PITTSBURGH--(BUSINESS WIRE)--EQT Corporation (NYSE: EQT) today announced first quarter 2015 net
income attributable to EQT of $173.4 million, or $1.14 per diluted share
(EPS), comparable to the first quarter 2014 earnings of $192.2 million,
or $1.26 per diluted share. Adjusted net income was $164.3 million in
the first quarter 2015, $41.2 million lower than the first quarter 2014,
while 2015 adjusted EPS was $1.08, $0.27 lower. Adjusted operating cash
flow attributable to EQT was $386.2 million in the first quarter 2015,
$72.2 million lower than the first quarter 2014. The non-GAAP financial
measures are detailed and reconciled in the Non-GAAP Disclosures section
of this news release.
Highlights:
-
Production sales volume was 37% higher
-
Midstream gathering revenue was 44% higher
-
Midstream transmission revenue was 38% higher
-
Realized natural gas price was 33% lower
-
Cash balance was $1.6 billion (excluding EQM)
-
A $1.5 billion undrawn, unsecured revolver
RESULTS BY BUSINESS
EQT PRODUCTION
EQT Production achieved sales volume of 145.2 Bcfe in the first quarter
2015, 37% higher than the first quarter 2014, and 6.2% higher than the
fourth quarter 2014.
The average realized sales price was 39% lower than last year, which
more than offset the impact of the increase in sales volume. Operating
income for the first quarter was $185.8 million, $91.4 million lower
than the same quarter last year. Adjusted net operating revenue for the
quarter (a non-GAAP financial measure) was $401.8 million, which was
$83.6 million lower.
EQT Production’s operating expenses for the quarter were $316.4 million,
$81.2 million higher than the same period last year, consistent with the
significant growth in sales volume. Depreciation, depletion, and
amortization (DD&A) was $40.2 million higher. Transportation and
processing expenses, which were previously presented as revenue
deductions, were $15 million higher than last year. Selling, general and
administrative (SG&A) was $4.1 million higher, excluding $11.3 million
due to rig termination charges and property impairments. Exploration
expense was $11.1 million higher; and lease operating expense (LOE),
excluding production taxes, was $1.7 million higher. Production taxes
were $2.3 million lower resulting from lower unhedged price. Per unit
LOE, including production taxes, was 30% lower.
The Company drilled (spud) 49 gross wells during the first quarter 2015,
including 36 Marcellus wells, with an average length-of-pay of 5,280
feet; 11 Upper Devonian wells, with an average length-of-pay of 5,680
feet; and two Permian wells, with an average length-of-pay of 7,750
feet. Additionally, in response to low oil prices, the Company made a
decision to suspend drilling on its acreage in the Permian Basin during
the first quarter 2015.
Realized Price
In the first quarter, the Company’s average realized price was $3.70 per
Mcfe, 33% lower than the $5.51 per Mcfe realized in the first quarter
2014 – with $2.77 per Mcfe allocated to EQT Production and $0.93 per
Mcfe allocated to EQT Midstream.
Guidance
The Company increased its 2015 guidance for production sales volume to
585 – 600 Bcfe, including liquids volume of 9,000 – 10,000 MBBls. Second
quarter volumes are estimated at 145 – 150 Bcfe, with liquids of 2,300 –
2,400 MBBls. The Company also expects the average differential to the
NYMEX price forecast of negative $0.35 – negative $0.45 per Mcf for
2015; with an average differential to the NYMEX price of negative $0.75
– negative $0.80 per Mcf for the second quarter of 2015.
EQT MIDSTREAM
EQT Midstream’s first quarter 2015 operating income was $129.7 million,
56% higher than the first quarter of 2014; while net operating revenue
was $206.6 million, 39% higher. Net gathering revenue was 44% higher at
$128.9 million, resulting from a 47% increase in gathered volume. Net
transmission revenue increased by 38% to $72.0 million, due to an
increase in firm transmission contracted capacity in the second quarter
2014. Operating expenses for the quarter were $76.9 million, which was
$11.2 million higher than the same period last year and consistent with
the growth of the business. Per unit gathering and compression expense
decreased by 31% as volume continued to grow faster than expenses.
OTHER BUSINESS
EQT Midstream Partners, LP (NYSE:EQM)
EQT owns a 30.2% limited partner interest and a 2.0% general partner
(GP) interest in EQT Midstream Partners, LP, whose results are
consolidated in EQT’s results. For the first quarter 2015, EQT
Corporation recorded $47.7 million of earnings, or $0.31 per diluted
share, attributable to noncontrolling interests. EQT Midstream Partners’
results were released today and are available at www.eqtmidstreampartners.com.
On April 21, 2015, EQT Midstream Partners announced a cash distribution
to its unitholders of $0.61 per unit for the first quarter of 2015. EQT
will receive $22.4 million in cash distributions, including $9.1 million
related to its GP interest.
2015 CAPEX Forecast
The Company revised its capital expenditure (CAPEX) forecast to reflect
negotiated service cost reductions. The revised CAPEX forecast is now
$1.9 billion, with $1.7 billion for EQT Production and $200 – $225
million for EQT Midstream. This forecast excludes business development
and land acquisitions, as well as capital to be invested at EQT
Midstream Partners.
Northern West Virginia Marcellus Gathering System
In March 2015, EQT announced the sale of its Northern West Virginia
Marcellus Gathering System, along with a preferred interest in an EQT
subsidiary, to EQT Midstream Partners for $1.05 billion. EQT received
$997.5 million in cash and $52.5 million in common and general partner
units. In addition, EQT Midstream Partners will fund approximately $370
million of system expansion projects that are expected during the next
several years. EQT Midstream Partners funded the acquisition with
a public offering of 9.5 million common units, and cash drawn on its
unsecured revolver.
