EQT Earnings Shine, Outlook Bright

Integrated energy player, EQT Corporation’s (EQT) third quarter 2013 adjusted earnings increased to 58 cents per share from 21 cents in prior-year quarter and surpassed the Zacks Consensus Estimate of 50 cents. The year-over-year increase was primarily attributable to higher production sales, prices, gathered volumes, and transmission capacity sales and throughput.

Net operating revenue in the quarter was $506.6 million, ahead of the Zacks Consensus Estimate of $485.0 million and above the year-ago number of $364.1 million.

Segment Details

EQT Production's third quarter operating revenues increased 56% year over year to $304.2 million. The growth came from a 42% increase in sales volume and higher average effective price, partially offset by an increase in operating expenses. Operating income increased from $38.5 million a year ago to $97.6 million.

Under the EQT Midstream segment, revenues rose 28.4% year over year to approximately $140.0 million in the reported quarter. Of this, net gathering revenues surged 19% year over year to $91.8 million, owing to 43% growth in gathered volumes. Net transmission revenues increased 50% year over year to $40.0 million. Net storage, marketing and other operating revenues rose $2.8 million year over year to $8.2 million. Operating income rose 54% year over year to $78.5 million.

EQT Distribution’s net operating revenues decreased $0.3 million year over year to $25.2 million. The segment digested operating loss of $0.1 million. In the prior-year quarter, the company had posted operating income of $0.7 million.

Sunrise Pipeline Sale

In July, EQT sold its wholly owned subsidiary, Sunrise Pipeline, LLC, to EQT Midstream Partners, L.P. (EQM). The purchase consideration was $507.5 million along with 479,184 common units and 267,942 general partner units in EQT Midstream Partners. As a result, as of Sep 30, 2013, EQT held a 42.6% limited partner interest and a 2% general partner interest in EQT Midstream Partners.

Financials

The company’s operating cash flow was $232.8 million during the quarter, reflecting an increase of 36% year over year.

EQT’s capital expenditure totaled $453.7 million, with $332.4 million spent on EQT Production, $111.6 million on EQT Midstream and $9.7 million on EQT Distribution.

Guidance

The company’s natural gas liquids sales volume guidance is 97 billion cubic feet equivalent (Bcfe) for the fourth quarter and 366 Bcfe for the full year, approximately 42% higher than 2012.

Zacks Rank

The company holds a Zacks Rank #3, which translates to a short-term Hold rating. However, there are Zacks Ranked #1 (Strong Buy) stocks – Bonanza Creek Energy, Inc. (BCEI), and Linn Co, LLC (LNCO) – in the oil and gas sector that are expected to outperform the market in the coming one to three months.

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