Volume growth continues; production sales volume
reiterated
EQT Corporation (NYSE: EQT) today announced first quarter 2017
net income attributable to EQT of $164.0 million, or
$0.95 earnings per diluted share (EPS), compared to first
quarter 2016 net income attributable to EQT of $5.6 million, or
$0.04 EPS. Net cash provided by operating activities was
$514.8 million, $229.9 million higher than the first 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 $74.8 million for
the quarter, compared to adjusted net income attributable to EQT of
$7.7 million in the first quarter 2016; and adjusted EPS was $0.43,
compared to $0.05 – primarily due to an increase in natural gas
prices. Adjusted operating cash flow attributable to EQT was
$322.3 million; $105.0 million higher than the first
quarter 2016. 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.
“During the first quarter, we continued to successfully execute
on our consolidation strategy by adding 67,000 acres to our core
Marcellus development area,” said Steve Schlotterbeck, president
and chief executive officer. “We've added more than 220,000 acres
in the past 10 months and the benefits of our core consolidation
efforts are now being realized through the drilling of longer
laterals, which provide operational efficiencies, improve well
economics, and deliver stronger returns."
First Quarter Highlights:
- Production sales volume was 6%
higher
- Average realized price was 33%
higher
- Core Marcellus EUR per 1,000 feet
increased by 14%
- Distributions to EQT from EQGP totaled
$45.8 million
- Cash balance was $857 million
(excluding EQM)
RESULTS BY BUSINESS
EQT PRODUCTION
EQT Production achieved sales volume of 190 Bcfe in the first
quarter 2017, representing a 6% increase over the first quarter
last year.
EQT Production’s operating income totaled $257.4 million for the
quarter, compared to an operating loss of $5.5 million in the first
quarter 2016. The $262.9 million increase was primarily
attributable to an increase in the average realized price,
increases in gains on derivatives not designated as hedges, an
increase in production sales volume, and increases in pipeline and
net marketing services revenue, partly offset by increased
operating expenses. Operating revenue totaled $828.7 million for
the first quarter 2017, which was $345.0 million higher than the
first quarter 2016.
EQT Production’s adjusted operating income, a non-GAAP financial
measure, totaled $108.2 million for the quarter, compared to an
adjusted operating loss of $2.0 million in 2016. During the
quarter, adjusted operating revenue, a non-GAAP financial measure,
was $665.0 million, which was $191.9 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 first quarter 2017 was $3.50 per Mcfe, 33% higher than the
$2.63 per Mcfe realized in the same period last year. Pipeline and
net marketing services revenue totaled $14.5 million in the
quarter.
EQT Production’s operating expenses for the quarter were $571.2
million, 17% higher than the same period last year. Transmission
expenses were $43.4 million higher primarily due to volumes moved
on Rockies Express Pipeline and the Ohio Valley Connector (OVC);
processing expenses were $16.7 million higher, consistent with
higher wet gas volumes; gathering expenses were $6.5 million
higher; production taxes were $6.2 million higher; selling, general
and administrative expenses (SG&A) were $5.4 million higher,
including a $5.0 million legal expense; and depreciation,
depletion, and amortization expenses (DD&A) were $5.4 million
higher; while lease operating expenses, excluding production taxes
(LOE) were $1.6 million lower.
The Company drilled (spud) 48 gross wells during the first
quarter 2017, including 28 Marcellus wells, with an average
expected length-of-pay of 8,600 feet; 19 Upper Devonian wells, with
an average expected length-of-pay of 9,000 feet; and one Utica well
with an expected length-of-pay of 8,000 feet.
EQT GATHERING
EQT Gathering first quarter 2017 operating income was $73.6
million, $1.0 million higher than the first quarter 2016. Operating
revenue was $102.3 million, a $4.3 million increase over 2016,
driven by production development in the Marcellus Shale. Firm
reservation fee revenue was $94.3 million in 2017, a $12.3 million
increase over the same quarter last year.
EQT Gathering operating expenses were $28.7 million, a $3.3
million increase over the same period last year. Specifically,
depreciation and amortization were $1.6 million higher; operating
and maintenance expense (O&M) was $1.5 million higher; and
SG&A was $0.2 million higher.