Hedging
During the quarter, the Company added to its hedge position. The
Company’s total natural gas production hedge position through December
2017 is:
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|
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2015**
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2016***
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2017***
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Fixed Price
|
|
|
|
|
|
|
|
|
|
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Total Volume (Bcf)
|
|
|
|
234
|
|
|
|
167
|
|
|
|
31
|
|
Average Price per Mcf (NYMEX)*
|
|
|
$
|
4.00
|
|
|
$
|
4.14
|
|
|
$
|
4.27
|
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|
|
|
|
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|
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|
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Collars
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Total Volume (Bcf)
|
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30
|
|
|
|
–
|
|
|
|
–
|
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Average Floor Price per Mcf (NYMEX)*
|
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|
$
|
4.57
|
|
|
$
|
–
|
|
|
$
|
–
|
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Average Cap Price per Mcf (NYMEX)*
|
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|
$
|
7.21
|
|
|
$
|
–
|
|
|
$
|
–
|
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|
|
|
|
|
|
|
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*
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The average price is based on a conversion rate of 1.05 MMBtu/Mcf
|
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**
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April through December
|
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***
|
|
For 2016 and 2017, the Company also has a natural gas sales
agreement for 35 Bcf that includes a NYMEX ceiling price of
$4.88/Mcf. The Company also sold calls/swaptions for 18 Bcf at a
strike price of $4.24 per Mcf for 2016, and approximately 6 Bcf at a
strike price of $3.93 per Mcf for 2017.
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Operating Income
The Company reports operating income by segment in this news release.
Interest, income taxes and unallocated expense are controlled on a
consolidated, corporate-wide basis and are not allocated to the segments.
The following table reconciles operating (loss) income by segment, as
reported in this news release, to the consolidated operating income
reported in the Company’s financial statements:
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|
|
Three Months Ended
March 31,
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(thousands)
|
|
|
2015
|
|
|
2014
|
|
Operating income:
|
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|
|
|
|
|
|
EQT Production
|
|
|
$
|
185,843
|
|
|
|
$
|
277,205
|
|
|
EQT Midstream
|
|
|
|
129,741
|
|
|
|
|
83,069
|
|
|
Unallocated expense
|
|
|
|
(825
|
)
|
|
|
|
(3,483
|
)
|
|
Operating income
|
|
|
$
|
314,759
|
|
|
|
$
|
356,791
|
|
|
|
|
|
|
|
|
|
|
|
|
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Unallocated expense is primarily due to certain incentive compensation
and administrative costs in excess of budget that are not allocated to
the operating segments.
Marcellus Horizontal Well Status (cumulative since inception)
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As of
3/31/15
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As of
12/31/14
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As of
9/30/14
|
|
|
As of
6/30/14
|
|
|
As of
3/31/14
|
|
Wells spud
|
|
|
761
|
|
|
722
|
|
|
670
|
|
|
628
|
|
|
573
|
|
Wells online
|
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|
560
|
|
|
531
|
|
|
480
|
|
|
439
|
|
|
390
|
|
Wells complete, not online
|
|
|
45
|
|
|
23
|
|
|
31
|
|
|
44
|
|
|
42
|
|
Frac stages (spud wells)*
|
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|
19,169
|
|
|
18,640
|
|
|
17,119
|
|
|
15,632
|
|
|
13,512
|
|
Frac stages online
|
|
|
13,392
|
|
|
12,408
|
|
|
10,762
|
|
|
9,289
|
|
|
8,012
|
|
Frac stages complete, not online
|
|
|
1,391
|
|
|
673
|
|
|
968
|
|
|
1,381
|
|
|
959
|
|
|
|
|
|
|
|
|
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|
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*Includes planned stages for spud wells that have not yet been
hydraulically fractured.
NON-GAAP DISCLOSURES
Adjusted Net Income and Adjusted Earnings per Diluted Share
Adjusted net income and adjusted earnings per diluted share are non-GAAP
supplemental financial measures that are presented because they are
important measures used by management to evaluate period-to-period
comparisons of earnings trends. Adjusted net income and adjusted
earnings per diluted share should not be considered as alternatives to
net income or earnings per diluted share presented in accordance with
GAAP.
The table below reconciles adjusted net income and adjusted earnings per
diluted share with net income and earnings per diluted share, as derived
from the statements of consolidated income to be included in EQT’s
report on Form 10-Q for the quarter ended March 31, 2015.
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Three Months Ended
March 31,
|
|
(thousands, except per share information)
|
|
2015
|
|
2014
|
|
Net income attributable to EQT, as reported
|
|
$
|
173,427
|
|
|
$
|
192,193
|
|
|
Add back (deduct):
|
|
|
|
|
|
Asset impairments and drilling program reduction charges
|
|
|
24,395
|
|
|
|
275
|
|
|
Hedging ineffectiveness loss
|
|
|
–
|
|
|
|
22,260
|
|
|
(Gain) loss on derivatives not designated as hedges
|
|
|
(43,592
|
)
|
|
|
9,354
|
|
|
Cash settlements received (paid) on derivatives not designated as
hedges
|
|
|
7,742
|
|
|
|
(11,301
|
)
|
|
Tax impact
|
|
|
2,358
|
|
|
|
(7,316
|
)
|
|
Subtotal
|
|
|
164,330
|
|
|
|
205,465
|
|
|
Loss from discontinued operations, net of tax
|
|
|
–
|
|
|
|
104
|
|
|
Adjusted net income attributable to EQT
|
|
$
|
164,330
|
|
|
$
|
205,569
|
|
|
Diluted weighted average common shares outstanding
|
|
|
152,756
|
|
|
|
152,759
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Diluted EPS, as adjusted
|
|
$
|
1.08
|
|
|
$
|
1.35
|
|
|
|
|
|
|
|
|
|
|
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Operating Cash Flow
Operating cash flow is a non-GAAP supplemental financial measure that is
presented 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. EQT includes this
information because management believes that changes in operating assets
and liabilities relate to the timing of cash receipts and disbursements,
and therefore, may not relate to the period in which the operating
activities occurred. Operating cash flow should not be considered as an
alternative to net cash provided by operating activities presented in
accordance with GAAP. The table below reconciles operating cash flow
with net cash provided by operating activities, as derived from
the statements of consolidated cash flows to be included in EQT’s report
on Form 10-Q for the quarter ended March 31, 2015.
