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This call will be replayed for a 7-day period beginning at approximately 1.30 pm Eastern Time today. The phone number for the replay is 412-317-0088. The confirmation code is 10006583. The call will also be available for seven days on our website.But first, I'd like to remind you that today's call may contain forward-looking statements related to future events and expectations. You can find factors that could cause the company's results to differ materially from these forward-looking statements listed in today's press release under risk factors in the company's Form 10-K for the year ended December 31, 2011, which was filed with the SEC and updated by any subsequent Form 10-Qs, which are also filed with the SEC and available on our website. Today's call may also contain certain non-GAAP financial measures. Please refer to this morning's press release for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measure. I'd now like to turn the call over to Phil Conti. Phil Conti – Senior Vice President and Chief Financial Officer Thanks Pat and good morning everyone. As you read in the press release this morning, EQT announced first quarter 2012 earnings of $0.48 per diluted share, a 42% decrease from EPS in the first quarter 2011. The first quarter of 2012 included $6.2 million of expense associated with the retroactive portion of newly enacted Pennsylvania legislation imposing an impact fee on all wells drilled in the state including those wells drilled prior to 2012. In addition, there were two items that cumulatively added $36 million to our pre-tax income in the first of 2011 which distort the year-over-year comparisons. Adjusting for those three items, EPS was $0.50 this year compared to $0.60 in the first quarter last year or a 24% decrease. The decrease in EPS comes as a result of lower natural gas prices on our un-hedged production, lower operating income at Equitable Gas as a result of unusually warm weather, and higher depletion rates at production. All of which more than offset another solid operational quarter including record produced natural gas sales and another record in gathering volumes. Operating cash flow which adjusts for those 2011 non-cash items as well as the non-cash impact of higher depletion rates decreased by 9% to $227 million for the quarter.
With that, I will go into a little more detail by business segments starting with EQT production, which continues to generate impressive growth in sales of produced natural gas. The growth rate was 26% in the recently completed quarter over the first quarter of 2011. That growth was primarily organic and was driven by sales from our Marcellus shale play, which contributed nearly 50% of the volumes in the quarter.As I mentioned, gas prices were lower in the quarter. The realized price at EQT production was $3.59 compared to $3.97 last year. At the corporate level, EQT received $4.84 per Mcf equivalent or 11% less than last year. Produced liquids excluding ethane accounted for 6% of the volumes and 34% of the un-hedged revenues in the quarter. Total operating expense of EQT production was higher quarter-over-quarter as a result of higher DD&A, production taxes, and SG&A. The increase in the depletion rate was primarily due to an increase in cost to drill and complete wells, the removal of some proved reserves due to lower natural gas prices at year end, and the suspension of drilling activity in the Huron play. As alluded to earlier, in February 2012, the Commonwealth of Pennsylvania passed a natural gas impact fee. The legislation, which covers a significant portion of EQT’s Marcellus shale acreage, imposes an manual fee for a period of 15 years on each well of drilled. The impact fee adjust yearly based on three factors, age of the well, changes in the consumer price index, and the average monthly NYMEX natural gas price. Production taxes increased primarily due to the $8.2 million accrual in the first quarter of 2012 for this impact fee. Again, $6.2 million of that represents the retroactive portion of the fee for pre-2012 Marcellus wells. Read the rest of this transcript for free on seekingalpha.com