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8-K - EQT CORPORATION 8-K - EQT Corp | a51447509.htm |
Exhibit 99.1
EQT Reports Third Quarter 2016 Earnings
Volume growth continues; 2016 drilling plan on-track
PITTSBURGH--(BUSINESS WIRE)--October 27, 2016--EQT Corporation (NYSE: EQT) today announced third quarter 2016 net loss attributable to EQT of $8.0 million, or $0.05 loss per diluted share (EPS), compared to third quarter 2015 net income attributable to EQT of $40.8 million, or $0.27 per diluted share. Net cash provided by operating activities was $274.3 million, $30.1 million higher than the third quarter 2015.
Adjusted net loss attributable to EQT was $44.2 million for the quarter, due to a decrease in natural gas prices, compared to an adjusted net loss attributable to EQT of $30.4 million in the third quarter 2015; and adjusted loss per diluted share was $0.26, compared to adjusted loss per diluted share of $0.20. Adjusted operating cash flow attributable to EQT was $167.7 million; $19.3 million higher than the third quarter 2015. 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.
Highlights:
- Production sales volume was 26% higher
- Midstream transmission revenue was 11% higher
- Realized natural gas price was 14% lower
- $275 million cash proceeds from asset sale to EQM
- Continued acreage acquisitions
RESULTS BY BUSINESS
EQT PRODUCTION
EQT Production achieved sales volume of 196 Bcfe in the third quarter 2016, representing a 26% increase over the third quarter last year.
EQT Production’s operating loss totaled $22.0 million for the quarter, compared to operating income of $56.4 million in 2015. Operating revenue totaled $502.5 million for the third quarter 2016, which was $28.8 million lower than the third quarter 2015, primarily due to a lower average realized sales price and decreased gains on derivatives not designated as hedges, which more than offset the increase in production sales volume.
EQT Production’s adjusted operating loss totaled $82.4 million for the quarter, due to a decline in natural gas prices, compared to an adjusted operating loss of $59.9 million in 2015. Adjusted operating revenue for the quarter was $430.7 million, which was $32.6 million higher than the same period last year, primarily due to increased production sales volume, offset by a lower average realized sales price. Average realized price for the third quarter 2016 was $2.20 per Mcfe, 14% lower than the $2.55 per Mcfe realized in the same period last year. Net marketing services revenue totaled $5.3 million in the third quarter 2016.
EQT Production’s operating expenses for the quarter were $524.6 million, $49.7 million higher than the same period last year. Consistent with the growth in sales volume – depreciation, depletion, and amortization (DD&A) expenses were $25.8 million higher; gathering expenses were $15.6 million higher; transmission expenses were $13.4 million higher; and processing expenses were $6.4 million higher. Exploration expenses were $5.5 million lower and production taxes were $4.6 million lower.
The Company drilled (spud) 24 gross wells during the third quarter 2016, including 21 Marcellus wells, with an average expected length-of-pay of 8,300 feet; two Upper Devonian wells, with an average expected length-of-pay of 11,100 feet; and one Utica well with an expected length-of-pay of 5,400 feet.
EQT MIDSTREAM
EQT Midstream’s third quarter 2016 operating income was $132.7 million, an increase of $19.7 million over the third quarter 2015, primarily as a result of increased gathering and transmission revenue. Operating revenue was $214.3 million, which was $15.8 million higher due to higher Marcellus volume. Gathering revenue was 8% higher at $136.7 million and transmission revenue increased by 11% to $69.5 million.
Total operating expenses for the quarter were $81.6 million, $4.0 million lower than last year. Operation and maintenance (O&M) expense was $4.8 million lower, primarily due to lower purchased gas costs; and selling, general and administrative (SG&A) expense was $2.2 million lower. The combined decrease in O&M and SG&A expenses were partially offset by the year-over-year increase in DD&A of $3.1 million. Per unit gathering and compression expense for the quarter was 17% lower year-over-year.
OTHER BUSINESS
Trans Energy / Republic Energy and Third-Party Acquisition
On October 25, 2016, EQT announced that it signed definitive agreements, in related transactions, to acquire additional core Marcellus acreage consisting of -- 42,600 net acres in West Virginia and current natural gas production of approximately 42 MMcfe per day from Trans Energy, Inc. (Trans Energy) and entities affiliated with Republic Energy (Republic) for an aggregate purchase price of $513 million; and 17,000 net acres in Pennsylvania and current natural gas production of approximately 2 MMcfe per day from a third-party for $170 million. The transactions are expected to close by year-end 2016.
Statoil Acquisition
On July 8, 2016, EQT closed a transaction with Statoil USA Onshore Properties, Inc. -- acquiring 62,500 net acres located in EQT’s core Marcellus development area of West Virginia. Much of the acreage is contiguous with EQT’s current acreage; therefore, allowing the lateral lengths of 106 existing EQT well locations to be extended from an average of 3,000 feet to an average of 6,500 feet, which will reduce overall costs and deliver stronger well economics. The acquisition also included approximately 500 undeveloped locations that are expected to have an average lateral length of 5,600 feet, along with the drilling rights on an estimated 53,000 net acres in the deep Utica.
EQT Midstream Partners, LP (NYSE: EQM) / EQT GP Holdings, LP (NYSE: EQGP)
On October 25, 2016, EQM announced a cash distribution to its unitholders of $0.815 per unit for the third quarter 2016. EQGP also announced a cash distribution to its unitholders of $0.165 per unit for the third quarter 2016.
The third quarter 2016 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.
Asset Sale to EQT Midstream Partners
Effective October 1, 2016, EQT sold the Allegheny Valley Connector transmission and storage system, along with several Marcellus gathering systems, to EQM for $275 million in cash.
Calculation of Net Income Attributable to Noncontrolling Interest
The results of EQGP and EQM are consolidated in EQT’s results. For the third quarter 2016, EQT recorded earnings of $78.1 million, or $0.45 per diluted share, attributable to the publicly held partnership interests in EQGP and EQM.
