Equitable Resources, Inc. (NYSE: EQT) today announced first quarter 2008
earnings per diluted share (EPS) of $0.57, 24% higher than the $0.46 EPS
earned in the first quarter 2007, driven by higher net operating
revenues at Production and Midstream. Operating cash flow was $146.8
million, 84% higher than the first quarter 2007, resulting from lower
cash taxes in addition to the higher net income.
Quarterly Results by Business
Equitable Production
Equitable Production had operating income for the quarter of $60.3
million, 56% higher than the $38.8 million earned in the same period
last year. Production operating revenues were $105.1 million, $17.1
million higher than the $88.0 million reported in 2007 as a result of
higher average well-head pricing and a 2% increase in production sales
volumes. Adjusting for the sale of assets in the second quarter 2007,
sales volumes increased by 9%.
Operating expenses for the quarter were $44.7 million compared to $49.2
million last year, a 9% decrease. Higher operating expenses related to
the company's ramp-up in drilling activities were more than offset by
lower selling, general and administrative expenses due to the absence of
non-recurring charges, totaling $10.7 million, for legal disputes
included in the first quarter 2007 results.
Horizontal drilling continued to exceed the company's expectations in
the first quarter 2008. The number of wells drilled in the quarter
exceeded projections and production from the wells turned-in-line is
consistent with the expected decline curve, updated March 11, 2008 and
posted on the company's website. The company drilled a total of 139
gross wells in the first quarter 2008, including 69 horizontal wells, 54
of which were development wells targeting the Huron shale. The company
also drilled 15 horizontal wells intended to evaluate its emerging
plays, including the Berea sandstone, Marcellus shale, Rhinestreet
shale, Huron re-entries and Cleveland shale. In addition, the company
successfully completed its first multilateral shale well in the Lower
Huron which is profitable at a cost of $1.0 million.
As a result of the continued success and acceleration of the pace of
horizontal drilling, Equitable Production now expects to drill more than
300 horizontal wells in 2008, an increase from prior projections and a
240% increase over 2007. The company reiterates its estimate that daily
sales will increase to 235 MMcfe by year-end.
Equitable Midstream
Equitable Midstream had first quarter operating income of $60.9 million
compared to $51.6 million reported for the same period last year. Net
operating revenues for the first quarter were $93.5 million, 12% higher
than last year's $83.1 million. The increase in net operating revenues
was driven by higher gathering rates, higher natural gas liquids prices
realized by the processing business, and higher storage optimization
revenues in transmission and storage, partially offset by lower gathered
volumes resulting from the contribution of assets to the Nora joint
venture with Range Resources (the "Nora JV") in the second quarter 2007.
Operating expenses increased year over year to $32.6 million from $31.5
million. The increase is primarily attributable to business expansion
related increases of $2.4 million in selling, general, and
administrative and $0.3 million in depreciation, depletion and
amortization, partially offset by a decrease in operating and
maintenance costs associated with the sale and contribution of assets to
the Nora JV.
The Midstream group continued to make progress on its three major
infrastructure projects during the quarter. The Big Sandy pipeline is
complete and is being commissioned; the construction of the Langley
processing plant continues to progress on a schedule supporting a third
quarter startup; and phase one of the Mayking corridor construction is
also on track for third quarter completion. These three projects
combined, when operational, are expected to provide the takeaway
capacity currently needed to achieve the company's growth targets.
Equitable Distribution
Equitable Distribution's operating income totaled $38.0 million for 2008
compared to $33.7 million for the same period last year. Net operating
revenues were $66.1 million for 2008, slightly higher than the $65.4
million for 2007. Weather in the first quarter of 2008 was 1% colder
than the first quarter of 2007, but was still 2% warmer than the 30-year
average.
Operating expenses declined by $3.7 million to $28.1 million, as $4.9
million of expenses incurred in 2007 in connection with the now
terminated agreement to acquire Peoples Gas and Hope Gas were partially
offset by an increase in bad debt expense.
Other Business
Executive Performance Incentive Programs
The company has an Executive Performance Incentive Program (EPIP)
designed to align management's long-term incentive compensation with the
absolute and relative returns earned by the company's shareholders. The
expense of this program, which ends on December 31, 2008, varies based
in part on changes in Equitable's stock price. The significant stock
appreciation in the first quarter resulted in changes to the company's
assumptions used to calculate EPIP expense. The EPIP expense for the
quarter was $42.5 million, and the estimated expense for 2008 is $77
million, assuming no further changes in assumptions.
