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Here's Why EQT Corp (EQT) is Up 6% Since Q3 Earnings Report

Zacks Equity Research

Shares of EQT Corporation EQT have gained almost 6% since its earnings announcement on Oct 31.

The reasons behind the rally were better-than-expected results in the third quarter and promising guidance for 2019 and 2020. The leading natural gas producer expects to produce almost the same volumes in 2019 and 2020 despite lowering capital budgets significantly for the years. The company is also committed to lowering debt significantly by the middle of 2020. Let’s delve deeper.

EQT Corp reported third-quarter 2019 adjusted loss from continuing operations of 6 cents per share, narrower than the Zacks Consensus Estimate of a loss of 17 cents. However, in the year-ago comparable period, the company reported adjusted profit of 16 cents per share.

Total operating revenues declined to $951.6 million from $1,050.1 million in the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $884 million.

The better-than-expected results were supported by a year-over-year increase in natural gas equivalent production level, partially offset by lower average price realization of commodity, and higher gathering and transmission expenses.

EQT Corporation Price, Consensus and EPS Surprise

 

EQT Corporation Price, Consensus and EPS Surprise

EQT Corporation price-consensus-eps-surprise-chart | EQT Corporation Quote

Production and Price Realization

Sales volume rose to 380.8 billion cubic feet equivalent (Bcfe) of natural gas from the year-ago figure of 374.2 Bcfe. Average realized price of natural gas equivalents was $2.47 per thousand cubic feet, down 10.5% from $2.76 in the year-ago quarter.

Expenses

Total selected operating expenses were $1.47 per unit in third-quarter 2019, up from $1.39 in the prior-year quarter.

Notably, processing expenses were 8 cents per thousand cubic feet equivalent (Mcfe) compared with 10 cents in the third quarter of 2018. However, gathering expenses rose to 55 cents per Mcfe from 53 cents in the year-ago period. Transmission costs increased to 52 cents per Mcfe from the year-ago level of 49 cents.

Wells Drilled

The company spud 28 net wells in the third quarter. Of the total, 20 wells were drilled in the PA Marcellus, the average lateral length being 12,200 feet; and eight were drilled in the OH Utica, the average lateral length being 10,400 feet.

Cash Flows

EQT Corp’s adjusted operating cash flow was $296.1 million in the quarter, down from $554.7 million a year ago.

Capex & Balance Sheet

Total capital expenditure amounted to $474.6 million in the third quarter, down from $854.3 million in the year-ago period.

As of Sep 30, 2019, the company had $7.5 million in cash and cash equivalents, and $5.2 billion of net debt.

Guidance

In fourth-quarter 2019, the company expects to drill net 23 wells in the PA Marcellus.

The company anticipates total sales volume of 355-375 Bcfe for the December-end quarter of 2019. For 2019, it expects total sales volume of 1,490-1,510 Bcfe.

The company anticipates adjusted operating cash flow of $1.77-$1.82 billion for 2019. It expects capital expenditure of $1.74-1.79 billion for the year, considerably lower than $1.83-$1.93 billion guided earlier. The mid-point of the latest guided 2019 capital spending reflects a year-over-year plunge of 35%.

For 2020, the leading upstream energy player expects total sales volume of 1,450-1,500 Bcfe, almost in line with the guidance for 2019. Importantly, the company anticipates capital spending of $1.3-$1.4 billion for 2020, suggesting a significant reduction from its projected 2019 spending.

EQT Corp expects to lower debt by 30% by the middle of 2020, reflecting the upstream firm’s focus on maintaining strong balance sheet.

Zacks Rank & Stocks to Consider

EQT Corp currently carries a Zacks Rank #3 (Hold). Meanwhile better ranked players in the energy space include CNX Resources Corporation CNX, Contango Oil & Gas Company MCF and Noble Midstream Partners LP NBLX. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.          

CNX Resources beat the Zacks Consensus Estimate in two of the prior four quarters, the average positive earnings surprise being 34.8%.

Contango Oil & Gas is likely to see bottom-line growth of 87% in 2019.

Noble Midstream has witnessed upward revisions in its 2019 earnings over the past 30 days.

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