EQT Corporation (NYSE: EQT) today announced fourth quarter and
full-year 2017 results.
2017 Highlights:
- Completed acquisition of Rice
Energy
- Announced 59% increase in proved
reserves
- Received FERC Certificate for Mountain
Valley Pipeline
- Production sales volume was 17% higher
than 2016
- Average realized price was 23% higher
than 2016
Financial Results Year Ended
December 31, ($ millions, except EPS)
2017
2016 Difference Net Income/(Loss) Attributable to EQT
$ 1,508.5 $ (453.0 ) $ 1,961.5 Adjusted Net Income/(Loss)
Attributable to EQT (a non-GAAP measure) $ 276.3 $ (54.3 ) $ 330.6
Diluted Earnings Per Share (EPS) $ 8.04 $ (2.71 ) $ 10.75 Adjusted
Earnings (Loss) Per Diluted Share (EPS) (a non-GAAP measure) $ 1.47
$ (0.33 ) $ 1.80 Net Cash Provided by Operating Activities $
1,637.7 $ 1,064.3 $ 573.4
Adjusted Operating Cash Flow Attributable
to EQT (a non-GAAP measure)
$ 1,193.1 $ 832.8 $ 360.3
Three Months Ended
December 31, ($ millions, except EPS)
2017
2016 Difference Net Income/(Loss) Attributable to EQT
$ 1,280.1 $ (192.0 ) $ 1,472.1 Adjusted Net Income Attributable to
EQT (a non-GAAP measure) $ 167.5 $ 43.8 $ 123.7 Diluted Earnings
Per Share (EPS) $ 5.83 $ (1.11 ) $ 6.94 Adjusted Earnings Per Share
(EPS) (a non-GAAP measure) $ 0.76 $ 0.25 $ 0.51 Net Cash Provided
by Operating Activities $ 426.3 $ 296.6 $ 129.7 Adjusted Operating
Cash Flow Attributable to EQT (a non-GAAP measure) $ 415.6 $ 332.3
$ 83.3
As a result of the federal tax reform legislation, net income
for the three months and year-ended December 31, 2017, includes a
tax benefit of approximately $1.2 billion for the revaluation of
existing net deferred tax liabilities to the lower corporate tax
rate. Adjusted earnings for the year-ended December 31, 2017, were
higher primarily due to increased commodity prices and sales
volume, partly offset by higher operating expenses. Adjusted cash
flow for year-ended December 31, 2017, includes $183 million of
transaction-related expenses.
Fourth quarter adjusted earnings were higher primarily due to
higher sales volume, partially offset by higher operating
expenses.
The Non-GAAP Disclosures section of this news release provides
reconciliations of non-GAAP financial measures to the most
comparable GAAP financial measure, as well as important disclosures
regarding certain projected non-GAAP financial measures.
RESULTS BY BUSINESS
EQT PRODUCTION
Financial Results Year Ended
December 31, ($ millions, except average realized price)
2017 2016 Difference Sales volume
(Bcfe) 887.5 759.0 128.5 Pipeline and net marketing services $ 65.0
$ 41.0 $ 24.0 Operating revenue $ 3,106.3 $ 1,387.1 $ 1,719.2
Adjusted operating revenue (a non-GAAP measure) $ 2,694.2 $ 1,872.3
$ 821.9 Operating expenses $ 2,516.6 $ 2,114.8 $ 401.8 Operating
income / (loss) $ 589.7 $ (719.7 ) $ 1,309.4 Adjusted operating
income / (loss) (a non-GAAP measure) $ 262.9 $ (164.0 ) $ 426.9
Average realized price ($/Mcfe) $ 3.04 $ 2.47 $ 0.57
The increase in operating income for 2017 was primarily due to a
gain on derivatives not designated as hedges, a higher average
realized price, and increased sales volumes for produced natural
gas and natural gas liquids (NGLs), as a result of recent
acquisitions and drilling activity, partly offset by increased
operating expenses.
The increase in the average realized price for the year was
primarily due to an increase in the average NYMEX natural gas
price, including cash settled derivatives, of $0.29 per Mcf; an
increase in the average natural gas differential of $0.19 per Mcf;
and an increase in NGLs pricing.
Operating expenses for 2017 were $401.8 million higher than last
year. Transmission expense increased $154.1 million, gathering
expense increased $66.4 million, and processing expense increased
$54.7 million, all consistent with higher volumes and improved
access to premium markets. Depreciation, depletion and amortization
expense (DD&A) increased $123.1 million as a result of higher
sales volumes, partly offset by a lower depletion rate
year-over-year. Selling, general and administrative expense
(SG&A) was $14.6 million lower due to the absence of one-time
items from the prior year, including a charge for pension
settlement and legal reserves in 2016, partially offset by higher
SG&A associated with the Rice acquisition.
Three Months Ended December 31, ($
millions, except average realized price)
2017
2016
Difference Sales volume (Bcfe) 294.4 198.4 96.0 Pipeline and
net marketing services $ 33.3 $ 12.9 $ 20.4 Operating revenue $
1,048.9 $ 318.3 $ 730.6 Adjusted operating revenue (a non-GAAP
measure) $ 896.3 $ 578.5 $ 317.8 Operating expenses $ 781.4 $ 577.4
$ 204.0 Operating income / (loss) $ 267.4 $ (251.1 ) $ 518.5
Adjusted operating income (a non-GAAP measure) $ 163.5 $ 32.1 $
131.4 Average realized price ($/Mcfe) $ 3.04 $ 2.92 $ 0.12
The increase in operating income for the quarter was primarily
due to a sales volume increase for both produced natural gas and
NGLs related to recent acquisitions, including Rice, and drilling
activity and a gain on derivatives not designated as hedges, partly
offset by increased operating expenses.
The increase in the average realized price for the quarter was
primarily due to an improvement in NGLs pricing.
Operating expenses for the quarter were $204.0 million higher
than the same period last year. DD&A increased $103.9 million,
gathering expense increased $39.2 million, transmission expense
increased $34.7 million, and processing expense increased $9.4
million, consistent with increased volumes and improved access to
premium markets.
EQT MIDSTREAM PARTNERS (EQM) GATHERING
Financial Results Year Ended
December 31, ($ millions)
2017 2016
Difference Operating revenue $ 454.5 $ 397.5 $ 57.0
Operating expenses $ 121.0 $ 108.5 $ 12.5 Operating income $ 333.6
$ 289.0 $ 44.6
Three Months Ended December 31,
($ millions)
2017 2016 Difference Operating
revenue $ 123.5 $ 100.2 $ 23.3 Operating expenses $ 32.7 $ 29.4 $
3.3 Operating income $ 90.8 $ 70.8 $ 20.0
Operating income increased 15% in 2017, and 28% in the fourth
quarter, primarily due to higher revenues driven by production
development in the Marcellus Shale. Revenue from firm reservation
fees represented 90% of total revenue during 2017 and 86% for the
fourth quarter.
Operating expenses increased primarily as a result of higher
depreciation and amortization expense due to additional assets
placed in-service, including those associated with the Range
Resources header pipeline project and various affiliate wellhead
gathering expansion projects. Operating and maintenance expenses
increased primarily as a result of higher personnel costs and
increased property taxes, consistent with the Company’s growth.
EQM TRANSMISSION
Financial Results Year Ended
December 31, ($ millions)
2017 2016
Difference Operating revenue $ 379.6 $ 338.1 $ 41.5
Operating expenses $ 132.4 $ 100.2 $ 32.2 Operating income $ 247.1
$ 237.9 $ 9.2
Three Months Ended December 31,
($ millions)
2017 2016 Difference Operating
revenue $ 101.0 $ 94.8 $ 6.2 Operating expenses $ 42.8 $ 31.0 $
11.8 Operating income $ 58.2 $ 63.8 $ (5.6 )
The increase in operating income was primarily due to higher
firm reservation fee revenue on the Ohio Valley Connector (OVC).
