EQT Corporation

Ladies and gentlemen, thank you for standing by and welcome to the EQP third quarter 2020 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 the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Andrew Briggs, Director of Investor Relations. Thank you. Please go ahead, sir.

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 1-800-585-8367 with a confirmation code of 897-1226. In a moment, Toby and David will present the prepared remarks with a question and answer session to follow. An updated investor presentation is available on the investor relations portion of our website, which we may reference certain slides during this discussion. I'd like to remind you that today's call may also contain forward-looking statements. Actual results, future events could materially differ for these forward-looking statements because of the factors described in today's earnings release and in the risk factors section of our Form 10-K for the year end, 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 earnings release and our most recent investor presentation for important disclosure regarding such measures, including reconciliations of the most comparable GAAP financial measures. And with that, I'll turn it over to Toby.

Thanks, Andrew, and good morning, everyone. Today, I look forward to providing an update on the business and how we've progressed with our strategic initiatives. But first, I'd like to jump right into the positive results of the third quarter. The momentum that we experienced during the transformational first year of managing this company has continued in the third quarter, which was another impressive quarter both operationally and financially. We delivered sales volumes of 366 BCFE, which was in line with our original guidance range, despite 15 BCF that we strategically curtailed at the beginning of September and through the remainder of the quarter. On the well cost front, we continue to realize improvements in operational performance, delivering well costs of $660 per foot on our Pennsylvania Marcellus asset. Third quarter well costs were $20 per foot lower than last quarter, 10% lower than target, and 22% lower than just one year ago. This continued progression gives us increasing confidence and makes our future development plan that much more compelling as we continue to find ways to increase performance and enhance results. We continue to do more with less, and that is apparent in our third quarter CapEx spend of $248 million, which is $227 million below the same period last year and $55 million below last quarter. The efficiencies that we continue to see in both drilling and completions substantiate the CapEx improvements. With less than 20% of the year-to-date cost improvements being attributable to service cost deflation, these are truly sustainable cost reductions. On the drilling side, we've seen roughly 20% improvement in horizontal drilling speeds quarter over quarter and roughly 60% year over year, which was accomplished through the continued application of best practices executed by the same crews guided by a stable operation schedule. On the completion side, our electric track fleets are really hitting their stride, improving pumping hours and stages per month by approximately 15%, respectively quarter over quarter. In addition to our electric faculty accomplishments, our teams have continued to find ways to streamline our operations. These efforts include automating processes that were previously manual, employing new technologies to increase the reliability, efficiency, and safety of our operations, utilizing centralized operating systems, taking data that was once siloed and fragmented and turning it into easily accessible and usable data to drive better decision-making and improve performance. Put simply, we are leaving no stone unturned to find ways to improve the performance of this business. The continued outperformance has resulted in positive revisions to certain full-year 2020 guidance at the midpoint, including an increase to production of 15 BCFE and a decrease in capital expenditures of $50 million. This represents the fourth time we have reduced our 2020 capital guidance for a total of $275 million, or 20% of the original budget, all while delivering more volumes, even considering strategic curtailments. After accounting for a slight widening in expected differentials, this will drive an expected improvement of $25 million in free cash flow. As we continue our financial and operational transformation, we do so with a heightened focus on our commitment to corporate responsibility and transparency. We recently launched our revamped ESG report focused on our evolution as a company, enhanced leadership directives, our operational strategy, and the implementation of our mission, vision, and values, all aimed at becoming the operator of choice for all stakeholders and the clear ESG leader in the natural gas industry. Before I get into highlights of the report, it's important to spend a little time on the criticality of natural gas to the energy mix of the future. You will see on slide 24 of our investor presentation, EQT's operations have the second lowest emissions intensity of nearly 40 surveyed domestic and global E&P companies during the period. Our peers in Appalachia perform at similar levels. Looking specifically at gas producers, you'll see on slide 25 that of the top 10 U.S. natural gas producers, Appalachian players produce approximately 60% more gas with 70% lower emissions intensity. What excites me about this data is the differentiation of natural gas, and in particular, Appalachian natural gas. The reliability, availability, and cost benefits of natural gas are unquestionable. And we think as people start to look at the data, there will be a decoupling of natural gas from other fossil fuels as it pertains to environmental and socioeconomic benefits. Turning to our ESG report, you will see that we have provided a detailed framework on how we think about our business and how all the pieces are aligned to execute on a cohesive operational corporate and ESG strategy. Our impacts on the ESG side of things are principally an output of operating in an informed, supported, and purpose-driven manner. In our report, we highlight, among other things, the significant environmental benefits of our combo development strategy, how integrating ESG into our digital work environment improves data collection, analysis, and reporting, our commitment to operating safely while utilizing the highest standards to protect and mitigate impacts in the environment, investments made in our local communities, including over $29 million in contributions in the form of infrastructure improvements, grants, scholarships, and sponsorships, and steps we are taking to reduce greenhouse gas emissions, which have decreased 23% compared to 2018. I encourage you to review our report, which can be found on our investor relations website. Shifting gears, I would like to talk about the compelling macro natural gas setup. There are several main points that drive our multi-year bullish thesis. In the near term, supply and demand will continue to tighten as weather demand overcomes the storage overhang. Core acres within the gassy regions are continuing to be drilled up, leaving Tier 2 and Tier 3 inventory that can only be economically drilled at materially higher strip. And lastly, total U.S. rig counts and completion crews have fallen by approximately 65% since the beginning of the year. In Appalachia, there would need to be about 30% more rigs to keep production flat, and in Haynesville, that number is about 15% more rigs. In the medium term, within the industry, there was approximately $115 billion of debt due from now until 2023. which has forced producers to focus on corporate returns and fixing their balance sheets rather than growing production. In the long term, we believe there will be a sustainable and long-term global call on U.S. natural gas. We anticipate that long-term U.S. demand will increase, driven by coal and nuclear retirements, partially offset by renewable builds, and long-term global demand will increase, driven by economic development in the developing countries. The favorable macro dynamics, as well as continued execution of our operational and financial strategies, optimally positions EQT to capitalize on this setup and outperform peers. The forward curve for 21 has moved up into the $3 level, and the 22 curve is now in the low 270s. Although important indicators, this will not cause EQT to add growth in 2021, as the curve is still too low and backward-dated. We are focused on running an efficient business plan aimed at increasing NAV per share driven by efficiency gains and not growth. We believe that one of the most important drivers of value creation for our shareholders is getting our assets valued at a long-term price deck that is closer to $3 as opposed to $2.50. And looking at the strip, there is clearly a need for more discipline from EQT and all other operators to achieve this. I'd now like to pass the call over to Dave to further discuss some of our financial and strategic highlights. Thanks, Toby.