EQT Reports Second Quarter 2020 Results
EQT Corporation reported its Q2 2020 financial results, showing total sales volumes of 346 Bcfe, exceeding guidance by 21 Bcfe. Revenue reached $527 million with an average realized price of $2.36 per Mcfe. Capital expenditures decreased by $163 million year-over-year, totaling $303 million. The company managed to reduce total debt by $417 million, retiring its 2021 term loan. Despite an operating net loss of $263 million, the management highlighted significant operational improvements and a successful $500 million convertible notes issuance to address debt maturities.
- Sales volumes of 346 Bcfe exceeded guidance by 21 Bcfe.
- $527 million in total operating revenues.
- Average realized price of $2.36 per Mcfe, a premium to NYMEX.
- Reduced capital expenditures by $163 million year-over-year.
- Total debt reduced by $417 million, fully retiring the 2021 term loan.
- Net loss of $263 million, a significant drop from net income of $126 million in 2019.
- Adjusted net loss of $45 million compared to adjusted net income of $22 million in 2019.
- Average realized price down by 9% from the previous year.
PITTSBURGH, July 27, 2020 /PRNewswire/ -- EQT Corporation (NYSE: EQT) today announced financial and operational performance results for the second quarter 2020.
Second Quarter Highlights:
- Delivered sales volumes of 346 Bcfe or 3.8 Bcfe per day, 21 Bcfe above midpoint of guidance for second quarter 2020
- Total operating revenues of
$527 million ; received an average realized price of$2.36 per Mcfe, a$0.56 premium to NYMEX pricing - Capital expenditures of
$303 million ,$163 million lower than the second quarter 2019 and in line with second quarter 2020 expectations - Achieved well costs of
$680 per foot in the Pennsylvania Marcellus, surpassing target well cost by$50 per foot - Achieved an industry first 24-hour drilling record of 10,566 feet - over 2 miles per day
- Successfully issued
$500 million in convertible senior notes to address near-term debt maturities - Received
$190 million in tax refunds - Divested certain non-strategic assets for an aggregate purchase price of
$125 million - Reduced total debt by
$417 million and net debt(1) by$401 million , fully retiring the 2021 term loan - Placed approximately
$0.1 billion in surety bonds, reducing outstanding letters of credit and improving liquidity
President and CEO Toby Rice stated, "Today I am particularly excited as we have recently eclipsed our one-year anniversary at the company. Since last July, this management team has been unrelenting in our quest to deliver on our promises, which have been validated by our operational results. We've proven our thesis that a well-planned business, combined with leading technology, creates a differentiated, durable and sustainable business model. By leveraging our past experiences, we have retooled EQT into a fit-for-purpose modern shale business."
Rice continued, "As evident in today's announced results, our efforts have translated into a step-change in operational performance, at a faster pace than originally projected. At EQT, our mission is to be the clear operator of choice for all of our stakeholders. I am proud to say that EQT stands firmly on stable ground and we are primed to take this company to the next level. EQT is truly a rate of change story being written by a highly motivated and experienced management team, and I'm excited to continue our path towards maximizing value for all stakeholders."
Second Quarter 2020 Financial and Operational Performance
Three Months Ended June 30, | |||||||||||
($ millions, except average realized price and EPS) | 2020 | 2019 | Change | ||||||||
Total sales volume (Bcfe) | 346 | 370 | (24) | ||||||||
Average realized price ($/Mcfe) | $ | 2.36 | $ | 2.59 | $ | (0.23) | |||||
Net (loss) income | $ | (263) | $ | 126 | $ | (389) | |||||
Adjusted net (loss) income (a) | $ | (45) | $ | 22 | $ | (67) | |||||
Adjusted EBITDA (a) | $ | 334 | $ | 461 | $ | (127) | |||||
Diluted earnings per share (EPS) | $ | (1.03) | $ | 0.49 | $ | (1.52) | |||||
Adjusted EPS (a) | $ | (0.18) | $ | 0.09 | $ | (0.27) | |||||
Net cash provided by operating activities | $ | 447 | $ | 444 | $ | 3 | |||||
Capital expenditures | $ | 303 | $ | 466 | $ | (163) | |||||
Free cash flow (a) | $ | (82) | $ | (81) | $ | (1) | |||||
(a) | A non-GAAP financial measure. See the Non-GAAP Disclosures section of this news release for the definition of, and other important information regarding, this non-GAAP financial measure. |
Net loss for the three months ended June 30, 2020 was
On May 16, 2020, EQT made the strategic decision to temporarily curtail approximately 1.4 Bcfe per day of gross production, equivalent to approximately 1.0 Bcfe per day of net production, which remained shut-in for the duration of the second quarter 2020 (the Strategic Production Curtailments). Total sales volumes decreased 24 Bcfe compared to the same quarter last year due primarily to the Strategic Production Curtailments. In addition, average realized price was
Net cash provided by operating activities increased by
Per Unit Operating Costs
The following presents certain of the Company's production-related operating costs on a per unit basis.
