EQT Corporation

Ladies and gentlemen, thank you for standing by and welcome to today's EQT Q1 quarterly results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this time, you will need to press star 1 on your telephone. If you require further assistance, please press star 0. I'd like to hand the conference call over to Andrew Brees, Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining today's conference call. With me today are Toby Rice, President and Chief Executive Officer, and David Connie, Chief Financial Officer. The replay for today's call will be available on our website for a seven-day period beginning this evening. The telephone number for the replay is 1-800-585-7000. 8367 with a confirmation code of 2066546. In a moment, Toby and David will provide the prepared remarks with a question and answer session to follow. During these prepared remarks, Toby and David will reference certain slides that have been published in a new investor presentation, which is available on the investor relations portion of our website. I'd like to remind you that today's call may contain forward-looking statements. Actual results and future events could materially differ from these forward-looking statements because of factors described in today's earnings release and in the risk factor section of our Form 10-K for the year ended December 31, 2019, and in subsequent filings we make with the SEC. We do not undertake any duty to update any forward-looking statements. Today's call may also contain certain non-GAAP financial measures. Please refer to this morning's earning release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. And with that, I'll turn it over to Toby.

Thanks, Andrew, and good morning, everyone. Today I will give a brief review of the quarter and provide an update on the business. I will then pass it today to review the details of the quarter and talk about the recent actions we have taken to improve the financial standing of this business. Afterwards, we will open up the call for Q&A. This management team, since being elected, has been unrelenting in our quest to deliver on campaign promises. Our operational results validate the promises that we made to our shareholders and prove our thesis that a well-planned business, combined with leading technology, creates a differentiated, durable, and sustainable business. The equity and debt markets have taken notice. Since the beginning of the year, we have accessed the capital markets twice. Once in January, with our $1.75 billion senior note offering, and again in April, with our $500 million convertible debt deal. Both offerings strengthened our strategic flexibility, de-risked our near-term maturities, and were met with overwhelming market participation. Additionally, we have seen significant strengthening in both our equity and debt performance supporting these strategic actions. ETT is in a unique position to capitalize on the improving natural gas macro, as the vast majority of our production is natural gas, and less than 5% of our production is tied to deteriorating liquids and oil prices. Even more so, our acreage sits in the southwestern core of the Marcellus and has over 15 years of inventory. Our financial and operational results over the last several quarters have proven that our approach to developing this world-class asset is working, and this company is well on its way to becoming the clear operator of choice. Moving forward, we will continue to push our technological boundaries and be at the forefront of innovation to drive incremental efficiencies and create value for our shareholders. This commitment is reflected in our first quarter results. Our acute focus on cost reduction, schedule optimization well-designed, and operational uptime drove our strong performance during the period. We were able to deliver volumes well above the high end of our guidance range for less capital and developed our Pennsylvania Marcellus asset at a well cost of $745 per lateral foot, an accomplishment that is approaching our target of $730 per lateral foot faster than anticipated. Our operational costs are trending down, and we will continue to focus on driving these down throughout the year. EQT and its employees continue to work hard to safely generate value during the COVID-19 pandemic. As exhibited by this quarter's results, our business has been able to thrive as we seamlessly transitioned all of our office personnel to a remote work environment. This success is principally a result of our digital work environment that we implemented during our 100-day plan, coupled with the heart, dedication, and teamwork of our employees. EQT remains committed to our safety culture. We have had regular conversations with state and local officials, and the safety of all of our employees and contractors have been our primary focus. We have gone beyond the minimum safety standards in our response and have intensified our focus on data collection and technology to create an insight that allows us to contact, trace employees and contractor partners that enter our active sites. This insight has allowed us to contact hundreds of contractors and employees shortly after learning of potential exposure cases and provide them with the names of all individuals to be monitored. The greatest risk to operators like EQT is the potential for increased exposure as a result of missed contacts and response delays, and our contact tracing technology is just one example of how we are looking at managing the impact of this pandemic differently. To our employees in the field, our contracted partners, our peers, and the healthcare and frontline responders, we thank you for your continued dedication during these times. We are working passionately to support the communities in which we operate, including recently donating $360,000 to local community funds. will keep doing our part to make EQT and its community as safe as possible. The energy industry has also been impacted by deteriorating oil prices as a result of unprecedented demand destruction due to the COVID-19 pandemic. While oil prices sit at historic lows and have forced reductions to rig counts and frack crews, well shut-ins, slashing of capital budgets and production, and bankruptcies, EQT has not only been resilient, but has been effectuating positive change while other EMPs are challenged. While we are just one quarter into the year, we are trending at the high end of our production guidance and the low end of our capital and operating expense guidance, a standing that presents us with the ability to make strategic decisions on the remainder of our 2020 program as we continue to monitor the improving macro setup in 2021. While we believe there is upside to our plan, we have maintained our previous 2020 guidance and intend to update that guidance as well as provide more commentary on our 2021 program as we move throughout the year. On a macro front, we continue to see weakness in demand impacting 2020 prices and expect prices to strengthen in 2021 and beyond. For 2020, demand has declined between 4 to 6 BCF per day with weakened power, industrial, and RESCOM consumption. Furthermore, LNG exports are facing more and more cancellations as the ARB to export gas has gone negative for the next three months. On the supply side, we are now beginning to see the impact of declining oil and liquids prices reducing associated gas output and building condensate and liquids inventory, resulting in associated gas supply being shut in. The estimates for the supply impact range from 3 to 8 BCF a day, and this can balance the market fairly quickly and sets up for a strong fourth quarter 2020 in calendar year 21 and beyond. In addition, the last several years of declining natural gas prices have caused natural gas rates to decline over 50%. from 200 back in January to currently under 90 today. As a result, near-term natural gas supply response will be very delayed until balance sheets are repaired. The challenge will be trying to balance the timing of demand recovery and to anticipate the new normal for demand. We can see prices having the potential to spike in certain peak demand periods that could result in some demand destruction or fuel switching. The 2014 and 2018 winter periods are somewhat test cases for how gas could be rationed for the highest and best use. We believe the forward curve is underestimating the move in prices, and this is especially noticeable in the 2022 and 2023 curve. As the largest natural gas producer in the country, EQT is doing its part with a disciplined approach to capital allocation, focusing on maximizing free cash flow versus production growth, despite a rising natural gas price environment. Now, I'll turn it over to David County to discuss some of our financial accomplishments, dig into the first quarter results a little more closely, and then discuss our balance sheet management strategy.