10-QPeriod: Q3 FY2013

EQT Corp Quarterly Report for Q3 Ended Sep 30, 2013

Filed October 24, 2013For Securities:EQT

Summary

EQT Corporation's third quarter 2013 filing shows a substantial increase in net income attributable to EQT Corporation, reaching $88.3 million ($0.58 per diluted share) compared to $31.9 million ($0.21 per diluted share) in the same period of 2012. This growth was driven by a significant increase in natural gas volumes sold (42%), alongside a modest rise in average effective sales prices for natural gas and natural gas liquids (NGLs). Midstream segment performance also saw a strong increase in operating income due to higher gathering and transmission revenues, supported by increased volumes and expanded infrastructure. The nine-month period ending September 30, 2013, mirrored this positive trend with net income attributable to EQT Corporation at $275.4 million ($1.82 per diluted share), more than double the $135.4 million ($0.90 per diluted share) reported in the prior year. This performance was fueled by a substantial 47% increase in natural gas volumes sold and a recovering NYMEX natural gas price. The company also reported significant capital expenditures, primarily focused on developing its Marcellus Shale assets and expanding midstream infrastructure, funded by operating cash flow and a public offering of EQT Midstream Partners, LP units.

Financial Highlights

46 data points
Beta

Net Income

$88.26M

EPS (Diluted)

$0.58

Total Assets

$9.68B

Cash & Equivalents

$423.90M

Free Cash Flow

-$433.87M

Financial Statements
Beta
SG&A Expenses$48.17M
Operating Expenses$312.54M
Operating Income$167.06M
Interest Expense$35.55M
Net Income$88.26M
EPS (Basic)$0.59
EPS (Diluted)$0.58
Shares Outstanding (Basic)150.68M
Shares Outstanding (Diluted)151.66M

Key Highlights

  • 1Net income attributable to EQT Corporation more than doubled year-over-year for both the three months ended September 30, 2013 ($88.3 million vs. $31.9 million) and the nine months ended September 30, 2013 ($275.4 million vs. $135.4 million).
  • 2Natural gas sales volumes increased significantly, up 42% for the third quarter and 47% for the first nine months of 2013 compared to the prior year periods.
  • 3The EQT Production segment's operating income saw a substantial increase, rising by 153.3% for the third quarter and 140.1% for the first nine months, driven by higher volumes and prices.
  • 4EQT Midstream's operating income increased by 53.9% for the third quarter and 34.8% for the first nine months, supported by strong growth in gathering and transmission revenues.
  • 5Capital expenditures increased significantly, with $1.26 billion spent in the first nine months of 2013 primarily on EQT Production assets and midstream infrastructure development.
  • 6The company completed a public offering of EQT Midstream Partners, LP common units, receiving net proceeds of $529.4 million, contributing to strong financing activities.
  • 7Despite a challenging basis differential in the Northeast region, EQT reported positive overall results, with average NYMEX natural gas prices increasing significantly in both reported periods.

Frequently Asked Questions

The primary drivers were a 47% increase in natural gas volumes sold, a substantial rise in the average NYMEX natural gas sales price from $2.59/Mcf to $3.67/Mcf, and increased transmission pipeline throughput and gathered volumes. These were partially offset by higher depreciation, depletion, and amortization (DD&A) expense and higher income taxes.

The IPO in July 2012 and a subsequent public offering of common units in July 2013 provided significant financing. For the nine months ended September 30, 2013, EQT Midstream's operating income increased by 34.8% due to higher gathering and transmission revenues, and net income attributable to noncontrolling interests in EQT Midstream increased significantly, reflecting the public ownership stake.

EQT has entered into an agreement to sell its Distribution segment (Equitable Gas and Homeworks) to PNG Companies LLC. The transaction is subject to regulatory approvals from federal and state agencies. The company expected to complete the regulatory review process by the end of 2013 and has classified the segment as a discontinued operation once satisfactory progress in the regulatory process was made.

EQT employs a commodity risk management program primarily focused on hedging sales of its produced natural gas through the use of futures contracts, swap agreements, and collar agreements. The objective is to protect cash flows from volatility in natural gas prices. As of September 30, 2013, the company had hedged portions of its expected production and forecasted purchases and sales.