EQT Corporation Q1 2010 Earnings Transcript

EQT Corporation Q1 2010 Earnings Transcript
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EQT Corporation (EQT)

Q1 2010 Earnings Call

April 28, 2010 10:30 AM ET

Executives

Pat Kane – Chief Investor Relations Officer

Dave Porges – President and CEO

Phil Conti – SVP and CFO

Analysts

Scott Hanold – RBC Capital Markets

Craig Shere – Tuohy Brothers Investments

Ray Deacon – Pritchard Capital

Rebecca Followill – Tudor Pickering

Zack Trevor (ph) – Ducane Capital

Presentation

Operator

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Previous Statements by EQT
» EQT Corporation. Q4 2009 Earnings Call Transcript
» EQT Corporation. Q3 2009 Earnings Call Transcript
» EQT Q2 2009 Earnings Transcript

Good morning and welcome to the EQT Corporation First Quarter 2010 Earnings Conference call. All participants will be in a listen-only mode. (Operator Instructions). Please note this event is being recorded. I would now like to turn the conference over to Pat Kane, Chief Investor Relations Officer. Sir, the floor is yours.

Pat

Kane

Good morning everyone and thank you for participating in EQT Corporation’s first quarter 2010 earnings conference call. With me today are Dave Porges, President and Chief Executive Officer, Phil Conti, Senior Vice President and Chief Financial Officer. In just a moment Phil will briefly review a few topics related to our financial results that we reported this morning then Dave will provide an update on our drilling and infrastructure development programs and our other operational matter.

Following Dave’s remarks we’ll open the phone lines for questions. But first I’d like to remind you that today’s call may contain forward-looking statements related to such matters as our drilling and infrastructure development including experience, expansion, sales volumes, rates of returns, well cost, acreage acquisitions, financing plans, operating cash flow, rates and other financial and operational matters. It should be noted that a variety of factors could cause the company’s actual results to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. These factors are listed in the company’s Form 10K for the year ended December 31, 2009 under risk factors as updated by any subsequent Form 10Qs which were on file at the Securities and Exchange Commission and available on our website.

Finally this morning’s call may contain certain non-GAAP financial measures. Please use this morning’s press release, a copy which is available on our website for the reconciliations and other disclosures which impact such non-GAAP financial measures. Before introducing Phil Conti, I do have one house keeping item. Later today we will pose to our website EQT’s 2009 quarterly sales volumes by play and our realized price reconciliation table in the new format that was presented this morning. With that I’ll turn it over to Phil Conti.

Philip Conti

Thank Pat and good morning everyone. As you saw in the press release this morning EQT announced first quarter 2010 earnings of $0.65 per diluted share which was an 18% increase over share in the first quarter of 2009. That increase in EPS as well as the increase in cash flow that we mentioned comes as a result of another outstanding operational quarter across all three of EQT’s business units, including record produced natural gas sales and continued load drilling and per unit operating costs at production. Another record in gathering transmission and processing volumes in our Midstream business and solid operating income at gas. The result this quarter I think are pretty straight forward, so my comments about the financial performance will be relatively brief before turning the call over to Dave Porges.

Starting out with EQT production, operating results, it is in the case for well over a year now, the big story in the quarter of EQT production was the growth in sales of produced natural gas. The growth rate as you saw hit almost 31% in the recently completed quarter over the first quarter of 2009. That growth rates was organic and was driven by sales from our Marcellus and Huron/Berea horizontal shale plays which together contributed over 40% of the volumes in the quarter, far exceeding the 25% contribution in the same quarter a year ago. Contribution from the Marcellus shale is growing rapidly and represented over 10% of the volume this quarter when it was really about 1%, it contributed about 1% in the first quarter of 2009 and only 3% for the full year of 2009.

Gas prices were also up a little bit in the quarter. The realized prices at EQT production was slightly higher at $4.23 compared to $4.16 last year and at the corporate level EQT realized $6.62 per Mcfe or about 9% higher than last year. You may have noticed that we have slightly ordered our price reconciliation table included in the press release this morning. We did underline to reflect the full value of our produced liquids in the realized price and by the way those liquids come primarily from our Huron/Berea play.

Our previous presentation did include the Btu premium at the price of natural gas. However any profit made when on Midstream group strips the liquids and realizes higher prices than the natural gas price was included in the processing that revenues at Midstream but it was not included in the average gathered price to EQT Corporation. While this additional detail does not change to reported financial results at all, we do think it only illustrates the full revenue generated from our producing wells.

As you can see on the table EQT Corporation realized a $1.22 per Mcf on average above the price of dry gas. The $0.58 recognized the Btu premium at production and $0.64 recognize that Midstream. A brief moment on expenses at production, total operating expenses were higher quarter-over-quarter as a result of higher DD&A, SG&A and ROE, all consistent with the significant production growth. Production taxes were down a fair amount in the quarter especially on a unit basis, $0.26 per Mcfe in the recent quarter versus $0.36 per Mcfe a year ago.

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