EQT Corporation (NYSE: EQT) today announced third quarter 2017
results.
Highlights:
- Production sales volume was 5% higher
than third quarter 2016
- Average realized price was 26% higher
than third quarter 2016
- Received FERC Certificate for Mountain
Valley Pipeline
Financial Results Three Months Ended
September 30, ($ millions, except EPS)
2017
2016 Difference Net Income/(Loss) Attributable
to EQT $ 23.3 $ (8.0 ) $ 31.3 Adjusted Net Income/(Loss)
Attributable to EQT (a non-GAAP measure) $ 20.8 $ (47.9 ) $ 68.7
Diluted Earnings Per Share (EPS) $ 0.13 $ (0.05 ) $ 0.18 Adjusted
Earnings Per Diluted Share (EPS) (a non-GAAP measure) $ 0.12 $
(0.28 ) $ 0.40 Net Cash Provided by Operating Activities $ 402.4 $
274.3 $ 128.1 Adjusted Operating Cash Flow Attributable to EQT(a
non-GAAP measure) $ 205.9 $ 166.5 $ 39.4
Earnings and cash flow were higher primarily as a result of
increases in commodity prices and sales volume. Net income and
adjusted net income attributable to EQT for the three months ended
September 30, 2017, were favorably impacted by a decrease in the
estimated effective annual income tax rate and discrete items
together totaling $29.7 million that resulted in an income tax
benefit for the quarter.
The Non-GAAP Disclosures section of this news release provides
reconciliations of non-GAAP financial measures to the most
comparable GAAP financial measure, as well as important disclosures
regarding certain projected non-GAAP financial measures.
RESULTS BY
BUSINESS
EQT PRODUCTION Financial Results Three
Months Ended September 30, ($ millions,
except average realized price)
2017 2016
Difference Sales volume (Bcfe) 205.1 196.1 9.0
Operating income / (loss) $ 12.1 $ (15.5 ) $ 27.6 Adjusted
operating income / (loss) (a non-GAAP measure) (9.7 ) (82.1 ) 72.4
Operating revenue $ 597.7 $ 508.1 $ 89.6 Adjusted operating
revenue (a non-GAAP measure) 566.8 430.7 136.1 Average
realized price ($/Mcfe) $ 2.76 $ 2.20 $ 0.56 Pipeline and
net marketing services $ 9.1 $ 10.8 $ (1.7 ) Operating
expenses $ 585.6 $ 523.6 $ 62.0
The increase in operating income in the quarter was primarily
due to a higher average realized price and increased sales volumes
of produced natural gas and NGLs, partly offset by increased
operating expenses and lower gains on derivatives not designated as
hedges.
The increase in the average realized price for the quarter was
primarily due to an improvement in the average natural gas
differential of $0.36 per Mcf, higher liquids prices, and an
increase in the average NYMEX natural gas price net of cash settled
derivatives.
Operating expenses for the quarter were $62.0 million higher
than the same period last year. Transmission expense increased
$38.3 million, gathering expense increased $13.7 million,
processing expense increased $10.8 million, and depreciation,
depletion and amortization expense (DD&A) increased $3.3
million, consistent with increased activity and access to premium
markets. Selling, general and administrative expense (SG&A) was
$4.5 million lower due to a decrease in a legal reserve.
The Company drilled (spud) 35 gross wells in the third quarter
2017, including 29 Marcellus wells, with an average expected
length-of-pay of 7,500 feet; and 6 Upper Devonian wells, with an
average expected length-of-pay of 7,000 feet. The Company
turned-in-line 49 wells during the third quarter 2017, including 32
Marcellus wells, and 16 Upper Devonian wells.
EQT GATHERING
Financial Results Three Months Ended September
30, ($ millions)
2017 2016
Difference Operating income $ 85.8 $ 72.5 $ 13.3
Operating revenue $ 116.5 $ 99.1 $ 17.4 Firm reservation fee
revenues $ 104.8 $ 83.6 $ 21.2 Operating expenses $ 30.7 $
26.6 $ 4.1
EQT Gathering revenues increased primarily driven by production
development in the Marcellus Shale. Firm reservation fee revenues
increased primarily as a result of third parties and affiliates
contracting for additional firm gathering capacity.
