EQGP Eqgp Holdings, Lp

EQT Corporation (NYSE: EQT) today announced fourth quarter and full-year 2017 results.

2017 Highlights:

• Completed acquisition of Rice Energy
• Announced 59% increase in proved reserves
• Received FERC Certificate for Mountain Valley Pipeline
• Production sales volume was 17% higher than 2016
• Average realized price was 23% higher than 2016

Financial Results   Year Ended   December 31, ($ millions, except EPS) 2017   2016 Difference Net Income/(Loss) Attributable to EQT $ 1,508.5 $ (453.0 ) $ 1,961.5 Adjusted Net Income/(Loss) Attributable to EQT (a non-GAAP measure) $ 276.3 $ (54.3 ) $ 330.6 Diluted Earnings Per Share (EPS) $ 8.04 $ (2.71 ) $ 10.75 Adjusted Earnings (Loss) Per Diluted Share (EPS) (a non-GAAP measure) $ 1.47 $ (0.33 ) $ 1.80 Net Cash Provided by Operating Activities $ 1,637.7 $ 1,064.3 $ 573.4

Adjusted Operating Cash Flow Attributable to EQT (a non-GAAP measure)

$ 1,193.1 $ 832.8 $ 360.3     Three Months Ended December 31, ($ millions, except EPS) 2017   2016 Difference Net Income/(Loss) Attributable to EQT $ 1,280.1 $ (192.0 ) $ 1,472.1 Adjusted Net Income Attributable to EQT (a non-GAAP measure) $ 167.5 $ 43.8 $ 123.7 Diluted Earnings Per Share (EPS) $ 5.83 $ (1.11 ) $ 6.94 Adjusted Earnings Per Share (EPS) (a non-GAAP measure) $ 0.76 $ 0.25 $ 0.51 Net Cash Provided by Operating Activities $ 426.3 $ 296.6 $ 129.7 Adjusted Operating Cash Flow Attributable to EQT (a non-GAAP measure) $ 415.6 $ 332.3 $ 83.3  

As a result of the federal tax reform legislation, net income for the three months and year-ended December 31, 2017, includes a tax benefit of approximately $1.2 billion for the revaluation of existing net deferred tax liabilities to the lower corporate tax rate. Adjusted earnings for the year-ended December 31, 2017, were higher primarily due to increased commodity prices and sales volume, partly offset by higher operating expenses. Adjusted cash flow for year-ended December 31, 2017, includes $183 million of transaction-related expenses.

Fourth quarter adjusted earnings were higher primarily due to higher sales volume, partially offset by higher operating expenses.

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   Year Ended   December 31, ($ millions, except average realized price) 2017   2016 Difference Sales volume (Bcfe) 887.5 759.0 128.5 Pipeline and net marketing services $ 65.0 $ 41.0 $ 24.0 Operating revenue $ 3,106.3 $ 1,387.1 $ 1,719.2 Adjusted operating revenue (a non-GAAP measure) $ 2,694.2 $ 1,872.3 $ 821.9 Operating expenses $ 2,516.6 $ 2,114.8 $ 401.8 Operating income / (loss) $ 589.7 $ (719.7 ) $ 1,309.4 Adjusted operating income / (loss) (a non-GAAP measure) $ 262.9 $ (164.0 ) $ 426.9 Average realized price ($/Mcfe) $ 3.04 $ 2.47 $ 0.57  

The increase in operating income for 2017 was primarily due to a gain on derivatives not designated as hedges, a higher average realized price, and increased sales volumes for produced natural gas and natural gas liquids (NGLs), as a result of recent acquisitions and drilling activity, partly offset by increased operating expenses.

The increase in the average realized price for the year was primarily due to an increase in the average NYMEX natural gas price, including cash settled derivatives, of $0.29 per Mcf; an increase in the average natural gas differential of $0.19 per Mcf; and an increase in NGLs pricing.

Operating expenses for 2017 were $401.8 million higher than last year. Transmission expense increased $154.1 million, gathering expense increased $66.4 million, and processing expense increased $54.7 million, all consistent with higher volumes and improved access to premium markets. Depreciation, depletion and amortization expense (DD&A) increased $123.1 million as a result of higher sales volumes, partly offset by a lower depletion rate year-over-year. Selling, general and administrative expense (SG&A) was $14.6 million lower due to the absence of one-time items from the prior year, including a charge for pension settlement and legal reserves in 2016, partially offset by higher SG&A associated with the Rice acquisition.

    Three Months Ended December 31, ($ millions, except average realized price) 2017

 

2016

Difference Sales volume (Bcfe) 294.4 198.4 96.0 Pipeline and net marketing services $ 33.3 $ 12.9 $ 20.4 Operating revenue $ 1,048.9 $ 318.3 $ 730.6 Adjusted operating revenue (a non-GAAP measure) $ 896.3 $ 578.5 $ 317.8 Operating expenses $ 781.4 $ 577.4 $ 204.0 Operating income / (loss) $ 267.4 $ (251.1 ) $ 518.5 Adjusted operating income (a non-GAAP measure) $ 163.5 $ 32.1 $ 131.4 Average realized price ($/Mcfe) $ 3.04 $ 2.92 $ 0.12  

The increase in operating income for the quarter was primarily due to a sales volume increase for both produced natural gas and NGLs related to recent acquisitions, including Rice, and drilling activity and a gain on derivatives not designated as hedges, partly offset by increased operating expenses.

The increase in the average realized price for the quarter was primarily due to an improvement in NGLs pricing.

Operating expenses for the quarter were $204.0 million higher than the same period last year. DD&A increased $103.9 million, gathering expense increased $39.2 million, transmission expense increased $34.7 million, and processing expense increased $9.4 million, consistent with increased volumes and improved access to premium markets.

