EQT Corporation (EQT), an integrated energy company with an emphasis on natural gas supply activities, posted weaker-than-expected second-quarter 2010 earnings of 20 cents per share, lower than the Zacks Consensus Estimate of 25 cents. However, earnings were in line with the year-earlier results.
Operating revenue in the quarter increased 8.2% year over year to $257.5 million, compared with the Zacks Consensus Estimate of $244 million. Operating income rose more than 16% year over year to $78.5 million.
Operational Performance
EQT Production’s second-quarter operating revenue increased more than 12% year over year to $101 million, reflecting a spike in sales of produced natural gas, partially offset by a drop in wellhead natural gas prices.
Operating income fell 29.3% to $23.8 million. Total operating expense in the quarter soared 37.2% to $77.2 million. Exploration expense in the quarter dropped significantly to $1.1 million. During the quarter under review, 164 gross wells were drilled, of which 128 were horizontals.
EQT Midstream’s operating income of $59 million was up 80% year over year on an increase of 37% registered in total net operating revenue of $111.4 million. Net processing revenue more than doubled to $25.6 million, driven by increased NGL (natural gas liquids) prices and volumes. Net gathering revenue and net transmission revenue increased 25% and 2% to $51 million and $18 million, respectively. Total operating expenses jumped 8.3% to $52.4 million.
EQT Distribution’s net operating revenue fell 9.7% to $29.2 million. The company earned operating income of $4.3 million, down considerably, while operating expenses climbed 8.4% to $24.9 million.
EQT generated operating cash flow of $112.6 million during the quarter.
The company expects 2010 sales of produced natural gas in the range of 129–131 Bcfe, representing approximately 30% growth over 2009.
Our Take
EQT Corporation continues to deliver consistent production growth on the back of its sizable acreage position in Huron Shale and Marcellus Shale plays. Further, an investment-grade balance sheet provides EQT with the financial flexibility to carry out this growth.
Low natural gas prices could challenge this pure gas producer and hinder production growth. A surge in operating expenses is also a threat to the company’s growth trajectory. Hence, we maintain our Neutral recommendation with the Zacks #3 Rank (Neutral).
EQT CORP (EQT): Free Stock Analysis Report
Zacks Investment Research
