PITTSBURGH, Jan. 26 /PRNewswire-FirstCall/ -- Equitable Resources, Inc.
(NYSE: EQT) today announced 2005 annual earnings per diluted share (EPS) of
$2.10. This compares with EPS of $2.22 in 2004. Fourth quarter 2005 EPS was
$0.59 as compared to fourth quarter 2004 EPS of $0.35. Several non-
operational factors, discussed below, affected 2005 and 2004 results,
including the gain resulting from the Westport Resources Corporation
(Westport) merger with Kerr-McGee Corporation (KMG) in 2004, the gains on the
sale of KMG shares in both years, pension settlement charges in both years,
and the sale of NORESCO in the fourth quarter 2005.
RESULTS BY SEGMENT
Equitable Utilities
Equitable Utilities had operating income of $98.3 million for 2005,
compared with $108.1 million for 2004, a 9% decrease. 2005 net revenues
increased $10.7 million or 4.4% over the previous year. Distribution net
revenues were 1.4% lower due to a decline in use per heating degree-day.
Heating degree-days totaled 5,543 for 2005, or 3.4% colder than the 5,360
degree-days recorded in 2004, but 4.9% warmer than the 30-year normal of 5,829
degree-days. Marketing net revenues were $14.3 million higher than in 2004,
benefiting from storage asset optimization opportunities and more than
offsetting the lower distribution net revenues.
Total operating expenses for 2005 were 15% higher at $155.1 million,
compared to $134.6 million in 2004. The biggest increase resulted from
settlement charges primarily for the conversion from a defined benefit pension
plan to a defined contribution plan for 229 employees, totaling $16.0 million
for 2005 and $2.2 million in the fourth quarter. In addition, as discussed in
the second quarter earnings press release, Equitable consolidated its entire
Pittsburgh-based workforce into a single office building. Equitable
Utilities' charges associated with that move were $3.8 million. Employee
wages and benefit costs were $3.1 million higher than last year. A $4.7
million reduction in bad debt expense for the year partially offset these
increases.
Operating income for the 2005 fourth quarter was $37.7 million, slightly
higher than the $37.5 million earned in the year ago quarter. Net revenues
were $75.9 million, $6.8 million higher than fourth quarter 2004 revenues of
$69.1 million. Colder weather increased distribution throughput and
associated revenues and storage asset optimization opportunities contributed
to an increase in marketing revenues. Operating expenses in the quarter
increased $6.5 million, from $31.7 million in 2004 to $38.2 million in 2005.
A $4.1 million increase in depreciation, depletion and amortization (DD&A) in
the quarter was primarily a result of the timing of a $3.5 million reduction
in DD&A resulting from an asset service life study, which was recorded in the
fourth quarter 2004, retroactive to January 1, 2004. In addition, $2.2
million of the higher operating costs in 2005 was related to pension
settlements discussed above. Finally, $1.3 million of increased operating
expense resulted from higher bad debt allowances related to higher
distribution revenues from increased commodity rates and colder weather.
Reductions in other operating expenses partially offset the increases.
Equitable Supply
Equitable Supply had operating income of $293.6 million in 2005, 29%
higher than the $227.4 million in 2004. Total revenues for 2005 were $489.2
million, 25% higher than 2004 revenues of $390.4 million. The increase in
total revenues was primarily the result of a 16% increase in the average well-
head sales price, a 9% increase in sales volumes, and a 33% increase in
gathering revenues. The increase in the average well-head sales price for the
year and the fourth quarter was mainly attributable to increased market prices
on unhedged volumes, partially offset by an adjustment of $10.6 million. That
adjustment was principally due to our conclusion that the well-head sales
price allocated to a 3rd party's working interest gas in previous periods may
be lower than the Company was obligated to pay.
Operating expenses increased from $163.1 million in 2004 to $195.6 million
in 2005. Of that increase, production taxes, related to higher natural gas
prices and higher volumes, were $13.7 million higher than 2004. DD&A, lease
operating expenses, gathering and compression expenses and selling, general
and administrative expenses were all higher. Efforts to increase production
and sales and overall oilfield inflation related to increased natural gas
prices explain the higher costs. During 2005, the Company drilled 455 wells,
compared with the 314 wells drilled in 2004. The Company expects to drill 550
wells in 2006.