Hedging
The company increased its hedge position for 2008 through 2015 using
cashless collars. The new hedges are intended to help assure a return on
the 2008 capital investments in drilling and infrastructure. As of April
29, 2008, the approximate volumes and prices of the company's total
hedge position for 2008 through 2010 are:
|
Swaps
|
|
2008**
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
Total Volume (Bcf)
|
|
|
38
|
|
|
37
|
|
|
35
|
|
Average Price per Mcf (NYMEX)*
|
|
$
|
4.62
|
|
$
|
5.91
|
|
$
|
5.96
|
|
|
|
|
|
Collars
|
|
2008**
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
Total Volume (Bcf)
|
|
9
|
|
|
23
|
|
|
21
|
|
Average Floor Price per Mcf (NYMEX)*
|
|
$
|
7.59
|
|
$
|
7.34
|
|
$
|
7.29
|
|
Average Cap Price per Mcf (NYMEX)*
|
|
$
|
12.00
|
|
$
|
13.68
|
|
$
|
13.51
|
|
|
* The above price is based on a conversion rate of 1.05 MMBtu/Mcf
|
|
|
** April through December
|
Operating Income
The company reports operating income by segment in this press release.
Both interest and income taxes are controlled on a consolidated,
corporate-wide basis, and are not allocated to the segments.
The following table reconciles operating income by segment as reported
in this press release to the consolidated operating income reported in
the company's financial statements:
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Operating income (thousands):
|
|
|
|
|
|
Equitable Production
|
|
$
|
60,332
|
|
|
$
|
38,761
|
|
|
Equitable Midstream
|
|
|
60,854
|
|
|
|
51,641
|
|
|
Equitable Distribution
|
|
|
37,950
|
|
|
|
33,677
|
|
|
Unallocated expenses
|
|
|
(39,713
|
)
|
|
|
(25,225
|
)
|
|
Operating income
|
|
$
|
119,423
|
|
|
$
|
98,854
|
|
Unallocated expenses are primarily due to incentive compensation. For
each period presented, the difference between equity in earnings of
nonconsolidated investments as reported on the company's statements of
consolidated income and on Equitable Midstream's operational and
financial report is the earnings from the company's ownership interest
in Appalachian Natural Gas Trust. Other segment financial measures
identified in this press release are reconciled to the most comparable
financial measures calculated in accordance with generally accepted
accounting practices ("GAAP") on the attached operational and financial
reports.
Operating Cash Flows
Operating cash flow is presented because of its acceptance as an
indicator of an oil and gas exploration and production company's ability
to internally fund exploration and development activities and to service
or incur additional debt. The company has also included this information
because changes in operating assets and liabilities relate to the timing
of cash receipts and disbursements which the company may not control and
may not relate to the period in which the operating activities occurred.
Operating cash flow should not be considered in isolation or as a
substitute for net cash provided by operating activities prepared in
accordance with generally accepted accounting principles. The table
below reconciles operating cash flow with net cash provided by operating
activities as derived from the statements of condensed consolidated cash
flows to be included in the company's Form 10-Q for the three months
ended March 31, 2008.
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
|
2008
|
|
|
|
2007
|
|
Operating cash flow (thousands):
|
|
$
|
146,756
|
|
|
$
|
79,889
|
|
Add back (deduct):
|
|
|
|
|
|
Change in operating assets and liabilities
|
|
|
(40,723
|
)
|
|
|
145,581
|
|
Net cash provided by operating activities
|
|
$
|
106,033
|
|
|
$
|
225,470
|
Equitable's teleconference with securities analysts, which begins at
10:30 a.m. Eastern Time today, will be broadcast live via Equitable's
website, http://www.eqt.com
and will be available for seven days.
Equitable Resources is a natural gas-focused energy company, with an
emphasis on Appalachian area natural gas activities, including
production, gathering, processing, transmission, storage and
distribution. For information please visit http://www.eqt.com.
Equitable Resources management speaks to investors from time to time.
Slides for these discussions will be available online via Equitable's
website. The slides may be updated periodically.
Cautionary Statements
Daily sales volumes at quarter end is an operational estimate of the
daily sales volume on a typical day (excluding curtailments) at the end
of the quarter.
Disclosures in this press release contain forward-looking statements.
Statements that do not relate strictly to historical or current facts
are forward-looking. Without limiting the generality of the foregoing,
forward-looking statements contained in this press release specifically
include the expectations of plans, strategies, objectives and growth and
anticipated financial and operational performance of the company and its
subsidiaries, including guidance regarding the company's drilling and
infrastructure programs and initiatives, the expected decline curve,
production and sales volumes, capital expenditures, capital budget,
financing plans and tax position. A variety of factors could cause the
company's actual results to differ materially from the anticipated
results or other expectations expressed in the company's forward-looking
statements. The risks and uncertainties that may affect the operations,
performance and results of the company's business and forward-looking
statements include, but are not limited to, those set forth under Item
1A, "Risk Factors" of the company's most recently filed Form 10-K.
