EQT Corp. trimmed more than $100 million from its capital budget for this year and will cut it by more than $500 million from its 2020 plan as it works to implement a highly choreographed system of natural gas drilling.
The Pittsburgh-based natural gas driller, which was taken over by a new management team in early July led by Toby Z. Rice, on Thursday provided its first quarterly financial report that took place under the Rice tenure. It also provided a highly anticipated look at what’s going on near the drill bit in 2019 and what it plans in 2020. EQT, the country’s largest independent natural gas producer, is a bellwether for the Marcellus and Utica shale industries. Early indications see a continued down market for natural gas overall.
EQT (NYSE: EQT) said it spent $475 million on capital, mostly land acquisition and drilling, and had cut by $115 million the amount of money it would spend in all of 2019. In January, the previous management team announced plans to spend between $1.9 billion and $2 billion for the full year. It has three rigs and three hydraulic fracturing crews and expects to have that through the end of the year.
For next year, EQT said it would spend between $1.3 billion and $1.4 billion, down $525 million from 2019’s plan. Also important for shareholders, who have been disappointed by EQT’s performance over the past year and a half, the company expected free cash flow between $200 million and $300 million as it would cut well costs and other capital by 25 percent. It also said it would cut down on its debt by $1.5 billion by the middle of 2020.
Key to Rice’s turnaround plan for EQT involves combo development, where multiple pads in a region are developed at the same time in various stages, using algorithms to determine the most efficient use of resources. EQT said its first large-scale combo development would occur in 2020 involving 50 percent of its wells turned in line and 80 percent begun.
EQT also swapped acreage during the third quarter in a transaction involving 16,000 acres in Wetzel and Marion counties in West Virginia; the company did not disclose the other company involved but said it was a “large-scale operator.” This sets up combo development in West Virginia, where EQT in 2021 will drill 25 wells.
“This project is a first-of-its-kind for EQT in West Virginia and is expected to deliver production and well costs in-line with the company’s core Greene County Pennsylvania assets,” EQT said.
For the third quarter, gas sales volumes were up 2 percent compared to a year ago but average prices were down 11 percent to $2.47 per thousand cubic feet of natural gas. EQT reported revenue of $951.6 million in the quarter, down from $1.05 billion the previous year’s quarter, and a wider loss, $361 million or $1.41 a share, compared to $39.7 million, 15 cents a share, a year ago.
The loss was due in part to the costs of the proxy, reorganization and other administrative costs as well an unrealized loss on its Equitrans Midstream Corp. investment, the company said.