PITTSBURGH--(BUSINESS WIRE)--EQT Corporation (NYSE: EQT) today announced 2013 net income attributable to EQT of $390.6 million, compared to $183.4 million last year. To accurately compare year-over-year earnings, items totaling $38.1 million after-tax that positively impacted 2013 results and others totaling $28.6 million after-tax that negatively impacted 2012 results should be considered. Adjusted net income excluding these items, was $352.4 million in 2013, 66% higher than the $211.9 million in 2012. Adjusted earnings per diluted share (EPS) was $2.32 in 2013, up 65% from 2012. Adjusted operating cash flow was $1,254.3 million in 2013, 43% higher; and adjusted cash flow per share (CFPS) was $8.26 in 2013, 42% higher than last year. The non-GAAP financial measures are reconciled in the Non-GAAP Disclosures section of this news release.
Highlights for 2013:
- CFPS was $8.26; 42% higher than 2012
- Record annual production sales volume of 378.2 Bcfe; 43% higher than 2012
- Record gathered volume of 466.4 TBtu; 39% higher than 2012
- Year-end proved reserves 8.3 Tcfe; 39% higher than 2012 (separate news release)
- Completed the sale of EQT’s distribution business, Equitable Gas Company, LLC
In 2013, EQT’s adjusted operating income was $749.5 million, 53% higher than 2012. Operating revenue increased 35% to $1,862.0 million in 2013. Total operating expenses increased 24% to $1,227.0 million due to higher depreciation, depletion and amortization (DD&A); selling, general and administrative (SG&A); and production expenses – all consistent with the growth in produced volume and the increase in midstream activity.
Fourth quarter 2013 net income attributable to EQT was $115.2 million, compared to $48.0 million in 2012. Adjusted operating cash flow was $336.0 million in 2013, versus $298.9 million in 2012; and CFPS was $2.20 versus $1.98 last year. To accurately compare quarterly earnings, items totaling $42.8 million after-tax that positively impacted 2013 results and others totaling $17.3 million after-tax that negatively impacted 2012 results should be considered. Fourth quarter 2013 adjusted earnings were $72.5 million, 11% higher than 2012; and adjusted EPS was $0.47, up from $0.43 in 2012. The fourth quarter tax rate was 48.2%, significantly higher than the full year rate of 33.6%.
EQT’s fourth quarter 2013 adjusted operating income was $201.0 million, a 29% increase from the same quarter of 2012. Higher operating revenue, due to an increase in production, gathering, and transmission volumes, was partially offset by lower commodity prices, higher costs related to increased volumes, and lower earnings from the Distribution segment that was sold in mid-December 2013. Net operating revenue rose 23% to $453.0 million in the quarter, while net operating expenses were 20% higher at $291.5 million – consistent with the growth of the EQT Production and EQT Midstream businesses.
RESULTS BY BUSINESS
EQT Production
With its continued focus on the Marcellus
Shale, EQT Production achieved record production sales volume of 378.2
Bcfe for 2013, representing a 43% increase over 2012. Approximately 73%
of total production sales volume was from horizontally drilled Marcellus
wells. As reflected in this earnings report, EQT changed its natural gas
liquids (NGLs) conversion method to an industry standard of six Mcfe per
barrel. For comparison purposes, 2013 total sales volume was 369.2 Bcfe
based on EQT’s previous conversion methodology. Please see the Investor
Relations section of EQT’s website to review the 2013 quarterly
operating results utilizing both methodologies.
Production operating income totaled $371.2 million in 2013, 98% higher than 2012. As a result of sales volume growth, net operating revenue was $1,168.7 million, which was 47%, higher than last year. The average effective sales price to EQT Corporation was 1% lower than last year at $4.13 per Mcfe, with $3.08 per Mcfe allocated to EQT Production, and $1.05 per Mcfe allocated to EQT Midstream; compared to 2012 allocations of $2.98 per Mcfe to EQT Production and $1.19 per Mcfe to EQT Midstream.
Consistent with the significant growth in sales volume and increased drilling activity, EQT Production’s 2013 operating expenses were $797.4 million, a $191.6 million, or 32% increase over last year. DD&A was $169.0 million higher; lease operating expense (LOE) was $10.9 million higher; exploration expense was $8.1 million higher; SG&A was $2.5 million higher; and production taxes were $1.0 million higher than 2012. Per unit LOE of $0.15 per Mcfe was 12% lower year-over-year due to sales volume growing significantly faster than operating costs. LOE, including production taxes, totaled $0.28 per Mcfe, compared to $0.33 per Mcfe in 2012.
Production sales volume totaled 103.0 Bcfe in the fourth quarter 2013, 32% higher than the fourth quarter 2012, and 6% higher sequentially. Operating income for the quarter was $94.5 million, 30% higher than the same period last year. Production net operating revenue for the quarter was $307.8 million, which was 26% higher than last year due to the increase in sales volume, partially offset by a lower average effective sales price. Operating expenses for the quarter were $213.3 million, which was $41.5 million higher than 2012 and consistent with the increase in production.
The Company drilled (spud) 225 gross wells during 2013; 146 wells targeted the Marcellus with an average length-of-pay of 4,935 feet; 50 wells were in the Huron with an average length-of-pay of 5,870 feet; 22 wells targeted the Upper Devonian with an average length-of-pay of 5,160 feet, and seven wells targeted the Utica with an average length-of-pay of 5,970 feet.