Operating expenses increased primarily as a result of higher
depreciation and amortization expense of $2.3 million, due to
additional assets placed in-service including those associated with
the Range Resources Header Pipeline project and a Northern West
Virginia Marcellus gathering system expansion project, and higher
personnel costs.
EQT TRANSMISSION
Financial Results Three Months Ended September
30, ($ millions)
2017 2016
Difference Operating income $ 59.7 $ 53.7 $ 6.0
Operating revenue $ 90.7 $ 77.6 $ 13.1 Firm reservation fee
revenues $ 84.4 $ 59.6 $ 24.8 Operating expenses $ 31.0 $
23.9 $ 7.1
EQT Transmission revenues increased primarily driven by
production development in the Marcellus Shale. Firm reservation fee
revenues increased primarily due to affiliates contracting for firm
capacity on the Ohio Valley Connector (OVC).
Operating expenses were $7.1 million higher than last year
driven primarily by increased depreciation and amortization expense
of $5.3 million and higher operating and maintenance expense of
$1.9 million resulting from the OVC project placed in-service in
the fourth quarter of 2016.
OTHER BUSINESS
Acquisition of Rice Energy Update
On June 19, 2017, EQT announced that it entered into a
definitive agreement to acquire Rice Energy Inc. (Rice). Completion
of the transaction is subject to the approval of both EQT and Rice
shareholders, as well as certain other customary closing
conditions. The special meetings of EQT and Rice shareholders are
scheduled to be held for these purposes on November 9, 2017.
Notes Issuance
On October 4, 2017, the Company completed the public offering of
Senior Notes and Floating Rate Notes totaling $3.0 billion. The
Company expects to use the net proceeds from the sale of the notes
to fund a portion of the cash consideration for the Rice
acquisition, to pay expenses related to the Rice acquisition and
related transactions, to redeem or repay certain Company
indebtedness due in 2018 and for other general corporate
purposes.
Mountain Valley Pipeline
On October 13, 2017, the Federal Energy Regulatory Commission
issued the Certificate of Public Convenience and Necessity for the
Mountain Valley Pipeline (MVP) project. The Certificate follows
more than three years of project planning, development, and review.
Mountain Valley Pipeline, LLC (MVP JV) expects to receive the
remaining permits and approvals in the fourth quarter this year,
with construction to commence soon after. 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 October 24, 2017, EQM announced a cash distribution to its
unitholders of $0.98 per unit for the third quarter. EQGP also
announced a cash distribution to its unitholders of $0.228 per unit
for the third quarter 2017.
The third 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 third quarter 2017, EQT’s results reflected earnings of
$82.1 million, or $0.47 per diluted share, attributable to the
publicly held partnership interests in EQGP and EQM.
Three Months Ended (thousands)
September
30, 2017 EQM net income $ 142,938 Less: General Partner
interest (including incentive distribution rights) 40,130
Limited Partner interest in net income $ 102,808
EQM LP units Publicly owned (73.4%) $ 75,463 EQGP
owned (26.6%) 27,345 Limited Partner interest in net
income $ 102,808
EQGP net income EQM LP unit
ownership $ 27,345 EQM GP unit ownership (including incentive
distribution rights) 40,130 EQGP incremental expenses (531 )
Limited Partner interest in net income $ 66,944
EQGP units Publicly owned LP (9.9%) $ 6,654 EQT owned LP
(90.1%) 60,290 Limited Partner interest in net income
$ 66,944
Noncontrolling interest in EQT
earnings EQM publicly-owned LP units $ 75,463 EQGP
publicly-owned LP units 6,654 Net income attributable
to noncontrolling interest $ 82,117
Hedging
As of October 24, 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) 120 189 19 Average Price per Mcf (NYMEX) $ 3.35 $ 3.18 $ 3.12
Collars Total Volume (Bcf) 6 18 − Average Floor Price per
Mcf (NYMEX) $ 3.06 $ 3.16 $ − Average Cap Price per Mcf (NYMEX) $
3.93 $ 3.63 $ −
(a)October through December 31
- The Company also sold calendar year
2017 and 2018 calls/swaptions for approximately 8 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 1 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 Nine Months Ended
September 30, September 30, (thousands)
2017
2016 2017 2016 Operating income
(loss): EQT Production $ 12,082 $ (15,465 ) $ 322,277 $ (468,678 )
EQT Gathering 85,817 72,495 242,716 218,274 EQT Transmission 59,689
53,715 188,995 174,085 Unallocated expense (19,894 )
(2,288 ) (35,856 ) (12,515 ) Operating income (loss)
$ 137,694 $ 108,457 $ 718,132 $ (88,834 )
Unallocated expenses consist primarily of compensation and
administrative expenses, including Rice Energy acquisition-related
costs.
