EQT Earnings Call Nuggets: Midstream Delays and Capital Allocation
Neal Dingmann – SunTrust Robinson Humphrey: Dave, maybe just first quick question. I won’t stay too long on the Utica. You mentioned about finished frac in the three wells. Did you mention that you tied the first well in the pipeline, did I understand that right?
David L. Porges – Chairman, President and CEO: Yes, that was just hours ago, yes.
Neal Dingmann – SunTrust Robinson Humphrey: Then you think on a go-forward basis, now, I mean, I know, there had been some midstream delays. So, once you’ve got this first one on is, is it fair to say as you and Steve start rolling out these wells, you’ll be able to tie them in sort of timely fashion?
David L. Porges – Chairman, President and CEO: Well, certainly, we’d be able to tie them, if it were just Steve and I turning them on line. I think, it’s other people doing it. Yes, look, the issue we are probably going to have on Midstream with the Utica is going to be the same as others do, which is we are in a window where we’ve anticipated that there is going to be a – there could be some wet gas and of course, it will be the processing, that’s the issue. So, as far as the pipe, yeah, I think we are fine on that for our plans and then the issue is going to be when we decide that what we really need to do to extract the most economic, is to strip the liquids. Crude oil, of course, the extent we have that, that’s something that’s coming out, if it’s liquids, it’s surface pressures than it’s, of course a different story therefor a little bit easier to deal with over time.
Neal Dingmann – SunTrust Robinson Humphrey: Then I know you all have said kind of reaching that I don’t know if it’s 50,000 which your goal is now. I mean is there a certain time that if I know acreage is a bit tougher to come by there. What are your thoughts on that? Dave, I mean would you still sort of stick with what you have or is it kind of all or nothing, as you can’t add significant amount of acreage here in the near future?
David L. Porges – Chairman, President and CEO: Well, the 50,000 acres of course was always just kind of a benchmark. What we really mean is something that is an economical size. So, at this point we’re encouraged that there are some pieces out there that we can look at and we’ll just have to see how that plays out. I actually don’t know that I’d say that acreage is not available. I think that a lot of folks are sorting through their portfolios. I understand that’s a routine thing to happen, maybe that’s more normal that it’s happening now after a lot of people compile portfolios and now they are sorting, so you know just as we are with our portfolio of course, what fits, what doesn’t fit and not just from the perspective of what looks good from a reserve perspective, but what helps you put together a development plan of reasonable scale. I think we’re all kind of going through that process. So, I’m not discouraged actually about there being no opportunities out there.
Neal Dingmann – SunTrust Robinson Humphrey: Then turning over to obviously Marcellus, I was just looking at your slide where you outlined the amount of mid-stream as far as the transmission capacity over the 1.7 in the miles of transmission pipeline. I guess what I’m getting at is now that you’re able to turn these pads and lines faster than expected, obviously, it’s a nice problem to have I guess my question is it seems like because you guys do control your own pipeline or your own midstream? Are you going to be ramping that up as far as how quick and how much money you will be adding to the midstream or are the plans already sufficient enough to sort of factored in this faster pads and line coming on?
David L. Porges – Chairman, President and CEO: We certainly have plans in line that are consistent with the production plans, but it is a rapid rate there is no doubt about that. So, that does require a fair amount of hustling to keep going and it’s not reverse, we continue to be open to moving some of our volumes through other people’s lines, just as we build our facilities to often times accommodate other producers. So yes we have kept that in mind. Now, we don’t of course control our own processing, so that’s one where we continue to work with folks who do that to make sure that contractually we’re able to organize enough capacity. But the volumes are going up so quickly in this neck of the woods that I’d say that we’re always feeling as if we’re running pretty fast. So, I don’t know that we’d ever want to feel that we’re that we’re sanguine, I think we feel optimistic that we can get things done, but I – we can’t rest on our laurels because the lines are just jumping up so quickly.
Neal Dingmann – SunTrust Robinson Humphrey: Last question, I think you’ve said this before David. I understand this is right as far as kind of potential for drop down, it’s in the mid-stream, whatever. If you are able to bring on a little more or you spend a little more in that area, is it always continue to dropdown about a quarter of what you have or if you could just remind us of kind of the plans on kind of annual basis of what you potentially could dropdown?
David L. Porges – Chairman, President and CEO: Well, we don’t really have a plan on an annual basis that goes out there. We have said that over time, let’s say the floor is that we would like to be generating proceeds at the EQT level from drops that equals the amount of spending EQT has on the midstream. But over time, of course we will want to be dropping more into EQM than we are spending. The other thing to take into account when you’re looking at what I gathered from the markets perspective was larger than expected drop is a lot of these assets that we’ll be dropping when we drop a specific project or asset. They’re going to be lumpy, so some of them are going to be larger and some of them are going to be smaller, but you should not take the size of that drop to be an indication that somehow we’ve ramped up our decisions on spending at Midstream at EQT level. We’re going to keep dropping as it looks economic to do so. It’s just that we’ve got this floor where, over time, we’d like to make sure we’re dropping enough so that the proceeds are going to be paying for the Midstream expenditures.
