10-QPeriod: Q3 FY2015

EQT Corp Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 22, 2015For Securities:EQT

Summary

EQT Corporation's third-quarter 2015 results show a notable decline in income attributable to EQT Corporation, primarily driven by a significant decrease in realized commodity prices, especially for NGLs and natural gas, compared to the same period in the prior year. Despite an increase in production sales volumes and gains on derivatives not designated as hedges, the company's top-line revenue remained relatively flat due to lower pricing. Operationally, EQT Production experienced a substantial drop in operating income, heavily impacted by lower realized prices and increased operating expenses. Conversely, EQT Midstream demonstrated strong growth, with increased operating income driven by higher gathering and transmission revenues, fueled by increased affiliate volumes and firm reservation fees. The company's financial position saw an increase in cash and cash equivalents, but also a significant rise in net income attributable to noncontrolling interests due to the IPOs of EQGP and EQM, impacting overall net income attributable to EQT Corporation. Investors should note the significant shift in commodity pricing and its impact on EQT Production's profitability. The midstream segment's resilience and growth are a key positive, while the increasing noncontrolling interests highlight the evolving structure of EQT's consolidated entities.

Financial Highlights

46 data points
Beta

Net Income

$40.79M

EPS (Diluted)

$0.27

Total Assets

$13.74B

Cash & Equivalents

$1.66B

Free Cash Flow

-$334.14M

Financial Statements
Beta
SG&A Expenses$60.63M
Operating Expenses$413.92M
Operating Income$170.06M
Interest Expense$36.55M
Net Income$40.79M
EPS (Basic)$0.27
EPS (Diluted)$0.27
Shares Outstanding (Basic)152.55M
Shares Outstanding (Diluted)152.85M

Key Highlights

  • 1Net income attributable to EQT Corporation decreased to $40.8 million ($0.27/diluted share) for Q3 2015, down from $98.6 million ($0.65/diluted share) in Q3 2014.
  • 2Average realized price for production sales volumes dropped significantly to $2.12 per Mcfe in Q3 2015 from $3.63 per Mcfe in Q3 2014, with NGL prices falling sharply.
  • 3EQT Production's operating income fell 59.8% year-over-year to $56.4 million due to lower realized prices and increased expenses.
  • 4EQT Midstream's operating income grew 20.7% year-over-year to $113.0 million, driven by strong performance in gathering and transmission segments.
  • 5Total operating revenues remained stable at approximately $577 million for both Q3 2015 and Q3 2014.
  • 6Net income attributable to noncontrolling interests increased substantially to $59.4 million in Q3 2015 from $33.7 million in Q3 2014, largely due to recent IPOs of EQGP and EQM.
  • 7Cash and cash equivalents increased to $1.66 billion as of September 30, 2015, up from $1.08 billion at December 31, 2014.

Frequently Asked Questions

The primary driver of the decrease in net income attributable to EQT Corporation was a significant decline in the average realized commodity prices for natural gas and NGLs compared to the same period in the previous year. This was compounded by higher operating expenses and an increase in net income attributable to noncontrolling interests.

EQT Midstream showed strong performance with a 20.7% increase in operating income, driven by higher gathering and transmission revenues due to increased affiliate volumes and firm reservation fees. In contrast, EQT Production's operating income declined significantly by 59.8% due to lower realized commodity prices and increased operating expenses.

The IPOs of EQT GP Holdings, LP (EQGP) and EQT Midstream Partners, LP (EQM) led to a substantial increase in 'net income attributable to noncontrolling interests.' This increase reflects the growing portion of income belonging to public unitholders of these entities, which in turn reduces the net income attributable to EQT Corporation, despite the overall growth in consolidated revenues and operating income of the midstream segment.

EQT Corporation utilizes derivative commodity instruments, primarily NYMEX swaps and collars, to hedge its exposure to commodity price volatility, particularly for natural gas sales. The company also enters into fixed-price natural gas sales agreements. As of September 30, 2015, they reported approximately 527 Bcf of natural gas hedged through derivatives and fixed-price contracts.