U.S. Markets closed
  • S&P Futures

    3,687.75
    -21.25 (-0.57%)
     
  • Dow Futures

    29,529.00
    -140.00 (-0.47%)
     
  • Nasdaq Futures

    11,311.25
    -65.50 (-0.58%)
     
  • Russell 2000 Futures

    1,676.30
    -9.80 (-0.58%)
     
  • Crude Oil

    78.99
    +0.25 (+0.32%)
     
  • Gold

    1,647.60
    -8.00 (-0.48%)
     
  • Silver

    18.66
    -0.25 (-1.35%)
     
  • EUR/USD

    0.9638
    -0.0050 (-0.5204%)
     
  • 10-Yr Bond

    3.6970
    -0.0110 (-0.30%)
     
  • Vix

    29.92
    +2.57 (+9.40%)
     
  • GBP/USD

    1.0467
    -0.0389 (-3.5871%)
     
  • USD/JPY

    143.7830
    +0.4630 (+0.3231%)
     
  • BTC-USD

    18,827.13
    -108.26 (-0.57%)
     
  • CMC Crypto 200

    432.09
    -12.45 (-2.80%)
     
  • FTSE 100

    7,018.60
    -140.92 (-1.97%)
     
  • Nikkei 225

    26,563.05
    -590.78 (-2.18%)
     

EQT REPORTS SECOND QUARTER 2022 RESULTS

·14 min read

PITTSBURGH, July 27, 2022 /PRNewswire/ -- EQT Corporation (NYSE: EQT) today announced financial and operational results for the second quarter 2022.

EQT Logo (June 2020) (PRNewsfoto/EQT Corporation)
EQT Logo (June 2020) (PRNewsfoto/EQT Corporation)

Second Quarter 2022 and Recent Highlights:

  • Sales volumes of 502 Bcfe

  • Total per unit operating costs of $1.37 per Mcfe

  • Capital expenditures of $376 MM or $0.75 per Mcfe

  • Net cash provided by operating activities of $230 MM, adjusted operating cash flow(1) of $916 MM and free cash flow(1) of $543 MM

  • Increased quarterly base dividend by 20 percent to $0.15 per share ($0.60 per share annualized)

  • Raising '22 – '23 debt reduction target to $2.5 B, an increase of $1.0 B

  • Retired $175 MM of senior notes during and subsequent to the end of Q2

  • Repurchased $213 MM of convertible notes, including $85 MM of principal, during and subsequent to the end of Q2, reducing fully diluted share count by 5.7 MM shares

President and CEO Toby Z. Rice stated, "We had a solid operational quarter, with material gains in completion efficiency despite a continued tight oilfield service backdrop. This facilitated almost $550 million of free cash flow(1) during the quarter, bringing our total year-to-date free cash flow(1)  to more than $1.1 billion."

Rice continued, "We also released our 2021 ESG Report in the second quarter, which highlighted the substantial progress we have made toward our goal of achieving net zero Scope 1 and Scope 2 emissions by 2025(2). Notably, our absolute Scope 1 and 2 Production segment GHG emissions declined by 22 percent year-over-year, and we reduced our methane intensity by 28 percent year-over-year. Our industry-leading emissions profile, coupled with an investment grade balance sheet and multi-decade core inventory, gives us significant confidence in the sustainability of our business and durability of our cash flows. As such, we recently raised our base dividend by 20 percent and will be further improving our balance sheet with an incremental $1 billion of projected debt reduction by year-end 2023. In total, we plan to return approximately $4 billion to shareholders by the end of next year, with room for further upside if natural gas prices remain strong."

(1)

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.

(2)

Net zero target is based on Scope 1 Production segment and Scope 2 GHG emissions, in each case from assets owned by EQT on June 30, 2021.