Any forward-looking statement speaks only as of the date on which such
statement is made and the company does not intend to correct or update
any forward-looking statement, whether as a result of new information,
future events or otherwise.
|
|
|
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
|
|
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
|
|
(Thousands except per share amounts)
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
Operating revenues
|
|
$
|
535,774
|
|
$
|
456,546
|
|
Cost of sales
|
|
|
271,178
|
|
|
220,012
|
|
Net operating revenues
|
|
|
264,596
|
|
|
236,534
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Operation and maintenance
|
|
|
25,592
|
|
|
27,444
|
|
Production
|
|
|
16,520
|
|
|
16,230
|
|
Exploration
|
|
|
555
|
|
|
282
|
|
Selling, general and administrative
|
|
|
71,741
|
|
|
66,297
|
|
Depreciation, depletion and amortization
|
|
|
30,765
|
|
|
27,427
|
|
Total operating expenses
|
|
|
145,173
|
|
|
137,680
|
|
|
|
Operating income
|
|
|
119,423
|
|
|
98,854
|
|
|
|
Gain on sale of available-for-sale securities
|
|
-
|
|
|
1,042
|
|
Other income
|
|
|
3,524
|
|
|
831
|
|
Equity in earnings of nonconsolidated investments
|
|
|
1,294
|
|
|
109
|
|
Interest expense
|
|
|
13,653
|
|
|
13,111
|
|
Income before income taxes
|
|
|
110,588
|
|
|
87,725
|
|
Income taxes
|
|
|
40,068
|
|
|
31,107
|
|
Net income
|
|
$
|
70,520
|
|
$
|
56,618
|
|
|
|
Earnings per share of common stock:
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
121,891
|
|
|
121,217
|
|
Net income
|
|
$
|
0.58
|
|
$
|
0.47
|
|
|
|
Diluted:
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
122,927
|
|
|
122,757
|
|
Net income
|
|
$
|
0.57
|
|
$
|
0.46
|
|
|
|
|
|
|
|
|
|
(A)
|
|
Due to the seasonal nature of the Company's natural gas
distribution and storage businesses and the volatility of
commodity prices, the interim statements for the three month
periods are not indicative of results for a full year.
|
|
|
|
|
|
|
|
EQUITABLE PRODUCTION
|
|
OPERATIONAL AND FINANCIAL REPORT
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
2007
|
|
OPERATIONAL DATA
|
|
|
|
|
|
|
|
Natural gas and oil production (MMcfe)
|
|
|
21,021
|
|
|
|
20,416
|
|
|
Company usage, line loss (MMcfe)
|
|
|
(1,306
|
)
|
|
|
(1,078
|
)
|
|
Total sales volumes (MMcfe)
|
|
|
19,715
|
|
|
|
19,338
|
|
|
|
|
Average (well-head) sales price ($/Mcfe)
|
|
$
|
5.21
|
|
|
$
|
4.42
|
|
|
|
|
Lease operating expenses, excluding production taxes ($/Mcfe)
|
|
$
|
0.28
|
|
|
$
|
0.32
|
|
|
Production taxes ($/Mcfe)
|
|
$
|
0.49
|
|
|
$
|
0.47
|
|
|
Production depletion ($/Mcfe)
|
|
$
|
0.81
|
|
|
$
|
0.70
|
|
|
|
|
Production depletion
|
|
$
|
17,091
|
|
|
$
|
14,332
|
|
|
Other depreciation, depletion and amortization
|
|
|
1,030
|
|
|
|
961
|
|
|
Total depreciation, depletion and amortization
|
|
$
|
18,121
|
|
|
$
|
15,293
|
|
|
|
|
Capital expenditures (thousands)
|
|
$
|
96,463
|
|
|
$
|
56,765
|
|
|
|
|
FINANCIAL DATA (Thousands)
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
105,077
|
|
|
$
|
87,978
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Lease operating expense excluding production taxes
|
|
|
5,962
|
|
|
|
6,533
|
|
|
Production taxes
|
|
|
10,223
|
|
|
|
9,573
|
|
|
Exploration expense
|
|
|
555
|
|
|
|
282
|
|
|
Selling, general and administrative
|
|
|
9,884
|
|
|
|
17,536
|
|
|
Depreciation, depletion and amortization
|
|
|
18,121
|
|
|
|
15,293
|
|
|
Total operating expenses
|
|
|
44,745
|
|
|
|
49,217
|
|
|
|
|
Operating income