(thousands) | Three Months Ended | ||||
September 30, 2016 | |||||
EQM net income | $ | 126,568 | |||
Less: General Partner interest (including incentive distribution rights) | 27,139 | ||||
Limited Partner interest in net income | $ | 99,429 | |||
EQM LP units | |||||
Publicly owned | $ | 72,836 | |||
EQGP owned | 26,593 | ||||
Limited Partner interest in net income | $ | 99,429 | |||
EQGP net income | |||||
EQM LP unit ownership | $ | 26,593 | |||
EQM GP unit ownership (including incentive distribution rights) | 27,139 | ||||
EQGP incremental expenses | (574 | ) | |||
Net income attributable to EQGP | $ | 53,158 | |||
EQGP units | |||||
Publicly owned LP (9.9%) | $ | 5,284 | |||
EQT owned LP (90.1%) | 47,874 | ||||
Net income attributable to EQGP | $ | 53,158 | |||
Noncontrolling interest in EQT earnings | |||||
EQM publicly-owned LP units | $ | 72,836 | |||
EQGP publicly-owned LP units | 5,284 | ||||
Net income attributable to noncontrolling interest | $ | 78,120 | |||
Hedging
As of October 25, 2016, the approximate volumes and prices of the Company’s derivative commodity instruments hedging sales of produced gas for 2016 through 2018 were:
2016(a) |
2017 | 2018 | |||||||||||
NYMEX Swaps | |||||||||||||
Total Volume (Bcf) | 77 | 266 | 105 | ||||||||||
Average Price per Mcf (NYMEX) | $ | 3.64 | $ | 3.31 | $ | 3.13 | |||||||
Collars | |||||||||||||
Total Volume (Bcf) | 1 |
17 |
− | ||||||||||
Average Floor Price per Mcf (NYMEX) | $ |
2.84 |
$ |
2.98 |
$ | − | |||||||
Average Cap Price per Mcf (NYMEX) | $ |
3.36 |
$ |
3.92 |
$ | − | |||||||
|
(a) |
October through December 31 |
|
• | The Company also sold calendar year 2016, 2017 and 2018 calls for approximately 11 Bcf, 32 Bcf and 16 Bcf at strike prices of $3.65 per Mcf, $3.53 per Mcf and $3.48 per Mcf, respectively | |
• | For 2017 and 2018 the Company sold puts for approximately 3 Bcf at a strike price of $2.63 per Mcf | |
• | The average price is based on a conversion rate of 1.05 MMBtu/Mcf | |
Operating Income (Loss)
The Company reports operating income (loss) by segment in this news release. Interest, income taxes and unallocated expenses 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 (loss) reported in the Company’s financial statements:
Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
(thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||||||
Operating income (loss): | |||||||||||||||||||
EQT Production | $ | (22,010 | ) | $ | 56,360 | $ | (477,264 | ) | $ | 175,317 | |||||||||
EQT Midstream | 132,727 | 113,010 | 399,114 | 350,942 | |||||||||||||||
Unallocated expenses | (2,260 | ) | 685 | (10,684 | ) | (8,411 | ) | ||||||||||||
Total operating income (loss) | $ | 108,457 | $ | 170,055 | $ | (88,834 | ) | $ | 517,848 | ||||||||||
Unallocated expenses consist primarily of incentive compensation expense and administrative costs.
Marcellus Horizontal Well Status (cumulative since inception)
As of | As of | As of | As of | As of | ||||||||||||
9/30/16 | 6/30/16 | 3/31/16 | 12/31/15 | 9/30/15 | ||||||||||||
Wells drilled (spud) | 949* | 896 | 869 | 854 | 827 | |||||||||||
Wells online | 816 | 774 | 735 | 693 | 642 | |||||||||||
Wells complete, not online | 32 | 34 | 45 | 57 | 65 | |||||||||||
Wells drilled, uncompleted | 101 | 88 | 89 | 104 | 120 | |||||||||||
*Includes 32 wells acquired in Q3 2016 |
||||||||||||||||
NON-GAAP DISCLOSURES
Adjusted Net Loss Attributable to EQT and Adjusted Loss per Diluted Share
Adjusted net loss attributable to EQT and adjusted loss per diluted share are non-GAAP supplemental financial measures that are presented because they are important measures used by management to evaluate period-to-period comparisons of earnings trends. Adjusted net loss attributable to EQT and adjusted loss per diluted share should not be considered as alternatives to net (loss) income attributable to EQT or (loss) earnings per diluted share presented in accordance with GAAP. Adjusted net loss attributable to EQT as presented excludes the revenue impact of changes in the fair value of derivative instruments prior to settlement, asset impairments and rig release expenses, and legal reserve charges. Management utilizes adjusted net loss attributable to EQT 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 adjusted net loss attributable to EQT as presented provides useful information for investors for evaluating period-over-period earnings.
The table below reconciles adjusted net loss attributable to EQT and adjusted loss per diluted share with net (loss) income attributable to EQT and (loss) earnings per diluted share as derived from the statements of consolidated operations to be included in EQT’s report on Form 10-Q for the quarter ended September 30, 2016.
Three Months Ended | ||||||||||
September 30, | ||||||||||
(thousands, except per share information) | 2016 | 2015 | ||||||||
Net (loss) income attributable to EQT, as reported | $ | (8,016 | ) | $ | 40,787 | |||||
Add back (deduct): | ||||||||||
Asset impairments and rig release expenses | 1,435 | 10,106 | ||||||||
Legal reserve | 4,755 | 1,926 | ||||||||
Gain on derivatives not designated as hedges | (93,356 | ) | (161,263 | ) | ||||||
Net cash settlements received on derivatives not designated as hedges | 27,287 | 32,099 | ||||||||
Premiums paid for derivatives that settled during the period | (558 | ) | (1,029 | ) | ||||||
Tax impact (a) | 24,267 | 46,945 | ||||||||
Adjusted net loss attributable to EQT | $ | (44,186 | ) |
|
$ | (30,429 | ) | |||
Diluted weighted average common shares outstanding | 172,867 | 152,854 | ||||||||
Diluted EPS, as adjusted | $ | (0.26 | ) | $ | (0.20 | ) | ||||
(a) | A tax rate of 40.2% and 39.7% for the three month periods ended September 30, 2016, and 2015, respectively, was applied to the items under the caption “Add back (deduct)”. This represents the incremental deferred tax benefit that would have been incurred had these items been excluded from net loss attributable to EQT. | |
Operating Cash Flow and Adjusted Operating Cash Flow Attributable to EQT
Operating cash flow and adjusted operating cash flow attributable to EQT 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 operating cash flow (a non-GAAP supplemental financial measure reconciled below), adjusted to exclude EQT Midstream Partners adjusted EBITDA (a non-GAAP supplemental financial measure reconciled below), and to include the EQT GP Holdings, LP (EQGP) cash distribution payable to EQT. Management believes that removing the impact on operating cash flows of the public unitholders of EQGP and EQT Midstream Partners, LP (EQM) that is otherwise required to be consolidated in EQT’s results provides useful information to an EQT investor. Adjusted operating cash flow attributable to EQT also excludes current taxes on transactions, cash exploration expense, non-recurring tax benefits and cash rig release expenses in order to adjust for the cash impact of these activities on operating activities of the period. Management believes this will enhance the comparability of results. Operating cash flow and adjusted operating cash flow attributable to EQT should not be considered as alternatives to net cash provided by operating activities presented in accordance with GAAP.
