10-QPeriod: Q1 FY2004

EQT Corp Quarterly Report for Q1 Ended Mar 31, 2004

Filed May 6, 2004For Securities:EQT

Summary

EQT Corporation (EQT) reported a solid first quarter for 2004, demonstrating year-over-year growth in income from continuing operations, which increased by 9% to $70.1 million, or $1.10 per diluted share, compared to $64.5 million, or $1.02 per diluted share, in the prior year period. This growth was primarily driven by higher average natural gas prices and increased sales volumes from production. The company also highlighted a 27% increase in operating income for its Equitable Supply segment, driven by higher production revenues and gathering rates. Despite a slight decrease in net operating revenues for the Equitable Utilities segment due to warmer weather, the company managed to decrease total expenses through cost-saving initiatives and the reduction of a regulatory reserve. EQT Corp also continues to focus on strategic initiatives, including a shift in its Equitable Supply business model towards infrastructure improvement and aggressive base well maintenance, and plans to divest its international projects in 2004. The company also announced a 27% increase in its quarterly cash dividend, reflecting confidence in its financial performance and commitment to shareholder returns.

Key Highlights

  • 1Net income from continuing operations increased by 9% to $70.1 million ($1.10 per diluted share) in Q1 2004, up from $64.5 million ($1.02 per diluted share) in Q1 2003.
  • 2Operating income for the Equitable Supply segment grew by 27% to $61.5 million, driven by increased production revenues and gathering rates.
  • 3The company is actively managing its market risk through a formally documented risk management program involving derivative contracts to hedge against fluctuations in natural gas prices.
  • 4EQT Corp announced a 27% increase in its quarterly cash dividend to $0.38 per share, payable on June 1, 2004, indicating strong shareholder return focus.
  • 5Capital expenditures decreased to $35.4 million in Q1 2004 from $70.5 million in Q1 2003, largely due to the absence of a significant partnership interest purchase in the current year.
  • 6The company is proceeding with the planned merger of Westport Resources Corporation with Kerr-McGee Corporation, expecting to receive Kerr-McGee shares in exchange for its Westport holdings.
  • 7Cash flows provided by operating activities significantly increased by $67.6 million to $145.6 million in Q1 2004, primarily due to a reduction in inventory.

Frequently Asked Questions

EQT's earnings growth in the first quarter of 2004 was primarily driven by an increase in average natural gas prices and higher sales volumes from its production activities within the Equitable Supply segment. The company also benefited from increased gathering rates and strategic cost management initiatives across its segments.

EQT employs a formal risk management program that utilizes derivative instruments such as forward contracts, swap agreements, and options to hedge against fluctuations in natural gas prices. These strategies are designed to protect earnings from significant price volatility and are managed by a Corporate Risk Committee.

Westport Resources Corporation announced a merger with Kerr-McGee Corporation in April 2004, expected to close in the third quarter of 2004. EQT will receive Kerr-McGee shares in exchange for its Westport shares. EQT plans to divest its investment and is evaluating hedging and tax deferral strategies to maximize shareholder value from this divestiture.

Cash flow from operating activities increased significantly by $67.6 million to $145.6 million in the first quarter of 2004. This improvement was mainly due to a substantial decrease in inventory levels, driven by rising natural gas prices and increased volumes stored at the end of 2003, along with an overall effective working capital management.