EQT Corporation

Press star 1 again. We ask that you please limit yourself to one question and one follow-up. I would now like to turn the conference over to Cameron Hortz, Managing Director of Investor Relations and Strategy. Please go ahead.

Good morning, and thank you for joining our fourth quarter and year-end 2023 Earnings Results Conference Call. With me today are Toby Rice, President and Chief Executive Officer, and Jeremy Knope, Chief Financial Officer. In a moment, Toby and Jeremy 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. A replay of today's call will be available on our website beginning this evening. 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, the risk factors 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 also contains 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. Coming into 2023, I sat down with our leadership team, and we set our overarching corporate mission and goal for the year with two simple words, peak performance. I wanted our fourth year since the takeover of EQT to be our best one yet, and the crew certainly came through in delivering on that mission. I want to take a few moments to briefly reflect on the incredible accomplishments from this organization that we achieved over the course of 2023. On the operations front, we set multiple drilling world records and achieved our highest completion efficiency pace ever, with 2023 monthly pumping hours per crew up more than 15% year over year. Importantly, this incredible operational pace came amid a 22% improvement in our 2023 EHS intensity, which was even better than our 15% target and underscores our unwavering commitment to safety at EQT. On the financial front, despite a challenging natural gas price environment, EQT generated nearly $880 million of free cash flow in 2023, retired north of $1.1 billion of debt, and raised our base dividend by 5%. This financial performance is a clear demonstration of our advantage position at the low end of the North American natural gas cost curve and highlights that EQT is poised to thrive regardless of where we are in the commodity cycle. On the M&A front, we closed on the strategic acquisition of Tug Hill and XCL Midstream and integrated the assets at a record pace. Our team has wasted no time driving material operational performance improvement on the assets with the latest EQT operated Marcellus drilling costs coming in more than $200 per foot or nearly 55% lower than Tughill operated wells. This recent performance suggests the potential for even more upside than the $150 per foot of well cost savings we discussed last quarter. which, as a reminder, is additive to $80 million of largely infrastructure-related synergies we originally announced with the deal. On the marketing front, EQT's low-cost, peer-leading inventory depth and environmental attributes enabled us to sign the largest long-term physical supply deals ever executed in the North American natural gas market with some of the country's leading utilities. With much stronger than expected power generation growth in many regions of the United States, and natural gas providing the ideal low-carbon dispatchable complement to renewable generation, we expect gas-fired power demand will surprise to the upside over the coming decade, and EQT's unique ability to meet this demand should result in additional margin capture opportunities moving forward. We also made material progress executing on our differentiated LNG strategy, leveraging our significant Gulf Coast firm transportation capacity to sign HOAs covering 2.5 million tons per annum of LNG tolling capacity were roughly 5% of our total natural gas production. Our more integrated approach to LNG exposure, compared with peers, gives us direct connectivity to end users of our gas globally, and we have seen strong interest from prospective international buyers. While there has been some noise around LNG permitting of late, the outcome of COP28 demonstrates the world has spoken, deeming natural gas as critical in facilitating the energy transition while ensuring energy security. It is abundantly clear that nations around the world currently powered by coal desperately want and need greater access to natural gas, and ultimately political posturing will reconcile with this reality if we as a society are truly intent on achieving global climate goals. On the ESG front, we announced a first-of-its-kind public-private forestry partnership with the state of West Virginia, which will create one of the highest quality most verifiable nature-based carbon sequestration projects anywhere around the globe. We have already seen solid momentum on this project to date, and we are incrementally confident in EQT's ability to become the first energy company of meaningful scale in the world to achieve net zero scope one and two emissions. 