The tables below reconcile 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-Q for the quarter ended September 30, 2016.
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
(thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Net income (loss) | $ | 70,104 | $ | 100,233 | $ | (22,278 | ) | $ | 385,148 | |||||||||||
Add back / (deduct): | ||||||||||||||||||||
Depreciation, depletion and amortization | 237,088 | 208,227 | 682,948 | 599,791 | ||||||||||||||||
Asset and lease impairments,
non-cash |
1,435 | 6,576 | 5,498 | 35,004 | ||||||||||||||||
Deferred income tax expense (benefit) | 19,855 | 116,967 | (145,739 | ) | (78,958 | ) | ||||||||||||||
(Gain) loss on derivatives not designated as hedges | (93,356 | ) | (161,263 | ) | 32,342 | (209,114 | ) | |||||||||||||
Cash settlements received on derivatives not designated as hedges | 27,287 | 32,099 | 222,516 | 70,874 | ||||||||||||||||
Non-cash incentive compensation | 10,674 | 13,193 | 34,551 | 41,622 | ||||||||||||||||
Pension settlement charge | − | − | 9,403 | − | ||||||||||||||||
Other items, net | (10,102 | ) | (3,262 | ) | (22,034 | ) | (8,538 | ) | ||||||||||||
Operating cash flow: |
|
$ | 262,985 | $ | 312,770 | $ | 797,207 | $ | 835,829 | |||||||||||
Add back / (deduct): | ||||||||||||||||||||
Changes in other assets and liabilities | 11,310 | (68,579 | ) | (29,508 | ) | 64,389 | ||||||||||||||
Net cash provided by operating activities | $ | 274,295 | $ | 244,191 | $ | 767,699 | $ | 900,218 | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
(thousands) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
Operating cash flow (a non-GAAP measure reconciled above) | $ | 262,985 | $ | 312,770 | $ | 797,207 | $ | 835,829 | ||||||||||||
(Deduct) / add back: | ||||||||||||||||||||
EQT Midstream Partners adjusted EBITDA(1) | (136,036 | ) | (113,378 | ) | (415,743 | ) | (320,404 | ) | ||||||||||||
Cash distribution payable to EQT (2) | 39,553 | 24,930 | 107,632 | 70,856 | ||||||||||||||||
Exploration expense, cash | 1,236 | 1,600 | 3,887 | 5,014 | ||||||||||||||||
Rig release expenses, cash | − | 3,529 | − | 8,697 | ||||||||||||||||
Current taxes on transactions(3) | − | − | − | 150,425 | ||||||||||||||||
Non recurring tax benefits | − | (81,031 | ) | − | (50,669 | ) | ||||||||||||||
Adjusted operating cash flow attributable to EQT | $ | 167,738 | $ | 148,420 | $ | 492,983 | $ | 699,748 | ||||||||||||
|
(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, 2016 and 2015 represents the distribution payable from EQGP to EQT. | |
(3) |
Represents current tax expense related to the sale of the Northern West Virginia Marcellus Gathering System (NWV Gathering). | |
EQT has not provided projected net cash provided by operating activities or a reconciliation of projected adjusted operating cash flow attributable to EQT 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. 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 reconciliation of projected adjusted operating cash flow attributable to EQT to projected net cash provided by operating activities, without unreasonable effort.
EQT Production Adjusted Operating Revenue
The table below reconciles EQT Production adjusted operating revenue, a non-GAAP supplemental financial measure, to EQT Corporation total operating revenue, 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, 2016.
EQT Production adjusted operating revenue (also referred to as total natural gas and liquids sales, including cash settled derivatives) 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 revenue should not be considered as an alternative to EQT Corporation total operating revenue presented in accordance with GAAP. 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 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 the revenue from natural gas sales is not impacted by the often volatile fluctuations in the fair value of derivatives prior to settlement. EQT Production adjusted operating revenue also excludes “Net marketing services” because management considers this revenue to be unrelated to the revenue for its natural gas and liquids production. “Net marketing services” includes 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 for investors for evaluating period-over-period earnings.
Calculation of EQT Production Adjusted | Three Months Ended | Nine Months Ended | ||||||||||||||||||
Operating Revenue | September 30, | September 30, | ||||||||||||||||||
$ in thousands (unless noted) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
EQT Production total operating revenue | $ | 502,546 | $ | 531,284 | $ | 1,052,516 |
|
$ |
1,563,830 |
|||||||||||
(Deduct) / add back: | ||||||||||||||||||||
(Gain) loss on derivatives not designated as hedges | (93,356 | ) | (160,458 | ) | 32,342 |
|
(209,881 |
) |
||||||||||||
Net cash settlements received on derivatives not designated as hedges
not designated as hedges |
27,287 | 33,170 | 222,516 |
|
69,714 |
|||||||||||||||
Premiums paid for derivatives that settled during the period | (558 | ) | (1,029 | ) | (1,574 | ) | (3,054 | ) | ||||||||||||
Net marketing services | (5,251 | ) | (4,886 | ) | (11,960 | ) | (27,845 | ) | ||||||||||||
EQT Production adjusted operating revenue, a non-GAAP financial measure | $ | 430,668 | $ | 398,081 | $ | 1,293,840 | $ | 1,392,764 | ||||||||||||
Total sales volumes (MMcfe) | 196,085 | 156,296 | 560,568 | 448,545 | ||||||||||||||||
Average realized price ($/Mcfe) | $ | 2.20 | $ | 2.55 | $ | 2.31 | $ | 3.11 | ||||||||||||
EQT Production total operating revenue | $ | 502,546 | $ | 531,284 | $ | 1,052,516 | $ | 1,563,830 | ||||||||||||
EQT Midstream total operating revenue | 214,335 | 198,579 | 653,362 | 599,235 | ||||||||||||||||
Less: intersegment revenue, net | (160,155 | ) | (145,885 | ) | (476,552 | ) | (424,683 | ) | ||||||||||||
EQT Corporation total operating revenue, as reported in accordance with GAAP | $ | 556,726 | $ | 583,978 | $ | 1,229,326 | $ | 1,738,382 | ||||||||||||
EQT Production Adjusted Operating (Loss) Income
The table below reconciles EQT Production adjusted operating (loss) income, a non-GAAP supplemental financial measure, to EQT Corporation operating (loss) income, 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, 2016.