Production sales volume for 2014 is projected to be 460 – 480 Bcfe, 24% higher than in 2013; and liquids volume is expected to be 6,800 – 6,900 MBBls. Production sales volume for the first quarter 2014 is projected to be 104 Bcfe; and liquids volume is expected to be 1,350 – 1,400 MBBls. These volume forecasts are based on the six Mcfe per barrel conversion.
EQT Midstream
EQT Midstream’s 2013 operating income was
$328.8 million, an increase of 30%, excluding a $19.6 million gain on
the sale of certain energy marketing contracts in the fourth quarter.
EQT Midstream realized net operating revenue of $545.6 million, a 21%
increase over 2012. Net gathering revenue was $351.4 million in 2013, up
16% from 2012, due to a 39% increase in gathered volume, partly offset
by lower gathering rates. Net transmission revenue increased by 54% to
$160.6 million, mainly driven by the sale of increased capacity
associated with the Sunrise Pipeline. Storage, marketing and other net
revenues totaled $33.6 million in 2013, down 21% from 2012, as a result
of reduced volume and lower seasonal price spreads.
Total operating expenses were $236.4 million, 11% higher than in 2012. This increase was due to the growth of the EQT Midstream business and includes higher SG&A, depreciation expenses related to projects to expand gathering and transmission infrastructure, higher labor costs, corporate allocations, and other expenses. On a per-unit basis; however, year-over-year gathering and compression expenses were 25% lower in 2013.
Fourth quarter 2013 operating income was $103.8 million, including the $19.6 million gain. Net operating revenue was $145.4 million, 16% higher in the fourth quarter 2013. Net gathering revenue was $90.8 million, an increase of $6.9 million over the same period last year, due to a 24% increase in gathered volume partly offset by lower gathering rates. Net transmission revenue totaled $44.5 million, a 33% increase over 2012; net storage, marketing and other revenues, excluding the gain, totaled $10.1 million, a 31% increase over 2012; and operating expenses for the quarter were $61.3 million, up $6.6 million from 2012.
OTHER BUSINESS
2013 Capital Expenditures
EQT invested $1,833.5 million in
capital projects during 2013. This included $1,423.2 million for EQT
Production, of which $186.2 million was for well and lease acreage
acquisitions; $369.4 million for EQT Midstream; and $40.9 million for
distribution infrastructure projects, that occurred prior to the sale of
the business; and other corporate items.
2013 Reserves Report
In a separate news release, EQT
reported its 2013 reserves. Proved reserves at December 31, 2013 totaled
8.3 Tcfe, a 39% increase over last year. Marcellus proved reserves
increased by 1.7 Tcfe to 6.0 Tcfe. Proved, probable, and possible (3P)
reserves totaled 36.4 Tcfe, 40% higher than last year.
EQT Midstream Partners, LP
As of December 31, 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.
EQT Midstream Partners’ 2013 year-end and fourth quarter results were
released today and are available at www.eqtmidstreampartners.com.
On January 23, 2014, EQT Midstream Partners announced a cash distribution to its unitholders of $0.46 per unit for the fourth quarter of 2013. EQT will receive $9.6 million on its limited partner units, plus a corresponding $0.4 million related to its 2% general partner interest, and $0.6 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.
Sale of Distribution Business
On December 17, 2013, EQT
completed the sale of its natural gas distribution business, Equitable
Gas Company, LLC, to Peoples Natural Gas. The transaction consideration
received by EQT included a cash payment of approximately $740 million,
as well as select midstream assets and commercial arrangements. The
Distribution business’ results, including the gain on the sale, are
reported as discontinued operations, net of tax. Operationally, the
Distribution segment had operating income of $78.9 million in 2013, and
$20.5 million in the fourth quarter 2013; including DD&A expense of
$23.4 million and $5.2 million, respectively.
Hedging
The Company recently added to its hedge position,
bringing the total natural gas production hedge position to:
| 2014 | 2015 | 2016** | ||||||||||||
| Fixed Price | ||||||||||||||
| Total Volume (Bcf) | 225 | 124 | 60 | |||||||||||
| Average Price per Mcf (NYMEX)* | $ | 4.35 | $ | 4.39 | $ | 4.45 | ||||||||
| Collars | ||||||||||||||
| Total Volume (Bcf) | 24 | 23 | - | |||||||||||
| Average Floor Price per Mcf (NYMEX)* | $ | 5.05 | $ | 5.03 | $ | - | ||||||||
| Average Cap Price per Mcf (NYMEX)* | $ | 8.85 | $ | 8.97 | $ | - | ||||||||
* The average price is based on a conversion rate of 1.05 MMBtu/Mcf
**
For 2016, the Company executed a natural gas sales agreement for
approximately 35 Bcf that includes a NYMEX ceiling price of $4.88 per Mcf
Operating Income
The Company reports operating income by
segment in this news release. Interest, income taxes and unallocated
(expense)/income are controlled on a consolidated, corporate-wide basis
and are not allocated to the segments. The Company’s management reviews
and reports segment results for operating revenues and purchased gas
costs net of third-party transportation costs.
The following table reconciles operating income by segment as reported in this news release to the consolidated operating income which will be reported in the Company’s Statement of Consolidated Income and included in the Company’s annual report on Form 10-K for the year ended December 31, 2013:
|
Three Months Ended
December 31, |
Year Ended December 31, |
|||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
| Operating income (thousands): | ||||||||||||||||||||
| EQT Production | $ | 94,492 | $ | 72,643 | $ | 371,245 | $ | 187,913 | ||||||||||||
| EQT Midstream | 103,789 | 70,417 | 328,782 | 237,324 | ||||||||||||||||
| Unallocated (expense)/income | (17,200 | ) | (16,555 | ) | (45,423 | ) | (35,608 | ) | ||||||||||||
| Operating income | $ | 181,081 | $ | 126,505 | $ | 654,604 | $ | 389,629 | ||||||||||||
Unallocated (expense)/income is primarily due to certain incentive compensation and administrative costs in excess of budget that are not allocated to the operating segments.