EQT MIDSTREAM PARTNERS (EQM) GATHERING

Financial Results     Year Ended   December 31, ($ millions) 2017   2016 Difference Operating revenue $ 454.5 $ 397.5 $ 57.0 Operating expenses $ 121.0 $ 108.5 $ 12.5 Operating income $ 333.6 $ 289.0 $ 44.6   Three Months Ended December 31, ($ millions) 2017 2016 Difference Operating revenue $ 123.5 $ 100.2 $ 23.3 Operating expenses $ 32.7 $ 29.4 $ 3.3 Operating income $ 90.8 $ 70.8 $ 20.0  

Operating income increased 15% in 2017, and 28% in the fourth quarter, primarily due to higher revenues driven by production development in the Marcellus Shale. Revenue from firm reservation fees represented 90% of total revenue during 2017 and 86% for the fourth quarter.

Operating expenses increased primarily as a result of higher depreciation and amortization expense due to additional assets placed in-service, including those associated with the Range Resources header pipeline project and various affiliate wellhead gathering expansion projects. Operating and maintenance expenses increased primarily as a result of higher personnel costs and increased property taxes, consistent with the Company’s growth.

EQM TRANSMISSION

Financial Results   Year Ended   December 31, ($ millions) 2017   2016 Difference Operating revenue $ 379.6 $ 338.1 $ 41.5 Operating expenses $ 132.4 $ 100.2 $ 32.2 Operating income $ 247.1 $ 237.9 $ 9.2   Three Months Ended December 31, ($ millions) 2017 2016 Difference Operating revenue $ 101.0 $ 94.8 $ 6.2 Operating expenses $ 42.8 $ 31.0 $ 11.8 Operating income $ 58.2 $ 63.8 $ (5.6 )  

The increase in operating income was primarily due to higher firm reservation fee revenue on the Ohio Valley Connector (OVC). Revenue from firm reservation fees represented 92% of total revenues during 2017.

Operating expenses were $1.3 million higher than last year, excluding a $10.5 million non-cash charge to depreciation and amortization expense in the fourth quarter of 2017. The non-cash charge related to a revaluation of differences between regulatory and tax bases in property, plant, and equipment.

OTHER BUSINESSAcquisition of Rice EnergyOn November 13, 2017, EQT completed the acquisition (Rice Merger) of Rice Energy Inc. (Rice). EQT acquired all of the outstanding shares of Rice common stock in exchange for 0.37 shares of EQT stock and $5.30 in cash per share of Rice stock.

The foundation of the transaction with Rice was the ability to realize significant synergies on SG&A expenses, as well as capture improved capital returns resulting from the ability to drill longer laterals on its much larger contiguous acreage position.

In 2018, SG&A savings from the acquisition are approximately $110 million and capital efficiency savings are approximately $210 million. The forecasted average lateral length in southwestern Pennsylvania is projected to be 13,600 feet.

As a result of replacing $1.3 billion of Rice senior notes with lower coupon investment grade debt, EQT expects to realize $45 million in annual interest savings.

Through the Rice Merger, EQT also acquired a controlling interest in Rice Midstream Partners LP (RMP), for which EQT will now report additional segments for RMP Gathering and RMP Water. A discussion of the results of those segments has been omitted from this release as EQT only reports the results of RMP from the acquisition date of November 13, 2017 and there is no comparable period.

2017 Reserves ReportIn a separate news release issued today, EQT reported total proved reserves at December 31, 2017, of 21.4 Tcfe, a 59% increase over 2016. Proved developed reserves increased 65% over 2016 to 11.3 Tcfe.

Mountain Valley PipelineThe Federal Energy Regulatory Commission (FERC) issued a Certificate of Public Convenience and Necessity for the Mountain Valley Pipeline project in October 2017. As of December 2017, Mountain Valley Pipeline, LLC (MVP JV) had received all of the necessary federal permits required for the project. In early January 2018, the MVP JV began filing requests for partial Notices to Proceed with the FERC, and subsequently has received permission to begin construction activities in certain areas along the route. The 303-mile pipeline is estimated to cost $3.5 billion, with EQM funding its proportional share, or approximately $1.6 billion. The 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.

Notes IssuanceOn October 4, 2017, the Company completed the public offering of Senior Notes and Floating Rate Notes totaling $3.0 billion. Net proceeds from the sale of the notes were primarily used to fund a portion of the cash consideration for, to refinance assumed indebtedness in, and to pay expenses related to the Rice Merger. Net proceeds from the sale of the notes were also used to redeem Company Senior Notes due in 2018.

Tax Reform ImpactOn December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted, lowering the federal corporate tax rate to 21% from 35%. As a result, the Company recorded a deferred tax benefit of $1.2 billion in the fourth quarter to revalue its existing net deferred tax liabilities to the lower rate.

This legislation also repealed the alternative minimum tax (AMT) and provides that existing AMT credit carryforwards can be utilized to offset current federal taxes owed in tax years 2018 through 2020. In addition, 50% of any unused AMT credit carryforwards can be refunded during these years with any remaining AMT credit carryforward being fully refunded in 2021. The Company expects a refund of $200 million related to 2018. The Company had approximately $435 million of AMT credit carryforwards as of December 31, 2017.

Lastly, this legislation preserved the deductibility of intangible drilling costs for federal income tax purposes and provides bonus depreciation which allows the Company to deduct 100% of its unregulated tangible capital deployed between 2018 and 2020. After 2022, the bonus percentage is reduced by 20% each year until it expires in 2027. None of the other provisions are expected to have a material effect on the Company's results of operations.

Marcellus Acreage AcquisitionsDuring 2017, the Company acquired approximately 110,000 net Marcellus acres, with drilling rights on approximately 55,000 net Utica acres, in the Company’s liquids-rich West Virginia core development area. The Company paid net cash of $740.1 million during the year-ended December 31, 2017, for these acquisitions, which exclude Rice.

EQT Midstream Partners, LP (NYSE: EQM) / EQT GP Holdings, LP (NYSE: EQGP) / Rice Midstream Partners LP (NYSE: RMP)On January 18, 2018, EQM announced a cash distribution to its unitholders of $1.025 per unit for the fourth quarter. EQGP announced a cash distribution to its unitholders of $0.244 per unit for the fourth quarter 2017. RMP also announced a cash distribution to its unitholders of $0.2917 per unit for the fourth quarter 2017.