Revenue from firm reservation fees represented 92% of total
revenues during 2017.
Operating expenses were $1.3 million higher than last year,
excluding a $10.5 million non-cash charge to depreciation and
amortization expense in the fourth quarter of 2017. The non-cash
charge related to a revaluation of differences between regulatory
and tax bases in property, plant, and equipment.
OTHER BUSINESSAcquisition
of Rice EnergyOn November 13, 2017, EQT completed the
acquisition (Rice Merger) of Rice Energy Inc. (Rice). EQT acquired
all of the outstanding shares of Rice common stock in exchange for
0.37 shares of EQT stock and $5.30 in cash per share of Rice
stock.
The foundation of the transaction with Rice was the ability to
realize significant synergies on SG&A expenses, as well as
capture improved capital returns resulting from the ability to
drill longer laterals on its much larger contiguous acreage
position.
In 2018, SG&A savings from the acquisition are approximately
$110 million and capital efficiency savings are approximately
$210 million. The forecasted average lateral length in southwestern
Pennsylvania is projected to be 13,600 feet.
As a result of replacing $1.3 billion of Rice senior notes with
lower coupon investment grade debt, EQT expects to realize $45
million in annual interest savings.
Through the Rice Merger, EQT also acquired a controlling
interest in Rice Midstream Partners LP (RMP), for which EQT will
now report additional segments for RMP Gathering and RMP Water. A
discussion of the results of those segments has been omitted from
this release as EQT only reports the results of RMP from the
acquisition date of November 13, 2017 and there is no comparable
period.
2017 Reserves ReportIn a separate news release issued
today, EQT reported total proved reserves at December 31, 2017, of
21.4 Tcfe, a 59% increase over 2016. Proved developed reserves
increased 65% over 2016 to 11.3 Tcfe.
Mountain Valley PipelineThe Federal Energy Regulatory
Commission (FERC) issued a Certificate of Public Convenience and
Necessity for the Mountain Valley Pipeline project in October 2017.
As of December 2017, Mountain Valley Pipeline, LLC (MVP JV) had
received all of the necessary federal permits required for the
project. In early January 2018, the MVP JV began filing requests
for partial Notices to Proceed with the FERC, and subsequently has
received permission to begin construction activities in certain
areas along the route. The 303-mile pipeline is estimated to cost
$3.5 billion, with EQM funding its proportional share, or
approximately $1.6 billion. The MVP JV has secured a total of 2 Bcf
per day of firm capacity commitments at 20-year terms and continues
to target a late 2018 in-service date.
Notes IssuanceOn October 4, 2017, the Company completed
the public offering of Senior Notes and Floating Rate Notes
totaling $3.0 billion. Net proceeds from the sale of the notes were
primarily used to fund a portion of the cash consideration for, to
refinance assumed indebtedness in, and to pay expenses related to
the Rice Merger. Net proceeds from the sale of the notes were also
used to redeem Company Senior Notes due in 2018.
Tax Reform ImpactOn December 22, 2017, the Tax Cuts and
Jobs Act of 2017 was enacted, lowering the federal corporate tax
rate to 21% from 35%. As a result, the Company recorded a deferred
tax benefit of $1.2 billion in the fourth quarter to revalue its
existing net deferred tax liabilities to the lower rate.
This legislation also repealed the alternative minimum tax (AMT)
and provides that existing AMT credit carryforwards can be utilized
to offset current federal taxes owed in tax years 2018 through
2020. In addition, 50% of any unused AMT credit carryforwards can
be refunded during these years with any remaining AMT credit
carryforward being fully refunded in 2021. The Company expects a
refund of $200 million related to 2018. The Company had
approximately $435 million of AMT credit carryforwards as of
December 31, 2017.
Lastly, this legislation preserved the deductibility of
intangible drilling costs for federal income tax purposes and
provides bonus depreciation which allows the Company to deduct 100%
of its unregulated tangible capital deployed between 2018 and 2020.
After 2022, the bonus percentage is reduced by 20% each year until
it expires in 2027. None of the other provisions are expected to
have a material effect on the Company's results of operations.
Marcellus Acreage AcquisitionsDuring 2017, the Company
acquired approximately 110,000 net Marcellus acres, with drilling
rights on approximately 55,000 net Utica acres, in the Company’s
liquids-rich West Virginia core development area. The Company paid
net cash of $740.1 million during the year-ended December 31, 2017,
for these acquisitions, which exclude Rice.
EQT Midstream Partners, LP (NYSE: EQM) / EQT GP Holdings, LP
(NYSE: EQGP) / Rice Midstream Partners LP (NYSE: RMP)On January
18, 2018, EQM announced a cash distribution to its unitholders of
$1.025 per unit for the fourth quarter. EQGP announced a cash
distribution to its unitholders of $0.244 per unit for the fourth
quarter 2017. RMP also announced a cash distribution to its
unitholders of $0.2917 per unit for the fourth quarter 2017.
The 2017 financial results for EQM and EQGP were released today
and provide operational results, as well as updates on significant
midstream projects under development by EQM. This news release is
available at www.eqtmidstreampartners.com.
Calculation of Net Income Attributable to Noncontrolling
Interest (NCI)
The results of EQGP, EQM, RMP and Strike Force Midstream LLC
(Strike Force) are consolidated in EQT’s results. For the year
ended December 31, 2017, EQT’s results reflected earnings of $349.6
million, or $1.86 per diluted share, attributable to the publicly
held partnership interests and the minority interest in Strike
Force.
Year Ended December 31, 2017 Unitholder interest
in net Public / minority NCI interest
in (thousands)
income (a)
ownership EQT earnings EQM $ 428,373 71.65 % $
306,927 EQGP $ 261,993 9.94 % $ 26,042 RMP $ 22,131 71.89 % $
15,910 Strike Force $ 2,936 25.00 % $ 734 Total $ 349,613
Three Months Ended December 31, 2017 Unitholder interest
in net Public / minority NCI interest in
(thousands)
income (a)
ownership EQT earnings EQM $ 105,553 71.65 % $ 75,628
EQGP $ 70,344 9.94 % $ 6,992 RMP $ 22,131 71.89 % $ 15,910 Strike
Force $ 2,936 25.00 % $ 734 Total $ 99,264
(a)Excludes incentive distribution rights
HedgingAs of January 31, 2018, the approximate volumes
and prices of the Company’s derivative commodity instruments
hedging sales of produced gas for 2018 through 2020 were:
2018(a)
2019 2020 NYMEX Swaps Total
Volume (Bcf) 541 234 234 Average Price per Mcf (NYMEX) $ 3.14 $
3.03 $ 3.05
Collars Total Volume (Bcf) 117 66 −
Average Floor Price per Mcf (NYMEX) $ 3.28 $ 3.15 $ − Average Cap
Price per Mcf (NYMEX) $ 3.78 $ 3.68 $ −
Puts (Long)
Total Volume (Bcf) 10 7 − Average Floor Price per Mcf (NYMEX) $
2.91 $ 2.94 $ −
(a)Full year 2018
- The Company also sold calendar year
2018 and 2019 calls for approximately 64 Bcf and 45 Bcf,
respectively, at strike prices of $3.49 per Mcf and $3.69 per Mcf,
respectively
- For 2018, the Company also sold puts
for approximately 3 Bcf, at a strike price of $2.63 per Mcf
- The average price is based on a
conversion rate of 1.05 MMBtu/Mcf
Operating Income (Loss)The Company reports operating
income (loss) by segment in this news release. Interest, income
taxes, and unallocated expense are controlled on a consolidated,
corporate-wide basis and are not allocated to the segments.