Three Months Ended | Six Months Ended | ||||||||||||||
Per Unit ($/Mcfe) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Gathering | $ | 0.73 | $ | 0.69 | $ | 0.70 | $ | 0.69 | |||||||
Transmission | 0.35 | 0.40 | 0.36 | 0.39 | |||||||||||
Processing | 0.10 | 0.09 | 0.09 | 0.09 | |||||||||||
Lease operating expense (LOE), excluding | 0.07 | 0.05 | 0.07 | 0.05 | |||||||||||
Production taxes | 0.04 | 0.05 | 0.03 | 0.05 | |||||||||||
Exploration | — | 0.01 | — | — | |||||||||||
SG&A | 0.13 | 0.23 | 0.11 | 0.18 | |||||||||||
Total per unit operating costs | $ | 1.42 | $ | 1.52 | $ | 1.36 | $ | 1.45 | |||||||
Production depletion | $ | 0.92 | $ | 1.00 | $ | 0.92 | $ | 1.00 | |||||||
Adjusted SG&A (a) | $ | 0.13 | $ | 0.13 | $ | 0.11 | $ | 0.12 | |||||||
Adjusted interest expense (a) | $ | 0.17 | $ | 0.14 | $ | 0.16 | $ | 0.14 | |||||||
(a) | A non-GAAP financial measure. See the Non-GAAP Disclosures section of this news release for the definition of, and other important information regarding, this non-GAAP financial measure. |
Liquidity
As of June 30, 2020, the Company had
As of July 22, 2020, the Company had sufficient unused borrowing capacity under its credit facility, net of letters of credit, to satisfy any collateral requests that its counterparties would be permitted to seek. As of July 22, 2020, such amounts could be up to approximately
OPERATIONAL UPDATE
In early July, the Company began a moderated approached to bring back on-line production which was curtailed in May as a result of the Strategic Production Curtailments. To-date, the Company has seen no degradation to well performance and all curtailed production has been returned to sales.
During the second quarter 2020, the Company continued to realize a step-change in operational performance, driven by strong schedule design, consistent application of a proven well design, and efficient drilling and completion operations. These efficiencies required less resources necessary to deliver planned activity levels and led to improved capital deployment during the second quarter 2020, as the Company developed its Pennsylvania Marcellus wells for
Since the change in management in July 2019, the Company has realized steady and consistent operational improvements. Production uptime on producing wells was over
In June, EQT reached an industry first by drilling 10,566 feet, or more than 2-miles, in a 24-hour period, exemplifying the Company's enhanced operational performance. EQT continues to push the operational and technological boundaries to drive value creation.
The tables below reflect the Company's operational activity during the second quarter 2020 and planned activity for the third quarter and full year 2020.
Wells Drilled (SPUD) | |||||||||||||||||
PA Marcellus | WV Marcellus | OH Utica | |||||||||||||||
2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | |||||||||
Net Wells | 21 | 17 | 69 | 3 | 15 | 24 | 2 | — | 3 | ||||||||
Net Avg. Lateral | 12,980 | 11,560 | 12,560 | 13,360 | 11,530 | 11,860 | 12,150 | — | 13,130 | ||||||||
Wells Horizontally Drilled | |||||||||||||||||
PA Marcellus | WV Marcellus | OH Utica | |||||||||||||||
2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | |||||||||
Net Wells | 21 | 21 | 82 | — | 7 | 9 | 4 | 1 | 8 | ||||||||
Net Avg. Lateral | 11,870 | 13,400 | 12,060 | — | 9,020 | 10,030 | 12,200 | 12,030 | 12,190 | ||||||||
Wells Completed (Frac) | |||||||||||||||||
PA Marcellus | WV Marcellus | OH Utica | |||||||||||||||
2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | |||||||||
Net Wells | 27 | 21 | 79 | 3 | — | 3 | 10 | — | 15 | ||||||||
Net Avg. Lateral | 11,100 | 12,390 | 11,730 | 4,420 | — | 4,420 | 9,980 | — | 10,560 | ||||||||
Wells Turned-in-Line (TIL) | |||||||||||||||||
PA Marcellus | WV Marcellus | OH Utica | |||||||||||||||
2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | 2Q20A | 3Q20E | FY20E | |||||||||
Net Wells | 14 | 15 | 89 | 3 | — | 7 | 10 | 0 | 10 | ||||||||
Net Avg. Lateral | 10,840 | 13,540 | 11,470 | 4,420 | — | 7,130 | 9,980 | — | 9,980 | ||||||||
2020 GUIDANCE
Production | Q3 2020 | Full-Year 2020 | ||
Total sales volume (Bcfe) | 360 - 380 | 1,450 - 1,500 | ||
Liquids sales volume, excluding ethane (Mbbls) | 1,700 - 1,800 | 7,600 - 7,700 | ||
Ethane sales volume (Mbbls) | 1,100 - 1,200 | 4,400 - 4,500 | ||
Total liquids sales volume (Mbbls) | 2,800 - 3,000 | 12,000 - 12,200 | ||
Btu uplift (MMbtu / Mcf) | 1.045 - 1.055 | |||
Average differential ($ / Mcf) | ||||
Resource Counts | ||||
Top-hole Rigs | 2 | |||
Horizontal Rigs | 2 - 3 | |||
Frac Crews | 2 - 3 | |||
Per Unit Operating Costs ($ / Mcfe) | ||||
Gathering (a) | ||||
Transmission (a) | ||||
Processing | ||||
LOE, excluding production taxes | ||||
Production taxes | ||||
SG&A | ||||
Total per unit operating costs | ||||
Adjusted interest expense (b) | ||||
Financial ($ Billions) | ||||
Adjusted EBITDA (b) | ||||
Adjusted operating cash flow (b) | ||||
Capital expenditures | ||||
Free cash flow (b) |
Based on NYMEX natural gas price of
(a) | Certain in-basin transportation expenses previously recorded in Transmission have been reclassified to Gathering to provide additional clarity into costs associated with transporting EQT's gas outside of the Appalachian Basin and to align with the reporting of such expenses in EQT's financial statement disclosures. |
(b) | Non-GAAP financial measure. See the Non-GAAP Disclosures section for the definition of, and other important information regarding, the non-GAAP financial measures included in this news release, including reasons why EQT is unable to provide a projection of its 2020 net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP, to projected adjusted operating cash flow and free cash flow, or a projection of its 2020 net income, the most comparable financial measure calculated in accordance with GAAP, to projected adjusted EBITDA. |
Second Quarter 2020 Earnings Webcast Information
The Company's conference call with securities analysts begins at 10:30 a.m. ET today and will be broadcast live via the Company's web site at www.eqt.com and on the investor information page of the Company's web site at ir.eqt.com, with a replay available for seven days following the call.