EQT TRANSMISSION
EQT Transmission first quarter 2017 operating income was $71.5
million, $7.0 million higher than the first quarter 2016. Firm
reservation fee revenue was $92.3 million in 2016, a $22.2 million
increase over 2016. Operating revenue was $101.1 million, a $13.3
million increase over 2016, which was a result of affiliates
contracting for additional capacity under firm contracts, primarily
on the OVC, and higher contractual rates on existing contracts.
Operating expenses were $29.6 million, $6.3 million higher than
last year. Depreciation and amortization were $4.9 million higher;
O&M was $1.6 million higher; and SG&A was $0.3 million
lower.
OTHER BUSINESS
Marcellus Acreage Acquisitions
On February 1, 2017, the Company acquired approximately 14,000
net Marcellus acres located in Marion, Monongalia, and Wetzel
Counties, West Virginia from a third-party for $130 million.
On February 27, 2017, the Company acquired approximately 85,000
acres including 53,400 net Marcellus acres in the Company’s
liquids-rich West Virginia core development areas, with drilling
rights on 44,100 net Utica acres, from Stone Energy Corp. for
$522.5 million.
Mountain Valley Pipeline
On March 31, 2017, the Federal Energy Regulatory Commission
(FERC) issued an updated Notice of Schedule for the environmental
review of the Mountain Valley Pipeline (MVP) project. Based on the
revised schedule, Mountain Valley Pipeline, LLC (MVP JV) expects to
receive the Final Environmental Impact Statement on June 23, 2017.
MVP JV has secured a total of 2 Bcf per day of firm capacity
commitments at 20-year terms and continues to target a late 2018
in-service date.
EQT Midstream Partners, LP (NYSE: EQM) / EQT GP Holdings, LP
(NYSE: EQGP)
On April 25, EQM announced a cash distribution to its
unitholders of $0.89 per unit for the first quarter 2017. EQGP also
announced a cash distribution to its unitholders of $0.191 per unit
for the first quarter 2017.
The first 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 first quarter 2017, EQT recorded earnings of $86.7 million,
or $0.50 per diluted share, attributable to the publicly held
partnership interests in EQGP and EQM.
Three Months Ended (thousands)
March 31,
2017 EQM net income $ 143,196 Less: General Partner
interest (including incentive distribution rights) 33,205
Limited Partner interest in net income $ 109,991
EQM LP units Publicly owned (73.3%) $ 80,612 EQGP owned
(26.7%) 29,379 Limited Partner interest in net income
$ 109,991
EQGP net income EQM LP unit ownership $
29,379 EQM GP unit ownership (including incentive distribution
rights) 33,205 EQGP incremental expenses (1,208 ) Limited
Partner interest in net income $ 61,376
EQGP units
Publicly owned LP (9.9%) $ 6,101 EQT owned LP (90.1%) 55,275
Limited Partner interest in net income $ 61,376
Noncontrolling interest in EQT earnings EQM publicly-owned
LP units $ 80,612 EQGP publicly-owned LP units 6,101
Net income attributable to noncontrolling interest $ 86,713
Hedging
As of April 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)
335
178 19 Average Price per Mcf (NYMEX) $ 3.35 $ 3.17 $ 3.12
Collars Total Volume (Bcf) 18 18 − Average Floor Price per Mcf
(NYMEX) $ 3.06 $ 3.16 $ − Average Cap Price per Mcf (NYMEX) $ 3.93
$ 3.63 $ −
(a)
April through December 31
•
The Company also sold calendar year 2017 and 2018 calls/swaptions
for approximately 24 Bcf and 40 Bcf, respectively, at strike prices
of $3.53 per Mcf and $3.46 per Mcf, respectively
•
For 2017 and 2018, the Company sold puts for approximately 3 Bcf 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 March 31,
(thousands)
2017 2016 Operating income
(loss): EQT Production $ 257,430 $ (5,478 ) EQT Gathering 73,589
72,604 EQT Transmission 71,524 64,516 Unallocated expense
(11,899 ) (4,441 ) Operating income $ 390,644 $
127,021
Unallocated expenses consist primarily of compensation expense
and administrative costs.
