EQT Corp (EQT) Models FY13 CapEx of $1.5B, Op Cash Flow of $1B

December 4, 2012 7:13 AM EST Send to a Friend
EQT Corporation (NYSE: EQT) today announced the Company’s 2013 capital expenditure (CAPEX) forecast of $1.5 billion. The CAPEX forecast includes $1.15 billion for EQT Production, $320 million for EQT Midstream, and $45 million for distribution infrastructure projects and other corporate items. The forecast does not include CAPEX for EQT Midstream Partners, LP (NYSE: EQM), which is a publicly traded entity controlled by EQT Corporation and consolidated in its financial statements. Funding will be provided by cash-on-hand at year-end, cash generated from operations, and proceeds from expected midstream asset sales (dropdowns) to EQT Midstream Partners, LP.

2013 GUIDANCE:

Operating cash flow is projected to be approximately $1.0 billion in 2013, based on current NYMEX natural gas prices. This estimate will increase or decrease by approximately $55 million per $0.25 change in the average NYMEX price.

Sales of produced natural gas in 2013 are projected between 335 and 340 Bcfe, 31% higher than the 2012 estimate of 257 Bcfe. Liquids volumes, included in this sales guidance, are expected to total between 3,300 and 3,400 Mbbls. The increase in volumes throughout the year is not expected to be uniform as a result of multi-well pad drilling.

Marcellus sales volumes in 2013 are projected between 242 and 247 Bcfe, representing a 63% increase over 2012. Non-Marcellus sales volumes are expected to be approximately 93 Bcfe, which is approximately 14 Bcfe lower than 2012.

The Company forecasts consolidated EQT Midstream 2013 EBITDA, which includes the results of EQT Midstream Partners, LP, of approximately $335 million compared to a 2012 EBITDA forecast of $300 million. Net operating revenues in 2013 will be approximately $325 million for gathering, $145 million for transmission, and $30 million for storage, marketing and other.

EQT Production:

EQT Production 2013 CAPEX is projected to total $1.15 billion, excluding land acquisitions; $915 million for well development; $27 million for geological and geophysical activities, which will focus on central Pennsylvania and Guernsey County, Ohio; with the remainder for capitalized overhead, well maintenance and compliance.

Marcellus Development

The Company plans to spend approximately $820 million on Marcellus well development in 2013 to drill 153 Marcellus wells with an average lateral length of 4,500 feet. All of the wells will be on multi-well pads to maximize operational efficiency and well economics. EQT Production plans to drill 88% of its 2013 wells with 30-foot cluster spacing. Approximately one-third of EQT’s Marcellus acreage can be developed using 30-foot cluster spacing.

The Company broadly defines its Marcellus acreage in three categories: Tier 1, Tier 2, and Tier 3. The Tiers are defined by the expected Estimated Ultimate Recovery (EUR) given a 5,300 foot lateral length well that utilizes the standard 60-foot cluster spacing. The expected EUR for wells drilled in Tier 1 acreage is 9.0 Bcf; Tier 2 is 7.4 Bcf; and Tier 3 is 6.4 Bcf. Utilization of 30-foot cluster spacing is estimated to have a 20% to 25% increase in EUR.

The 2013 drilling plan includes 11 wells in the Tier 3 dry acreage in central Pennsylvania to gather more data for infrastructure planning and to quantify the resource potential.

The Company plans to operate six horizontal rigs and two top-hole rigs in 2013. In 2012, the Company commissioned two Marcellus drilling rigs powered by clean burning natural gas, and expects to retrofit four additional rigs to utilize natural gas in 2013. EQT estimates a fuel cost savings of approximately $400,000 annually per converted rig, as well as an expected 20% to 30% reduction in carbon dioxide emissions, which helps minimize the Company’s overall environmental footprint.

Utica Development

The Company plans to spend approximately $40 million on Utica well development in 2013 to drill 8 wells on its liquids rich acreage located in Guernsey County, Ohio. EQT Production has approximately 16,000 gross Utica acres (13,600 net acres) in the liquids rich development area of Ohio. The 2013 Utica wells are expected to have an average lateral length of 6,000 feet, with two of the wells utilizing 30-foot cluster spacing.

Upper Devonian Development

The Company plans to spend approximately $55 million to drill 11 Upper Devonian wells in 2013 with an average lateral length of 4,200 feet, each of which will share a pad with Marcellus wells. Ten of the wells drilled in 2013 will utilize 30-foot cluster spacing. The Upper Devonian shale formation sits above the Marcellus shale zone across a substantial portion of EQT’s existing acreage position. EQT Production estimates that it has approximately 170,000 acres in the Upper Devonian that can be developed independently. The 2013 drilling program is intended to delineate the Upper Devonian position.

EQT Midstream:

EQT Midstream plans to invest $320 million in 2013; $190 million for Marcellus gathering lines; $110 million for a Marcellus header project; and the remainder for maintenance and compliance activities.

The Marcellus gathering investments are focused on EQT Production development areas in Pennsylvania and will increase gathering capacity by 400 MMcf per day. EQT Midstream also plans to construct a Marcellus header that will connect liquids rich Marcellus acreage, including the Company’s acreage, in north central West Virginia with the Mobley processing plant (owned and operated by MarkWest Energy Partners). The 32-mile header system will have 265 MMcf per day of capacity.


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