Marcellus Horizontal Well Status (cumulative since
inception)
As of As of As of
As of As of 9/30/17 6/30/17
3/31/17** 12/31/16* 9/30/16* Wells drilled
(spud) 1,288 1,259 1,216 1,046 949 Wells online 1,060 1,028 1,013
875 816 Wells complete, not online 21 15 20 21 32 Wells drilled,
uncompleted 207 216 183 150 101
*Includes wells acquired in 2016**Includes wells acquired in Q1
2017
NON-GAAP DISCLOSURES
Adjusted Net Income (Loss) Attributable to EQT and Adjusted
Earnings per Diluted Share (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 (loss) attributable to EQT and adjusted EPS should not be
considered as alternatives to net income (loss) attributable to EQT
or earnings per diluted share (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 September 30, 2017.
Three Months Ended September 30, (thousands,
except per share information)
2017 2016
Net income (loss) attributable to EQT, as reported $ 23,340 $
(8,016 ) Add back / (deduct): Rice Energy acquisition costs 17,593
− Gain on derivatives not designated as hedges (35,625 ) (93,356 )
Net cash settlements received on derivatives not designated as
hedges 13,321 27,287 Premiums received (paid) for derivatives that
settled during the period 537 (558 ) Tax impact of non-GAAP items*
1,678 26,784 Adjusted net income (loss)
attributable to EQT** $ 20,844 $ (47,859 ) Diluted weighted
average common shares outstanding 173,675 172,867 Diluted EPS, as
adjusted $ 0.12 $ (0.28 ) * A tax rate of 40.2% was applied
to the items under the caption “Add back (deduct)” for the three
month periods ended September 30, 2017 and 2016. 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. ** Adjusted net income attributable to EQT
includes favorable items impacting income tax expense for the three
months ended September 30, 2017, of $29.7 million. This includes
the favorable impact of the decrease in the estimated effective
annual tax rate from 23.0% at June 30, 2017, to 19.5% at September
30, 2017, on pre-tax income attributable to the six months ended
June 30, 2017, and $12.4 million of discrete benefit recorded in
the three months ended September 30, 2017, related to refined
estimates on the 2016 income tax return.
Operating Cash Flow and Adjusted Operating Cash Flow
Attributable to EQT
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 September 30, 2017.
Three Months Ended Nine Months Ended
September 30, September 30, (thousands)
2017
2016 2017 2016 Net cash provided
by operating activities $ 402,378 $ 274,295 $ 1,211,372 $ 767,699
Add back / (deduct) Changes in other assets and liabilities
(80,627 ) (11,310 ) (106,257 ) 29,508
Operating cash flow (a non-GAAP measure) $ 321,751 $ 262,985 $
1,105,115 $ 797,207 (Deduct) / add back: EQT Midstream Partners
adjusted EBITDA(1) (170,498 ) (136,036 ) (504,400 ) (415,743 ) Cash
distribution payable to EQT(2) 54,655 39,553
150,781 107,632 Adjusted
operating cash flow attributable to EQT $ 205,908 $ 166,502
$ 751,496 $ 489,096 (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 nine months ended September 30, 2017 and
2016, represents the distribution payable from EQGP to EQT related
to the respective period.
