What drove the increase in earnings in 1993?

Net income rose 22% to $73.5 million, primarily from higher average wellhead gas prices (up 18%), 11% higher production, and better margins in utility services after a July 1992 Pennsylvania rate increase. These gains were partly offset by a roughly $5 million tax cost from the one-point federal rate increase. Results also included about $4.7 million of regulatory recoveries tied to prior-year gas price settlements.

Why did revenue and assets grow so much in 1993?

The growth came mainly from the mid-1993 acquisitions of Louisiana Intrastate Gas Company and Hershey Oil Corporation. LIG pushed gas marketing revenue from $269 million to $506 million and added a Louisiana pipeline and processing plants. Total assets rose to $1.95 billion from $1.47 billion.

How is the company financing its growth, and is the balance sheet stretched?

The company issued 3 million shares at $38.50 in September 1993, netting about $111.6 million, to pay down acquisition debt. Short-term loans still rose to $253.9 million from $114.0 million, and long-term debt was $378.8 million. Management says it has adequate borrowing capacity, with $325 million in available credit lines, and plans to fund 1994 capex of about $151 million from operations and short-term loans.

What are the main risks and uncertain items for investors?

Key risks include the unrecognized $19 million Columbia Gas bankruptcy claim, the outstanding $49 million of settlement recoveries that depend on future PUC approvals, and the approximately $60 million of disputed Equitrans transition costs under FERC Order 636. The company also has a shift toward gas marketing, which exposes it to commodity price volatility, and it carries an alternative minimum tax liability that reduces operating cash flow.

What is the company's outlook for natural gas supply and drilling?

Management describes the long-range supply outlook as very favorable and expects supply to exceed demand for at least the next decade. The 1994 Energy Resources capex program is $90.5 million, weighted toward Appalachia ($35.3 million) and the Rocky Mountains ($24.6 million), with additional funds for Gulf of Mexico offshore drilling and building a Henry Hub-linked market hub. Management says drilling decisions will depend on future gas prices.

EQT 10-K FY1993 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 24, 1994. Cited figures are marked; the original filing is the authoritative source.

Equitable Resources, Inc. (EQT) reported a strong 1993 for its fiscal year ended December 31, 1993.

Consolidated net income rose 22% to $73.5 million^a, or $2.27 per share, from $60.0 million ($1.92) in 1992, and operating revenues climbed 35% to $1.09 billion. Management attributes the gain to higher average wellhead gas prices (up 18%), 11% higher production, and improved margins in utility services, partly offset by a one-point federal tax rate increase that cost about $5 million. Earnings included roughly $4.7 million of regulatory recoveries from prior-year gas price settlements, a non-recurring boost to the trend.

The company made a significant acquisition push in 1993. It bought Louisiana Intrastate Gas Company (LIG), a 1,900-mile Louisiana intrastate pipeline with four processing plants, for $191 million^b on June 30, 1993, and Hershey Oil Corporation, which holds roughly 68 Bcf of proved reserves in Alberta, for about $18 million. Total 1993 capital expenditures were $339.4 million, and the company issued 3 million common shares at $38.50 to repay short-term debt.

Proved gas reserves rose to 822.6 Bcf, with 759.3 Bcf proved developed, and 16.5 million barrels of oil reserves. Management expects supply to exceed demand for at least the next decade. Investors should weigh the balance sheet and structural points.

Short-term loans rose to $253.9 million^c, and total long-term debt was $378.8 million. Columbia Gas Transmission's Chapter 11 reorganization leaves a potential $19 million direct-billing recovery unrecognized, and about $49 million of prior settlement recoveries remain to be collected through future PUC filings.

Utility operations are regulated, with FERC Order 636 unbundling still producing transition-cost disputes at Equitrans. Energy Resources now generates 65%^d of revenue, shifting the company toward a more volatile, marketing-heavy profile.

02—Key points

Key Highlights

Net income rose 22% to $73.5 million ($2.27 per share) in 1993, the second-highest in company history, versus $60.0 million ($1.92) in 1992.
Operating revenues reached $1.09 billion, up 35% from $812.4 million, driven largely by gas marketing revenue, which grew from $269 million to $506 million.
Acquired Louisiana Intrastate Gas Co. (1,900-mile pipeline, four processing plants) for $191 million and Hershey Oil Corp. (Alberta reserves, about 68 Bcf) for about $18 million.
Average wellhead gas prices rose 18% in 1993 to their highest level since 1988, while production increased 11%.
Proved gas reserves reached 822.6 Bcf at year-end 1993, up from 720.0 Bcf, with substantially all located in Appalachia.
Financed 1993 capex of $339.4 million partly through a 3-million-share equity offering at $38.50 (net proceeds about $111.6 million); the dividend increased to $1.10 per share from $1.04.
Exposure remains from Columbia Gas Transmission's bankruptcy, with a $19 million settlement claim unrecognized, and short-term loans rising to $253.9 million.

03—Questions

Frequently Asked Questions

What drove the increase in earnings in 1993?
Net income rose 22% to $73.5 million, primarily from higher average wellhead gas prices (up 18%), 11% higher production, and better margins in utility services after a July 1992 Pennsylvania rate increase. These gains were partly offset by a roughly $5 million tax cost from the one-point federal rate increase. Results also included about $4.7 million of regulatory recoveries tied to prior-year gas price settlements.
Why did revenue and assets grow so much in 1993?
The growth came mainly from the mid-1993 acquisitions of Louisiana Intrastate Gas Company and Hershey Oil Corporation. LIG pushed gas marketing revenue from $269 million to $506 million and added a Louisiana pipeline and processing plants. Total assets rose to $1.95 billion from $1.47 billion.
How is the company financing its growth, and is the balance sheet stretched?
The company issued 3 million shares at $38.50 in September 1993, netting about $111.6 million, to pay down acquisition debt. Short-term loans still rose to $253.9 million from $114.0 million, and long-term debt was $378.8 million. Management says it has adequate borrowing capacity, with $325 million in available credit lines, and plans to fund 1994 capex of about $151 million from operations and short-term loans.
What are the main risks and uncertain items for investors?
Key risks include the unrecognized $19 million Columbia Gas bankruptcy claim, the outstanding $49 million of settlement recoveries that depend on future PUC approvals, and the approximately $60 million of disputed Equitrans transition costs under FERC Order 636. The company also has a shift toward gas marketing, which exposes it to commodity price volatility, and it carries an alternative minimum tax liability that reduces operating cash flow.
What is the company's outlook for natural gas supply and drilling?
Management describes the long-range supply outlook as very favorable and expects supply to exceed demand for at least the next decade. The 1994 Energy Resources capex program is $90.5 million, weighted toward Appalachia ($35.3 million) and the Rocky Mountains ($24.6 million), with additional funds for Gulf of Mexico offshore drilling and building a Henry Hub-linked market hub. Management says drilling decisions will depend on future gas prices.

04—Continue

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