PITTSBURGH, July 26 /PRNewswire-FirstCall/ -- Equitable Resources, Inc.
(NYSE: EQT) today announced second quarter 2007 earnings per diluted share
of $0.87, compared with $0.36 reported in the second quarter 2006. During
the second quarter 2007, the Company recognized a $119.4 million pre-tax
gain related to the agreements with Range Resources Corporation to jointly
develop the Nora Field in southwestern Virginia.
Quarterly Results by Business
Equitable Supply
Equitable Supply's operating income for the 2007 second quarter totaled
$71.2 million, 9% higher than the $65.4 million earned in the same period
last year. Total operating revenues were $127.9 million, $8.6 million
higher than the 2006 second quarter total of $119.3 million. Production
sales volumes increased by 0.3 Bcfe to 19.4 Bcfe as volumes from new wells
more than offset normal declines and the 0.6 Bcfe from wells sold in the
Nora transaction. The average well-head sales price increased by 8% to
$5.07 per Mcfe.
Gathering operating income was $7.9 million, $0.9 million lower than
the second quarter 2006. As a result of the gathering asset contribution to
Nora Gathering, LLC, gathered volumes, gathering revenues and
gathering-related expenses related to the Nora Field gathering activities
are no longer included in Equitable Supply's operating results. The Company
reported Equity in Earnings of $0.6 million from its ownership in Nora
Gathering, LLC.
Total operating expenses for the 2007 second quarter totaled $56.7
million compared to $53.9 million in the 2006 second quarter. Higher
depreciation, depletion and amortization, gathering and compression expense
and production taxes account for most of the increase in operating
expenses. Partially offsetting the increases were a decrease in expenses
due to the Nora Field transaction, lower selling, general and
administrative expenses related to reserves established in the second
quarter 2006 for the West Virginia royalty disputes and other legal
expenses.
During the quarter, the Company drilled 157 gross operated wells,
compared with 114 wells for the same period in 2006. The Company is on
track to drill 650 gross operated wells in 2007, including at least 70
horizontal wells, and reiterates its sales forecast of between 77 and 78
Bcfe this year.
Equitable Utilities
Equitable Utilities had operating income for the second quarter of
$10.9 million compared to $13.9 million reported for the same period last
year. Net operating revenues increased to $48.4 million from $45.8 million
in 2006, primarily due to higher weather-related Distribution net revenues
partially offset by lower Marketing net revenues.
Total operating expenses for the quarter increased by $5.6 million from
$31.9 million in 2006 to $37.5 million in 2007. Operating expenses for the
2007 quarter included $4.3 million of costs associated with planning for
the integration of The Peoples Natural Gas Company and Hope Gas, Inc. while
the Company continues to pursue the required regulatory approvals. On July
3, 2007, the Company agreed not to exercise its termination right under the
agreement to acquire Peoples and Hope prior to September 1, 2007.
Other Business
Horizontal Drilling
Since September 2006, the Company has drilled 30 horizontal wells. The
Company's engineering projections and cost estimates have been revised to
incorporate experience to date. A revised decline curve and summary
economics are posted on the Company's website, reflecting an 8% reduction
in estimated cost per well to $1.2 million, a 17% increase in the expected
reserve recovery and a higher expected after-tax return of 17%, up from
15%. Based on the encouraging results of the horizontal program, the
Company decided in the second quarter to exclusively drill Kentucky shale
wells horizontally.
Nora Field
On May 17, 2007, Equitable and Range Resources Corporation completed
the majority of the transactions contemplated under agreements to jointly
develop the Nora Field in southwestern Virginia. The Company agreed to sell
81 Bcf of proved reserves and contribute its Nora gathering assets to a
limited liability company, which is 50% owned by the Company. Equitable
recorded a gain of $147.8 million on the transaction and a loss of $28.4
million as the Company reduced its hedge position as a result of the sale.
Executive Performance Incentive Programs
The Company has an Executive Performance Incentive Program (EPIP)
designed to align management's long-term incentive compensation to the
absolute and relative returns earned by the Company's shareholders. The
expense of this program, which vests on December 31, 2008, varies based in
part on changes in Equitable's stock price. The EPIP expense for the
quarter was $20.8 million, consistent with an increase in plan assumptions.