Marcellus Horizontal Well Status (cumulatively since inception)
|
As of |
As of |
As of |
As of |
As of |
|||||||||||||
| Wells spud* |
527 |
486 |
444 |
404 |
371 |
||||||||||||
| Wells online* |
373 |
338 |
322 |
279 |
261 |
||||||||||||
| Wells complete, not online |
32 |
20 | 11 | 30 | 17 | ||||||||||||
| Frac stages (spud wells)** |
11,991 |
10,613 | 9,754 | 8,327 | 7,230 | ||||||||||||
| Frac stages online |
7,567 |
6,596 | 6,297 | 4,788 | 4,366 | ||||||||||||
| Frac stages complete, not online | 708 | 553 | 224 | 925 | 462 |
* Beginning June 30, 3013, totals include wells acquired on June 3,
2013
** Includes planned stages for spud wells that have not
yet been hydraulically fractured
NON-GAAP DISCLOSURES
Adjusted Operating Income, Adjusted
Net Income and Adjusted Earnings Per Diluted Share
Adjusted
operating income, adjusted net income and adjusted earnings per diluted
share are non-GAAP financial measures that are presented because they
are important measures used by management to evaluate period-to-period
comparisons of earnings trends. Adjusted operating income, adjusted net
income and adjusted earnings per diluted share should not be considered
in isolation or as a substitute for operating income, net income or
earnings per diluted share prepared in accordance with generally
accepted accounting principles (GAAP). The tables below reconcile
adjusted operating income, adjusted net income and adjusted earnings per
diluted share with operating income, net income, and earnings per
diluted share, as derived from the statements of consolidated income to
be included in the Company’s Form 10-K for the year ended December 31,
2013.
| Three Months Ended | Twelve Months Ended | |||||||||||||||||
| December 31, | December 31, | |||||||||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||
| Operating income as reported | $ | 181,081 | $ | 126,505 | $ | 654,604 | $ | 389,629 | ||||||||||
| Add back /(deduct): | ||||||||||||||||||
| Operating income from discontinued operations | 184,209 |
24,639 |
251,378 | 81,328 | ||||||||||||||
| Gain on sale of distribution business | (166,276 | ) | – | (166,276 | ) | – | ||||||||||||
| Gain on sale of certain contracts | (19,618 | ) | – | (19,618 | ) | – | ||||||||||||
| Ineffectiveness on hedges | 16,817 | – | 21,335 | 75 | ||||||||||||||
|
Cost associated with sale of distribution business |
4,796 | 4,459 | 8,051 | 4,459 | ||||||||||||||
| Financial put premium | – | – | – | 8,227 | ||||||||||||||
| PA impact fee (retroactive portion) | – | – | – | 6,745 | ||||||||||||||
| Adjusted operating income | $ | 201,009 | $ | 155,603 | $ | 749,474 | $ | 490,463 | ||||||||||
|
Three Months Ended
December 31, |
Year Ended
December 31, |
|||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||
| Net income attributable to EQT, as reported | $ 115,205 | $ 48,041 | $ 390,572 | $ 183,395 | ||||||||
| Add back /(deduct): | ||||||||||||
| Gain on sale of certain contracts | (19,618) | – | (19,618) | – | ||||||||
| Ineffectiveness on hedges | 16,817 | – | 21,335 | 75 | ||||||||
| Cost associated with sale of distribution business | 4,796 | 4,459 | 8,051 | 4,459 | ||||||||
| Interest rate hedge expense | – | 23,340 | - | 23,340 | ||||||||
| Financial put premium | – | – | - | 8,227 | ||||||||
| PA impact fee (retroactive portion) | – | – | - | 6,745 | ||||||||
| Tax impact* | (923) | (10,490) | (4,087) | (14,292) | ||||||||
| Subtotal | 116,277 | 65,350 | 396,253 | 211,949 | ||||||||
| Gain on sale of distribution business, net of tax (rate of 73.6%) | (43,822) | – | (43,822) | – | ||||||||
| Adjusted net income attributable to EQT | $ 72,455 | $ 65,350 | $ 352,431 | $ 211,949 | ||||||||
| Diluted weighted common shares outstanding | 153,017 | 150,825 | 151,787 | 150,506 | ||||||||
| Diluted EPS, as adjusted | $ 0.47 | $ 0.43 | $ 2.32 | $ 1.41 | ||||||||
* The costs associated with the sale of the distribution business were tax effected at the discontinued operations tax rate of 47.4% and 39.5% for the three months ended December 31, 2013 and 2012, respectively; and 43.6% and 41.6% for the twelve months ended December 31, 2013 and 2012, respectively. All other items were tax effected at the continuing operations tax rate of 48.2% and 37.4% for the three months ended December 31, 2013 and 2012, respectively; and 33.6% and 32.4% for the twelve months ended December 31, 2013 and 2012, respectively.
