EQT Reports Fourth Quarter and Full Year 2023 Results and Provides 2024 Guidance

PITTSBURGH, Feb. 13, 2024 /PRNewswire/ -- EQT Corporation (NYSE: EQT) today announced financial and operational results for the fourth quarter and full year 2023 as well as financial and operational guidance for 2024.

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
• 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⁽¹⁾
• 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^(1,2)

Full Year 2023 Highlights:

• Generated ~$3.2 billion of net cash provided by operating activities and $879 million of free cash flow,⁽¹⁾ 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%
• 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⁽¹⁾ at recent strip pricing
• 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⁽⁴⁾
• Signed first-of-its kind forest management partnership with the State of West Virginia, supporting EQT's path to net zero⁽⁵⁾ 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⁽¹⁾ 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."

Fourth Quarter 2023 Financial and Operational Performance

Full Year 2023 Financial and Operational Performance

Per Unit Operating Costs
The following table presents certain of the Company's production-related operating costs on a per unit basis.

Gathering expense decreased on a per Mcfe basis for the three months ended December 31, 2023 compared to the same period in 2022 due primarily to the impact of the gathering assets acquired in the Company's acquisition of Tug Hill and XcL Midstream (the Tug Hill and XcL Midstream Acquisition), which are wholly owned by the Company and, therefore, reduce the Company's gathering cost structure.

Gathering expense decreased on a per Mcfe basis for 2023 compared to 2022 due primarily to lower gathering rates on certain contracts indexed to price as well as the impact of the gathering assets acquired in the Tug Hill and XcL Midstream Acquisition.

Transmission expense increased on a per Mcfe basis for 2023 compared to 2022 due primarily to additional capacity acquired, partly offset by increased credits received from the Texas Eastern Transmission Pipeline.

Processing expense increased on a per Mcfe basis for 2023 compared to 2022 due primarily to processing expenses for the liquids-rich assets acquired in the Tug Hill and XcL Midstream Acquisition as well as inflation of third-party-contracted processing rates.

Production taxes decreased on a per Mcfe basis for 2023 compared to 2022 due to lower West Virginia severance taxes due to lower TETCO M2 price and lower Pennsylvania impact fees due to lower NYMEX price, partly offset by higher West Virginia property taxes due to assets acquired in the Tug Hill and XcL Midstream Acquisition and higher rates.

Liquidity

As of December 31, 2023, the Company had no revolving credit facility borrowings and $15 million of letters of credit outstanding under its $2.5 billion revolving credit facility. Total liquidity as of December 31, 2023 was ~$2.6 billion.

As of December 31, 2023, total debt and net debt⁽¹⁾ were $5.8 billion and $5.7 billion, respectively, compared to $5.7 billion and $4.2 billion, respectively, as of December 31, 2022.

Proved Reserves

The Company reported 2023 total proved reserves of 27.6 Tcfe, an increase of 2,594 Bcfe, or 10%, compared to 2022 due to extensions, discoveries and other additions and acquisitions from the Tug Hill and XcL Midstream Acquisition, partly offset by production and revisions to previous estimates. Proved undeveloped reserves increased by 550 Bcfe, or 7%, compared to 2022.

The Marcellus Shale comprises 91% of the Company's total proved developed reserves, 98% of the Company's total proved undeveloped reserves and 93% of the Company's total proved reserves.

The following table presents the Company's reserves, standardized measure of discounted future net cash flow (the Standardized Measure) and PV-10 as compared to five-year strip pricing sensitivity.

Netherland, Sewell & 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 as of December 31, 2023.