|
|
|
Three Months Ended
March 31,
|
|
(thousands)
|
|
2015
|
|
2014
|
|
Net Income
|
|
$
|
221,168
|
|
|
$
|
210,935
|
|
|
Add back / (deduct):
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
194,745
|
|
|
|
152,111
|
|
|
Asset impairments, non-cash
|
|
|
18,995
|
|
|
|
275
|
|
|
Deferred income tax (benefit) expense
|
|
|
(31,070
|
)
|
|
|
85,878
|
|
|
Hedging ineffectiveness loss
|
|
|
–
|
|
|
|
22,260
|
|
|
(Gain) loss on derivatives not designated as hedges
|
|
|
(43,592
|
)
|
|
|
9,354
|
|
|
Cash settlements received (paid) on derivatives not designated as
hedges
|
|
|
7,742
|
|
|
|
(11,301
|
)
|
|
Non-cash incentive compensation
|
|
|
15,441
|
|
|
|
11,317
|
|
|
Other items, net
|
|
|
(1,463
|
)
|
|
|
(865
|
)
|
|
Operating cash flow:
|
|
$
|
381,966
|
|
|
$
|
479,964
|
|
|
|
|
|
|
|
|
(Deduct) / add back:
|
|
|
|
|
|
Changes in other assets and liabilities
|
|
|
71,150
|
|
|
|
(4,103
|
)
|
|
Net cash provided by operating activities
|
|
$
|
453,116
|
|
|
$
|
475,861
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Operating Cash Flow Attributable to EQT
Adjusted operating cash flow attributable to EQT is a non-GAAP
supplemental financial measure that is presented 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. EQT also includes this information because management
believes that changes in operating assets and liabilities relate to the
timing of cash receipts and disbursements, and therefore, may not relate
to the period in which the operating activities occurred. Adjusted
operating cash flow attributable to EQT should not be considered as an
alternative to net cash provided by operating activities presented in
accordance with GAAP. The table below provides the calculation for
adjusted operating cash flow attributable to EQT, as derived from the
financial statements to be included in EQT’s report on Form 10-Q for the
quarter ended March 31, 2015.
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|
|
Three Months Ended
March 31,
|
|
(thousands)
|
|
2015
|
|
2014
|
|
Operating cash flow (a non-GAAP measure reconciled above)
|
|
$
|
381,966
|
|
|
$
|
479,964
|
|
|
(Deduct) / add back:
|
|
|
|
|
|
Noncontrolling interest portion of adjusted EQT Midstream Partners
EBITDA(a)
|
|
|
(62,542
|
)
|
|
|
(22,763
|
)
|
|
Exploration expense, cash
|
|
|
1,425
|
|
|
|
1,144
|
|
|
Drilling program reduction charges, cash
|
|
|
5,400
|
|
|
|
–
|
|
|
Cash taxes on transactions(b)
|
|
|
59,939
|
|
|
|
–
|
|
|
Adjusted operating cash flow attributable to EQT
|
|
$
|
386,188
|
|
|
$
|
458,345
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted EQT Midstream Partners EBITDA and noncontrolling interest
portion of adjusted EQT Midstream Partners EBITDA are non-GAAP
supplemental financial measures reconciled below.
|
|
(b)
|
|
Amount represents current tax expense related to the sale of NWV
Gathering that will be paid in 2015.
|
|
|
|
|
EQT Production Adjusted Net Operating Revenues
The operational information in the EQT Corporation Price Reconciliation
table below presents an average realized price ($/Mcfe) to EQT
Production and EQT Corporation, which is based on EQT Production’s
adjusted net operating revenues, a non-GAAP supplemental financial
measure. EQT Production adjusted net operating revenues is presented
because it is an important measure used by the Company’s management to
evaluate period-to-period comparisons of earnings and cash flow trends.
EQT Production adjusted net operating revenues should not be considered
as an alternative to EQT Corporation operating revenues, the most
directly comparable GAAP financial measure, to be included in EQT’s
report on Form 10-Q for the quarter ended March 31, 2015. The tables
below reconcile EQT Production adjusted net operating revenues, a
non-GAAP supplemental financial measure, to EQT Corporation operating
revenues.
The Company reports gain (loss) for hedging ineffectiveness and gain
(loss) on derivatives not designated as hedges within total operating
revenues.