HEDGING (as of July 22, 2020)
The Company's total natural gas production NYMEX hedge positions are:
2020 (a) | 2021 | 2022 | 2023 | 2024 | ||||||||||||||||
Swaps: | ||||||||||||||||||||
Volume (MMDth) | 575 | 467 | — | 2 | 2 | |||||||||||||||
Average Price ($/Dth) | $ | 2.74 | $ | 2.50 | $ | — | $ | 2.67 | $ | 2.67 | ||||||||||
Calls – Net Short: | ||||||||||||||||||||
Volume (MMDth) | 200 | 219 | 284 | 77 | 15 | |||||||||||||||
Average Short Strike Price ($/Dth) | $ | 2.91 | $ | 2.90 | $ | 2.89 | $ | 2.89 | $ | 3.11 | ||||||||||
Puts – Net Long: | ||||||||||||||||||||
Volume (MMDth) | 69 | 57 | 135 | 69 | 15 | |||||||||||||||
Average Long Strike Price ($/Dth) | $ | 2.29 | $ | 2.38 | $ | 2.35 | $ | 2.40 | $ | 2.45 | ||||||||||
Fixed Price Sales (b): | ||||||||||||||||||||
Volume (MMDth) | 5 | 72 | 3 | 3 | — | |||||||||||||||
Average Price ($/Dth) | $ | 2.66 | $ | 2.50 | $ | 2.52 | $ | 2.38 | $ | — | ||||||||||
(a) | July 1 - December 31, 2020. |
(b) | The difference between the fixed price and NYMEX price is included in average differential presented in the Company's price reconciliation. |
For 2020 (July 1 - December 31), 2021, 2022, 2023 and 2024, the Company has natural gas sales agreements for approximately 6 MMDth, 18 MMDth, 18 MMDth, 88 MMDth and 11 MMDth, respectively, that include average NYMEX ceiling prices of
NON-GAAP DISCLOSURES
Adjusted Net (Loss) Income and Adjusted Earnings per Diluted Share (Adjusted EPS)
Adjusted net (loss) income is defined as net (loss) income, excluding impairments, transaction, proxy and reorganization costs, the revenue impact of changes in the fair value of derivative instruments prior to settlement and certain other items that impact comparability between periods. Adjusted EPS is defined as adjusted net (loss) income divided by diluted weighted average common shares outstanding. Adjusted net (loss) income and adjusted EPS are non-GAAP supplemental financial measures used by the Company's management to evaluate period-over-period earnings trends. The Company's management believes that these measures provide useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted net (loss) income and adjusted EPS to evaluate earnings trends because the measures reflect only the impact of settled derivative contracts; thus, the measures exclude the often-volatile revenue impact of changes in the fair value of derivative instruments prior to settlement. These measures also exclude other items that affect the comparability of results or that are not indicative of trends in the ongoing business. Adjusted net (loss) income and adjusted EPS should not be considered as alternatives to net (loss) income or diluted EPS presented in accordance with GAAP.
