Continued volume growth, with average pricing up 36%
year-over-year
EQT Corporation (NYSE: EQT) today announced second quarter 2017
net income attributable to EQT of $41.1 million, or
$0.24 earnings per diluted share (EPS), compared to second
quarter 2016 net loss attributable to EQT of $258.6 million, or
$1.55 loss per share. Net cash provided by operating
activities was $294.2 million, $85.7 million higher than the second
quarter 2016. Earnings and cash flow were higher primarily as a
result of increases in commodity prices and produced volumes.
Adjusted net income attributable to EQT was $10.1 million for
the quarter, compared to an adjusted net loss attributable to EQT
of $63.2 million in the second quarter 2016. Adjusted EPS was
$0.06, compared to a $0.38 loss per share in the second quarter of
2016 – primarily due to an increase in natural gas prices. Adjusted
operating cash flow attributable to EQT was $223.3 million
this quarter, which was $118.0 million higher than the same
period last year. The Non-GAAP Disclosures section of this news
release provides reconciliations of non-GAAP financial measures to
the most comparable GAAP financial measure, as well as important
disclosures regarding certain projected non-GAAP financial
measures.
Steve Schlotterbeck, president and chief executive officer,
stated, "Significant sales volume growth and an increase in the
average realized price contributed to our strong second quarter
results. We were also able to ramp up execution of our
consolidation strategy by entering into an agreement to acquire
Rice Energy.”
Schlotterbeck continued, "Rice is an outstanding strategic and
operational fit for us and we anticipate the combined entities will
capture significant operating efficiencies, improve overall well
economics, and deliver stronger returns to our shareholders. With
our asset position in one of the most prolific natural gas basins
in the world, we remain confident in our ability to drive both
near- and long-term value creation."
Second Quarter Highlights:
- Announced an agreement to acquire Rice
Energy
- Production sales volume was 7% higher
than second quarter 2016
- Average realized price was 36% higher
than second quarter 2016
- Distributions payable to EQT from EQGP
totaled $50 million
RESULTS BY BUSINESS
EQT PRODUCTION
EQT Production achieved sales volume of 198.1 Bcfe in the second
quarter 2017, representing a 7% increase over the second quarter
last year.
EQT Production’s operating income totaled $52.8 million for the
quarter, compared to an operating loss of $447.7 million in the
second quarter 2016. The $500.5 million increase was primarily
attributable to increases in gains on derivatives not designated as
hedges, an increase in the average realized price, and an increase
in production sales volume, partly offset by increased operating
expenses. Operating revenue totaled $631.1 million for the second
quarter 2017, which was $554.1 million higher than the second
quarter 2016.
EQT Production’s adjusted operating loss, a non-GAAP financial
measure, totaled $4.2 million for the quarter, compared to an
adjusted operating loss of $118.1 million in 2016. Adjusted
operating revenue, a non-GAAP financial measure, was $566.1 million
for the quarter, which was $176.0 million higher than the same
period last year, primarily due to a higher average realized sales
price and increased production sales volume. Average realized price
for the second quarter 2017 was $2.86 per Mcfe, 36% higher than the
$2.11 per Mcfe realized in the same period last year. Pipeline and
net marketing services revenue totaled $8.1 million in the
quarter.
EQT Production’s operating expenses for the quarter were $578.3
million, $53.6 million higher than the same period last year.
Transmission expenses were $37.7 million higher, primarily due to
volumes transported on the Rockies Express Pipeline and the Ohio
Valley Connector (OVC); processing expenses were $17.7 million
higher, consistent with higher wet gas volumes; depreciation,
depletion, and amortization expense (DD&A) was $10.4 million
higher; gathering expense was $6.9 million higher; and production
tax was $1.8 million higher consistent with higher volumes; while
LOE, excluding production tax, was $3.3 million lower as a result
of consolidating Kentucky operations, and selling, general and
administrative expense (SG&A) was $1.0 million lower, excluding
$9.4 million of pension settlement charges and $7.1 million of
legal reserves charges recorded in the second quarter 2016.
The Company drilled (spud) 66 gross wells during the second
quarter 2017, including 43 Marcellus wells, with an average
expected length-of-pay of 8,200 feet; and 23 Upper Devonian wells,
with an average expected length-of-pay of 8,300 feet. The Company
turned-in-line 17 wells during the second quarter 2017, including
15 Marcellus wells, and 2 Upper Devonian wells.
In anticipation of the merger with Rice Energy, EQT has
suspended its Utica test program as improved returns on Marcellus
wells resulting from longer laterals made possible by the Rice
acquisition are higher than the return expected on the average
Utica well today. The Company’s 2017 sales volume guidance has been
reduced by 10 – 15 Bcfe as a result of the suspension of the
Company’s Utica test program.
EQT GATHERING
EQT Gathering second quarter 2017 operating income was $83.3
million, $10.1 million higher than the second quarter 2016.
Operating revenue was $112.1 million, a $12.0 million increase over
2016, primarily driven by production development in the Marcellus
Shale. Firm reservation fee revenue was $101.9 million in the
second quarter 2017, an $18.3 million increase over the same
quarter last year.
EQT Gathering operating expenses were $28.8 million, a $1.9
million increase over the same period last year consistent with
higher throughput. Specifically, depreciation and amortization
expense was $2.0 million higher; operating and maintenance expense
(O&M) was $1.3 million higher; and SG&A was $1.4 million
lower.
EQT TRANSMISSION
EQT Transmission second quarter 2017 operating income was $57.8
million, $1.9 million higher than the second quarter 2016. Firm
reservation fee revenue was $79.5 million in 2017, a $19.2 million
increase over 2016, which was primarily a result of affiliates
contracting for additional firm capacity on the OVC. Operating
revenue was $86.8 million, an $8.9 million increase over 2016.
Operating expenses were $29.0 million, $7.0 million higher than
last year. Depreciation and amortization was $4.9 million higher;
O&M was $2.9 million higher; and SG&A was $0.8 million
lower.
