Consistent with growth and increased drilling activity, EQT Production 2012 operating expenses rose to $605.9 million, a $201.7 million increase over last year. DD&A was $152.5 million higher; SG&A was $28.5 million higher; production taxes were $9.4 million higher, and included $6.7 million in retroactive Pennsylvania impact fees; and lease operating expense (LOE) was $5.8 million higher than 2011. Per unit LOE was 10% lower year-over-year at $0.18 per Mcfe, due to production sales volumes growing significantly faster than operating costs. LOE including production taxes totaled $0.34 per Mcfe, excluding the $6.7 million retroactive portion of the Pennsylvania impact fee.
Production sales volumes totaled 76.2 Bcfe in the fourth quarter 2012, 44% higher than the fourth quarter 2011, and 12% higher sequentially. Operating income for the fourth quarter of 2012 was $72.6 million, compared to $106.1 million in the same period last year. Production operating revenues for the quarter were $244.4 million, 14% higher than last year due to the increase in sales volumes; however, partially offset by a 20% lower average wellhead sales price to EQT Production. Operating expenses for the quarter were $171.8 million in 2012, $63.9 million higher than the fourth quarter 2011, consistent with the increase in Marcellus drilling activity. Exploration expense totaled $5.5 million and included $4.4 million of lease impairment charges during the quarter.
The Company drilled (spud) 135 gross wells during 2012; 127 targeted the Marcellus shale with an average length of pay of 5,485 feet; 7 targeted the Huron shale and 1 targeted the Utica shale.
Production sales volumes in 2013 are projected between 335 and 340 Bcfe, 31% higher than in 2012. Liquids volumes for 2013 are now expected between 3,900 and 4,000 MBBls.EQT Midstream EQT Midstream’s operating income totaled $237.3 million in 2012, 11% higher than in 2011 after excluding $202.9 million in pre-tax gains from the sale of Big Sandy and Langley. The Company realized higher gathered volumes and an increase in firm transportation revenues. Net operating revenues for 2012 totaled $449.4 million, representing a $44.8 million increase over 2011. Net gathering revenues were $302.3 million in 2012, up 21% from 2011, due to a 30% increase in gathered volumes, partially offset by lower gathering rates. Net transmission revenues increased by 16% to $104.5 million in 2012, mainly driven by the sale of increased capacity associated with the Sunrise and Marcellus expansion projects. Storage, marketing and other net revenues totaled $42.7 million in 2012, down 34% from 2011, as a result of lower marketed volumes and lower seasonal price spreads, and a non-cash $9.2 million unrealized loss on derivatives and inventory.