The table below reconciles adjusted net (loss) income and adjusted EPS with net (loss) income and diluted EPS, respectively, the most comparable financial measures calculated in accordance with GAAP, each as derived from the Statements of Condensed Consolidated Operations to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands, except per share information) | |||||||||||||||
Net (loss) income | $ | (263,075) | $ | 125,566 | $ | (430,214) | $ | 316,257 | |||||||
Add (deduct): | |||||||||||||||
Loss on sale/exchange of long-lived assets | 49,207 | — | 98,059 | — | |||||||||||
Impairment and expiration of leases | 41,279 | 48,584 | 95,047 | 78,118 | |||||||||||
Transaction, proxy and reorganization | 4,745 | 21,518 | 4,745 | 25,607 | |||||||||||
Gain on derivatives not designated as hedges | (26,426) | (407,635) | (415,862) | (275,639) | |||||||||||
Net cash settlements received (paid) on | 315,393 | 53,144 | 561,129 | (10,490) | |||||||||||
Premiums received (paid) for derivatives that | 2,076 | 4,769 | (1,479) | 7,206 | |||||||||||
Litigation expense | — | 37,786 | — | 45,786 | |||||||||||
Gain on Equitrans Share Exchange | — | — | (187,223) | — | |||||||||||
(Gain) loss on investment in Equitrans | (82,983) | 104,741 | 307,645 | 15,686 | |||||||||||
Loss on debt extinguishment | 353 | — | 16,963 | — | |||||||||||
Non-cash interest expense (amortization) (a) | 5,481 | — | 7,741 | — | |||||||||||
Tax impact of non-GAAP items (b) | (91,286) | 33,524 | (63,866) | 31,339 | |||||||||||
Adjusted net (loss) income | $ | (45,236) | $ | 21,997 | $ | (7,315) | $ | 233,870 | |||||||
Diluted weighted average common shares | 255,524 | 255,223 | 255,477 | 255,211 | |||||||||||
Diluted EPS | $ | (1.03) | $ | 0.49 | $ | (1.68) | $ | 1.24 | |||||||
Adjusted EPS | $ | (0.18) | $ | 0.09 | $ | (0.03) | $ | 0.92 | |||||||
(a) | As a result of increased significance of non-cash interest expense (amortization) in 2020, this line item was added as an adjustment to the calculation of adjusted net income for the three and six months ended June 30, 2020. Had adjusted net income been calculated on a consistent basis, it would have been |
(b) | The tax impact of non-GAAP items represents the incremental tax (benefit) expense that would have been incurred had these items been excluded from net (loss) income, which resulted in blended tax rates of |
Adjusted EBITDA
Adjusted EBITDA is defined as net (loss) income, excluding interest expense, income tax (benefit) expense, depreciation and depletion, amortization of intangible assets, impairments, transaction, proxy and reorganization costs, the revenue impact of changes in the fair value of derivative instruments prior to settlement and certain other items that impact comparability between periods. Adjusted EBITDA is a non-GAAP supplemental financial measure used by the Company's management to evaluate period-over-period earnings trends. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted EBITDA to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts; thus, the measure excludes the often-volatile revenue impact of changes in the fair value of derivative instruments prior to settlement. The measure also excludes other items that affect the comparability of results or that are not indicative of trends in the ongoing business. Adjusted EBITDA should not be considered as an alternative to net (loss) income presented in accordance with GAAP.
The table below reconciles adjusted EBITDA with net (loss) income, the most comparable financial measure as calculated in accordance with GAAP, as reported in the Statements of Condensed Consolidated Operations to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands) | |||||||||||||||
Net (loss) income | $ | (263,075) | $ | 125,566 | $ | (430,214) | $ | 316,257 | |||||||
Add (deduct): | |||||||||||||||
Interest expense | 65,386 | 50,503 | 127,760 | 107,076 | |||||||||||
Income tax (benefit) expense | (103,003) | 38,865 | (70,181) | 77,099 | |||||||||||
Depreciation and depletion | 323,096 | 372,413 | 680,622 | 763,526 | |||||||||||
Amortization of intangible assets | 7,477 | 10,342 | 14,955 | 20,684 | |||||||||||
Loss on sale/exchange of long-lived assets | 49,207 | — | 98,059 | — | |||||||||||
Impairment and expiration of leases | 41,279 | 48,584 | 95,047 | 78,118 | |||||||||||
Transaction, proxy and reorganization | 4,745 | 21,518 | 4,745 | 25,607 | |||||||||||
Gain on derivatives not designated as | (26,426) | (407,635) | (415,862) | (275,639) | |||||||||||
Net cash settlements received (paid) on | 315,393 | 53,144 | 561,129 | (10,490) | |||||||||||
Premiums received (paid) for derivatives | 2,076 | 4,769 | (1,479) | 7,206 | |||||||||||
Litigation expense | — | 37,786 | — | 45,786 | |||||||||||
Gain on Equitrans Share Exchange | — | — | (187,223) | — | |||||||||||
(Gain) loss on investment in Equitrans | (82,983) | 104,741 | 307,645 | 15,686 | |||||||||||
Loss on debt extinguishment | 353 | — | 16,963 | — | |||||||||||
Adjusted EBITDA | $ | 333,525 | $ | 460,596 | $ | 801,966 | $ | 1,170,916 | |||||||
The Company has not provided projected net income (loss) or a reconciliation of projected adjusted EBITDA to projected net income (loss), the most comparable financial measure calculated in accordance with GAAP. Net (loss) income includes the impact of depreciation and depletion expense, income tax expense, the revenue impact of changes in the projected fair value of derivative instruments prior to settlement and certain other items that impact comparability between periods and the tax effect of such items, which may be significant and difficult to project with a reasonable degree of accuracy. Therefore, projected net income (loss), and a reconciliation of projected adjusted EBITDA to projected net income (loss), are not available without unreasonable effort.
Adjusted Operating Cash Flow and Free Cash Flow
Adjusted operating cash flow is defined as net cash provided by operating activities less changes in other assets and liabilities. Free cash flow is defined as adjusted operating cash flow less accrual-based capital expenditures. Adjusted operating cash flow and free cash flow are non-GAAP supplemental financial measures used by the Company's management to assess liquidity, including the Company's ability to generate cash flow in excess of its capital requirements and return cash to shareholders. The Company's management believes that these measures provide useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Adjusted operating cash flow and free cash flow should not be considered as alternatives to net cash provided by operating activities or any other measure of liquidity presented in accordance with GAAP.
