01—Abstract
Summary
Summary of the 10-K filed February 9, 2017. Cited figures are marked; the original filing is the authoritative source.
EQT Corporation's 2016 10-K filing reveals a significant production increase, with record annual sales volumes, up 26%a year-over-year, driven by a 31% rise in Marcellus volumes.
This growth was achieved despite a 20% decrease in the average realized price for natural gas, NGLs, and oil, which fell to $2.47b per Mcfe. The company expanded its Marcellus acreage by approximately 145,500 net acres, bolstering its reserve base. Financially, EQT Production reported an operating loss of $719.7 million for 2016, a substantial decline from the $132.0 million operating income in 2015, primarily due to lower realized prices and a significant loss on derivatives not designated as hedges.
The company raised approximately $1.2 billionc in net proceeds through two public stock offerings to fund its operations and growth initiatives. The midstream segments, EQT Gathering and EQT Transmission, both experienced revenue and operating income growth, supported by increased volumes and infrastructure development, including the Ohio Valley Connector pipeline project.
Overall, while production volumes are strong, the company's profitability in 2016 was heavily impacted by lower commodity prices and derivative accounting impacts. Investors should note the company's strategic focus on expanding its Marcellus acreage and its continued investment in midstream infrastructure via EQM.
02—Key points
Key Highlights
- Record annual production sales volumes increased by 26% to 759.0 Bcfe, with Marcellus volumes up 31%.
- Average realized price decreased by 20% to $2.47 per Mcfe due to lower commodity prices.
- Acquired approximately 145,500 net Marcellus acres, primarily in West Virginia and Pennsylvania.
- EQT Production reported an operating loss of $719.7 million for 2016, down from an operating income of $132.0 million in 2015.
- Completed two public stock offerings, raising approximately $1.2 billion in net proceeds.
- EQM placed the Ohio Valley Connector pipeline into service, enhancing transmission capacity.
- Total proved reserves increased to 13.5 Tcfe as of December 31, 2016, a significant rise from the previous year, largely due to acquisitions.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2016, Eqt lost $0.33.
- Revenue$1.39B100.0%
- Cost of revenue−$880.2M63.5%
- Gross profit$506.9M36.5%
- Operating costs−$1.26B91.0%
- Operating income−$755.0M54.4%
- Interest, other & tax$302.0M21.8%
- Net income−$453.0M32.7%
04—Financials
Financial Highlights
Figures from 10-KFY2016filed February 9, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $1.39B— | — |
| Cost of Revenue | $880.19M— | — |
| Gross Profit | $506.86M— | — |
| SG&A Expenses | $218.95M$249.93M | −12.4% |
| Operating Expenses | $2.15B$1.78B | +21.0% |
| Operating Income | -$755.03M$563.14M | −234.1% |
| Interest Expense | $131.16M$146.53M | −10.5% |
| Net Income | -$452.98M$85.17M | −631.9% |
| EPS (Basic) | $-2.71$0.56 | −583.9% |
| EPS (Diluted) | $-2.71$0.56 | −583.9% |
| Shares Outstanding (Basic) | 166.98M152.40M | +9.6% |
| Shares Outstanding (Diluted) | 166.98M152.94M | +9.2% |
05—Questions
Frequently Asked Questions
What was EQT's financial performance in 2016 regarding production and pricing?
In 2016, EQT achieved record production sales volumes, increasing by 26% to 759.0 Bcfe, with Marcellus volumes showing a 31% rise. However, the average realized price decreased by 20% to $2.47 per Mcfe, reflecting the challenging commodity price environment.
How did EQT expand its asset base in 2016?
EQT significantly grew its asset base by acquiring approximately 145,500 net acres in the Marcellus Shale, primarily in northern West Virginia and southwestern Pennsylvania. Additionally, its midstream subsidiary, EQM, placed the Ohio Valley Connector pipeline into service, enhancing its transmission infrastructure.
What was the impact of commodity prices and hedging on EQT's 2016 results?
Lower commodity prices, down 20% year-over-year, significantly impacted EQT's average realized price. The company also reported a substantial loss on derivatives not designated as hedges in 2016, which contributed to the EQT Production segment's operating loss of $719.7 million, contrasting with an operating income in the prior year.
How did EQT fund its operations and growth in 2016?
EQT funded its operations and growth through a combination of cash flows from operations and capital raised through financial activities. Notably, the company completed two public stock offerings that generated approximately $1.2 billion in net proceeds.
06—Continue