The following table reconciles operating income (loss) by
segment, as reported in this news release, to the consolidated
operating income reported in the Company’s financial
statements:
Three Months Ended Year Ended
December 31, December 31, (thousands)
2017
2016 2017 2016 Operating income
(loss): EQT Production $ 267,439 $ (251,053 ) $ 589,716 $ (719,731
) EQM Gathering 90,847 70,753 333,563 289,027 EQM Transmission
58,150 63,837 247,145 237,922 RMP Gathering 21,800 − 21,800 − RMP
Water 4,145 − 4,145 − Unallocated expense (227,532 )
(73,003 ) (263,388 ) (85,518 ) Operating income
(loss) $ 214,849 $ (189,466 ) $ 932,981 $ (278,300 )
Unallocated expenses generally include incentive compensation
costs and administrative expenses. In addition, 2017 includes
$237.3 million of Rice Merger related expenses and 2016 includes a
$59.7 million impairment on gathering assets prior to the sale to
EQM.
Wells Drilled (spud)
Marcellus Upper Devonian Ohio
Utica (net) 2017 144 49 4 Q4 2017 40 5 4 2018 Forecast 134 16
25 Q1 2018 Forecast 20 – 25 3 – 5 6 – 8
- 2017 average lateral lengths: Marcellus
8,900; Upper Devonian 9,800; Ohio Utica 10,500
- Q4 2017 average lateral lengths:
Marcellus 9,800; Upper Devonian 11,500; Ohio Utica 10,500
- 2018 forecasted average lateral
lengths: Marcellus 12,600; Upper Devonian 15,800; Ohio Utica
11,000
Wells Turned-in-line (TIL)
Marcellus Upper Devonian Ohio
Utica (net) 2017 113 37 3 Q4 2017 53 13 3 2018 Forecast 160 –
170 20 – 25 20 – 25 Q1 2018 Forecast 18 – 21 4 4
- 2017 average lateral lengths: Marcellus
7,400; Upper Devonian 8,300; Ohio Utica 12,800
- Q4 2017 average lateral lengths:
Marcellus 7,100; Upper Devonian 7,000; Ohio Utica 12,700
- 2018 forecasted average lateral
lengths: Marcellus 8,700; Upper Devonian 11,300; Ohio Utica
11,500
Marcellus Horizontal Well Status (cumulative since
inception)
As of As of As of
As of As of 12/31/17* 9/30/17
6/30/17 3/31/17 12/31/16* Wells drilled (spud)
1,743 1,288 1,259 1,216 1,046 Wells online 1,424 1,060 1,028 1,013
875 Wells complete, not online 21 21 15 20 21 Wells drilled,
uncompleted 298 207 216 183 150
*Includes 77 wells acquired in 2016 and 570 wells acquired in
2017
NON-GAAP
DISCLOSURESAdjusted Net Income (Loss) Attributable to
EQT and Adjusted Earnings per Diluted Share (Adjusted
EPS)Adjusted net income (loss) attributable to EQT and adjusted
EPS are non-GAAP supplemental financial measures that are presented
because they are important measures used by management to evaluate
period-to-period comparisons of earnings trends. Adjusted net
income (loss) attributable to EQT and adjusted EPS should not be
considered as alternatives to net income (loss) attributable to EQT
or earnings per diluted share (EPS) presented in accordance with
GAAP. Adjusted net income (loss) attributable to EQT as presented
excludes the revenue impact of changes in the fair value of
derivative instruments prior to settlement, Rice Merger-related
expenses, and certain other items that impact comparability between
periods. Management utilizes adjusted net income (loss)
attributable to EQT to evaluate earnings trends because the measure
reflects only the impact of settled derivative contracts; thus, the
income from natural gas sales is not impacted by the often-volatile
fluctuations in the fair value of derivatives prior to settlement.
The measure also excludes other items that affect the comparability
of results. Management believes that adjusted net income (loss)
attributable to EQT as presented provides useful information for
investors for evaluating period-over-period earnings.
The table below reconciles adjusted net income (loss)
attributable to EQT and adjusted EPS with net income (loss)
attributable to EQT and EPS as derived from the statements of
consolidated operations to be included in EQT’s report on Form 10-K
for the year ended December 31, 2017.
Three Months Ended Year Ended
December 31, December 31,
(thousands, except per share
information)
2017 2016 2017 2016 Net
income (loss) attributable to EQT, as reported $ 1,280,071 $
(191,958 ) $ 1,508,529 $ (452,983 ) Add back / (deduct): Asset and
Lease Impairments 15,274 69,935 20,327 75,434 Rice Merger-related
costs 222,634 – 245,281 – (Gain) loss on derivatives not designated
as hedges (167,328 ) 216,649 (390,021 ) 248,991 Net cash
settlements received on derivatives not designated as hedges 47,565
56,909 40,728 279,425 Premiums received (paid) for derivatives that
settled during the period 537 (558 ) 2,132 (2,132 ) Loss on debt
extinguishment 12,641 – 12,641 – Huron Restructuring Charges – – –
4,360 Pension Settlement Charge – – – 9,403 Gain on sale / exchange
of assets – (8,025 ) – (8,025 ) Tax impact of non-GAAP items*
(49,199 ) (134,634 ) 31,296
(244,197 ) Subtotal 1,362,195 8,318 1,470,913 (89,724 ) Tax benefit
related to federal tax law change** (1,205,140 ) – (1,205,140 ) –
Tax expense related to regulatory liability 10,488 – 10,488 – Tax
expense related to regulatory asset – 35,438
– 35,438 Adjusted net income
(loss) attributable to EQT $ 167,543 $ 43,756 $
276,261 $ (54,286 ) Diluted weighted average common shares
outstanding 219,712 173,688 187,727 166,978 Diluted EPS, as
adjusted $ 0.76 $ 0.25 $ 1.47 $ (0.33 ) *
Blended tax rates of 37.46% and 45.41%
were applied to the items under the caption “Add back (deduct)” for
the three months and year ended December 31, 2017, respectively. A
tax rate of 40.2% was applied to the items under the caption “Add
back (deduct)” for the three months and year ended December 31,
2016. This represents the incremental deferred tax (expense)
benefit that would have been incurred had these items been excluded
from net income (loss) attributable to EQT.
** The income tax benefit of $1.2 billion for the three months and
year ended December 31, 2017 reflects the revaluation of net
deferred tax liabilities to the lower corporate tax rate due to the
Tax Cuts and Jobs Act of 2017.
Operating Cash Flow, Adjusted Operating Cash Flow
Attributable to EQT and Adjusted Operating Cash Flow Attributable
to EQT ProductionOperating cash flow, adjusted operating cash
flow attributable to EQT and adjusted operating cash flow
attributable to EQT Production are non-GAAP supplemental financial
measures that are presented as indicators of an oil and gas
exploration and production company’s ability to internally fund
exploration and development activities and to service or incur
additional debt. EQT includes this information because management
believes that changes in operating assets and liabilities relate to
the timing of cash receipts and disbursements and therefore may not
relate to the period in which the operating activities occurred.
Adjusted operating cash flow attributable to EQT is EQT’s net cash
provided by operating activities, less changes in other assets and
liabilities, adjusted to exclude EQM and RMP adjusted EBITDA, plus
EQM and RMP interest expense plus the EQGP and RMP cash
distributions payable to EQT. Prior to EQT’s 2018 operational
forecast announcement in December 2017, the Company’s calculation
of adjusted operating cash flow attributable to EQT did not include
the addition of EQM’s and RMP’s interest expense. The Company
believes it is preferable to present this non-GAAP supplemental
financial measure with this adjustment as it better reflects EQT’s
cash flows by excluding the cost of debt for EQM and RMP. EQT has
recast all periods presented to be consistent with this change in
the definition of adjusted operating cash flow attributable to EQT.