Adjusted Operating Cash Flow and Adjusted Cash Flow Per Share
Adjusted
operating cash flow is a non-GAAP financial measure that is presented as
an indicator of an oil and gas exploration and production company’s
ability to internally fund exploration and development activities and to
service or incur additional debt. EQT also includes this information
because management believes that changes in operating assets and
liabilities relate to the timing of cash receipts and disbursements, and
therefore, may not relate to the period in which the operating
activities occurred. Adjusted cash flow per share is a non-GAAP
financial measure that is presented because it is a capital efficiency
metric used by investors and analysts to evaluate oil and gas companies.
Adjusted operating cash flow and adjusted cash flow per share should not
be considered in isolation or as a substitute for net cash provided by
operating activities or net income per share or as a measure of
liquidity.
The tables below reconcile adjusted operating cash flow and adjusted cash flow per share with net cash provided by operating activities, as derived from the statement of consolidated cash flows to be included in the Company’s Form 10-K for the year ended December 31, 2013.
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2013 (a) | 2012 | 2013 (a) | 2012 | |||||||||||||||||
|
(thousands) |
||||||||||||||||||||
| Net Income | $ | 131,806 | $ | 56,226 | $ | 437,815 | $ | 196,411 | ||||||||||||
| Gain on sale of distribution business | (166,276 | ) | – | (166,276 | ) | – | ||||||||||||||
| Gain on sale of certain contracts | (19,618 | ) | – | (19,618 | ) | – | ||||||||||||||
| Ineffectiveness on hedges | 16,817 | – | 21,335 | 75 | ||||||||||||||||
| Deferred taxes | 95,494 | 49,712 | 110,363 | 95,185 | ||||||||||||||||
| Depreciation, depletion, and amortization | 183,229 | 144,301 | 676,570 | 499,118 | ||||||||||||||||
| Non-cash incentive compensation | 15,510 | 11,478 | 52,618 | 40,230 | ||||||||||||||||
| Non-cash financial instrument put premium | – | – | – | 8,227 | ||||||||||||||||
| Other items | 2,469 | 8,254 | 1,913 | (4,550 | ) | |||||||||||||||
| Operating cash flow | $ | 259,431 | $ |
269,971 |
$ | 1,114,720 | $ | 834,696 | ||||||||||||
| Add back / (deduct) | ||||||||||||||||||||
| Changes in other assets and liabilities | $ | (43,232 | ) | $ | (122,078 | ) | $ | 85,678 | $ | (26,223 | ) | |||||||||
| Net cash provided by operating activities | $ | 216,199 | $ | 147,893 | $ | 1,200,398 | $ | 808,473 | ||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| (thousands) | 2013 (a) | 2012 | 2013 (a) | 2012 | ||||||||||||||||
| Operating cash flow (a non-GAAP measure reconciled above) | $ | 259,431 | $ | 269,971 | $ | 1,114,720 | $ | 834,696 | ||||||||||||
| Add back / (deduct) | ||||||||||||||||||||
| Exploration expense (cash) | 1,293 | 1,108 | 4,285 | 4,827 | ||||||||||||||||
| Cash taxes for sale of distribution business | 67,728 | – | 67,728 | – | ||||||||||||||||
| Costs associated with sale of distribution business | 4,796 | 4,459 | 8,051 | 4,459 | ||||||||||||||||
| Cash taxes for Sunrise sale | 2,732 | – | 59,496 | – | ||||||||||||||||
| Interest rate hedge expense | – | 23,340 | – | 23,340 | ||||||||||||||||
| PA impact fee (retro portion) | – | – | – | 6,745 | ||||||||||||||||
| Adjusted operating cash flow | $ | 335,980 | $ | 298,878 | $ | 1,254,280 | $ | 874,067 | ||||||||||||
| Diluted weighted average common shares outstanding | 153,017 | 150,825 | 151,787 | 150,506 | ||||||||||||||||
| Adjusted cash flow per share | $ | 2.20 | $ | 1.98 | $ | 8.26 | $ | 5.81 | ||||||||||||
| (a) | Includes results of discontinued operations | ||
Net Operating Revenues and Net Operating Expenses
Net
operating revenues and net operating expenses are non-GAAP financial
measures that exclude purchased gas costs and are presented because they
are important analytical measures used by management to evaluate
period-to-period comparisons of revenue and operating expenses.
Purchased gas cost is typically excluded by management in such analysis
because, although subject to commodity price volatility, purchased gas
cost is mostly passed on to customers and does not have a significant
impact on the Company’s earnings. Net operating revenues and net
operating expenses should not be considered in isolation or as a
substitute for operating revenues or total operating expenses prepared
in accordance with GAAP. The table below reconciles net operating
revenues to operating revenues and net operating expenses to total
operating expenses for the three and twelve months ended December 31,
2013:
|
Three Months Ended
December 31, |
Year Ended
December 31, |
|||||||||||||||
| (thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Net operating revenues | $ | 452,982 | $ | 369,263 | $ | 1,713,303 | $ | 1,242,271 | ||||||||
| Plus: purchased gas cost | 40,447 | 37,010 | 148,708 | 134,951 | ||||||||||||
| Operating revenues | $ | 493,429 | $ | 406,273 | $ | 1,862,011 | $ | 1,377,222 | ||||||||
| Net operating expenses | $ | 291,519 | $ | 242,758 | $ | 1,078,317 | $ | 852,642 | ||||||||
| Plus: purchased gas cost | 40,447 | 37,010 | 148,708 | 134,951 | ||||||||||||
| Total operating expenses | $ | 331,966 | $ | 279,768 | $ | 1,227,025 | $ | 987,593 | ||||||||
2013 Year-end and Q4 Webcast Information
EQT's
conference call with securities analysts begins at 10:30 a.m. ET today.