The table below reconciles adjusted operating cash flow and free cash flow with net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP, as derived from the Statements of Condensed Consolidated Cash Flows to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands) | |||||||||||||||
Net cash provided by operating activities | $ | 446,859 | $ | 443,546 | $ | 947,121 | $ | 1,314,833 | |||||||
Decrease (increase) in changes in other assets | (226,134) | (57,845) | (213,749) | (281,779) | |||||||||||
Adjusted operating cash flow | $ | 220,725 | $ | 385,701 | $ | 733,372 | $ | 1,033,054 | |||||||
Less: capital expenditures | 302,700 | 466,387 | 564,832 | 942,409 | |||||||||||
Free cash flow | $ | (81,975) | $ | (80,686) | $ | 168,540 | $ | 90,645 | |||||||
The Company has not provided projected net cash provided by operating activities or reconciliations of projected adjusted operating cash flow and free cash flow to projected net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP. The Company is unable to project net cash provided by operating activities for any future period because this metric includes the impact of changes in operating assets and liabilities related to the timing of cash receipts and disbursements that may not relate to the period in which the operating activities occurred. The Company is unable to project these timing differences with any reasonable degree of accuracy without unreasonable efforts such as predicting the timing of its payments and its customers' payments, with accuracy to a specific day, months in advance. Furthermore, the Company does not provide guidance with respect to its average realized price, among other items, that impact reconciling items between net cash provided by operating activities and adjusted operating cash flow and free cash flow, as applicable. Natural gas prices are volatile and out of the Company's control, and the timing of transactions and the income tax effects of future transactions and other items are difficult to accurately predict. Therefore, the Company is unable to provide projected net cash provided by operating activities, or the related reconciliations of projected adjusted operating cash flow and free cash flow to projected net cash provided by operating activities, without unreasonable effort.
Adjusted Operating Revenues
Adjusted operating revenues is defined as total operating revenues, less the revenue impact of changes in the fair value of derivative instruments prior to settlement and net marketing services and other revenues. Adjusted operating revenues (also referred to as total natural gas & liquids sales, including cash settled derivatives) is a non-GAAP supplemental financial measure used by the Company's management to evaluate period-over-period earnings trends. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted operating revenues to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts; thus, the measure excludes the often-volatile revenue impact of changes in the fair value of derivative instruments prior to settlement. The measure also excludes net marketing services and other revenues because it is unrelated to the revenue for the Company's natural gas and liquids production. Adjusted operating revenues should not be considered as an alternative to total operating revenues presented in accordance with GAAP.
The table below reconciles adjusted operating revenues to total operating revenue, the most comparable financial measure calculated in accordance with GAAP, as reported in the Statements of Condensed Consolidated Operations to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands, unless noted) | |||||||||||||||
Total operating revenues | $ | 527,074 | $ | 1,310,252 | $ | 1,634,131 | $ | 2,453,425 | |||||||
Add (deduct): | |||||||||||||||
Gain on derivatives not designated as hedges | (26,426) | (407,635) | (415,862) | (275,639) | |||||||||||
Net cash settlements received (paid) on | 315,393 | 53,144 | 561,129 | (10,490) | |||||||||||
Premiums received (paid) for derivatives that | 2,076 | 4,769 | (1,479) | 7,206 | |||||||||||
Net marketing services and other | (1,876) | (2,090) | (4,296) | (5,646) | |||||||||||
Adjusted operating revenues | $ | 816,241 | $ | 958,440 | $ | 1,773,623 | $ | 2,168,856 | |||||||
Total sales volume (MMcfe) | 345,647 | 370,114 | 730,717 | 753,584 | |||||||||||
Average realized price ($/Mcfe) | $ | 2.36 | $ | 2.59 | $ | 2.43 | $ | 2.88 | |||||||
Adjusted SG&A Per Unit
Adjusted SG&A per unit is defined as SG&A less litigation expense, divided by total sales volume. Adjusted SG&A per unit is a non-GAAP supplemental financial measure used by the Company's management to evaluate period-over-period earnings trends. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted SG&A per unit to evaluate earnings trends because the measure excludes items that affect the comparability of results or that are not indicative of trends in the ongoing business. Adjusted SG&A per unit should not be considered as an alternative to SG&A presented in accordance with GAAP.
The table below reconciles adjusted SG&A per unit with SG&A, the most comparable financial measure calculated in accordance with GAAP, as derived from the Statements of Condensed Consolidated Operations to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands, unless noted) | |||||||||||||||
Selling, general and administrative | $ | 43,341 | $ | 86,208 | $ | 78,279 | $ | 135,186 | |||||||
Less: Litigation expense | — | 37,786 | — | 45,786 | |||||||||||
Adjusted SG&A | $ | 43,341 | $ | 48,422 | $ | 78,279 | $ | 89,400 | |||||||
Total sales volume (MMcfe) | 345,647 | 370,114 | 730,717 | 753,584 | |||||||||||
Adjusted SG&A per unit ($/Mcfe) | $ | 0.13 | $ | 0.13 | $ | 0.11 | $ | 0.12 | |||||||
Adjusted Interest Expense Per Unit
Adjusted interest expense per unit is defined as interest expense less non-cash interest expense (amortization) of debt discounts and issuance costs divided by total sales volume. Adjusted interest expense per unit is a non-GAAP supplemental financial measure used by the Company's management to evaluate period-over-period interest expense which required cash payments. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Management uses adjusted interest expense per unit to evaluate interest expense which required cash payments because the measure excludes non-cash interest expense (amortization) that affects the comparability of results and does not result in cash payments. Adjusted interest expense per unit should not be considered as an alternative to interest expense presented in accordance with GAAP.