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 (loss) income 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, restructuring charges, a pension settlement charge, a legal reserve charge, impairments and rig release expenses and non-cash gains (losses) on sales / exchanges of assets (if applicable). 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) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
EQT Corporation operating income (loss), as reported in accordance with GAAP | $ | 108,457 | $ | 170,055 | $ | (88,834 | ) | $ | 517,848 | |||||||||||
Add back / (deduct): | ||||||||||||||||||||
Unallocated expenses | 2,260 | (685 | ) | 10,684 | 8,411 | |||||||||||||||
EQT Midstream operating income, as reported on segment page | (132,727 | ) | (113,010 | ) | (399,114 | ) | (350,942 | ) | ||||||||||||
EQT Production operating (loss) income, as reported on segment page | $ | (22,010 | ) | $ | 56,360 | $ | (477,264 | ) | $ | 175,317 | ||||||||||
Add back / (deduct): | ||||||||||||||||||||
(Gain) loss on derivatives not designated as hedges | (93,356 | ) | (160,458 | ) | 32,342 | (209,881 | ) | |||||||||||||
Net cash settlements received on derivatives not designated as hedges | 27,287 | 33,170 | 222,516 | 69,714 | ||||||||||||||||
Premiums paid for derivatives that settled during the period | (558 | ) | (1,029 | ) | (1,574 | ) | (3,054 | ) | ||||||||||||
Pension settlement charge | − | − | 1,709 | − | ||||||||||||||||
Legal reserve charge | 4,755 | 1,926 | 11,583 | 2,938 | ||||||||||||||||
Asset impairments and rig release expenses | 1,435 | 10,106 | 5,498 | 41,780 | ||||||||||||||||
Restructuring charges | − | − | 2,029 | − | ||||||||||||||||
EQT Production adjusted operating (loss) income | $ | (82,447 | ) | $ | (59,925 | ) | $ | (203,161 | ) | $ | 76,814 | |||||||||
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
As used in this news release, EBITDA is defined as earnings before interest, taxes, depreciation, and amortization expense. EBITDA is not a financial measure calculated in accordance with GAAP. EBITDA is a non-GAAP supplemental financial measure that EQT’s management and external users of EQT’s financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: (i) EQT’s performance versus prior periods; (ii) EQT’s operating performance as compared to other companies in its industry; (iii) the ability of EQT’s assets to generate sufficient cash flow to make distributions to its investors; (iv) EQT’s ability to incur and service debt and fund capital expenditures; and (v) the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
EQT has not provided projected net income (loss) or reconciliations of projected EBITDA to projected net income (loss), the most comparable financial measure calculated in accordance with GAAP. EQT does not provide guidance with respect to its average realized price or income taxes, among other items, that are reconciling items between EBITDA and net income (loss). 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. Further, management believes a reliable forecasted effective tax rate is not available because small fluctuations in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate for 2016. Consequently, EQT is not able to provide a projected net income (loss) that would be useful to investors. Therefore, projected net income (loss) and reconciliations of projected EBITDA to projected net income (loss) are not available without unreasonable effort.
EQT Midstream Partners Adjusted EBITDA
As used in this news release, EQT Midstream Partners adjusted EBITDA means EQM’s net income plus EQM’s interest expense, depreciation and amortization expense, income tax expense (if applicable), and non-cash long-term compensation expense (if applicable) less EQM’s equity income, AFUDC-equity, capital lease payments, and adjusted EBITDA attributable to the NWV Gathering 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, 2016.
EQM has not provided reconciliations of projected EQT Midstream Partners adjusted EBITDA to projected EQM net income, the most comparable financial measure calculated in accordance with GAAP. 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 and 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 forecast of EQM net income and EQT Midstream Partners adjusted EBITDA to allow for the variability in the timing of 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) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income, EQT Midstream Partners | $ | 126,568 | $ | 94,116 | $ | 380,395 | $ | 280,741 | ||||||||
Add: | ||||||||||||||||
Interest expense | 7,662 | 11,264 | 27,311 | 34,361 | ||||||||||||
Depreciation and amortization expense | 15,704 | 13,217 | 46,293 | 37,402 | ||||||||||||
Income tax expense | - | - | - | 6,703 | ||||||||||||
Non-cash long-term compensation expense | - | 328 | 195 | 1,133 | ||||||||||||
Less: | ||||||||||||||||
Equity income | (2,700 | ) | (753 | ) | (6,139 | ) | (1,147 | ) | ||||||||
AFUDC - equity | (7,412 | ) | (1,716 | ) | (15,126 | ) | (3,599 | ) | ||||||||
Capital lease payments for Allegheny Valley Connector (a) | (3,786 | ) | (3,078 | ) | (17,186 | ) | (15,349 | ) | ||||||||
Adjusted EBITDA attributable to NWV Gathering prior to acquisition (b) | - | - | - | (19,841 | ) | |||||||||||
EQT Midstream Partners Adjusted EBITDA |
|
$ | 136,036 | $ | 113,378 | $ | 415,743 | $ | 320,404 | |||||||
(a) | Reflects capital lease payments due under the lease. These lease payments are generally made monthly on a one-month lag. | |
(b) | Adjusted EBITDA attributable to NWV Gathering prior to acquisition for the periods presented was excluded from EQM’s adjusted EBITDA calculations as these amounts were generated by NWV Gathering prior to EQM’s acquisition; therefore, they were not amounts that could have been distributed to EQM’s unitholders. Adjusted EBITDA attributable to NWV Gathering for the nine months ended September 30, 2015 was calculated as net income of $11.1 million plus depreciation and amortization expense of $2.0 million plus income tax expense of $6.7 million. | |
Third Quarter 2016 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.