OTHER BUSINESS
Rice Energy Acquisition
On June 19, 2017, the Company announced that it had entered into
a definitive merger agreement under which EQT will acquire all of
the outstanding shares of Rice Energy common stock in exchange for
0.37 shares of EQT stock and $5.30 cash per share of Rice stock.
EQT will also assume or refinance approximately $1.5 billion of net
debt and preferred equity. The transaction is expected to close in
the fourth quarter of 2017, subject to customary closing
conditions.
EQT Midstream Partners, LP (NYSE: EQM) / EQT GP Holdings, LP
(NYSE: EQGP)
On July 25, 2017, EQM announced a cash distribution to its
unitholders of $0.935 per unit for the second quarter. EQGP also
announced a cash distribution to its unitholders of $0.21 per unit
for the second quarter 2017.
The second quarter 2017 financial results for EQM and EQGP were
released today and provide operational results, as well as updates
on significant midstream projects under development by EQM. This
news release is available at www.eqtmidstreampartners.com.
Calculation of Net Income Attributable to Noncontrolling
Interest
The results of EQGP and EQM are consolidated in EQT’s results.
For the second quarter 2017, EQT’s results reflected earnings of
$81.5 million, or $0.47 per diluted share, attributable to the
publicly held partnership interests in EQGP and EQM.
Three Months Ended (thousands)
June 30,
2017 EQM net income $ 139,139 Less: General Partner
interest (including incentive distribution rights) 36,598
Limited Partner interest in net income $ 102,541
EQM LP units Publicly owned (73.4%) $ 75,224 EQGP owned
(26.6%) 27,317 Limited Partner interest in net income
$ 102,541
EQGP net income EQM LP unit ownership $
27,317 EQM GP unit ownership (including incentive distribution
rights) 36,598 EQGP incremental expenses (585 ) Limited
Partner interest in net income $ 63,330
EQGP units
Publicly owned LP (9.9%) $ 6,295 EQT owned LP (90.1%) 57,035
Limited Partner interest in net income $ 63,330
Noncontrolling interest in EQT earnings EQM
publicly-owned LP units $ 75,224 EQGP publicly-owned LP units
6,295 Net income attributable to noncontrolling
interest $ 81,519
Hedging
As of July 25, 2017, the approximate volumes and prices of the
Company’s derivative commodity instruments hedging sales of
produced gas for 2017 through 2019 were:
2017(a)
2018 2019 NYMEX Swaps Total Volume (Bcf) 249 189 19
Average Price per Mcf (NYMEX) $ 3.35 $ 3.18 $ 3.12 Collars
Total Volume (Bcf) 12 18 − Average Floor Price per Mcf (NYMEX) $
3.06 $ 3.16 $ − Average Cap Price per Mcf (NYMEX) $ 3.93 $ 3.63 $ −
(a)
July through December 31
•
The Company also sold calendar year 2017 and 2018 calls/swaptions
for approximately 16 Bcf and 33 Bcf, respectively, at strike prices
of $3.53 per Mcf and $3.47 per Mcf, respectively
•
For 2017 and 2018, the Company sold puts for approximately 2 Bcf
and 3 Bcf, respectively, at a strike price of $2.63 per Mcf
•
The average price is based on a conversion
rate of 1.05 MMBtu/Mcf
Operating Income (Loss)
The Company reports operating income (loss) by segment in this
news release. Interest, income taxes, and unallocated expense are
controlled on a consolidated, corporate-wide basis and are not
allocated to the segments.
The following table reconciles operating income (loss) by
segment, as reported in this news release, to the consolidated
operating income reported in the Company’s financial
statements:
Three Months Ended Six Months Ended
June 30, June 30, (thousands)
2017
2016 2017 2016 Operating income (loss):
EQT Production $ 52,765 $ (447,735 ) $ 310,195 $ (453,213 ) EQT
Gathering 83,310 73,175 156,899 145,779 EQT Transmission 57,782
55,854 129,306 120,370 Unallocated expense (4,063 )
(5,786 ) (15,962 ) (10,227 ) Operating income (loss)
$ 189,794 $ (324,492 ) $ 580,438 $ (197,291 )
Unallocated expenses consist primarily of compensation expense
and Rice Energy acquisition costs.
Marcellus Horizontal Well Status (cumulative since
inception)
As of As of As of
As of As of 6/30/17 3/31/17**
12/31/16* 9/30/16* 6/30/16* Wells drilled
(spud) 1,259 1,216 1,046 949 896 Wells online 1,028 1,013 875 816
774 Wells complete, not online 15 20 21 32 34 Wells drilled,
uncompleted 216 183 150 101 88
*Includes wells acquired in 2016**Includes wells acquired in Q1
2017
NON-GAAP DISCLOSURES
Adjusted Net Income (Loss) Attributable to EQT and Adjusted
EPS
Adjusted net income (loss) attributable to EQT and adjusted EPS
are non-GAAP supplemental financial measures that are presented
because they are important measures used by management to evaluate
period-to-period comparisons of earnings trends. Adjusted net
income attributable to EQT and adjusted EPS should not be
considered as alternatives to net income attributable to EQT or EPS
presented in accordance with GAAP. Adjusted net income (loss)
attributable to EQT as presented excludes the revenue impact of
changes in the fair value of derivative instruments prior to
settlement, pension settlement charges and Rice Energy acquisition
costs. Management utilizes adjusted net income (loss) attributable
to EQT to evaluate earnings trends because the measure reflects
only the impact of settled derivative contracts; thus, the income
from natural gas sales is not impacted by the often volatile
fluctuations in the fair value of derivatives prior to settlement.
The measure also excludes other items that affect the comparability
of results. Management believes that adjusted net income (loss)
attributable to EQT as presented provides useful information for
investors for evaluating period-over-period earnings.