Marcellus Horizontal Well Status (cumulative since
inception)
As of As of
As of As of As of
3/31/17** 12/31/16* 9/30/16* 6/30/16*
3/31/16* Wells drilled (spud) 1,216 1,046 949 896 869 Wells
online 1,013 875 816 774 735 Wells complete, not online 20 21 32 34
45 Wells drilled, uncompleted 183 150 101 88 89
*Includes wells acquired in 2016**Includes wells acquired in Q1
2017
NON-GAAP DISCLOSURES
Adjusted Net Income Attributable to EQT and Adjusted Earnings
per Diluted Share
Adjusted net income attributable to EQT and adjusted earnings
per diluted share 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
earnings per diluted share should not be considered as alternatives
to net income attributable to EQT or earnings per diluted share
presented in accordance with GAAP. Adjusted net income attributable
to EQT as presented excludes the revenue impact of changes in the
fair value of derivative instruments prior to settlement and Huron
restructuring charges. Management utilizes adjusted net income
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
attributable to EQT as presented provides useful information for
investors for evaluating period-over-period earnings.
The table below reconciles adjusted net income attributable to
EQT and adjusted earnings per diluted share with net income
attributable to EQT and earnings per diluted share as derived from
the statements of consolidated operations to be included in EQT’s
report on Form 10-Q for the three months ended March 31, 2017.
Three Months Ended March 31, (thousands,
except per share information)
2017 2016
Net income attributable to EQT, as reported $ 163,992 $ 5,636 Add
back / (deduct): Huron restructuring charges – 3,812 Gain on
derivatives not designated as hedges (140,742 ) (108,995 ) Net cash
settlements (paid) received on derivatives not designated as hedges
(8,967 ) 109,132 Premiums received (paid) for derivatives that
settled during the period 526 (463 ) Tax impact of non-GAAP items*
59,972 (1,401 ) Adjusted net income
attributable to EQT $ 74,781 $ 7,721 Diluted weighted
average common shares outstanding 173,511 157,195 Diluted EPS, as
adjusted $ 0.43 $ 0.05 * A tax rate of 40.2% for the three
months ended March 31, 2017 and 2016, 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 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 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 three months ended March 31, 2017.
Three Months Ended March
31, (thousands)
2017 2016 Net cash
provided by operating activities $ 514,817 $ 284,917 Add back /
(deduct) Changes in other assets and liabilities (69,624 )
41,818 Operating cash flow (a non-GAAP measure) $
445,193 $ 326,735 (Deduct) / add back: EQT Midstream Partners
adjusted EBITDA(1) (168,664 ) (141,571 ) Cash distribution payable
to EQT(2) 45,786 32,122 Adjusted
operating cash flow attributable to EQT $ 322,315 $ 217,286
(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 months ended March 31,
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 the
Operating Income (Loss) section in this news release 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.
Three Months Ended Calculation of EQT Production
adjusted operating revenues March 31, (thousands)
2017 2016 EQT Production total
operating revenues, as reported on segment page $ 828,662 $ 483,707
(Deduct) / add back: Gain on derivatives not designated as hedges
(140,742 ) (108,995 ) Net cash settlements (paid) received on
derivatives not designated as hedges (8,967 ) 109,132 Premiums
received (paid) for derivatives that settled during the period 526
(463 ) Pipeline and net marketing services (14,455 )
(10,285 ) EQT Production adjusted operating revenues, a non-GAAP
financial measure $ 665,024 $ 473,096 Total
sales volume (MMcfe) 189,934 179,935 Average realized price
($/Mcfe) $ 3.50 $ 2.63
EQT Production Adjusted Operating Income (Loss)
The table below reconciles EQT Production adjusted operating
income (loss), a non-GAAP supplemental financial measure, to EQT
Corporation operating income, as derived from the statements of
consolidated operations to be included in EQT’s report on Form 10-Q
for the three months ended March 31, 2017.