The 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 (NCI)

The results of EQGP, EQM, RMP and Strike Force Midstream LLC (Strike Force) are consolidated in EQT’s results. For the year ended December 31, 2017, EQT’s results reflected earnings of $349.6 million, or $1.86 per diluted share, attributable to the publicly held partnership interests and the minority interest in Strike Force.

  Year Ended December 31, 2017 Unitholder interest in net   Public / minority   NCI interest in (thousands)

income (a)

ownership EQT earnings EQM $ 428,373 71.65 % $ 306,927 EQGP $ 261,993 9.94 % $ 26,042 RMP $ 22,131 71.89 % $ 15,910 Strike Force $ 2,936 25.00 % $ 734 Total $ 349,613   Three Months Ended December 31, 2017 Unitholder interest in net Public / minority NCI interest in (thousands)

income (a)

ownership EQT earnings EQM $ 105,553 71.65 % $ 75,628 EQGP $ 70,344 9.94 % $ 6,992 RMP $ 22,131 71.89 % $ 15,910 Strike Force $ 2,936 25.00 % $ 734 Total $ 99,264

(a)Excludes incentive distribution rights

HedgingAs of January 31, 2018, the approximate volumes and prices of the Company’s derivative commodity instruments hedging sales of produced gas for 2018 through 2020 were:

 

2018(a)

  2019   2020 NYMEX Swaps Total Volume (Bcf) 541 234 234 Average Price per Mcf (NYMEX) $ 3.14 $ 3.03 $ 3.05   Collars Total Volume (Bcf) 117 66 − Average Floor Price per Mcf (NYMEX) $ 3.28 $ 3.15 $ − Average Cap Price per Mcf (NYMEX) $ 3.78 $ 3.68 $ −   Puts (Long) Total Volume (Bcf) 10 7 − Average Floor Price per Mcf (NYMEX) $ 2.91 $ 2.94 $ −  

(a)Full year 2018

• The Company also sold calendar year 2018 and 2019 calls for approximately 64 Bcf and 45 Bcf, respectively, at strike prices of $3.49 per Mcf and $3.69 per Mcf, respectively
• For 2018, the Company also 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   Year Ended December 31, December 31, (thousands) 2017   2016 2017   2016 Operating income (loss): EQT Production $ 267,439 $ (251,053 ) $ 589,716 $ (719,731 ) EQM Gathering 90,847 70,753 333,563 289,027 EQM Transmission 58,150 63,837 247,145 237,922 RMP Gathering 21,800 − 21,800 − RMP Water 4,145 − 4,145 − Unallocated expense   (227,532 )   (73,003 )   (263,388 )   (85,518 ) Operating income (loss) $ 214,849   $ (189,466 ) $ 932,981   $ (278,300 )  

Unallocated expenses generally include incentive compensation costs and administrative expenses. In addition, 2017 includes $237.3 million of Rice Merger related expenses and 2016 includes a $59.7 million impairment on gathering assets prior to the sale to EQM.

Wells Drilled (spud)

  Marcellus   Upper Devonian   Ohio Utica (net) 2017 144 49 4 Q4 2017 40 5 4 2018 Forecast 134 16 25 Q1 2018 Forecast 20 – 25 3 – 5 6 – 8  

• 2017 average lateral lengths: Marcellus 8,900; Upper Devonian 9,800; Ohio Utica 10,500
• Q4 2017 average lateral lengths: Marcellus 9,800; Upper Devonian 11,500; Ohio Utica 10,500
• 2018 forecasted average lateral lengths: Marcellus 12,600; Upper Devonian 15,800; Ohio Utica 11,000

Wells Turned-in-line (TIL)

  Marcellus   Upper Devonian   Ohio Utica (net) 2017 113 37 3 Q4 2017 53 13 3 2018 Forecast 160 – 170 20 – 25 20 – 25 Q1 2018 Forecast 18 – 21 4 4  

• 2017 average lateral lengths: Marcellus 7,400; Upper Devonian 8,300; Ohio Utica 12,800
• Q4 2017 average lateral lengths: Marcellus 7,100; Upper Devonian 7,000; Ohio Utica 12,700
• 2018 forecasted average lateral lengths: Marcellus 8,700; Upper Devonian 11,300; Ohio Utica 11,500

Marcellus Horizontal Well Status (cumulative since inception)

  As of   As of   As of   As of   As of 12/31/17* 9/30/17 6/30/17 3/31/17 12/31/16* Wells drilled (spud) 1,743 1,288 1,259 1,216 1,046 Wells online 1,424 1,060 1,028 1,013 875 Wells complete, not online 21 21 15 20 21 Wells drilled, uncompleted 298 207 216 183 150

*Includes 77 wells acquired in 2016 and 570 wells acquired in 2017

NON-GAAP DISCLOSURESAdjusted 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, Rice Merger-related expenses, and certain other items that impact comparability between periods. 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-K for the year ended December 31, 2017.

  Three Months Ended   Year Ended December 31, December 31,

(thousands, except per share information)

2017   2016 2017   2016 Net income (loss) attributable to EQT, as reported $ 1,280,071 $ (191,958 ) $ 1,508,529 $ (452,983 ) Add back / (deduct): Asset and Lease Impairments 15,274 69,935 20,327 75,434 Rice Merger-related costs 222,634 – 245,281 – (Gain) loss on derivatives not designated as hedges (167,328 ) 216,649 (390,021 ) 248,991 Net cash settlements received on derivatives not designated as hedges 47,565 56,909 40,728 279,425 Premiums received (paid) for derivatives that settled during the period 537 (558 ) 2,132 (2,132 ) Loss on debt extinguishment 12,641 – 12,641 – Huron Restructuring Charges – – – 4,360 Pension Settlement Charge – – – 9,403 Gain on sale / exchange of assets – (8,025 ) – (8,025 ) Tax impact of non-GAAP items*   (49,199 )   (134,634 )   31,296     (244,197 ) Subtotal 1,362,195 8,318 1,470,913 (89,724 ) Tax benefit related to federal tax law change** (1,205,140 ) – (1,205,140 ) – Tax expense related to regulatory liability 10,488 – 10,488 – Tax expense related to regulatory asset   –     35,438     –     35,438   Adjusted net income (loss) attributable to EQT $ 167,543   $ 43,756   $ 276,261   $ (54,286 ) Diluted weighted average common shares outstanding 219,712 173,688 187,727 166,978 Diluted EPS, as adjusted $ 0.76 $ 0.25 $ 1.47 $ (0.33 ) *  

