10-QPeriod: Q3 FY2023

EQT Corp Quarterly Report for Q3 Ended Sep 30, 2023

Filed October 26, 2023For Securities:EQT

Summary

EQT Corporation's (EQT) third quarter 2023 results show a significant shift compared to the previous year, with net income attributable to EQT Corporation falling to $81.3 million ($0.20 per diluted share) from $683.7 million ($1.69 per diluted share) in Q3 2022. This decline is primarily attributed to lower realized prices for natural gas, NGLs, and oil, despite an increase in sales volume driven by recent acquisitions and wells turned online. Despite lower year-over-year revenue from commodity sales, EQT recorded a substantial gain on derivatives in Q3 2023, contrasting with a loss in the prior year's quarter. This, along with a significant increase in net income for the nine-month period compared to 2022 (driven by derivative gains and absence of prior-year impairments), highlights the impact of commodity price hedging and market volatility on EQT's financial performance. The company also completed a significant acquisition of Tug Hill and XcL Midstream assets in August 2023, contributing to increased capital expenditures and a more robust asset base.

Financial Highlights

48 data points
Beta

Revenue

$1.00B

44.6% Gross Margin

Net Income

$81.25M

8.1% Net Margin

EPS (Diluted)

$0.20

Total Assets

$24.55B

Cash & Equivalents

$64.75M

Free Cash Flow

-$49.52M

Financial Statements
Beta
Revenue$1.00B
Cost of Revenue$554.79M
Gross Profit$447.10M
SG&A Expenses$56.94M
Operating Expenses$1.17B
Operating Income$15.81M
Interest Expense$60.43M
Net Income$81.25M
EPS (Basic)$0.21
EPS (Diluted)$0.20
Shares Outstanding (Basic)383.36M
Shares Outstanding (Diluted)416.19M

Key Highlights

  • 1Net income attributable to EQT Corporation for the third quarter of 2023 was $81.3 million ($0.20 per diluted share), a significant decrease from $683.7 million ($1.69 per diluted share) in the third quarter of 2022.
  • 2Total operating revenues decreased to $1.19 billion in Q3 2023 from $2.07 billion in Q3 2022, primarily due to lower sales of natural gas, NGLs, and oil.
  • 3EQT recorded a $177.9 million gain on derivatives in Q3 2023, compared to a $1.63 billion loss in Q3 2022, significantly impacting profitability.
  • 4Sales volume increased by 7.2% in Q3 2023 compared to Q3 2022, driven by the acquisition of Tug Hill and XcL Midstream assets and new wells coming online.
  • 5The company completed the acquisition of Tug Hill and XcL Midstream assets on August 22, 2023, which contributed to increased capital expenditures for the nine-month period.
  • 6Net cash provided by operating activities increased to $2.55 billion for the nine months ended September 30, 2023, from $2.40 billion in the prior year, aided by derivative settlements and favorable working capital changes.
  • 7As of September 30, 2023, EQT's senior notes were rated investment grade by Moody's, S&P, and Fitch, with a 'Stable' outlook from all three agencies.

Frequently Asked Questions

The primary driver for the decrease in net income is the lower average realized price for natural gas, NGLs, and oil. While sales volume increased, it was not enough to offset the impact of lower commodity prices. Additionally, the prior year's third quarter benefited from significant gains on derivatives, whereas the current quarter's results were impacted by a gain that, while positive, did not reach the same magnitude as the prior year's loss.

The acquisition, completed in late August 2023, contributed to an increase in sales volume during the third quarter. It also led to higher capital expenditures for the nine-month period and increased processing and LOE expenses due to the integration of new assets. The financial results for the quarter reflect approximately one month of operations from these newly acquired assets.

The gain on derivatives in Q3 2023 ($177.9 million) and the loss on derivatives in Q3 2022 ($1.63 billion) highlight the significant impact of commodity price hedging strategies on EQT's reported earnings. The gain in the current quarter was primarily due to favorable changes in the fair market value of NYMEX swaps and options as NYMEX forward prices decreased. The substantial loss in the prior year was due to the opposite market movement. These fluctuations underscore the volatility in commodity markets and the effectiveness of hedging in smoothing out earnings, though they can also lead to significant period-over-period swings.

EQT believes that cash flows from operating activities and availability under its revolving credit facility will be sufficient to meet its cash requirements for at least the next twelve months and for the long term. The company expects to fund its planned capital expenditures, including those for the fourth quarter of 2023, primarily with cash generated from operations. EQT retains discretion over the timing and amount of certain capital expenditures, which can be adjusted based on commodity prices, availability of resources, and costs.