10-QPeriod: Q1 FY2013

EQT Corp Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 25, 2013For Securities:EQT

Summary

EQT Corporation reported a strong first quarter for 2013, demonstrating significant year-over-year growth in net income attributable to EQT Corporation, which rose by 39% to $100.3 million, translating to $0.66 per diluted share from $0.48 in the prior year. This robust performance was driven by a substantial 47% increase in natural gas volumes sold, coupled with growth in midstream operations and favorable weather conditions. The company is actively managing its commodity price exposure through a comprehensive hedging program, which contributed to a better effective sales price despite a slightly lower hedge gain compared to the previous year. EQT Corporation also continues to execute on its strategy of monetizing its asset base, highlighted by the pending sale of its distribution segment (Equitable Gas and Homeworks) and ongoing development of its core EQT Production segment, particularly in the Marcellus Shale. Looking ahead, EQT Corporation plans significant capital expenditures for 2013, focusing on drilling and completion activities in the Marcellus and Utica shales, as well as midstream infrastructure expansion. The company remains committed to growing shareholder value through economic asset monetization and strategic investments, all while maintaining a strong balance sheet and solid cash flow.

Financial Statements
Beta
SG&A Expenses$39.78M
Operating Expenses$271.40M
Operating Income$144.48M
Interest Expense$37.75M
Net Income$100.25M
EPS (Basic)$0.67
EPS (Diluted)$0.66
Shares Outstanding (Basic)150.33M
Shares Outstanding (Diluted)150.95M

Key Highlights

  • 1Net income attributable to EQT Corporation increased by 39% to $100.3 million for the three months ended March 31, 2013, up from $72.0 million in the prior year.
  • 2Diluted earnings per share rose to $0.66 from $0.48, reflecting improved profitability.
  • 3Total natural gas sales volumes increased significantly by 47% year-over-year, driving revenue growth.
  • 4The EQT Production segment saw a 25.5% increase in operating income, driven by higher production volumes, primarily from the Marcellus play.
  • 5EQT Midstream reported a 32.2% increase in operating income, boosted by higher transmission and gathering revenues.
  • 6The company is in the process of selling its distribution segment (Equitable Gas and Homeworks) to PNG Companies LLC, with regulatory approvals progressing.
  • 7Capital expenditures for 2013 are planned at approximately $1.1 billion for EQT Production and $400 million for midstream infrastructure, indicating continued investment in growth.

Frequently Asked Questions

The primary drivers for the 39% increase in net income attributable to EQT Corporation were a 47% surge in natural gas volumes sold, increased activity in the EQT Production segment (particularly in the Marcellus Shale), growth in EQT Midstream's gathering and transmission services, and favorable weather conditions impacting the Distribution segment. Higher effective sales prices, partly due to hedging, also contributed.

EQT Corporation has executed a Master Purchase Agreement to sell its distribution subsidiaries, Equitable Gas and Equitable Homeworks, to PNG Companies LLC. Regulatory approvals are in progress, and the Hart-Scott Rodino antitrust waiting period expired on April 22, 2013, indicating no FTC objection. The company anticipates receiving necessary approvals by year-end.

EQT Corporation utilizes a comprehensive hedging program primarily focused on its natural gas production. This involves using derivative instruments such as futures contracts, swaps, and collars to protect cash flows from significant exposure to commodity price volatility. The company also enters into fixed price natural gas sales agreements.

For 2013, EQT Corporation plans to invest approximately $1.1 billion in its EQT Production segment, focusing on drilling and completing wells, particularly in the Marcellus and Utica shales. Additionally, approximately $400 million is allocated for midstream infrastructure expansion to support production growth, including increasing gathering and transmission capacity.