Additional Information
This news release and the description contained herein is for informational purposes only and is not a recommendation, an offer to buy, or the solicitation of an offer to sell any shares of common stock of Trans Energy, Inc. (Trans Energy). EQT Corporation, and its wholly-owned subsidiary, WV Merger Sub, Inc. (Merger Sub), will file with the U.S. Securities and Exchange Commission (SEC) a Tender Offer Statement on Schedule TO containing an offer to purchase (Offer to Purchase), a form of letter of transmittal (Letter of Transmittal) and other related documents and, thereafter, Trans Energy will file with the SEC a Solicitation/Recommendation Statement on Schedule 14D9 with respect to the tender offer. THESE DOCUMENTS, AS EACH MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, CONTAIN IMPORTANT INFORMATION ABOUT THE TENDER OFFER AND TRANS ENERGY SHAREHOLDERS ARE URGED TO READ THEM CAREFULLY. Shareholders of Trans Energy may to obtain a free copy of these documents and other documents filed by Trans Energy, EQT or Merger Sub with the SEC at the website maintained by the SEC at www.sec.gov. In addition, shareholders of Trans Energy may obtain a free copy of these documents by visiting the “Investors” section of Trans Energy’s website at http://www.transenergyinc.com/investors, or shareholders may obtain a free copy of these documents from the information agent named in the Offer to Purchase.
The Offer to Purchase is not being made to holders of (nor will tenders be accepted from or on behalf of holders of) shares of Trans Energy’s common stock in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the securities, blue sky or other laws of such jurisdiction. In those jurisdictions where applicable laws or regulations require the Offer to Purchase to be made by a licensed broker or dealer, the Offer to Purchase shall be deemed to be made on behalf of Merger Sub by one or more registered brokers or dealers licensed under the laws of such jurisdiction to be designated by Merger Sub or EQT.
Cautionary Statements
The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We use certain terms, such as “EUR” (estimated ultimate recovery) and “3P” (proved, probable and possible), that the SEC’s guidelines prohibit us from including in filings with the SEC. These measures are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain.
Total sales volume per day (or daily production) is an operational estimate of the daily production or sales volume on a typical day (excluding curtailments).
Disclosures in this news release contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Statements that do not relate strictly to historical or current facts are forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this news release specifically include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of the Company and its subsidiaries, including guidance regarding the Company’s strategy to develop its Marcellus, deep Utica, and other reserves; drilling plans and programs (including the number, type, feet of pay and location of wells to be drilled and number and type of drilling rigs); projected natural gas prices, basis and average differential; total resource potential, reserves, EUR, expected decline curve and reserve replacement ratio; projected Company and third party production sales volume and growth rates (including liquids sales volume and growth rates); projected unit costs and well costs; projected net marketing services revenues; projected gathering and transmission volume and growth rates; the Company’s access to, and timing of, capacity on pipelines; infrastructure programs (including the timing, cost and capacity of the transmission and gathering expansion projects); the timing, cost, capacity and expected interconnects with facilities and pipelines of the Mountain Valley Pipeline (MVP) project; the ultimate terms, partners and structure of the MVP joint venture; technology (including drilling and completion techniques); projected EBITDA; acquisition transactions, including the expected timing of closing of, and the Company's ability to complete, pending acquisition transactions; monetization transactions, including asset sales (dropdowns) to EQT Midstream Partners, LP (EQM) and other 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 EQT GP Holdings, LP (EQGP); internal rate of return (IRR) and returns per well; projected capital contributions and expenditures; potential future impairments of the Company’s assets; the amount and timing of any repurchases under the Company’s share repurchase authorization; liquidity and financing requirements, including funding sources and availability; the expected use of proceeds from equity offerings; changes in the Company’s or EQM’s credit ratings; projected net income attributable to noncontrolling interests, adjusted operating cash flow attributable to EQT Corporation, revenue and cash-on-hand; hedging strategy; the effects of government regulation and litigation; projected dividend and distribution amounts and rates; the effects of government regulation and litigation; 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, 2015, 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.
2016 Current Guidance
Based on current NYMEX natural gas prices adjusted operating cash flow attributable to EQT is projected to be approximately $750 million for 2016, which includes approximately $150 million from EQT’s interest in EQGP. See the Non-GAAP Disclosures section for important information regarding the non-GAAP financial measures included in this news release, including the projections for adjusted operating cash flow attributable to EQT and EBITDA.