The table below reconciles adjusted net income (loss)
attributable to EQT and adjusted EPS with net income (loss)
attributable to EQT and EPS as derived from the statements of
consolidated operations to be included in EQT’s report on Form 10-Q
for the quarter ended June 30, 2017.
Three Months Ended June 30, (thousands, except
per share information)
2017 2016 Net income
(loss) attributable to EQT, as reported $ 41,126 $ (258,645 ) Add
back / (deduct): Pension settlement charges – 9,403 Rice Energy
acquisition costs 5,054 – (Gain) loss on derivatives not designated
as hedges (46,326 ) 234,693 Net cash settlements (paid) received on
derivatives not designated as hedges (11,191 ) 86,097 Premiums
received (paid) for derivatives that settled during the period 532
(553 ) Tax impact of non-GAAP items* 20,876
(134,163 ) Adjusted net income (loss) attributable to EQT $ 10,071
$ (63,168 ) Diluted weighted average common shares
outstanding 173,582 166,801 Diluted EPS, as adjusted $ 0.06 $ (0.38
)
*
A tax rate of 40.2% and 40.7% for the
three month periods ended June 30, 2017 and 2016, respectively, was
applied to the items under the caption “Add back (deduct)”. This
represents the incremental deferred tax benefit (expense) that
would have been incurred had these items been excluded from net
income (loss) attributable to EQT.
Operating Cash Flow, Adjusted Operating Cash Flow
Attributable to EQT and Adjusted Operating Cash Flow Attributable
to EQT Production
Operating cash flow, adjusted operating cash flow attributable
to EQT and adjusted operating cash flow attributable to EQT
Production are non-GAAP supplemental financial measures that are
presented as indicators 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
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
operating cash flow attributable to EQT excludes the noncontrolling
interest portion of EQT Midstream Partners (EQM) adjusted EBITDA
(a non-GAAP supplemental financial measure reconciled below).
Management believes that removing the impact on operating cash
flows of the public unitholders of EQGP and EQM that is otherwise
required to be consolidated in EQT’s results provides useful
information to an EQT investor. As used in this news release,
adjusted operating cash flow attributable to EQT Production means
the EQT Production segment’s total operating revenues less the EQT
Production segment’s cash operating expense, less gains (losses) on
derivatives not designated as hedges, plus net cash settlements
received (paid) on derivatives not designated as hedges, plus
premiums received (paid) for derivatives that settled during the
period, plus EQT Production asset impairments (if applicable).
Operating cash flow, adjusted operating cash flow attributable to
EQT and adjusted operating cash flow attributable to EQT Production
should not be considered as alternatives to net cash provided by
operating activities presented in accordance with GAAP. The table
below reconciles operating cash flow and adjusted operating cash
flow attributable to EQT with net cash provided by operating
activities, as derived from the statements of condensed
consolidated cash flows to be included in EQT’s report on Form 10-Q
for the quarter ended June 30, 2017.
Three Months Ended Six Months Ended
June 30, June 30, (thousands)
2017
2016 2017 2016 Net cash provided by
operating activities $ 294,177 $ 208,487 $ 808,994 $ 493,404 Add
back / (deduct) Changes in other assets and liabilities
43,994 (1,000 ) (25,630 ) 40,818
Operating cash flow (a non-GAAP measure) 338,171 207,487 783,364
534,222 (Deduct) / add back: EQT Midstream Partners adjusted
EBITDA(1) (165,238 ) (138,136 ) (333,902 ) (279,707 ) Cash
distribution payable to EQT(2) 50,340 35,957
96,126 68,079 Adjusted operating
cash flow attributable to EQT $ 223,273 $ 105,308 $
545,588 $ 322,594 (1) EQT Midstream Partners
adjusted EBITDA is a non-GAAP supplemental financial measure
reconciled in this section (2) Cash distribution payable to EQT for
the three and six months ended June 30, 2017 and 2016, represents
the distribution payable from EQGP to EQT
EQT has not provided projected net cash provided by operating
activities or reconciliations of projected adjusted operating cash
flow attributable to EQT or EQT Production to projected net cash
provided by operating activities, the most comparable financial
measure calculated in accordance with GAAP. EQT is unable to
project net cash provided by operating activities because this
metric includes the impact of changes in operating assets and
liabilities related to the timing of cash receipts and
disbursements that may not relate to the period in which the
operating activities occurred. EQT is unable to project these
timing differences with any reasonable degree of accuracy without
unreasonable efforts such as predicting the timing of its and
customers’ payments, with accuracy to a specific day, three or more
months in advance. Therefore, EQT is unable to provide projected
net cash provided by operating activities, or the related
reconciliations of projected adjusted operating cash flow
attributable to EQT and EQT Production to projected net cash
provided by operating activities, without unreasonable effort.
EQT Production Adjusted Operating Revenues
The table below reconciles EQT Production adjusted operating
revenues, a non-GAAP supplemental financial measure, to EQT
Production total operating revenues, as reported in the EQT
Production Results of Operations, its most directly comparable
financial measure calculated in accordance with GAAP. Refer to
Financial Information by Business Segment footnote to be included
in EQT’s report on Form 10-Q for the quarter ended June 30, 2017
for a reconciliation of EQT Production total operating revenues to
EQT Corporation total operating revenues, as reported.
EQT Production adjusted operating revenues (also referred to as
total natural gas & liquids sales, including cash settled
derivatives) is presented because it is an important measure used
by the Company’s management to evaluate period-over-period
comparisons of earnings trends. EQT Production adjusted operating
revenues as presented excludes the revenue impact of changes in the
fair value of derivative instruments prior to settlement and the
revenue impact of certain pipeline and net marketing services.