Third-party costs incurred to gather, process and transport gas produced
by EQT Production to market sales points are recorded as a portion of
transportation and processing costs in the Company’s Statements of
Consolidated Income, to be included in EQT’s report on Form 10-Q for the
quarter ended March 31, 2015. Some transportation costs incurred by the
Company are marketed for resale and are not incurred to transport gas
produced by EQT Production. These transportation costs are reflected as
a deduction from total operating revenues.
|
Calculation of EQT Production adjusted net operating revenues
|
|
Three Months Ended
March 31,
|
|
$ in thousands (unless noted)
|
|
2015
|
|
2014
|
|
EQT Production total operating revenues
|
|
$
|
502,194
|
|
|
$
|
512,374
|
|
|
(Deduct) add back:
|
|
|
|
|
|
Loss for hedging ineffectiveness
|
|
|
–
|
|
|
|
22,260
|
|
|
(Gain) loss on derivatives not designated as hedges
|
|
|
(44,246
|
)
|
|
|
5,140
|
|
|
Net cash settlements received (paid) on derivatives not designated
as hedges
|
|
|
3,473
|
|
|
|
(9,717
|
)
|
|
EQT Production transportation and processing
|
|
|
(59,640
|
)
|
|
|
(44,629
|
)
|
|
EQT Production adjusted net operating revenues, a non-GAAP measure
|
|
$
|
401,781
|
|
|
$
|
485,428
|
|
|
Total sales volumes (MMcfe)
|
|
|
145,198
|
|
|
|
106,123
|
|
|
Average realized price to EQT Production ($/Mcfe)
|
|
$
|
2.77
|
|
|
$
|
4.57
|
|
|
Add:
|
|
|
|
|
|
Gathering and Transmission to EQT Midstream ($/Mcfe)
|
|
$
|
0.93
|
|
|
$
|
0.94
|
|
|
Average realized price to EQT Corporation ($/Mcfe)
|
|
$
|
3.70
|
|
|
$
|
5.51
|
|
|
EQT Production total operating revenues
|
|
$
|
502,194
|
|
|
$
|
512,374
|
|
|
EQT Midstream total operating revenues
|
|
|
208,227
|
|
|
|
166,226
|
|
|
Less: intersegment revenues, net
|
|
|
(1,648
|
)
|
|
|
(16,975
|
)
|
|
EQT Corporation total operating revenues, as reported in accordance
with GAAP
|
|
$
|
708,773
|
|
|
$
|
661,625
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EQT Midstream Partners EBITDA and Noncontrolling Interest
Portion of Adjusted EQT Midstream Partners EBITDA
As used in this news release, adjusted EQT Midstream Partners EBITDA
means EQT Midstream Partners' (Partnership) net income plus the
Partnership’s interest expense, depreciation and amortization expense,
income tax expense (if applicable), and non-cash long-term compensation
expense less other non-cash adjustments (if applicable), other
Partnership income, capital lease payments, and adjusted EBITDA
attributable to Jupiter and NWV Gathering prior to acquisition. As used
in this news release, noncontrolling interest portion of adjusted EQT
Midstream Partners EBITDA means the portion of adjusted EQT Midstream
Partners EBITDA attributable to the noncontrolling interest unit holders
of the Partnership. Adjusted EQT Midstream Partners EBITDA and
noncontrolling interest portion of adjusted EQT Midstream Partners
EBITDA are non-GAAP supplemental financial measures that management and
external users of the Company's consolidated financial statements, such
as industry analysts, investors, lenders and rating agencies, use to
assess the effects of the noncontrolling interests in the Partnership in
relation to:
-
the Company's operating performance as compared to other companies in
its industry;
-
the ability of the Company's assets to generate sufficient cash flow
to make distributions to its investors;
-
the Company's ability to incur and service debt and fund capital
expenditures; and
-
the viability of acquisitions and other capital expenditure projects
and the returns on investment of various investment opportunities.
The Company believes that adjusted EQT Midstream Partners EBITDA and
noncontrolling interest portion of adjusted EQT Midstream Partners
EBITDA provide useful information to investors in assessing the
Company's financial condition and results of operations. Adjusted EQT
Midstream Partners EBITDA and noncontrolling interest portion of
adjusted EQT Midstream Partners EBITDA should not be considered as
alternatives to the Partnership’s net income, operating income, or any
other measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EQT Midstream Partners EBITDA and
noncontrolling interest portion of adjusted EQT Midstream Partners
EBITDA have important limitations as analytical tools because they
exclude some, but not all, items that affect the Partnership's net
income. Additionally, because adjusted EQT Midstream Partners EBITDA and
noncontrolling interest portion of adjusted EQT Midstream Partners
EBITDA may be defined differently by other companies in the Company's or
the Partnership's industries, the definition of adjusted EQT Midstream
Partners EBITDA and noncontrolling interest portion of adjusted EQT
Midstream Partners EBITDA may not be comparable to similarly titled
measures of other companies, thereby diminishing their utility. The
table below reconciles adjusted EQT Midstream Partners EBITDA and
noncontrolling interest portion of adjusted EQT Midstream Partners
EBITDA to the Partnership’s net income, as derived from the statements
of consolidated operations to be included in the Partnership’s report on
Form 10-Q for the quarter ended March 31, 2015.
|
|
|
Three Months Ended
March 31,
|
|
(thousands, unless noted)
|
|
2015
|
|
2014
|
|
Net Income, EQT Midstream Partners
|
|
$
|
95,306
|
|
|
$
|
54,998
|
|
|
Add:
|
|
|
|
|
|
Interest expense
|
|
|
11,457
|
|
|
|
5,655
|
|
|
Depreciation and amortization expense
|
|
|
11,927
|
|
|
|
9,997
|
|
|
Income tax expense
|
|
|
6,703
|
|
|
|
12,233
|
|
|
Non-cash long-term compensation expense
|
|
|
566
|
|
|
|
978
|
|
|
Less:
|
|
|
|
|
|
Other income
|
|
|
(714
|
)
|
|
|
(269
|
)
|
|
Capital lease payments for AVC
|
|
|
(8,844
|
)
|
|
|
(6,979
|
)
|
|
Adjusted EBITDA attributable to Jupiter prior to acquisition(a)
|
|
|
--
|
|
|
|
(25,237
|
)
|
|
Adjusted EBITDA attributable to NWV Gathering prior to acquisition(b)
|
|
|
(19,841
|
)
|
|
|
(10,287
|
)
|
|
Adjusted EQT Midstream Partners EBITDA
|
|
$
|
96,560
|
|
|
$
|
41,089
|
|
|
|
|
|
|
|
|
Noncontrolling interest ownership percentage(c)
|
|
|
64.8
|
%
|
|
|
55.4
|
%
|
|
Noncontrolling interest portion of Adjusted EQT Midstream Partners
EBITDA
|
|
$
|
62,542
|
|
|
$
|
22,763
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Adjusted EBITDA attributable to Jupiter for the three months ended
March 31, 2014 was calculated as net income of $14.6 million plus
depreciation and amortization expense of $1.5 million plus income
tax expense of $9.1 million.