PRODUCTION |
||||||||
Q4 2016 | 2016 | |||||||
Total production sales volume (Bcfe) | 189 – 194 | 750 – 755 | ||||||
Total liquids sales volume (Mbbls) | 3,095 – 3,185 | 11,825 – 11,915 | ||||||
Ethane sales volume (Mbbls) | 535 – 585 | 1,755 – 1,805 | ||||||
NGL & oil volume sales volume (Mbbls) | 2,560 – 2,600 | 10,070 – 10,110 | ||||||
Marcellus / Utica Rigs | 4 | |||||||
Top-hole rigs | 3 | |||||||
Unit Costs ($ / Mcfe) | ||||||||
Gathering to EQT Midstream | $ | 0.65 – 0.67 | ||||||
Transmission to EQT Midstream | $ | 0.19 – 0.20 | ||||||
Third-party gathering and transmission | $ | 0.29 – 0.30 | ||||||
Processing | $ | 0.16 – 0.17 | ||||||
LOE, excluding production taxes | $ | 0.08 – 0.10 | ||||||
Production taxes | $ | 0.05 – 0.06 | ||||||
SG&A | $ | 0.17 – 0.19 | ||||||
DD&A | $ | 1.06 – 1.08 | ||||||
Average differential ($ / Mcf)* | $ | (1.00) – (0.90) | $ | (0.85) – (0.75) | ||||
Net marketing services ($MM) | $ | (2.5) – 2.5 | $ | 7 – 17 | ||||
FINANCIAL |
||||||||
Net income attributable to noncontrolling interest ($MM) |
$ |
81 |
$ |
320 |
||||
EBITDA ($MM) |
||||||||
EQM adjusted EBITDA |
$ |
568 – 573 |
||||||
Huron gathering |
35 – 40 |
|||||||
Other EQT Midstream** |
30 – 35 |
|||||||
Total consolidated Midstream |
$ |
633 – 648 |
||||||
Total Production EBITDA*** |
580 – 590 |
|||||||
Total EBITDA |
$ |
1,213 – 1,238 |
||||||
* | Includes fixed price physical sales of 9 Bcf at average prices of $3.09 per Mcf for October-December 2016. | |
** | Represents EBITDA earned at EQT prior to drop-down to EQM | |
*** | Excludes non-cash derivative losses. | |
EQT CORPORATION AND SUBSIDIARIES | |||||||||||||||||
Statements of Consolidated Operations (Unaudited) | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
(Thousands except per share amounts) | |||||||||||||||||
Revenues: | |||||||||||||||||
Sales of natural gas, oil and NGLs | $ | 403,939 | $ | 365,940 | $ 1,072,898 | $ | 1,326,104 | ||||||||||
Pipeline and marketing services | 59,431 | 56,775 | 188,770 | 203,164 | |||||||||||||
Gain (loss) on derivatives not designated as hedges | 93,356 | 161,263 | (32,342 | ) | 209,114 | ||||||||||||
Total operating revenues | 556,726 | 583,978 | 1,229,326 | 1,738,382 | |||||||||||||
Operating expenses: | |||||||||||||||||
Transportation and processing | 89,883 | 71,996 | 251,283 | 207,129 | |||||||||||||
Operation and maintenance | 31,185 | 32,385 | 91,921 | 92,693 | |||||||||||||
Production | 26,058 | 32,505 | 85,998 | 95,353 | |||||||||||||
Exploration | 2,671 | 8,177 | 9,385 | 32,153 | |||||||||||||
Selling, general and administrative | 61,384 | 60,633 | 196,625 | 189,163 | |||||||||||||
Depreciation, depletion and amortization | 237,088 | 208,227 | 682,948 | 599,791 | |||||||||||||
Impairment of long-lived assets | - | - | - | 4,252 | |||||||||||||
Total operating expenses | 448,269 | 413,923 | 1,318,160 | 1,220,534 | |||||||||||||
Operating income (loss) | 108,457 | 170,055 | (88,834 | ) | 517,848 | ||||||||||||
Other income | 10,715 | 2,661 | 23,199 | 6,289 | |||||||||||||
Interest expense | 35,984 | 36,547 | 108,469 | 110,596 | |||||||||||||
Income (loss) before income taxes | 83,188 | 136,169 | (174,104 | ) | 413,541 | ||||||||||||
Income tax expense (benefit) | 13,084 | 35,936 | (151,826 | ) | 28,393 | ||||||||||||
Net income (loss) | 70,104 | 100,233 | (22,278 | ) | 385,148 | ||||||||||||
Less: Net income attributable to noncontrolling interests | 78,120 | 59,446 | 238,747 | 165,398 | |||||||||||||
Net (loss) income attributable to EQT Corporation | $ | (8,016 | ) | $ | 40,787 | $ (261,025 | ) | $ | 219,750 | ||||||||
Earnings per share of common stock attributable to EQT Corporation: | |||||||||||||||||
Basic: | |||||||||||||||||
Weighted average common stock outstanding | 172,867 | 152,551 | 165,197 | 152,326 | |||||||||||||
Net (loss) income | $ | (0.05 | ) | $ | 0.27 | $ (1.58 | ) | $ | 1.44 | ||||||||
Diluted: | |||||||||||||||||
Weighted average common stock outstanding | 172,867 | 152,854 | 165,197 | 152,789 | |||||||||||||
Net (loss) income | $ | (0.05 | ) | $ | 0.27 | $ (1.58 | ) | $ | 1.44 | ||||||||
Dividends declared per common share | $ | 0.03 | $ | 0.03 | $ 0.09 | $ | 0.09 | ||||||||||
EQT CORPORATION | ||||||||||||||||||||
PRICE RECONCILIATION | ||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
in thousands (unless noted) | 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
NATURAL GAS | ||||||||||||||||||||
Sales volume (MMcf) | 175,191 | 141,367 | 508,206 | 405,743 | ||||||||||||||||
NYMEX price ($/MMBtu) (a) | $ | 2.81 | $ | 2.77 | $ | 2.29 | $ | 2.80 | ||||||||||||
Btu uplift | $ | 0.27 | $ | 0.28 | $ | 0.21 | $ | 0.26 | ||||||||||||
Natural gas price ($/Mcf) | $ | 3.08 | $ | 3.05 | $ | 2.50 | $ | 3.06 | ||||||||||||
Basis ($/Mcf) (b) | $ | (1.21 | ) | $ | (1.16 | ) | $ | (0.80 | ) | $ | (0.64 | ) | ||||||||
Cash settled basis swaps (not designated as hedges) ($/Mcf) | - | 0.01 | 0.05 | (0.02 | ) | |||||||||||||||
Average differential, including cash settled basis swaps ($/Mcf) | $ | (1.21 | ) | $ | (1.15 | ) | $ | (0.75 | ) | $ | (0.66 | ) | ||||||||
