10-KPeriod: FY2012

EQT Corp Annual Report, Year Ended Dec 31, 2012

Filed February 21, 2013For Securities:EQT

Summary

EQT Corporation's 2012 Form 10-K highlights a year of significant operational growth, particularly in its EQT Production segment, with record production volumes driven by strong performance in the Marcellus play. The company's strategy focused on developing its high-return Marcellus reserves, which contributed to a 12% increase in total proved reserves to 6.0 Tcfe. A key strategic move was the successful initial public offering (IPO) of EQT Midstream Partners, LP (EQM) in July 2012, which provided capital for drilling and development programs and offered enhanced visibility for its midstream assets. Financially, while operating income saw a decrease due to lower realized natural gas prices and the absence of significant gains from asset dispositions in the prior year, the company's operational expansion compensated for some of this. EQT also announced its intention to sell its distribution segment, Equitable Gas Company, to PNG Companies LLC for $720 million in cash and select midstream assets, a transaction expected to close in 2013 subject to regulatory approvals. This strategic shift signals a move towards a more focused portfolio, emphasizing upstream production and midstream infrastructure.

Financial Highlights

46 data points
Beta

Net Income

$183.40M

EPS (Diluted)

$1.22

Total Assets

$8.85B

Cash & Equivalents

$182.06M

Free Cash Flow

$796.82M

Financial Statements
Beta
SG&A Expenses$172.24M
Operating Expenses$987.59M
Operating Income$389.63M
Interest Expense$184.79M
Net Income$183.40M
EPS (Basic)$1.23
EPS (Diluted)$1.22
Shares Outstanding (Basic)149.62M
Shares Outstanding (Diluted)150.51M

Key Highlights

  • 1Record annual production sales volumes of 258.5 Bcfe, a 33% increase from 2011, largely driven by a 85% increase in Marcellus sales volumes.
  • 2Total proved reserves increased by 12% to 6.0 Tcfe, with the Marcellus play holding 4.3 Tcfe.
  • 3Completed the initial public offering (IPO) of EQT Midstream Partners, LP (EQM) in July 2012, raising capital and creating a growth-oriented master limited partnership.
  • 4Announced an agreement to sell Equitable Gas Company and Equitable Homeworks, LLC to PNG Companies LLC for approximately $720 million in cash and select midstream assets, subject to regulatory approvals.
  • 5Invested approximately $857 million in well development, with a focus on drilling 127 horizontal Marcellus wells.
  • 6Secured credit ratings of BBB (Stable) from S&P and Baa2 (Under Review for Downgrade) from Moody's as of year-end 2012.
  • 7Shifted dividend rate to $0.12 per share annually, effective January 2013, to better reflect the company's post-transaction business mix.

Frequently Asked Questions

EQT Corporation's primary strategic focus in 2012 was on profitably developing its extensive undeveloped Marcellus reserves. This involved increasing capital expenditure towards drilling operations in the Marcellus play, while indefinitely suspending development in less attractive plays like Huron and CBM. The formation and IPO of EQT Midstream Partners, LP was another key strategic initiative to facilitate capital raising for development programs and to monetize midstream assets.

The IPO of EQT Midstream Partners, LP (EQM) in July 2012 was significant as it raised approximately $231 million in net cash proceeds for EQT, providing capital to accelerate its drilling and development programs. It also established EQT Midstream as a publicly traded master limited partnership, offering enhanced visibility and a platform for growth in gathering, transmission, and storage services within the Appalachian Basin. EQT retained a majority interest in the Partnership.

The proposed sale of Equitable Gas Company and Equitable Homeworks, LLC to PNG Companies LLC for approximately $720 million (subject to adjustments) in cash and select midstream assets represents a significant strategic shift. This transaction, pending regulatory approvals, would allow EQT to divest its regulated distribution business, allowing it to concentrate on its core EQT Production and EQT Midstream segments. The proceeds from the sale are expected to be used for capital expenditures and to strengthen the balance sheet.

EQT Corporation's financial performance in 2012 showed a decrease in net income attributable to EQT Corporation ($183.4 million in 2012 vs. $479.8 million in 2011) and operating income ($470.5 million in 2012 vs. $861.3 million in 2011). This was primarily due to lower realized natural gas prices and the absence of significant gains from asset dispositions that occurred in 2011. However, record production and gathering volumes provided a partial offset.