Management utilizes EQT Production adjusted operating revenues to
evaluate earnings trends because the measure reflects only the
impact of settled derivative contracts and thus does not impact the
revenue from natural gas sales with the often volatile fluctuations
in the fair value of derivatives prior to settlement. EQT
Production adjusted operating revenues also excludes "Pipeline and
net marketing services" because management considers these revenues
to be unrelated to the revenues for its natural gas and liquids
production. "Pipeline and net marketing services" includes revenues
for gathering services provided to third-parties, as well as both
the cost of and recoveries on third-party pipeline capacity not
used for EQT Production sales volume. Management further believes
that EQT Production adjusted operating revenues, as presented,
provide useful information to investors for evaluating
period-over-period earnings trends.
Calculation of EQT Production Adjusted
Three Months Ended Six Months Ended Operating
Revenue June 30, June 30, $ in thousands (unless
noted)
2017 2016 2017
2016 EQT Production total operating revenues, as reported on
segment page $ 631,101 $ 76,953 $ 1,459,763 $ 560,660 (Deduct) /
add back: (Gain) loss on derivatives not designated as hedges
(46,326 ) 234,693 (187,068 ) 125,698 Net cash settlements (paid)
received on derivatives not designated as hedges (11,191 ) 86,097
(20,158 ) 195,229 Premiums received (paid) for derivatives that
settled during the period 532 (553 ) 1,058 (1,016 ) Pipeline and
net marketing services (8,061 ) (7,114 )
(22,516 ) (17,399 ) EQT Production adjusted operating
revenue, a non-GAAP measure $ 566,055 $ 390,076 $ 1,231,079 $
863,172 Total sales volumes (MMcfe) 198,080 184,548 388,014
364,483 Average realized price ($/Mcfe) $ 2.86 $ 2.11 $ 3.17
$ 2.37
EQT Production Adjusted Operating Income (Loss)
The table below reconciles EQT Production adjusted operating
income (loss), a non-GAAP supplemental financial measure, to EQT
Production operating income (loss), as reported in the EQT
Production Results of Operations. Refer to the Operating Income
(Loss) section in this news release for a reconciliation of EQT
Production total operating income (loss) to EQT Corporation total
operating income (loss), as reported.
EQT Production adjusted operating income (loss) is presented
because it is an important measure used by EQT’s management to
evaluate period-over-period comparisons of earnings trends. EQT
Production adjusted operating income (loss) should not be
considered as an alternative to EQT Corporation operating income
presented in accordance with GAAP. EQT Production adjusted
operating income (loss) as presented excludes the revenue impact of
changes in the fair value of derivative instruments prior to
settlement. Management utilizes EQT Production adjusted operating
income (loss) to evaluate earnings trends because the measure
reflects only the impact of settled derivative contracts and thus
the income from natural gas sales is not impacted by the often
volatile fluctuations in the fair value of derivatives prior to
settlement. The measure also excludes other items that affect the
comparability of results. Management believes that EQT Production
adjusted operating income (loss) as presented provides useful
information for investors for evaluating period-over-period
earnings.
Three Months Ended Six Months Ended
June 30, June 30, (thousands)
2017
2016 2017 2016 EQT Production operating
income (loss), as reported on segment page $ 52,765 $
(447,735 ) $ 310,195 $ (453,213 ) (Deduct) / add back:
(Gain) / loss on derivatives not designated as hedges
$
(46,326
)
234,693 (187,068 ) 125,698 Net cash settlements (paid) received on
derivatives not designated as hedges (11,191 ) 86,097 (20,158 )
195,229 Premiums received (paid) for derivatives that settled
during the period 532 (553 ) 1,058 (1,016 ) Pension settlement
charges − 9,403 −
9,403 EQT Production adjusted operating (loss) income $
(4,220 ) $ (118,095 ) $ 104,027 $ (123,899 )
EQT Midstream Partners Adjusted EBITDA
As used in this news release, EQT Midstream Partners adjusted
EBITDA means EQM’s net income plus EQM’s net interest expense,
depreciation and amortization expense, income tax expense
(if applicable), preferred interest payments received
post-conversion, and non-cash long-term compensation expense less
EQM’s equity income, AFUDC-equity, pre-acquisition capital lease
payments for Allegheny Valley Connector, LLC (AVC), and adjusted
EBITDA of assets prior to acquisition. EQT Midstream Partners
adjusted EBITDA is a non-GAAP supplemental financial measure that
management and external users of EQT’s consolidated financial
statements, such as industry analysts, investors, lenders and
rating agencies, use to assess the effects of the noncontrolling
interests in relation to:
- EQT's operating performance as compared
to other companies in its industry;
- the ability of EQT's assets to generate
sufficient cash flow to make distributions to its investors;
- EQT's ability to incur and service debt
and fund capital expenditures; and
- the viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
EQT believes that EQT Midstream Partners adjusted EBITDA
provides useful information to investors in assessing EQT's
financial condition and results of operations. EQT Midstream
Partners adjusted EBITDA should not be considered as an alternative
to EQM’s net income, operating income, or any other measure of
financial performance or liquidity presented in accordance with
GAAP. EQT Midstream Partners adjusted EBITDA has important
limitations as an analytical tool because it excludes some, but not
all, items that affect EQM's net income. Additionally, because EQT
Midstream Partners adjusted EBITDA may be defined differently by
other companies in EQT's or EQM's industries, the definition of EQT
Midstream Partners adjusted EBITDA may not be comparable to
similarly titled measures of other companies, thereby diminishing
the utility of the measure. The table below reconciles EQT
Midstream Partners adjusted EBITDA with EQM’s net income, as
derived from the statements of consolidated operations to be
included in EQM’s report on Form 10-Q for the quarter ended June
30, 2017.
