolution are at the center of all we do.
EQT Management speaks to investors from time to time and the analyst presentation for these discussions, which is updated periodically, is available via EQT's investor relations website at https://ir.eqt.com.