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EQT Corp. (EQT) Q2 Earnings Miss on Lower Natural Gas Prices

EQT Corporation EQT reported second-quarter 2020 adjusted loss from continuing operations of 18 cents per share, wider than the Zacks Consensus Estimate of a loss of 15 cents. In the year-ago period, the company reported adjusted profit of 9 cents per share.

Adjusted operating revenues declined to $816.2 million from $958.4 million in the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $810 million.

The weaker-than-expected earnings were due to a year-over-year decrease in natural gas equivalent production volumes and lower commodity price realizations, partially offset by low per unit operating expenses.

EQT Corporation Price, Consensus and EPS Surprise

EQT Corporation Price, Consensus and EPS Surprise

EQT Corporation price-consensus-eps-surprise-chart | EQT Corporation Quote

Operations:

Total Production Decreases

Sales volume decreased to 345.6 billion cubic feet equivalent (Bcfe) of natural gas from the year-ago figure of 370.1 Bcfe. Natural gas sales volume was 325.2 Bcf for the second quarter, down from 351.2 Bcf a year ago. Total liquids sales volume for the quarter was recorded at 1,762 thousand barrels (MBbls), lower than the year-ago period’s 1,867 MBbls.

Price Realization Decreases

Average realized price was $2.36 per thousand cubic feet of natural gas equivalent (Mcfe), down from $2.59 in the year-ago quarter. Natural gas price was recorded at $1.80 per Mcf, lower than the year-ago level of $2.76. Oil price was recorded at $10.17 per barrel, significantly down from $48.78 in second-quarter 2019. Moreover, ethane sales price was recorded at $3.38 per barrel for the second quarter, lower than the year-ago level of $6.54.

Expenses

Total operating expenses were $1.42 per Mcfe for second-quarter 2020, down from $1.52 in the prior-year quarter.

Processing expenses were 10 cents per Mcfe, up by a penny from the year-ago period. Gathering expenses rose to 73 cents per Mcfe from 69 cents in second-quarter 2019. Lease operating expenses were 7 cents for the quarter, up from 5 cents in the year-ago period. However, transmission costs decreased to 35 cents per Mcfe from the year-ago level of 40 cents.

Overall, total operating expenses amounted to $914 million, down from $1,014.2 million in second-quarter 2019 due to lower SG&A, as well as transportation and processing costs.

Wells Drilled

The company spud 26 net wells in the second quarter. Of the total, 21 wells were drilled in PA Marcellus, with the average lateral length being 12,980 feet; three in WV Marcellus, with average lateral length of 13,360 feet; and two in OH Utica, with average lateral length of 12,150 feet.

Cash Flows

EQT Corp.’s adjusted operating cash flow was $220.7 million for the quarter, down from $385.7 million a year ago.

Capex & Balance Sheet

Total capital expenditure amounted to $302.7 million for the second quarter, down from $466.4 million in the year-ago period.

As of Jun 30, 2020, the company had $3 million in cash and cash equivalents, down from the first-quarter level of $18.7 million. Total debt of $4,620.3 million declined from the first-quarter level of $5,036.9 million.

Guidance

In 2020, EQT Corp. expects to drill net 69 wells in the PA Marcellus, 24 in WV Marcellus and three in OH Utica. The company anticipates total sales volume in the 360-380 Bcfe range for third-quarter 2020. For full-year 2020, it expects total sales volume within 1,450-1,500 Bcfe, indicating a decline from the 2019 level of 1,507 Bcfe. The company curtailed production in the second quarter in response to demand destruction caused by coronavirus-induced lockdowns. It is expected to restore production in the third quarter.

Total unit costs for 2020 are expected in the range of $1.32-$1.44 per Mcfe. The metric was recorded at $1.44 per Mcfe in 2019.

The company anticipates adjusted operating cash flow in the range of $1.35-$1.45 billion for 2020, suggesting fall from $1.83 billion in 2019. It expects capital expenditure in the band of $1.075-1.175 billion for the year, implying a decrease from $1.77 billion in 2019. As such, free cash flow will likely be recorded within $250-$350 million this year.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include NGL Energy Partners LP NGL, EOG Resources, Inc. EOG and Cimarex Energy Co. XEC, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 95.8% year over year.

EOG Resources’ bottom line for the next year is expected to rise 209.6% year over year.

Cimarex Energy’s bottom-line estimates for 2020 have witnessed 15 upward and five downward revisions in the past 60 days.

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