2024 Outlook
In 2024, the Company expects total sales volume of 2,200 – 2,300 Bcfe. The Company expects maintenance capital expenditures to total $1,950 – $2,050 million in 2024. The Company also plans to spend $200 – $300 million on strategic growth capital expenditures, which targets opportunistic, high-return water, midstream and other infrastructure and land opportunities. During 2024, the Company plans to turn-in-line (TIL) 110 – 140 net wells, including 22 – 36 net wells expected to TIL in the first quarter of 2024. Total sales volume in the first quarter of 2024 is expected to be 525 – 575 Bcfe, which includes the impact of 10 – 15 Bcfe of lower sales volume due to non-operated midstream constraints. Inclusive of the Company's advantaged hedge position, the Company estimates a 2024 NYMEX Henry Hub free cash flow breakeven price of ~$2.20 per MMBtu.^(1,2)

2024 Guidance^(a)

Fourth Quarter and Full Year 2023 Earnings Webcast Information
The Company's conference call with securities analysts begins at 10:00 a.m. ET on Wednesday February 14, 2024 and will be broadcast live via webcast. An accompanying presentation is available on the Company's investor relations website, www.ir.eqt.com, under "Events & Presentations." To access the live audio webcast, visit the Company's investor relations website at ir.eqt.com. A replay will be archived and available for one year in the same location after the conclusion of the live event.

Hedging (as of February 9, 2024)
The following table summarizes the approximate volume and prices of the Company's NYMEX hedge positions. The difference between the fixed price and NYMEX price is included in average differential presented in the Company's price reconciliation.

The Company has also entered into transactions to hedge basis. The Company may use other contractual agreements from time to time to implement its commodity hedging strategy.

Non-GAAP Disclosures

Adjusted Net Income Attributable to EQT and Adjusted Earnings per Diluted Share (Adjusted EPS)
Adjusted net income attributable to EQT is defined as net income attributable to EQT Corporation, excluding loss (gain) on sale/exchange of long-lived assets, impairments, the revenue impact of changes in the fair value of derivative instruments prior to settlement and certain other items that impact comparability between periods. Adjusted EPS is defined as adjusted net income attributable to EQT divided by diluted weighted average common shares outstanding. Adjusted net income attributable to EQT and adjusted EPS are non-GAAP supplemental financial measures used by the Company's management to evaluate period-over-period earnings trends. The Company's management believes that these measures provide useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted net income attributable to EQT and adjusted EPS to evaluate earnings trends because the measures reflect only the impact of settled derivative contracts; thus, the measures exclude the often-volatile revenue impact of changes in the fair value of derivative instruments prior to settlement. These measures also exclude other items that affect the comparability of results or that are not indicative of trends in the ongoing business. Adjusted net income attributable to EQT and adjusted EPS should not be considered as alternatives to net income attributable to EQT Corporation or diluted earnings per share presented in accordance with GAAP.

The table below reconciles adjusted net income attributable to EQT and adjusted EPS with net income attributable to EQT Corporation and diluted earnings per share, respectively, the most comparable financial measures calculated in accordance with GAAP, each as derived from the Statements of Condensed Consolidated Operations to be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Adjusted EBITDA 
Adjusted EBITDA is defined as net income, excluding interest expense, income tax expense (benefit), depreciation and depletion, loss (gain) on sale/exchange of long-lived assets, impairments, the revenue impact of changes in the fair value of derivative instruments prior to settlement and certain other items that impact comparability between periods. Adjusted EBITDA is a non-GAAP supplemental financial measure used by the Company's management to evaluate period-over-period earnings trends. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted EBITDA to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts; thus, the measure excludes the often-volatile revenue impact of changes in the fair value of derivative instruments prior to settlement. The measure also excludes other items that affect the comparability of results or that are not indicative of trends in the ongoing business. Adjusted EBITDA should not be considered as an alternative to net income presented in accordance with GAAP.

The table below reconciles adjusted EBITDA with net income, the most comparable financial measure as calculated in accordance with GAAP, as reported in the Statements of Condensed Consolidated Operations to be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The Company has not provided projected net income or a reconciliation of projected adjusted EBITDA to projected net income, the most comparable financial measure calculated in accordance with GAAP. Net income includes the impact of depreciation and depletion expense, income tax expense (benefit), the revenue impact of changes in the projected fair value of derivative instruments prior to settlement and certain other items that impact comparability between periods and the tax effect of such items, which may be significant and difficult to project with a reasonable degree of accuracy. Therefore, projected net income, and a reconciliation of projected adjusted EBITDA to projected net income, are not available without unreasonable effort.