|
|
(b)
|
|
Adjusted EBITDA attributable to NWV Gathering for the three months
ended March 31, 2015 and 2014 was calculated as net income of $11.1
million and $5.5 million, respectively, plus depreciation and
amortization expense of $2.0 million and $1.6 million, respectively,
plus income tax expense of $6.7 million and $3.2 million,
respectively.
|
|
(c)
|
|
Represents weighted average noncontrolling interest ownership
percentage for the period.
|
|
|
|
|
Q1 2015 Webcast Information
The Company's conference call with securities analysts begins at 10:30
a.m. ET today and will be broadcast live via the Company's web site at http://www.eqt.com,
and on the investor information page of the Company’s web site at http://ir.eqt.com,
with a replay available for seven days following the call.
EQT Midstream Partners, LP (NYSE:EQM), for which EQT Corporation is the
general partner and a significant equity owner, will host a conference
call with security analysts today, beginning at 11:30 a.m. ET. The call
will be broadcast live via http://www.eqtmidstreampartners.com,
with a replay available for seven days following the call.
About EQT Corporation:
EQT Corporation is an integrated energy company with emphasis on
Appalachian area natural gas production, gathering, and transmission.
EQT is the general partner and significant equity owner of EQT Midstream
Partners, LP. With more than 125 years of experience, EQT continues to
be a leader in the use of advanced horizontal drilling technology –
designed to minimize the potential impact of drilling-related activities
and reduce the overall environmental footprint. Through safe and
responsible operations, the Company is committed to meeting the
country’s growing demand for clean-burning energy, while continuing to
provide a rewarding workplace and enrich the communities where its
employees live and work. Company shares are traded on the New York Stock
Exchange as EQT.
EQT Management speaks to investors from time-to-time and the analyst
presentation for these discussions, which is updated periodically, is
available via the Company’s investor relations website at http://ir.eqt.com.
Visit EQT Corporation at www.EQT.com.
Cautionary Statements
The United States Securities and Exchange Commission (SEC) permits oil
and gas companies, in their filings with the SEC, to disclose only
proved, probable and possible reserves that a company anticipates as of
a given date to be economically and legally producible and deliverable
by application of development projects to known accumulations. We use
certain terms, such as “EUR” (estimated ultimate recovery) and “3P”
(proved, probable and possible), that the SEC’s guidelines prohibit us
from including in filings with the SEC. These measures are by their
nature more speculative than estimates of reserves prepared in
accordance with SEC definitions and guidelines and accordingly are less
certain.
Total sales volume per day (or daily production) is an operational
estimate of the daily production or sales volume on a typical day
(excluding curtailments).
EBITDA is defined as earnings before interest, taxes, depreciation, and
amortization and is not a financial measure calculated in accordance
with GAAP. EBITDA is a non-GAAP supplemental financial measure that the
Company’s management and external users of the Company’s financial
statements, such as industry analysts, investors, lenders and rating
agencies, may use to assess: (i) the Company’s performance versus prior
periods; (ii) the Company’s operating performance as compared to other
companies in its industry; (iii) the ability of the Company’s assets to
generate sufficient cash flow to make distributions to its investors;
(iv) the Company’s ability to incur and service debt and fund capital
expenditures; and (v) the viability of acquisitions and other capital
expenditure projects and the returns on investment of various investment
opportunities.
The Company is unable to provide a reconciliation of projected EBITDA to
projected operating income, the most comparable financial measure
calculated in accordance with GAAP, due to the unknown effect, timing
and potential significance of certain income statement items.
Similarly, the Company is unable to provide a reconciliation of its
projected operating cash flow to projected net cash provided by
operating activities, the most comparable financial measure calculated
in accordance with GAAP, because of uncertainties associated with
projecting future net income and changes in assets and liabilities.