Management believes that removing the impact on operating cash
flows of the public unitholders of EQGP, EQM and RMP that is
otherwise required to be consolidated in EQT’s results provides
useful information to an EQT investor. As used in this news
release, adjusted operating cash flow attributable to EQT
Production means the EQT Production segment’s total operating
revenues less the EQT Production segment’s cash operating expense,
less gains (losses) on derivatives not designated as hedges, plus
net cash settlements received (paid) on derivatives not designated
as hedges, plus premiums received (paid) for derivatives that
settled during the period, plus EQT Production asset impairments
(if applicable). Operating cash flow, adjusted operating cash flow
attributable to EQT and adjusted operating cash flow attributable
to EQT Production should not be considered as alternatives to net
cash provided by operating activities presented in accordance with
GAAP. The table below reconciles operating cash flow and adjusted
operating cash flow attributable to EQT with net cash provided by
operating activities, as derived from the statements of
consolidated cash flows to be included in EQT’s report on Form 10-K
for the year ended December 31, 2017.
Three Months Ended Year Ended
December 31, December 31, thousands
2017
2016 2017 2016 Net cash provided
by operating activities $ 426,326 $ 296,621 $ 1,637,698 $ 1,064,320
Add back / (deduct) Changes in other assets and liabilities
116,921 144,764 10,664
174,272 Operating cash flow (a non-GAAP measure) 543,247
441,385 1,648,362 1,238,592 (Deduct) / add back: EQM adjusted
EBITDA(1) (185,098 ) (156,868 ) (689,498 ) (572,611 ) RMP adjusted
EBITDA(1) (33,457 ) – (33,457 ) – EQM net interest expense 10,167
5,318 36,181 16,766 RMP net interest expense 826 – 826 – Cash
distribution payable to EQT from EQGP(2) 58,490 42,430 209,271
150,062 Cash distribution payable to EQT from RMP(3) 21,432
– 21,432 –
Adjusted operating cash flow attributable to EQT $
415,607
$ 332,265 $ 1,193,117 $ 832,809 (1)
EQM adjusted EBITDA and RMP adjusted EBITDA are non-GAAP
supplemental financial measures reconciled in this section. (2)
Cash distribution payable to EQT for the three months and year
ended December 31, 2017 and 2016, represents the distribution
payable from EQGP to EQT related to the respective period. (3) Cash
distribution payable to EQT for the three months and year ended
December 31, 2017 represents the distribution payable from RMP to
EQT related to the respective period, as well as a cash
distribution received by EQT from RMP following the Rice Merger in
respect of the third quarter of 2017 distribution which was payable
November 16, 2017.
EQT has not provided projected net cash provided by operating
activities or reconciliations of projected adjusted operating cash
flow attributable to EQT or EQT Production to projected net cash
provided by operating activities, the most comparable financial
measure calculated in accordance with GAAP. EQT is unable to
project net cash provided by operating activities 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. EQT is unable to project these
timing differences with any reasonable degree of accuracy without
unreasonable efforts such as predicting the timing of its and
customers’ payments, with accuracy to a specific day, three or more
months in advance. Furthermore, EQT does not provide guidance with
respect to its average realized price or income taxes, among other
items, that are reconciling items between net cash provided by
operating activities and adjusted operating cash flow attributable
to EQT and adjusted operating cash flow attributable to EQT
Production, as applicable. Natural gas prices are volatile and out
of EQT’s control, and the timing of transactions and the income tax
effects of future transactions and other items are difficult to
accurately predict. Therefore, EQT is unable to provide projected
net cash provided by operating activities, or the related
reconciliations of projected adjusted operating cash flow
attributable to EQT and EQT Production to projected net cash
provided by operating activities, without unreasonable effort.
EQT Production Adjusted Operating RevenueThe table below
reconciles EQT Production adjusted operating revenues, a non-GAAP
supplemental financial measure, to EQT Production total operating
revenue, as reported in the EQT Production Results of Operations,
its most directly comparable financial measure calculated in
accordance with GAAP. Refer to the Financial Information by
Business Segment footnote to be included in EQT’s report on Form
10-K for the year ended December 31, 2017, for a reconciliation of
EQT Production total operating revenue to EQT Corporation total
operating revenue, as reported.
EQT Production adjusted operating revenue (also referred to as
total natural gas & liquids sales, including cash settled
derivatives) is presented because it is an important measure used
by the Company’s management to evaluate period-over-period
comparisons of earnings trends. EQT Production adjusted operating
revenue as presented excludes the revenue impact of changes in the
fair value of derivative instruments prior to settlement and the
revenue impact of certain pipeline and net marketing services.
Management utilizes EQT Production adjusted operating revenue to
evaluate earnings trends because the measure reflects only the
impact of settled derivative contracts and thus does not impact the
revenue from natural gas sales with the often volatile fluctuations
in the fair value of derivatives prior to settlement. EQT
Production adjusted operating revenue also excludes "Pipeline and
net marketing services" because management considers this revenue
to be unrelated to the revenue for its natural gas and liquids
production. EQT Production "Pipeline and net marketing services"
includes revenue for gathering services provided to third-parties,
as well as both the cost of and recoveries on third-party pipeline
capacity not used for EQT Production sales volume. Management
further believes that EQT Production adjusted operating revenue, as
presented, provides useful information to investors for evaluating
period-over-period earnings trends.
Calculation of EQT Production
Adjusted
Three Months Ended Year Ended
Operating Revenue
December 31, December 31, $ in thousands (unless
noted)
2017 2016 2017
2016 EQT Production total operating revenue, as reported on
segment page $ 1,048,856 $ 318,302 $ 3,106,337 $ 1,387,054 (Deduct)
/ add back: (Gain) loss on derivatives not designated as hedges
(167,328 ) 216,649 (390,021 ) 248,991 Net cash settlements received
on derivatives not designated as hedges 47,565 56,909 40,728
279,425 Premiums received (paid) for derivatives that settled
during the period 537 (558 ) 2,132 (2,132 ) Pipeline and net
marketing services (33,342 ) (12,852 ) (64,998
) (41,048 ) EQT Production adjusted operating revenue, a
non-GAAP measure $ 896,288 $ 578,450 $ 2,694,178 $ 1,872,290
Total sales volumes (MMcfe) 294,439 198,399 887,520 758,967
Average realized price ($/Mcfe) $ 3.04 $ 2.92 $ 3.04 $ 2.47
EQT Production Adjusted Operating Income (Loss)The table
below reconciles EQT Production adjusted operating income (loss), a
non-GAAP supplemental financial measure, to EQT Production
operating income (loss), as reported in the EQT Production Results
of Operations. Refer to the Operating Income (Loss) section in this
news release for a reconciliation of EQT Production total operating
income (loss) to EQT Corporation total operating income (loss), as
reported.
EQT Production adjusted operating income (loss) is presented
because it is an important measure used by EQT’s management to
evaluate period-over-period comparisons of earnings trends. EQT
Production adjusted operating income (loss) should not be
considered as an alternative to EQT Corporation operating income
(loss) presented in accordance with GAAP. EQT Production adjusted
operating income (loss) as presented excludes the revenue impact of
changes in the fair value of derivative instruments prior to
settlement, asset impairments and drilling expenses, pension
settlement charges and restructuring charges. Management utilizes
EQT Production adjusted operating income (loss) to evaluate
earnings trends because the measure reflects only the impact of
settled derivative contracts and thus the income from natural gas
sales is not impacted by the often volatile fluctuations in the
fair value of derivatives prior to settlement. The measure also
excludes certain other items that affect the comparability of
results. Management believes that EQT Production adjusted operating
income (loss) as presented provides useful information for
investors for evaluating period-over-period earnings.
