Ladies and gentlemen, greetings, and welcome to the EQT Corporation Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this program is being recorded. It is now my pleasure to introduce your host, Blake McLean, Senior Vice President of Investor Relations. Thank you, you may begin.

Thank you. Good morning and thank you for joining today's conference call. With me today are Rob McNally, President and Chief Executive Officer, Jimmi Sue Smith, Senior Vice President and Chief Financial Officer; Erin Centofanti, Executive President of Production; and Blue Jenkins, Executive Vice President, Commercial, Business Development, IT and Safety. A replay for today's call will be available for a seven-day period beginning this evening. The telephone number for the replay is 201-612-7415, with a confirmation code of 13674487. The call will also be replayed for seven days on our website. In a moment, Rob, Jimmi Sue and Erin will present their prepared remarks. Following these remarks, Rob, Jimmy Sue, Erin and Blue will be available to answer your questions. I'd also like to remind you that today's call may contain forward-looking statements. Actual results and future events may differ, possibly materially, from these forward-looking statements due to a variety of factors, including those described in today's press release and under Risk Factors in our Form 10-K for the year ended December 31st, 2017, and our Form 10-K for the year ended December 31st, 2018, to be filed with the SEC later today, as updated by any subsequent Form 10-Qs and other reports we file with the SEC. Today's call may also contain certain non-GAAP financial measures. Please refer to this morning's press release for important disclosures regarding such measures, including when able reconciliations to the most comparable GAAP financial measures. I'd now like to turn the call over to Rob.

Thank you, Blake. Good morning, everyone. The last several months have been very exciting time at EQT. Post separation, the new management team, with support from everyone across the organization, has successfully shifted our direction to focus on development, optimization and efficiencies. This strategic shift has resulted in significant progress in a short period of time and is exceeding my expectations. This company is full of some of the best and brightest minds in the industry, and empowering these people to make real decisions and drive change has had an immediate and noticeable impact. We're excited about the future of the company and our ability to execute on the plan that we've set forth. I'm highly confident that we have the right overall execution framework set in motion to achieve our strategic vision. Now, I'd like to reiterate some of the progress we made in late 2018. On the operational side, we completed 2018 with full year sales volumes of 1,488 Bcfe, and fourth quarter sales volumes of 394 Bcfe, above prior guidance and approximately 5% over the third quarter. Additionally, fourth quarter capital expenditures were in line with guidance. Most importantly, we generated approximately $134 million of adjusted free cash flow, a significant increase above the $100 million that we guided to on our call last month. These results demonstrate that we are successfully executing our plan to enhance efficiencies and deliver sustainable free cash flow. As a premiere pure play upstream company, with a world-class asset base, EQT has begun a new chapter. We have a clear and compelling action plan and are taking meaningful and decisive steps to strengthen EQT's financial and operational results. We are committed to driving down costs and operating more efficiently, and our entire organization is moving forward with a sense of urgency.…

Thanks, Rob. Today, I will briefly discuss the financial highlights for the fourth quarter and full year 2018, and then end with some forward-looking remarks. But first, our notable accomplishments in 2018 included: the completion of four separate and complex midstream streamlining transactions that were negotiated simultaneously; the divestiture of our non-core Permian Basin and Huron assets, which significantly improved our cost structure and eliminated substantial plug-in and other liabilities; and the execution of our spin off of Equitrans Midstream, creating a premiere pure play Appalachian midstream company and the third largest natural gas gatherer in the United States. You will notice the difference in our reporting as a result of the November spin off. The financial tables that you see in the press release and our SEC filing later today, are recast to reflect the operations of the stand-alone EQT for periods prior to the separation with the results of the midstream business reflected as discontinued operations. The separation, combined with the divestitures of the Huron and Permian operations, position EQT as a pure play Appalachian upstream company. Now, turning to 2018 results. As detailed in the press release, EQT announced 2018 adjusted net income from continuing operations of $1.70 per share compared to $0.54 in 2017. Adjusted operating cash flow attributable to EQT, which excludes cash generated by, but includes cash distributions from the midstream operations was approximately $2.5 billion in 2018 compared to $1.2 billion in 2017. Adjusted operating revenue increased 66% over 2017, primarily on increased sales volumes. For the year, EQT reported sales volumes of approximately 1,488 Bcfe compared to 888 Bcfe in 2017. Average realized price was $3.01 per Mcfe in 2018 versus $3.04 in 2017. Additionally, as we highlighted in January, capital expenditures were in line with our prior guidance. Moving to our…