Hedging
The Company's hedge position declined by 7.3 Bcf in conjunction with
the Nora Field transaction. The approximate volumes and prices of
Equitable's hedges for the last six months of 2007 through 2009 are:
Swaps 2007** 2008 2009
Total Volume (Bcf) 26 50 37
Average Price per Mcf (NYMEX)* $4.72 $4.62 $5.91
Collars 2007** 2008 2009
Total Volume (Bcf) 5 10 10
Average Floor Price per Mcf (NYMEX)* $7.61 $7.61 $7.61
Average Cap Price per Mcf (NYMEX)* $11.27 $11.27 $11.27
* The above price is based on a conversion rate of 1.05 MMbtu/Mcf
** July through December
Operating Income
The Company reports operating income by segment in this press release.
Both interest and income taxes 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 Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Operating income (thousands):
Equitable Supply $71,177 $65,443 $126,037 $137,426
Equitable Utilities 10,859 13,867 80,078 74,889
Unallocated expenses (20,517) (5,191) (45,742) (10,539)
Operating Income $61,519 $74,119 $160,373 $201,776
The unallocated expenses are primarily due to executive compensation.
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.
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 seven days.
Equitable Resources is an integrated energy company with emphasis on
Appalachian area natural gas supply, transmission and distribution. For
information, please visit Equitable's website, http://www.eqt.com .
Equitable Resources management speaks to investors from time to time.
Slides for these discussions will be available online via Equitable's
website. The slides are updated periodically.
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 programs and
initiatives, infrastructure projects, production and sales volumes,
marketing revenues and margins, executive compensation, capital
expenditures, the pending acquisition of The Peoples Natural Gas Company
and Hope Gas, Inc. and the financing of that acquisition and the Company's
move to a holding company structure. 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, those set forth under Item 1A,
"Risk Factors" of the Company's most recently filed Form 10-K.
Any forward-looking statement speaks only as of the date on which such
statement is made and the Company does not intend 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 Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Operating revenues $293,240 $251,207 $749,786 $681,326
Cost of sales 116,953 86,113 336,965 294,930
Net operating revenues 176,287 165,094 412,821 386,396
Operating expenses:
Operation and maintenance 25,568 25,366 53,012 48,970
Production 16,125 15,670 32,637 31,789
Selling, general and
administrative 45,483 28,050 111,780 57,755
Office consolidation impairment
charges - (2,908) - (2,908)
Depreciation, depletion and
amortization 27,592 24,797 55,019 49,014
Total operating expenses 114,768 90,975 252,448 184,620
Operating income 61,519 74,119 160,373 201,776
Gain on sale of assets, net 119,401 - 119,401 -
Gain on sale of available-for-sale
securities - - 1,042 -
Equity in earnings (losses) of
nonconsolidated investments 666 (124) 775 50
Interest expense 9,483 9,995 21,763 22,952
Income before income taxes 172,103 64,000 259,828 178,874
Income taxes 64,760 20,091 95,867 62,606
Net income $107,343 $43,909 $163,961 $116,268
Earnings per share of common stock:
Basic:
Weighted average common shares
outstanding 121,356 120,128 121,289 119,823
Net income $0.88 $0.37 $1.35 $0.97
Diluted:
Weighted average common shares
outstanding 122,837 122,044 122,806 121,899
Net income $0.87 $0.36 $1.34 $0.95
(A) Due to the seasonal nature of the Company's natural gas distribution
and energy marketing business, and the volatility of gas and oil
commodity prices, the interim statements for the three and six month
periods are not indicative of results for a full year.