Operating income for the 2005 fourth quarter totaled $85.2 million, $31.0
million higher than the $54.2 million of operating income in the fourth
quarter 2004. Revenues totaled $136.5 million, $36.5 million higher than last
year and expenses totaled $51.3 million, $5.5 million higher than last year.
The factors driving increased revenues and costs for the full 2005 year also
apply to the fourth quarter results.
NORESCO
In December 2005, Equitable sold NORESCO for approximately $82 million,
subject to customary adjustments. The sale resulted in reclassifying NORESCO
as "discontinued operations." With amounts recorded net of tax, Equitable
recorded income of $1.5 million from discontinued operations in 2005, compared
to a loss of $18.9 million in 2004. In the fourth quarter, Equitable recorded
a loss from discontinued operations of $7.2 million, which included net costs
related to the NORESCO sale of $18.7 million and a tax benefit of $6.4 million
from reorganizing international assets. In the fourth quarter 2004, the
Company reported earnings from discontinued operations of $3.0 million. All
periods presented have been restated to reflect the discontinued operations.
In 2004, NORESCO recognized an impairment of $23.9 million, which
represented substantially all of the international investment portfolio and
the related costs of exiting these investments. The business conditions
improved internationally during 2005 resulting in a reversal of $7.8 million
of the reserves, of which $2.7 million was recorded in the fourth quarter.
These amounts are reported after-tax.
Other Business
Kerr-McGee Corp.
In 2005, Equitable sold approximately 7 million KMG shares resulting in a
net pre-tax gain of $110.3 million. These totals include 0.7 million shares
sold in the fourth quarter for a gain of $30.0 million.
In 2004, the merger between Westport and KMG resulted in a gain of $217.2
million on the exchange of Westport shares for KMG shares. Equitable also
sold 800,000 KMG shares for a gain of $3.0 million and contributed 357,000
shares to the Equitable foundation incurring an $18.2 million expense.
Office Consolidation
As mentioned above, in 2005 the Company completed its relocation to a new
office building. The Company recognized a loss of $7.8 million related to the
move, $3.8 million was allocated to Utilities, $0.5 million was allocated to
Supply and $3.5 million was not allocated to a segment.
Executive Performance Incentive Programs
During 2005, two Executive Performance Incentive Programs (EPIPs) linked
to shareholder returns were in place; one vested and was paid out on December
30, 2005, the other vests on December 31, 2008. The programs are designed to
align management's long-term incentive compensation to the absolute and
relative returns earned by the Company's shareholders. The expense related to
these programs totaled $43.8 million in 2005, with $13.9 million recorded in
the fourth quarter 2005.
Tax
During 2005, the Company completed its review of the American Jobs
Creation Act of 2004 (the Jobs Act), which the President signed into law on
October 22, 2004. As a result, the Board of Directors ended the deferred
compensation plans for employees. This decision, and the payout of the 2003
EPIP in December, resulted in a $15.3 million tax loss disallowance under
Section 162(m) of the Internal Revenue Code of 1986, of which $5.0 million was
recorded in the fourth quarter.
2006 Earnings Guidance
The Company estimates 2006 earnings guidance of $1.90 - $2.00 per diluted
share. The guidance is based on the current NYMEX strip.
Hedging
The approximate volumes and prices of Equitable's hedges for 2006 through
2008 are:
Swaps 2006 2007 2008
Total Volume (Bcf) 59 56 54
Average Price per Mcf (NYMEX)* $4.77 $4.74 $4.64
Collars 2006 2007 2008
Total Volume (Bcf) 7 7 7
Average Floor Price per Mcf
(NYMEX)* $7.35 $7.35 $7.35
Average Cap Price per Mcf
(NYMEX)* $10.84 $10.84 $10.84
* The above price is based on a conversion rate of 1.05 MMbtu/Mcf
Stock Buyback
During 2005, Equitable Resources repurchased 3.6 million shares of
Equitable stock, 1.0 million shares during the fourth quarter. The total
number of shares repurchased since October 1998 is approximately 41.6 million,
out of the current 50.0 million share repurchase authorization.
2005 Capital Expenditures
Equitable invested $333 million in capital projects during 2005. This
included $131 million for well development, $75 million for Supply
infrastructure, $61 million for Equitable Utilities, and $8 million for
Headquarters. During 2005, the Company purchased the limited partnership
interest in Eastern Seven Partners for $58 million.
