10-QPeriod: Q2 FY2015

EQT Corp Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 23, 2015For Securities:EQT

Summary

EQT Corporation's (EQT) Q2 2015 results show a significant decline in net income attributable to EQT Corporation, falling to $5.5 million ($0.04 per diluted share) from $110.9 million ($0.73 per diluted share) in the same period of 2014. This decrease is largely driven by a substantial drop in realized commodity prices, which fell by 40% for production sales volumes compared to the prior year, alongside increased operating expenses and higher net income attributable to noncontrolling interests. The company's EQT Production segment experienced an operating loss of $66.9 million, a sharp contrast to the $144.7 million operating income in Q2 2014, primarily due to the lower realized prices and increased exploration expenses. Conversely, the EQT Midstream segment demonstrated resilience, with operating income increasing by 22% to $108.2 million, driven by higher gathering and transmission revenues, reflecting the strategic focus on midstream infrastructure growth. Financially, EQT ended the quarter with a robust cash position of $1.96 billion. The company also successfully raised capital through the IPO of EQT GP Holdings, LP (EQGP) and offerings related to EQT Midstream Partners, LP (EQM), bolstering its liquidity and funding for capital expenditures. Despite the challenging commodity price environment, EQT remains committed to developing its resource base and maximizing efficiency.

Financial Highlights

45 data points
Beta

Net Income

$5.54M

EPS (Diluted)

$0.04

Total Assets

$13.57B

Cash & Equivalents

$1.96B

Free Cash Flow

-$490.39M

Financial Statements
Beta
SG&A Expenses$65.40M
Operating Expenses$406.55M
Operating Income$33.03M
Interest Expense$36.83M
Net Income$5.54M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)152.45M
Shares Outstanding (Diluted)152.88M

Key Highlights

  • 1Net income attributable to EQT Corporation significantly decreased to $5.5 million in Q2 2015 from $110.9 million in Q2 2014, primarily due to lower commodity prices.
  • 2EQT Production segment reported an operating loss of $66.9 million in Q2 2015, a substantial decline from $144.7 million in operating income in Q2 2014, driven by lower realized prices and increased exploration costs.
  • 3EQT Midstream segment showed strong performance with operating income increasing by 22% to $108.2 million in Q2 2015, fueled by growth in gathering and transmission revenues.
  • 4Total operating revenues decreased by 17.7% to $433.2 million in Q2 2015 compared to $526.2 million in Q2 2014, reflecting lower natural gas, oil, and NGL sales.
  • 5The company ended the quarter with a strong cash and cash equivalents balance of $1.96 billion, up from $1.08 billion at the beginning of the year.
  • 6EQT completed the IPO of EQT GP Holdings, LP (EQGP) and had significant financing activities related to EQT Midstream Partners, LP (EQM), raising capital and strengthening liquidity.
  • 7Capital expenditures remained substantial, totaling $1.32 billion for the six months ended June 30, 2015, primarily directed towards well development and acreage acquisition.

Frequently Asked Questions

The primary reason for the significant drop in net income attributable to EQT Corporation is the substantial decrease in realized commodity prices, particularly for natural gas, oil, and NGLs. Average realized prices for production sales volumes decreased by 40% year-over-year, coupled with increased operating expenses and higher income attributable to noncontrolling interests.

The EQT Production segment experienced a considerable decline, reporting an operating loss of $66.9 million compared to a strong operating income of $144.7 million in the prior year. This was mainly due to lower commodity prices and increased exploration expenses. In contrast, the EQT Midstream segment demonstrated growth, with operating income increasing by 22% to $108.2 million, driven by higher gathering and transmission revenues, reflecting its strategic expansion in midstream infrastructure.

EQT maintained a strong liquidity position, ending the second quarter of 2015 with $1.96 billion in cash and cash equivalents. The company also successfully raised substantial capital through the IPO of EQT GP Holdings, LP (EQGP) and equity offerings related to EQT Midstream Partners, LP (EQM). These financing activities provided significant cash inflows and strengthened the company's financial flexibility.

EQT's strategy involves hedging its commodity price risk primarily through NYMEX swaps and collar agreements, focusing on natural gas sales to protect cash flows. The company aims to manage the volatility of commodity prices through a set of policies approved by its Hedge & Financial Risk Committee. While they do not currently hedge oil or NGL exposure, they continuously monitor price and production levels to adjust hedging quantities as warranted.