Three Months Ended Year Ended
December 31, December 31, (thousands)
2017
2016 2017 2016 EQT Production
operating income (loss), as reported on segment page $ 267,439 $
(251,053) $ 589,716 $ (719,731) (Deduct) / add back: (Gain) loss on
derivatives not designated as hedges (167,328) 216,649 (390,021)
248,991 Net cash settlements received on derivatives not designated
as hedges 47,565 56,909 40,728 279,425 Premiums received (paid) for
derivatives that settled during the period 537 (558) 2,132 (2,132)
Asset impairments and drilling expenses 15,274 10,187 20,327 15,686
Pension settlement charges – – – 9,403 Restructuring charges – – –
4,360 EQT Production adjusted operating income (loss) $ 163,487 $
32,134 $ 262,882 $ (163,998)
EQM Adjusted EBITDAAs used in this news release, EQM
adjusted EBITDA means EQM’s net income plus EQM’s net interest
expense, depreciation and amortization expense, income tax expense
(if applicable), preferred interest payments received
post-conversion and non-cash long-term compensation expense less
EQM’s equity income, AFUDC-equity, pre-acquisition capital lease
payments for Allegheny Valley Connector, LLC (AVC), and adjusted
EBITDA of assets prior to acquisition. EQM adjusted EBITDA is a
non-GAAP supplemental financial measure that management and
external users of EQT’s consolidated financial statements, such as
industry analysts, investors, lenders and rating agencies, use to
assess the effects of the noncontrolling interests in relation
to:
- EQT's operating performance as compared
to other companies in its industry;
- the ability of EQT's assets to generate
sufficient cash flow to make distributions to its investors;
- EQT's ability to incur and service debt
and fund capital expenditures; and
- the viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
EQT believes that EQM EBITDA provides useful information to
investors in assessing the impact of the noncontrolling interest in
EQM on EQT's financial condition and results of operations. EQM
adjusted EBITDA should not be considered as an alternative to EQM’s
net income, operating income, or any other measure of financial
performance or liquidity presented in accordance with GAAP. EQM
adjusted EBITDA has important limitations as an analytical tool
because it excludes some, but not all, items that affect EQM's net
income. Additionally, because EQM adjusted EBITDA may be defined
differently by other companies in EQT's or EQM's industries, the
definition of EQM adjusted EBITDA may not be comparable to
similarly titled measures of other companies, thereby diminishing
the utility of the measure. The table below reconciles EQM adjusted
EBITDA with EQM’s net income, as derived from the statements of
consolidated operations to be included in EQM’s report on Form 10-K
for the year ended December 31, 2017.
Three Months Ended Year Ended
December 31, December 31, (thousands)
2017
2016 2017 2016 Net income $
146,631 $ 135,700 $ 571,904 $ 537,954 Add back: Net interest
expense 10,167 5,318 36,181 16,766 Depreciation and amortization
expense 33,294 19,514 97,485 62,691 Preferred interest payments
received post conversion 2,746 2,764 10,984 2,764 Non-cash
long-term compensation expense – – 225 195 Income tax expense – – –
10,147 Less: Equity income (6,758 ) (3,759 ) (22,171 ) (9,898 )
AFUDC – equity (982 ) (2,669 ) (5,110 ) (19,402 ) Pre-acquisition
capital lease payments for AVC – – – (17,186 ) Adjusted EBITDA
attributable to the assets prior to acquisition –
– – (11,420 ) EQM Adjusted
EBITDA
$ 185,098 $ 156,868 $ 689,498 $ 572,611
RMP Adjusted EBITDARMP adjusted EBITDA means RMP’s net
income (loss) plus RMP’s net interest expense, depreciation
expense, and non-cash equity compensation expense. RMP adjusted
EBITDA is a non-GAAP supplemental financial measure that management
and external users of EQT’s consolidated financial statements, such
as industry analysts, investors, lenders and rating agencies, use
to assess the effects of the noncontrolling interests in relation
to:
- EQT's operating performance as compared
to other companies in its industry;
- the ability of EQT's assets to generate
sufficient cash flow to make distributions to its investors;
- EQT's ability to incur and service debt
and fund capital expenditures; and
- the viability of acquisitions and other
capital expenditure projects and the returns on investment of
various investment opportunities.
EQT believes that RMP adjusted EBITDA provides useful
information to investors in assessing the impact of the
noncontrolling interest in RMP on EQT's financial condition and
results of operations. RMP adjusted EBITDA should not be considered
as an alternative to RMP’s net income, operating income, or any
other measure of financial performance or liquidity presented in
accordance with GAAP. RMP adjusted EBITDA has important limitations
as an analytical tool because it excludes some, but not all, items
that affect RMP's net income. Additionally, because RMP adjusted
EBITDA may be defined differently by other companies in EQT's or
RMP's industries, the definition of RMP adjusted EBITDA may not be
comparable to similarly titled measures of other companies, thereby
diminishing the utility of the measure. The table below reconciles
RMP adjusted EBITDA with RMP’s net income for the successor period
November 13, 2017 to December 31, 2017, as derived from the
statements of consolidated operations to be included in RMP’s
report on Form 10-K for the year ended December 31, 2017.
Three Months Ended Year Ended
December 31, December 31, (thousands)
2017
2016 2017 2016 Net income $
25,134 $ – $ 25,134 $ – Add back: Net interest expense 826
– 826 – Depreciation and amortization expense 7,480 – 7,480 –
Non-cash long-term compensation expense 17 –
17 – RMP Adjusted EBITDA
$ 33,457 $ – $ 33,457 $ – (a) The 2017 activity reflects the
post-acquisition period from November 13, 2017 to December 31,
2017.
Year-End and Fourth Quarter 2017
Webcast InformationThe 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.
EQT Midstream Partners, LP and EQT GP Holdings, LP, for which
EQT Corporation is the parent company, will also host a joint
conference call with security analysts today, beginning at 11:30
a.m. ET. The call will be broadcast live via
www.eqtmidstreampartners.com, with a replay available for seven
days following the call.
About EQT Corporation:EQT
Corporation is an integrated energy company with emphasis on
Appalachian area natural gas production, gathering, and
transmission. With nearly 130 years of experience and a
long-standing history of good corporate citizenship, EQT is the
largest producer of natural gas in the United States. As a leader
in the use of advanced horizontal drilling technology, EQT is
committed to minimizing the impact of drilling-related activities
and reducing its overall environmental footprint. Through safe and
responsible operations, EQT is helping to meet our nation’s growing
demand for clean-burning energy, while continuing to provide a
rewarding workplace and enrich the communities where its employees
live and work. EQT owns the general partner interest and a 90%
limited partner interest in EQT GP Holdings, LP, which owns the
general partner interest, all of the incentive distribution rights,
and a portion of the limited partner interest in EQT Midstream
Partners, LP. EQT also owns the general partner interest, all of
the incentive distribution rights, and a 28% limited partner
interest in Rice Midstream Partners LP.
Visit EQT Corporation at www.EQT.com; and to learn more about
EQT’s sustainability efforts, please visit https://csr.eqt.com.
About EQT Midstream
Partners:EQT Midstream Partners, LP is a growth-oriented
limited partnership formed by EQT Corporation to own, operate,
acquire, and develop midstream assets in the Appalachian Basin. The
Partnership provides midstream services to EQT Corporation and
third-party companies through its strategically located
transmission, storage, and gathering systems that service the
Marcellus and Utica regions. The Partnership owns approximately 950
miles of FERC-regulated interstate pipelines; and also owns
approximately 1,800 miles of high- and low-pressure gathering
lines.
