Transformative Acquisition
Alta Resources
May 6, 2021
Strategic Consolidation of Core, High Margin NE Marcellus Assets
Acquisition accelerates all of EQT's financial and strategic objectives
- Acquired assets at ~18% free cash flow yield(1,2,3)
- Accelerates deleveraging (1.7x YE22 leverage(4)) & timeline to return capital to shareholders
- Projected increase in annual free cash flow(1,2) by $300-$400 MM; ~$2 B in free cash flow(1,2) through 2026E
- Decreases annual pro forma free cash flow breakeven(5) by ~$0.10/MMBtu
- Maintenance capital intensity declines 10% from 65% to 55% in 2022E
FREE CASH FLOW LEVERAGE
+20% | -0.3x | ||
In 2022E FCF/Share(1,2) | Leverage(4) | in 2022E | |
+15% | -0.5x | ||
Cumulative FCF per share(2) | Leverage(4) | in 2023E | |
accretion through 2026E | |||
PRO FORMA ACREAGE POSITION
Best of SW Marcellus + Best of NE Marcellus
Net Marcellus Acres:
SW MRC: >1,300,000
NE MRC: >300,000
Total Net Acres: >1,600,000
1. | NYMEX strip as of 4/23/21. | |
2. | Non-GAAP measure. See appendix for definition and further details. | |
3. | Defined as the midpoint of annual expected free cash flow divided by equity component consideration. | |
4. | Leverage is defined as year-end net debt divided by last twelve months (LTM) adjusted EBITDA. Net debt and adjusted EBITDA are non-GAAP financial measures. See the Non-GAAP Disclosures section of this presentation for the | 2 |
definition of, and other important information regarding these measures. |
5. Defined as the Henry Hub price needed to generate positive free cash flow under a maintenance production plan.
Pro Forma Plan Projected to Generate ~$5.5 B in FCF(1) Through 2026
Acquisition improves breakeven and cumulative free cash flow profile
FCF(1,2) ($MM) vs. UNHEDGED NYMEX BREAKEVEN(3) ($/MMBTU)
$1,500$2.50
Upside | |||
$2.40 | |||
$1,000 | ~30% | ||
($/MMBtu)Breakeven | |||
($MM)FCF | $2.30 | ||
~125% | Assumes | ||
partial year | |||
~90% | $2.20 | ||
$500 | ~70% |
$2.10 |
$- | $2.00 | |||||||||
2020 | 2021E | 2022E | 2026E | |||||||
Status Quo FCF | 1Q Update to FCF | Acquired FCF | Status Quo Breakeven | Pro-Forma Breakeven | ||||||
Alta Acquisition
- High margin production bolsters free cash flow
- Integrated midstream assets and mineral ownership drive lower breakeven
- Prolific inventory delivers superior well economics
Upside
- Conservatively underwritten Alta acquisition
- MVP capacity sell-down
- Continued operational improvements and efficiencies
- Credit upgrades reducing interest expense and cost of capital
- Commodity price improvements
- Every $0.10 increase in NYMEX = $200 MM of incremental annual FCF(1)
1. | Non-GAAP measure. See appendix for definition. | 3 |
2. | Based on 4/23/21 NYMEX strip pricing. |
3. Defined as the Henry Hub price needed to generate positive free cash flow under a maintenance production plan.
Transaction Strengthens EQT's Position as the Premier Appalachian-Core
Operator
Preliminary Estimates | EQT | Alta | Pro Forma | |
Net Production | Bcfe/d | 4.6 | 1.0 | ~5.6 |
2022E OPEX(1) | $/Mcfe | $1.45 | $0.45 | ~$1.25 |
2022E ADJ. EBITDA(2) | $B | $1.9 | $0.6 | ~$2.5 |
2022E CAPEX | $B | $1.1 | $0.2 | ~$1.3 |
2022E Free Cash Flow(2) | $B | $0.65 | $0.35 | ~$1.0 |
YE2022E Leverage(3) | 2.0x | 1.0x | ~1.7x | |
2022E Maintenance Intensity | 65% | 35% | ~55% | |
(CAPEX / OCF(2)) | ||||
CONSERVATIVE UNDERWRITING PROVIDES UPSIDE
- Operations:
- Risked PDP volumes, infill type curves and inventory
- No value attributed Upper Marcellus inventory
- Value ascribed to only ~30% of total potential lateral footage - all child wells removed
- Anticipate well cost synergies
- Optimization through integrated business model
- Portfolio and development optimization
- Financial:
- Accelerates return to investment grade with significant interest savings
- Improved cost of capital
- Better access to capital
- Commercial and marketing optimization
- ESG:
- Integrates well into ESG platform
- Continued focus on acquiring low-emissions intensive natural gas assets
1. | Operating expenses include gathering, transportation, processing, LOE, production taxes, and SG&A | |
2. | Non-GAAP measure. See appendix for definition. | |
3. | Leverage is defined as year-end net debt divided by last twelve months (LTM) adjusted EBITDA. Net debt and adjusted EBITDA are non-GAAP financial measures. See the Non-GAAP Disclosures section of this presentation for the | 4 |
definition of, and other important information regarding these measures. |
Note: Management estimates based on a maintenance program, subject to further revision, and does not indicate formal guidance.
Acquisition Summary
Core rock + low royalty burden + mineral ownership + integrated gathering system = superior returns and FCF
• On May 6, 2021, EQT announced the acquisition of Alta Resources' Marcellus assets for $2.925 B, | |||
Transaction | subject to customary closing adjustments | ||
• $1.0 B of cash consideration | |||
• ~105 MM shares(1) of EQT stock, to be reduced based on customary closing adjustments | |||
• Current net production of 1.0 Bcf/d, 100% dry gas, ~50% operated | |||
• ~222,000 operated and ~78,000 non-operated acres, 98% held-by-production | |||
• 381 operated wells, 93 operated pads, 6 current DUCs | |||
Upstream Assets | • ~85% of non-op acreage position is operated by Chesapeake Energy | ||
• | Low 14% average royalty burden; as low as 11% on core operated assets due to direct mineral | ||
ownership | |||
• Drilling economics with minerals and gathering ownership are on par or superior to EQT's existing | |||
assets | |||
• 300 miles of in-place owned and operated gathering lines and compression | |||
Midstream Assets | • 100 miles of water pipelines and 14 freshwater impoundments | ||
• | Integrated business model provides high margin cash flows and superior drilling economics, | ||
expanding the commercial core | |||
• Transaction expected to close in Q3 2021, subject to EQT shareholder approval | |||
Closing | • EQT shares to be issued to diversified ownership group of institutional investors and Alta | ||
individuals | |||
• No Alta shareholder will receive more than 5% of EQT's pro forma outstanding stock | |||
1. Based on $1.925 billion equity consideration divided by 30-day VWAP as of 5/5/2021 market close. Anticipated closing adjustment is between $200-225 MM, which would result in share reduction of ~11 million shares. | 5 |
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EQT Corporation published this content on 06 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 06 May 2021 10:40:07 UTC.