Blended tax rates of 37.46% and 45.41% were applied to the items under the caption “Add back (deduct)” for the three months and year ended December 31, 2017, respectively. A tax rate of 40.2% was applied to the items under the caption “Add back (deduct)” for the three months and year ended December 31, 2016. This represents the incremental deferred tax (expense) benefit that would have been incurred had these items been excluded from net income (loss) attributable to EQT.

** The income tax benefit of $1.2 billion for the three months and year ended December 31, 2017 reflects the revaluation of net deferred tax liabilities to the lower corporate tax rate due to the Tax Cuts and Jobs Act of 2017.  

Operating Cash Flow, Adjusted Operating Cash Flow Attributable to EQT and Adjusted Operating Cash Flow Attributable to EQT ProductionOperating 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 is EQT’s net cash provided by operating activities, less changes in other assets and liabilities, adjusted to exclude EQM and RMP adjusted EBITDA, plus EQM and RMP interest expense plus the EQGP and RMP cash distributions payable to EQT. Prior to EQT’s 2018 operational forecast announcement in December 2017, the Company’s calculation of adjusted operating cash flow attributable to EQT did not include the addition of EQM’s and RMP’s interest expense. The Company believes it is preferable to present this non-GAAP supplemental financial measure with this adjustment as it better reflects EQT’s cash flows by excluding the cost of debt for EQM and RMP. EQT has recast all periods presented to be consistent with this change in the definition of adjusted operating cash flow attributable to EQT. Management believes that removing the impact on operating cash flows of the public unitholders of EQGP, EQM and RMP 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 consolidated cash flows to be included in EQT’s report on Form 10-K for the year ended December 31, 2017.

    Three Months Ended Year Ended December 31, December 31, thousands 2017   2016 2017   2016 Net cash provided by operating activities $ 426,326 $ 296,621 $ 1,637,698 $ 1,064,320 Add back / (deduct) Changes in other assets and liabilities   116,921     144,764     10,664     174,272   Operating cash flow (a non-GAAP measure) 543,247 441,385 1,648,362 1,238,592 (Deduct) / add back: EQM adjusted EBITDA(1) (185,098 ) (156,868 ) (689,498 ) (572,611 ) RMP adjusted EBITDA(1) (33,457 ) – (33,457 ) – EQM net interest expense 10,167 5,318 36,181 16,766 RMP net interest expense 826 – 826 – Cash distribution payable to EQT from EQGP(2) 58,490 42,430 209,271 150,062 Cash distribution payable to EQT from RMP(3)   21,432     –     21,432     –   Adjusted operating cash flow attributable to EQT $

415,607

  $ 332,265   $ 1,193,117   $ 832,809   (1)   EQM adjusted EBITDA and RMP adjusted EBITDA are non-GAAP supplemental financial measures reconciled in this section. (2) Cash distribution payable to EQT for the three months and year ended December 31, 2017 and 2016, represents the distribution payable from EQGP to EQT related to the respective period. (3) Cash distribution payable to EQT for the three months and year ended December 31, 2017 represents the distribution payable from RMP to EQT related to the respective period, as well as a cash distribution received by EQT from RMP following the Rice Merger in respect of the third quarter of 2017 distribution which was payable November 16, 2017.  

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. Furthermore, EQT does not provide guidance with respect to its average realized price or income taxes, among other items, that are reconciling items between net cash provided by operating activities and adjusted operating cash flow attributable to EQT and adjusted operating cash flow attributable to EQT Production, as applicable. Natural gas prices are volatile and out of EQT’s control, and the timing of transactions and the income tax effects of future transactions and other items are difficult to accurately predict. 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 RevenueThe table below reconciles EQT Production adjusted operating revenues, a non-GAAP supplemental financial measure, to EQT Production total operating revenue, 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-K for the year ended December 31, 2017, for a reconciliation of EQT Production total operating revenue to EQT Corporation total operating revenue, as reported.

EQT Production adjusted operating revenue (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 revenue 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 revenue 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 revenue also excludes "Pipeline and net marketing services" because management considers this revenue to be unrelated to the revenue for its natural gas and liquids production. EQT Production "Pipeline and net marketing services" includes revenue 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 revenue, as presented, provides useful information to investors for evaluating period-over-period earnings trends.

   

Calculation of EQT Production Adjusted

Three Months Ended Year Ended

Operating Revenue

December 31, December 31, $ in thousands (unless noted) 2017   2016 2017   2016 EQT Production total operating revenue, as reported on segment page $ 1,048,856 $ 318,302 $ 3,106,337 $ 1,387,054 (Deduct) / add back: (Gain) loss on derivatives not designated as hedges (167,328 ) 216,649 (390,021 ) 248,991 Net cash settlements received on derivatives not designated as hedges 47,565 56,909 40,728 279,425 Premiums received (paid) for derivatives that settled during the period 537 (558 ) 2,132 (2,132 ) Pipeline and net marketing services   (33,342 )   (12,852 )   (64,998 )   (41,048 ) EQT Production adjusted operating revenue, a non-GAAP measure $ 896,288 $ 578,450 $ 2,694,178 $ 1,872,290

 

Total sales volumes (MMcfe) 294,439 198,399 887,520 758,967   Average realized price ($/Mcfe) $ 3.04 $ 2.92 $ 3.04 $ 2.47  