Second Quarter 2022 Financial and Operational Performance


Three Months Ended June 30,



($ millions, except average realized price and EPS)

2022


2021


Change

Total sales volume (Bcfe)

502


421


81

Average realized price ($/Mcfe)

$                3.21


$                2.37


$                0.84

Net income (loss) attributable to EQT Corporation

$                 891


$               (933)


$              1,824

Adjusted net income attributable to EQT (a)

$                 340


$                   20


$                 320

Adjusted EBITDA (a)

$                 943


$                 445


$                 498

Diluted earnings (loss) per share

$                2.19


$              (3.34)


$                5.53

Adjusted earnings per share (EPS) (a)

$                0.83


$                0.06


$                0.77

Net cash provided by operating activities

$                 230


$                   43


$                 187

Adjusted operating cash flow (a)

$                 916


$                 397


$                 519

Capital expenditures

$                 376


$                 246


$                 130

Free cash flow (a)

$                 543


$                 155


$                 388



(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.

Sales volume growth reflects the Company's 2021 acquisition of Alta Resources (the Alta Acquisition). Average realized price increased for the three months ended June 30, 2022 compared to the same period in 2021 due to higher NYMEX prices and higher liquids prices, partly offset by unfavorable cash settled derivatives and unfavorable differential.

Net cash provided by operating activities was $230 million and adjusted operating cash flow(1) was $916 million for the three months ended June 30, 2022. Adjusted operating cash flow excludes changes in other assets and liabilities which are included in net cash provided by operating activities, as defined in the Non-GAAP Disclosures section of this news release. For the three months ended June 30, 2022, changes in other assets and liabilities of $686 million negatively impacted net cash provided by operating activities and was driven by higher working capital, which was primarily the result of higher accounts receivable as of June 30, 2022 as compared to March 31, 2022 due to higher pricing, partly offset by higher accounts payable.

The Company reiterates its 2022 total sales volume guidance of  1,950 – 2,050  Bcfe under a maintenance production program. Incorporating the Company's current inflation outlook, 2022 capital expenditures are now expected to total $1.400$1.500 billion, or $0.68$0.77 per Mcfe, excluding capital expenditures attributable to noncontrolling interests. The Company has started phasing in its next generation well design and has seen encouraging early results. Given the time required to develop wells that are part of the Company's large-scale combo-development model, the Company continues to expect preliminary results of its investment by the end of 2022 and full visibility by the middle of 2024.

Per Unit Operating Costs

The following presents certain of the Company's production-related operating costs on a per unit basis.


Three Months Ended

June 30,


Six Months Ended

June 30,

Per Unit ($/Mcfe)

2022


2021


2022


2021

Gathering

$            0.68


$            0.68


$            0.66


$            0.68

Transmission

0.30


0.31


0.30


0.31

Processing

0.10


0.11


0.10


0.11

Lease operating expense (LOE)

0.09


0.06


0.08


0.06

Production taxes

0.08


0.05


0.07


0.05

SG&A

0.12


0.12


0.13


0.11

Total per unit operating costs

$            1.37


$            1.33


$            1.34


$            1.32









Production depletion

$            0.85


$            0.90


$            0.85


$            0.90

LOE increased on a per Mcfe basis for the three months ended June 30, 2022 compared to the same period in 2021 due primarily to higher salt water disposal costs.

Production taxes increased on a per Mcfe basis for the three months ended June 30, 2022 compared to the same period in 2021 due to increased West Virginia severance taxes, which resulted primarily from higher prices, and increased Pennsylvania impact fees, which resulted from the additional wells acquired in the Alta Acquisition, higher prices and inflation.

Liquidity

As of June 30, 2022, the Company had $100 million in credit facility borrowings and $208 million of letters of credit outstanding under its $2.5 billion credit facility. As of June 30, 2022, both total debt and net debt(1) were $5.0 billion, compared to $5.6 billion and $5.5 billion, respectively, as of December 31, 2021.

(1)

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.

2022 GUIDANCE

Production


Q3 2022


Full Year 2022

Total sales volume (Bcfe)


475 – 525


1,950 – 2,050

  Liquids sales volume, excluding ethane (Mbbls)


2,625 – 2,725


10,250 – 10,750

  Ethane sales volume (Mbbls)


1,475 – 1,575


6,700 – 6,800

Total liquids sales volume (Mbbls)


4,100 – 4,300


16,950 – 17,550






Btu uplift (MMbtu / Mcf)


1.050 – 1.060


1.045 – 1.055






Average differential ($ / Mcf)


($0.90) – ($0.80)


($0.75) – ($0.50)