EQM is unable to provide a reconciliation of projected EQT
Midstream Partners adjusted EBITDA to projected EQM net income, the
most comparable financial measure calculated in accordance with
GAAP, because EQM does not provide guidance with respect to the
intra-year timing of its or Mountain Valley Pipeline, LLC’s capital
spending, which impact AFUDC-debt and equity as well as equity
earnings, among other items, that are reconciling items between EQT
Midstream Partners adjusted EBITDA and EQM net income. The timing
of capital expenditures is volatile as it depends on weather,
regulatory approvals, contractor availability, system performance
and various other items. EQM provides a range for the forecasts of
EQM net income and EQT Midstream Partners adjusted EBITDA to allow
for the variability in the timing of capital spending and the
impact on the related reconciling items, many of which interplay
with each other. Therefore, the reconciliation of projected EQT
Midstream Partners adjusted EBITDA to projected EQM net income is
not available without unreasonable effort.
Three Months Ended Six Months Ended June
30, June 30, (thousands, unless noted)
2017
2016 2017 2016 Net income $
139,139 $ 131,859 $ 282,335 $ 268,594 Add back: Net interest
expense 8,662 4,094 16,588 8,646 Depreciation and amortization
expense 21,400 14,531 41,947 28,538 Income tax expense − 3,485 −
6,920 Preferred interest payments received post conversion 2,746 −
5,492 − Non-cash long-term compensation expense − − 225 195 Less:
Equity income (5,111 ) (1,850 ) (9,388 ) (3,439 ) AFUDC - equity
(1,598 ) (5,793 ) (3,297 ) (8,730 ) Pre-acquisition capital lease
payments for AVC − (4,036 ) − (13,400 ) Adjusted EBITDA
attributable to the assets prior to acquisition −
(4,154 ) − (7,617 ) EQT Midstream
Partners Adjusted EBITDA $ $ 165,238 $ 138,136 $
333,902 $ 279,707
Second quarter 2017 Webcast
Information
The Company's conference call with securities analysts begins at
10:30 a.m. ET today and will be broadcast live via the Company's
web site at www.eqt.com, and on the investor information page of
the Company’s web site at ir.eqt.com, with a replay available for
seven days following the call.
EQT Midstream Partners, LP and EQT GP Holdings, LP, for which
EQT Corporation is the parent company, will also host a joint
conference call with security analysts today, beginning at 11:30
a.m. ET. The call will be broadcast live via
www.eqtmidstreampartners.com, with a replay available for seven
days following the call.
About EQT Corporation:
EQT Corporation is an integrated energy company with emphasis on
Appalachian area natural gas production, gathering, and
transmission. 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. EQT also
owns a 90% limited partner interest in EQT GP Holdings, LP. EQT GP
Holdings, LP owns the general partner interest, all of the
incentive distribution rights, and a portion of the limited partner
interests in EQT Midstream Partners, LP.
Visit EQT Corporation at www.EQT.com.
EQT Management speaks to investors from time-to-time and the
analyst presentation for these discussions, which is updated
periodically, is available via the Company’s investor relations
website at http://ir.eqt.com.
About EQT Midstream
Partners:
EQT Midstream Partners, LP is a growth-oriented limited
partnership formed by EQT Corporation to own, operate, acquire, and
develop midstream assets in the Appalachian Basin. The Partnership
provides midstream services to EQT Corporation and third-party
companies through its strategically located transmission, storage,
and gathering systems that service the Marcellus and Utica regions.
The Partnership owns approximately 950 miles of FERC-regulated
interstate pipelines; and also owns approximately 1,800 miles of
high- and low-pressure gathering lines.
Visit EQT Midstream Partners, LP at
www.eqtmidstreampartners.com.
About EQT GP Holdings:
EQT GP Holdings, LP is a limited partnership that owns the
general partner interest, all of the incentive distribution rights,
and a portion of the limited partner interests in EQT Midstream
Partners, LP. EQT Corporation owns a 90% limited partner interest
in EQT GP Holdings, LP.
Visit EQT GP Holdings, LP at www.eqtmidstreampartners.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 volume per day (or daily production) is an
operational estimate of the daily production or sales volume on a
typical day (excluding curtailments).
Disclosures in this news release contain certain forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended. 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, Upper Devonian, Utica, and other
reserves; drilling plans and programs (including the number, type,
average length-of-pay or lateral length and location of wells to be
drilled and number and type of drilling rigs); projected natural
gas prices, basis and average differential; total resource
potential, reserves and EUR; projected Company and third party
production sales volume and growth rates (including liquids sales
volume and growth rates); projected unit costs and well costs;
projected pipeline and net marketing services revenues; projected
gathering and transmission volume and growth rates; the Company’s
access to, and timing of, capacity on pipelines; infrastructure
programs (including the timing, cost and capacity of the
transmission and gathering expansion projects); the cost, timing of
regulatory approvals and anticipated in-service date of the
Mountain Valley Pipeline (MVP) project; the ultimate terms,
partners and structure of the MVP joint venture; technology
(including drilling and completion techniques); acquisition
transactions; the Company’s ability to complete, the timing of, and
the Company’s financing of the funds required for, the Company’s
acquisition of Rice Energy, and the Company’s ability to achieve
the anticipated synergies from the transaction; monetization
transactions, including asset sales, joint ventures or other
transactions involving the Company’s assets; the projected cash
flows resulting from the Company’s limited partner interests in
EQGP; internal rate of return (IRR) and returns per well; projected
capital contributions and expenditures; potential future
impairments of the Company’s assets; liquidity and financing
requirements, including funding sources and availability; changes
in the Company’s or EQM’s credit ratings; projected net income
attributable to noncontrolling interests, adjusted operating cash
flow attributable to EQT, adjusted operating cash flow attributable
to EQT Production, EBITDA, revenues and cash-on-hand; hedging
strategy; the effects of government regulation and litigation;
projected dividend and distribution amounts and rates; and tax
position and projected effective tax rate. 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, many of which are difficult to
predict and 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, 2016 as 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.
Information in this news release regarding EQGP and its
subsidiaries, including EQM, is derived from publicly available
information published by the partnerships.