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
Financial Information by Business Segment footnote to be included
in EQT’s report on Form 10-Q for the quarter ended September 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. EQT 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
Operating Revenue
Three Months EndedSeptember
30,
Nine Months EndedSeptember
30,
$ in thousands (unless noted)
2017 2016
2017 2016 EQT Production total operating
revenues, as reported on segment page $ 597,718 $ 508,092 $
2,057,481 $ 1,068,752 (Deduct) / add back: (Gain) loss on
derivatives not designated as hedges (35,625 ) (93,356 ) (222,693 )
32,342 Net cash settlements received (paid) on derivatives not
designated as hedges 13,321 27,287 (6,837 ) 222,516 Premiums
received (paid) for derivatives that settled during the period 537
(558 ) 1,595 (1,574 ) Pipeline and net marketing services
(9,140 ) (10,797 ) (31,656 ) (28,196 ) EQT
Production adjusted operating revenue, a non-GAAP measure $ 566,811
$ 430,668 $ 1,797,890 $ 1,293,840 Total sales volumes (MMcfe)
205,067 196,085 593,081 560,568 Average realized price
($/Mcfe) $ 2.76 $ 2.20 $ 3.03 $ 2.31
EQT Production Adjusted Operating (Loss) Income
The table below reconciles EQT Production adjusted operating
(loss) income, 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 (loss) income 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 (loss) income should not be
considered as an alternative to EQT Corporation operating income
(loss) presented in accordance with GAAP. EQT Production adjusted
operating (loss) income as presented excludes the revenue impact of
changes in the fair value of derivative instruments prior to
settlement. Management utilizes EQT Production adjusted operating
(loss) income 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 (loss) income as presented provides useful
information for investors for evaluating period-over-period
earnings.
Three Months Ended Nine Months Ended
September 30, September 30, (thousands)
2017
2016 2017 2016 EQT Production
operating income (loss), as reported on segment page $ 12,082 $
(15,465 ) $ 322,277 $ (468,678 ) (Deduct) / add back: (Gain) loss
on derivatives not designated as hedges (35,625 ) (93,356 )
(222,693 ) 32,342 Net cash settlements received (paid) on
derivatives not designated as hedges 13,321 27,287 (6,837 ) 222,516
Premiums received (paid) for derivatives that settled during the
period 537 (558 ) 1,595 (1,574 ) Pension settlement charges − − −
9,403 Restructuring charges − −
− 4,360 EQT Production adjusted operating
(loss) income $ (9,685 ) $ (82,092 ) $ 94,342 $ (201,631 )
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
September 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 Nine Months Ended
September 30, September 30, (thousands, unless noted)
2017 2016 2017 2016 Net
income $ 142,938 $ 133,660 $ 425,273 $ 402,254 Add back: Net
interest expense 9,426 2,802 26,014 11,448 Depreciation and
amortization expense 22,244 14,639 64,191 43,177 Income tax expense
− 3,227 − 10,147 Preferred interest payments received post
conversion 2,746 − 8,238 − Non-cash long-term compensation expense
− − 225 195 Less: Equity income (6,025 ) (2,700 ) (15,413 ) (6,139
) AFUDC - equity (831 ) (8,003 ) (4,128 ) (16,733 ) Pre-acquisition
capital lease payments for AVC − (3,786 ) − (17,186 ) Adjusted
EBITDA attributable to the assets prior to acquisition −
(3,803 ) − (11,420 ) EQT
Midstream Partners Adjusted EBITDA
$ 170,498 $ 136,036 $ 504,400 $ 415,743
Third 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 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 the general
partner interest and 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 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, and the timing of,
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 has filed with
the SEC a registration statement on Form S-4 that contains a
joint proxy statement of EQT and Rice Energy Inc. (Rice) and also
constitutes a prospectus of EQT. The registration statement was
declared effective by the SEC on October 12, 2017 and EQT and
Rice commenced mailing the definitive joint proxy
statement/prospectus to their respective shareholders on or about
October 12, 2017. 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 DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS REGARDING THE TRANSACTION AND ANY OTHER
RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC, AS
WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE
THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION. Investors may
obtain a free copy of the registration statement and the 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 documents filed with
the SEC by EQT can 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. Copies of the documents filed with the SEC
by Rice can be obtained, without charge, by directing a request 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, is contained in the definitive joint proxy
statement/prospectus of EQT and Rice and other relevant materials
filed with the SEC. Free copies of this document may be obtained as
described in the preceding paragraph.