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 (loss) 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, asset impairments and drilling expenses, pension settlement charges and 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 certain 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 Year Ended December 31, December 31, (thousands) 2017   2016 2017   2016 EQT Production operating income (loss), as reported on segment page $ 267,439 $ (251,053) $ 589,716 $ (719,731) (Deduct) / add back: (Gain) loss on derivatives not designated as hedges (167,328) 216,649 (390,021) 248,991 Net cash settlements received on derivatives not designated as hedges 47,565 56,909 40,728 279,425 Premiums received (paid) for derivatives that settled during the period 537 (558) 2,132 (2,132) Asset impairments and drilling expenses 15,274 10,187 20,327 15,686 Pension settlement charges – – – 9,403 Restructuring charges – – – 4,360 EQT Production adjusted operating income (loss) $ 163,487 $ 32,134 $ 262,882 $ (163,998)  

EQM Adjusted EBITDAAs used in this news release, EQM 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. EQM 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 EQM EBITDA provides useful information to investors in assessing the impact of the noncontrolling interest in EQM on EQT's financial condition and results of operations. EQM 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. EQM 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 EQM adjusted EBITDA may be defined differently by other companies in EQT's or EQM's industries, the definition of EQM adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measure. The table below reconciles EQM 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-K for the year ended December 31, 2017.

    Three Months Ended   Year Ended December 31, December 31, (thousands) 2017   2016 2017   2016 Net income $ 146,631 $ 135,700 $ 571,904 $ 537,954 Add back: Net interest expense 10,167 5,318 36,181 16,766 Depreciation and amortization expense 33,294 19,514 97,485 62,691 Preferred interest payments received post conversion 2,746 2,764 10,984 2,764 Non-cash long-term compensation expense – – 225 195 Income tax expense – – – 10,147 Less: Equity income (6,758 ) (3,759 ) (22,171 ) (9,898 ) AFUDC – equity (982 ) (2,669 ) (5,110 ) (19,402 ) Pre-acquisition capital lease payments for AVC – – – (17,186 ) Adjusted EBITDA attributable to the assets prior to acquisition   –     –     –     (11,420 ) EQM Adjusted EBITDA

 

$ 185,098   $ 156,868   $ 689,498   $ 572,611    

RMP Adjusted EBITDARMP adjusted EBITDA means RMP’s net income (loss) plus RMP’s net interest expense, depreciation expense, and non-cash equity compensation expense. RMP 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 RMP adjusted EBITDA provides useful information to investors in assessing the impact of the noncontrolling interest in RMP on EQT's financial condition and results of operations. RMP adjusted EBITDA should not be considered as an alternative to RMP’s net income, operating income, or any other measure of financial performance or liquidity presented in accordance with GAAP. RMP adjusted EBITDA has important limitations as an analytical tool because it excludes some, but not all, items that affect RMP's net income. Additionally, because RMP adjusted EBITDA may be defined differently by other companies in EQT's or RMP's industries, the definition of RMP adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measure. The table below reconciles RMP adjusted EBITDA with RMP’s net income for the successor period November 13, 2017 to December 31, 2017, as derived from the statements of consolidated operations to be included in RMP’s report on Form 10-K for the year ended December 31, 2017.

  Three Months Ended   Year Ended December 31, December 31, (thousands) 2017   2016 2017   2016 Net income $ 25,134 $ – $ 25,134 $ – Add back: Net interest expense 826

 

– 826 – Depreciation and amortization expense 7,480 – 7,480 – Non-cash long-term compensation expense   17   –   17   – RMP Adjusted EBITDA

 

$ 33,457 $ – $ 33,457 $ – (a)   The 2017 activity reflects the post-acquisition period from November 13, 2017 to December 31, 2017.  

Year-End and Fourth Quarter 2017 Webcast InformationThe 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 nearly 130 years of experience and a long-standing history of good corporate citizenship, EQT is the largest producer of natural gas in the United States. As a leader in the use of advanced horizontal drilling technology, EQT is committed to minimizing the impact of drilling-related activities and reducing its overall environmental footprint. Through safe and responsible operations, EQT is helping to meet our nation’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 owns the general partner interest and a 90% limited partner interest in EQT GP Holdings, LP, which owns the general partner interest, all of the incentive distribution rights, and a portion of the limited partner interest in EQT Midstream Partners, LP. EQT also owns the general partner interest, all of the incentive distribution rights, and a 28% limited partner interest in Rice Midstream Partners LP.

Visit EQT Corporation at www.EQT.com; and to learn more about EQT’s sustainability efforts, please visit https://csr.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 the general partner interest and a 90% limited partner interest in EQT GP Holdings, LP.

Visit EQT GP Holdings, LP at www.eqtmidstreampartners.com.

About Rice Midstream Partners:Rice Midstream Partners LP is a fee-based, growth-oriented limited partnership formed to own, operate, develop and acquire midstream assets in the Appalachian basin. RMP provides midstream services to EQT Corporation and third-party companies through its natural gas gathering, compression and water assets in the rapidly developing dry gas cores of the Marcellus and Utica Shales.

Visit Rice Midstream Partners LP at www.ricemidstream.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 relationship website at http://ir.eqt.com.

Cautionary StatementsThe 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; infrastructure programs (including the timing, cost and capacity of the transmission and gathering expansion projects); the cost, capacity, 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 projected general and administrative savings, capital efficiency savings and other operating efficiencies and synergies resulting from the Rice Merger, and the Company’s ability to achieve the anticipated synergies and efficiencies; monetization transactions, including asset sales, joint ventures or other transactions involving the Company’s assets; whether the Company will sell its Ohio midstream assets to EQM and the timing of such transaction or transactions; the timing of the Company’s announcement of a decision for addressing its sum-of-the-parts discount, and the impact of the results of such review; the projected cash flows resulting from the Company’s partnership interests in EQGP and RMP; 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, projected effective tax rate and the impact of changes in tax laws. 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 and the Company’s Form 10-K for the year ended December 31, 2017 to be filed with the SEC, as updated by any subsequent Form 10-Qs.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

Information in this news release regarding EQGP and its subsidiaries, including EQM, and RMP is derived from publicly available information published or to be published by the partnerships.