2006 Capital Expenditures
Equitable forecasts $497 million of capital expenditures for 2006. This
forecast includes $194 million for well development, $222 million for
midstream and infrastructure investment in Appalachia, $78 million for
Equitable Utilities and $3 million for Headquarters.
The Company is announcing a significant infrastructure project called The
Big Sandy Pipeline. The Big Sandy Pipeline will help to alleviate throughput
constraints in Eastern Kentucky for Equitable Supply and third party
producers. The 60 mile, 20" pipeline is expected to have a capacity of 70,000
dth per day and will connect the Kentucky Hydrocarbon processing plant in
Langley, Kentucky with the Tennessee Gas Pipeline interconnect in Carter
County, Kentucky. The pipeline, which is projected to cost $83 million, is
scheduled for operation in 2007. The Company will provide additional details
on this project and the overall capital expense plan at the Company's analyst
conference on February 24, 2006, which will be webcast on our website.
Pension
During the fourth quarter of 2004, the Company incurred a pension related
charge of $13.4 million.
Operating Income, Equity Earnings from Nonconsolidated Investments, and
Other Income
The Company reports operating income, equity earnings from nonconsolidated
investments, and other income by segment in this press release. Interest,
income taxes, KMG related matters, and similar items are controlled on a
consolidated, corporate-wide basis, and are not allocated to the segments.
The following table reconciles operating income by segment as reported in
this press release to the consolidated operating income reported in the
Company's financial statements:
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Operating income
(thousands):
Equitable Utilities $37,672 $37,469 $98,254 $108,149
Equitable Supply 85,157 54,209 293,581 227,369
Unallocated expenses (14,361) (22,456) (48,023) (45,813)
Operating Income $108,468 $69,222 $343,812 $289,705
The following table reconciles equity earnings from nonconsolidated
investments by segment as reported in this press release to the consolidated
equity earnings from nonconsolidated investments reported in the Company's
financial statements:
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Equity earnings from
nonconsolidated
investments (thousands):
Equitable Supply $232 $223 $493 $688
Unallocated 117 52 269 168
Total $349 $275 $762 $856
The following table reconciles other income by segment as reported in this
press release to the consolidated other income reported in the Company's
financial statements:
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Other income, net
(thousands):
Equitable Supply $ - $ - $ - $576
Unallocated - 1,514 1,195 3,116
Total $ - $1,514 $1,195 $3,692
Other segment financial measures identified in this press release are
reconciled to the most comparable financial measures calculated in accordance
with GAAP on the attached operational and financial reports.
As previously announced, Equitable's teleconference with securities
analysts, which begins at 10:30 a.m. Eastern Time today, will be broadcast
live via Equitable's website, http://www.eqt.com and will be available for
replay for a seven-day period.
Equitable Resources management speaks to investors from time to time.
Slides for these discussions will be available online on Equitable's website.
The slides may be updated periodically.
Equitable Resources is an integrated energy company with emphasis on
Appalachian area natural-gas supply, transmission and distribution. For
information please visit http://www.eqt.com.
Forward-Looking Statements
Disclosures in this press release contain forward-looking statements.
Statements that do not relate strictly to historical or current facts are
forward-looking. Without limiting the generality of the foregoing, forward-
looking statements contained in this press release specifically include the
expectations of plans, strategies, objectives and growth and anticipated
financial and operational performance of the Company and its subsidiaries,
including guidance regarding the Company's drilling program, production
volumes, earnings, and capital expenditure program. A variety of factors
could cause the Company's actual results to differ materially from the
anticipated results or other expectations expressed in the Company's forward-
looking statements. The risks and uncertainties that may affect the
operations, performance and results of the Company's business and forward-
looking statements include, but are not limited to, the following:
- the impact of adverse weather conditions on commodity prices, Equitable
Utilities' operations, Equitable Supply's well drilling program, and
the infrastructure improvement program
- the volatility of the price of natural gas and the effect of changing
prices on the Company's revenues, hedging, well drilling and
infrastructure improvement activities, production taxes, and
collections
- the need for, and availability and cost of, financing, including
changes to the Company's debt ratings by S&P and Moody's
- the implementation and execution of operational enhancements and cost
control initiatives
- the effect of curtailments or other disruptions in production and
gathering
- the substance, timing and availability of regulatory and legislative
actions, initiatives and proceedings
- the Company's success in implementing acquisition or divestiture
activities, and the success of divested businesses
- the ability of the Company to develop, produce, gather, and market
reserves, including its ability to substantially increase well drilling
activity and alleviate throughput constraints
- the inherent uncertainty of estimating gas reserves and projecting
future rates of production and reserve development
- the ability of the Company to acquire and apply technology to its
operations
- the impact of competitive factors, including consolidation in the
utility industry
- the ability of the Company to maintain good working relations with its
represented employees and to retain its key personnel
- changes in the market price of the common stock of EQT and its peer
group
- general economic and political conditions
- changes in accounting rules or their interpretation, and
- other factors discussed in other reports filed by the Company from time
to time.
