10-QPeriod: Q2 FY2020

EQT Corp Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 27, 2020For Securities:EQT

Summary

EQT Corporation reported a significant net loss of $263.1 million for the three months ended June 30, 2020, a substantial downturn from the $125.6 million net income recorded in the same period of 2019. This negative performance was primarily driven by a sharp decrease in operating revenues, which fell by 59.8% year-over-year to $527.1 million, largely due to lower natural gas and liquids prices, compounded by strategic production curtailments. Despite these challenges, the company recognized a substantial gain on derivatives not designated as hedges in the current quarter, though it was significantly lower than the prior year's comparable gain. For the six-month period ended June 30, 2020, EQT also reported a net loss of $430.2 million, a reversal from the $316.3 million net income in the first half of 2019. Operating revenues also saw a significant decline of 33.4% to $1.63 billion. The company experienced losses related to asset sales and impairments, as well as a notable gain from the Equitrans Share Exchange. Management's discussion highlights the impact of volatile commodity prices, including the effects of the COVID-19 pandemic and the oil price war, on the company's operations and outlook. EQT is actively pursuing a deleveraging plan, focusing on debt reduction through asset monetizations and improved free cash flow.

Financial Highlights

50 data points
Beta

Revenue

$498.77M

18.7% Gross Margin

Net Income

-$263.07M

-52.7% Net Margin

EPS (Diluted)

$-1.03

Total Assets

$18.01B

Cash & Equivalents

$2.97M

Free Cash Flow

$190.92M

Financial Statements
Beta
Revenue$498.77M
Cost of Revenue$405.64M
Gross Profit$93.14M
SG&A Expenses$43.34M
Operating Expenses$913.99M
Operating Income-$386.91M
Interest Expense$65.39M
Net Income-$263.07M
EPS (Basic)$-1.03
EPS (Diluted)$-1.03
Shares Outstanding (Basic)255.52M
Shares Outstanding (Diluted)255.52M

Key Highlights

  • 1EQT reported a net loss of $263.1 million for Q2 2020, a significant drop from a net income of $125.6 million in Q2 2019.
  • 2Total operating revenues decreased by 59.8% to $527.1 million in Q2 2020 compared to $1.31 billion in Q2 2019, driven by lower commodity prices and sales volumes.
  • 3The company recognized a gain on derivatives not designated as hedges of $26.4 million in Q2 2020, down from $407.6 million in Q2 2019.
  • 4For the first six months of 2020, EQT reported a net loss of $430.2 million, compared to a net income of $316.3 million in the same period of 2019.
  • 5The company issued $500 million in convertible senior notes in April 2020 to repay debt and for general corporate purposes.
  • 6EQT recognized a $187.2 million gain on the Equitrans Share Exchange in Q1 2020.
  • 7Capital expenditures for the first six months of 2020 were $512 million, a decrease from $765 million in the comparable 2019 period, reflecting a shift towards capital efficiency.

Frequently Asked Questions

The primary reason for the substantial decline was a significant decrease in operating revenues, down 59.8% year-over-year, primarily due to lower commodity prices for natural gas and NGLs, as well as lower sales volumes resulting from strategic production curtailments. Additionally, while there was a gain on derivatives, it was substantially lower than in the prior year.

The COVID-19 pandemic and the associated oil price war have significantly impacted commodity prices, leading to decreased demand and revenue for EQT. While EQT has limited direct oil and NGL exposure (95% of production is natural gas), the volatility in energy markets has affected its outlook and financial performance. The company has experienced increased volatility in commodity prices and uncertainty in financial markets, impacting its ability to execute its deleveraging plan.

EQT is actively pursuing a 'Deleveraging Plan' which includes reducing debt through asset monetizations and increasing free cash flow. The company is selectively pursuing non-core asset sales and opportunistically monetizing its remaining interest in Equitrans Midstream. They also announced the suspension of their quarterly cash dividend to accelerate cash flow for debt reduction. The issuance of convertible senior notes in April 2020 also aimed to repay debt and improve leverage.

In March 2020, EQT completed the Equitrans Share Exchange, selling 50% of its ownership in Equitrans Midstream. This transaction resulted in a gain of approximately $187 million recorded in the Statement of Condensed Consolidated Operations. The company also recorded a contract asset representing the fair value of rate relief and a derivative liability related to a cash bonus payment.