EQT Corp., the biggest U.S. natural gas producer, said Oct. 31 it cut its capex guidance for 2019 and 2020 as new management highlighted their plans to deal with low energy prices.
EQT cut its expected 2019 capex by $115 million and reduced its planned 2020 spending forecast by $525 million from its prior 2019 guidance.
Despite the cut in 2019 capex, the company said in its third-quarter earnings release that it was maintaining its 2019 full-year production guidance of 1,490 billion to 1,510 billion cubic feet equivalent (Bcfe).
The company, which focuses on production from the Marcellus and Utica shale basins in Pennsylvania, Ohio and West Virginia, said it expects sales volumes in 2020 of 1,450-1,500 Bcfe, which is roughly flat with projected 2019 output.
"We are committed to allocating our capital responsibly and effectively, with the intent to reduce absolute debt by at least $1.5 billion by mid-year 2020 to maintain investment grade metrics," EQT President and CEO Toby Rice said in the earnings release.
Rice, who took over as head of EQT in July following a proxy battle, said the company expects to reduce well costs, overhead, land and other capex by 25% relative to legacy costs.
The equity market likes EQT's plan. Shares in EQT, which fell to a 17-year low last week, were up 8.6% to $10.75 a share in midday trade on Oct. 31.
EQT said it planned to spend $1.3 billion to $1.4 billion in 2020. That compares with its previous capex expectation of $1.825 billion to $1.925 billion in 2019. That previous expectation was before the $115 million reduction announced on Oct. 31.
EQT is not the only driller cutting spending to focus on earnings as it copes with an expected decline in energy prices.
U.S. financial services firm Cowen & Co said projections from the exploration and production (E&P) companies it tracks point to a 5% decline in capex for drilling and completions in 2019 versus 2018.
Before EQT reported its earnings, Cowen said nine of the 47 E&Ps it tracks reported spending estimates for 2020 with just two increases and seven decreases vs. 2019.
EQT said 87% of its 2020 gas production is hedged at a weighted average floor price of $2.71 per dekatherm, which is equivalent to $2.71 per million British thermal units (mmBtu).
Analysts project gas prices at the Henry Hub benchmark in Louisiana will average $2.76 per mmBtu in 2019 and $2.65 in 2020. That compares with an average of $3.16 in 2018 and a five-year (2014-2018) average of $3.13.
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