EQT Corporation (EQT) has reported second quarter earnings from continuing operations of 51 cents, surpassing the Zacks Consensus Estimate by 10 cents. Results also compare favorably with 20 cents earned in the prior-year quarter.
A gain on the ANPI transaction, a gain on the divestiture of available-for-sale securities and a reduction of certain non-income taxes led to a 7 cent increase in the quarter’s earnings. Accounting for this increase, the company has reported net earnings of 58 cents in the quarter.
Operational Update
Operating revenue in the quarter under review grossed $349 million. The 36% year-over-year improvement was driven by higher production, midstream volumes and commodity prices, somewhat mitigated by lower storage, marketing and other net revenues. The revenue was also comfortably ahead of the Zacks Consensus Estimate $311 million.
Operating expense in the quarter increased 9% year over year to $195 million.
Operating income jumped 95% year over year to $153 million.
Segment Update
EQT Production's second quarter operating revenue increased 65% year over year to $197 million, reflecting a spike in volume increase, higher unhedged natural gas prices, expansion in natural gas liquid and lower midstream rates.
Total operating expense soared 24% year over year to $97 million. Exploration expense increased 11% year over year to $1 million.
Operating income improved 143% year over year to $100 million.
Total sales volume swelled 47% year over year to 47,030 million cubic feet equivalent (MMcfe) in the quarter. The average wellhead sales price was $4.16 per thousand cubic feet equivalent (Mcfe); 14% above the year-ago level of $3.66 Mcfe.
Under the EQT Midstream segment, net gathering revenues surged 20% year over year to $61 million, owing to a significant growth in gathered volumes. Net transmission revenues soared 36% to $25 million, mainly on increased sale of capacity related with the primary phase of the Equitrans Marcellus expansion project, which came online in the fourth quarter of 2010.
However, net storage, marketing and other revenues plunged 50% year over year to $12 million.
Total operating expenses of the midstream segment declined 12% year over year to $46 million.
Operating income increased 25% year over year to $52 million in the quarter.
EQT Distribution’s net operating revenue showed a 13% year-over-year increase to reach $33 million in the quarter, driven by colder weather.
Operating expense declined 4% year over year due to lower bad debt expense.
EQT generated an operating income of $9 million, up 108% year over year.
Financial Update
The company’s operating cash flow was $189 million during the quarter, an improvement of 66% year over year.
EQT’s capital expenditure totaled 374 million in the quarter, with $318 million spent on EQT Production, $47 million on EQT Midstream and $9 million on EQT Distribution.
2011 Guidance
EQT projects production sales volumes between 190 Bcfe and 195 Bcfe, reflecting a 43% increase from 2010.
Peer Comparison
Valero Energy Corporation (VLO), which competes with EQT, reported second quarter 2011 earnings from continuing operations of $1.30, which missed the Zacks Consensus estimate of $1.47. However, results were better than the year-ago earnings from continuing operations of 93 cents largely due to a better refining margins’ environment and higher feedstock discounts.
Another peer, Cabot Oil and Gas (COG) reported second quarter operating earnings per share of 41 cents, breezing past the Zacks Consensus Estimate of 28 cents on higher production.
For the long term, we maintain our recommendation of Outperform on EQT Corporation.
CABOT OIL & GAS (COG): Free Stock Analysis Report
EQT CORP (EQT): Free Stock Analysis Report
VALERO ENERGY (VLO): Free Stock Analysis Report
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