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 and Huron restructuring charges. 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 March 31, (thousands)
2017 2016 EQT Corporation operating income, as
reported in accordance with GAAP $ 390,644 $ 127,201 Add back /
(deduct): Unallocated expense 11,899 4,441 EQT Gathering operating
income, as reported on segment page (73,589 ) (72,604 ) EQT
Transmission operating income, as reported on segment page
(71,524 ) (64,516 ) EQT Production operating income (loss),
as reported on segment page $ 257,430 $ (5,478 ) Add back /
(deduct): Gain on derivatives not designated as hedges (140,742 )
(108,995 ) Net cash settlements (paid) received on derivatives not
designated as hedges (8,967 ) 109,132 Premiums received (paid) for
derivatives that settled during the period 526 (463 ) Huron
restructuring charges – 3,812 EQT
Production adjusted operating income (loss) $ 108,247 $
(1,992 )
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 three months ended
March 31, 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 March 31,
(thousands)
2017 2016 Net income $
143,196 $ 136,735 Add back: Net interest expense 7,926 4,552
Depreciation and amortization expense 20,547 14,007 Income tax
expense - 3,435 Preferred interest payments received post
conversion 2,746 – Non-cash long-term compensation expense 225 195
Less: Equity income (4,277 ) (1,589 ) AFUDC – equity (1,699 )
(2,937 ) Pre-acquisition capital lease payments for AVC – (9,364 )
Adjusted EBITDA attributable to Rager Mountain Storage Company, LLC
and certain gathering assets prior to acquisition –
(3,463 ) EQT Midstream Partners Adjusted EBITDA $ 168,664
$ 141,571
First 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, EUR, expected decline curve and reserve
replacement ratio; 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 timing, cost, capacity and
expected interconnects with facilities and pipelines 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; 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;
the amount and timing of any repurchases under the Company’s share
repurchase authorization; 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, revenues and cash-on-hand; hedging strategy; the
effects of government regulation and litigation; projected dividend
and distribution amounts and rates; 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.
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 Q2 2017
2017 Total production sales volume (Bcfe)
190 – 195
835 – 855 Liquids sales volume, excluding ethane (Mbbls) 2,955 –
2,975 12,060 – 12,460 Ethane sales volume (Mbbls) 1,670 – 1,680
6,000 – 6,200 Total liquids sales volume (Mbbls) 4,625 – 4,655
18,060 – 18,660 Marcellus / Utica Rigs 6 – 8 Top-hole rigs 5
– 7 Unit Costs ($ / Mcfe) Gathering to EQT Gathering $ 0.45
– 0.47 Transmission to EQT Transmission
$ 0.19 – 0.21
Third-party gathering and transmission
$ 0.44 – 0.46
Processing
$ 0.19 – 0.21
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) $ (0.65) – (0.55) $ (0.50) – (0.35)
Pipeline and net marketing services
($MM)
$ 0 – 10 $ 30 – 35
FINANCIAL ($MM) Net income attributable
to noncontrolling interest ($MM) $ 72 – 74 $ 335 – 345
ADJUSTED OPERATING CASH FLOW
($MM)
Adjusted operating cash flow attributable to EQT Production $ 1,200
Distributions from EQGP
200
Interest, taxes, and other items (100) Adjusted operating cash flow
attributable to EQT $ 1,300
Based on current NYMEX natural gas prices of $3.37
EQT CORPORATION AND SUBSIDIARIES Statements of
Consolidated Operations Three Months Ended
March 31, 2017 2016 (Thousands except per