Resource Counts





Top-hole Rigs




1 – 2

Horizontal Rigs




2 – 3

Frac Crews




2 – 3






Per Unit Operating Costs ($ / Mcfe)





Gathering


$0.66 – $0.68


$0.66 – $0.68

Transmission


$0.29 – $0.31


$0.29 – $0.31

Processing


$0.09 – $0.11


$0.08 – $0.10

LOE


$0.10 – $0.12


$0.08 – $0.10

Production taxes


$0.07 – $0.09


$0.06 – $0.08

SG&A


$0.12 – $0.14


$0.11 – $0.13

   Total per unit operating costs


$1.33 – $1.45


$1.28 – $1.40






Financial ($ Billions)





Adjusted EBITDA (a)




$3.850 – $4.050

Adjusted operating cash flow (a)




$3.700 – $3.900

Capital expenditures (b)


$0.350 – $0.400


$1.400 – $1.500

Free cash flow (a)




$2.200 – $2.500

Based on NYMEX natural gas price of $6.98 per MMbtu as of July 22, 2022.


(a)

A 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 the Company is unable to provide a projection of its 2022 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 2022 net income, the most comparable financial measure calculated in accordance with GAAP, to projected adjusted EBITDA.

(b)

Excludes amounts attributable to noncontrolling interests.

Second Quarter 2022 Earnings Webcast Information

The Company's conference call with securities analysts begins at 10:00 a.m. ET on Thursday July 28, 2022 and will be broadcast live via webcast. To access the live audio webcast, visit EQT's investor relations website at ir.eqt.com. A replay will be archived and available in the same location after the conclusion of the live event.

HEDGING (as of July 22, 2022)

The following table summarizes the approximate volume and prices of the Company's NYMEX hedge positions. The difference between the fixed price and NYMEX price is included in average differential presented in the Company's price reconciliation.


Q3 2022 (a)


Q4 2022


Q1 2023


Q2 2023


Q3 2023


Q4 2023


2024

Hedged Volume (MMDth)

272


284


216


258


261


225


17

Hedged Volume (MMDth/d)

3.0


3.1


2.4


2.8


2.8


2.4
















Swaps – Long














Volume (MMDth)

125


157


41


41


42


14


Avg. Price ($/Dth)

$      4.88


$      5.59


$      6.07


$      4.75


$      4.77


$      4.77


$         —















Swaps – Short














Volume (MMDth)

362


332


41


41


42


42


2

Avg. Price ($/Dth)

$      2.93


$      2.89


$      2.68


$      2.53


$      2.53


$      2.53


$      2.67















Calls – Long














Volume (MMDth)

42


36


40


40


40


40


51

Avg. Strike ($/Dth)

$      3.79


$      2.79


$      2.72


$      2.72


$      2.72


$      2.72


$      3.20















Calls – Short














Volume (MMDth)

145


195


202


274


277


182


66

Avg. Strike ($/Dth)

$      3.33


$      5.39


$      8.07


$      4.48


$      4.48


$      4.34


$      3.11















Puts – Long














Volume (MMDth)

71


119


215


257


260


197


15

Avg. Strike ($/Dth)

$      3.11


$      4.82


$      4.04


$      3.06


$      3.06


$      3.08


$      2.45















Puts – Short














Volume (MMDth)

37


11






Avg. Strike ($/Dth)

$      3.12


$      2.35


$         —


$         —


$         —


$         —


$         —















Fixed Price Sales














Volume (MMDth)

1


1


1


1


1



Avg. Price ($/Dth)

$      2.38


$      3.47


$      4.09


$      2.38


$      2.38


$         —


$         —















Option Premiums














Cash Settlement of Deferred Premiums (millions)

$         —


$         —


$       (61)


$       (42)


$       (42)


$       (45)


$         —

(a)

July 1 through September 30.

For 2022 (July 1 through December 31), 2023 and 2024, the Company has natural gas sales agreements for approximately 9 MMDth, 88 MMDth and 11 MMDth, respectively, that include average NYMEX ceiling prices of $3.17, $2.84 and $3.21, respectively.

The Company has also entered into transactions to hedge basis. The Company may use other contractual agreements from time to time to implement its commodity hedging strategy.

