10-QPeriod: Q2 FY2003

EQT Corp Quarterly Report for Q2 Ended Jun 30, 2003

Filed August 14, 2003For Securities:EQT

Summary

EQT Corporation (EQT) reported its second-quarter 2003 financial results, showing an increase in net income to $31.4 million from $38.2 million in the prior year's second quarter, primarily driven by higher commodity prices and increased sales volumes. The company's operating income from continuing operations before accounting changes also saw an improvement, reflecting higher realized selling prices and the absence of a significant impairment charge recorded in the prior year. Key operational drivers included strong performance in the Equitable Supply segment due to favorable commodity prices and increased production, alongside growth in gathering revenues. The Equitable Utilities segment faced challenges from warmer weather, impacting revenues, though colder weather in the first quarter contributed positively to year-to-date results. The NORESCO segment saw an increase in operating income due to the prior year's impairment charge, but a decrease in construction activity and backlog presented headwinds. The company also made significant changes to its accounting for its investment in Westport, reclassifying it as available-for-sale and recognizing a substantial unrealized gain. Additionally, EQT is undergoing an SEC review concerning its accounting for prepaid gas forward sales, with potential implications for historical financial statements.

Key Highlights

  • 1Net income for the second quarter of 2003 was $31.4 million, or $0.50 per diluted share, compared to $38.2 million, or $0.59 per diluted share, in the prior year's second quarter.
  • 2Income from continuing operations before cumulative effect of accounting change increased to $31.4 million ($0.50/share) in Q2 2003 from $29.2 million ($0.45/share) in Q2 2002.
  • 3The Equitable Supply segment reported a 12% increase in operating income for Q2 2003 to $45.8 million, driven by higher commodity prices and increased sales volumes.
  • 4A significant change in accounting treatment for the investment in Westport Resources Corporation occurred, moving from the equity method to available-for-sale, resulting in a reclassification adjustment and an unrealized gain recorded in accumulated other comprehensive income.
  • 5The company purchased the remaining 31% limited partnership interest in Appalachian Basin Partners, LP (ABP) for $44.2 million, consolidating the entity fully.
  • 6EQT's dividend per common share increased to $0.30 in Q2 2003 from $0.17 in Q2 2002, with a declared increase to $0.30 for the upcoming quarter.
  • 7An SEC review is ongoing regarding the accounting treatment of prepaid gas forward sales, with potential implications for historical financial statements.

Frequently Asked Questions

EQT reported a net income of $31.4 million, or $0.50 per diluted share, for the second quarter of 2003. This compares to a net income of $38.2 million, or $0.59 per diluted share, for the same period in 2002. While net income decreased, income from continuing operations before accounting changes increased, reflecting improved operational performance.

The Equitable Supply segment showed strong performance with a 12% increase in operating income due to higher commodity prices and sales volumes. The Equitable Utilities segment experienced lower revenues due to warmer weather but saw year-to-date improvement from colder weather in the first quarter. The NORESCO segment's operating income increased due to the absence of a prior year impairment charge, but it faced challenges from reduced construction activity and backlog.

The company changed its accounting for its investment in Westport Resources Corporation from the equity method to available-for-sale. Additionally, an SEC review is in progress concerning the accounting for prepaid gas forward sales, which could potentially lead to restatements of historical financial statements. The company also adopted SFAS No. 143 for asset retirement obligations, resulting in a one-time charge.

EQT declared a regular quarterly cash dividend of $0.30 per share, representing a 50% increase over the previous quarter and a 76% increase year-to-date. The company is targeting dividend growth in line with its earnings per share growth. The company also repurchased shares and acquired the remaining interest in ABP, indicating a focus on shareholder returns and strategic consolidation.