10-QPeriod: Q2 FY2009

EQT Corp Quarterly Report for Q2 Ended Jun 30, 2009

Filed July 29, 2009For Securities:EQT

Summary

EQT Corporation's second quarter 2009 results show a decrease in net income compared to the same period in 2008, largely driven by unfavorable commodity prices that reduced average well-head and NGL sales prices by $62 million pre-tax. Despite this, the company saw an increase in gas sales volumes due to its drilling program and growth in midstream and distribution segments. Capital expenditures remain significant, focusing on organic growth through horizontal drilling and infrastructure expansion. The balance sheet reflects a strong liquidity position with substantial cash and cash equivalents, bolstered by recent debt offerings. The company is actively managing commodity price risk through hedging strategies, with protection for a significant portion of expected natural gas production sales volumes extending through 2011. EQT Midstream's growth is supported by increased gathered volumes and the commissioning of new infrastructure, while the Distribution segment benefited from base rate increases.

Financial Highlights

41 data points
Beta

Net Income

$26.64M

EPS (Diluted)

$0.20

Total Assets

$5.68B

Cash & Equivalents

$335.35M

Free Cash Flow

$24.17M

Financial Statements
Beta
SG&A Expenses$35.58M
Operating Expenses$170.53M
Operating Income$67.51M
Interest Expense$26.46M
Net Income$26.64M
EPS (Basic)$0.20
EPS (Diluted)$0.20
Shares Outstanding (Basic)130.83M
Shares Outstanding (Diluted)131.44M

Key Highlights

  • 1Net income decreased to $26.6 million ($0.20/diluted share) for Q2 2009 from $55.4 million ($0.44/diluted share) in Q2 2008, primarily due to lower commodity prices.
  • 2Operating revenues for Q2 2009 were $238.0 million, down from $334.0 million in Q2 2008, mainly due to reduced natural gas prices.
  • 3EQT Production saw a 22.1% increase in total sales volumes for Q2 2009 compared to Q2 2008, though average well-head sales price decreased by 41.5%.
  • 4EQT Midstream's operating income increased by 38.8% year-over-year to $32.8 million, driven by higher gathered volumes and transmission activity.
  • 5The company raised $700 million through an 8.125% Senior Notes offering in May 2009 to repay short-term borrowings and fund capital programs.
  • 6Cash flow from operations significantly improved, reaching $468.1 million for the first six months of 2009, up from $88.7 million in the prior year, aided by improved working capital management and a tax refund.
  • 7Capital expenditures for the first six months of 2009 were $448.9 million, a decrease from $524.9 million in the prior year, reflecting a reduced spending plan for 2009.

Frequently Asked Questions

The primary driver for the decrease in net income was unfavorable commodity prices, which led to reduced average well-head and NGL sales prices. This resulted in a pre-tax impact of approximately $62 million for the second quarter.

EQT manages its exposure to natural gas price volatility through a hedging program that utilizes derivative commodity instruments such as futures contracts, swap agreements, and collar agreements. As of June 30, 2009, the company had price protection for approximately 60% of its expected natural gas production sales volumes in 2009 and over 40% through 2011.

EQT operates in three main segments: EQT Production (exploration and production), EQT Midstream (gathering, processing, transportation, and storage), and Distribution (regulated natural gas distribution). In Q2 2009, EQT Production's operating income decreased due to lower prices, while EQT Midstream saw increased operating income driven by higher volumes and infrastructure additions. The Distribution segment also reported higher operating income due to base rate increases and lower operating expenses.

In the first half of 2009, EQT completed a public offering of $700 million in Senior Notes to repay short-term borrowings and fund its capital program. Capital expenditures for the period were $448.9 million, focused on drilling and midstream infrastructure, and were lower than the previous year's $524.9 million due to a reduced spending plan.