10-QPeriod: Q1 FY2015

EQT Corp Quarterly Report for Q1 Ended Mar 31, 2015

Filed April 23, 2015For Securities:EQT

Summary

EQT Corporation's first quarter 2015 report shows a decrease in net income attributable to EQT Corporation to $173.4 million, or $1.14 per diluted share, down from $192.2 million, or $1.26 per diluted share, in the prior year's quarter. This decline was primarily driven by a significant drop in average realized natural gas prices, a 33% decrease year-over-year, coupled with higher operating expenses. Despite lower commodity prices impacting the EQT Production segment, the EQT Midstream segment demonstrated robust growth, with revenues increasing by 25.3%, driven by higher gathering and transmission revenues, especially from firm reservation fees and increased volumes. The company significantly increased its investment in capital expenditures, particularly in well development and acreage acquisition, and made a substantial capital contribution to the Mountain Valley Pipeline project. This increased investment, along with robust cash flow from operations and strategic financing activities, including proceeds from the EQT Midstream Partners, LP public offering, led to a substantial increase in cash and cash equivalents. EQT's strategic focus remains on developing its resource base while navigating commodity price volatility, with plans to fund future growth through various avenues including midstream asset monetization and potential future equity offerings.

Financial Highlights

45 data points
Beta

Net Income

$173.43M

EPS (Diluted)

$1.14

Total Assets

$13.07B

Cash & Equivalents

$1.78B

Free Cash Flow

-$174.58M

Financial Statements
Beta
SG&A Expenses$63.13M
Operating Expenses$400.06M
Operating Income$314.76M
Interest Expense$37.22M
Net Income$173.43M
EPS (Basic)$1.14
EPS (Diluted)$1.14
Shares Outstanding (Basic)152.04M
Shares Outstanding (Diluted)152.76M

Key Highlights

  • 1Net income attributable to EQT Corporation decreased by 9.7% to $173.4 million ($1.14/share diluted) compared to $192.2 million ($1.26/share diluted) in Q1 2014, primarily due to lower realized commodity prices.
  • 2Total operating revenues slightly decreased by 1.2% to $708.8 million, impacted by lower natural gas prices, though partially offset by increased production volumes.
  • 3EQT Production segment operating income decreased significantly by 33% to $185.8 million, largely due to a 39.4% drop in average realized price to $2.77/Mcfe.
  • 4EQT Midstream segment revenue grew substantially by 25.3% to $208.2 million and operating income increased by 56.2% to $129.7 million, driven by higher gathering and transmission revenues.
  • 5Capital expenditures increased by 17.2% to $555.4 million, with a significant portion directed towards well development in the Marcellus play and a $54.2 million contribution to the Mountain Valley Pipeline.
  • 6Cash and cash equivalents more than doubled to $1.78 billion, boosted by a $696.7 million net proceeds from EQT Midstream Partners, LP's public offering and increased short-term loans.
  • 7The company elected to de-designate all cash flow hedges effective December 31, 2014, meaning all changes in fair value of derivative instruments are now recognized in the Statement of Consolidated Income.

Frequently Asked Questions

The primary reason for the decrease in net income attributable to EQT Corporation is the significant decline in the average realized price for natural gas and other commodities. The average realized price per Mcfe for EQT Production dropped by 39.4% to $2.77 in the first quarter of 2015 compared to $4.57 in the first quarter of 2014. This was compounded by higher operating expenses in the EQT Production segment.

The EQT Midstream segment showed strong performance, with total operating revenues increasing by 25.3% to $208.2 million and operating income surging by 56.2% to $129.7 million. This growth was driven by increased net gathering and transmission revenues, fueled by higher firm reservation fees, increased gathered and transmitted volumes, and a strategic focus on firm reservation contracts, particularly in the Marcellus play.

EQT Corporation significantly increased its capital expenditures to $555.4 million, primarily for well development and acreage acquisition, including significant investment in the Marcellus play. Additionally, the company made a $54.2 million capital contribution to the Mountain Valley Pipeline project. These investments were funded through a combination of strong operating cash flows, proceeds from the EQT Midstream Partners, LP public offering ($696.7 million), and increased short-term borrowings.

Effective December 31, 2014, EQT Corporation elected to de-designate all cash flow hedges. This means that all changes in the fair value of its derivative instruments are now recognized directly in the Statement of Consolidated Income in each period, rather than being deferred in Accumulated Other Comprehensive Income. The company continues to use derivative instruments to manage commodity price risk for its production sales.