Q3 2024 Earnings Summary
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Fourth Quarter Production | Q4 2024 | no prior guidance | 555–605 Bcfe | no prior guidance |
Fourth Quarter Differential | Q4 2024 | no prior guidance | $0.50–$0.60 per Mcf | no prior guidance |
Fourth Quarter Operating Expense | Q4 2024 | $0.75–$0.85 per Mcfe | Midpoint lowered by $0.05 per Mcfe ($0.70–$0.80) | lowered |
Capital Expenditure (CapEx) | Q4 2024 | no prior guidance | Increased by $50M | no prior guidance |
2024 Production | FY 2024 | no prior guidance | Tracking above 2,200–2,300 Bcfe | no prior guidance |
2025 Sales Volumes | FY 2025 | no prior guidance | 2,100 Bcfe | no prior guidance |
Free Cash Flow at $2.75 gas | 2025–2029 | $9B | $8B | lowered |
Free Cash Flow at $3.50 gas | 2025–2029 | no prior guidance | $14.5B | no prior guidance |
Free Cash Flow at $5 gas | 2025–2029 | no prior guidance | $25B | no prior guidance |
Hedging | FY 2025 | no prior guidance (previous was only for 1H 2025 ) | 60% hedged at $3.25 floor, upside to $5.50 in Q4 2025 | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Long-Term Debt | Q3 2024 | 5–7 billion USD | 13.39 billion USD | Missed |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
Equitrans acquisition synergies | In Q2, identified $175 million of upside synergies, with compression and water integration exceeding top-end assumptions. Q1 emphasized $0.50 per Mcfe cost improvement and $0.08 upside potential, no mention in Q4. | Already realized $145 million in annualized cost savings, over half of the $250 million base synergy target. Achieved these within three months; seeing faster synergy capture and potential upside. | Synergy capture accelerating; sentiment remains bullish. |
Asset sales and deleveraging | Q2 focused on marketing non-op Northeast PA assets to domestic/international buyers and minority equity sale in regulated assets. Q1 highlighted cash-oriented sales (partly Equinor deal) and target to reach debt goals by 2025; Q4 reiterated a $2 billion deleveraging target. | Sold non-op assets for $1.25 billion, accelerated regulated asset sale timeline to end of 2024; hedged 60% of 2025 production to "bulletproof" deleveraging. | Consistent progress with enhanced confidence in deleveraging. |
Production strategy and curtailments | Q2 curtailed 1 Bcf/day, but still exceeded production guidance; Q1 curtailed up to 1 Bcf/day due to low prices; Q4 signaled further flexibility if prices dropped below breakeven. | Employed a tactical curtailment strategy, toggling up to 1 Bcf/day off and on to optimize pricing; ended Q3 at full capacity. | Recurring practice, with more bullish short-term sentiment as curtailments fully returned. |
Natural gas price outlook and volatility | Q2 saw price swings from $1.60 to $3.00 and a focus on hedging for balance sheet protection. Q1 predicted prices remaining low into summer before an October inflection; Q4 foresaw a fat-tailed distribution of outcomes. | Expect increased volatility with lower lows/higher highs, storage constraints potentially widening seasonal spreads; using curtailments to capture higher prices. | Ongoing expectations of volatility; EQT remains bullish on capturing upside. |
MVP and pipeline expansions | Q2 emphasized ownership and eagerness to expand MVP quickly; Q1 highlighted 2 to 2.5 Bcf/day expansion via compression; Q4 discussed some capacity limits at Station 165. | MVP expected to flow near full capacity in winter; expansion via compression, with minimal new pipeline construction. | Consistently viewed as a key growth driver; sentiment remains positive. |
Water management and operational efficiencies | Q2 highlighted water integration boosting completion speeds; Q1 attributed lower LOE to water infrastructure investments; Q4 stressed high recycling rates and interconnecting water systems. | Reduced nonproductive time by addressing water logistics, potentially dropping a frac crew and saving $50 million/year. | Continuously improving; sentiment increasingly bullish about cost savings. |
Data center and AI-driven gas demand | Q2 noted MVP’s role in powering data centers; Q1 highlighted data centers as a strong secular growth story, with existing deals in Southeast; Q4 saw AI demand as a bullish tailwind. | AI/data centers seen as major drivers, with potential 10-18 Bcf/day of incremental gas demand; gas turbine orders rising sharply. | Increasingly cited as a long-term growth catalyst. |
