EQT Earnings Call NUGGETS: Facility Construction, Drop-Down Schedule
On Thursday, EQT Corp (NYSE:EQT) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Neal Dingmann – SunTrust Robinson Humphrey: Just a couple questions, first just is you alluded to on the drop downs, I guess, my – I was just wondering timing, how soon could we begin to see some of those drop downs and just again remind me, the rationale of initially why to buy to the EQT and then drop down versus, I thought maybe there would a lower cost structure the other way?
David L. Porges – Chairman, President and CEO: Well, I’m not that comfortable giving timing guidance on drop downs at this point, because we just kicked this off. Obviously, routinely we would want to have drop downs, but I just assume to stay away from – too much guidance on that. Neal, was your other question about why the (construct) we are using for the time being at least is to build facilities at EQT and then drop as opposed to building at EQM?
Neal Dingmann – SunTrust Robinson Humphrey: Correct. I am certain you looked at sort of cost basis. I am wanted the benefits, how much you anticipate saving that?
David L. Porges – Chairman, President and CEO: Certainly, over time we would expect there will be more facilities constructed at EQM. The issue that we have though is that as we understand because we are neophyte in this – at MLP world. But as we understand it what we really trying to do to drive value at that level is, as you try to drive unit distribution growth and it is more difficult to do that when a high percentage of the capital employed is tied up in non-cash generating assets, such as assets under construction. So, from that perspective – actually you think even with large MLPs. You see that there’s only a certain percentage of their capital that they have invested in non-cash generating assets, is just the size of EQM, that’s not a very big number right now. Over time you would expect to see that number to grow.
Neal Dingmann – SunTrust Robinson Humphrey: Just two more if I could, Dave for you or Steve; one, as well as looking at the – I think the last presentation, you all had out. I think you’ve identified maybe 30% — 35% of the Marcellus as being wet. Number one, is that still accurate; and then number two, around that clearly with these pads, what kind of well cost savings should we continue to assume as this 10 well pad just is amazing, so I’m just wondering, how much savings we could see because of these?
David L. Porges – Chairman, President and CEO: At this time, I’m sure you are bored of hearing my voice, so I’ll let Steve answer that.
Steven T. Schlotterbeck – SVP and President, Exploration and Production: Neal, I think regarding the breakout of wet versus non-wet that still holds. I will be clear on our definition of wet versus non-wet because into those numbers is an 1,100 BTU cut off. So I think that’s not always consistent amongst companies, but that’s what we’re using to come up with that number. But nothing has changed in that area. Regarding well cost savings, the average cost numbers that we’re using for our type curves incorporate the fact that some of our well will be on 10 well pads. So I think you will be safe to continue to use those type curve numbers.
Neal Dingmann – SunTrust Robinson Humphrey: Then lastly, maybe Steve just following up as far as uniquely (indiscernible) would have cut CapEx a little bit even on the upstream side. Just wondering, when you look at lease expirations any – again you generally haven’t had any issues there, will that continue to be the case?
Steven T. Schlotterbeck – SVP and President, Exploration and Production: Nearly, all of our acres is hbp. We have a small handful of drilling commitments that we’re easily able to keep up with. So really no issues whatsoever with lease expirations.
Anne Cameron – BNP Paribas: Just a question on the drop-down schedule. I know you don’t want to talk about it too much, but you made a comment before I was just curious about. If you’re going to fund CapEx at EQT with proceeds from drop downs at EQM, I mean, just given the run rate of your spending this year that implies a somewhat slower drop-down schedule than I was expecting if we slap in an assumption of like 10 or 11 whatever you want multiple on it. Can you just comment on whether or not the drop-down schedule could get ahead of your CapEx?
David L. Porges – Chairman, President and CEO: Certainly, it could, yeah because all of this is over time. Rarely will you find a quarter and maybe even a calendar year in which they just line up perfectly. So, yes, absolutely it is possible for us to run ahead. And I do realize that over a longer period of time, of course, there will be more dropdowns than there will be CapEx, more and more of the business will shift to EQM. So, the issue that we get into – the struggle that we have is trying to forecast what dropdowns are, frankly especially given the various disclosure constraints with the new entity. So, yeah, absolutely there can be periods of time even in the near-term when dropdowns run ahead of CapEx.
Anne Cameron – BNP Paribas: And is there a target of how much of the EQM units that EQT wants to remain the owner of?
David L. Porges – Chairman, President and CEO: No, we do not have such a target.
Anne Cameron – BNP Paribas: How important are the IDCs from your drilling business in terms of shielding gains on sale from those dropdown?
David L. Porges – Chairman, President and CEO: That is definitely something that will be taken into account when there are timing dropdowns.
Anne Cameron – BNP Paribas: Okay, I guess what I asking is, is there a scenario where you could maybe spin-off the LP and the GP and dropdown without those if those IDCs able there to shield it?
David L. Porges – Chairman, President and CEO: Sure. As you know we have said that we are open to anything that create shareholder value. That is the tax attributes or something that or one of the issues that one ways when looking at those kinds of decisions. So, I don’t feel that comfortable saying anything more than yes we would certainly take that into account, but it’s not the – that’s not the sole determining factor in anything that we do from a structural perspective.