The U.S.’s largest natural gas producer said this week its plan to cut gross natural gas production by roughly one-third, effective May 16, could be extended through June 30.
EQT also announced it sold “non-strategic” assets in Pennsylvania and West Virginia to Diversified Gas and Oil Plc (DGO) for $125 million in cash.
Given the current price for natural gas, EQT believes cutting gross production by 1.4 billion cubic feet per day (1.0 Bcf/d net) is value accretive, with deferred production to be sold at a higher forward commodity price.
“The duration of the curtailment will be subject to commodity price movements, relationships and resulting economics, and could potentially continue through the end of the second quarter 2020,” EQT said, in a statement.
Assuming production remains cut by 1.4 Bcf/d through June 30, EQT expects second-quarter total sales volumes to range between 315–335 billion cubic feet-equivalent, roughly 45 Bcfe lower than its previously announced guidance range of 360–380 Bcfe.
EQT reiterated its second-quarter average differential guidance of $0.45–$0.25 per thousand cubic feet.
Second-quarter total per unit operating costs are expected to be at the high-end of the company’s full-year guidance range of $1.34–$1.46 per thousand cubic feet-equivalent.
EQT expects no changes to its full-year 2020 guidance, including production (1.45 trillion cubic feet-equivalent to 1.50 Tcfe), and financial guidance.
The DGO transaction includes potential contingent consideration of up to $20 million, payable based on certain future commodity price targets.
The deal also relieves EQT of roughly $47 million in asset retirement obligations and other liabilities associated with the assets. Proceeds from the sale have been used to pay down EQT’s $350 million term loan due in 2021.
“The closing of this non-strategic asset sale demonstrates our commitment to improving the balance sheet and reducing debt,” said EQT president and CEO Toby Rice. “… The transaction relieves EQT of the higher relative operating costs and substantial asset retirement obligations associated with these assets and will improve our financial standing.”
Assets sold to DGO are located in Pennsylvania’s Cameron, Clarion, Clearfield, Elk, Indiana, Jefferson, and Tioga counties, and include 80 Marcellus Shale wells with current net production of approximately 50 million cubic feet-equivalent per day.
Leasehold and drilling rights are retained by EQT on all acreage, excluding Tioga County. Also sold were 33 miles of gathering lines.
Assets sold in West Virginia are located in Doddridge, Harrison, Marion, Monongalia, Ritchie, Taylor, Tyler, and Wetzel counties and include 809 conventional wells with current net production of approximately 3 MMcfe/d, leasehold and drilling rights retained on all acreage, and 154 miles of gathering lines.