10-QPeriod: Q3 FY2021

EQT Corp Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 28, 2021For Securities:EQT

Summary

EQT Corporation reported a significant net loss for the three and nine months ended September 30, 2021, primarily driven by substantial losses on derivatives not designated as hedges. Despite a considerable increase in operating revenues due to higher sales of natural gas, NGLs, and oil, the company's expenses, particularly depreciation and depletion, and transportation and processing, also rose. The company made significant strategic moves during the period, including the completion of the Alta Acquisition, which expanded its acreage and production significantly. EQT also continued its debt management strategies, including issuing new senior notes and repaying existing debt. While the reported net loss presents a concern, investors should note the substantial increase in sales volume and the strategic acquisitions aimed at long-term growth. The impact of derivative accounting on reported earnings is a key factor to consider when evaluating EQT's operational performance.

Financial Highlights

51 data points
Beta

Revenue

$1.78B

72.3% Gross Margin

Net Income

-$1.98B

-110.8% Net Margin

EPS (Diluted)

$-5.54

Total Assets

$23.01B

Cash & Equivalents

$22.79M

Free Cash Flow

-$188.57M

Financial Statements
Beta
Revenue$1.78B
Cost of Revenue$494.90M
Gross Profit$1.29B
SG&A Expenses$49.11M
Operating Expenses$1.14B
Operating Income-$2.61B
Interest Expense$75.51M
Net Income-$1.98B
EPS (Basic)$-5.54
EPS (Diluted)$-5.54
Shares Outstanding (Basic)356.79M
Shares Outstanding (Diluted)356.79M

Key Highlights

  • 1EQT Corporation reported a net loss of $1.98 billion for the three months ended September 30, 2021, and $2.96 billion for the nine months ended September 30, 2021. This was largely impacted by significant derivative losses not designated as hedges.
  • 2Operating revenues surged by 197.8% to $1.78 billion for the three months and by 120.2% to $3.99 billion for the nine months ended September 30, 2021, driven by increased sales volumes and higher commodity prices.
  • 3The company completed the Alta Acquisition in July 2021, significantly expanding its asset base with approximately 300,000 Northeast Marcellus acres and 1.0 Bcfe per day of production.
  • 4Total operating expenses increased, with depreciation and depletion up 29.9% for the quarter and 17.5% for the nine months, and transportation and processing expenses also rising.
  • 5Cash flows from operating activities decreased to $492 million for the nine months ended September 30, 2021, from $1.13 billion in the prior year, impacted by derivative settlements and working capital changes.
  • 6EQT issued $1 billion in new senior notes in May 2021 to help fund the Alta Acquisition, and continued to manage its debt structure by repaying other debt facilities.
  • 7The company's sales volumes increased substantially, with Marcellus production up 41.1% for the quarter and 25.1% for the nine months, partly due to acquisitions.

Frequently Asked Questions

The primary reason for the substantial net loss in the reported periods is the significant 'Loss on derivatives not designated as hedges.' For the three months ended September 30, 2021, this loss amounted to $3.26 billion, and for the nine months, it was $4.79 billion. These derivative accounting impacts do not reflect cash flows from operations but rather changes in the fair value of financial instruments.

The Alta Acquisition, completed in July 2021, was accounted for as a business combination. It contributed significantly to increased property, plant, and equipment on the balance sheet and resulted in higher operating revenues and sales volumes in the income statement due to the acquired production and midstream assets. The acquisition also involved substantial cash and stock consideration, impacting the financing and equity sections of the financial statements.

Adjusted Operating Revenues is a non-GAAP financial measure that management uses to evaluate earnings trends by excluding the volatile impact of changes in the fair value of derivative instruments prior to settlement, as well as net marketing services and other items. It aims to provide a clearer view of the company's core operational performance by focusing on settled derivative contracts and production-related revenues.

EQT is actively managing its debt through various actions. It issued new senior notes in May 2021, repaid existing debt facilities, and has a $2.5 billion credit facility. The company believes its operating cash flows and credit facility are sufficient to meet its financial obligations. EQT also plans to dispose of its remaining Equitrans Midstream shares to further reduce debt.