Important Additional Information
In connection with the proposed transaction, EQT will file with
the SEC a Registration Statement on Form S-4 that will include a
Joint Proxy Statement of EQT and Rice and a Prospectus of EQT, as
well as other relevant documents concerning the proposed
transaction. The proposed transaction involving EQT and Rice will
be submitted to EQT’s shareholders and Rice’s stockholders for
their consideration. This communication does not constitute an
offer to sell or the solicitation of an offer to buy any securities
or a solicitation of any vote or approval. SHAREHOLDERS OF EQT AND
STOCKHOLDERS OF RICE ARE URGED TO READ THE REGISTRATION STATEMENT
AND THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE TRANSACTION
WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED
WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE
DOCUMENTS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION.
Investors will be able to obtain a free copy of the definitive
joint proxy statement/prospectus, as well as other filings
containing information about EQT and Rice, without charge, at the
SEC’s website (http://www.sec.gov). Copies of the joint proxy
statement/prospectus and the filings with the SEC that will be
incorporated by reference in the joint proxy statement/prospectus
can also be obtained, without charge, by directing a request to
Investor Relations, EQT Corporation, EQT Plaza, 625 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3111, Tel. No. (412) 553-5700 or to
Investor Relations, Rice Energy Inc., 2200 Rice Drive, Canonsburg,
Pennsylvania 15317, Tel. No. (724) 271-7200.
Participants in the Solicitation
EQT, Rice, and certain of their respective directors, executive
officers and employees may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding EQT’s directors and executive officers is
available in its definitive proxy statement, which was filed with
the SEC on February 17, 2017, and certain of its Current Reports on
Form 8-K. Information regarding Rice’s directors and executive
officers is available in its definitive proxy statement, which was
filed with the SEC on April 17, 2017, and certain of its Current
Reports on Form 8-K. Other information regarding the participants
in the proxy solicitation and a description of their direct and
indirect interests, by security holdings or otherwise, will be
contained in the joint proxy statement/prospectus and other
relevant materials filed with the SEC. Free copies of this document
may be obtained as described in the preceding paragraph.
2017 GUIDANCE
See the Non-GAAP Disclosures section for important information
regarding the non-GAAP financial measures included in this news
release, including reasons why EQT is unable to provide projections
of its 2017 net cash provided by operating activities, the most
comparable financial measure to adjusted operating cash flow
attributable to EQT and EQT Production, calculated in accordance
with GAAP.
PRODUCTION Q3 2017 2017
Total production sales volume (Bcfe) 205 – 210 825 – 840
Liquids sales volume, excluding ethane (Mbbls) 3,240 – 3,260 13,200
– 13,600 Ethane sales volume (Mbbls) 1,565 – 1,575 5,850 – 6,050
Total liquids sales volume (Mbbls) 4,805 – 4,835 19,050 – 19,650
Marcellus / Utica Rigs 6 – 9 Top-hole rigs 5 – 7 Unit
Costs ($ / Mcfe) Gathering to EQT Gathering $ 0.45 – 0.47
Transmission to EQT Transmission $ 0.20 – 0.22 Third-party
gathering and transmission $ 0.44 – 0.46 Processing $ 0.21 – 0.23
LOE, excluding production taxes $ 0.12 – 0.14 Production taxes $
0.08 – 0.10 SG&A $ 0.18 – 0.20 DD&A $ 1.03 – 1.05
Average differential ($ / Mcf)
$ (0.85) – (0.75
)
$ (0.55) – (0.45
)
Pipeline and net marketing services ($MM) $ 0 – 10
$ 35 – 45
FINANCIAL ($MM) Net income attributable to noncontrolling
interest ($MM) $ 80 – 82
$ 335 – 345
ADJUSTED OPERATING CASH FLOW ($MM) Adjusted operating
cash flow attributable to EQT Production $ 1,100 Distributions from
EQGP
200
Interest, taxes, and other items
(100
)
Adjusted operating cash flow attributable to EQT $ 1,200
Based on current NYMEX natural gas prices of $3.18All guidance,
forecasts and projections included in this news release do not
reflect the pro forma impact of the Company’s pending acquisition
of Rice Energy
EQT CORPORATION AND SUBSIDIARIES Statements of
Consolidated Operations Three
Months Ended Six Months Ended June 30, June
30, 2017 2016 2017 2016 (Thousands
except per share amounts) Revenues: Sales of natural gas, oil and
NGLs $ 576,714 $ 304,532 $ 1,250,179 $ 668,959 Pipeline and net
marketing services 67,853 57,692 151,169 129,339 Gain (loss) on
derivatives not designated as hedges 46,326 (234,693
) 187,068 (125,698 ) Total operating revenues 690,893
127,531 1,588,416 672,600 Operating expenses: Transportation
and processing 134,818 84,207 268,524 161,400 Operation and
maintenance 20,581 16,353 40,867 33,489 Production 44,393 45,891
90,182 87,093 Exploration 3,481 3,591 6,603 6,714 Selling, general
and administrative 57,009 77,352 129,067 135,335 Depreciation,
depletion and amortization 240,817 224,629
472,735 445,860 Total operating expenses
501,099 452,023 1,007,978 869,891 Operating income (loss)
189,794 (324,492 ) 580,438 (197,291 ) Other income 6,638
7,644 10,019 12,484 Interest expense 44,078 36,305
86,733 72,485 Income (loss) before
income taxes 152,354 (353,153 ) 503,724 (257,292 ) Income tax
expense (benefit) 29,709 (172,346 ) 130,374
(164,910 ) Net income (loss) 122,645 (180,807 ) 373,350