Thanks, Jimmi Sue. And good morning, everyone. As we have stated for the past three months, we have moved toward a stable operating model by maintaining a consistent frac crew count that supports our strategic plan to generate significant cash flows and increased capital and operating efficiencies. We are being very cognizant about the proportion of ultra-long laterals, those with lengths greater than 15,000 feet that we are developing simultaneously in our development program. We have made changes on the drilling side that has improved our performance. We have simplified the geometry of our long wells by eliminating back builds and made adjustments to our drilling mud properties and fine-tuned our connection and tripping processes. As a result, our horizontal drilling performance in January of 2019 was approximately 25% better than the second half of 2018, improving from 1.17 days per 1,000 feet to 0.87 days per 1,000 feet. Our frac crews have executed incredibly well in the early winter months, increasing performance by 65% from January of 2018 to January of 2019. We fully expect that these efficiency gains will continue throughout 2019. Our well costs in January are in line with the guidance we published in our January 22nd presentation. This all underscores that the operational missteps of 2018 are behind us. As you may expect, the shift from a high of 12 frac crews in the middle of 2018 down to steady state operation with five to seven frac crews in late 2018 and throughout 2019 will lead to some fluctuations in our quarterly volume cadence. As a reminder, we turned in line 81 net wells in Q3 of 2018 and 45 net wells in Q4 of 2018. The high number of Q3 sales resulted in high Q4 production. We exited Q4 of 2018 at approximately 4.3…

Thank you. Erin. Our strong fourth quarter performance demonstrates our focus on enhancing operations and positioning EQT for increased efficiency, free cash flow growth and shareholder value creation. While we are proud of the progress we've made, we are only getting started. With that, I'll hand the call over to the operator, who can open it up for Q&A. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Holly Stewart from Scotia Howard Weil. You are now live.

Good morning, gentlemen, ladies.

Hi, Holly.

Maybe, Jimmi Sue, just on my first question, you kind of rattled through that fast on the free cash flow bookends for the quarter. I think that would imply obviously 1Q and 4Q, and then, negative free cash flow during 2Q and 3Q. Is there any detail behind that, is that kind of just driven by the basis assumptions or is there certain CapEx shift in those quarters that we should be aware of?

No. Holly, it's really driven by the shape of the natural gas curve, as well as the shape of our production curve for the year.

Okay, okay. That's good. And then, just another maybe small one on the guidance. It looks like there was a slight shift in the EBITDA change, but no shift in cash flow guidance. Is there anything to highlight there?

I think the big highlight there is the $50 million of additional cost savings we identified. That lowered our CapEx guidance, and let us keep our free cash flow guidance the same, even though we lowered the strip pricing, and that was what's driving the decline in the forecasted EBITDA numbers from our last release.

Got it. Okay. That makes sense. Maybe one final one on the guidance if I could. It looked like EQM, this morning reiterated their timing of 4Q for the end-service of MVP. Is there anything baked into either your costs or basis assumptions for MVP at this point for '19?

Holly, this is Rob. No. We're assuming that their guidance is just correct, that pipe will come online in the fourth quarter, and that is baked into our assumptions on both basis and realized pricing. But it really doesn't affect 2019 very much, that's really a 2020 issue.

Okay. Because it's probably late in the year. And then one - maybe, just one final one, maybe for Blue if I could. I mean, it looked like basis came in certainly better than our expectation. Is there anything right now just to kind of highlight in the overall marketing landscape? I mean, it looks like your guidance for 1Q is pretty solid as well?

Yeah. Hi, Holly. No, you're absolutely right. With the new pipes that came online in 4Q and coming online in 1Q. So the basis in Appalachia tightened up and so we were able to take advantage of that opportunity, and that's the primary conversation around that move.

Okay. Great. Thanks, guys.

Thanks, Holly.

Thank you.

Thank you. Our next question comes from the line of Michael Hall from Heikkinen Energy Advisors. You are now live.

Hey. Good morning. I appreciate the time. I just wanted to talk a little bit about water. It seems like water is kind of at the heart of a lot of the differences in cost structure that you all have discussed, also sounds like it was part of the early $50 million savings that you highlighted this morning. Just wondering what can be done to potentially structurally address water costs, and improve that over a longer dated basis? And kind of what sort of initiatives, little more color on the initiatives that are in place right now?

Hi, Michael. This is Erin. First on the initiative, I will say, we have two main things on the initiative. The first one is, we were able to bring our water hauling rates down by an additional 8%, since we first put our business plan together back in November-December time frame. We've also implemented a proprietary water optimization model. So, this model was developed in-house by our optimization engineering team, and the goal of the model is to really optimize the logistics at how we move our water, and the number of trucks that we have on the roads everyday to minimize our costs.