NON-GAAP DISCLOSURES

Adjusted Net Income Attributable to EQT and Adjusted Earnings per Diluted Share (Adjusted EPS)

Adjusted net income attributable to EQT is defined as net income (loss) attributable to EQT Corporation, excluding gain on sale/exchange of long-lived assets, impairments, 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 income attributable to EQT divided by diluted weighted average common shares outstanding. Adjusted net income attributable to EQT 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 income attributable to EQT 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 income attributable to EQT and adjusted EPS should not be considered as alternatives to net income (loss) attributable to EQT Corporation or diluted earnings (loss) per share presented in accordance with GAAP.

The table below reconciles adjusted net income attributable to EQT and adjusted EPS with net income (loss) attributable to EQT Corporation and diluted earnings (loss) per share, 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, 2022.


Three Months Ended

June 30,


Six Months Ended

June 30,


2022


2021 (b)


2022


2021 (b)


(Thousands, except per share information)

Net income (loss) attributable to EQT Corporation

$      891,361


$     (933,260)


$     (624,687)


$     (970,687)

(Deduct) add:








Gain on sale/exchange of long-lived assets

(981)


(16,816)


(2,190)


(18,023)

Impairment and expiration of leases

47,048


25,634


77,039


42,391

Impairment of contract asset



184,945


Loss on derivatives

845,095


1,345,532


3,922,732


1,534,345

Net cash settlements paid on derivatives

(1,753,732)


(71,441)


(2,639,271)


(109,581)

Premiums received (paid) for derivatives that settled during the period

251


(9,579)


(32,212)


(19,305)

Other operating expenses

7,120


5,225


23,467


14,668

(Income) loss from investments

(3,577)


(11,829)


17,208


(23,677)

Loss on debt extinguishment

104,348


5,332


111,271


9,756

Non-cash interest expense (amortization)

3,173


3,083


6,573


5,715

Tax impact of non-GAAP items (a)

199,746


(321,873)


(371,051)


(362,878)

Adjusted net income attributable to EQT

$      339,852


$        20,008


$      673,824


$      102,724

Diluted weighted average common shares outstanding

407,303


316,858


409,234


316,062

Diluted earnings (loss) per share

$            2.19


$           (3.34)


$           (1.68)


$           (3.48)

Adjusted EPS

$            0.83


$            0.06


$            1.65


$            0.33



(a)

The tax impact of non-GAAP items represents the incremental tax (expense) benefit that would have been incurred had these items been excluded from net loss attributable to EQT Corporation, which resulted in blended tax rates of 26.6% and 25.2% for the three months ended June 30, 2022 and 2021, respectively, and 22.2% and 25.3% for the six months ended June 30, 2022 and 2021, respectively. The rates differ from the Company's statutory tax rate due primarily to state taxes, including valuation allowances limiting certain state tax benefits.



(b)

The Company adopted accounting guidance on January 1, 2022 which changed the amounts historically recorded for the Company's convertible senior notes. The amounts presented for the three and six months ended June 30, 2021 have been recast to reflect this adoption. See the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 for further discussion.

Adjusted EBITDA

Adjusted EBITDA is defined as net income (loss), excluding interest expense, income tax expense (benefit), depreciation and depletion, gain on sale/exchange of long-lived assets, impairments, 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 income (loss) presented in accordance with GAAP.

The table below reconciles adjusted EBITDA with net income (loss), 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, 2022.


Three Months Ended

June 30,


Six Months Ended

June 30,


2022


2021


2022


2021


(Thousands)

Net income (loss)

$      894,224


$     (933,322)


$     (620,359)


$     (971,263)

Add (deduct):








Interest expense

65,985


72,254


133,887


142,727

Income tax expense (benefit)

308,234


(346,311)


(157,463)


(359,270)

Depreciation and depletion

429,143


380,288


851,241


757,404

Gain on sale/exchange of long-lived assets

(981)


(16,816)


(2,190)


(18,023)

Impairment and expiration of leases

47,048


25,634


77,039


42,391

Impairment of contract asset



184,945


Loss on derivatives

845,095


1,345,532


3,922,732


1,534,345

Net cash settlements paid on derivatives