Visit EQT Midstream Partners, LP at
www.eqtmidstreampartners.com.
About EQT GP Holdings:EQT GP
Holdings, LP is a limited partnership that owns the general partner
interest, all of the incentive distribution rights, and a portion
of the limited partner interests in EQT Midstream Partners, LP. EQT
Corporation owns the general partner interest and a 90% limited
partner interest in EQT GP Holdings, LP.
Visit EQT GP Holdings, LP at www.eqtmidstreampartners.com.
About Rice Midstream
Partners:Rice Midstream Partners LP is a fee-based,
growth-oriented limited partnership formed to own, operate, develop
and acquire midstream assets in the Appalachian basin. RMP provides
midstream services to EQT Corporation and third-party companies
through its natural gas gathering, compression and water assets in
the rapidly developing dry gas cores of the Marcellus and Utica
Shales.
Visit Rice Midstream Partners LP at www.ricemidstream.com.
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 http://ir.eqt.com.
Cautionary StatementsThe United States Securities and
Exchange Commission (SEC) permits oil and gas companies, in their
filings with the SEC, to disclose only proved, probable and
possible reserves that a company anticipates as of a given date to
be economically and legally producible and deliverable by
application of development projects to known accumulations. We use
certain terms, such as “EUR” (estimated ultimate recovery) and “3P”
(proved, probable and possible), that the SEC’s guidelines prohibit
us from including in filings with the SEC. These measures are by
their nature more speculative than estimates of reserves prepared
in accordance with SEC definitions and guidelines and accordingly
are less certain.
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).
Disclosures in this news release contain 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 the Company
and its subsidiaries, including guidance regarding the Company’s
strategy to develop its reserves; drilling plans and programs
(including the number, type, average length-of-pay or lateral
length and location of wells to be drilled and number and type of
drilling rigs); projected natural gas prices, basis and average
differential; total resource potential, reserves and EUR; projected
Company and third party production sales volume and growth rates
(including liquids sales volume and growth rates); projected unit
costs and well costs; projected pipeline and net marketing services
revenues; projected gathering and transmission volume and growth
rates; infrastructure programs (including the timing, cost and
capacity of the transmission and gathering expansion projects); the
cost, capacity, timing of regulatory approvals and anticipated
in-service date of the Mountain Valley Pipeline (MVP) project; the
ultimate terms, partners and structure of the MVP joint venture;
technology (including drilling and completion techniques);
acquisition transactions; the projected general and administrative
savings, capital efficiency savings and other operating
efficiencies and synergies resulting from the Rice Merger, and the
Company’s ability to achieve the anticipated synergies and
efficiencies; monetization transactions, including asset sales,
joint ventures or other transactions involving the Company’s
assets; whether the Company will sell its Ohio midstream assets to
EQM and the timing of such transaction or transactions; the timing
of the Company’s announcement of a decision for addressing its
sum-of-the-parts discount, and the impact of the results of such
review; the projected cash flows resulting from the Company’s
partnership interests in EQGP and RMP; internal rate of return
(IRR) and returns per well; projected capital contributions and
expenditures; potential future impairments of the Company’s assets;
liquidity and financing requirements, including funding sources and
availability; changes in the Company’s or EQM’s credit ratings;
projected net income attributable to noncontrolling interests,
adjusted operating cash flow attributable to EQT, adjusted
operating cash flow attributable to EQT Production, EBITDA,
revenues and cash-on-hand; hedging strategy; the effects of
government regulation and litigation; projected dividend and
distribution amounts and rates; and tax position, projected
effective tax rate and the 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. 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, those
set forth under Item 1A, “Risk Factors,” of the Company’s Form 10-K
for the year ended December 31, 2016 as filed with the SEC and the
Company’s Form 10-K for the year ended December 31, 2017 to be
filed with the SEC, as updated by any subsequent Form 10-Qs.
Any forward-looking statement speaks only as of the date on
which such statement is made and the Company does not intend to
correct or update any forward-looking statement, whether as a
result of new information, future events or otherwise.
Information in this news release regarding EQGP and its
subsidiaries, including EQM, and RMP is derived from publicly
available information published or to be published by the
partnerships.
2018 GUIDANCESee the Non-GAAP Disclosures section for
important information regarding the non-GAAP financial measures
included in this news release, including reasons why EQT is unable
to provide projections of its 2018 net cash provided by operating
activities, the most comparable financial measure to adjusted
operating cash flow attributable to EQT and EQT Production,
calculated in accordance with GAAP.
PRODUCTION Q1 2018 2018 Total
production sales volume (Bcfe) 350 – 360 1,520 – 1,560 Liquids
sales volume, excluding ethane (Mbbls) 3,230 – 3,250 12,300 –
12,600 Ethane sales volume (Mbbls) 1,540 – 1,560 4,900 – 5,200
Total liquids sales volume (Mbbls)
4,770 - 4,810
17,200 - 17,800
Marcellus / Utica Rigs
8 - 10
Top-hole rigs
4 - 5
Frac Crews
9 - 11
Unit Costs ($ / Mcfe) Gathering to EQM and RMP $ 0.48 – 0.50
Transmission to EQM $ 0.11 – 0.13 Third-party gathering and
transmission $ 0.39 – 0.41 LOE, excluding production taxes $ 0.07 –
0.09 Production taxes $ 0.06 – 0.08 SG&A $ 0.10 – 0.12 DD&A
$ 1.10 – 1.12 Development costs ($ / Mcfe)
$ 0.41 - 0.43
Average differential ($ / Mcf) $ 0.15 – 0.25 $ (0.35) –
(0.25) Pipeline and net marketing services ($MM) $ 60 – 70 $
60 – 70
Processing expense ($MM)
$185
FINANCIAL ($MM) Net income attributable to
noncontrolling interest ($MM) $ 130 – 140 $ 560 – 570
ADJUSTED OPERATING CASH FLOW ($MM) Adjusted operating cash
flow attributable to EQT Production
$ 2,300 – 2,350
Distributions from EQGP and RMP $ 325 – 375 Interest, taxes, and
other items $ (25) – 25 Adjusted operating cash flow attributable
to EQT
$ 2,650 – 2,750
Based on current NYMEX natural gas prices of $2.77
EQT CORPORATION AND SUBSIDIARIES Statements of
Consolidated Operations Three
Months Ended Year Ended December 31, December
31, 2017 (a) 2016 2017 (a) 2016
(Thousands except per share amounts) Revenues: Sales of natural
gas, oil and NGLs $ 848,186 $ 522,099 $ 2,651,318 $ 1,594,997
Pipeline, water and net marketing services 113,772 73,572 336,676
262,342 Gain (loss) on derivatives not designated as hedges
167,328 (216,649 ) 390,021
(248,991 ) Total operating revenues 1,129,286 379,022 3,378,015
1,608,348 Operating expenses: Transportation and processing
155,096 114,534 559,839 365,817 Operation and maintenance 27,395
21,441 88,866 73,266 Production 52,925 48,734 182,737 174,826
Exploration 16,078 4,026 25,117 13,410 Selling, general and
administrative 71,471 76,119 262,664 272,747 Depreciation,
depletion and amortization 358,264 244,972 1,077,559 927,920
Impairment of long-lived assets – 66,687 – 66,687 Acquisition costs
222,268 – 237,312 – Amortization of intangible assets 10,940
– 10,940 – Total
operating expenses 914,437 576,513 2,445,034 1,894,673 Gain
on sale / exchange of assets – 8,025
– 8,025 Operating income (loss) 214,849
(189,466 ) 932,981 (278,300 ) Other income 8,077 8,494
24,955 31,693 Loss on debt extinguishment 12,641 – 12,641 –
Interest expense 65,662 39,451
202,772 147,920 Income (loss) before income
taxes 144,623 (220,423 ) 742,523 (394,527 ) Income tax (benefit)
expense (1,234,712 ) (111,638 ) (1,115,619 )
(263,464 ) Net income (loss) 1,379,335 (108,785 ) 1,858,142
(131,063 ) Less: Net income attributable to noncontrolling
interests 99,264 83,173 349,613
321,920 Net income (loss) attributable to EQT
Corporation $ 1,280,071 $ (191,958 ) $ 1,508,529 $
(452,983 ) Earnings per share of common stock attributable
to EQT Corporation: Basic: Weighted average common stock
outstanding 218,937 172,906
187,380 166,978 Net income (loss) $ 5.85
$ (1.11 ) $ 8.05 $ (2.71 ) Diluted: Weighted
average common stock outstanding 219,712
172,906 187,727 166,978 Net
income (loss) $ 5.83 $ (1.11 ) $ 8.04 $ (2.71 )
Dividends declared per common share $ 0.03 $ 0.03 $
0.12 $ 0.12 (a) For the three months and year
ended December 31, 2017, the EQT Statements of Consolidated
Operations include the results of operations acquired in the Rice
Merger for the period of November 13, 2017, through December 31,
2017.