Is there anything that can be done to just take trucks off entirely? I mean, any sort of additional capital projects that might make sense or the payback is just not there on those, or how you are all thinking about that?

Yeah. Michael, there certainly is. There is opportunity to pipe produced water, and obviously, there are geographic constraints to that, and it won't work in every instance. But we do have projects under way to develop pipe water solutions and not just for fresh water but also produced water. And anytime that we can make those economics work, it really is beneficial for us as we can get trucks off the road, and from a safety, environmental and cost perspective, it is a win, but there is not - given the geographic footprint that we have, there is not a 100% pipe solution, there will always be trucking involved to some degree.

Understood. Okay. And is any of that contemplated in the outlook at present or is…

It is not contemplated in the numbers that we've put forward or in the $50 million of cost savings for 2019. And frankly, it's going to take a little more time. So I think those are things that you would see in 2020 and beyond.

Okay. And then, I was also curious just on the longer dated plan. You just noticed the average lateral length obviously increasing over time. What are you all assuming in West Virginia at this point, as it relates to lateral lengths, and where you can get those and I'm just curious what sort of acreage spend is required to do that over the course of the five-year outlook ?

Michael, this is Erin. So on the West Virginia side, the real challenge in West Virginia for us is from a legislative standpoint. And so, it isn't necessarily spending more money on the leases. It's more about trading acreage with our competitors, and we have great relationships with all of our competitors in West Virginia. We're currently working some very large acreage trades, and you'll see that start to affect our 2020 and beyond lateral lengths in West Virginia. So we expect to be relatively short this year, but the short wells in West Virginia still compete pretty well, because of the liquids content of the gas, and we also have firm gathering and transportation commitments that we're trying to sell in West Virginia as well. So we expect 2020, you'll see a pretty large step change in our lateral lengths in West Virginia.

Okay. So it sounds like maybe these trades are something we could hear and get formalized by the end of the year, is that fair to think?

That is fair to say. I will say I don't know that we will comment on it publicly. That's not typically our practice, but they are in the works.

Okay. And then the last one, just curious if there is any indications around timing of the General Meeting? Obviously that's been a focus point of late, appreciate any color, if you are able to provide any?

Yeah. Michael, the date of the Annual Meeting hasn't been set yet, and it's obviously a Board decision. And the Board is committed to an orderly Annual Meeting process that ensures that all of the shareholders views will be heard and represented. And so, we'll come back to the market when we have more information on that.

All right. Appreciate it. Thanks.

Thanks, Michael.

Thank you. Our next question comes from the line of Brian Singer from Goldman Sachs. You are now live.

Thank you. Good morning.

Hi, Brian.

Two questions, one, and I apologize if you mentioned this earlier, but can you just break down the $50 million portion of the Target 10% Initiative driving down the CapEx relative to the call and the initial plan a few weeks ago, where that's coming from and the risk around that one way or the other?

Yes. Sure, Brian. This is Erin. So as Jimmi Sue mentioned in her talking points, the $50 million is focused in a couple of areas. So the first one we talked about was water hauling, so bringing the rates down on our water hauling fleet, and then also implementing our proprietary water optimization model. The second area is around construction, both on the facility and civil construction side. So we're working diligently to retrofit and redeploy our existing equipment for new wells, and streamline our construction finding by prefabing a lot of that equipment off location. On the civil construction side, we've renegotiated rates for our sound wall rentals, our winter maintenance, and our aggregate trucking. We've also aligned our survey and inspection needs to eliminate any redundancies in our processes. And the third area that we have streamlined our processes around is production operations. So we are refining our work and deploying our resources by exception, which is largely due to the implementation of technology over the course of 2018, that we are now starting to realize the benefits of in 2019. This again allows us to streamline our processes and eliminate any redundant work practices.

Okay. Great. Thank you. And my follow up is just on the constrained production. What are your expectations for how that evolves over the course of 2019, and remind us again what's built into guidance there?

Yeah. What's in the guidance is that we will believe the constraints by the end of 2020. As I've mentioned in the past, I do think that there is real opportunity for us to get that done quicker than the end of 2020, but I think it really will be late 2019, early 2020, before we see any meaningful movement on relieving the constraints.

Great. Thank you so much.

Okay. Thanks, Brian.

Thank you. Our next question comes from the line of Josh Silverstein from Wolfe Research. You are now live.

Yeah. Thanks. Good morning, guys. Just a question on the COO process here. Just wanted to get an understanding of what you guys are trying to look for in a new Operating Officer to come in? You outlined the plan that you think already optimizes the best outlook for production and cash flow optimization. Does this COO have to come in and work with that or three months into the plan - three months into them being hired, they can go and rework the plan and come out with, either a higher or lower growth rate or other cash flow outlooks?