EQUITABLE SUPPLY
OPERATIONAL AND FINANCIAL REPORT
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
OPERATIONAL DATA
Production:
Natural gas and oil production
(MMcfe) 21,024 20,381 41,440 39,963
Company usage, line loss (MMcfe) (1,621) (1,266) (2,699) (2,519)
Total sales volumes (MMcfe) 19,403 19,115 38,741 37,444
Average (well-head) sales price
($/Mcfe) $5.07 $4.71 $4.88 $4.90
Lease operating expenses excluding
production taxes ($/Mcfe) $0.31 $0.31 $0.32 $0.30
Production taxes ($/Mcfe) $0.46 $0.46 $0.47 $0.50
Production depletion ($/Mcfe) $0.70 $0.62 $0.70 $0.62
Gathering:
Gathered volumes (MMcfe) 24,068 26,268 53,110 53,550
Average gathering fee ($/Mcfe) $1.12 $1.01 $1.11 $1.00
Gathering and compression expense
($/Mcfe) $0.49 $0.40 $0.46 $0.38
Gathering and compression
depreciation ($/Mcfe) $0.16 $0.15 $0.15 $0.14
(in thousands)
Production operating income $63,277 $56,655 $107,224 $118,667
Gathering operating income 7,900 8,788 18,813 18,759
Total operating income $71,177 $65,443 $126,037 $137,426
Production depletion $14,737 $12,594 $29,069 $24,731
Gathering and compression
depreciation 3,894 3,821 8,227 7,588
Other depreciation, depletion and
amortization 1,469 1,034 2,801 1,976
Total depreciation, depletion and
amortization $20,100 $17,449 $40,097 $34,295
Capital expenditures (thousands) $159,462 $68,615 $297,455 $122,527
FINANCIAL DATA (Thousands)
Production revenues $100,954 $92,671 $194,241 $188,192
Gathering revenues 26,930 26,656 58,900 53,584
Total operating revenues 127,884 119,327 253,141 241,776
Operating expenses:
Lease operating expenses excluding
production taxes 6,471 6,360 13,286 11,790
Production taxes 9,655 9,310 19,351 19,999
Gathering and compression 11,797 10,582 24,621 20,424
Selling, general and administrative 8,684 10,183 29,749 17,842
Depreciation, depletion and
amortization 20,100 17,449 40,097 34,295
Total operating expenses 56,707 53,884 127,104 104,350
Operating income $71,177 $65,443 $126,037 $137,426
Gain on sale of assets, net $119,401 $ - $119,401 $ -
Equity in earnings (losses) of
nonconsolidated investments $633 $(124) $706 $(18)
EQUITABLE UTILITIES
OPERATIONAL AND FINANCIAL REPORT
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
OPERATIONAL DATA
Heating degree days (30-year
average: Qtr - 705; YTD - 3,635) 617 565 3,465 3,103
Residential sales and transportation
volumes (MMcf) 3,301 2,656 15,251 12,861
Commercial and industrial volumes
(MMcf) 5,632 4,667 15,638 13,750
Total throughput (MMcf) -
Distribution 8,933 7,323 30,889 26,611
Net operating revenues (thousands):
Distribution
Residential $19,093 $16,648 $60,268 $53,167
Commercial & industrial 7,553 6,589 25,510 22,668
Other 2,115 1,697 3,991 3,204
Total Distribution 28,761 24,934 89,769 79,039
Pipeline 14,327 13,868 32,443 38,937
Marketing 5,315 6,965 37,468 26,644
Total net operating revenues $48,403 $45,767 $159,680 $144,620
Operating income (thousands):
Distribution (regulated) $958 $2,285 $30,261 $29,571
Pipeline (regulated) 5,123 5,150 13,920 19,348
Marketing 4,778 6,432 35,897 25,970
Total operating income $10,859 $13,867 $80,078 $74,889
Capital expenditures (thousands) $18,616 $13,626 $38,207 $29,080
FINANCIAL DATA (Thousands)
Distribution revenues (regulated) $71,560 $61,594 $281,969 $283,303
Pipeline revenues (regulated) 14,949 14,239 33,286 39,636
Marketing revenues 96,950 75,840 225,648 181,237
Less: intrasegment revenues (11,347) (12,646) (25,679) (30,451)
Total operating revenues 172,112 139,027 515,224 473,725
Purchased gas costs 123,709 93,260 355,544 329,105
Net operating revenues 48,403 45,767 159,680 144,620
Operating expenses:
Operating and maintenance 14,286 14,642 28,484 28,257
Selling, general and administrative 16,066 12,483 36,802 29,545
Office consolidation impairment
charges - (2,396) - (2,396)
Depreciation, depletion and
amortization 7,192 7,171 14,316 14,325
Total operating expenses 37,544 31,900 79,602 69,731
Operating income $10,859 $13,867 $80,078 $74,889
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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