EQT Corporation (EQT) reported first quarter earnings from continuing operations of 67 cents, surpassing the Zacks Consensus Estimate by 11 cents. Results compare favorably with 65 cents earned in the prior year quarter.
Including a gain on the sale of the Langley natural gas processing complex and a reduction of certain non-income tax accruals of 15 cents in the quarter, the company reported net income of 82 cents.
Operational Update
Operating revenue in the quarter under review grossed $357.5 million. The 11% year over year improvement was driven by higher production sales volumes as well as gathering volumes and natural gas liquid prices, somewhat mitigated by lower realized natural gas prices and storage, marketing and other net revenues. Results were ahead of the Zacks Consensus Estimate $352 million.
Operating expense in the quarter increased 4% year over year to $159.8 million.
Operating income improved 17% year over year to $197.6 million.
Segment Update
EQT Production‘s first quarter operating revenue increased 20% year over year to $173.0 million, reflecting a spike in volume increase and higher natural gas liquid prices, partially offset by a drop in wellhead natural gas prices.
Total operating expense in the quarter soared 27% year over year to $90.7 million. Exploration expense increased 3% to $1.4 million.
Operating income improved 17% year over year to $197.6 million.
Total sales volume swelled approximately 43% year over year to 43,047 million cubic feet equivalent (MMcfe) in the quarter. The average wellhead sales price was $3.97 per thousand cubic feet equivalent (Mcfe); 16% lower than the year-ago quarter’s level of $4.74.
Under the EQT Midstream segment, net gathering revenues surged 21% year over year to $59 million, owing to a significant growth in the gathered volumes. Net transmission revenues soared 22% to $26.4 million, mainly due to increased sale of capacity associated with the initial phase of the Equitrans Marcellus expansion project, which came online in the last quarter.
However, net storage, marketing and other revenues plunged 32% year over year to $21.2 million, due to reduction of seasonal natural gas price volatility and spreads.
Total operating expenses of the midstream segment declined 18% to $39.9 million.
Operating income increased 26% year over year to $66.6 million in the quarter.
EQT Distribution’s net operating revenue showed a 1.4% year over year increase to reach $77.9 million in the quarter, driven by colder weather.
Operating expense declined 17% year over year due to reduction of non-income tax reserves and lower bad debt expense.
EQT earned an operating income of $53.4 million, up 12.5% year over year.
Financial Update
The company generated operating cash flow of $249.1 million during the quarter, an improvement of 22% year over year.
EQT shelled out $263 million in capital expenditure in the quarter, with $227 million spent on EQT Production, $29 million on EQT Midstream and $6 million on EQT Distribution.
2011 Guidance
EQT projects production sales volumes at 180 Bcfe, a 34% increase from 2010.
Divestiture
In February, EQT completed the sale of its Langley natural gas processing complex to MarkWest Energy Partners for $230.5 million. The company realized a pre-tax gain of $22.8 million on the sale.
Peer Comparison
Dominion Resources (D), which competes with EQT, reported first quarter 2011 operating earnings of 93 cents, beating the Zacks Consensus estimate of 91 cents. Results were however lower versus the year-ago operating earnings of 96 cents largely due to lower merchant generation margins, the absence of earnings from the company’s E&P operations and higher interest expense.
Another peer, Cabot Oil and Gas (COG) reported first quarter operating earnings per share of 20 cents, ahead of the Zacks Consensus Estimate of 12 cents, attributable to higher production.
We maintain our Neutral recommendation on EQT Corporation. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
CABOT OIL & GAS (COG): Free Stock Analysis Report
DOMINION RES VA (D): Free Stock Analysis Report
EQT CORP (EQT): Free Stock Analysis Report
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