Disclosures in this news release contain certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and Section 27A of the Securities Act of 1933,
as amended. 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 news 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
strategy to develop its Marcellus and other reserves; drilling plans and
programs (including the number, type, feet of pay and location of wells
to be drilled); projected natural gas prices, basis, recoveries and
average differential; total resource potential, reserves, EUR, expected
decline curve and reserve replacement ratio; projected production sales
volume and growth rates (including liquids sales volume and growth
rates); projected finding and development costs, operating costs, unit
costs, well costs and midstream revenue deductions; projected gathering
and transmission volume and growth rates; projected firm pipeline
capacity and sales; the Company’s access to, and timing of, capacity on
third-party pipelines; infrastructure programs (including the timing,
cost and capacity of the transmission and gathering expansion projects);
the timing, cost, capacity and expected interconnects with facilities
and pipelines of the Ohio Valley Connector (OVC) and Mountain Valley
Pipeline (MVP) projects; the ultimate terms, partners and structure of
the MVP joint venture; technology (including drilling and completion
techniques); projected EQT Midstream and EQT Midstream Partners, LP
(Partnership) EBITDA; monetization transactions, including asset sales
(dropdowns) to the Partnership and other asset sales, joint ventures or
other transactions involving the Company’s assets; the percentage
interest in EQT GP Holdings, LP (EQGP) the Company sells, and the
Company’s use of proceeds from, the expected initial public offering of
EQGP common units; the projected cash flows resulting from the Company’s
general partner and limited partner interests and incentive distribution
rights in the Partnership; internal rate of return (IRR) and returns per
well; projected capital expenditures; the amount and timing of any
repurchases under the Company’s share repurchase authorization;
liquidity and financing requirements, including funding sources and
availability; projected operating revenues, cash flows and cash-on-hand;
hedging strategy; the effects of government regulation and litigation;
the Company dividend and Partnership distribution amounts and rates; and
tax position. These forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Accordingly, investors should not place undue
reliance on forward-looking statements as a prediction of actual
results. The Company has based these forward-looking statements on
current expectations and assumptions about future events. While the
Company considers these expectations and assumptions to be reasonable,
they are inherently subject to significant business, economic,
competitive, regulatory and other risks and uncertainties, many of which
are difficult to predict and beyond the Company’s control. 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 Form 10-K for the year ended December 31, 2014, as updated by
any subsequent Form 10-Qs.
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.
Information in this news release regarding the Partnership and its
subsidiaries is derived from publicly available information published by
the Partnership.
|
EQT CORPORATION AND SUBSIDIARIES
STATEMENTS OF
CONSOLIDATED INCOME (UNAUDITED)
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2015
|
|
2014
|
|
|
|
(Thousands, except per share amounts)
|
|
Revenues:
|
|
|
|
|
|
Operating revenues
|
|
$
|
665,181
|
|
|
$
|
670,979
|
|
|
Gain (loss) on derivatives not designated as hedges
|
|
43,592
|
|
|
(9,354
|
)
|
|
Total operating revenues
|
|
708,773
|
|
|
661,625
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Transportation and processing
|
|
59,734
|
|
|
45,175
|
|
|
Operation and maintenance
|
|
28,247
|
|
|
25,221
|
|
|
Production
|
|
31,356
|
|
|
31,940
|
|
|
Exploration
|
|
12,554
|
|
|
1,419
|
|
|
Selling, general and administrative
|
|
67,378
|
|
|
48,968
|
|
|
Depreciation, depletion and amortization
|
|
194,745
|
|
|
152,111
|
|
|
Total operating expenses
|
|
394,014
|
|
|
304,834
|
|
|
|
|
|
|
|
|
Operating income
|
|
314,759
|
|
|
356,791
|
|
|
|
|
|
|
|
|
Other income
|
|
939
|
|
|
2,551
|
|
|
Interest expense
|
|
37,216
|
|
|
31,968
|
|
|
Income before income taxes
|
|
278,482
|
|
|
327,374
|
|
|
Income taxes
|
|
57,314
|
|
|
116,335
|
|
|