EQT CORPORATION AND SUBSIDIARIES
PRICE RECONCILIATION Three Months Ended
Year Ended December 31, December 31, in
thousands (unless noted)
2017 (e) 2016 2017
(e) 2016 NATURAL GAS Sales volume (MMcf)
265,619 175,290 774,076 683,495 NYMEX price ($/MMBtu) (a) $ 2.94 $
2.98 $ 3.09 $ 2.47 Btu uplift 0.24 0.29
0.27 0.22 Natural gas price ($/Mcf) $
3.18 $ 3.27 $ 3.36 $ 2.69 Basis ($/Mcf) (b) (0.55 ) (0.88 )
(0.54 ) (0.81 ) Cash settled basis swaps (not designated as hedges)
($/Mcf) 0.07 0.21 0.01
0.09 Average differential, including cash settled
basis swaps ($/Mcf) $ (0.48 ) $ (0.67 ) $ (0.53 ) $ (0.72 ) Average
adjusted price ($/Mcf) $ 2.70 $ 2.60 $ 2.83 $ 1.97 Cash settled
derivatives (cash flow hedges) ($/Mcf) 0.01 0.11 0.01 0.13 Cash
settled derivatives (not designated as hedges) ($/Mcf) 0.13
0.11 0.05 0.31
Average natural gas price, including cash settled derivatives
($/Mcf) $ 2.84 $ 2.82 $ 2.89 $ 2.41 Natural gas sales, including
cash settled derivatives $ 752,523 $ 493,934 $ 2,237,234 $
1,649,831
LIQUIDS NGLs (excluding ethane):
Sales volume (MMcfe) (c) 18,971 15,512 74,060 57,243 Sales volume
(Mbbls) 3,161 2,585 12,343 9,540 Price ($/Bbl) $ 41.06 $ 27.55 $
31.59 $ 19.43 Cash settled derivatives (not designated as hedges)
($/Bbl) (1.46 ) – (0.69 ) –
Average NGL price, including cash settled derivatives
($/Bbl) $ 39.60 $ 27.55 $ 30.90 $ 19.43 NGL sales $ 125,204
$ 71,217 $ 381,327 $ 185,405
Ethane: Sales volume (MMcfe)
(c) 8,462 6,546 33,432 13,856 Sales volume (Mbbls) 1,410 1,091
5,572 2,309 Price ($/Bbl) $ 5.94 $ 5.64 $ 6.32
$ 5.08 Ethane sales $ 8,383 $ 6,152 $ 35,241 $ 11,742
Oil: Sales volume (MMcfe) (c) 1,387 1,051 5,952 4,373 Sales
volume (Mbbls) 231 175 992 729 Price ($/Bbl) $ 44.03 $ 40.79
$ 40.70 $ 34.73 Oil sales $ 10,178 $ 7,148 $
40,376 $ 25,312 Total liquids sales volume (MMcfe) (c )
28,820 23,109 113,444 75,472 Total liquids sales volume (Mbbls)
4,802 3,851 18,907 12,578 Liquids sales $ 143,765 $ 84,517 $
456,944 $ 222,459
TOTAL PRODUCTION Total natural gas
& liquids sales, including cash settled derivatives (d) $
896,288 $ 578,451 $ 2,694,178 $ 1,872,290 Total sales volume
(MMcfe) 294,439 198,399 887,520 758,967 Average realized
price ($/Mcfe) $ 3.04 $ 2.92 $ 3.04 $ 2.47 (a) The Company’s
volume weighted NYMEX natural gas price (actual average NYMEX
natural gas price ($/MMBtu) was $2.93 and $2.98 for the three
months ended December 31, 2017 and 2016, respectively, and $3.11
and $2.46 for the twelve months ended December 31, 2017 and 2016,
respectively). (b) Basis represents the difference between the
ultimate sales price for natural gas and the NYMEX natural gas
price. (c) NGLs, ethane and crude oil were converted to Mcfe at the
rate of six Mcfe per barrel for all periods. (d) Also referred to
in this report as EQT Production adjusted operating revenues, a
non-GAAP supplemental financial measure. (e) For the three months
and year ended December 31, 2017, EQT Production includes the
results of production operations acquired in the Rice Merger for
the period of November 13, 2017 through December 31, 2017.
EQT PRODUCTION RESULTS OF OPERATIONS
Three Months Ended Year Ended
December 31, December 31, 2017(d) 2016
2017 (d) 2016 OPERATIONAL DATA Sales volume
detail (MMcfe): Marcellus (a) 247,498 173,707 770,620 660,146 Ohio
Utica 24,018 109 24,266 536 Other 22,923
24,583 92,634 98,285 Total
production sales volumes (b) 294,439 198,399 887,520 758,967
Average daily sales volumes (MMcfe/d) 3,200 2,157 2,432 2,074
Average realized price ($/Mcfe) $ 3.04 $ 2.92 $ 3.04 $ 2.47
Gathering to EQM and RMP ($/Mcfe) $ 0.44 $ 0.46 $ 0.47 $
0.48 Transmission to EQM ($/Mcfe) $ 0.16 $ 0.22 $ 0.20 $ 0.20 Third
party gathering and transmission ($/Mcfe) $ 0.37 $ 0.39 $ 0.42 $
0.32 Processing ($/Mcfe) $ 0.16 $ 0.18 $ 0.20 $ 0.16 Lease
operating expenses (LOE), excluding production taxes ($/Mcfe) $
0.12 $ 0.14 $ 0.13 $ 0.15 Production taxes ($/Mcfe) $ 0.06 $ 0.10 $
0.08 $ 0.08 Production depletion ($/Mcfe) $ 1.06 $ 1.06 $ 1.04 $
1.06 Depreciation, depletion and amortization (DD&A)
(thousands): Production depletion $ 311,051 $ 209,475 $ 924,430 $
803,883 Other DD&A 16,641 14,290
57,673 55,135 Total DD&A $ 327,692
$ 223,765 $ 982,103 $ 859,018 Capital expenditures
(thousands) (c) $ 579,612 $ 979,160 $ 2,430,094 $ 2,073,907
FINANCIAL DATA (thousands) Revenues: Sales of natural gas,
oil and NGLs $ 848,186 $ 522,099 $ 2,651,318 $ 1,594,997 Pipeline
and net marketing services 33,342 12,852 64,998 41,048 Gain (loss)
on derivatives not designated as hedges 167,328
(216,649 ) 390,021 (248,991 ) Total
operating revenues 1,048,856 318,302 3,106,337 1,387,054
Operating expenses: Gathering 145,310 106,076 480,111 413,758
Transmission 141,101 106,373 495,635 341,569 Processing 45,793
36,435 179,538 124,864 LOE, excluding production taxes 36,415
27,999 113,937 112,509 Production taxes 16,558 20,735 68,848 62,317
Exploration 16,077 4,026 25,117 13,410 Selling, general and
administrative (SG&A) 46,931 45,032 165,792 180,426 DD&A
327,692 223,765 982,103 859,018 Amortization of intangible assets
5,540 - 5,540 - Impairment of long-lived assets -
6,939 - 6,939 Total
operating expenses 781,417 577,380 2,516,621 2,114,810 Gain on sale
/ exchange of assets - 8,025 -
8,025 Operating income (loss) $ 267,439
$ (251,053 ) $ 589,716 $ (719,731 ) (a) Includes
Upper Devonian wells. (b) NGLs, ethane and crude oil were converted
to Mcfe at the rate of six Mcfe per barrel for all periods. (c)
Includes measurement period adjustments of $(11.8) million for
acquisitions during the three months ended December 31, 2017.