International interest in non-operated assets | Q2 emphasized renewed global parties eyeing non-op assets; Q1 noted strong international appetite; Q4 referenced inbound interest from overseas seeking U.S. gas exposure. | Mentioned robust interest and stronger-than-expected cost of capital; deal now expected to close before end of 2024. | Remains high, timeline accelerated. |
Free cash flow projections | Q2 forecasted $16.5B at $3.60 gas (2025-2029) and resilient $9B at $2.75 gas; Q1 mentioned $8B at $2.75; Q4 projected nearly $9B over five years at $3.40. | Could generate $14.5B from 2025 to 2029 at $3.50 gas; breakeven as low as $1 Henry Hub for 2024-25. | Steady bullish outlook, highlighting low-cost resilience. |
Storage overhang and commodity price pressure | Q2 saw Eastern storage buildup pressuring local prices; Q1 indicated a 600 Bcf overhang, expecting a rebalance by autumn; Q4 maintained that mild winter caused a temporary oversupply. | Cited limited storage capacity leading to wider seasonal spreads; curtailment strategy used to mitigate weak prices. | Still topical, but confidence in curtailments and demand growth is increasing. |
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Asset Sales and Balance Sheet
Q: How will asset sales impact your balance sheet?
A: We have a plan to eliminate our debt efficiently and smoothly, without any inefficiencies. There's been robust interest in our regulated assets, exceeding our expectations. We now expect to complete a deal before the end of this year. In our recent non-op asset sale, we received $1.25 billion now for assets that would have generated $750 million over the next five years, so we're pleased with the valuation. -
Curtailment Strategy Flexibility
Q: How flexible is your curtailment strategy to gas prices?
A: We can quickly adjust production in response to pricing. In Q3, we were turning on and off up to 1 Bcf/day almost daily, which improved our basis differential by $0.10 this quarter. We've already brought back previously curtailed volumes, so we won't be adding an additional 1 Bcf/day into the market. When local prices exceed $1.50 at M2, we operate at full capacity. -
Equitrans Synergy Progress
Q: Are you exceeding synergy targets from Equitrans acquisition?
A: Yes, we're ahead of schedule and realizing greater synergies than anticipated. Specifically, our compression pilots are showing nearly 2x the uplift we initially assumed, which will benefit our 2025 plan. -
2025 Production Outlook
Q: Should we expect production declines in 2025?
A: Overall, we expect relatively flat production year-over-year on assets we retain post-divestiture. The non-op sale removes about $75 million from 2025 capital spending, and efficiency gains add $50 million in savings, so our spending will likely be at the lower end of our previous guidance. -
AI-Driven Gas Demand
Q: How will AI and data centers affect gas demand?
A: We project that power demand growth due to AI could add between 10 and 18 Bcf/day of natural gas demand. Orders for gas turbines are up significantly—Mitsubishi by 50%, GE by 90%—indicating natural gas will meet much of this new demand. -
Additional Cost Savings
Q: Are there cost savings beyond synergy targets?
A: Yes, by optimizing water logistics and reducing non-productive time, we can drop one frac crew, translating to savings of about $50 per foot or roughly $50 million per year, which is separate from our synergy targets. -
Competition from Renewables and Nuclear
Q: How does competition from renewables and nuclear affect you?
A: Alternatives like reviving nuclear plants could add about 3 gigawatts of power demand, but that's minimal compared to what's needed. Natural gas remains the primary solution for reliable, affordable energy. -
Future M&A and Capital Allocation
Q: Will you pursue more acquisitions or return capital?
A: We're less focused on M&A now, having transformed EQT into the lowest-cost producer with substantial inventory. Excess cash will likely be used for share buybacks rather than acquisitions. -
Gas Price Outlook and Storage
Q: Is market volatility reflected in gas prices?
A: The market will be short on storage capacity, and to incentivize more storage, seasonal spreads need to widen. This will likely be expressed in the options market as volatility increases. -
MVP Full Flow Impact
Q: What is the impact of MVP flowing at full capacity in winter?
A: We assume that between December and February, MVP will flow at or near full capacity, which is reflected in our guidance.
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