EQT Corporation

Good morning. Thank you for attending today's EQT Quarter 1, 2022 Quarterly Results Conference Call. My name is Amber, and I will be your moderator for today's call. All lines will be muted until the question and answer portion of today's presentation. If you would like to ask a question, please press star 1 on your telephone keypad at any time. I now have the pleasure of handing our conference over to our host, Cameron Horwitz with EQT. Cameron, please proceed.

Good morning, and thank you for joining our first quarter 2022 earnings results 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. In a moment, Toby and Dave will present their prepared remarks with a question and answer session to follow. An updated investor presentation has been posted to the investor relations portion of our website, and we will reference certain slides during today's discussion. 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 the factors described in yesterday's earnings release, in our investor presentation, in the risk factor section of our Form 10-K, 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 our most recent earnings release and investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. With that, I'll turn the call over to Toby.

Thanks, Cam, and good morning, everyone. Since our fourth quarter conference call, the dialogue around energy has been fundamentally altered. The invasion of Ukraine has accelerated an already emerging global energy crisis while also reasserting security as a foundational pillar of energy and climate policy. Even before the invasion, we were seeing the impacts of global undersupply of traditional energy sources. This manifested in high energy prices, economic rationing, and rampant inflation. Now we have crossed an even dire threshold with military conflict occurring in Europe and signs of energy insecurity emerging in the United States as well. At the same time, the world is falling behind on its emissions reduction goals. With this as a backdrop, a fundamental shift is clearly needed. One offering bold yet practical solutions that can provide energy security to the world while getting us back on track to meeting global emissions targets. Last month, we unveiled our Unleash US LNG plan to do just that. Our plan contemplates quadrupling US LNG capacity by 2030, which we estimate would reduce international CO2 emissions by an incremental 1.1 billion tons per year. To put that in context, this is the emissions reduction equivalent to electrifying every US passenger vehicle, putting solar panels on every home in America, and doubling the installed capacity of US wind power generation, all combined. Unleashing US LNG is by far the largest green initiative on the planet, is ready to deploy today, and would meaningfully bolster energy security for our allies. And without incremental US natural gas, the world is reverting to coal. In just the last 12 months, emissions associated with international coal consumption increased at a level that effectively wipes out all of the progress made by the United States in deploying wind and solar over the last 15 years. We will not be successful in addressing climate change without providing a scalable solution to international coal. That scalable solution is natural gas, and we're the ones that have it. And to achieve the largest green initiative in the world, one that will help blunt the humanitarian and inflationary impacts of our global energy insecurity all we need to do is build pipelines and more energy infrastructure no technology breakthroughs no subsidies nothing but building what we've built for decades the reaction to our plan has been extremely positive as it is targeted impactful and feasible we are seeing encouraging political signals with the body administration approving incremental energy exports to europe Supportive actions from the FERC and recognition from the likes of John Kerry on the decarbonization benefits of natural gas. The influx of support from the broader public has also been tremendous and will ultimately empower our industry to meet the energy demands of Americans while providing energy security to the world. At EQT, we are uniquely positioned to be the linchpin in putting this game plan into action. As the largest natural gas producer in the U.S., Our scale provides a material supply base with multiple decades of core high return inventory. The depth and quality of our resource gives us tremendous confidence in being able to meet growing long-term natural gas demand. Our recent investment grade credit rating upgrade highlights the differentiated strength of our balance sheet. And as the largest producer of responsibly sourced gas with line of sight to being net zero by or before 2025, we believe EQT's natural gas production is among the most coveted energy molecules in the world. We are currently in discussions with LNG end users across various geographies and are contemplating equity investment opportunities in LNG export facilities. Our firm transportation portfolio delivers over one BCF a day of production to the Gulf Coast, which will underpin the initial leg of our LNG strategy. we are pursuing a portfolio approach from the perspective of liquefaction at end-end markets. Our goal is to have our first LNG contract signed by the end of the year and believe we could see meaningful accretion associated with our energy strategy by the middle part of the decade. Turning to first quarter results, we executed upon our guidance and got off to a fast start in returning capital to shareholders since announcing our capital allocation framework in December. On the operations front, We began to realize the returns from our investment in our mixed-use water system and execution of large-scale combo development in West Virginia. Our first two pads utilizing our modern development runs came in with DNC costs nearly 20% below legacy West Virginia development. Furthermore, after nearly a decade of advocacy, West Virginia Governor Justice recently signed into law modern pooling and utilization legislation, marking a huge win for both industry and landowners in the state. The unique property laws in West Virginia have made it a challenging place to operate, oftentimes resulting in delays and planning risks. This new legislation will streamline our operations and allow for more efficient long lateral development of our nearly 300,000 core net acres. And when combined with the synergies we are realizing on the water and operational front should drive additional value creation for our shareholders over the coming years. Since announcing our shareholder return framework in December, We have repurchased $230 million of our common stock at an average price of approximately $23 per share, reducing our share count by approximately 2.5%. And we made our first $47 million quarterly fixed dividend payment. We also repaid $570 million of 2022 senior notes during the quarter, marking substantial progress towards our goal of reducing debt by $1.5 billion by year-end 23. In total, we returned $816 million during the quarter via share repurchases, dividends, and debt retirement. With the robust backdrop for natural gas prices, we are increasing our 2022 free cash flow outlook by 50% to roughly $2.35 billion at the midpoint. We believe the recent rise in natural gas forward curve is structural in nature and have positioned EQT stakeholders to meaningfully benefit. In the past quarter, We have not added any hedges, but early in this pricing run-up, we restructured our existing Q1 2023 swaps into callers with a ceiling of $10 per million BTU, providing shareholders direct exposure to the recent rally in both near and long-dated natural gas prices. Looking to 2023, despite the recent appreciation in our share price, our 2023 free cash flow yield is approximately 25% at strip pricing as natural gas prices have rallied alongside our stock. we now expect to generate roughly $17 billion of cumulative free cash flow from 2022 through 2027, representing approximately 115% of our current equity market capitalization. Beyond 2027, our 15 plus years of core long lateral inventory has also substantially increased in value due to the rally in prices and the realization by investors and policymakers of the key role that natural gas will play in providing cheap, reliable, and low carbon energy to the world for decades to come. We believe that while many operators' core inventory is being depleted, EQT will remain uniquely positioned amongst peers to continue delivering predictable, robust returns from our deep core inventory. This outlook underscores the compelling value opportunity at EQT and affords us tremendous flexibility to build upon our capital returns framework moving forward. I'll now turn the call over to Dave.