Includes cash capital expenditures of $638.4 million and non-cash
capital expenditures of $83.9 million related to acquisitions
during the three months ended December 31, 2016. Includes cash
capital expenditures of $819.0 million, non-cash capital
expenditures of $10.0 million and measurement period adjustments of
$(14.3) million for acquisitions during the year ended December 31,
2017. Includes cash capital expenditures of $1,051.2 million and
non-cash capital expenditures of $87.6 million related to
acquisitions during the year ended December 31, 2016. (d) For the
three months and year ended December 31, 2017, the operating income
for EQT Production includes the results of operations for the
production operations and retained midstream operations acquired in
the Rice Merger for the period of November 13, 2017 through
December 31, 2017.
EQM GATHERING RESULTS OF
OPERATIONS Three Months
Ended Year Ended December 31, December 31,
2017 2016 2017 2016 FINANCIAL
DATA (Thousands, other than per day amounts) Firm reservation
fee revenues $ 106,454 $ 90,110 $ 407,355 $ 339,237 Volumetric
based fee revenues: Usage fees under firm contracts (a) 13,033
6,893 32,206 38,408 Usage fees under interruptible contracts
4,053 3,186 14,975 19,849 Total volumetric
based fee revenues 17,086 10,079 47,181
58,257 Total operating revenues 123,540 100,189
454,536 397,494 Operating expenses: Operating
and maintenance 12,153 10,627 43,235 38,367 SG&A 10,142 10,907
38,942 39,678 Depreciation and amortization 10,398
7,902 38,796 30,422 Total operating expenses
32,693 29,436 120,973 108,467 Operating
income $ 90,847 $ 70,753 $ 333,563 $ 289,027
OPERATIONAL
DATA Gathered volumes (BBtu per day) Firm capacity reservation
1,956 1,697 1,826 1,553 Volumetric based services (b) 565
285 361 420 Total gathered volumes 2,521 1,982
2,187 1,973 Capital expenditures $ 46,143 $ 47,560 $ 196,871
$ 295,315 (a) Includes fees on volumes gathered in excess of
firm contracted capacity. (b) Includes volumes gathered under
interruptible contracts and volumes gathered in excess of firm
contracted capacity.
EQM TRANSMISSION
RESULTS OF OPERATIONS Three
Months Ended Year Ended December 31, December
31, 2017 2016 2017 2016
FINANCIAL DATA (Thousands, other than per day amounts) Firm
reservation fee revenues $ 91,969 $ 87,813 $ 348,193 $ 277,816
Volumetric based fee revenues: - Usage fees under firm contracts
(a) 3,956 3,405 13,743 45,679 Usage fees under interruptible
contracts 5,046 3,607 17,624 14,625
Total volumetric based fee revenues 9,002 7,012
31,367 60,304 Total operating revenues 100,971
94,825 379,560 338,120 Operating
expenses: Operating and maintenance 11,093 10,899 41,482 34,846
SG&A 8,832 8,477 32,244 33,083 Depreciation and amortization
22,896 11,612 58,689 32,269 Total
operating expenses 42,821 30,988 132,415
100,198 Operating income $ 58,150 $ 63,837 $ 247,145
$ 237,922
OPERATIONAL DATA Transmission pipeline
throughput (BBtu per day) Firm capacity reservation 2,743 2,054
2,399 1,651 Volumetric based services (b) 65 57
37 430 Total transmission pipeline throughput 2,808
2,111 2,436 2,081 Average contracted firm transmission
reservation commitments (BBtu per day) 3,952 3,485 3,627 2,814
Capital expenditures $ 37,423 $ 38,092 $ 111,102 $ 292,049
(a) Includes commodity charges and fees on all volumes
transported under firm contracts as well as transmission fees on
volumes in excess of firm contracted capacity. (b) Includes volumes
transported under interruptible contracts and volumes transported
in excess of firm contracted capacity.
RMP
GATHERING RESULTS OF OPERATIONS
Three Months Ended Year Ended December
31, December 31, 2017 (a) 2016 2017
(a) 2016 FINANCIAL DATA (Thousands, other than
per day amounts) Gathering revenues Affiliate $ 26,242 $ – $ 26,242
$ – Third-party 19 – 19 –
Total gathering revenues 26,261 – 26,261 – Compression
revenues: Affiliate 4,343 – 4,343 – Third-party 10
– 10 – Total compression revenues
4,353 – 4,353 – Total
operating revenues 30,614 – 30,614 – Operating expenses:
Operation and maintenance expense 1,584 – 1,584 – General and
administrative expense 3,265 – 3,265 – Depreciation expense
3,965 – 3,965 – Total operating
expenses 8,814 – 8,814 –
Operating income (loss) $ 21,800 $ – $ 21,800 $ –
OPERATIONAL DATA Gathered volumes (BBtu/d) 1,547 – 1,547 –
Compression volumes (BBtu/d) 1,155 – 1,155 – Capital
expenditures $ 28,320 $ – $ 28,320 $ – (a) This table sets
forth selected financial and operational data for RMP Gathering for
the period November 13, 2017, through December 31, 2017, as the
Company completed the Rice Merger on November 13, 2017.
RMP WATER RESULTS OF OPERATIONS
Three Months Ended Year Ended
December 31, December 31, 2017 (a) 2016
2017 (a) 2016 FINANCIAL DATA (Thousands, other
than per day amounts) Operating revenues Affiliate $ 13,549 $ – $
13,549 – Third-party 56 – 56
– Total operating revenues $ 13,605 – 13,605 –
Operating expenses: Operation and maintenance expense 5,598 – 5,598
– General and administrative expense 347 – 347 – Depreciation
expense 3,515 – 3,515 –
Total operating expenses 9,460 – 9,460
– Operating income (loss) $ 4,145 $ – $ 4,145
$ –
OPERATIONAL DATA Water services volumes (MMgal)
226 – 226 – Capital expenditures $ 6,233 $ – $ 6,233 $ – (a)
This table sets forth selected financial and operational
data for RMP Water for the period November 13, 2017 through
December 31, 2017, as the Company completed the Rice Merger on
November 13, 2017.
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version on businesswire.com: http://www.businesswire.com/news/home/20180215005327/en/
EQT analyst inquiries:Patrick Kane – Chief Investor
Relations Officer, 412-553-7833pkane@eqt.comorEQT Midstream
Partners / EQT GP Holdings / Rice Midstream Partners analyst
inquiries:Nate Tetlow – Investor Relations Director,
412-553-5834ntetlow@eqt.comorMedia inquiries:Natalie Cox –
Corporate Director, Communications, 412-395-3941ncox@eqt.com
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