By a News Reporter-Staff News Editor at Energy Weekly News -- EQT Corporation (NYSE: EQT) announced second quarter 2014 net income attributable to EQT of $110.9 million, or $0.73 per diluted share, compared to second quarter 2013 earnings of $86.9 million, or $0.57 per diluted share. Adjusted earnings for the second quarter 2014, excluding the impact of a few items including a $37.7 million gain on the Nora asset exchange, were $88.3 million, or $0.58 per diluted share - which was 3% higher than the $85.5 million, or $0.56 per diluted share last year. Adjusted operating cash flow in the quarter was $317.2 million, compared to $319.1 million; and adjusted cash flow per share was $2.08, compared to $2.11. The Non-GAAP financial measures are reconciled in the Non-GAAP Disclosures section of this news release. Second Quarter Highlights 2014 vs. 2013: Production sales volume was 17% higher
Midstream transmission operating revenues were 33% higher
Midstream gathered volume was 17% higher
Reiterates full-year production volume guidance of 465-480 Bcfe
EQT's second quarter 2014 operating income was $224.8 million. Adjusted operating income was 16% higher than the prior year, primarily due to increases in production sales volume, contracted transmission capacity, and gathered volume, and partially offset by a 10% lower average realized price. Net operating revenues increased 9% to $474.4 million in the quarter, while net operating expenses increased only 4% to $287.4 million. RESULTS BY BUSINESS EQT PRODUCTION With its continued focus on the Marcellus Shale, EQT Production achieved sales volume of 110.1 Bcfe in the second quarter 2014, representing a 17% increase compared to the second quarter 2013. Sales volume from the Marcellus/Upper Devonian averaged 943.4 MMcfe per day, 25% higher; and natural gas liquids (NGL) volume totaled 1,326 Mbbls, 15% higher. Sales volume was approximately 4 Bcf below guidance due to the delay of turning-in-line 22 wells on 3 multi-well pads; all of which are currently producing.
Production operating income for the second quarter totaled $144.7 million, an increase of 8% from last year when excluding a pre-tax gain of $31.0 million related to the Nora asset exchange. As a result of an increase in sales volume, partially offset by a lower average realized price, net operating revenue for the quarter was $322.1 million, 5% higher.
Consistent with the growth in sales volume, EQT Production's operating expenses for the quarter were $208.4 million, $7.3 million higher than the same period last year. Selling, general and administrative (SG&A) expense was $4.9 million higher excluding a $4.8 million legal reserve. Also, production taxes were $3.2 million higher; exploration expense was $1.3 million higher; and lease operating expense (LOE), less production taxes, was $0.9 million higher, although per unit LOE, excluding production taxes, decreased 7% to $0.14 per Mcfe. The depreciation, depletion and amortization (DD&A) expense was $7.8 million lower as the per unit depletion rate was 19% lower than last year.
The Company drilled (spud) 89 gross wells during the quarter -- 55 wells targeted the Marcellus with an average length-of-pay of 6,140 feet; 22 wells targeted the Huron with an average length-of-pay of 5,970 feet; 11 wells targeted the Upper Devonian with an average length-of-pay of 6,960 feet; and 1 well targeted the Wolfcamp with a length-of-pay of 7,000 feet.
The Company reiterates its 2014 production sales volume guidance of 465 - 480 Bcfe; and expects liquids volume to be 6,500 - 6,600 Mbbls. Production sales volume for the third quarter 2014 is projected to be 118 - 122 Bcfe; and liquids volume is expected to be 1,800 - 1,900 Mbbls. Realized Price The NYMEX price of natural gas averaged $4.67 per MMBtu in the second quarter 2014, which was 14% higher than the average of $4.09 for the same period last year. EQT's realized price varies from NYMEX due to revenue deductions for the net cost of gathering, transporting and processing, regional basis, and hedging. In the second quarter, the Company's average realized price was $3.85 per Mcfe, 10% lower than the $4.29 per Mcfe realized last year - with $2.92 per Mcfe allocated to EQT Production and $0.93 per Mcfe allocated to EQT Midstream. This decrease in the realized price reflects the impact of regional basis, which is recorded at the first liquid delivery point, and during the quarter averaged a negative $0.78 per Mcfe compared to a negative $0.02 in the second quarter 2013. This decrease in basis more-than-offset the impact of higher NYMEX pricing net of hedging. Net third-party gathering and transmission costs per Mcfe were flat quarter-over-quarter.
Based on current market conditions, EQT is forecasting basis to average negative $1.00 to negative $1.10 per Mcfe, and third-party gathering and transmission recoveries to average positive $0.60 to positive $0.65 per Mcfe, for the second half of 2014. EQT MIDSTREAM EQT Midstream's second quarter 2014 operating income was $88.5 million, 13% higher than the second quarter last year when excluding a pre-tax gain of $6.8 million related to the Nora asset exchange. Net operating revenue was $152.3 million, 16% higher. Net gathering revenue was $91.2 million, an increase of 5%, which was primarily due to a 17% increase in gathered volume, partially offset by lower average gathering rates. Net transmission revenue totaled $51.5 million, a 33% increase over last year as a result of higher contracted capacity and volumes. Net storage, marketing and other revenues totaled $9.6 million, which included an increase of $4.1 million as a result of the storage assets acquired in the Equitable Gas Company transaction. Operating expenses for the quarter were $70.6 million, $11.5 million higher than the same period last year and consistent with the volume growth. Per unit gathering and compression expense decreased by 6% as gathered volumes continued to grow faster than expenses. OTHER BUSINESS Analyst Presentation Updates were made to EQT's analyst presentation, which include: the cash flow forecast and valuation of EQT's general partner interest in EQT Midstream Partners, LP; an increase in Marcellus net acreage from 560,000 to 580,000; an increase in initial production rate and estimated ultimate recovery for Marcellus acreage in southwest Pennsylvania; the introduction of a new Marcellus development area in the dry gas zone of northern West Virginia; an initial Upper Devonian type curve; a dry gas net acreage map of Utica/Point Pleasant; and minor updates throughout. EQT's analyst presentation is available on its Investor Relations website at http://ir.eqt.com. EQT Midstream Partners, LP EQT has a 34.4% limited partner interest and a 2% general partner interest in EQT Midstream Partners, LP, (Partnership) whose results are consolidated in EQT's results. For the quarter, EQT Corporation recorded $27.3 million, or $0.18 of earnings per diluted share, attributable to non-controlling interests. The Partnership's results for the second quarter 2014 were also released and are available at www.eqtmidstreampartners.com.
On July 22, 2014, the Partnership announced a cash distribution to its unitholders of $0.52 per unit for the second quarter, from which EQT will receive $11.1 million on its limited partner units. In addition, EQT will receive $0.7 million related to its 2% general partner interest, and $1.9 million for its incentive distribution rights.
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Keywords for this news article include: Energy, Oil & Gas, Natural Gas, EQT Corporation.
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