From Pittsburgh-based EQT Corp. earlier this week.:
EQT Third Quarter 2013 Earnings Increase 177%
Revenues increase at nearly twice the rate of expenses
PITTSBURGH, PA (October 24, 2013)
-- EQT Corporation (NYSE: EQT) today announced third quarter 2013 earnings of $88.3 million, or $0.58 per diluted share; 177% higher than the third quarter 2012 earnings of $31.9 million, or $0.21 per diluted share. Operating cash flow was $232.8 million, 36% higher; and adjusted cash flow per share was $1.92, 68% higher. EQT’s third quarter 2013 operating income was $170.5 million, 98% higher. The non-GAAP financial measures are detailed and reconciled in the Non-GAAP Disclosures section below.
Third Quarter Highlights 2013 vs. 2012:
Production sales volume was 42% higher
Marcellus production sales volume was 74% higher
Production LOE per Mcfe was 17% lower
Production SG&A per Mcfe was 34% lower
Midstream gathered volume was 43% higher
Midstream gathering and compression expense per unit was 29% lower
Earnings per share, adjusted cash flow per share, and operating income were higher due to increased production sales volume, higher commodity prices, increased gathered volume, and increased firm transmission capacity sales and throughput. Net operating revenues increased 42% to $469.3 million; while net operating expenses only increased 23%, to $298.8 million, in support of the Company’s growth.
RESULTS BY BUSINESS
For the third quarter 2013, EQT Production had sales volume of 96.9 Bcfe, an average of 1.0 Bcfe per day, which was a 42% increase over the third quarter 2012. This increase was driven by production from the Marcellus, which averaged 787 MMcfe per day, 74% higher than last year. Natural gas liquids (NGL) volume totaled 1,150 Mbbls, a 35% increase over the same period last year. The Company’s fourth quarter and full-year 2013 sales volume guidance is 97 Bcfe and 366 Bcfe, respectively, which is approximately 42% higher than 2012; and its fourth quarter and full-year 2013 NGL volume guidance is 1,300 Mbbls and 4,875 Mbbls, respectively.
Operating income for the Production business in the third quarter 2013 was $97.6 million, 153% higher than the third quarter 2012; while total operating revenues were $304.2 million, 56% higher. The revenue growth was due to a 42% increase in sales volume and a higher average effective sales price. The average effective sales price to EQT was 4.0% higher at $4.20 per Mcfe, with $3.13 per Mcfe allocated to EQT Production; and $1.07 per Mcfe allocated to EQT Midstream. - 2 -
Operating expenses for EQT Production for the third quarter 2013 were $206.6 million, $49.9 million, or 32% higher than the same quarter last year. Depreciation, depletion and amortization expenses (DD&A) were $42.4 million higher; lease operating expenses (LOE), excluding production taxes, were $2.5 million higher; and production taxes were $2.3 million higher; all related to sales volume growth. Per unit LOE decreased 17% to $0.15 per Mcfe, as volume growth dramatically outpaced higher costs. Exploration expense was $4.1 million higher.
EQT spud 32 gross wells in the Marcellus during the quarter, with an average length-of-pay of 4,880 feet; eight Upper Devonian wells, with an average length-of-pay of 4,800 feet; and two Utica wells, with an average length-of-pay of 4,890 feet.
Utica Well Results
The Company completed three Utica wells in the oil window in the third quarter 2013 – with 30-day initial production rates of 286, 268, and 241 bbls/d of oil, respectively. If processing were available, the wells would have produced 41, 58, and 42 bbls/d of NGLs, plus, approximately 755, 1,082, and 771 MMcf/d of natural gas, respectively. Regional pricing was realized for the natural gas; while the realized oil price was approximately $101 per bbl. The Company is on track to spud eight Utica wells in 2013.
EQT Midstream’s third quarter 2013 operating income was $78.5 million; 54% higher than the third quarter of 2012. Net gathering revenues increased 19% to $91.8 million, primarily due to a 43% increase in gathered volume, partly offset by lower average gathering rates. Net transmission revenues totaled $40.0 million, a 50% increase, primarily due to sales of new capacity, as well as higher throughput. Net storage, marketing and other revenues were $2.8 million higher. Operating expenses for the quarter were $61.4 million, 6% higher, and consistent with the growth of the business. Per unit gathering and compression expense decreased by 29%.
On July 22, 2013, EQT sold its Sunrise Pipeline to EQT Midstream Partners for $507.5 million plus 479,184 common units and 267,942 general partner units in EQT Midstream Partners. EQT recognized a federal income tax gain of approximately $475 million, resulting in cash taxes of approximately $57 million.
EQT Midstream Partners, LP
As of September 30, 2013, EQT had a 42.6% limited partner interest and a 2% general partner interest in EQT Midstream Partners, whose results are consolidated in EQT’s results. For the third quarter 2013, EQT Corporation recorded $14.4 million, or $0.09 of earnings per diluted share, attributable to non-controlling interests. EQT Midstream Partners’ results were released today and are available at www.eqtmidstreampartners.com.
On October 22, 2013, EQT Midstream Partners announced a cash distribution to its unitholders of $0.43 per unit for the third quarter of 2013. EQT will receive $8.9 million on its limited partner units, plus a corresponding $0.4 million related to its 2% general partner interest, and $0.2 million related to its incentive distribution rights; as EQT is entitled to 15% of the amount by which the quarterly distribution exceeds $0.4025 per unit. - 3 -
On December 20, 2012, the Company announced that it entered into a definitive agreement for the transfer of its natural gas distribution business, Equitable Gas Company, to Peoples Natural Gas, subject to receipt of regulatory approvals. The Company incurred a $0.4 million of unallocated expense in the third quarter of 2013 related to the transaction.
The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act for the pending transaction expired on April 22, 2013, without a request for additional information. This expiration indicates that the Federal Trade Commission did not object to the transaction and that the parties may proceed. As part of the regulatory approval process, EQT has also submitted filings with the Pennsylvania Public Utility Commission, the West Virginia Public Service Commission, and the Federal Energy Regulatory Commission. The Kentucky Public Service Commission concluded that they did not need to approve the transaction. The Company expects to complete the regulatory review process by year-end.
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