2018 GUIDANCESee 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 2018 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   Q1 2018   2018 Total production sales volume (Bcfe) 350 – 360 1,520 – 1,560 Liquids sales volume, excluding ethane (Mbbls) 3,230 – 3,250 12,300 – 12,600 Ethane sales volume (Mbbls) 1,540 – 1,560 4,900 – 5,200 Total liquids sales volume (Mbbls)

4,770 - 4,810

17,200 - 17,800

  Marcellus / Utica Rigs

8 - 10

Top-hole rigs

4 - 5

Frac Crews

9 - 11

  Unit Costs ($ / Mcfe) Gathering to EQM and RMP $ 0.48 – 0.50 Transmission to EQM $ 0.11 – 0.13 Third-party gathering and transmission $ 0.39 – 0.41 LOE, excluding production taxes $ 0.07 – 0.09 Production taxes $ 0.06 – 0.08 SG&A $ 0.10 – 0.12 DD&A $ 1.10 – 1.12 Development costs ($ / Mcfe)

 

$ 0.41 - 0.43

  Average differential ($ / Mcf) $ 0.15 – 0.25 $ (0.35) – (0.25)   Pipeline and net marketing services ($MM) $ 60 – 70 $ 60 – 70  

Processing expense ($MM)

$185

  FINANCIAL ($MM) Net income attributable to noncontrolling interest ($MM) $ 130 – 140 $ 560 – 570   ADJUSTED OPERATING CASH FLOW ($MM) Adjusted operating cash flow attributable to EQT Production

$ 2,300 – 2,350

Distributions from EQGP and RMP $ 325 – 375 Interest, taxes, and other items $ (25) – 25 Adjusted operating cash flow attributable to EQT