Any forward-looking statement speaks only as of the date on which such
statement is made and the Company undertakes no obligation to correct or
update any forward-looking statement, whether as a result of new information,
future events or otherwise.
EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(Thousands except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
Operating revenues $392,882 $305,261 $1,253,724 $1,045,183
Cost of sales 180,565 136,105 511,169 412,050
Net operating revenues 212,317 169,156 742,555 633,133
Operating expenses:
Operation and maintenance 23,770 28,034 95,369 87,988
Production 16,960 10,687 61,483 43,274
Selling, general and
administrative 39,165 43,577 140,529 130,090
Office consolidation
impairment charges - - 7,835 -
Depreciation, depletion and
amortization 23,954 17,636 93,527 82,076
Total operating expenses 103,849 99,934 398,743 343,428
Operating income 108,468 69,222 343,812 289,705
Gain on exchange of Westport
for Kerr-McGee shares - - - 217,212
Charitable foundation
contribution - - - (18,226)
Gain on sale of available for
sale securities, net 30,023 - 110,280 3,024
Equity in earnings of
nonconsolidated investments: 349 275 762 856
Other income, net - 1,514 1,195 3,692
Interest expense 11,330 11,512 44,437 42,520
Income from continuing
operations before income
taxes 127,510 59,499 411,612 453,743
Income taxes 47,491 19,248 153,038 154,953
Income from continuing
operations 80,019 40,251 258,574 298,790
Income (loss) from
discontinued operations, net
of tax (7,180) 3,023 1,481 (18,936)
Net income $72,839 $43,274 $260,055 $279,854
Earnings per share of common
stock:
Basic:
Weighted average common shares
outstanding 120,392 121,970 121,099 123,364
Income from continuing
operations $0.67 $0.33 $2.14 $2.42
Income (loss) from
discontinued operations (0.06) 0.02 0.01 (0.15)
Net income $0.61 $0.35 $2.15 $2.27
Diluted:
Weighted average common shares
outstanding 122,791 124,966 123,715 126,202
Income from continuing
operations $0.65 $0.33 $2.09 $2.37
Income (loss) from
discontinued operations (0.06) 0.02 0.01 (0.15)
Net income $0.59 $0.35 $2.10 $2.22
(A) Due to the seasonal nature of the Company's natural gas distribution
and energy marketing business, and the volatility of gas and oil
commodity prices, the interim statements for the three month period
are not indicative of results for a full year.