The call will cover financial and operational results and other matters;
and will be broadcast live via EQT's website at www.eqt.com,
and on the investor information page at http://ir.eqt.com,
with a replay available for seven days.
EQT Midstream Partners, LP, for which EQT Corporation is the general partner and significant equity owner, will host a conference call with security analysts today at 11:30 a.m. ET. The call will cover 2013 financial and operational results and other matters; and will be broadcast live via www.eqtmidstreampartners.com. A replay will be available for seven days following the call.
EQT Management speaks to investors from time to time. Slides for these discussions, which are updated periodically, are available online via the Company’s investor information page at http://ir.eqt.com.
About EQT Corporation:
EQT Corporation is an
integrated energy company with emphasis on Appalachian area natural gas
production, gathering, and transmission. EQT is the general partner and
significant equity owner of EQT Midstream Partners, LP. With more than
125 years of experience, EQT continues to be a leader in the use of
advanced horizontal drilling technology – designed to minimize the
potential impact of drilling-related activities and reduce the overall
environmental footprint. Through safe and responsible operations, the
Company is committed to meeting the country’s growing demand for
clean-burning energy, while continuing to provide a rewarding workplace
and enrich the communities where its employees live and work. Company
shares are traded on the New York Stock Exchange as EQT.
Visit EQT Corporation at www.EQT.com.
Cautionary Statements
The United States Securities and
Exchange Commission (SEC) permits oil and gas companies, in their
filings with the SEC, to disclose only proved, probable and possible
reserves that a company anticipates as of a given date to be
economically and legally producible and deliverable by application of
development projects to known accumulations. We use certain terms, such
as “EUR” (estimated ultimate recovery) and “3P” (proved, probable and
possible), that the SEC’s guidelines prohibit us from including in
filings with the SEC. These measures are by their nature more
speculative than estimates of reserves prepared in accordance with SEC
definitions and guidelines and accordingly are less certain.
Total sales volumes per day (or daily production) is an operational estimate of the daily production or sales volume on a typical day (excluding curtailments).
EBITDA is defined as earnings before interest, taxes, depreciation, and amortization and is not a financial measure calculated in accordance with GAAP. EBITDA is a non-GAAP supplemental financial measure that the Company’s management and external users of the Company’s financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: (i) the Company’s performance versus prior periods; (ii) the Company’s operating performance as compared to other companies in its industry; (iii) the ability of the Company’s assets to generate sufficient cash flow to make distributions to its investors; (iv) the Company’s ability to incur and service debt and fund capital expenditures; and (v) the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
The Company is unable to provide a reconciliation of projected EBITDA to projected net income, the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing and potential significance of certain income statement items.
Similarly, the Company is unable to provide a reconciliation of its projected operating cash flow to projected net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP, because of uncertainties associated with projecting future net income and changes in assets and liabilities.
Disclosures in this news release contain certain forward-looking statements. Statements that do not relate strictly to historical or current facts are forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this news release specifically include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of the Company and its subsidiaries, including guidance regarding the Company’s strategy to develop its Marcellus and other reserves; drilling plans and programs (including the number, type, feet of pay and location of wells to be drilled); projected natural gas prices and changes in basis; total resource potential, reserves, EUR, expected decline curve and reserve replacement ratio; projected production sales volumes and growth rates (including liquids sales volumes and growth rates); projected F&D costs, operating costs, unit costs, well costs and gathering and transmission revenue deductions to EQT Midstream; projected gathering and transmission volumes and growth rates; infrastructure programs (including the timing, cost and capacity of the transmission and gathering expansion projects); technology (including drilling and completion techniques); projected midstream EBITDA; monetization