$ 2,650 – 2,750

Based on current NYMEX natural gas prices of $2.77

  EQT CORPORATION AND SUBSIDIARIES Statements of Consolidated Operations         Three Months Ended Year Ended December 31, December 31, 2017 (a) 2016 2017 (a) 2016 (Thousands except per share amounts) Revenues: Sales of natural gas, oil and NGLs $ 848,186 $ 522,099 $ 2,651,318 $ 1,594,997 Pipeline, water and net marketing services 113,772 73,572 336,676 262,342 Gain (loss) on derivatives not designated as hedges   167,328     (216,649 )   390,021     (248,991 ) Total operating revenues 1,129,286 379,022 3,378,015 1,608,348   Operating expenses: Transportation and processing 155,096 114,534 559,839 365,817 Operation and maintenance 27,395 21,441 88,866 73,266 Production 52,925 48,734 182,737 174,826 Exploration 16,078 4,026 25,117 13,410 Selling, general and administrative 71,471 76,119 262,664 272,747 Depreciation, depletion and amortization 358,264 244,972 1,077,559 927,920 Impairment of long-lived assets – 66,687 – 66,687 Acquisition costs 222,268 – 237,312 – Amortization of intangible assets   10,940     –     10,940     –   Total operating expenses 914,437 576,513 2,445,034 1,894,673   Gain on sale / exchange of assets   –     8,025     –     8,025   Operating income (loss) 214,849 (189,466 ) 932,981 (278,300 )   Other income 8,077 8,494 24,955 31,693 Loss on debt extinguishment 12,641 – 12,641 – Interest expense   65,662     39,451     202,772     147,920   Income (loss) before income taxes 144,623 (220,423 ) 742,523 (394,527 ) Income tax (benefit) expense   (1,234,712 )   (111,638 )   (1,115,619 )   (263,464 ) Net income (loss) 1,379,335 (108,785 ) 1,858,142 (131,063 ) Less: Net income attributable to noncontrolling interests   99,264     83,173     349,613     321,920   Net income (loss) attributable to EQT Corporation $ 1,280,071   $ (191,958 ) $ 1,508,529   $ (452,983 )   Earnings per share of common stock attributable to EQT Corporation: Basic: Weighted average common stock outstanding   218,937     172,906     187,380     166,978   Net income (loss) $ 5.85   $ (1.11 ) $ 8.05   $ (2.71 )   Diluted: Weighted average common stock outstanding   219,712     172,906     187,727     166,978   Net income (loss) $ 5.83   $ (1.11 ) $ 8.04   $ (2.71 ) Dividends declared per common share $ 0.03   $ 0.03   $ 0.12   $ 0.12   (a)   For the three months and year ended December 31, 2017, the EQT Statements of Consolidated Operations include the results of operations acquired in the Rice Merger for the period of November 13, 2017, through December 31, 2017.     EQT CORPORATION AND SUBSIDIARIES PRICE RECONCILIATION     Three Months Ended Year Ended December 31, December 31, in thousands (unless noted) 2017 (e)   2016 2017 (e)   2016 NATURAL GAS Sales volume (MMcf) 265,619 175,290 774,076 683,495 NYMEX price ($/MMBtu) (a) $ 2.94 $ 2.98 $ 3.09 $ 2.47 Btu uplift   0.24     0.29     0.27     0.22   Natural gas price ($/Mcf) $ 3.18 $ 3.27 $ 3.36 $ 2.69   Basis ($/Mcf) (b) (0.55 ) (0.88 ) (0.54 ) (0.81 ) Cash settled basis swaps (not designated as hedges) ($/Mcf)   0.07     0.21     0.01     0.09   Average differential, including cash settled basis swaps ($/Mcf) $ (0.48 ) $ (0.67 ) $ (0.53 ) $ (0.72 ) Average adjusted price ($/Mcf) $ 2.70 $ 2.60 $ 2.83 $ 1.97 Cash settled derivatives (cash flow hedges) ($/Mcf) 0.01 0.11 0.01 0.13 Cash settled derivatives (not designated as hedges) ($/Mcf)   0.13     0.11     0.05     0.31   Average natural gas price, including cash settled derivatives ($/Mcf) $ 2.84 $ 2.82 $ 2.89 $ 2.41 Natural gas sales, including cash settled derivatives $ 752,523 $ 493,934 $ 2,237,234 $ 1,649,831   LIQUIDS NGLs (excluding ethane): Sales volume (MMcfe) (c) 18,971 15,512 74,060 57,243 Sales volume (Mbbls) 3,161 2,585 12,343 9,540 Price ($/Bbl) $ 41.06 $ 27.55 $ 31.59 $ 19.43 Cash settled derivatives (not designated as hedges) ($/Bbl)   (1.46 )   –     (0.69 )   –   Average NGL price, including cash settled derivatives ($/Bbl) $ 39.60 $ 27.55 $ 30.90 $ 19.43   NGL sales $ 125,204 $ 71,217 $ 381,327 $ 185,405 Ethane: Sales volume (MMcfe) (c) 8,462 6,546 33,432 13,856 Sales volume (Mbbls) 1,410 1,091 5,572 2,309 Price ($/Bbl) $ 5.94   $ 5.64   $ 6.32   $ 5.08   Ethane sales $ 8,383 $ 6,152 $ 35,241 $ 11,742 Oil: Sales volume (MMcfe) (c) 1,387 1,051 5,952 4,373 Sales volume (Mbbls) 231 175 992 729 Price ($/Bbl) $ 44.03   $ 40.79   $ 40.70   $ 34.73   Oil sales $ 10,178 $ 7,148 $ 40,376 $ 25,312   Total liquids sales volume (MMcfe) (c ) 28,820 23,109 113,444 75,472 Total liquids sales volume (Mbbls) 4,802 3,851 18,907 12,578   Liquids sales $ 143,765 $ 84,517 $ 456,944 $ 222,459   TOTAL PRODUCTION Total natural gas & liquids sales, including cash settled derivatives (d) $ 896,288 $ 578,451 $ 2,694,178 $ 1,872,290 Total sales volume (MMcfe) 294,439 198,399 887,520 758,967   Average realized price ($/Mcfe) $ 3.04 $ 2.92 $ 3.04 $ 2.47 (a)   The Company’s volume weighted NYMEX natural gas price (actual average NYMEX natural gas price ($/MMBtu) was $2.93 and $2.98 for the three months ended December 31, 2017 and 2016, respectively, and $3.11 and $2.46 for the twelve months ended December 31, 2017 and 2016, respectively). (b) Basis represents the difference between the ultimate sales price for natural gas and the NYMEX natural gas price. (c) NGLs, ethane and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods. (d) Also referred to in this report as EQT Production adjusted operating revenues, a non-GAAP supplemental financial measure. (e) For the three months and year ended December 31, 2017, EQT Production includes the results of production operations acquired in the Rice Merger for the period of November 13, 2017 through December 31, 2017.     EQT PRODUCTION RESULTS OF OPERATIONS         Three Months Ended Year Ended December 31, December 31, 2017(d) 2016 2017 (d) 2016 OPERATIONAL DATA Sales volume detail (MMcfe): Marcellus (a) 247,498 173,707 770,620 660,146 Ohio Utica 24,018 109 24,266 536 Other   22,923     24,583     92,634     98,285   Total production sales volumes (b) 294,439 198,399 887,520 758,967   Average daily sales volumes (MMcfe/d) 3,200 2,157 2,432 2,074   Average realized price ($/Mcfe) $ 3.04 $ 2.92 $ 3.04 $ 2.47   Gathering to EQM and RMP ($/Mcfe) $ 0.44 $ 0.46 $ 0.47 $ 0.48 Transmission to EQM ($/Mcfe) $ 0.16 $ 0.22 $ 0.20 $ 0.20 Third party gathering and transmission ($/Mcfe) $ 0.37 $ 0.39 $ 0.42 $ 0.32 Processing ($/Mcfe) $ 0.16 $ 0.18 $ 0.20 $ 0.16 Lease operating expenses (LOE), excluding production taxes ($/Mcfe) $ 0.12 $ 0.14 $ 0.13 $ 0.15 Production taxes ($/Mcfe) $ 0.06 $ 0.10 $ 0.08 $ 0.08 Production depletion ($/Mcfe) $ 1.06 $ 1.06 $ 1.04 $ 1.06   Depreciation, depletion and amortization (DD&A) (thousands): Production depletion $ 311,051 $ 209,475 $ 924,430 $ 803,883 Other DD&A   16,641     14,290     57,673     55,135   Total DD&A $ 327,692 $ 223,765 $ 982,103 $ 859,018   Capital expenditures (thousands) (c) $ 579,612 $ 979,160 $ 2,430,094 $ 2,073,907   FINANCIAL DATA (thousands) Revenues: Sales of natural gas, oil and