EQT CORPORATION AND SUBSIDIARIES Statements of
Consolidated Operations Three
Months Ended Nine Months Ended September 30,
September 30, 2017 2016 2017
2016 (Thousands except per share amounts) Revenues: Sales of
natural gas, oil and NGLs $ 552,953 $ 403,939 $ 1,803,132 $
1,072,898 Pipeline and net marketing services 71,735 59,431 222,904
188,770 Gain (loss) on derivatives not designated as hedges
35,625 93,356 222,693 (32,342 )
Total operating revenues 660,313 556,726 2,248,729 1,229,326
Operating expenses: Transportation and processing 136,219 89,883
404,743 251,283 Operation and maintenance 20,604 18,198 61,471
51,687 Production 39,630 38,999 129,812 126,092 Exploration 2,436
2,671 9,039 9,385 Selling, general and administrative 77,170 61,430
206,237 196,765 Depreciation, depletion and amortization
246,560 237,088 719,295 682,948
Total operating expenses 522,619 448,269 1,530,597 1,318,160
Operating income (loss) 137,694 108,457 718,132 (88,834 )
Other income 6,859 10,715 16,878 23,199 Interest expense
50,377 35,984 137,110
108,469 Income (loss) before income taxes 94,176 83,188
597,900 (174,104 ) Income tax (benefit) expense (11,281 )
13,084 119,093 (151,826 ) Net income
(loss) 105,457 70,104 478,807 (22,278 ) Less: Net income
attributable to noncontrolling interests 82,117
78,120 250,349 238,747 Net
income (loss) attributable to EQT Corporation $ 23,340 $
(8,016 ) $ 228,458 $ (261,025 ) Earnings per share of common
stock attributable to EQT Corporation: Basic: Weighted average
common stock outstanding 173,476 172,867
173,368 165,197 Net income
(loss) $ 0.13 $ (0.05 ) $ 1.32 $ (1.58 )
Diluted: Weighted average common stock outstanding 173,675
172,867 173,572 165,197
Net income (loss) $ 0.13 $ (0.05 ) $ 1.32 $ (1.58 )
Dividends declared per common share $ 0.03 $ 0.03 $
0.09 $ 0.09
EQT CORPORATION AND
SUBSIDIARIES PRICE RECONCILIATION
Three Months Ended Nine Months Ended
September 30, September 30, in thousands (unless
noted)
2017 2016 2017 2016 NATURAL
GAS Sales volume (MMcf) 176,311 175,191 508,457 508,206 NYMEX
price ($/MMBtu) (a) $ 3.00 $ 2.81 $ 3.16 $ 2.29 Btu uplift
0.30 0.27 0.28 0.21
Natural gas price ($/Mcf) $ 3.30 $ 3.08 $ 3.44 $ 2.50
Basis ($/Mcf) (b) (0.81 ) (1.21 ) (0.53 ) (0.80 ) Cash settled
basis swaps (not designated as hedges) ($/Mcf) (0.04 )
– (0.02 ) 0.05 Average
differential, including cash settled basis swaps ($/Mcf) $ (0.85 )
$ (1.21 ) $ (0.55 ) $ (0.75 ) Average adjusted price ($/Mcf)
$ 2.45 $ 1.87 $ 2.89 $ 1.75 Cash settled derivatives (cash flow
hedges) ($/Mcf) 0.01 0.14 0.01 0.14 Cash settled derivatives (not
designated as hedges) ($/Mcf) 0.13 0.15
0.01 0.38 Average natural gas price,
including cash settled derivatives ($/Mcf) $ 2.59 $ 2.16 $ 2.91 $
2.27 Natural gas sales, including cash settled derivatives $
456,347 $ 378,484 $ 1,484,711 $ 1,155,898
LIQUIDS
NGLs (excluding ethane): Sales volume (MMcfe) (c) 19,054
16,803 55,089 44,897 Sales volume (Mbbls) 3,176 2,799 9,182 7,482
Price ($/Bbl) $ 29.81 $ 14.82 $ 28.33 $ 15.26 Cash settled
derivatives (not designated as hedges) ($/Bbl) (0.44 )
– (0.43 ) – Average NGL price,
including cash settled derivatives ($/Bbl) $ 29.37 $ 14.82 $ 27.90
$ 15.26 NGL sales $ 93,273 $ 41,508 $ 256,123 $ 114,188
Ethane: Sales volume (MMcfe) (c) 8,226 2,967 24,970 4,144
Sales volume (Mbbls) 1,371 495 4,162 691 Price ($/Bbl) $ 5.92
$ 8.02 $ 6.45 $ 8.09 Ethane sales $