The table below reconciles adjusted interest expense per unit with interest expense, the most comparable financial measure calculated in accordance with GAAP, as derived from the Statements of Condensed Consolidated Operations to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands, unless noted) | |||||||||||||||
Interest expense | $ | 65,386 | $ | 50,503 | $ | 127,760 | $ | 107,076 | |||||||
Less: Non-cash interest expense (amortization) (a) | 5,481 | — | 7,741 | — | |||||||||||
Adjusted interest expense | $ | 59,905 | $ | 50,503 | $ | 120,019 | $ | 107,076 | |||||||
Total sales volume (MMcfe) | 345,647 | 370,114 | 730,717 | 753,584 | |||||||||||
Adjusted interest expense per unit ($/Mcfe) | $ | 0.17 | $ | 0.14 | $ | 0.16 | $ | 0.14 | |||||||
(a) | As a result of increased significance of non-cash interest expense (amortization) in 2020, this line item was added as an adjustment to the calculation of adjusted interest expense for the three and six months ended June 30, 2020. Had adjusted interest expense been calculated on a consistent basis, it would have been |
The table below reconciles the full-year 2020 forecasted ranges of adjusted interest expense per unit with interest expense, the most comparable financial measure calculated in accordance with GAAP.
Year Ended December 31, 2020 | |||||||
(Thousands, unless noted) | |||||||
Interest expense | $ | 260,000 | $ | 270,000 | |||
Less: Non-cash interest expense (amortization) | 22,000 | 22,000 | |||||
Adjusted interest expense | $ | 238,000 | $ | 248,000 | |||
Total sales volume (MMcfe) | 1,500,000 | 1,450,000 | |||||
Adjusted interest expense per unit ($/Mcfe) | $ | 0.16 | $ | 0.17 | |||
Net Debt
Net debt is defined as total debt less cash and cash equivalents. Total debt includes the Company's current portion of debt, credit facility borrowings, term loan borrowings, senior notes and note payable to EQM Midstream Partners, LP. Net debt is a non-GAAP supplemental financial measure used by the Company's management to evaluate leverage since the Company could choose to use its cash and cash equivalents to retire debt. The Company's management believes that this measure provides useful information to external users of the Company's consolidated financial statements, such as industry analysts, lenders and ratings agencies. Net debt should not be considered as an alternative to total debt presented in accordance with GAAP.
The table below reconciles net debt with total debt, the most comparable financial measure calculated in accordance with GAAP, as derived from the Statements of Condensed Consolidated Balance Sheets to be included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.
June 30, 2020 | March 31, 2020 | December 31, 2019 | |||||||||
(Thousands) | |||||||||||
Current portion of debt | $ | 16,309 | $ | 16,256 | $ | 16,204 | |||||
Credit facility borrowings | 38,000 | — | 294,000 | ||||||||
Term loan facility borrowings | — | 799,574 | 999,353 | ||||||||
Senior notes (a) | 4,463,548 | 4,117,256 | 3,878,366 | ||||||||
Note payable to EQM Midstream Partners, LP | 102,483 | 103,778 | 105,056 | ||||||||
Total debt | 4,620,340 | 5,036,864 | 5,292,979 | ||||||||
Less: Cash and cash equivalents | 2,968 | 18,651 | 4,596 | ||||||||
Net debt | $ | 4,617,372 | $ | 5,018,213 | $ | 5,288,383 | |||||
(a) | Senior notes included the convertible senior notes which, at issuance, were recorded in the consolidated financial statements at fair value. The debt discount, which is the excess of the principal amount of |
Investor Contact:
Andrew Breese
Director, Investor Relations
412.395.2555
ABreese@eqt.com
About EQT Corporation
EQT Corporation is a leading independent natural gas production company with operations focused in the cores of the Marcellus and Utica Shales in the Appalachian Basin. We are dedicated to responsibly developing our world-class asset base and being the operator of choice for our stakeholders. By leveraging a culture that prioritizes operational efficiency, technology and sustainability, we seek to continuously improve the way we produce environmentally responsible, reliable and low-cost energy. We have a longstanding commitment to the safety of our employees, contractors, and communities, and to the reduction of our overall environmental footprint. Our values are evident in the way we operate and in how we interact each day – trust, teamwork, heart, and evolution are at the center of all we do.
EQT Management speaks to investors from time to time and the analyst presentation for these discussions, which is updated periodically, is available via the Company's investor relationship website at https://ir.eqt.com.
Cautionary Statements
Total sales volume per day (or daily production) is an operational estimate of the daily production or sales volume on a typical day (excluding curtailments).