NGLs $ 848,186 $ 522,099 $ 2,651,318 $ 1,594,997 Pipeline and net marketing services 33,342 12,852 64,998 41,048 Gain (loss) on derivatives not designated as hedges   167,328     (216,649 )   390,021     (248,991 ) Total operating revenues 1,048,856 318,302 3,106,337 1,387,054   Operating expenses: Gathering 145,310 106,076 480,111 413,758 Transmission 141,101 106,373 495,635 341,569 Processing 45,793 36,435 179,538 124,864 LOE, excluding production taxes 36,415 27,999 113,937 112,509 Production taxes 16,558 20,735 68,848 62,317 Exploration 16,077 4,026 25,117 13,410 Selling, general and administrative (SG&A) 46,931 45,032 165,792 180,426 DD&A 327,692 223,765 982,103 859,018 Amortization of intangible assets 5,540 - 5,540 - Impairment of long-lived assets   -     6,939     -     6,939   Total operating expenses 781,417 577,380 2,516,621 2,114,810 Gain on sale / exchange of assets   -     8,025     -     8,025   Operating income (loss) $ 267,439   $ (251,053 ) $ 589,716   $ (719,731 ) (a)   Includes Upper Devonian wells. (b) NGLs, ethane and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods. (c) Includes measurement period adjustments of $(11.8) million for acquisitions during the three months ended December 31, 2017. Includes cash capital expenditures of $638.4 million and non-cash capital expenditures of $83.9 million related to acquisitions during the three months ended December 31, 2016. Includes cash capital expenditures of $819.0 million, non-cash capital expenditures of $10.0 million and measurement period adjustments of $(14.3) million for acquisitions during the year ended December 31, 2017. Includes cash capital expenditures of $1,051.2 million and non-cash capital expenditures of $87.6 million related to acquisitions during the year ended December 31, 2016. (d) For the three months and year ended December 31, 2017, the operating income for EQT Production includes the results of operations for the production operations and retained midstream operations acquired in the Rice Merger for the period of November 13, 2017 through December 31, 2017.     EQM GATHERING RESULTS OF OPERATIONS         Three Months Ended Year Ended December 31, December 31, 2017 2016 2017 2016 FINANCIAL DATA (Thousands, other than per day amounts) Firm reservation fee revenues $ 106,454 $ 90,110 $ 407,355 $ 339,237 Volumetric based fee revenues: Usage fees under firm contracts (a) 13,033 6,893 32,206 38,408 Usage fees under interruptible contracts   4,053   3,186   14,975   19,849 Total volumetric based fee revenues   17,086   10,079   47,181   58,257 Total operating revenues   123,540   100,189   454,536   397,494   Operating expenses: Operating and maintenance 12,153 10,627 43,235 38,367 SG&A 10,142 10,907 38,942 39,678 Depreciation and amortization   10,398   7,902   38,796   30,422 Total operating expenses   32,693   29,436   120,973   108,467   Operating income $ 90,847 $ 70,753 $ 333,563 $ 289,027   OPERATIONAL DATA Gathered volumes (BBtu per day) Firm capacity reservation 1,956 1,697 1,826 1,553 Volumetric based services (b)   565   285   361   420 Total gathered volumes 2,521 1,982 2,187 1,973   Capital expenditures $ 46,143 $ 47,560 $ 196,871 $ 295,315 (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.     EQM TRANSMISSION RESULTS OF OPERATIONS         Three Months Ended Year Ended December 31, December 31, 2017 2016 2017 2016 FINANCIAL DATA (Thousands, other than per day amounts) Firm reservation fee revenues $ 91,969 $ 87,813 $ 348,193 $ 277,816 Volumetric based fee revenues: - Usage fees under firm contracts (a) 3,956 3,405 13,743 45,679 Usage fees under interruptible contracts   5,046   3,607   17,624   14,625 Total volumetric based fee revenues   9,002   7,012   31,367   60,304 Total operating revenues   100,971   94,825   379,560   338,120   Operating expenses: Operating and maintenance 11,093 10,899 41,482 34,846 SG&A 8,832 8,477 32,244 33,083 Depreciation and amortization   22,896   11,612   58,689   32,269 Total operating expenses   42,821   30,988   132,415   100,198   Operating income $ 58,150 $ 63,837 $ 247,145 $ 237,922   OPERATIONAL DATA Transmission pipeline throughput (BBtu per day) Firm capacity reservation 2,743 2,054 2,399 1,651 Volumetric based services (b)   65   57   37   430 Total transmission pipeline throughput 2,808 2,111 2,436 2,081   Average contracted firm transmission reservation commitments (BBtu per day) 3,952 3,485 3,627 2,814   Capital expenditures $ 37,423 $ 38,092 $ 111,102 $ 292,049 (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.     RMP GATHERING RESULTS OF OPERATIONS         Three Months Ended Year Ended December 31, December 31, 2017 (a) 2016 2017 (a) 2016 FINANCIAL DATA (Thousands, other than per day amounts) Gathering revenues Affiliate $ 26,242 $ – $ 26,242 $ – Third-party   19     –   19     – Total gathering revenues 26,261 – 26,261 –   Compression revenues: Affiliate 4,343 – 4,343 – Third-party   10     –   10     – Total compression revenues   4,353     –   4,353     – Total operating revenues 30,614 – 30,614 –   Operating expenses: Operation and maintenance expense 1,584 – 1,584 – General and administrative expense 3,265 – 3,265 – Depreciation expense   3,965     –   3,965     – Total operating expenses   8,814     –   8,814     –   Operating income (loss) $ 21,800 $ – $ 21,800 $ –   OPERATIONAL DATA Gathered volumes (BBtu/d) 1,547 – 1,547 –   Compression volumes (BBtu/d) 1,155 – 1,155 –   Capital expenditures $ 28,320 $ – $ 28,320 $ – (a)   This table sets forth selected financial and operational data for RMP Gathering for the period November 13, 2017, through December 31, 2017, as the Company completed the Rice Merger on November 13, 2017.     RMP WATER RESULTS OF OPERATIONS         Three Months Ended Year Ended December 31, December 31, 2017 (a) 2016 2017 (a) 2016 FINANCIAL DATA (Thousands, other than per day amounts) Operating revenues Affiliate $ 13,549 $ – $ 13,549 – Third-party   56     –   56     – Total operating revenues $ 13,605 – 13,605 –   Operating expenses: Operation and maintenance expense 5,598 – 5,598 – General and administrative expense 347 – 347 – Depreciation expense   3,515     –   3,515     – Total operating expenses   9,460     –   9,460     –   Operating income (loss) $ 4,145 $ – $ 4,145 $ –   OPERATIONAL DATA Water services volumes (MMgal) 226 – 226 –   Capital expenditures $ 6,233 $ – $ 6,233 $ – (a)   This table sets forth selected financial and operational data for RMP Water for the period November 13, 2017 through December 31, 2017, as the Company completed the Rice Merger on November 13, 2017.

View source version on businesswire.com: http://www.businesswire.com/news/home/20180215005327/en/

EQT analyst inquiries:Patrick Kane – Chief Investor Relations Officer, 412-553-7833pkane@eqt.comorEQT Midstream Partners / EQT GP Holdings / Rice Midstream Partners analyst inquiries:Nate Tetlow – Investor Relations Director, 412-553-5834ntetlow@eqt.comorMedia inquiries:Natalie Cox – Corporate Director, Communications, 412-395-3941ncox@eqt.com