EQT Corp. said this week second quarter production would come in at the high end of the company’s 355-375 Bcfe guidance for the period, while 2019 capital expenditures are also expected to decline.
The latest update comes less than a month before shareholders will vote for seven board nominees put forward by Rice Energy co-founders Toby and Derek Rice, who are pushing to take over the company.
If EQT’s early estimates hold, it would be the third quarter in a row that the current management team has overseen improvements. Most of the executive management team took over late last year, including CEO Robert McNally, who has led a push to cut costs, optimize results and generate more free cash flow after a shaky stretch following the acquisition of Rice Energy for $8 billion in 2017, which transformed EQT into the nation’s largest natural gas producer.
Under an initiative to cut capital costs over the next five years, EQT expects to shave $25 million off this year’s $1.85-1.95 billion budget. The company has identified $175 million in annual cost savings to date and is now forecasting adjusted free cash flow of more than $3 billion through 2023.
EQT beat its guidance in 1Q2019 and improved drilling days, increased hydraulic fracture stages and pushed laterals longer. The efficiency gains found it increasing full year guidance by 10 Bcfe to 1.480-1.520 Tcfe. Drilling days increased another 8% sequentially in the second quarter while frack stages saw a 20% gain and 14% more frack plugs were drilled out per day in the same time.
The Rice brothers, which again questioned the savings and gains announced by EQT this week, contend that they can create more value for the company. They own more than 3% of EQT shares. If the Rice’s director candidates prevail at next month’s shareholder meeting, the brothers have indicated that Toby would replace McNally, and top management positions at the company would be filled by Rice Energy veterans.
EQT’s stock was up more than 2% on Tuesday morning, trading around $16.23/share on the New York Stock Exchange.