(92,382 ) Less: Net income attributable to noncontrolling interests
81,519 77,838 168,232 160,627
Net income (loss) attributable to EQT Corporation $ 41,126 $
(258,645 ) $ 205,118 $ (253,009 ) Earnings per share of
common stock attributable to EQT Corporation: Basic: Weighted
average common stock outstanding 173,462 166,801
173,320 161,909 Net income
(loss) $ 0.24 $ (1.55 ) $ 1.18 $ (1.56 ) Diluted:
Weighted average common stock outstanding 173,582
166,801 173,525 161,909 Net income
(loss) $ 0.24 $ (1.55 ) $ 1.18 $ (1.56 ) Dividends declared per
common share $ 0.03 $ 0.03 $ 0.06 $ 0.06
EQT CORPORATION AND SUBSIDIARIES PRICE
RECONCILIATION Three Months
Ended Six Months Ended June 30, June 30,
in thousands (unless noted)
2017 2016 2017
2016 NATURAL GAS Sales volume (MMcf) 167,682 167,741
332,146 333,015 NYMEX price ($/MMBtu) (a) $ 3.18 $ 1.95 $ 3.25 $
2.02 Btu uplift 0.26 0.16 0.27
0.17 Natural gas price ($/Mcf) $ 3.44 $ 2.11 $
3.52 $ 2.19 Basis ($/Mcf) (b) (0.60 ) (0.75 ) (0.39 ) (0.58
) Cash settled basis swaps (not designated as hedges) ($/Mcf)
(0.04 ) (0.04 ) - 0.08
Average differential, including cash settled basis swaps ($/Mcf) $
(0.64 ) $ (0.79 ) $ (0.39 ) $ (0.50 ) Average adjusted price
($/Mcf) $ 2.80 $ 1.32 $ 3.13 $ 1.69 Cash settled derivatives (cash
flow hedges) ($/Mcf) 0.02 0.16 0.01 0.14 Cash settled derivatives
(not designated as hedges) ($/Mcf) (0.02 ) 0.55
(0.05 ) 0.50 Average natural gas price,
including cash settled derivatives ($/Mcf) $ 2.80 $ 2.03 $ 3.09 $
2.33 Natural gas sales, including cash settled derivatives $
469,165 $ 342,561 $ 1,028,364 $ 777,414
LIQUIDS
NGLs (excluding ethane): Sales volume (MMcfe) (c) 18,895
14,442 36,035 28,094 Sales volume (Mbbls) 3,149 2,408 6,006 4,683
Price ($/Bbl) $ 24.03 $ 16.12 $ 27.54 $ 15.52 Cash settled
derivatives (not designated as hedges) ($/Bbl) (0.32 )
- (0.43 ) - Average NGL price,
including cash settled derivatives ($/Bbl) $ 23.71 $ 16.12 $ 27.11
$ 15.52 NGL sales $ 74,653 $ 38,805 $ 162,850 $ 72,680
Ethane: Sales volume (MMcfe) (c) 9,771 1,177 16,744 1,177
Sales volume (Mbbls) 1,629 196 2,791 196 Price ($/Bbl) $ 6.76
$ 8.28 $ 6.72 $ 8.28 Ethane sales $
11,007 $ 1,624 $ 18,739 $ 1,624
Oil: Sales volume (MMcfe)
(c) 1,732 1,188 3,089 2,197 Sales volume (Mbbls) 289 198 515 366
Price ($/Bbl) $ 38.91 $ 35.78 $ 41.04 $ 31.28
Oil sales $ 11,230 $ 7,086 $ 21,126 $ 11,454 Total
liquids sales volume (MMcfe) (c ) 30,398 16,807 55,868 31,468 Total
liquids sales volume (Mbbls) 5,067 2,802 9,312 5,245 Liquids
sales $ 96,890 $ 47,515 $ 202,715 $ 85,758
TOTAL
PRODUCTION Total natural gas & liquids sales, including
cash settled derivatives (d) $ 566,055 $ 390,076 $ 1,231,079 $
863,172 Total sales volume (MMcfe) 198,080 184,548 388,014 364,483
Average realized price ($/Mcfe) $ 2.86 $ 2.11 $ 3.17 $ 2.37
(a)
The Company’s volume weighted NYMEX
natural gas price (actual average NYMEX natural gas price ($/MMBtu)
was $3.18 and $1.95 for the three months ended June 30, 2017 and
2016, respectively, and $3.25 and $2.02 for the six months ended
June 30, 2017 and 2016, respectively).
(b)
Basis represents the difference between
the ultimate sales price for natural gas and the NYMEX natural gas
price.
(c)
NGLs, ethane and crude oil were converted
to Mcfe at the rate of six Mcfe per barrel for all periods.
(d)
Also referred to in this report as EQT
Production adjusted operating revenues, a non-GAAP supplemental
financial measure.
EQT PRODUCTION RESULTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016
2017 2016 OPERATIONAL DATA Sales volume
detail (MMcfe): Marcellus (a) 175,103 160,382 341,472 314,971 Other
(b) 22,977 24,166 46,542 49,512
Total production sales volumes (c) 198,080 184,548 388,014
364,483 Average daily sales volumes (MMcfe/d) 2,177 2,028
2,144 2,003 Average realized price ($/Mcfe) $ 2.86 $ 2.11 $
3.17 $ 2.37 Gathering to EQT Gathering ($/Mcfe) $ 0.48 $
0.50 $ 0.48 $ 0.60 Transmission to EQT Transmission ($/Mcfe) $ 0.22
$ 0.19 $ 0.23 $ 0.19 Third party gathering and transmission
($/Mcfe) $ 0.44 $ 0.30 $ 0.46 $ 0.29 Processing ($/Mcfe) $ 0.24 $
0.16 $ 0.23 $ 0.15 Lease operating expenses (LOE), excluding
production taxes ($/Mcfe) $ 0.13 $ 0.16 $ 0.13 $ 0.15 Production
taxes ($/Mcfe) $ 0.09 $ 0.09 $ 0.10 $ 0.08 Production depletion
($/Mcfe) $ 1.04 $ 1.06 $ 1.04 $ 1.06 Depreciation, depletion
and amortization (DD&A) (thousands): Production depletion $
205,524 $ 195,293 $ 402,986 $ 387,288 Other DD&A 13,687
13,516 27,322 27,197 Total
DD&A $ 219,211 $ 208,809 $ 430,308 $ 414,485 Capital
expenditures (thousands) (d) 455,721 234,325 1,401,179 471,891
FINANCIAL DATA (thousands) Revenues: Sales of
natural gas, oil and NGLs $ 576,714 $ 304,532 $ 1,250,179 668,959
Pipeline and net marketing services 8,061 7,114 22,516 17,399 Gain
(loss) on derivatives not designated as hedges 46,326
(234,693 ) 187,068 (125,698 ) Total operating
revenues 631,101 76,953 1,459,763 560,660 Operating
expenses: Gathering 110,965 104,035 217,880 204,451 Transmission
116,209 78,556 234,805 153,740 Processing 46,819 29,082 89,579
55,097 LOE, excluding production taxes 26,034 29,312 51,345 56,207
Production taxes 18,359 16,579 38,837 30,886 Exploration 3,481
3,591 6,603 6,714 Selling, general and administrative (SG&A)
37,258 54,724 80,211 92,293 DD&A 219,211 208,809
430,308 414,485 Total operating
expenses 578,336 524,688 1,149,568
1,013,873 Operating income (loss) $ 52,765 $ (447,735
) $ 310,195 $ (453,213 )
(a)
Includes Upper Devonian wells.