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 team underpinned by a culture of excellence and teamwork. Turning to our reserve report, EQT's 2023 approved reserves total 27.6 TCFE, which was up 2.6 TCFE relative to 2022, largely driven by additions from the Tug Hill acquisition. Importantly, even with the SEC price deck dropping from over $6 per million BTU at year-end 2022 to $2.64 at year-end 2023, EQT's approved reserves prior to the impact of Tug Hill were slightly higher year-over-year, underscoring the economic resiliency of our world-class low-cost Appalachian Reserve Base. Within our approved undeveloped reserve category of roughly eight TCFE, we have just 417 gross locations booked or roughly three years of development, representing only 10% of our de-risk inventory of nearly 4,000 gross locations. It's also worth highlighting that we estimate an additional two TCFE of reserves not captured in our bookings associated with our non-operated position in Northeast Pennsylvania as we book limited PUDs on this asset given we only have timing visibility out three to six months. Additionally, we've taken a conservative stance with limited reserve bookings for Tug Hill's Go Forward Utica inventory in West Virginia, which should be a source of reserve upside over time. Using the year-end 2023 SEC price deck of just $2.64 per million BTU, the PV10 of our approved reserves is approximately $12 billion. Assuming recent strip pricing, this value jumps to almost $23 billion, and again, this ascribes credit to just three years or 10% of our remaining inventory. I'd also note our reserve valuation is calculated prior to the impact of our firm transportation portfolio, so the value accruing to EQT from marketing arrangements like the MVP firm sales contracts we announced last quarter are incremental to these PV10 values. We see the consistency and economic resiliency reflected in our reserve report as an important channel check for investors that highlights EQT has among the highest quality, lowest cost natural gas asset base anywhere in the world. Looking to 2024, we are initiating 2024 production guidance of 2200 to 2300 BCFE, which includes some flexibility to curtail volumes should natural gas prices remain weak. Our program contemplates running two to three rigs, three to four frack crews, and turning in line 110 to 140 net wells. As shown on slide six of our investor deck, this activity level juxtaposed against our large production base underscores the incredible capital efficiency and quality of our assets. as EQT is generating the most gross operator production per rig of any natural gas operator in the United States by a wide margin. Looking at our spending profile, we are setting a 2024 maintenance capital budget of $1.95 to $2.05 billion, including maintenance, land, and infrastructure spending. We have also tactically allocated $200 to $300 million for strategic growth projects across water infrastructure, gas gathering, and land that are opportunistic in nature and highly symbiotic with our upstream operations. Jeremy will give more details later on, but these projects generate the best risk-adjusted returns in our portfolio, de-risk our upstream execution, allow us to replenish inventory at extremely attractive costs, and facilitate the compounding of capital for shareholder value creation. At the midpoint of our maintenance capital in production guidance ranges, our implied 2024 maintenance capital efficiency equates to 89 cents per MCFE. And our unhedged maintenance NYMEX free cash flow breakeven is $2.50 to $2.60 per million BTU. With contractual gathering rate reductions, the shallowing of our base decline, improving basis from the firm sales arrangements we announced last quarter, and reductions in interest expense, our all-in NYMEX free cash flow breakeven price should be in a glide path down towards $2.30 per million BTU over the next several years. We believe this economic profile is in a class of its own relative to the rest of the industry, where we expect to see upward pressure on cost structure over this period associated with operators shifting to lower quality inventory in both the Hainesville and parts of Appalachia. This differentiation is highlighted by the fact that we project EQT will generate cumulative free cash flow of almost $9 billion over the next five years at a natural gas strip that averages approximately $3.40 per million BTU over this period. This gas price is roughly equivalent to the fully loaded corporate marginal cost of supply in the U.S. required to simply break even from a free cash flow perspective, let alone to generate returns for shareholders. Said another way, higher cost natural gas producers will at best generate no shareholder value at the current strip over the next five years, while EQT is set to generate more than 40% of our enterprise value and free cash flow over the same timeframe. This stark contrast underscores why cost structure is our north star at EQT and why we strive not to be the biggest, but to be the highest quality, most resilient company that can generate durable free cash flow, both in up cycles and in down cycles. This is the essence of sustainability and value creation in a commodity business. and we believe our shareholders are uniquely positioned to reap the rewards of EQT's unrivaled combination of scale, peer-leading low-cost inventory depth, and best-in-class emissions profile. I'll now turn the call over to Jeremy.