10-QPeriod: Q3 FY2017

EQT Corp Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 26, 2017For Securities:EQT

Summary

EQT Corporation reported a significant turnaround in its financial performance for the nine months ended September 30, 2017, compared to the same period in 2016. The company shifted from a net loss of $261 million to a net income of $228.5 million, driven by a substantial increase in total operating revenues, which grew from $1.23 billion to $2.25 billion. This revenue growth was fueled by higher sales of natural gas, oil, and NGLs, alongside increased revenue from pipeline and marketing services. The company's strategic focus on developing its Appalachian Basin reserves and expanding its midstream infrastructure is evident. Despite increased operating expenses, the improved commodity prices and higher production volumes were key drivers of the positive financial results. Investors should note EQT's ongoing strategic initiatives, including the significant pending acquisition of Rice Energy Inc., which is expected to close in mid-November 2017, and the recent completion of a substantial notes offering to finance this acquisition and other corporate purposes.

Financial Highlights

49 data points
Beta

Revenue

$597.72M

77.2% Gross Margin

Net Income

$23.34M

3.9% Net Margin

EPS (Diluted)

$0.13

Total Assets

$15.98B

Cash & Equivalents

$483.56M

Free Cash Flow

-$70.03M

Financial Statements
Beta
Revenue$597.72M
Cost of Revenue$136.22M
Gross Profit$461.50M
SG&A Expenses$66.26M
Operating Expenses$521.39M
Operating Income-$6.38M
Interest Expense$50.38M
Net Income$23.34M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)173.48M
Shares Outstanding (Diluted)173.68M

Key Highlights

  • 1EQT Corporation reported a net income attributable to EQT Corporation of $228.5 million for the nine months ended September 30, 2017, a significant improvement from a net loss of $261.0 million in the prior year period.
  • 2Total operating revenues increased by approximately 83% to $2.25 billion for the nine months ended September 30, 2017, driven by higher commodity prices and increased sales volumes.
  • 3The company made substantial capital expenditures of $2.08 billion for segment assets during the nine months ended September 30, 2017, including significant acquisitions and development activities.
  • 4EQT Gathering and EQT Transmission segments showed strong revenue growth, with Gathering revenues up 11.3% and Transmission revenues up 14.5% year-to-date.
  • 5The company is actively pursuing strategic growth through the pending acquisition of Rice Energy Inc., expected to close in mid-November 2017, which is intended to further consolidate its position in the Appalachian Basin.
  • 6Subsequent to the quarter, EQT completed a significant public offering of notes totaling $2.97 billion in net proceeds, primarily to fund the Rice merger, related expenses, and refinance existing debt.
  • 7The company's average realized price for natural gas and NGLs increased by 31.2% to $3.03 per Mcfe for the nine months ended September 30, 2017.

Frequently Asked Questions

The primary driver is the significant increase in total operating revenues, which rose from $1.23 billion to $2.25 billion year-over-year. This was achieved through higher sales of natural gas, oil, and NGLs due to improved commodity prices and increased production volumes, as well as stronger performance in pipeline and marketing services.

EQT entered into an agreement to acquire Rice Energy Inc. on June 19, 2017, with an expected closing in mid-November 2017. The acquisition is a significant strategic move, and EQT completed a $2.97 billion notes offering in October 2017 to finance the cash portion of the merger consideration, related expenses, and debt refinancing. The acquisition is expected to result in EQT shareholders owning approximately 65% of the combined company.

EQT utilizes a commodity risk management program primarily through derivative instruments such as NYMEX swaps and collars to hedge forecasted sales of production and basis exposure. The company aims to protect cash flows from volatility in natural gas and NGL prices. As of September 30, 2017, portions of its expected production were hedged through 2020.

For the nine months ended September 30, 2017, EQT invested $2.08 billion in segment assets, including substantial capital expenditures for acquisitions and well development. Excluding the Rice Merger, the 2017 capital investment plan was expected to be around $2.0 billion, funded by cash generated from operations and cash on hand. Midstream investments through EQM are also a significant part of the capital plan.