Average adjusted price ($/Mcf) | $ | 1.87 | $ | 1.91 | $ | 1.75 | $ | 2.39 | ||||||||||||
Cash settled derivatives (cash flow hedges) ($/Mcf) | 0.14 | 0.46 | 0.14 | 0.50 | ||||||||||||||||
Cash settled derivatives (not designated as hedges) ($/Mcf) | 0.15 | 0.21 | 0.38 | 0.19 | ||||||||||||||||
Average natural gas price, including cash settled derivatives ($/Mcf) | $ | 2.16 | $ | 2.58 | $ | 2.27 | $ | 3.08 | ||||||||||||
Natural gas sales, including cash settled derivatives | $ | 378,484 | $ | 365,266 | $ | 1,155,898 | $ | 1,251,140 | ||||||||||||
LIQUIDS | ||||||||||||||||||||
NGLs: (excluding ethane) |
||||||||||||||||||||
Sales volume (MMcfe)(c) | 14,536 | 13,827 | 41,731 | 39,552 | ||||||||||||||||
Sales volume (Mbbls) | 2,422 | 2,305 | 6,955 | 6,592 | ||||||||||||||||
Price ($ / Bbl) | $ | 17.13 | $ | 11.12 | $ | 16.42 | $ | 18.11 | ||||||||||||
NGL sales | $ | 41,508 | $ | 25,628 | $ | 114,188 | $ | 119,403 | ||||||||||||
Ethane: | ||||||||||||||||||||
Sales volume (MMcfe)(c) | 5,234 | - | 7,310 | - | ||||||||||||||||
Sales volume (Mbbls) | 872 | - | 1,218 | - | ||||||||||||||||
Price ($ / Bbl) | $ | 4.55 | $ | - | $ | 4.59 | $ | - | ||||||||||||
Ethane sales | $ | 3,966 | $ | - | $ | 5,590 | $ | - | ||||||||||||
Oil: | ||||||||||||||||||||
Sales volume (MMcfe)(c) | 1,124 | 1,102 | 3,321 | 3,250 | ||||||||||||||||
Sales volume (Mbbls) | 188 | 184 | 554 | 542 | ||||||||||||||||
Price ($ / Bbl) | $ | 35.81 | $ | 39.13 | $ | 32.81 | $ | 41.02 | ||||||||||||
Oil sales | $ | 6,710 | $ | 7,187 | $ | 18,164 | $ | 22,221 | ||||||||||||
Total liquids sales volume (MMcfe)(c) | 20,894 | 14,929 | 52,362 | 42,802 | ||||||||||||||||
Total liquids sales volume (Mbbls) | 3,482 | 2,489 | 8,727 | 7,134 | ||||||||||||||||
Liquids sales | $ | 52,184 | $ | 32,815 | $ | 137,942 | $ | 141,624 | ||||||||||||
TOTAL PRODUCTION | ||||||||||||||||||||
Total natural gas & liquids sales, including cash settled derivatives (d) | $ | 430,668 | $ | 398,081 | $ | 1,293,840 | $ | 1,392,764 | ||||||||||||
Total sales volume (MMcfe) | 196,085 | 156,296 | 560,568 | 448,545 | ||||||||||||||||
Average realized price ($/Mcfe) | $ | 2.20 | $ | 2.55 | $ | 2.31 | $ | 3.11 | ||||||||||||
(a) | The Company’s volume weighted NYMEX natural gas price (actual average NYMEX natural gas price ($/MMBtu) was $2.81 and $2.77 for the three months ended September 30, 2016 and 2015, respectively, and $2.29 and $2.80 for the nine months ended September 30, 2016 and 2015, 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 financial measure. | |
Three Months Ended | Nine Months Ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||
Total natural gas & liquids sales, including cash settled derivatives above (d) | $ | 430,668 | $ | 398,081 | $ | 1,293,840 | $ | 1,392,764 | ||||||||||||
(Deduct) add: | ||||||||||||||||||||
Net cash settlements received on derivatives not designated as hedges | (27,287 | ) | (33,170 | ) | (222,516 | ) | (69,714 | ) | ||||||||||||
Premiums paid for derivatives that settled during the period | 558 | 1,029 | 1,574 | 3,054 | ||||||||||||||||
Production sales | $ | 403,939 | $ | 365,940 | $ | 1,072,898 | $ | 1,326,104 | ||||||||||||
EQT PRODUCTION | ||||||||||||||||||
RESULTS OF OPERATIONS | ||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||
September 30, | September 30, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
OPERATIONAL DATA | ||||||||||||||||||
Sales volume detail (MMcfe): | ||||||||||||||||||
Marcellus (a) | 171,468 | 129,645 | 486,439 | 373,522 | ||||||||||||||
Other (b) | 24,617 | 26,651 | 74,129 | 75,023 | ||||||||||||||
Total production sales volumes (c) | 196,085 | 156,296 | 560,568 | 448,545 | ||||||||||||||
Average daily sales volumes (MMcfe/d) | 2,131 | 1,699 | 2,046 | 1,643 | ||||||||||||||
Average realized price ($/Mcfe) | $ | 2.20 | $ | 2.55 | $ | 2.31 | $ | 3.11 | ||||||||||
Gathering to EQT Midstream ($/Mcfe) | $ | 0.62 | $ | 0.72 | $ | 0.66 | $ | 0.74 | ||||||||||
Transmission to EQT Midstream ($/Mcfe) | $ | 0.19 | $ | 0.19 | $ | 0.19 | $ | 0.19 | ||||||||||
Third party gathering and transmission ($/Mcfe) | $ | 0.29 | $ | 0.29 | $ | 0.29 | $ | 0.29 | ||||||||||
Processing ($/Mcfe) | $ | 0.17 | $ | 0.17 | $ | 0.16 | $ | 0.17 | ||||||||||
Lease operating expenses (LOE), excluding production taxes ($/Mcfe) | $ | 0.09 | $ | 0.12 | $ | 0.09 | $ | 0.12 | ||||||||||
Production taxes ($/Mcfe) | $ | 0.05 | $ | 0.09 | $ | 0.06 | $ | 0.09 | ||||||||||
Production depletion ($/Mcfe) | $ | 1.06 | $ | 1.16 | $ | 1.06 | $ | 1.16 | ||||||||||
Depreciation, depletion and amortization (DD&A) (thousands): | ||||||||||||||||||
Production depletion | $ | 207,120 | $ | 181,857 | $ | 594,408 | $ | 521,741 | ||||||||||
Other DD&A | 2,946 | 2,420 | 8,358 | 7,330 | ||||||||||||||
Total DD&A | $ | 210,066 | $ | 184,277 | $ | 602,766 | $ | 529,071 | ||||||||||
Capital expenditures (thousands) | $ | 621,377 | $ | 451,358 | $ | 1,090,033 | $ | 1,453,647 | ||||||||||
FINANCIAL DATA (thousands) | ||||||||||||||||||
Revenues: | ||||||||||||||||||