(b)
Includes 2,510 and 3,842 MMcfe of Utica
sales volume for the three months ended June 30, 2017 and 2016,
respectively, and 4,972 and 7,795 MMcfe of Utica sales volume for
the six months ended June 30, 2017 and 2016, respectively.
(c)
NGLs, ethane and crude oil were converted
to Mcfe at the rate of six Mcfe per barrel for all periods.
(d)
Expenditures for segment assets in the EQT
Production segment included $49.6 million and $34.8 million for
general leasing activity during the three months ended June 30,
2017 and 2016, respectively, and $94.9 million and $68.1 million
for general leasing activity during the six months ended June 30,
2017 and 2016, respectively. The three and six months ended June
30, 2017 also includes $141.7 million and $811.2 million of cash
capital expenditures for acquisitions, respectively. During the six
months ended June 30, 2017, the Company also incurred $9.7 million
of non-cash capital expenditures for acquisitions.
EQT GATHERING RESULTS OF OPERATIONS
Three Months Ended Six Months
Ended June 30, June 30, 2017 2016
2017 2016 FINANCIAL DATA (Thousands, other
than per day amounts) Firm reservation fee revenues $ 101,858 $
83,560 $ 196,129 $ 165,567 Volumetric based fee revenues: Usage
fees under firm contracts (a) 6,479 11,039 11,300 21,491 Usage fees
under interruptible contracts 3,808 5,556
7,045 11,106 Total volumetric based fee revenues
10,287 16,595 18,345 32,597 Total operating
revenues 112,145 100,155 214,474
198,164 Operating expenses: Operating and maintenance 10,408
9,123 20,863 18,068 SG&A 8,872 10,263 18,297 19,460
Depreciation and amortization 9,555 7,594
18,415 14,857 Total operating expenses 28,835
26,980 57,575 52,385 Operating income $ 83,310
$ 73,175 $ 156,899 $ 145,779
OPERATIONAL DATA
Gathered volumes (BBtu per day) Firm capacity reservation 1,780
1,535 1,754 1,478 Volumetric based services (b) 281
462 253 469 Total gathered volumes 2,061 1,997 2,007
1,947 Capital expenditures $ 53,708 $ 86,278 $ 102,546 $
159,365
(a)
Includes fees on volumes gathered in
excess of firm contracted capacity
(b)
Includes volumes gathered under
interruptible contracts and volumes gathered in excess of firm
contracted capacity.
EQT TRANSMISSION RESULTS OF OPERATIONS
Three Months Ended Six Months
Ended June 30, June 30, 2017 2016
2017 2016 FINANCIAL DATA (Thousands, other
than per day amounts) Firm reservation fee revenues $ 79,512 $
60,284 $ 171,786 $ 130,393 Volumetric based fee revenues: Usage
fees under firm contracts (a) 3,503 14,245 6,360 27,674 Usage fees
under interruptible contracts 3,806 3,358
9,772 7,597 Total volumetric based fee revenues 7,309
17,603 16,132 35,271 Total operating revenues
86,821 77,887 187,918 165,664
Operating expenses: Operating and maintenance 10,173 7,230 20,004
15,421 SG&A 7,021 7,866 15,076 16,192 Depreciation and
amortization 11,845 6,937 23,532 13,681
Total operating expenses 29,039 22,033 58,612
45,294 Operating income $ 57,782 $ 55,854 $ 129,306 $
120,370
OPERATIONAL DATA Transmission pipeline
throughput (BBtu per day) 2,218 1,486 2,171 1,554 Firm capacity
reservation 21 570 24 528 Volumetric
based services (b) 2,239 2,056 2,195 2,082 Total transmission
pipeline throughput Average contracted firm transmission
reservationcommitments (BBtu per day) 3,341 2,401 3,542 2,703
Capital expenditures $ 29,978 $ 115,946 $ 51,367 $ 176,017
(a)
Includes commodity charges and fees on all
volumes transported under firm contracts as well as transmission
fees on volumes in excess of firm contracted capacity.
(b)
Includes volumes transported under
interruptible contracts and volumes transported in excess of firm
contracted capacity.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727005310/en/
EQT analyst inquiries please contact:Patrick Kane – Chief
Investor Relations Officer, 412-553-7833pkane@eqt.comorEQT
Midstream Partners / EQT GP Holdings analyst inquiries please
contact:Nate Tetlow – Investor Relations Director,
412-553-5834ntetlow@eqt.comorMedia inquiries please
contact:Natalie Cox – Corporate Director, Communications,
412-395-3941ncox@eqt.com
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