transactions, including asset sales (dropdowns) to EQT Midstream Partners, LP (the Partnership) and other asset sales, joint ventures or other transactions involving the Company’s assets; the expected EBITDA to be generated from the midstream assets and commercial arrangements transferred by and entered into with PNG Companies LLC and its affiliates; uses of capital provided by the Equitable Gas transaction; the cash flows resulting from, and the value of, the Company’s general partner and limited partner interests and incentive distribution rights in the Partnership; internal rate of return (IRR); projected capital expenditures; liquidity and financing requirements, including funding sources and availability; projected operating revenues and cash flows; hedging strategy; the effects of government regulation and litigation; the Company dividend and Partnership distribution rates; and tax position. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company has based these forward-looking statements on current expectations and assumptions about future events. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control. The risks and uncertainties that may affect the operations, performance and results of the Company’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors,” of the Company’s Form 10-K for the year ended December 31, 2012 and in the Company’s Form 10-K for the year ended December 31, 2013 to be filed with the SEC, as updated by any subsequent Form 10-Qs.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
| EQT CORPORATION AND SUBSIDIARIES | ||||||||||||||||
| STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED) | ||||||||||||||||
|
Three Months Ended |
Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| (Thousands, except per share amounts) | ||||||||||||||||
| Operating revenues | $ | 493,429 | $ | 406,273 | $ | 1,862,011 | $ | 1,377,222 | ||||||||
| Operating expenses: | ||||||||||||||||
| Purchased gas costs | 40,447 | 37,010 | 148,708 | 134,951 | ||||||||||||
| Operation and maintenance | 24,560 | 24,690 | 97,762 | 99,257 | ||||||||||||
| Production | 27,379 | 23,359 | 108,091 | 96,155 | ||||||||||||
| Exploration | 3,359 | 5,492 | 18,483 | 10,370 | ||||||||||||
| Selling, general and administrative | 58,071 | 50,614 | 200,849 | 172,243 | ||||||||||||
| Depreciation, depletion and amortization | 178,150 | 138,603 | 653,132 | 474,617 | ||||||||||||
| Total operating expenses | 331,966 | 279,768 | 1,227,025 | 987,593 | ||||||||||||
| Gain on dispositions | 19,618 | − | 19,618 | − | ||||||||||||
| Operating income | 181,081 | 126,505 | 654,604 | 389,629 | ||||||||||||
| Other income | 2,610 | 1,969 | 9,242 | 15,536 | ||||||||||||
| Interest expense | 31,998 | 62,445 | 142,688 | 184,786 | ||||||||||||
| Income before income taxes | 151,693 | 66,029 | 521,158 | 220,379 | ||||||||||||
| Income taxes | 73,159 | 24,721 | 175,186 | 71,461 | ||||||||||||
| Income from continuing operations | 78,534 | 41,308 | 345,972 | 148,918 | ||||||||||||
| Income from discontinued operations, net of tax | 53,272 | 14,918 | 91,843 | 47,493 | ||||||||||||
| Net income | 131,806 | 56,226 | 437,815 | 196,411 | ||||||||||||
| Less: Net income attributable to noncontrolling interests | 16,601 | 8,185 | 47,243 | 13,016 | ||||||||||||
| Net income attributable to EQT Corporation | $ | 115,205 | $ | 48,041 | $ | 390,572 | $ | 183,395 | ||||||||
| Amounts attributable to EQT Corporation: | ||||||||||||||||
| Income from continuing operations | $ | 61,933 | $ | 33,123 | $ | 298,729 | $ | 135,902 | ||||||||
| Income from discontinued operations | 53,272 | 14,918 | 91,843 | 47,493 | ||||||||||||
| Net income | $ | 115,205 | $ | 48,041 | $ | 390,572 | $ | 183,395 | ||||||||
| Earnings per share of common stock attributable to EQT Corporation: | ||||||||||||||||
| Basic: | ||||||||||||||||
| Weighted average common shares outstanding | 150,772 | 149,779 | 150,574 | 149,619 | ||||||||||||
| Income from continuing operations | $ | 0.41 | $ | 0.22 | $ | 1.98 | $ | 0.91 | ||||||||
| Income from discontinued operations | 0.35 | 0.10 | 0.61 | 0.32 | ||||||||||||
| Net income | $ | 0.76 | $ | 0.32 | $ | 2.59 | $ | 1.23 | ||||||||
| Diluted: | ||||||||||||||||
| Weighted average common shares outstanding | 153,017 | 150,825 | 151,787 | 150,506 | ||||||||||||
| Income from continuing operations | 0.40 | 0.22 | $ | 1.97 | $ | 0.90 | ||||||||||
| Income from discontinued operations | 0.35 | 0.10 | 0.60 | 0.32 | ||||||||||||
| Net income | $ | 0.75 | $ | 0.32 | $ | 2.57 | $ | 1.22 | ||||||||
|
EQT Corporation Price Reconciliation |
||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
| in thousands (unless noted) | ||||||||||||||||||||
| Liquids | ||||||||||||||||||||
| NGLs: | ||||||||||||||||||||
| Sales Volume (MMcfe) (a) | 7,812 | 5,478 | 27,860 | 18,981 | ||||||||||||||||
| Sales Volume (MBBls) | 1,302 | 913 | 4,643 | 3,163 | ||||||||||||||||
| Gross Price ($/bbl) | $ | 51.58 | $ | 47.23 | $ | 45.58 | $ | 49.29 | ||||||||||||