|
|
$
|
60,332
|
|
|
$
|
38,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITABLE MIDSTREAM
|
|
OPERATIONAL AND FINANCIAL REPORT
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
|
|
2008
|
|
2007
|
|
OPERATIONAL DATA
|
|
|
|
|
|
|
|
Gathering and processing:
|
|
|
|
|
|
Gathered volumes (MMBtu)
|
|
|
33,837
|
|
|
41,293
|
|
Average gathering fee ($/MBtu)
|
|
$
|
0.98
|
|
$
|
0.84
|
|
Gathering and compression expense ($/MBtu)
|
|
$
|
0.34
|
|
$
|
0.33
|
|
NGLs Sold (Mgal)
|
|
|
18,393
|
|
|
18,630
|
|
Average NGL sales price ($/gal)
|
|
$
|
1.37
|
|
$
|
0.92
|
|
|
|
Transmission and storage:
|
|
|
|
|
|
Transmission pipeline throughput (MMBtu)
|
|
|
14,760
|
|
|
12,288
|
|
|
|
Net operating revenues (thousands):
|
|
|
|
|
|
Gathering and processing
|
|
$
|
44,783
|
|
$
|
39,749
|
|
Transmission and storage
|
|
|
48,670
|
|
|
43,365
|
|
Total net operating revenues
|
|
$
|
93,453
|
|
$
|
83,114
|
|
|
|
Net operating income (thousands):
|
|
|
|
|
|
Gathering and processing
|
|
$
|
22,122
|
|
$
|
16,758
|
|
Transmission and storage
|
|
|
38,732
|
|
|
34,883
|
|
Total net operating income
|
|
$
|
60,854
|
|
$
|
51,641
|
|
|
|
Depreciation and amortization (thousands):
|
|
|
|
|
|
Gathering and processing
|
|
$
|
5,528
|
|
$
|
5,060
|
|
Transmission and storage
|
|
|
1,690
|
|
|
1,815
|
|
Total depreciation and amortization
|
|
$
|
7,218
|
|
$
|
6,875
|
|
|
|
Capital expenditures (thousands)
|
|
$
|
95,565
|
|
$
|
88,168
|
|
|
|
FINANCIAL DATA (Thousands)
|
|
|
|
|
|
|
|
Total operating revenues
|
|
$
|
221,325
|
|
$
|
170,287
|
|
Purchased gas costs
|
|
|
127,872
|
|
|
87,173
|
|
Net operating revenues
|
|
|
93,453
|
|
|
83,114
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Operating and maintenance
|
|
|
15,265
|
|
|
16,887
|
|
Selling, general and administrative
|
|
|
10,116
|
|
|
7,711
|
|
Depreciation and amortization
|
|
|
7,218
|
|
|
6,875
|
|
Total operating expenses
|
|
|
32,599
|
|
|
31,473
|
|
|
|
Operating income
|
|
$
|
60,854
|
|
$
|
51,641
|
|
|
|
Other income
|
|
$
|
3,383
|
|
$
|
763
|
|
Equity in earnings of nonconsolidated investments
|
|
$
|
1,155
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
EQUITABLE DISTRIBUTION
|
|
OPERATIONAL AND FINANCIAL REPORT
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2008
|
|
2007
|
|
|
|
OPERATIONAL DATA
|
|
|
|
|
|
|
Heating degree days (30-year average: 2,930)
|
|
2,884
|
|
|
2,848
|
|
|
|
Residential sales and transportation
|
|
|
|
|
volumes (MMcf)
|
|
12,063
|
|
|
11,950
|
|
Commercial and industrial volumes (MMcf)
|
|
11,611
|
|
|
10,006
|
|
Total throughput (MMcf) - Distribution
|
|
23,674
|
|
|
21,956
|
|
|
|
Net operating revenues (thousands):
|
|
|
|
|
Residential
|
$
|
41,288
|
|
$
|
41,175
|
|
Commercial & industrial
|
|
19,834
|
|
|
17,957
|
|
Off-system and energy services
|
|
4,944
|
|
|
6,310
|
|
Total net operating revenues
|
$
|
66,066
|
|
$
|
65,442
|
|
|
|
Capital expenditures (thousands)
|
$
|
7,605
|
|
$
|
11,820
|
|
|
|
FINANCIAL DATA (Thousands)
|
|
|
|
|
|
|
Total operating revenues
|
$
|
255,962
|
|
$
|
251,381
|
|
Purchased gas costs
|
|
189,896
|
|
|
185,939
|
|
Net operating revenues
|
|
66,066
|
|
|
65,442
|
|
|
|
Operating expenses:
|
|
|
|
|
Operating and maintenance
|
|
10,116
|
|
|
10,259
|
|
Selling, general and administrative
|
|
12,947
|
|
|
16,553
|
|
Depreciation and amortization
|
|
5,053
|
|
|
4,953
|
|
Total operating expenses
|
|
28,116
|
|
|
31,765
|
|
|
|
Operating income
|
$
|
37,950
|
|
$
|
33,677
|
|
|
|
|
|
|
|