Income from continuing operations
|
|
221,168
|
|
|
211,039
|
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
(104
|
)
|
|
Net income
|
|
221,168
|
|
|
210,935
|
|
|
Less: Net income attributable to noncontrolling interests
|
|
47,741
|
|
|
18,742
|
|
|
Net income attributable to EQT Corporation
|
|
$
|
173,427
|
|
|
$
|
192,193
|
|
|
|
|
|
|
|
|
Amounts attributable to EQT Corporation:
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
173,427
|
|
|
$
|
192,297
|
|
|
Loss from discontinued operations
|
|
—
|
|
|
(104
|
)
|
|
Net income
|
|
$
|
173,427
|
|
|
$
|
192,193
|
|
|
|
|
|
|
|
|
Earnings per share of common stock attributable to EQT Corporation:
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
Weighted average common stock outstanding
|
|
152,036
|
|
|
151,371
|
|
|
Income from continuing operations
|
|
$
|
1.14
|
|
|
$
|
1.27
|
|
|
Loss from discontinued operations
|
|
—
|
|
|
—
|
|
|
Net income
|
|
$
|
1.14
|
|
|
$
|
1.27
|
|
|
Diluted:
|
|
|
|
|
|
Weighted average common stock outstanding
|
|
152,756
|
|
|
152,759
|
|
|
Income from continuing operations
|
|
$
|
1.14
|
|
|
$
|
1.26
|
|
|
Loss from discontinued operations
|
|
—
|
|
|
—
|
|
|
Net income
|
|
$
|
1.14
|
|
|
$
|
1.26
|
|
|
Dividends declared per common share
|
|
$
|
0.03
|
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
|
|
EQT Corporation
Price Reconciliation
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
in thousands (unless noted)
|
|
2015
|
|
2014
|
|
LIQUIDS
|
|
|
|
|
|
NGLs:
|
|
|
|
|
|
Sales volume (MMcfe) (a)
|
|
13,281
|
|
|
7,767
|
|
|
Sales volume (Mbbls)
|
|
2,214
|
|
|
1,295
|
|
|
Gross price ($/Bbl)
|
|
$
|
22.14
|
|
|
$
|
55.71
|
|
|
Gross NGL sales
|
|
$
|
49,014
|
|
|
$
|
72,114
|
|
|
Third-party processing
|
|
(18,381
|
)
|
|
(11,818
|
)
|
|
Net NGL sales
|
|
$
|
30,633
|
|
|
$
|
60,296
|
|
|
Oil:
|
|
|
|
|
|
Sales volume (MMcfe) (a)
|
|
1,010
|
|
|
304
|
|
|
Sales volume (Mbbls)
|
|
168
|
|
|
51
|
|
|
Net price ($/Bbl)
|
|
$
|
37.58
|
|
|
$
|
83.10
|
|
|
Net oil sales
|
|
$
|
6,328
|
|
|
$
|
4,214
|
|
|
|
|
|
|
|
|
Net liquids sales
|
|
$
|
36,961
|
|
|
$
|
64,510
|
|
|
|
|
|
|
|
|
NATURAL GAS
|
|
|
|
|
|
Sales volume (MMcf)
|
|
130,907
|
|
|
98,052
|
|
|
NYMEX price ($/MMBtu) (b)
|
|
$
|
2.99
|
|
|
$
|
4.92
|
|
|
Btu uplift
|
|
$
|
0.27
|
|
|
$
|
0.35
|
|
|
Gross natural gas price ($/Mcf)
|
|
$
|
3.26
|
|
|
$
|
5.27
|
|
|
|
|
|
|
|
|
Basis ($/Mcf)
|
|
$ (1.00
|
)
|
|
$ (0.24
|
)
|
|
Recoveries ($/Mcf) (c)
|
|
|
1.52
|
|
|
|
1.26
|
|
|
Cash settled basis swaps (not designated as hedges) ($/Mcf)
|
|
|
(0.06
|
)
|
|
|
(0.10
|
)
|
|
Average differential ($/Mcf)
|
|
$
|
0.46
|
|
|
$
|
0.92
|
|
|
|
|
|
|
|
|
Average adjusted price - unhedged ($/Mcf)
|
|
$
|
3.72
|
|
|
$
|
6.19
|
|
|
Cash settled derivatives (cash flow hedges) ($/Mcf)
|
|
0.52
|
|
|
(0.29
|
)
|
|
Cash settled derivatives (not designated as hedges) ($/Mcf)
|
|
0.08
|
|
|
—
|
|
|
Average adjusted price, including cash settled derivatives ($/Mcf)
|
|
$
|
4.32
|
|
|
$
|
5.90
|
|
|
|
|
|
|
|
|
Net natural gas sales, including cash settled derivatives
|
|
$
|
565,580
|
|
|
$
|
577,703
|
|
|
|
|
|
|
|
|
TOTAL PRODUCTION
|
|
|
|
|
|
Total net natural gas & liquids sales, including cash settled
derivatives
|
|
$
|
602,541
|
|
|
$
|
642,213
|
|
|
Total sales volume (MMcfe)
|
|
145,198
|
|
|
106,123
|
|
|
|
|
|
|
|
|
Net natural gas & liquids price, including cash settled derivatives
($/Mcfe)
|
|
$
|
4.15
|
|
|
$
|
6.05
|
|
|
|
|
|
|
|
|
Midstream Deductions ($/Mcfe)
|
|
|
|
|
|
Gathering to EQT Midstream
|
|
$
|
(0.74
|
)
|
|
$
|
(0.73
|
)
|
|
Transmission to EQT Midstream
|
|
(0.19
|
)
|
|
(0.21
|
)
|
|
Third-party gathering and transmission costs
|
|
(0.45
|
)
|
|
(0.54
|
)
|
|
Total midstream deductions
|
|
$
|
(1.38
|
)
|
|
$
|
(1.48
|
)
|
|
Average realized price to EQT Production ($/Mcfe)
|
|
$
|
2.77
|
|
|
$
|
4.57
|
|
|
Gathering and transmission to EQT Midstream ($/Mcfe)
|
|
$
|
0.93
|
|
|
$
|
0.94
|
|
|
Average realized price to EQT Corporation ($/Mcfe)
|
|
$
|
3.70
|
|
|
$
|
5.51
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
NGLs and crude oil were converted to Mcfe at the rate of six Mcfe
per barrel for all periods.
|
|
(b)
|
|
The Company’s volume weighted NYMEX natural gas price (actual
average NYMEX natural gas price ($/MMBtu) was $2.98 and $4.94 for
the three months ended March 31, 2015 and 2014, respectively.)
|
|
(c)
|
|
Includes approximately $0.22 and $0.15 per Mcf for the three months
ended March 31, 2015 and 2014, respectively, for the sale of unused
capacity.