This news release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Statements that do not relate strictly to historical or current facts are forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this news release specifically include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of EQT Corporation and its subsidiaries (collectively, the Company), including guidance regarding the Company's strategy to develop its reserves; drilling plans and programs (including the number, type, spacing, average lateral length and location of wells to be drilled or turned-in-line, the number and type of drilling rigs and, the number of frac crews); projections of wells SPUD, horizontally drilled, completed and turned-in-line; projected natural gas prices, basis and average differential; potential impacts to the Company's business and operations resulting from the COVID-19 pandemic; the effects of the COVID-19 pandemic and actions taken by the Organization of the Petroleum Exporting Countries and other allied countries (collectively known as OPEC+) as it pertains to the global supply and demand of, and prices for, natural gas, NGLs and oil; the impact of commodity prices on the Company's business; total resource potential; projected production and sales volume and growth rates (including liquids sales volume and growth rates); projected drilling and completions (D&C) costs, other well costs, unit costs and G&A expenses; projected reductions in expenses, capital costs and well costs, the projected timing of achieving such reductions and the Company's ability to achieve such reductions; infrastructure programs; the Company's ability to successfully implement and execute the executive management team's operational, organizational and technological initiatives, and achieve the anticipated results of such initiatives; the projected reduction of the Company's gathering and compression rates resulting from the Company's consolidated gas gathering and compression agreement with EQM Midstream Partners, LP, and the anticipated cost savings and other strategic benefits associated with the execution of such agreement; monetization transactions, including asset sales, joint ventures or other transactions involving the Company's assets, the timing of such monetization transactions, if at all, the projected proceeds from such monetization transactions and the Company's planned use of such proceeds; the amount and timing of any redemptions, repayments or repurchases of the Company's common stock, outstanding debt securities or other debt instruments; the Company's ability to reduce its debt and the timing of such reductions, if any; projected free cash flow, adjusted interest expense, adjusted operating cash flow, and adjusted EBITDA, liquidity and financing requirements, including funding sources and availability; the Company's ability to maintain or improve its credit ratings, leverage levels and financial profile; the Company's hedging strategy; the Company's tax position and projected effective tax rate; and the expected impact of changes in tax laws. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The Company has based these forward-looking statements on current expectations and assumptions about future events, taking into account all information currently available to the Company. While the Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond the Company's control. The risks and uncertainties that may affect the operations, performance and results of the Company's business and forward-looking statements include, but are not limited to, volatility of commodity prices; the costs and results of drilling and operations; access to and cost of capital; uncertainties about estimates of reserves, identification of drilling locations and the ability to add proved reserves in the future; the assumptions underlying production forecasts; the quality of technical data; the Company's ability to appropriately allocate capital and resources among its strategic opportunities; inherent hazards and risks normally incidental to drilling for, producing, transporting and storing natural gas, NGLs and oil; cyber security risks; availability and cost of drilling rigs, completion services, equipment, supplies, personnel, oilfield services and water required to execute the Company's exploration and development plans; the ability to obtain environmental and other permits and the timing thereof; government regulation or action; environmental and weather risks, including the possible impacts of climate change; uncertainties related to the severity, magnitude and duration of the COVID-19 pandemic; and disruptions to the Company's business due to acquisitions and other significant transactions. These and other risks are described under Item 1A, "Risk Factors," and elsewhere in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, as updated by Part II, Item 1A, "Risk Factors" in the Company's subsequently filed Quarterly Reports on Form 10-Q and other documents the Company files from time to time with the Securities and Exchange Commission. In addition, the Company may be subject to currently unforeseen risks that may have a materially adverse impact on it.
EQT CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONDENSED CONSOLIDATED OPERATIONS (UNAUDITED)
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands, except per share amounts) | |||||||||||||||
Operating revenues: | |||||||||||||||
Sales of natural gas, natural gas liquids and oil | $ | 498,772 | $ | 900,527 | $ | 1,213,973 | $ | 2,172,140 | |||||||
Gain on derivatives not designated as hedges | 26,426 | 407,635 | 415,862 | 275,639 | |||||||||||
Net marketing services and other | 1,876 | 2,090 | 4,296 | 5,646 | |||||||||||
Total operating revenues | 527,074 | 1,310,252 | 1,634,131 | 2,453,425 | |||||||||||