Adjusted Operating Cash Flow, Free Cash Flow and Free Cash Flow Yield
Adjusted operating cash flow is defined as net cash provided by operating activities less changes in other assets and liabilities. Free cash flow is defined as adjusted operating cash flow less accrual-based capital expenditures, excluding capital expenditures attributable to noncontrolling interests. Free cash flow yield is defined as free cash flow divided by market capitalization. Adjusted operating cash flow, free cash flow and free cash flow yield are non-GAAP supplemental financial measures used by the Company's management to assess liquidity, including the Company's ability to generate cash flow in excess of its capital requirements and return cash to shareholders. The Company's management believes that these measures provide useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Adjusted operating cash flow, free cash flow and free cash flow yield should not be considered as alternatives to net cash provided by operating activities or any other measure of liquidity presented in accordance with GAAP.

The table below reconciles adjusted operating cash flow and 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 Condensed Consolidated Cash Flows to be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The Company has not provided projected net cash provided by operating activities or reconciliations of projected adjusted operating cash flow, free cash flow and free cash flow yield to projected net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP. The Company 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. The Company is unable to project these timing differences with any reasonable degree of accuracy without unreasonable efforts such as predicting the timing of its payments and its customers' payments, with accuracy to a specific day, months in advance. Furthermore, the Company 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, free cash flow and free cash flow yield, as applicable. Natural gas prices are volatile and out of the Company's control, and the timing of transactions and the income tax effects of future transactions and other items are difficult to accurately predict. Therefore, the Company is unable to provide projected net cash provided by operating activities, or the related reconciliations of projected adjusted operating cash flow, free cash flow and free cash flow yield to projected net cash provided by operating activities, without unreasonable effort.

Adjusted EBITDA to Free Cash Flow Reconciliation
The table below reconciles adjusted EBITDA to free cash flow.

Adjusted Operating Revenues
Adjusted operating revenues is defined as total operating revenues, less the revenue impact of changes in the fair value of derivative instruments prior to settlement and net marketing services and other revenues. Adjusted operating revenues (also referred to as total natural gas and liquids sales, including cash settled derivatives) is a non-GAAP supplemental financial measure used by the Company's management to evaluate period-over-period earnings trends. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted operating revenues to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts; thus, the measure excludes the often-volatile revenue impact of changes in the fair value of derivative instruments prior to settlement. The measure also excludes net marketing services and other revenues because it is unrelated to the revenue for the Company's natural gas and liquids production. Adjusted operating revenues should not be considered as an alternative to total operating revenues presented in accordance with GAAP.

The table below reconciles adjusted operating revenues to total operating revenues, the most comparable financial measure calculated in accordance with GAAP, as reported in the Statements of Condensed Consolidated Operations to be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Net Debt and Leverage
Net debt is defined as total debt less cash and cash equivalents. Total debt includes the Company's current portion of debt, revolving credit facility borrowings, term loan facility borrowings, senior notes and note payable to EQM Midstream Partners, LP. Leverage is defined as net debt divided by adjusted EBITDA (a non-GAAP supplemental financial measure defined above). Net debt is a non-GAAP supplemental financial measure used by the Company's management to evaluate leverage since the Company could choose to use its cash and cash equivalents to retire debt. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Net debt should not be considered as an alternative to total debt presented in accordance with GAAP.

The table below reconciles net debt with total debt, the most comparable financial measure calculated in accordance with GAAP, as derived from the Statements of Condensed Consolidated Balance Sheets to be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

The Company has not provided a reconciliation of projected net debt to projected total debt, the most comparable financial measure calculated in accordance with GAAP. The Company is unable to project total debt for any future period because total debt is dependent on the timing of cash receipts and disbursements that may not relate to the periods in which the operating activities occurred. The Company is unable to project these timing differences with any reasonable degree of accuracy and therefore cannot reasonably determine the timing and payment of revolving credit facility borrowings or other components of total debt without unreasonable effort. Furthermore, the Company does not provide guidance with respect to its average realized price, among other items that impact reconciling items between certain of the projected total debt and projected net debt, as applicable. Natural gas prices are volatile and out of the Company's control, and the timing of transactions and the distinction between cash on hand as compared to revolving credit facility borrowings are too difficult to accurately predict. Therefore, the Company is unable to provide a reconciliation of projected net debt to projected total debt, without unreasonable effort.