share amounts) Revenues: Sales of natural gas, oil and NGLs $
673,465 $ 364,427 Pipeline and net marketing services 83,316 71,647
Gain on derivatives not designated as hedges 140,742
108,995 Total operating revenues 897,523 545,069 Operating
expenses: Transportation and processing 133,706 77,193 Operation
and maintenance 20,286 17,136 Production 45,789 41,202 Exploration
3,122 3,123 Selling, general and administrative 72,058 57,983
Depreciation, depletion and amortization 231,918
221,231 Total operating expenses 506,879 417,868 Operating
income 390,644 127,201 Other income 3,381 4,840 Interest
expense 42,655 36,180 Income before income taxes
351,370 95,861 Income tax expense 100,665 7,436 Net
income 250,705 88,425 Less: Net income attributable to
noncontrolling interests 86,713 82,789 Net income
attributable to EQT Corporation $ 163,992 $ 5,636 Earnings
per share of common stock attributable to EQT Corporation: Basic:
Weighted average common stock outstanding 173,213
156,720 Net income $ 0.95 $ 0.04 Diluted: Weighted average
common stock outstanding 173,511 157,195 Net income $
0.95 $ 0.04 Dividends declared per common share $ 0.03 $ 0.03
EQT CORPORATION AND SUBSIDIARIES Price
Reconciliation Three Months Ended March
31, in thousands (unless noted)
2017
2016 NATURAL GAS Sales volume (MMcf) 164,464 165,274
NYMEX price ($/MMBtu) (a) $ 3.31 $ 2.08 Btu uplift 0.28
0.18 Natural gas price ($/Mcf) $ 3.59 $ 2.26
Basis ($/Mcf) (b) (0.16 ) (0.42 ) Cash settled basis swaps
(not designated as hedges) ($/Mcf) 0.03 0.20
Average differential, including cash settled basis swaps
($/Mcf) $ (0.13 ) $ (0.22 ) Average adjusted price ($/Mcf) $
3.46 $ 2.04 Cash settled derivatives (cash flow hedges) ($/Mcf)
0.01 0.13 Cash settled derivatives (not designated as hedges)
($/Mcf) (0.07 ) 0.46 Average natural gas
price, including cash settled derivatives ($/Mcf) $ 3.40 $ 2.63
Natural gas sales, including cash settled derivatives $
559,199 $ 434,853
LIQUIDS NGLs (excluding
ethane): Sales volume (MMcfe) (c) 17,140 13,652 Sales volume
(Mbbls) 2,857 2,275 Price ($/Bbl) $ 31.41 $ 14.89 Cash settled
derivatives (not designated as hedges) ($/Bbl) (0.54 )
– Average NGL price, including cash settled
derivatives ($/Bbl) $ 30.87 $ 14.89 NGL sales $ 88,197 $ 33,875
Ethane: Sales volume (MMcfe) (c) 6,973 – Sales volume
(Mbbls) 1,162 – Price ($/Bbl) $ 6.65 $ – Ethane sales
$ 7,732 $ –
Oil: Sales volume (MMcfe) (c) 1,357 1,009 Sales
volume (Mbbls) 226 168 Price ($/Bbl) $ 43.75 $ 25.98
Oil sales $ 9,896 $ 4,368 Total liquids sales volume (MMcfe)
(c) 25,470 14,661 Total liquids sales volume (Mbbls) 4,245 2,443
Liquids sales $ 105,825 $ 38,243
TOTAL
PRODUCTION Total natural gas & liquids sales, including
cash settled derivatives (d) $ 665,024 $ 473,096 Total sales volume
(MMcfe) 189,934 179,935 Average realized price ($/Mcfe) $
3.50 $ 2.63 (a) The Company’s volume weighted NYMEX natural
gas price (actual average NYMEX natural gas price ($/MMBtu) was
$3.32 and $2.09 for the three months ended March 31, 2017 and 2016,
respectively) (b) Basis represents the difference between the
ultimate sales price for natural gas and the NYMEX natural gas
price (c) NGLs, ethane and crude oil were converted to Mcfe at the
rate of six Mcfe per barrel for all periods (d) Also referred to in
this report as EQT Production adjusted operating revenues, a
non-GAAP supplemental financial measure
EQT
PRODUCTION RESULTS OF OPERATIONS Three Months
Ended March 31, 2017 2016
OPERATIONAL DATA Sales volume detail (MMcfe):
Marcellus (a) 166,369 154,589 Other (b) 23,565 25,346
Total production sales volumes (c) 189,934 179,935
Average daily sales volumes (MMcfe/d) 2,110 1,977 Average realized