| Gross NGL Revenue | $ | 67,157 | $ | 43,119 | $ | 211,626 | $ | 155,926 | ||||||||||||
| BTU Premium (Ethane sold as natural gas): | ||||||||||||||||||||
| Sales Volume (MMbtu) | 7,562 | 6,828 | 29,185 | 22,494 | ||||||||||||||||
| Price ($/MMbtu) | $ | 3.62 | $ | 3.40 | $ | 3.66 | $ | 2.83 | ||||||||||||
| BTU Premium Revenue | $ | 27,335 | $ | 23,191 | $ | 106,724 | $ | 63,668 | ||||||||||||
| Oil: | ||||||||||||||||||||
| Sales Volume (MMcfe) (a) | 450 | 438 | 1,620 | 1,587 | ||||||||||||||||
| Sales Volume (MBBls) | 75 | 73 | 270 | 264 | ||||||||||||||||
| Net Price ($/bbl) | $ | 81.64 | $ | 84.13 | $ | 85.82 | $ | 83.95 | ||||||||||||
| Net Oil Revenue | $ | 6,123 | $ | 6,141 | $ | 23,171 | $ | 22,161 | ||||||||||||
| Total Liquids Revenue | $ | 100,615 | $ | $72,451 | $ | 341,521 | $ | 241,755 | ||||||||||||
| GAS | ||||||||||||||||||||
| Sales Volume (MMcf) | 94,737 | 72,121 | 348,693 | 243,886 | ||||||||||||||||
| NYMEX Price ($/Mcf) (b) | $ | 3.62 | $ | 3.40 | $ | 3.66 | $ | 2.83 | ||||||||||||
| Gas Revenue | $ | 342,481 | $ | 244,971 | $ | 1,277,847 | $ | 690,293 | ||||||||||||
| Basis | (25,024 | ) | 745 | (51,274 | ) | (960 | ) | |||||||||||||
| Gross Gas Revenue (unhedged) | $ | 317,457 | $ | 245,716 | $ | 1,226,573 | $ | 689,333 | ||||||||||||
| Total Gross Gas & Liquids Revenue (unhedged) | $ | 418,072 | $ | 318,167 | $ | 1,568,094 | $ | 931,088 | ||||||||||||
| Hedge impact (c) | 30,984 | 53,339 | 137,634 | 290,557 | ||||||||||||||||
| Total Gross Gas & Liquids Revenue | $ | 449,056 | $ | 371,506 | $ | 1,705,728 | $ | 1,221,645 | ||||||||||||
| Total Sales Volume (MMcfe) | 103,000 | 78,037 | 378,173 | 264,454 | ||||||||||||||||
| Average hedge adjusted price ($/Mcfe) | $ | 4.36 | $ | 4.76 | $ | 4.51 | $ | 4.62 | ||||||||||||
| Midstream Revenue Deductions ($ / Mcfe) | ||||||||||||||||||||
| Gathering to EQT Midstream | (0.77 | ) | (0.96 | ) | $ | (0.82 | ) | $ | (1.00 | ) | ||||||||||
| Transmission to EQT Midstream | (0.24 | ) | (0.21 | ) | (0.23 | ) | (0.19 | ) | ||||||||||||
| Third-party gathering and transmission (d) | (0.26 | ) | (0.36 | ) | (0.28 | ) | (0.35 | ) | ||||||||||||
| Third-party processing | (0.11 | ) | (0.11 | ) | (0.10 | ) | (0.10 | ) | ||||||||||||
| Total midstream revenue deductions | (1.38 | ) | (1.64 | ) | (1.43 | ) | (1.64 | ) | ||||||||||||
| Average effective sales price to EQT Production | $ | 2.98 | $ | 3.12 | $ | 3.08 | $ | 2.98 | ||||||||||||
| EQT Revenue ($ / Mcfe) | ||||||||||||||||||||
| Revenues to EQT Midstream | $ | 1.01 | $ | 1.17 | $ | 1.05 | $ | 1.19 | ||||||||||||
| Revenues to EQT Production | 2.98 | 3.12 | 3.08 | 2.98 | ||||||||||||||||
| Average effective sales price to EQT Corporation | $ | 3.99 | $ | 4.29 | $ | 4.13 | $ | 4.17 | ||||||||||||
| (a) | NGLs and crude oil were converted to Mcfe at the rates of six Mcfe per barrel for all periods. All prior periods have been recast to reflect this presentation. | ||
| (b) | The Company's volume weighted NYMEX natural gas price (actual average NYMEX natural gas price ($/Mcf) was $3.60 and $3.40 for the three months ended December 31, 2013 and 2012, respectively, and $3.65 and $2.79 for the twelve months ended December 31, 2013 and 2012, respectively). | ||
| (c) | Includes gains or losses related to the sale of fixed price natural gas. The hedge impact also included a loss for hedging ineffectiveness of $17.0 million, $0.17 per Mcfe for the three months ended December 31, 2013; and $21.5 million, $0.06 per Mcfe for the year ended December 31, 2013. Hedging ineffectiveness did not impact the effective sales price for the years ended December 31, 2012. | ||
| (d) | Due to the sale of unused capacity on the El Paso 300 line that was not under long-term resale agreements at prices below the capacity charge, third-party gathering and transmission rates increased by $0.05 per Mcfe and $0.04 per Mcfe for the years ended December 31, 2013 and 2012, respectively; and $0.04 per Mcfe and $0.07 per Mcfe for the three months ended December 31, 2013 and 2012, respectively. | ||
|
UNIT COSTS |
Three Months Ended
December 31, |
Twelve Months Ended
December 31, |
||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Production segment costs: ($ / Mcfe) | ||||||||||||||||
| LOE | $ | 0.14 | $ | 0.14 | $ | 0.15 | $ | 0.17 | ||||||||
| Production taxes* | 0.12 | 0.16 | 0.13 | 0.16 | ||||||||||||
| SG&A | 0.23 | 0.29 | 0.24 | 0.34 | ||||||||||||
| $ | 0.49 | $ | 0.59 | $ | 0.52 | $ | 0.67 | |||||||||
| Midstream segment costs: ($ / Mcfe) | ||||||||||||||||
| Gathering and transmission | $ | 0.22 | $ | 0.27 | $ | 0.23 | $ | 0.32 | ||||||||
| SG&A | 0.13 | 0.13 | 0.14 | 0.16 | ||||||||||||
| $ | 0.35 | $ | 0.40 | $ | 0.37 | $ | 0.48 | |||||||||
| Total ($ / Mcfe) | $ | 0.84 | $ | 0.99 | $ | 0.89 | $ | 1.15 | ||||||||
* Excludes the retroactive Pennsylvania Impact Fee of $0.03 per Mcfe for the twelve months ended December 31, 2012, for Marcellus wells spud prior to 2012.
