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EQT CORP. Reports Operating Results (10-Q)

April 28, 2010 | About:
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10qk

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EQT CORP. (EQT) filed Quarterly Report for the period ended 2010-03-31.

Eqt Corp. has a market cap of $6.3 billion; its shares were traded at around $43.78 with a P/E ratio of 32.1 and P/S ratio of 5. The dividend yield of Eqt Corp. stocks is 2%. Eqt Corp. had an annual average earning growth of 6.5% over the past 10 years.EQT is in the portfolios of Stanley Druckenmiller of Duquesne Capital Management, LLC, RS Investment Management, Bruce Kovner of Caxton Associates, Arnold Schneider of Schneider Capital Management, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

EQT Corporations consolidated net income for the three months ended March 31, 2010 totaled $88.1 million, or $0.65 per diluted share, compared to $72.0 million, or $0.55 per diluted share, reported for the same period a year ago. Several factors contributed to the increase in net income between periods. The Company was favorably impacted by increased produced natural gas sales volumes, increased sales prices for NGLs, higher gathered volumes, and base rate increases for residential customers in the distribution business. These favorable net revenue variances were partially offset by increased depletion expenses resulting from an increased investment in natural gas producing properties and increased natural gas production, increased interest charges resulting from additional long-term debt issued during 2009, increased operating expenses for 2010 and reduced margins in marketing activities. The effective income tax rate decreased in 2010 compared to 2009 as a result of lower limitations on state tax operating losses.

*Average (well-head) sales price is calculated as market price adjusted for hedging activities less deductions for gathering, processing and transmission and NGL revenues included in EQT Midstream revenues. These deductions totaled $2.39 and $1.89 per Mcfe for the three months ended March 31, 2010 and 2009, respectively.

EQT Productions operating income totaled $58.5 million for the three months ended March 31, 2010 compared to $44.4 million for the three months ended March 31, 2009. The $14.1 million increase in operating income was primarily the result of increased produced natural gas sales volumes partially offset by higher depletion, depreciation and amortization and higher selling, general and administrative expenses.

Total operating revenues were $129.0 million for the three months ended March 31, 2010 compared to $97.8 million for the three months ended March 31, 2009. The $31.2 million increase in total operating revenues was primarily due to an increase in produced natural gas sales volumes as well as a 2% increase in the average well-head sales price. The increase in produced natural gas sales volumes was the result of increased production from the 2009 and

2010 drilling programs, primarily in the Huron/Berea and Marcellus Shale plays as the Company drilled 37 more gross horizontal wells in the fourth quarter of 2009 compared to the fourth quarter of 2008. The increase in produced natural gas sales volumes were partially offset by the normal production decline in the Companys wells. The $0.07 per Mcfe increase in the average well-head sales price was due to a $0.41 per Dth (8%) increase in the average NYMEX price and a higher percentage of unhedged gas sales, partially offset by a lower realized hedge price. The operating revenues and recognized price reflect a non-cash benefit for ineffectiveness in cash flow hedges of $2.7 million ($0.09 per Mcfe) in 2010 and a non-cash charge for ineffectiveness in cash flow hedges of $6.2 million ($0.27 per Mcfe) in 2009. The ineffectiveness in the first quarter of 2009 was a non-cash charge related to NYMEX swaps entered into in 2003 and 2004 with maturity dates from 2009 through 2011. The charge was primarily the result of decreases in forecast basis in the Appalachian Basin as compared to basis at the inception of the hedges. At March 31, 2010, the change in the forecasted basis prices resulted in less ineffectiveness on the NYMEX swaps which resulted in a partial reversal of the charge in the first quarter of 2010. The Company evaluates hedge effectiveness on a quarterly basis and, as a result, increases or decreases in location basis may generate gains or losses from time to time.

Operating expenses totaled $70.5 million for the three months ended March 31, 2010 compared to $53.3 million for the three months ended March 31, 2009. The increase in operating expenses was primarily the result of increases in DD&A and in SG&A. The depletion expense increase reflects increases in the unit rate ($6.8 million) and in volumes ($6.8 million). The $0.21 per Mcfe increase in the depletion rate is primarily attributable to the increased investment in oil and gas producing properties. The increase in SG&A was primarily due to personnel costs associated with the growth of the business and a first quarter 2009 favorable adjustment to the reserve for uncollectible accounts. These factors were partially offset by decreases in exploration expense and production taxes. The decrease in exploration expense was due to a reduction in exploration activity compared to the prior year. The decrease in production taxes was due to decreased property taxes partially offset by an increase in severance taxes. The decrease in property taxes was a direct result of the reduction in commodity prices from 2008 to 2009, as property taxes in several of the taxing jurisdictions where the Companys wells are located are calculated based on historical gas commodity prices and gas sales volumes calculated on a rolling one to three-year lag. The increase in severance taxes (a production tax directly imposed on the value of the gas extracted) was primarily due to higher gas commodity prices in the current year.

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