The operator introduces the EQT First Quarter 2024 Results Conference Call and welcomes everyone. Cameron Horwitz, Managing Director of Investor Relations and Strategy, introduces Toby Rice, President and CEO, and Jeremy Knop, CFO. Toby and Jeremy will present their prepared remarks and then take questions. A replay of the call will be available and it may contain forward-looking statements and non-GAAP financial measures. Toby then begins his remarks.

EQT's acquisition of Equitrans Midstream will make it America's first vertically integrated large-scale natural gas business, allowing for low-cost production and potential price upside. This will result in a long-term, free cash flow breakeven price of $2 per million Btu, giving EQT a sustainable advantage over other natural gas producers. The combination of EQT and Equitrans will also create an integrated well-to-watt solution to meet the growing demand for natural gas in the Southeast and Mid-Atlantic regions, driven by the proliferation of data centers and other electricity-intensive markets. This could result in an incremental 10-18 Bcf per day of natural gas demand by 2030.

EQT's natural gas assets and long-term sales arrangements make it well-positioned to meet the growing demand for natural gas in the power generation segment, particularly in the Southeastern United States. The company plans to expand its capacity on the MVP pipeline and believes it is well-positioned to capture the increasing demand for natural gas in both the Southeast and its own backyard in Appalachia. This will be crucial in meeting America's power needs as the country moves towards the age of AI.

The company achieved better-than-expected results in the first quarter due to efficient operational execution, strong well performance, and lower-than-expected costs. They also announced an agreement to sell a 40% interest in their non-operated natural gas assets for a total value of over $1.1 billion, which will help with their deleveraging plan. The assets they are receiving include 26,000 net acres in Ohio and a working interest in over 200 producing wells in Pennsylvania.

EQT's recent transaction to acquire 100% ownership of the Seely and Warrensville gathering systems aligns with their strategy of lowering cost structure through vertical integration. The company expects operational synergies and potential upside from the Marcellus in Monroe County. The sale of non-operated assets at an attractive multiple and the option to monetize other assets at Equitrans will help the company achieve its debt repayment goals and create shareholder value. Overall, the company's first quarter results demonstrate strong performance.

In the first quarter, the company curtailed production due to low natural gas prices, resulting in lower sales volumes. However, without the curtailments, production would have been within the high end of the guidance range. Operating costs were in line with guidance, with LOE outperforming due to investments in water infrastructure. The company also retired all outstanding convertible notes, reducing $400 million of debt.

In the first quarter, the company liquidated a capped call and issued a $750 million bond to reduce their term loan balance and extend the maturity. They ended the quarter with $5.5 billion in total debt and $650 million in cash, and used $205 million to fund a buyout. They plan to use the remaining cash and proceeds from a recent deal to reduce debt and have added to their hedge book to reduce risk. They aim to limit defensive hedging to less than 20% of their production after achieving their debt targets.

EQT's $2 Henry Hub free cash flow breakeven price and the Equitrans acquisition provide a structural hedge and limit the need for financial hedging. The company has updated its production outlook to reflect voluntary curtailments in response to low natural gas prices and plans to continue curtailments through the end of May. This strategy is in contrast to high-cost producers who need to cut activity to reduce CapEx. EQT's low-cost structure and strong balance sheet allow for this approach. The company also expects the MVP to start up in June, following Equitrans' filing for in-service with the FERC.

The Equitrans acquisition is a significant milestone for EQT, as it will allow them to provide natural gas to meet growing demand in the Southeast region. Upon closing the acquisition, EQT plans to expand the MVP pipeline to meet additional demand. The transaction is expected to result in a cost structure improvement of approximately $0.50 per Mcfe for EQT, with potential for further improvement. This will have a monumental impact on EQT's free cash flow, as shown on slide 10 of their investor presentation.

The paragraph discusses EQT's pro forma free cash flow durability, which is projected to be peer-leading at $2.75 natural gas prices. The Equitrans acquisition has further accelerated the trend of high grading of EQT's shareholder base, with near unanimous support from some of the world's largest and most thoughtful long-term fund managers. EQT's easy-to-own business model is expected to be increasingly coveted by long-term investors who are bullish on natural gas. The company looks forward to demonstrating its differentiated value proposition for shareholders in the volatile world ahead. The call is now open for questions.

During the question-and-answer session, the first question is about the non-operated asset sales in the pipeline. The speaker, Jeremy Knop, says that they are having constructive conversations and have confidence in getting the deals done. He also mentions that the recent deal with Equinor has helped move things forward. The remaining sales will likely be in cash consideration. The next question is about the supply and demand for natural gas in the U.S. and the speaker, Toby Rice, says that they expect other operators to continue with production cuts and discipline.

The speaker believes that the focus is on the potential impact of normal summer weather and low gas prices on storage and power demand. They predict that there will be an overhang of 600 Bcf that will need to be worked out by October, which will likely keep prices low. However, they expect an increase in LNG demand to lead to a swift market change after October. The speaker also mentions the potential for premium opportunities for gas sold on the Transco Zones 4 and 5 South lines, and highlights their leverage to these zones in the Appalachia Basin.

The company's physical gas sales deals in Q3 and Q4 of last year were structured in tranches and ranged in price. This indicates a high demand and tailwinds for the market, driven by factors such as electrification and data center growth. The Southeast market is expected to become the most premium market due to LNG facilities pulling gas away and a deeper deficit from coal retirement and data center growth. The company is excited about expanding their MVP and their adjacent assets in this market.