Production sales | $ | 403,939 | $ | 365,940 | $ | 1,072,898 | $ | 1,326,104 | ||||||||||
Net marketing services | 5,251 | 4,886 | 11,960 | 27,845 | ||||||||||||||
Gain (loss) on derivatives not designated as hedges | 93,356 | 160,458 | (32,342 | ) | 209,881 | |||||||||||||
Total operating revenues | $ | 502,546 | $ | 531,284 | $ | 1,052,516 | $ | 1,563,830 | ||||||||||
Operating expenses: | ||||||||||||||||||
Gathering | 135,113 | 119,507 | 403,514 | 348,317 | ||||||||||||||
Transmission | 81,456 | 68,044 | 235,196 | 198,697 | ||||||||||||||
Processing | 33,332 | 26,934 | 88,429 | 76,505 | ||||||||||||||
LOE, excluding production taxes | 17,419 | 18,808 | 50,127 | 53,615 | ||||||||||||||
Production taxes | 9,094 | 13,698 | 36,326 | 41,739 | ||||||||||||||
Exploration | 2,670 | 8,163 | 9,384 | 32,128 | ||||||||||||||
Selling, general and administrative (SG&A) | 35,406 | 35,493 | 104,038 | 104,189 | ||||||||||||||
DD&A | 210,066 | 184,277 | 602,766 | 529,071 | ||||||||||||||
Impairment of long-lived assets | - | - | - | 4,252 | ||||||||||||||
Total operating expenses | 524,556 | 474,924 | 1,529,780 | 1,388,513 | ||||||||||||||
Operating (loss) income | $ | (22,010 | ) | $ | 56,360 | $ | (477,264 | ) | $ | 175,317 | ||||||||
(a) | Includes Upper Devonian wells. | |
(b) | Includes 3,847 and 11,641 MMcfe of deep Utica sales volume for the three and nine months ended September 30, 2016, respectively; and 1,731 MMcfe of deep Utica sales volume for both the three and nine months ended September 30, 2015. | |
(c) | NGLs, ethane and crude oil were converted to Mcfe at the rate of six Mcfe per barrel for all periods. | |
EQT MIDSTREAM | ||||||||||||||||
RESULTS OF OPERATIONS | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
OPERATIONAL DATA | ||||||||||||||||
Operating revenues (thousands): | ||||||||||||||||
Gathering | ||||||||||||||||
Firm reservation fee revenues | $ | 84,848 | $ 68,205 | $ | 252,993 | $ | 194,869 | |||||||||
Volumetric based fee revenues: | ||||||||||||||||
Usage fees under firm contracts (a) | 10,027 | 8,815 | 31,883 | 25,567 | ||||||||||||
Usage fees under interruptible contracts | 41,829 | 49,435 | 125,192 | 158,288 | ||||||||||||
Total volumetric based fee revenues | 51,856 | 58,250 | 157,075 | 183,855 | ||||||||||||
Total gathering revenues | $ | 136,704 | $ 126,455 | $ | 410,068 | $ | 378,724 | |||||||||
Transmission | ||||||||||||||||
Firm reservation fee revenues | $ | 52,655 | $ 50,657 | $ | 169,325 | $ | 162,602 | |||||||||
Volumetric based fee revenues: | ||||||||||||||||
Usage fees under firm contracts (a) | 14,470 | 11,129 | 41,803 | 29,706 | ||||||||||||
Usage fees under interruptible contracts | 2,340 | 897 | 7,214 | 3,422 | ||||||||||||
Total volumetric based fee revenues | 16,810 | 12,026 | 49,017 | 33,128 | ||||||||||||
Total transmission revenues | $ | 69,465 | $ 62,683 | $ | 218,342 | $ | 195,730 | |||||||||
Storage, marketing and other revenues | 8,166 | 9,441 | 24,952 | 24,781 | ||||||||||||
Total operating revenues | $ | 214,335 | $ 198,579 | $ | 653,362 | $ | 599,235 | |||||||||
Gathered volumes (BBtu per day): | ||||||||||||||||
Firm reservation | 1,563 | 1,150 | 1,507 | 1,085 | ||||||||||||
Volumetric based services (b) | 855 | 947 | 871 | 967 | ||||||||||||
Total gathered volumes | 2,418 | 2,097 | 2,378 | 2,052 | ||||||||||||
Gathering and compression expense ($/MMBtu) | $ | 0.10 | $ 0.12 | $ | 0.10 | $ | 0.12 | |||||||||
Transmission pipeline throughput (BBtu per day): | ||||||||||||||||
Firm capacity reservation | 1,440 | 1,751 | 1,515 | 1,866 | ||||||||||||
Volumetric based services (b) | 610 | 300 | 556 | 257 | ||||||||||||
Total transmission pipeline throughput | 2,050 | 2,051 | 2,071 | 2,123 | ||||||||||||
Average contracted firm transmission reservation commitments (BBtu per day) |
2,365 |
2,390 | 2,591 | 2,567 | ||||||||||||
Capital expenditures (thousands) | $ | 171,645 | $ 130,902 | $ | 513,776 | $ | 368,019 | |||||||||
FINANCIAL DATA (thousands) | ||||||||||||||||
Total operating revenues | $ | 214,335 | $ 198,579 | $ | 653,362 | $ | 599,235 | |||||||||
Operating expenses: | ||||||||||||||||
Operating and maintenance (O&M) | 30,867 | 35,691 | 92,162 | 100,399 | ||||||||||||
SG&A | 23,804 | 26,048 | 82,138 | 77,477 | ||||||||||||
DD&A | 26,937 | 23,830 | 79,948 | 70,417 | ||||||||||||
Total operating expenses | 81,608 | 85,569 | 254,248 | 248,293 | ||||||||||||
Operating income |
$ | 132,727 | $ 113,010 | $ | 399,114 | $ | 350,942 | |||||||||
|
(a) | Includes commodity charges and fees on volumes gathered or transported in excess of firm contracted capacity. | |
(b) | Includes volumes gathered or transported under interruptible contracts and volumes in excess of firm contracted capacity. |
CONTACT:
EQT analyst inquiries:
Patrick Kane – Chief
Investor Relations Officer
412-553-7833
pkane@eqt.com
or
EQT
Midstream Partners / EQT GP Holdings analyst inquiries:
Nate
Tetlow – Investor Relations Director
412-553-5834
ntetlow@eqt.com
or
Media
inquiries:
Natalie Cox – Corporate Director, Communications
412-395-3941
ncox@eqt.com