EQT Corp. on Dec. 13 launched a $1 billion share repurchase program and announced the reinstatement of its regular dividend, marking what CEO Toby Rice called “the next phase of the sustainable shale era.”
The Pittsburgh-based shale gas giant has eliminated approximately $500 million of recurring annual costs from the business since Rice took its helm in July 2019 to lead a makeover of the company that included repairing its balance sheet and repositioning EQT as a highly-efficient, technology-driven operator and the leading producer of natural gas in North America.
“We have entered the next phase of the sustainable shale era—one that values free cash flow generation, balance sheet strength, emissions reduction and returning capital to shareholders,” Rice commented in a release by the company. “Now, we are executing on all four of these pillars.”
Oil and Gas Investor Executive Q&A: Extreme EQT Makeover
On Dec. 13, EQT said the company’s board of directors authorized the share repurchase program, under which the company is authorized to repurchase up to $1 billion of its outstanding common stock. The share repurchase authority is effective immediately and valid through year-end 2023. This program is equivalent to approximately 13% of EQT’s current market cap.
Meanwhile, the reinstatement of EQT’s regular quarterly cash dividend starts in the first quarter of 2022, at an annual dividend rate of $0.50 per share of the company’s common stock ($0.125 per quarter), representing a competitive current yield of approximately 2.5%.
EQT expects to generate approximately $1.9 billion of free cash flow in 2022 and expects to generate an average of roughly $1.6 billion of free cash flow per year from 2023 through 2026 in a flat $3 per MMBtu natural gas price environment. This should provide EQT with robust dividend coverage and ample room for future dividend growth throughout commodity price cycles, according to its release.
“With a premier asset base projected to generate approximately $5.6 billion in available cash through 2023 and over $10 billion through 2026 we have ample flexibility to achieve both our debt reduction goals and execute capital return initiatives in any price environment,” Rice added in the release.
As part of the company’s continued commitment to attaining investment grade metrics, EQT also revised its long-term leverage target to between 1.0x and 1.5x, measured at the lower of $2.75 per MMBtu flat natural gas pricing or Nymex strip pricing. To achieve this target leverage, EQT said it has committed to reducing absolute debt by at least $1.5 billion by the end of 2023, which at current pricing is expected to result in leverage of 1.0x or less.
The execution of this plan is expected to result in investment grade financial metrics during 2022, setting the stage for potential credit ratings upgrades and providing maximum future financial flexibility, the company release noted.
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