Toby Rice: Yeah. We were certainly encouraged to hear Governor Shapiro’s comments about natural gas, both on increasing potential for power demand. But also his comments about the LNG pause and advising President Biden that this LNG pause is a bad idea. I think Governor Shapiro understands that the people of Pennsylvania understand that natural gas is the economic engine that’s powering the economy here in Pennsylvania and understands that natural gas is the key to decarbonizing, not only our own grids in the U.S., which Pennsylvania is the poster child for how impactful you can be lowering emissions when you replace coal with gas, but also understanding how we can do that on the world stage. People need to recognize — I think a lot of people don’t understand how much power Pennsylvania actually generates.
And with the lowest cost, cleanest source of natural gas in the country being located in Pennsylvania, we have an opportunity to really think about expanding electricity exports to other states. And listen, look at what’s happening in the Northeast part of this country, a lot of them put a lot of eggs in the offshore wind basket, and we consistently see offshore wind get knocked down, have projects get pulled, what’s going to replace that. The sure thing, the thing that’s always been there, natural gas demand, and we have an opportunity here that we are pushing to make sure natural gas can continue to give Americans affordable, reliable clean energy.
Arun Jayaram: Thanks Toby.
Operator: Your next question comes from Jacob Roberts with TPH & Company. Please go ahead.
Jake Roberts: Morning.
Toby Rice: Good morning.
Jake Roberts: Just looking at the second quarter production guide. I apologize if I missed it, but can you help quantify the impact of the non-op side of things on the curtailments and TIL deferrals, please?
Jeremy Knop: Are you talking about from the sale or which you’re talking about specifically?
Jake Roberts: I believe the guide includes the 1 Bcf a day from your side and then also note some non-op TIL deferrals and curtailments as well. So I was just wondering on that non-op side of things.
Jeremy Knop: Yeah. So net to the non-op interest, what’s baked in there is about 10 to 15 Bs and the rest of it is operated deferrals that we — or direct impact of our decisions.
Jake Roberts: Okay. Great. Thank you. And then the second question, I think our work would help us agreeing with you on the outlook on the Southeast and Mid-Atlantic demand growth as we progressed through the decade. Just wanted to get your views on the potential to send more gas that way beyond MVP and the expansion? And maybe related to that, how should we think about third-party volumes on MVP over time?
Jeremy Knop: Yeah. So I think what’s unique about MVP is that it is a — it’s a pipe where EQT owns 60% of the capacity today, and we are the only producer shipper on that pipe. So there’s no other producers who actually can access that market through MVP. The other 40% are held by utilities on the other end. And so I think we are very uniquely positioned in that sense. The expansion will be part of a FERC open season. So who ends up with that capacity just under that regulated process. But it’s certainly something that we think we are positioned to benefit from either way. I mean, there’s value to be created through the expansion. There’s value to be added for the utilities by supplying the new gas in that end market. I mean, we’re all aligned and wanting to have that happen.
Even if we are not the ones to take the capacity out, not win that auction, I think we benefit the other way, we get to sell more gas where producers collectively in Appalachia get to sell more gas to the utilities on the other end of that pipe. So it’s — no matter how you look at it, I think, a big net benefit to EQT.
Jake Roberts: Thanks for your time, guys.
Operator: Your next question comes from Michael Scialla with Stephens. Please go ahead.
Michael Scialla: Hey, morning, everybody. I want to see a little bit more detail on your curtailments in terms of price level you would need to see before you change your decision there on the Bcf per day of curtailments.
Jeremy Knop: Yeah. At a high level, we think about it as cash cost plus F&D costs. We do want to recover the sunk cost of drilling the well. So that’s why we think about it like that. So, I mean, it depends on the area, but call it around $1.50 in basin.
Michael Scialla: Okay. And Jeremy, say you — it sounds like you expect a pretty good step up in price when you get to sort of the October timeframe. If you were to see that $1.50 price persists through the summer before you see that step up, would that suggest you’re going to likely extend those curtailments through the summer?
Jeremy Knop: I mean, look, we’ll always do what’s best to create long-term value. So look, we’re always watching the market. There is always events that happen that we will change our decisions if the facts change. So it depends. But what we’ve mapped out right now is our current expectation.
Michael Scialla: Gotcha. And then just want to follow-up on MVP. You talked about the demand growth you see in the Southeast U.S. and your plans to expand the pipeline, so a lot of focus on the integrated upstream, midstream model for you in your lower cost structure. How do you think about that with your divestiture plan and your potential to lay off some interest in that pipeline? Is it important to maintain control there? Or could — to sell off all your interest there? Just how you’re thinking about marrying those two things.
Jeremy Knop: Yeah. So we have a tremendous amount of optionality, first of all. If you think about — I mean, look, I think if you back in, first of all, in the non-op asset sales side, the $1.1 billion value level that we called out for what we did with Equinor, if you gross that up, that implies about $2.75 billion to that whole package, right? So if the rest of it is a cash sale, you end up with, call it, $2 billion to $2.5 billion of cash coming in the door from that side, right? That’s already, call it, two-thirds of the $3.5 billion asset sale target we talked about a month or two ago when we announce the Equitrans deal. So we don’t have to really divest a lot or many assets on the Equitrans side if we don’t want to.
