10-QPeriod: Q1 FY2012

EQT Corp Quarterly Report for Q1 Ended Mar 31, 2012

Filed April 26, 2012For Securities:EQT

Summary

EQT Corporation's Q1 2012 filing shows a notable decrease in net income compared to the prior year, primarily driven by the absence of a significant gain on asset sales recorded in Q1 2011. Operating revenues also declined, impacted by lower realized sales prices for natural gas, although this was partially offset by increased production volumes, especially from the Marcellus play. The company continues to invest heavily in its EQT Production and EQT Midstream segments, with significant capital expenditures focused on drilling and midstream infrastructure development. Despite lower profitability this quarter, EQT remains focused on its long-term strategy of developing its Marcellus reserves and expanding its midstream assets, with plans for further capital investment in 2012.

Financial Highlights

42 data points
Beta

Net Income

$72.03M

EPS (Diluted)

$0.48

Total Assets

$8.86B

Cash & Equivalents

$745.21M

Free Cash Flow

-$47.46M

Financial Statements
Beta
SG&A Expenses$42.94M
Operating Expenses$297.77M
Operating Income$111.05M
Interest Expense$41.25M
Net Income$72.03M
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)149.49M
Shares Outstanding (Diluted)150.22M

Key Highlights

  • 1Net income for Q1 2012 was $72.0 million ($0.48/diluted share), a significant decrease from $122.3 million ($0.82/diluted share) in Q1 2011, largely due to a $22.8 million gain on asset disposition in the prior year.
  • 2Operating revenues decreased to $449.96 million from $472.70 million year-over-year, primarily due to lower realized natural gas prices.
  • 3Production volumes increased by 25.6% to 54,070 MMcfe, driven by strong performance in the Marcellus play and contributions from recent acquisitions.
  • 4Capital expenditures remained substantial at $269.6 million, with a significant portion allocated to EQT Production ($183.7 million) and EQT Midstream ($79.6 million) for drilling and infrastructure expansion.
  • 5The company initiated a natural gas impact fee accrual of $8.2 million in Q1 2012 related to Pennsylvania legislation, impacting production taxes.
  • 6EQT Midstream is advancing plans for an initial public offering of units in EQT Midstream Partners, LP, which is expected to involve a portion of its midstream assets.
  • 7Despite the decrease in net income, the company maintained its regular quarterly cash dividend of $0.22 per share.

Frequently Asked Questions

The primary reason for the decrease in net income is the absence of a significant gain on asset dispositions that was recorded in the first quarter of 2011. Specifically, the sale of the Langley natural gas processing complex in Q1 2011 contributed $22.8 million to net income, which was not present in Q1 2012.

Production sales volumes increased by 25.6% to 54,070 MMcfe, largely due to increased production from the Marcellus play and recent acquisitions. However, the average wellhead sales price to EQT Production decreased by 9.6% to $3.59 per Mcfe, primarily due to a 33% decrease in the average NYMEX natural gas price, partially offset by higher hedging gains.

EQT plans capital expenditures of approximately $955 million for well development, focusing on 132 Marcellus wells, and $365 million for midstream infrastructure in 2012. The company is committed to developing its Marcellus reserves and expanding its midstream assets, despite volatile natural gas prices, which led to a suspension of new drilling in the Huron play.

The Commonwealth of Pennsylvania passed a natural gas impact fee in February 2012. EQT accrued $8.2 million for this fee in Q1 2012, which includes a retroactive component of $6.2 million for pre-2012 Marcellus wells. This fee adds to production taxes and will adjust annually based on factors like well age, CPI, and average monthly NYMEX natural gas prices.