|
|
|
|
|
|
UNIT COSTS
|
|
Three Months Ended
March 31,
|
|
|
|
2015
|
|
2014
|
|
Production segment costs: ($/Mcfe)
|
|
|
|
|
|
LOE
|
|
$
|
0.11
|
|
$
|
0.14
|
|
Production taxes
|
|
|
0.10
|
|
|
0.16
|
|
SG&A
|
|
|
0.28
|
|
|
0.24
|
|
|
|
$
|
0.49
|
|
$
|
0.54
|
|
Midstream segment costs: ($/Mcfe)
|
|
|
|
|
|
Gathering and transmission
|
|
$
|
0.16
|
|
$
|
0.20
|
|
SG&A
|
|
|
0.14
|
|
|
0.14
|
|
|
|
$
|
0.30
|
|
$
|
0.34
|
|
Total ($/Mcfe)
|
|
$
|
0.79
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
EQT PRODUCTION
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2015
|
|
2014
|
|
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
Sales volume detail (MMcfe):
|
|
|
|
|
|
Horizontal Marcellus Play (a)
|
|
121,471
|
|
|
83,126
|
|
|
Horizontal Huron Play
|
|
9,133
|
|
|
7,119
|
|
|
Other
|
|
14,594
|
|
|
15,878
|
|
|
Total production sales volumes (b)
|
|
145,198
|
|
|
106,123
|
|
|
|
|
|
|
|
|
Average daily sales volumes (MMcfe/d)
|
|
1,613
|
|
|
1,179
|
|
|
|
|
|
|
|
|
Average realized price to EQT Production ($/Mcfe)
|
|
$
|
2.77
|
|
|
$
|
4.57
|
|
|
|
|
|
|
|
|
Lease operating expenses (LOE), excluding production taxes ($/Mcfe)
|
|
$
|
0.11
|
|
|
$
|
0.14
|
|
|
Production taxes ($/Mcfe)
|
|
$
|
0.10
|
|
|
$
|
0.16
|
|
|
Production depletion ($/Mcfe)
|
|
$
|
1.16
|
|
|
$
|
1.21
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization (DD&A) (thousands):
|
|
|
|
|
|
Production depletion
|
|
$
|
169,028
|
|
|
$
|
128,557
|
|
|
Other DD&A
|
|
2,435
|
|
|
2,682
|
|
|
Total DD&A (thousands)
|
|
$
|
171,463
|
|
|
$
|
131,239
|
|
|
|
|
|
|
|
|
Capital expenditures (thousands)
|
|
$
|
481,974
|
|
|
$
|
411,084
|
|
|
|
|
|
|
|
|
FINANCIAL DATA (thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
Production sales
|
|
$
|
457,948
|
|
|
$
|
539,774
|
|
|
Loss for hedging ineffectiveness
|
|
—
|
|
|
(22,260
|
)
|
|
Gain (loss) on derivatives not designated as hedges
|
|
44,246
|
|
|
(5,140
|
)
|
|
Total operating revenues
|
|
502,194
|
|
|
512,374
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Transportation and processing
|
|
59,640
|
|
|
44,629
|
|
|
LOE, excluding production taxes
|
|
16,534
|
|
|
14,847
|
|
|
Production taxes
|
|
14,822
|
|
|
17,093
|
|
|
Exploration expense
|
|
12,544
|
|
|
1,412
|
|
|
SG&A
|
|
41,348
|
|
|
25,949
|
|
|
DD&A
|
|
171,463
|
|
|
131,239
|
|
|
Total operating expenses
|
|
316,351
|
|
|
235,169
|
|
|
Operating income
|
|
$
|
185,843
|
|
|
$
|
277,205
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Includes Upper Devonian wells.
|
|
(b)
|
|
NGLs and crude oil were converted to Mcfe at the rate of six Mcfe
per barrel for all periods.
|
|
EQT MIDSTREAM
RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2015
|
|
2014
|
|
OPERATIONAL DATA
|
|
|
|
|
|
Net operating revenues (thousands):
|
|
|
|
|
|
Gathering
|
|
|
|
|
|
Firm reservation fee revenues
|
|
$
|
58,373
|
|
$
|
1,289
|
|
Volumetric based fee revenues:
|
|
|
|
|
|
Usage fees under firm contracts (a)
|
|
|
9,549
|
|
|
—
|
|
Usage fees under interruptible contracts
|
|
|
60,938
|
|
|
88,087
|
|
Total volumetric based fee revenues
|
|
|
70,487
|
|
|
88,087
|
|
Total gathering net revenues
|
|
$
|
128,860
|
|
$
|
89,376
|
|
|
|
|
|
|
|
Gathered volumes (BBtu per day)
|
|
|
2,054
|
|
|
1,402
|
|
|
|
|
|
|
|
Gathering and compression expense ($/MMBtu)
|
|
$
|
0.11
|
|
$
|
0.16
|
|
|
|
|
|
|
|
Transmission
|
|
|
|
|
|
Firm reservation fee revenues
|
|
$
|
61,854
|
|
$
|
41,805
|
|
Volumetric based fee revenues:
|
|
|
|
|
|
Usage fees under firm contracts (a)
|
|
|
8,575
|
|
|
8,876
|
|
Usage fees under interruptible contracts
|
|
|
1,536
|
|
|
1,428
|
|
Total volumetric based fee revenues
|
|
|
10,111
|
|
|
10,304
|
|
Total transmission net revenues
|
|
$
|
71,965
|
|
$
|
52,109
|
|
|
|
|
|
|
|
Transmission pipeline throughput (BBtu per day) (b)
|
|
|
2,238
|
|
|
1,600
|
|
|
|
|
|
|
|
Contracted firm transmission commitments (BBtu per day)
|
|
|
2,947
|
|
|
2,004
|
|
|
|
|
|
|
|
Storage, marketing and other revenues
|
|
$
|
5,782
|
|
$
|
7,220
|
|
|
|
|
|
|
|
Capital expenditures (thousands)
|
|
$
|
72,575
|
|
$
|
84,919
|
|
|
|
|
|
|
|
FINANCIAL DATA (thousands)
|
|
|
|
|
|
Total operating revenues
|
|
$
|
208,227
|
|
$
|
166,226
|
|
Purchased gas costs
|
|
|
1,620
|
|
|
17,521
|
|
Total net operating revenues
|
|
|
206,607
|
|
|
148,705
|
|
Operating expenses:
|
|
|
|
|
|
Operating and maintenance (O&M)
|
|
|
28,193
|
|
|
25,154
|
|
SG&A
|
|
|
25,478
|
|
|
19,473
|
|
DD&A
|
|
|
23,195
|
|
|
21,009
|
|
Total operating expenses
|
|
|
76,866
|
|
|
65,636
|
|
|
|
|
|
|
|
Operating income
|
|
$
|
129,741
|
|
$
|
83,069
|
|
|
|
|
|
|
|
(a)
|
|
Includes commodity charges and fees on volumes gathered or
transported in excess of firm contracted capacity.
|
|
(b)
|
|
Includes volumes gathered or transported under interruptible
contracts and volumes in excess of firm contracted capacity.
|