8,119 $ 3,966 $ 26,858 $ 5,590
Oil: Sales volume (MMcfe) (c)
1,476 1,124 4,565 3,321 Sales volume (Mbbls) 246 188 761 554 Price
($/Bbl) $ 36.86 $ 35.81 $ 39.69 $ 32.81
Oil sales $ 9,072 $ 6,710 $ 30,198 $ 18,164 Total liquids
sales volume (MMcfe) (c ) 28,756 20,894 84,624 52,362 Total liquids
sales volume (Mbbls) 4,793 3,482 14,105 8,727 Liquids sales
$ 110,464 $ 52,184 $ 313,179 $ 137,942
TOTAL
PRODUCTION Total natural gas & liquids sales, including
cash settled derivatives (d) $ 566,811 $ 430,668 $ 1,797,890 $
1,293,840 Total sales volume (MMcfe) 205,067 196,085 593,081
560,568 Average realized price ($/Mcfe) $ 2.76 $ 2.20 $ 3.03
$ 2.31 (a) The Company’s volume weighted NYMEX natural gas
price (actual average NYMEX natural gas price ($/MMBtu) was $3.00
and $2.81 for the three months ended September 30, 2017 and 2016,
respectively, and $3.17 and $2.29 for the nine months ended
September 30, 2017 and 2016, respectively). (b) Basis represents
the difference between the ultimate sales price for natural gas and
the NYMEX natural gas price. (c) NGLs, ethane and crude oil were
converted to Mcfe at the rate of six Mcfe per barrel for all
periods. (d) Also referred to in this report as EQT Production
adjusted operating revenues, a non-GAAP supplemental financial
measure.
EQT PRODUCTION RESULTS OF
OPERATIONS Three Months
Ended Nine Months Ended September 30,
September 30, 2017 2016 2017
2016 OPERATIONAL DATA Sales volume detail
(MMcfe): Marcellus (a) 181,650 171,468 523,122 486,439 Other (b)
23,417 24,617 69,959 74,129
Total production sales volumes (c) 205,067 196,085 593,081
560,568 Average daily sales volumes (MMcfe/d) 2,229 2,131
2,172 2,046 Average realized price ($/Mcfe) $ 2.76 $ 2.20 $
3.03 $ 2.31 Gathering to EQT Gathering ($/Mcfe) $ 0.47 $
0.46 $ 0.48 $ 0.49 Transmission to EQT Transmission ($/Mcfe) $ 0.23
$ 0.19 $ 0.23 $ 0.19 Third party gathering and transmission
($/Mcfe) $ 0.45 $ 0.29 $ 0.46 $ 0.29 Processing ($/Mcfe) $ 0.22 $
0.17 $ 0.23 $ 0.16 Lease operating expenses (LOE), excluding
production taxes ($/Mcfe) $ 0.13 $ 0.14 $ 0.13 $ 0.15 Production
taxes ($/Mcfe) $ 0.07 $ 0.05 $ 0.09 $ 0.07 Production depletion
($/Mcfe) $ 1.03 $ 1.06 $ 1.03 $ 1.06 Depreciation, depletion
and amortization (DD&A) (thousands): Production depletion $
210,393 $ 207,120 $ 613,379 $ 594,408 Other DD&A 13,710
13,648 41,032 40,845 Total
DD&A $ 224,103 $ 220,768 $ 654,411 $ 635,253 Capital
expenditures (thousands) (d) 449,303 622,856 1,850,482 1,094,747
FINANCIAL DATA (thousands) Revenues: Sales of
natural gas, oil and NGLs $ 552,953 $ 403,939 $ 1,803,132 $
1,072,898 Pipeline and net marketing services 9,140 10,797 31,656
28,196 Gain (loss) on derivatives not designated as hedges
35,625 93,356 222,693 (32,342 ) Total
operating revenues 597,718 508,092 2,057,481 1,068,752
Operating expenses: Gathering 116,921 103,231 334,801 307,682
Transmission 119,729 81,456 354,534 235,196 Processing 44,166
33,332 133,745 88,429 LOE, excluding production taxes 26,177 28,303
77,522 84,510 Production taxes 13,453 10,696 52,290 41,582
Exploration 2,437 2,670 9,040 9,384 Selling, general and
administrative (SG&A) 38,650 43,101 118,861 135,394 DD&A
224,103 220,768 654,411 635,253
Total operating expenses 585,636 523,557
1,735,204 1,537,430 Operating income
(loss) $ 12,082 $ (15,465 ) $ 322,277 $ (468,678 ) (a)