Toby Rice, CEO of EQT Corporation, discusses the potential for increased demand for natural gas in Pennsylvania, as well as the state's role in exporting electricity and gas. He mentions Governor Shapiro's support for natural gas and opposition to the LNG pause, highlighting the economic and environmental benefits of using natural gas. Rice also emphasizes the importance of Pennsylvania's natural gas reserves and their potential for powering the state's economy and reducing emissions on a global scale. He also mentions the potential for natural gas to replace offshore wind as a reliable source of energy in the Northeast.

During a conference call, Jake Roberts from TPH & Company asked about the impact of non-operated assets on the company's second quarter production guide. Jeremy Knop, the operator, clarified that the guide includes about 10 to 15 billion cubic feet from non-op interests and the rest is due to the company's own decisions. Roberts then asked about the potential for increased gas shipments to the Southeast and Mid-Atlantic, to which Knop explained that EQT is uniquely positioned to benefit from the expansion of the MVP pipeline, as they are the only producer shipper on the pipe. The expansion will be part of a regulated process, but EQT is confident in their ability to create value for both themselves and the utilities in that market.

The speaker discusses the potential benefits for EQT if they are not the ones to win an auction for capacity, stating that it would still result in increased gas sales for producers in Appalachia. They also mention their criteria for curtailments and the possibility of extending them if prices remain low. The speaker then touches on their plans for expanding the MVP pipeline and how it fits into their integrated upstream, midstream model, despite their divestiture plans.

Jeremy Knop discusses the company's strategy for maintaining control and potentially selling off their interest in Equitrans. He mentions the $1.1 billion value level from the Equinor deal and the potential for $2 billion to $2.5 billion in cash from the rest of the assets. This gives the company a lot of optionality and they are considering different ways to structure the deal, such as selling off some assets or a minority interest while maintaining control and operatorship. Knop expresses confidence in their ability to delever the balance sheet efficiently and maintain optionality in the long-term. A question is then asked about the company's plans for maintaining control and potentially selling off their interest in Equitrans.

During a conference call, Bertrand Donnes asked about the company's potential divestitures and how price-sensitive they are. Toby Rice and Jeremy Knop explain that they are focused on maximizing value and have a lot of optionality. They also mention their confidence in completing the plan and the potential for a more robust gas market in 2025. They also discuss the company's LNG agreement and their approach to their Gulf Coast exposure.

The speaker discusses the company's strategy for market diversification, stating that they aim to have around 10% of their volumes exposed to international pricing. They also mention that they have non-binding agreements in place, but they may not all be finalized. The speaker also mentions the potential impact of data center demand on their LNG business, but states that they are still focused on advocating for LNG and positioning the company to have access to new opportunities.

The company is receiving calls about LNG deals and is taking a targeted approach to capturing opportunities. They have learned from past experiences and are being cautious about signing up for too much LNG. They believe that data center demand will provide more stable and long-term demand compared to LNG. There is no update on regulatory hurdles related to the acquisition of ETRN, but they have pulled and refiled with the FTC and the sustained operating procedure.

EQT has been working closely with the FTC to discuss how their acquisition will make them a lower cost and more reliable energy provider, while also delivering cleaner energy sources. They have seen an increase in demand for natural gas, particularly from data centers, due to its affordability, reliability, and speed. They plan to leverage existing power infrastructure and are looking at ways to quickly meet this new demand.

The speaker compares the small footprint of natural gas production to the much larger footprints of solar and wind energy. They also mention the company's success in selling gas to major utilities and their potential for further growth in the data center market. Another analyst agrees with their strategy.

The speaker discusses the uncertainties and potential risks in the natural gas market, using the example of the Freeport LNG outage. They mention their company's approach to dealing with these uncertainties, including a measured and strategic approach to accessing new markets. They also highlight the importance of lowering their cost structure to derisk their business and increase exposure to higher pricing.

The speaker believes that their company has a good strategy in place, but it is important to keep track of all the moving parts. They mention the potential risks in the LNG market, such as natural disasters or disruptions in production. The company's goal is to have low costs so that they do not have to rely on high prices to remain cash flow positive. They also note that integrated companies have been successful in the past.

The speaker discusses the company's ability to weather market volatility and capitalize on opportunities, citing their success in 2022 and their recent acquisition. They also mention the potential for future events and their strategy to position themselves for long-term value growth. The interviewer brings up the issue of grid-fed fragility and the company's previous deal with Bloom Energy for RSG certificate sales.

The speaker is discussing the potential for investments in clean energy, particularly in regards to partnerships with power generating companies like Bloom Energy. They believe that behind-the-grid power generation solutions will offer a faster pathway to meeting energy demands and that these partnerships can be leveraged to utilize existing assets and pipelines. The speaker also mentions that third-party revenues are a significant contributor to their lower breakeven price, but it is unclear if these agreements will remain consistent over the next decade or longer.

Jeremy Knop and Toby Rice discuss the cost walk and third-party opportunities for EQT. Knop expects minimal change from non-op sales, while Rice believes other factors will have a greater impact. They also mention the potential to reduce costs through increased utilization of midstream assets, including using third-party volumes. The EQT leadership has a track record of maximizing utilization, which aligns with their core strategy of lowering costs. They also briefly touch on hedges.

The speaker clarifies that their previous call about E-Train being the new hedge is consistent with their current strategy of deleveraging and protecting the balance sheet. They plan to have a different hedge strategy after 2025 and are focused on bulletproofing their plan for the next 12-18 months. The speaker also mentions potential upside to higher gas prices in the future. The operator then ends the call.

This summary was generated with AI and may contain some inaccuracies.