price ($/Mcfe) $ 3.50 $ 2.63 Gathering to EQT Gathering
($/Mcfe) $ 0.48 $ 0.50 Transmission to EQT Transmission ($/Mcfe) $
0.23 $ 0.19 Third party gathering and transmission ($/Mcfe) $ 0.48
$ 0.28 Processing ($/Mcfe) $ 0.23 $ 0.14 Lease operating expenses
(LOE), excluding production taxes ($/Mcfe) $ 0.13 $ 0.15 Production
taxes ($/Mcfe) $ 0.11 $ 0.08 Production depletion ($/Mcfe) $ 1.04 $
1.07 Depreciation, depletion & amortization (DD&A)
(thousands): Production depletion $ 197,462 $ 191,995 Other
DD&A 13,635 13,681 Total DD&A $
211,097 $ 205,676 Capital expenditures (thousands) (d) $
945,458 $ 237,566
FINANCIAL DATA (thousands)
Revenues: Sales of natural gas, oil and NGLs $ 673,465 $ 364,427
Pipeline and net marketing services 14,455 10,285 Gain on
derivatives not designated as hedges 140,742 108,995
Total operating revenues $ 828,662 $ 483,707
Operating expenses: Gathering $ 106,915 $ 100,416 Transmission
118,596 75,184 Processing 42,760 26,015 LOE, excluding production
taxes 25,311 26,895 Production taxes 20,478 14,307 Exploration
3,122 3,123 Selling, general and administrative (SG&A) 42,953
37,569 DD&A 211,097 205,676 Total
operating expenses $ 571,232 $ 489,185 Operating income
(loss) $ 257,430 $ (5,478 ) (a) Includes Upper Devonian
wells (b) Includes 2,462 and 3,953 MMcfe of Utica sales volume for
the three months ended March 31, 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 $45.3 million and
$33.3 million for general leasing activity during the three months
ended March 31, 2017 and 2016, respectively. The three months ended
March 31, 2017 also includes $669.5 million of cash capital
expenditures and $15.4 million of non-cash capital expenditures for
acquisitions.
EQT GATHERING RESULTS OF
OPERATIONS Three Months Ended
March 31, 2017 2016
FINANCIAL DATA (Thousands, other than per day amounts) Firm
reservation fee revenues $ 94,271 $ 82,007 Volumetric based fee
revenues: Usage fees under firm contracts (a) 4,821 10,452 Usage
fees under interruptible contracts 3,237 5,550 Total
volumetric based fee revenues 8,058 16,002 Total
operating revenues 102,329 98,009 Operating
expenses: Operating and maintenance 10,455 8,945 Selling, general
and administrative 9,425 9,197 Depreciation and amortization
8,860 7,263 Total operating expenses 28,740
25,405 Operating income $ 73,589 $ 72,604
OPERATIONAL DATA Gathered volumes (BBtu per day): Firm
capacity reservation 1,728 1,424 Volumetric based services (b)
224 473 Total gathered volumes 1,952 1,897
Capital expenditures $ 48,838 $ 73,087 (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 March 31, 2017
2016 FINANCIAL DATA (Thousands, other than per day
amounts) Firm reservation fee revenues $ 92,274 $ 70,109 Volumetric
based fee revenues: Usage fees under firm contracts (a) 2,857
13,429 Usage fees under interruptible contracts 5,966
4,239 Total volumetric based fee revenues 8,823
17,668 Total operating revenues 101,097 87,777
Operating expenses: Operating and maintenance 9,831 8,191 Selling,
general and administrative 8,055 8,326 Depreciation and
amortization 11,687 6,744 Total operating expenses
29,573 23,261 Operating income $ 71,524 $
64,516
OPERATIONAL DATA Transmission pipeline
throughput (BBtu per day): Firm capacity reservation 2,119 1,622
Volumetric based services (b) 31 487 Total
transmission pipeline throughput 2,150 2,109 Average
contracted firm transmission reservationcommitments (BBtu per day)
3,743 3,005 Capital expenditures $ 21,389 $ 60,071 (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/20170427005249/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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