Includes Upper Devonian wells. (b) Includes 2,267 and 3,847 MMcfe
of Utica sales volume for the three months ended September 30, 2017
and 2016, respectively, and 7,239 and 11,641 MMcfe of Utica sales
volume for the nine months ended September 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 $52.1 million and $30.1 million for general leasing
activity during the three months ended September 30, 2017 and 2016,
respectively, and $147.0 million and $98.2 million for general
leasing activity during the nine months ended September 30, 2017
and 2016, respectively. The three and nine months ended September
30, 2017 includes $7.8 million and $819.0 million of cash capital
expenditures, respectively for acquisitions. The three and nine
months ended September 30, 2016 includes $412.3 million of cash
capital expenditures for acquisitions. During the nine months ended
September 30, 2017 and 2016, the Company also incurred $7.5 million
and $6.2 million of non-cash capital expenditures for acquisitions.
EQT GATHERING RESULTS OF OPERATIONS
Three Months Ended Nine
Months Ended September 30, September 30,
2017 2016 2017 2016 FINANCIAL
DATA (Thousands, other than per day amounts) Firm reservation
fee revenues $ 104,772 $ 83,560 $ 300,901 $ 249,127 Volumetric
based fee revenues: Usage fees under firm contracts (a) 7,873
10,024 19,173 31,515 Usage fees under interruptible contracts 3,877
5,557 10,922 16,663 Total volumetric based fee revenues 11,750
15,581 30,095 48,178 Total operating revenues 116,522 99,141
330,996 297,305 Operating expenses: Operating and
maintenance 10,219 9,672 31,082 27,740 SG&A 10,503 9,311 28,800
28,771 Depreciation and amortization 9,983 7,663 28,398 22,520
Total operating expenses 30,705 26,646 88,280 79,031
Operating income $ 85,817 $ 72,495 $ 242,716 $ 218,274
OPERATIONAL DATA Gathered volumes (BBtu per day) Firm
capacity reservation 1,838 1,563 1,783 1,506 Volumetric based
services (b) 370 451 292 463 Total gathered volumes 2,208 2,014
2,075 1,969 Capital expenditures $ 48,182 $ 88,390 $ 150,728
$ 247,755 (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 Nine Months Ended September 30,
September 30, 2017 2016 2017
2016 FINANCIAL DATA (Thousands, other than per day
amounts) Firm reservation fee revenues $ 84,438 $ 59,610 $ 256,224
$ 190,003 Volumetric based fee revenues: Usage fees under firm
contracts (a) 3,427 14,600 9,787 42,274 Usage fees under
interruptible contracts 2,806 3,421 12,578 11,018 Total volumetric
based fee revenues 6,233 18,021 22,365 53,292 Total operating
revenues 90,671 77,631 278,589 243,295 Operating expenses:
Operating and maintenance 10,385 8,526 30,389 23,947 SG&A 8,336
8,414 23,412 24,606 Depreciation and amortization 12,261 6,976
35,793 20,657 Total operating expenses 30,982 23,916 89,594 69,210
Operating income $ 59,689 $ 53,715 $ 188,995 $ 174,085
OPERATIONAL DATA Transmission pipeline throughput
(BBtu per day) 2,517 1,440 2,288 1,515 Firm capacity reservation 21
610 22 556 Volumetric based services (b) 2,538 2,050 2,310 2,071
Total transmission pipeline throughput Average contracted
firm transmission reservation commitments (BBtu per day) 3,474
2,365 3,519 2,591 Capital expenditures $ 22,312 $ 77,940 $
73,679 $ 253,957 (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/20171026005130/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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