EQT Beats Q3 Earnings Estimates, Signs Appalachian Deal

EQT Corporation EQT reported third-quarter 2020 adjusted loss from continuing operations of 15 cents per share, narrower than the Zacks Consensus Estimate of a loss of 22 cents. The quarterly loss, however, was wider than the year-ago quarter loss of 6 cents per share.

Adjusted operating revenues declined to $853.2 million from $941.7 million in the prior-year quarter. However, the top line beat the Zacks Consensus Estimate of $845 million.

Despite coronavirus pandemic-induced lower fuel demand, the largest natural gas producer in the United States reported better-than-expected results, thanks to a decrease in total operating expenses. The positive was partially offset by lower natural gas equivalent production volumes and commodity price realizations.

EQT Corporation Price, Consensus and EPS Surprise

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

Deal for Appalachia Assets

EQT Corp., on Oct 27, announced a definitive purchase and sale agreement with Chevron Corporation CVX. The $735-million accord reflects the leading natural gas producer’s decision to acquire upstream and midstream assets of the integrated energy giant in the prolific Appalachian Basin.

Once the deal closes, likely in late December quarter, EQT Corp. will be able to bolster its core footings in the southwest Marcellus. The company expects the acquisition to prove accretive to free cash flow per share.

Operations:

Total Production Decreases

Sales volume decreased to 366.1 billion cubic feet equivalent (Bcfe) of natural gas from the year-ago figure of 380.8 Bcfe. Natural gas sales volume was 348.1 Bcf for the third quarter, down from 363 Bcf a year ago. However, total liquids sales volume for the quarter was recorded at 3,001 thousand barrels (MBbls), higher than the year-ago period’s 2,964 MBbls.

Price Realization Declines

Average realized price was $2.33 per thousand cubic feet of natural gas equivalent (Mcfe), down from $2.47 in the year-ago quarter. Natural gas price was recorded at $2.08 per Mcf, lower than the year-ago level of $2.34. Oil price was recorded at $24.43 per barrel, significantly down from $39.01 in third-quarter 2019. Moreover, ethane sales price was recorded at $2.94 per barrel for the third quarter, lower than the year-ago level of $5.22.

Expenses

Total operating expenses were $1.44 per Mcfe for third-quarter 2020, down from $1.47 in the prior-year quarter.

Notably, processing expenses were 9 cents per Mcfe, up by a penny from the year-ago period. Gathering expenses rose to 75 cents per Mcfe from 68 cents in third-quarter 2019. Lease operating expenses were 8 cents for the quarter, up from 6 cents in the year-ago period. However, transmission costs decreased to 33 cents per Mcfe from the year-ago level of 39 cents.

Overall, total operating expenses amounted to $932.3 million, down from $1,113.1 million in third-quarter 2019.

Wells Drilled

The company spud 30 net wells in the third quarter. Of the total, 22 wells were drilled in PA Marcellus, with the average lateral length being 14,140 feet; eight in WV Marcellus, with average lateral length of 12,090 feet.

Cash Flows

EQT Corp.’s adjusted operating cash flow was $294.7 million for the quarter, down from $296.1 million a year ago.

Capex & Balance Sheet

Total capital expenditure amounted to $247.9 million for the third quarter, down from $474.6 million in the year-ago period.

As of Sep 30, 2020, the company had $13.7 million in cash and cash equivalents, up from the second-quarter level of almost $3 million. Total debt of roughly $4,731 million increased from the second-quarter level of $4,620.3 million.

Guidance

In the December quarter of 2020, EQT Corp. expects to drill net nine wells in the PA Marcellus and four in WV Marcellus. The company anticipates total sales volume in the 380-400 Bcfe range for fourth-quarter 2020. For 2020, it expects total sales volume within 1,480-1,500 Bcfe, indicating a decline from the 2019 level of 1,507.9 Bcfe.

Total unit operating costs for 2020 are expected in the range of $1.32-$1.44 per Mcfe. The metric was recorded at $1.44 per Mcfe in 2019.

The company anticipates adjusted operating cash flow in the range of $1.375-$1.425 billion for 2020, suggesting a fall from $1.83 billion in 2019. It expects capital expenditure in the band of $1.050-1.100 billion for the year, implying a decrease from $1.77 billion in 2019. As such, free cash flow is estimated within $0.300-$0.350 billion this year.

Zacks Rank & Stock to Consider

The company currently has a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include Equinor ASA EQNR and Sunoco LP SUN, each sporting a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Equinor has seen upward earnings estimate revisions for 2020 in the past 30 days.

Sunoco has seen upward estimate revisions for its 2020 bottom line in the past 30 days.

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