Phillip Jungwirth – BMO Capital Markets: With over $1 billion in cash coming in, in the second half with – from EQM and the utility sale and then what looks to be a minimal outspend in 2014 and beyond, how are you thinking about capital allocation between; one, accelerating in the Marcellus; two, share buybacks there; or, three, increasing the dividend?
David L. Porges – Chairman, President and CEO: We are looking at it – I don’t want to be trite here, but we are looking at the same way we will always look at it. We think that – we’re not – we don’t believe our decisions are being, or should be, overly influenced by what the balance sheet says. As I mean unless, of course, we just didn’t have enough money to do some of the things that we wanted. But we should be investing in the projects that create value and foregoing the projects that don’t. Being temporarily a little bit more liquid, we don’t feel creates any pressure or burning holes in our pockets, et cetera. So we do examine other ways to invest the money, such as share buybacks and dividends. But we view it the same way I’d say that we always do. We compare the investment opportunities and, yes, anybody who looks at our incentive comp plans knows that the way that this management gets paid is to have our share price perform over the course of time. So hopefully, we’re aligned with the shareholders in that regard. We just want to create value. I’d say from that perspective, it hasn’t changed. When I became CEO, the strategy was we need to pick what we want to invest in and what we want to offload and I just say that we’re kind of in the midst of that process. So, we’ll continue also to look at monetizing things that whereby perhaps the value is greater in the hands of others…
Phillip Jungwirth – BMO Capital Markets: Then on EQM with the GP potentially in the high end of the split in the next 18 months and probably could be earlier assuming a lower coverage ratio of 1.1 times. I mean how would that impact the valuation and EQM’s ability to raise capital to pay for future dropdown given that the GP will be in the higher end of the split, so we are early and then what was the GP value that in the $32.5 million of proceeds of EQM stock per unit.
David L. Porges – Chairman, President and CEO: Actually Phil probably has the answer to that.
Philip P. Conti – SVP and CFO: The units that we got back in addition to the cash were 480,000 limited partner units and then 268,000 GP units.
David L. Porges – Chairman, President and CEO: So the way to look at that will be the 400,000 LP units at the market price at the time and then the rest is the GP.
Phillip Jungwirth – BMO Capital Markets: Then next question, can you share with us your views on both near term and long-term on where you see Marcellus base is going and then how regional weakness will impact the third quarter?
David L. Porges – Chairman, President and CEO: For that one I have been doing a lot of the talking. So, I will turn that over to Randy. Randy, what are your thoughts on the base?
Randall L. Crawford – SVP and President, Midstream, Distribution and Commercial: We talked about short-term and long-term. In the short-term, I mean the influx of supply, the natural gas in the region for the purpose of blending, higher BTU ethane produces to put pressure on the basin. So this is – we think will be somewhat alleviated with the Mariner West project that just came online this week and the ATEX project that is set to come on in early 2014. Just to close a loop on that ethane topic, EQT has a tremendous dry gas resource in Western PA as you know and particularly in Greene County. So that provides us the ability to blend our ethane with wet gas production for the foreseeable future. Now in regard to the long-term, in the long-term we have stayed ahead of the curve in terms of planning our takeaway capacity. So currently we have almost 655 million dekatherms per day of firm pipeline capacity that’s out of the basin and we have got approximately 400 million dekatherms per day of firm sales, so for a total of 1.05 Bcf per day. So we recognize that the basin is in its growing stage and we are remaining flexible with regard to making additional long-term commitments. Obviously with that said, we have committed to an incremental 300 million a day pipeline capacity expansion into the Gulf Coast in the Mid-Atlantic markets which we have scheduled to come on in service by the end of 2014. So moving forward we continue to add firm capacity to the portfolio and we added to the diversity of markets and so we’ve been on this issue and we are continuing to look at those diversity of markets and liquidity. So in the long run we think that including the growing southeast markets we should be in good shape.
Phillip Jungwirth – BMO Capital Markets: Last question real quick. On the Upper Devonian wells did you use RCS on those?
Steven T. Schlotterbeck – SVP and President, Exploration and Production: This Steve. We used RCS on one of the four wells that we have production data on. So the results that we are quoting are three-quarters based on our 60-foot clusters and one-quarter based on the 30-foot cluster test. Our expectation is, just like we’re seeing in the Marcellus, I think we’ll have to test this to find out, but I think we’re – we think it’s likely that the Upper Devonian will benefit from 30-foot cluster spacing. So for the wells we’re drilling this year, they’ll be using the 30-foot clusters.
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