Yeah. Josh, here is what I would say, I think that our team, our organization has the right basic plan in place that we're executing on. My expectation is that a new COO is going to come and bring added leadership and focus on real optimization around operational efficiency, and it would be incrementally improving the plan. I don't think it's going to be throw this plan out and implement a whole new plan as much as help us optimize and get better. The low hanging fruit, we're doing a pretty good job of finding right now on our own. I think that's evident in the $150 million of cash costs that we pulled out since November. I think to truly get to a manufacturing type operation, it takes a little bit different mindset and I think that's where the new COO can help the organization get to.

So, this is more an accountability to have a person in place to go and deliver this game plan, that's the sense I'm getting?

I think it's two - frankly, I think it's - to deliver what we've laid out, I think can be done with the organization as we have it. I think that the new COO is going to help us do better than that. Get us to a truly manufacturing style of operation. And frankly it's a change in mindset, right. I mean this has been an organization that's been driven by volume growth for a decade. And so making the shift to capital efficiency, manufacturing style operation, it will take a little bit of time and I think some different skill sets.

Got it. And then, just wanted to follow up on the land spend. I think you guys have outlined a budget of around $200 million annually. This was also a big gap in the free cash flow differentials that the Rice Brothers outlined. I think it was around $85 million. I think they talked about some apps and technology to roll out and so reduce that amount. Could you just talk about what the difference in the gap there would be as to why it's $100 million annually?

Well, I don't know what their assumptions are, they didn't give much detail on those assumptions. But the reality is, there is money that will have to be spent to maintain our land position, and it can be spent either on leasing, it can be spent on operations to hold land by operations and there is no magic app that's going to decrease the land spend by $100 million. It's just not reality. And frankly, the apps that they've talked about on the land side, we've employed. Actually, we're using those fully now in our land operations. And the spend on land is just the reality of the business and there is no way to wave a magic wand over it and make it get cut in half or more.

Thanks for that. And then just a quick follow-up on that. The $200 million spend for this, is this to just maintain the inventory as is, that's roughly a 12, 13 years, within that range or does this actually extend it beyond that or is it just to make sure it's not depleting?

Josh, it's really to maintain the inventory and for fill-in. There's always going to be gaps in the land position and so it's to fill in those doughnut holes and lengthen laterals. So it's a realistic look at what it will take to manage the land position and the drilling operations.

Great. Thanks, guys.

Okay. Thanks, Josh.

Thank you. Our next question comes from the line of Sameer Panjwani from Tudor Pickering Holt & Company. You're now live.

Hey, guys. Good morning.

Hi, Sameer.

Good morning.

So, given some of the issues that you highlighted earlier around West Virginia and the limited activity that's planned for the region in 2019, what's your appetite for carving off some of that acreage to offset the land spending for bolt-ons in Southwest PA? Seems like it can be a pretty easy way to boost free cash flow, while further high grading your acreage?

Yeah. I mean we're always willing to consider selling acreage that's further back in the drilling queue. If somebody is willing to pay us more than what we think it's worth in our portfolio, we're always open minded about that. I would caution, however, that there is not a long list of buyers for acreage out there right now given where gas prices are and the shape of some companies' balance sheets. So while we're always open minded about that, I would caution about too much optimism in terms of available buyers.

Okay. That makes sense. And then I think you guys mentioned earlier, just as you've ran the sensitivities on your five year plan, just trying to get a sense of how you think about increasing or decreasing activity according to commodity prices in order to meet your target of maximizing free cash flow? I ask because current share pricing is closer to $2.70 versus your outlook of $2.85 that's baked into your five-year outlook?

Yeah. I'd say broadly, Sameer, that lower pricing that we think is going to hold will push us toward lower growth, and then the opposite is also true. But we're not talking about huge swings, right. This plan already contemplates a mid single-digit growth rate. I think that if we believe that the forward curve is going to be to $2.70 or $2.60, that probably pushes us a bit lower and you could see activity come down, but not big changes.

Okay. Thank you.

Thanks, Sameer.

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I'd like to turn the floor back over to management for closing.

All right. Thank you all. This is a very exciting time at EQT and we really are encouraged by the progress that we've already made toward delivering value for our shareholders. Our plan has been successfully executed by the capable and hardworking employees at EQT. We look forward to updating you on our progress and additional upside that we expect to realize throughout this year. As always, none of this will be achievable without the dedication of the outstanding people of EQT. Our thanks go out to all of the EQT team members who are making this plan a reality. Thank you.

Thank you. Ladies and gentlemen, this does conclude our teleconference for today. You may now disconnect your line at this time. Thank you for your participation, and have a wonderful day.