) first quarter 2012 earnings declined 24.2% year over year to 50
cents and missed the Zacks Consensus Estimate of 61 cents. The
earnings decline was primarily due to an 11% reduction in the
average wellhead sales price to EQT Corporation as well as
unseasonal warm weather in the Distribution segment's service
Net operating revenue in the quarter was $365.9 million,
exhibiting a 2.4% year-over-year improvement. However, reported
revenue fell short of the Zacks Consensus Estimate $418
Net operating expense in the quarter crept up 33.7% year over
year to $213.7 million. Adjusted operating income dropped 10.8%
year over year to $159.5 million.
's first quarter operating revenue increased 13% year over year to
$195.4 million, reflecting 26% year-over-year volume expansion,
partially offset by lower average wellhead sales price.
Operating income dropped 27% year over year to $60.1
segment, net gathering revenues surged 17% year over year to $69.3
million, owing to a significant 21% growth in gathered volumes. Net
transmission revenues dropped 13% to $22.9 million, mainly due to
the sale of Big Sandy. This was somewhat mitigated by improved
sales related to the Equitrans Marcellus expansion project.
Operating income increased 10.4% year over year to $56.1 million
in the reported quarter.
s net operating revenue dropped 19% year over year to $63.4
The segment generated an operating income of $36.8 million, down
from the year-ago level of $53.4 million.
The company's operating cash flow was $227.1 million during the
quarter, reflecting a decrease of 9% year over year.
EQT's capital expenditure totaled $269.6 million in the quarter,
with $183.7 million spent on EQT Production, $79.6 million on EQT
Midstream and $5.5 million on EQT Distribution.
The company expects produced natural gas sales between 250 Bcfe
and 255 Bcfe for the year, which is 30% higher than 2011. The
expectation was reduced by 5 Bcfe from the previous forecast mainly
to reflect the company's decision to suspend drilling in the Huron
play, in the current price environment.
The company also lowered its 2012 capex guidance by $100 million
to $1,365 million, as its service costs to complete wells declined
by 9% per well due to the lower natural gas prices.
We reiterate our long-term Neutral recommendation for EQT.
EQT Corporation is an integrated energy company with an emphasis
on natural gas supply activities in the Appalachian area, including
production and gathering, natural gas distribution and transmission
and energy efficiency solutions, primarily in the eastern and
western coastal regions of the United States.
With an increasing reserve structure and stellar Marcellus
results, we believe that the company exhibits industry-leading
organic growth momentum. Moreover, management's continuous efforts
to derive value by monetizing midstream assets will likely
accelerate exploration and production growth. During 2012, the
Equitrans expansion project is likely to augment transmission
capacity by 450 MMcf per day.
Again, the company plans to sell a limited partner interest in
the master limited partnership (
) that would own portions of the assets of Equitrans, L.P., EQT's
interstate pipeline subsidiary. After the completion of the IPO,
EQT would own the general partner of the MLP that will in turn
provide the company with incentive distribution rights and a
substantial portion of the MLP's common units.
Proceeds of the IPO would be used to finance further
acceleration of EQT's Marcellus development. The MLP is anticipated
to focus on providing transmission and gathering services to
producers in the Marcellus Shale, including EQT Production
However, EQT lacks a geographically diversified asset base, as
its resources are concentrated in the Appalachian Basin. Any
potential disruption in the region will adversely affect the
The company holds a Zacks #3 Rank, which translates to a
short-term Hold rating. The company faces competition from
Southwest Gas Corporation
EQT CORP (
): Free Stock Analysis Report
SOUTHWEST GAS (
): Free Stock Analysis Report
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