10-QPeriod: Q2 FY2000

EQT Corp Quarterly Report for Q2 Ended Jun 30, 2000

Filed August 11, 2000For Securities:EQT

Summary

Equitable Resources, Inc. (EQT) reported a significant increase in financial performance for the six months ended June 30, 2000, compared to the same period in 1999. Net income more than doubled to $55.3 million from $37.0 million, and diluted earnings per share rose to $1.67 from $1.06. This growth was primarily driven by the Equitable Production segment, fueled by the substantial acquisition of Statoil's Appalachian oil and gas properties in February 2000. Higher natural gas and crude oil prices, coupled with increased production volumes, significantly boosted revenues in this segment. The Equitable Utilities segment also showed improvement, benefiting from the acquisition of Carnegie Natural Gas and increased marketing margins, despite warmer weather conditions. The NORESCO segment experienced a decrease in earnings due to a reduced construction backlog and the decision to exit international project development. Liquidity was impacted by the Statoil acquisition, leading to an increase in short-term debt. However, the company is actively working to replace this short-term financing with a combination of other financings and proceeds from asset sales. A significant transaction was the monetization of a portion of its interest in nonconventional fuel tax credit properties, generating $122.2 million in cash. Management is focused on hedging strategies to mitigate exposure to volatile commodity prices and has adequate borrowing capacity to meet its financing needs.

Key Highlights

  • 1Net income for the six months ended June 30, 2000, rose to $55.3 million, a 49.6% increase from $36.9 million in the prior year.
  • 2Diluted earnings per share (EPS) for the six-month period improved to $1.67, up from $1.06 in the same period last year.
  • 3The Equitable Production segment saw significant growth, driven by the acquisition of Statoil's Appalachian assets and higher commodity prices.
  • 4Total operating revenues increased to $717.5 million for the six months ended June 30, 2000, from $608.1 million in the prior year.
  • 5Short-term debt increased significantly due to the Statoil acquisition, but the company is actively working to replace it with other financing and asset sales.
  • 6The company completed a significant transaction by selling a portion of its interest in properties qualifying for nonconventional fuel tax credits, netting $122.2 million in cash.
  • 7The NORESCO segment's earnings declined due to a reduced construction backlog and the strategic decision to exit international project development.

Frequently Asked Questions

The significant increase in net income was primarily driven by the Equitable Production segment, largely due to the acquisition of Statoil's Appalachian oil and gas properties completed in February 2000. This acquisition, combined with higher natural gas and crude oil prices and increased production volumes, significantly boosted segment revenues and profitability.

The Statoil acquisition led to a substantial increase in short-term debt, as the company initially funded the purchase through commercial paper and short-term loans. However, EQT is actively working to replace this short-term debt with alternative financings and proceeds from asset sales to improve its liquidity position. The company also generated significant cash from monetizing certain production assets.

The Equitable Production segment is expected to continue to be a key growth driver, benefiting from the Statoil acquisition and currently favorable commodity prices. The company's hedging strategies aim to protect earnings from price volatility, allowing participation in upward price movements while providing downside protection.

Key challenges include the volatility of commodity prices for natural gas and crude oil, which impacts earnings. The company also faces seasonal demand fluctuations in its Utilities segment. Additionally, the NORESCO segment's performance was impacted by a reduced construction backlog and the decision to exit international markets. The significant increase in short-term debt also presents a short-term concern that management is actively addressing.