Operating expenses: | |||||||||||||||
Transportation and processing | 405,636 | 436,984 | 845,470 | 876,230 | |||||||||||
Production | 38,329 | 36,316 | 78,709 | 79,724 | |||||||||||
Exploration | 876 | 1,857 | 1,799 | 2,864 | |||||||||||
Selling, general and administrative | 43,341 | 86,208 | 78,279 | 135,186 | |||||||||||
Depreciation and depletion | 323,096 | 372,413 | 680,622 | 763,526 | |||||||||||
Amortization of intangible assets | 7,477 | 10,342 | 14,955 | 20,684 | |||||||||||
Loss on sale/exchange of long-lived assets | 49,207 | — | 98,059 | — | |||||||||||
Impairment and expiration of leases | 41,279 | 48,584 | 95,047 | 78,118 | |||||||||||
Transaction, proxy and reorganization | 4,745 | 21,518 | 4,745 | 25,607 | |||||||||||
Total operating expenses | 913,986 | 1,014,222 | 1,897,685 | 1,981,939 | |||||||||||
Operating (loss) income | (386,912) | 296,030 | (263,554) | 471,486 | |||||||||||
Gain on Equitrans Share Exchange | — | — | (187,223) | — | |||||||||||
(Gain) loss on investment in Equitrans Midstream | (82,983) | 104,741 | 307,645 | 15,686 | |||||||||||
Dividend and other income | (3,590) | (23,645) | (28,304) | (44,632) | |||||||||||
Loss on debt extinguishment | 353 | — | 16,963 | — | |||||||||||
Interest expense | 65,386 | 50,503 | 127,760 | 107,076 | |||||||||||
(Loss) income before income taxes | (366,078) | 164,431 | (500,395) | 393,356 | |||||||||||
Income tax (benefit) expense | (103,003) | 38,865 | (70,181) | 77,099 | |||||||||||
Net (loss) income | $ | (263,075) | $ | 125,566 | $ | (430,214) | $ | 316,257 | |||||||
(Loss) earnings per share of common stock: | |||||||||||||||
Basic: | |||||||||||||||
Weighted average common stock outstanding | 255,524 | 255,099 | 255,477 | 254,975 | |||||||||||
Net (loss) income | $ | (1.03) | $ | 0.49 | $ | (1.68) | $ | 1.24 | |||||||
Diluted: | |||||||||||||||
Weighted average common stock outstanding | 255,524 | 255,223 | 255,477 | 255,211 | |||||||||||
Net (loss) income | $ | (1.03) | $ | 0.49 | $ | (1.68) | $ | 1.24 | |||||||
EQT CORPORATION AND SUBSIDIARIES
PRICE RECONCILIATION
Three Months Ended | Six Months Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
(Thousands, unless noted) | |||||||||||||||
NATURAL GAS | |||||||||||||||
Sales volume (MMcf) | 325,248 | 351,211 | 694,990 | 714,928 | |||||||||||
NYMEX price ($/MMBtu) (a) | $ | 1.71 | $ | 2.64 | $ | 1.84 | $ | 2.90 | |||||||
Btu uplift | 0.09 | 0.12 | 0.09 | 0.14 | |||||||||||
Natural gas price ($/Mcf) | $ | 1.80 | $ | 2.76 | $ | 1.93 | $ | 3.04 | |||||||
Basis ($/Mcf) (b) | $ | (0.36) | $ | (0.36) | $ | (0.29) | $ | (0.20) | |||||||
Cash settled basis swaps (not designated as hedges) ($/Mcf) | (0.02) | (0.05) | 0.02 | (0.08) | |||||||||||
Average differential, including cash settled basis swaps ($/Mcf) | $ | (0.38) | $ | (0.41) | $ | (0.27) | $ | (0.28) | |||||||
Average adjusted price ($/Mcf) | $ | 1.42 | $ | 2.35 | $ | 1.66 | $ | 2.76 | |||||||
Cash settled derivatives (not designated as hedges) ($/Mcf) | 1.00 | 0.20 | 0.79 | 0.07 | |||||||||||
Average natural gas price, including cash settled derivatives ($/Mcf) | $ | 2.42 | $ | 2.55 | $ | 2.45 | $ | 2.83 | |||||||
Natural gas sales, including cash settled derivatives | $ | 786,595 | $ | 896,441 | $ | 1,702,006 | $ | 2,025,642 | |||||||
LIQUIDS | |||||||||||||||
Natural gas liquids (NGLs), excluding ethane: | |||||||||||||||
Sales volume (MMcfe) (c) | 10,572 | 11,201 | 21,392 | 23,750 | |||||||||||
Sales volume (Mbbl) | 1,762 | 1,867 | 3,565 | 3,958 | |||||||||||
Price ($/Bbl) | $ | 13.52 | $ | 21.15 | $ | 16.08 | $ | 25.75 | |||||||
Cash settled derivatives (not designated as hedges) ($/Bbl) | (0.52) | 2.86 | (0.26) | 2.22 | |||||||||||
Average NGLs price, including cash settled derivatives ($/Bbl) | $ | 13.00 | $ | 24.01 | $ | 15.82 | $ | 27.97 | |||||||
NGLs sales | $ | 22,910 | $ | 44,821 | $ | 56,421 | $ | 110,724 | |||||||
Ethane: | |||||||||||||||
Sales volume (MMcfe) (c) | 8,769 | 6,455 | 12,098 | 12,393 | |||||||||||
Sales volume (Mbbl) | 1,461 | 1,076 | 2,016 | 2,066 | |||||||||||
Price ($/Bbl) | $ | 3.38 | $ | 6.54 | $ | 3.56 | $ | 6.87 | |||||||
Ethane sales | $ | 4,941 | $ | 7,038 | $ | 7,186 | $ | 14,190 | |||||||
Oil: | |||||||||||||||
Sales volume (MMcfe) (c) | 1,058 | 1,247 | 2,237 | 2,513 | |||||||||||
Sales volume (Mbbl) | 176 | 208 | 373 | 419 | |||||||||||
Price ($/Bbl) | $ | 10.17 | $ | 48.78 | $ | 21.48 | $ | 43.69 | |||||||
Oil sales | $ | 1,795 | $ | 10,140 | $ | 8,010 | $ | 18,300 | |||||||
Total liquids sales volume (MMcfe) (c) | 20,399 | 18,903 | 35,727 | 38,656 | |||||||||||
Total liquids sales volume (Mbbl) | 3,399 | 3,151 | 5,954 | 6,443 | |||||||||||
Total liquids sales | $ | 29,646 | $ | 61,999 | $ | 71,617 | $ | 143,214 | |||||||
TOTAL | |||||||||||||||
Total natural gas and liquids sales, including cash settled derivatives (d) | $ | 816,241 | $ | 958,440 | $ | 1,773,623 | $ | 2,168,856 | |||||||
Total sales volume (MMcfe) | 345,647 | 370,114 | 730,717 | 753,584 | |||||||||||
Average realized price ($/Mcfe) | $ | 2.36 | $ | 2.59 | $ | 2.43 | $ | 2.88 | |||||||
(a) | The Company's volume weighted NYMEX natural gas price (actual average NYMEX natural gas price ($/MMBtu)) was |
(b) | Basis represents the difference between the ultimate sales price for natural gas and the NYMEX natural gas price. |
(c) | NGLs, ethane and oil were converted to Mcfe at the rate of six Mcfe per barrel. |
(d) | Also referred to in this report as adjusted operating revenues, a non-GAAP supplemental financial measure. |
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SOURCE EQT Corporation
FAQ
What were EQT's Q2 2020 sales volumes?
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What was EQT's average realized price per Mcfe for Q2 2020?
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