|
EQT PRODUCTION RESULTS OF OPERATIONS |
||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Sales volume detail (MMcfe): | ||||||||||||||||
| Horizontal Marcellus Play (a) | 77,636 | 50,492 | 275,029 | 151,430 | ||||||||||||
| Horizontal Huron Play | 8,472 | 9,784 | 35,255 | 41,985 | ||||||||||||
| CBM Play | 3,089 | 3,216 | 12,429 | 13,084 | ||||||||||||
| Other | 13,803 | 14,545 | 55,460 | 57,955 | ||||||||||||
| Total production sales volumes (b) | 103,000 | 78,037 | 378,173 | 264,454 | ||||||||||||
| Average daily sales volumes (MMcfe/d) | 1,120 | 848 | 1,036 | 723 | ||||||||||||
| Average effective sales price to EQT Production ($/Mcfe) |
$ |
2.98 |
$ | 3.12 |
$ |
3.08 |
$ |
2.98 |
||||||||
| Lease operating expenses (LOE), excluding production taxes ($/Mcfe) | $ | 0.14 | $ | 0.14 | $ | 0.15 | $ | 0.17 | ||||||||
| Production taxes ($/Mcfe) (c) | $ | 0.12 | $ | 0.16 | $ | 0.13 | $ | 0.16 | ||||||||
| Production depletion ($/Mcfe) | $ | 1.52 | $ | 1.52 | $ | 1.50 | $ | 1.52 | ||||||||
| DD&A (thousands): | ||||||||||||||||
| Production depletion | $ | 156,476 | $ | 118,304 | $ | 568,990 | $ | 401,456 | ||||||||
| Other DD&A | 2,546 | 2,148 | 9,651 | 8,172 | ||||||||||||
| Total DD&A (thousands) | $ | 159,022 | $ | 120,452 | $ | 578,641 | $ | 409,628 | ||||||||
| Capital expenditures (thousands) (d) | $ | 445,791 | $ | 287,941 | $ | 1,423,185 | $ | 991,775 | ||||||||
| FINANCIAL DATA (thousands) | ||||||||||||||||
| Total net operating revenues | $ | 307,783 | $ | 244,439 | $ | 1,168,657 | $ | 793,773 | ||||||||
| Operating expenses: | ||||||||||||||||
| LOE, excluding production taxes | 14,658 | 11,221 | 57,110 | 46,212 | ||||||||||||
| Production taxes (c) | 12,721 | 12,138 | 50,981 | 49,943 | ||||||||||||
| Exploration expense | 3,359 | 5,492 | 18,483 | 10,370 | ||||||||||||
| SG&A | 23,531 | 22,493 | 92,197 | 89,707 | ||||||||||||
| DD&A | 159,022 | 120,452 | 578,641 | 409,628 | ||||||||||||
| Total operating expenses | 213,291 | 171,796 | 797,412 | 605,860 | ||||||||||||
| Operating income | $ | 94,492 | $ | 72,643 | $ | 371,245 | $ | 187,913 | ||||||||
| (a) | Includes Upper Devonian wells. | ||
| (b) | NGLs and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods. All prior periods have been recast to reflect this presentation. | ||
| (c) | Production taxes include severance and production-related ad valorem and other property taxes and the Pennsylvania impact fee. The Pennsylvania impact fee for the year ended December 31, 2012 totaled $15.3 million, of which $6.7 million represented the retroactive fee for pre-2012 Marcellus wells. The production taxes unit rate for the year ended December 31, 2012 excludes the impact of the accrual for pre-2012 Marcellus wells. | ||
| (d) | Includes $114.2 million of capital expenditures for the purchase of acreage and Marcellus wells from Chesapeake Energy Corporation and its partners during the year ended December 31, 2013. | ||
|
EQT MIDSTREAM RESULTS OF OPERATIONS |
||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| OPERATIONAL DATA | ||||||||||||||||
| Gathered volumes (BBtu) | 123,903 | 99,530 | 466,405 | 335,407 | ||||||||||||
| Average gathering fee ($/MMBtu) | $ | 0.73 | $ | 0.84 | $ | 0.75 | $ | 0.90 | ||||||||
| Gathering and compression expense ($/MMBtu) | $ | 0.17 | $ | 0.20 | $ | 0.18 | $ | 0.24 | ||||||||
| Transmission pipeline throughput (BBtu) | 121,234 | 73,074 | 418,360 | 221,944 | ||||||||||||
| Net operating revenues (thousands): | ||||||||||||||||
| Gathering | $ | 90,779 | $ | 83,844 | $ | 351,410 | $ | 302,255 | ||||||||
| Transmission | 44,516 | 33,483 | 160,621 | 104,501 | ||||||||||||
| Storage, marketing and other | 10,129 | 7,737 | 33,555 | 42,693 | ||||||||||||
| Total net operating revenues | $ | 145,424 | $ | 125,064 | $ | 545,586 | $ | 449,449 | ||||||||
| Capital expenditures (thousands) | $ | 115,194 | $ | 79,033 | $ | 369,399 | $ | 375,731 | ||||||||
|
FINANCIAL DATA (thousands) |
||||||||||||||||
| Total operating revenues | $ | 161,311 | $ | 142,868 | $ | 614,042 | $ | 505,498 | ||||||||
| Purchased gas costs | 15,887 | 17,804 | 68,456 | 56,049 | ||||||||||||
| Total net operating revenues | 145,424 | 125,064 | 545,586 | 449,449 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Operating and maintenance (O&M) | 25,211 | 24,155 | 97,540 | 97,400 | ||||||||||||
| SG&A | 16,611 | 12,574 | 63,850 | 49,943 | ||||||||||||
| DD&A | 19,431 | 17,918 | 75,032 | 64,782 | ||||||||||||
| Total operating expenses | 61,253 | 54,647 | 236,422 | 212,125 | ||||||||||||
| Gain on dispositions | 19,618 | − | 19,618 | − | ||||||||||||
| Operating income | $ | 103,789 | $ | 70,417 | $ | 328,782 | $ | 237,324 | ||||||||
