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EQT CORP. Reports Operating Results (10-Q)

July 26, 2012 | About:
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10qk

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EQT CORP. (EQT) filed Quarterly Report for the period ended 2012-06-30.

Eqt Corporation has a market cap of $8.46 billion; its shares were traded at around $55.76 with a P/E ratio of 27.3 and P/S ratio of 5.2. The dividend yield of Eqt Corporation stocks is 1.6%. Eqt Corporation had an annual average earning growth of 7.8% over the past 10 years.

Highlight of Business Operations:

three months ended June 30, 2011, the net impact on operating revenues consisted of a $2.1 million gain related to the exclusion of the spot/forward differential from the assessment of effectiveness and a $0.7 million loss due to changes in basis. For the six months ended June 30, 2012, the net impact on operating revenues consisted of a $2.8 million gain due to the exclusion of the spot/forward differential from the assessment of effectiveness and a $0.4 million gain due to changes in basis. For the six months ended June 30, 2011, the net impact on operating revenues consisted of a $1.5 million gain related to the exclusion of the spot/forward differential from the assessment of effectiveness and a $0.3 million loss due to changes in basis.

The average realized sales price to EQT Corporation for production sales volumes was $4.31 per Mcfe during the six months ended 2012 compared to $5.52 per Mcfe in the same period of the prior year. The average NYMEX natural gas price decreased from $4.21 in 2011 to $2.48 in 2012. Hedging activities resulted in an increase in the price of production sales volumes of $1.52 per Mcf in 2012 compared to $0.44 per Mcf in 2011 as a result of higher volumes being hedged and decreases in NYMEX natural gas prices in the current year.

Total operating revenues were $158.6 million for the three months ended June 30, 2012 compared to $196.8 million for the three months ended June 30, 2011. The $38.2 million decrease in operating revenues was primarily due to a 37% decrease in the average wellhead sales price to EQT Production which more than offset a 28% increase in production sales volumes. The $1.54 per Mcfe decrease in the average wellhead sales price to EQT Production was primarily due to a 49% decrease in the average NYMEX price as well as lower NGL and basis prices partially offset by higher hedging gains and lower gathering rates compared to the second quarter of 2011. The average wellhead sales price was also impacted unfavorably in the second quarter of 2012 by $0.14 per Mcfe as a result of an $8.2 million adjustment to recognize financial instrument put premiums which should have been recorded ratably over 2010 and 2011 and by $0.07 per Mcfe for the cost of new transmission capacity on the El Paso 300 line including long-term resale agreements. Management evaluated the size and nature of the put premium adjustment and concluded that the adjustment was not material to the financial statements. The increase in production sales volumes was primarily the result of increased production from the 2011 and 2012 drilling programs, primarily in the Marcellus, as well as the acquisition of producing properties associated with the ANPI transaction in May 2011 which added 0.7 Bcfe of sales volumes in the three months ended June 30, 2012. This increase was partially offset by the normal production decline in the Companys wells.

Total operating revenues were $354.0 million for the six months ended June 30, 2012 compared to $369.9 million for the six months ended June 30, 2011. The $15.9 million decrease in operating revenues was primarily due to a 24% decrease in the average wellhead sales price to EQT Production which more than offset a 27% increase in production sales volumes. The $0.99 per Mcfe decrease in the average wellhead sales price to EQT Production was primarily due to a 41% decrease in the average NYMEX price as well as lower basis and NGL prices partially offset by higher hedging gains and lower gathering rates compared to 2011. The average wellhead sales price was also impacted unfavorably in the first six months of 2012 by $0.07 per Mcfe as a result of an $8.2 million adjustment to recognize financial instrument put premiums which should have been recorded ratably over 2010 and 2011 and favorably by $0.06 per Mcfe for the cost of new transmission capacity on the El Paso 300 line including long-term resale agreements. Management evaluated the size and nature of the put premium adjustment and concluded that the adjustment was not material to the financial statements. The increase in production sales volumes was the result of increased production from the 2011 and 2012 drilling programs, primarily in the Marcellus, as well as the acquisition of producing properties associated with the ANPI transaction in May 2011 which added 2.6 Bcfe of sales volumes in the six months ended June 30, 2012. This increase was partially offset by the normal production decline in the Companys wells.

Net operating revenues were $94.6 million for the first half of 2012 compared to $110.8 million for the first half of 2011. Net operating revenues from residential customers decreased $11.5 million as a result of weather which was 21% warmer than the first half of 2011 (23% warmer than the 30-year National Oceanic and Atmospheric Administration (NOAA) average for the Companys service territory). According to the NOAA, it was the warmest January through March time period on record in the Companys service territory. Commercial and industrial net operating revenues also decreased approximately $3.7 million primarily due to warmer weather and a decrease in performance-based revenues. Off-system and energy services net operating revenues decreased $1.0 million primarily due to lower revenues from asset optimization opportunities realized during the first half of 2012 as compared to the same period in 2011. The decreases in total operating revenues and purchased gas costs were primarily due to lower customer throughput as a result of warmer weather during the first half of 2012 and a decrease in the commodity component of tariff rates.

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