10-QPeriod: Q1 FY2011

EQT Corp Quarterly Report for Q1 Ended Mar 31, 2011

Filed April 28, 2011For Securities:EQT

Summary

EQT Corporation's first quarter 2011 results show a significant increase in net income, largely driven by a $22.8 million gain from the sale of its Langley natural gas processing complex and a $4.0 million gain from the sale of available-for-sale securities. Despite a decrease in average realized sales prices for natural gas, the company saw a substantial increase in natural gas sales volumes, up 43.5% year-over-year, primarily from increased production in the Marcellus Shale and Huron plays. Operationally, EQT Production experienced strong volume growth, while EQT Midstream benefited from increased gathering and transmission volumes. The Distribution segment saw improved operating income due to colder weather and rate increases. The company continues to invest heavily in its drilling and infrastructure programs, with capital expenditures increasing by 21.1% to $263.4 million for the quarter. EQT's financial position remains solid, with a strong operating cash flow and a robust hedging strategy in place to mitigate commodity price volatility.

Financial Highlights

42 data points
Beta

Net Income

$122.25M

EPS (Diluted)

$0.82

Total Assets

$7.04B

Cash & Equivalents

$138.63M

Free Cash Flow

-$20.91M

Financial Statements
Beta
SG&A Expenses$38.89M
Operating Expenses$275.07M
Operating Income$220.41M
Interest Expense$32.85M
Net Income$122.25M
EPS (Basic)$0.82
EPS (Diluted)$0.82
Shares Outstanding (Basic)149.27M
Shares Outstanding (Diluted)150.00M

Key Highlights

  • 1Net income increased by 38.8% to $122.3 million ($0.82 per diluted share) compared to $88.1 million ($0.65 per diluted share) in Q1 2010, boosted by asset sales.
  • 2The company completed the sale of its Langley natural gas processing complex for $230.5 million, realizing a pre-tax gain of $22.8 million.
  • 3Natural gas sales volumes surged by 43.5% to 43,047 MMcfe, driven by increased production from the Marcellus Shale and Huron plays.
  • 4Capital expenditures rose by 21.1% to $263.4 million, reflecting continued investment in EQT Production's drilling and development activities.
  • 5EQT Midstream saw a 26.5% increase in operating income, driven by higher gathered volumes and transmission throughput.
  • 6The company's hedging program continues to provide a significant benefit, with hedging activities increasing production sales volumes' price by $0.46 per Mcfe in Q1 2011.
  • 7EQT's financial leverage remains manageable, with a total debt-to-total capitalization ratio well within covenants.

Frequently Asked Questions

The primary drivers of the significant increase in net income for EQT in Q1 2011 were the gain on the sale of the Langley natural gas processing complex ($22.8 million) and the gain on the sale of available-for-sale securities ($4.0 million). Additionally, increased natural gas sales volumes from EQT Production and improved operating results from EQT Midstream contributed to the positive financial performance.

EQT Production experienced a substantial 43.5% increase in total produced sales volumes (MMcfe) to 43,047, driven by strong performance in the Marcellus Shale and Huron plays. Despite a decrease in the average wellhead sales price per Mcfe by 16.2% to $3.97, the significant volume growth, combined with hedging benefits, led to a 19.9% increase in EQT Production's total operating revenues to $173.0 million.

EQT is strategically increasing its capital expenditures, with Q1 2011 capex at $263.4 million, up 21.1% year-over-year. The company is focusing its drilling efforts on horizontal wells in shale formations, particularly the Marcellus Shale and Huron plays. EQT anticipates continued growth in natural gas sales volumes, with a projected increase of approximately 34% for the full year 2011, indicating a commitment to expanding its production base through cost-effective and technologically advanced drilling.

EQT employs a comprehensive hedging program using derivative commodity instruments such as futures contracts, swap agreements, collar agreements, and option contracts. This strategy is designed to protect cash flows from significant fluctuations in natural gas prices. As of March 31, 2011, the company had hedged significant portions of its expected production through 2015, with deferred gains in accumulated other comprehensive income, which are expected to be recognized in earnings over the next twelve months as hedged transactions settle.