PV-10
PV-10 is derived from the Standardized Measure, which is the most directly comparable financial measure computed using GAAP. PV-10 differs from the Standardized Measure because it does not include the effects of income taxes on future net revenues. The Company's management believes the presentation of PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to proved reserves held by companies without regard to the specific income tax characteristics of such entities and is a useful measure of evaluating the relative monetary significance of the Company's oil and natural gas properties. Investors may utilize PV-10 as a basis for comparing the relative size and value of the Company's proved reserves to other companies. PV-10 should not be considered as a substitute for, or more meaningful than, the Standardized Measure as determined in accordance with GAAP. Neither PV-10 nor the Standardized Measure represents an estimate of the fair market value of the Company's oil and natural gas properties.

The table below reconciles PV-10 to the Standardized Measure, the most comparable financial measure calculated in accordance with GAAP, as derived from the footnotes to be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Investor Contact
Cameron Horwitz
Managing Director, Investor Relations & Strategy
412.395.2555
[email protected]

About EQT Corporation
EQT Corporation is a leading independent natural gas production company with operations focused 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.

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 EQT Corporation and its subsidiaries (collectively, the Company), including guidance regarding the Company's strategy to develop its reserves; drilling plans and programs (including the number and type of drilling rigs and the number of frac crews to be utilized by the Company, the projected amount of wells to be turned-in-line and the timing thereof); projected natural gas prices, basis and average differential; the impact of commodity prices on the Company's business; total resource potential; projected production and sales volumes, including liquified natural gas (LNG) volumes and sales; projected well costs and unit costs; the Company's ability to successfully implement and execute its operational, organizational, technological and environmental, social and governance (ESG) initiatives, including the Company's emissions reduction goals, and the Company's ability to achieve the anticipated results of such initiatives; potential acquisitions or other strategic transactions, including the timing and final terms of the Company's proposed acquisition of additional ownership interests in its operated gathering systems, if at all; projected synergies from the Tug Hill and XcL Midstream Acquisition and the timing thereof; the amount and timing of any redemptions, repayments or repurchases of the Company's common stock, outstanding debt securities or other debt instruments; the Company's ability to reduce its debt and the timing of such reductions, if any; projected dividends, if any; projected free cash flow, adjusted operating cash flow, and adjusted EBITDA; liquidity and financing requirements, including funding sources and availability; the Company's ability to maintain or improve its credit ratings, leverage levels and financial profile, and the timing of achieving such improvements, if at all; the Company's hedging strategy and projected margin posting obligations; the Company's tax position and projected effective tax rate; and the expected impact of changes in laws.

The forward-looking statements included in this news release 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 known by 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. These risks and uncertainties include, but are not limited to, volatility of commodity prices; the costs and results of drilling and operations; uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future; the assumptions underlying production forecasts; the quality of technical data; the Company's ability to appropriately allocate capital and other resources among its strategic opportunities; access to and cost of capital, including as a result of rising interest rates, inflation and other economic uncertainties; the Company's hedging and other financial contracts; inherent hazards and risks normally incidental to drilling for, producing, transporting and storing natural gas, NGLs and oil; cybersecurity risks and acts of sabotage; availability and cost of drilling rigs, completion services, equipment, supplies, personnel, oilfield services and sand and water required to execute the Company's exploration and development plans, including as a result of supply chain and inflationary pressures; risks associated with operating primarily in the Appalachian Basin and obtaining a substantial amount of the Company's midstream services from Equitrans Midstream Corporation; the ability to obtain environmental and other permits and the timing thereof; government regulation or action, including regulations pertaining to methane and other greenhouse gas emissions; negative public perception of the fossil fuels industry; increased consumer demand for alternatives to natural gas; environmental and weather risks, including the possible impacts of climate change; and disruptions to the Company's business due to acquisitions, divestitures and other strategic transactions. These and other risks are described under the "Risk Factors" section and elsewhere in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 to be filed with the SEC and in 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, except as required by law, the Company does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

SOURCE EQT Corporation (EQT-IR)

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