EQUITABLE UTILITIES
OPERATIONAL AND FINANCIAL REPORT
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
OPERATIONAL DATA
Heating degree days (30-year
average: Qtr- 2,070; YTD- 5,829) 2,078 1,827 5,543 5,360
Residential sales and
transportation volume (MMcf) 7,842 7,228 24,680 25,520
Commercial and industrial volume
(MMcf) 7,110 7,467 25,368 29,597
Total throughput (MMcf) -
Distribution 14,952 14,695 50,048 55,117
Net Revenues (thousands):
Distribution ( regulated )
Residential $29,686 $28,783 $102,457 $104,612
Commercial & industrial 13,304 12,617 46,857 48,563
Other 1,508 1,393 7,544 5,950
Pipeline ( regulated ) 16,492 16,884 53,767 55,123
Marketing 14,872 9,454 42,739 28,457
Total $75,862 $69,131 $253,364 $242,705
Operating expenses as a % of net
operating revenues 50.34% 45.80% 61.22% 55.44%
Operating income (thousands):
Distribution ( regulated ) $17,424 $19,561 $40,322 $56,877
Pipeline ( regulated ) 6,280 8,839 17,345 24,656
Marketing 13,968 9,069 40,587 26,616
Total $37,672 $37,469 $98,254 $108,149
Capital expenditures (thousands) $21,066 $12,847 $61,349 $56,274
FINANCIAL DATA (Thousands)
Distribution revenues (regulated) $164,590 $128,829 469,102 $422,438
Pipeline revenues ( regulated ) 20,258 $16,884 57,534 55,123
Marketing revenues 119,745 $88,530 382,479 300,513
Less: intrasegment revenues (8,820) $(16,630) (45,804) (46,213)
Total operating revenues 295,773 217,613 863,311 731,861
Purchased gas costs 219,911 $148,482 609,947 489,156
Net operating revenues 75,862 69,131 253,364 242,705
Operating expenses:
Operating and maintenance 14,333 15,116 57,315 52,481
Selling, general and
administrative 16,357 13,184 66,080 56,446
Office consolidation impairment
charges - - 3,841 -
Depreciation, depletion and
amortization 7,500 3,362 27,874 25,629
Total operating expenses 38,190 31,662 155,110 134,556
Operating income $37,672 $37,469 $98,254 $108,149
EQUITABLE SUPPLY
OPERATIONAL AND FINANCIAL REPORT
Three Months Ended Year Ended
December 31, December 31,
2005 2004 2005 2004
OPERATIONAL DATA
Capital expenditures
(thousands) $62,747 $51,276 $264,095 $141,661
Production:
Total sales volumes (MMcfe) 18,417 16,889 73,909 67,731
Average (well-head) sales
price ($/Mcfe) $5.73 $4.65 $5.17 $4.46
Company usage, line loss
(MMcfe) 1,216 1,477 4,897 5,090
Natural gas inventory usage,
net (MMcfe) - (70) (51) (61)
Natural gas and oil
production (MMcfe) 19,633 18,296 78,755 72,760
Lease operating expense
excluding production tax
($/Mcfe) $0.24 $0.20 $0.29 $0.26
Production taxes ($/Mcfe) $0.62 $0.38 $0.49 $0.34
Production depletion ($/Mcfe) $0.58 $0.54 $0.59 $0.54
Gathering:
Gathered volumes (MMcfe) 29,705 32,729 121,044 127,339
Average gathering fee
($/Mcfe) $0.96 $0.57 $0.82 $0.58
Gathering and compression
expense ($/Mcfe) $0.32 $0.39 $0.31 $0.28
Gathering and compression
depreciation ($/Mcfe) $0.13 $0.10 $0.12 $0.11
(in thousands)
Production operating income 73,852 54,787 $260,931 $212,657
Gathering operating income 11,305 (578) $32,650 $14,712
Total $85,157 $54,209 $293,581 $227,369
Production depletion $11,325 $9,861 $46,750 $39,100
Gathering and compression
depreciation 3,827 3,384 14,312 13,441
Other depreciation, depletion
and amortization 1,104 868 3,835 3,295
Total depreciation,
depletion and amortization $16,256 $14,113 $64,897 $55,836
FINANCIAL DATA (Thousands)
Production revenues $108,024 81,265 $390,290 $315,986
Gathering revenues 28,431 18,760 98,901 74,442
Total revenues 136,455 100,025 489,191 390,428
Operating expenses:
Lease operating expense
excluding production taxes 4,695 3,730 23,195 18,685
Production taxes 12,265 6,957 38,288 24,589
Gathering and compression 9,479 12,898 38,101 35,494
Selling, general and
administrative 8,603 8,118 30,610 28,455
Office consolidation
impairment charges - - 519 -
Depreciation, depletion and
amortization 16,256 14,113 64,897 55,836
Total operating expenses 51,298 45,816 195,610 163,059
Operating income $85,157 $54,209 $293,581 $227,369
Other income - $- $- $576
Equity in earnings from
nonconsolidated investments $232 $223 $493 $688
SOURCE Equitable Resources, Inc.
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Related links:
http://www.eqt.com
CONTACT:
Patrick Kane of Equitable Resources, Inc.,
+1-412-553-7833
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