10-QPeriod: Q1 FY2022

EQT Corp Quarterly Report for Q1 Ended Mar 31, 2022

Filed April 28, 2022For Securities:EQT

Summary

EQT Corporation reported a significant net loss of $1.516 billion for the three months ended March 31, 2022, a stark contrast to the $37.4 million net loss in the same period of the prior year. This substantial increase in loss was primarily driven by a substantial $3.08 billion loss on derivatives not designated as hedges, alongside an impairment of a contract asset and increased operating expenses. Despite the net loss, the company's "adjusted operating revenues" (a non-GAAP measure excluding derivative fair value changes) showed a healthy increase of 44.8% to $1.57 billion, driven by higher commodity prices and increased sales volumes, particularly from the Alta Acquisition. Operating cash flow also saw a substantial improvement, more than doubling to $1.02 billion. Investors should note the significant impact of commodity price hedging on reported earnings, while operational performance, as indicated by adjusted operating revenues and cash flow, remains strong.

Financial Highlights

49 data points
Beta

Revenue

$2.49B

79.2% Gross Margin

Net Income

-$1.52B

-61.0% Net Margin

EPS (Diluted)

$-4.05

Total Assets

$21.81B

Cash & Equivalents

$16.91M

Free Cash Flow

$728.94M

Financial Statements
Beta
Revenue$2.49B
Cost of Revenue$516.10M
Gross Profit$1.97B
SG&A Expenses$69.10M
Operating Expenses$1.31B
Operating Income-$1.89B
Interest Expense$67.90M
Net Income-$1.52B
EPS (Basic)$-4.05
EPS (Diluted)$-4.05
Shares Outstanding (Basic)374.14M
Shares Outstanding (Diluted)374.14M

Key Highlights

  • 1Reported a net loss of $1.516 billion for Q1 2022, compared to a net loss of $37.4 million in Q1 2021, largely due to significant losses on undesignated derivative instruments.
  • 2Adjusted operating revenues (a non-GAAP measure) increased by 44.8% to $1.57 billion, driven by higher commodity prices and increased sales volumes.
  • 3Net cash provided by operating activities significantly improved to $1.02 billion in Q1 2022, up from $400 million in Q1 2021.
  • 4Sales of natural gas, NGLs, and oil increased by 119.9% to $2.49 billion due to higher average realized prices and increased sales volume, partly from the Alta Acquisition.
  • 5Total operating expenses increased by 39.1% to $1.31 billion, with notable rises in gathering, transmission, and selling, general, and administrative expenses.
  • 6The company repurchased $229.2 million of its common stock under its $1 billion authorization by the end of Q1 2022.
  • 7EQT declared a quarterly cash dividend of $0.125 per share, payable in June 2022.

Frequently Asked Questions

The primary driver for the substantial increase in net loss is the 'Loss on derivatives not designated as hedges,' which amounted to $3.08 billion in the first quarter of 2022. This loss arises from changes in the fair market value of derivative instruments before they are settled and is not representative of the company's core operational performance in that period.

Excluding the impact of derivative fair value changes, EQT's operational performance, as measured by 'adjusted operating revenues' (a non-GAAP measure), showed significant strength. Adjusted operating revenues increased by 44.8% to $1.57 billion, driven by higher average realized prices for natural gas and NGLs, coupled with increased sales volumes, partly due to the recent Alta Acquisition.

EQT has a $2.5 billion credit facility and is generally compliant with its debt covenants. Net cash provided by operating activities was strong at $1.02 billion for Q1 2022. The company also engaged in significant financing activities, including substantial repayments and retirements of debt, and a $1 billion share repurchase program.

The Alta Resources Development, LLC acquisition, which closed in July 2021, contributed to increased sales volumes and revenues in the first quarter of 2022. It also led to higher operating expenses, such as gathering, transmission, and lease operating expenses, reflecting the expanded asset base.