10-QPeriod: Q1 FY2023

EQT Corp Quarterly Report for Q1 Ended Mar 31, 2023

Filed April 27, 2023For Securities:EQT

Summary

EQT Corporation reported a significant turnaround in its financial performance for the first quarter of 2023 compared to the same period in 2022. The company posted a net income of $1.218 billion, or $3.10 per diluted share, a substantial improvement from the net loss of $1.516 billion, or $4.05 per diluted share, in Q1 2022. This dramatic shift was primarily driven by a substantial gain on derivatives in the current quarter, contrasting with a large loss on derivatives in the prior year, and the absence of a contract asset impairment charge seen in Q1 2022. Despite a decrease in sales volume and total operating revenues, the company demonstrated operational resilience. While sales of natural gas, NGLs, and oil declined by 26.4%, this was partially offset by a higher average realized price, attributed to favorable derivative settlements and price differentials. Management anticipates continued supply chain constraints and commodity price volatility, but remains focused on operational efficiency and capital allocation, with planned 2023 capital expenditures of $1.7 billion to $1.9 billion.

Financial Highlights

48 data points
Beta

Revenue

$1.83B

71.9% Gross Margin

Net Income

$1.22B

66.6% Net Margin

EPS (Diluted)

$3.10

Total Assets

$22.69B

Cash & Equivalents

$2.13B

Free Cash Flow

$1.17B

Financial Statements
Beta
Revenue$1.83B
Cost of Revenue$514.98M
Gross Profit$1.32B
SG&A Expenses$51.89M
Operating Expenses$1.05B
Operating Income$1.61B
Interest Expense$46.55M
Net Income$1.22B
EPS (Basic)$3.37
EPS (Diluted)$3.10
Shares Outstanding (Basic)361.46M
Shares Outstanding (Diluted)393.88M

Key Highlights

  • 1Reported a net income of $1.218 billion ($3.10 per diluted share) in Q1 2023, a significant recovery from a net loss of $1.516 billion ($4.05 per diluted share) in Q1 2022.
  • 2Total operating revenues decreased by 559.5% to $2.66 billion in Q1 2023 from a negative $0.58 billion in Q1 2022, largely due to a significant gain on derivatives in Q1 2023 versus a loss in Q1 2022.
  • 3Sales of natural gas, NGLs, and oil decreased by 26.4% to $1.83 billion, primarily due to lower sales volumes, though partially offset by a higher average realized price.
  • 4Operating expenses decreased by 19.8% to $1.05 billion, with notable reductions in Selling, General & Administrative (SG&A) expenses and depreciation and depletion.
  • 5Net cash provided by operating activities increased substantially to $1.66 billion in Q1 2023 from $1.02 billion in Q1 2022, driven by net cash settlements received on derivatives.
  • 6Capital expenditures for Q1 2023 were $495 million, with planned full-year 2023 capital expenditures estimated at $1.7 billion to $1.9 billion.
  • 7The company declared a quarterly cash dividend of $0.15 per share, payable in June 2023.

Frequently Asked Questions

The primary driver is the significant difference in 'Gain (loss) on derivatives.' In Q1 2023, EQT reported a gain of $824.9 million on derivatives, largely due to favorable changes in the fair value of its commodity hedging instruments. In contrast, Q1 2022 saw a loss of $3,077.6 million on derivatives, primarily due to increases in NYMEX forward prices. The absence of a $184.9 million impairment of a contract asset in Q1 2023, which was present in Q1 2022, also contributed to the improved net income.

Total sales volume decreased by 6.8% to 458,805 MMcfe in Q1 2023 compared to 492,275 MMcfe in Q1 2022. This decrease was mainly attributed to natural well declines and fewer wells being turned-in-line due to third-party supply chain constraints in 2022. However, the average realized price per Mcfe increased to $4.11 in Q1 2023 from $3.19 in Q1 2022. This increase was driven by favorable cash-settled derivatives and favorable differentials, which offset lower NYMEX and liquids prices.

EQT plans to spend approximately $1.7 billion to $1.9 billion in capital expenditures for 2023, excluding expenditures related to the pending Tug Hill and XcL Midstream Acquisition. The company expects to fund these through operating cash flow and its credit facility. Management acknowledges the risks of continued supply chain constraints and commodity price volatility, which could lead to adjustments in the 2023 development schedule. Inflationary pressures are also noted as a factor impacting operating expenses and cost of capital.

EQT has been actively managing its debt, as evidenced by the repayment and retirement of debt during the quarter. The company's total debt decreased from $5.68 billion at the end of 2022 to $5.47 billion at the end of Q1 2023. EQT states that cash flows from operations and its credit facility should be sufficient to meet cash requirements for at least the next twelve months and for the long term, indicating a stable liquidity position.