10-QPeriod: Q3 FY2000

EQT Corp Quarterly Report for Q3 Ended Sep 30, 2000

Filed November 13, 2000For Securities:EQT

Summary

Equitable Resources, Inc. (EQT) reported a substantial increase in net income for the nine months ended September 30, 2000, reaching $74.5 million, a significant jump from $42.7 million in the same period of 1999. This growth was driven by strong performance in the Equitable Production segment, bolstered by the acquisition of Statoil's Appalachian oil and gas properties and higher commodity prices. The company also saw increased revenues in its Equitable Utilities segment, primarily due to the acquisition of Carnegie Natural Gas and improved energy marketing margins. However, the NORESCO segment experienced a revenue decrease, largely due to reduced construction activity. The company's financial position shows a notable increase in total assets, largely attributed to the Statoil acquisition. While short-term debt also increased significantly due to this acquisition, management is actively working to replace it with other forms of financing and cash from asset sales. The company continues to manage its market risk through hedging strategies for natural gas, crude oil, and natural gas liquids, with a focus on protecting earnings from price volatility.

Key Highlights

  • 1Net income surged to $74.5 million for the nine months ended September 30, 2000, up from $42.7 million in the prior year.
  • 2Operating revenues increased across the board, reaching $1,061.7 million for the nine months ended September 30, 2000, compared to $801.3 million in the prior year.
  • 3The Equitable Production segment saw significant growth, driven by the acquisition of Statoil's assets and higher commodity prices, resulting in a substantial increase in its earnings before interest and taxes (EBIT).
  • 4Equitable Utilities segment also showed improvement, with increased revenues and EBIT, supported by the Carnegie Natural Gas acquisition and enhanced energy marketing.
  • 5Total assets grew significantly, reflecting the strategic acquisition of Statoil's oil and gas properties.
  • 6Short-term debt increased substantially due to the Statoil acquisition, but the company is pursuing alternative financing and asset sales to manage this.
  • 7The company is actively managing commodity price risk through derivative instruments and hedging strategies.

Frequently Asked Questions

The significant increase in net income was primarily driven by strong performance in the Equitable Production segment, which benefited from the acquisition of Statoil's Appalachian oil and gas properties and higher natural gas and oil commodity prices. Additionally, the Equitable Utilities segment contributed positively due to the acquisition of Carnegie Natural Gas and improved energy marketing margins.

The acquisition of Statoil's assets in February 2000 significantly increased the company's total assets and net property, plant, and equipment. It also led to a substantial increase in short-term debt, which was used to fund the acquisition. The company is actively working to replace this short-term debt with other financing methods and asset sales.

Equitable Resources employs a hedging program with the objective of protecting earnings from fluctuations in natural gas, crude oil, and natural gas liquids prices. They utilize a mix of derivative instruments, including costless collars, straight floors, and fixed price swaps, to establish price floors for production while allowing participation in upward price movements for natural gas, and fixed price swaps for crude oil and natural gas liquids to lock in current prices.

A labor contract dispute at Kentucky West Virginia Gas Company led to a strike starting on October 15, 2000. This has resulted in production volume losses and additional strike-related expenses. Vandalism has also occurred. The company has stated that the duration and resolution of the strike are unknown but likely to have a significant adverse impact on future results of operations.