EQT Corp. is looking to raise about $1.5 billion by selling assets outside of southwestern Pennsylvania, cashing in its stake in a spun-off pipeline business and selling mineral interests. The money will be used to pay off debt that matures over the next three years.
This will be done against a backdrop of stubbornly low natural gas prices that are forcing players across the oil and gas industry to pull back on spending and production.
Although a final budget won’t be available until a board vote in December, EQT expects it will spend between $1.3 billion and $1.4 billion next year. That’s $525 million less than this year’s budget. At the same time, the company plans to produce almost the same volume of gas in 2020.
On Thursday, the Downtown-based company reported its first financial results since Toby Rice succeeded in ousting previous management, overturning the board of directors and taking control of the natural gas producer, the largest in the country.
He said the 100-day plan that promised to “kickstart our evolution” has been a success in reducing costs and better connecting the organization.
For the past three months, EQT posted a net loss of $361 million, or $1.41 per share, compared to a loss of $40 million, or 15 cents per share, during the same quarter last year.
Sales revenue was down 26%. Even though EQT sold slightly more gas during the past quarter than a year ago, the price it was able to fetch was 11% lower.
A large chunk of current loss was the diminished value of EQT’s stake in Equitrans Midstream Partners, a pipeline operator. EQT said Thursday that it plans to sell that stake — valued at $750 million at the end of last month — by mid-2020.
EQT is Equitrans’ largest customer and is in the process of renegotiating gas gathering agreements with the company, Mr. Rice said. This is EQT’s “biggest needle mover” as it looks to future cost-reduction targets.
Transporting gas is by far the largest chunk of EQT’s operating costs.
One of Mr. Rice’s signature promises during the proxy battle was to bring EQT’s costs down to $735 per foot. For an average well being drilled next year in southwestern Pennsylvania, at 13,000 feet long, that would translate to $9,555,000. He said EQT will be below that level by the second half of next year in this area. Its West Virginia and Ohio programs have higher cost and shorter laterals.
But while company leaders told analysts on Thursday that “West Virginia will become a larger part of EQT’s story going forward,” the Ohio assets that Mr. Rice personally negotiated at a critical point in his former firm Rice Energy’s trajectory may be headed for a sale.
To pay off debt, EQT is also considering selling off holdings in central Pennsylvania and southern West Virginia.
It is also looking at selling a stake in its mineral interests, as has become more common in the industry with players like Range Resources. A deal on royalty interests could come in “a matter of months,” EQT’s leaders said and might involve a cut of current and/or future production.
Anya Litvak: alitvak@post-gazette.com or 412-263-1455.
This story has been corrected to show the average well cost would translate to $9,555,000.
First Published: October 31, 2019, 7:14 p.m.