PITTSBURGH, Aug. 1 /PRNewswire-FirstCall/ -- Equitable Resources, Inc.
(NYSE: EQT) today announced second quarter 2008 earnings per diluted share
(EPS) of $0.44, compared to $0.87 EPS earned in the second quarter 2007.
Second quarter 2007 results included a $119.4 million pre-tax gain related
to agreements with Range Resources Corporation to jointly develop the Nora
area in southwestern Virginia. Operating cash flow (a non-GAAP number, see
reconciliation table) for second quarter 2008 was $161.9 million, 145%
higher than the second quarter 2007, resulting from lower cash taxes, lower
Executive Performance Incentive Program expenses and higher operating
income at Production and Midstream.
Quarterly Results by Business
Equitable Production
Equitable Production had operating income for the quarter of $74.2
million, 28% higher than the $57.9 million earned in the same period last
year. Production operating revenues were $124.9 million, $29.4 million
higher than the $95.5 million reported in 2007 as a result of significantly
higher average well-head pricing and a 3% increase in production sales
volumes. Adjusting for the sale of production to Range Resources
Corporation in the second quarter 2007, sales volumes increased by 6.4%. As
expected, the commissioning of the Big Sandy pipeline, which is critical
for the company's long-term prospects, constrained the growth rate in the
quarter.
Operating expenses for the quarter were $50.8 million compared to $37.6
million last year. The increase is related to the company's ramp-up in
drilling activities, as well as higher severance taxes and allowance for
bad debt, both of which are consistent with higher natural gas prices.
Developmental Drilling
Equitable drilled 185 gross wells in the second quarter, bringing total
wells drilled for the first half of 2008 to 324. The pace of horizontal
drilling continues to exceed the company's expectation. Equitable now plans
to drill 350 horizontal wells in 2008, a 17% increase over previous
estimates.
Of the 185 wells drilled in the second quarter, 99 were horizontal
wells; 83 of which were development wells targeting the Lower Huron shale.
Production performance and cost per well from the Lower Huron horizontal
wells is consistent with the previously published projections last updated
March 11, 2008 and posted on the company's website, http://www.eqt.com.
Emerging Plays
Equitable has had encouraging drilling results from several of our
emerging plays, which could result in important additions to future reserve
estimates. The current reserve report does not reflect material proved,
probable or possible reserves booked in connection with these emerging
plays.
The company has drilled eight wells in the Berea sandstone this year;
five are currently producing. The two most recent wells drilled have been
on-line less than one month but nonetheless are expected to yield first
month average daily flow rates of approximately 1,500 Mcfe. These two Berea
wells cost $1.4 million each. The company plans to drill between 25 and 30
Berea wells in 2008. Based on the results of previous drilling in the Berea
and the results of these latest wells, Equitable believes there could be as
many as 3,800 additional drilling locations. Furthermore, the company plans
to drill 11 horizontal wells testing other non-shale formations:
Ravencliff, Big Lime and Weir.
To date, the company has drilled 53 horizontal wells on locations
previously completed in low pressure Devonian shales with vertical wells.
The purpose of this "re-entry" program is to determine whether production
and reserves can be increased on these old locations with the application
of horizontal drilling technology. Fourteen of the new wells have been
producing for 30 days or longer and results are encouraging in that the
initial production and decline profile of these "re-entry" wells is similar
to those of horizontal wells drilled in previously undrilled locations.
Equitable has 4,700 potential "re-entry" locations.
Equitable has over 400,000 acres in the high pressure Marcellus play.
The company has completed one horizontal well and three vertical wells this
year; all four connected to pipelines and flowing to the sales meter. The
first month average daily flow rate of the horizontal well was 1,900 Mcfe.
The three vertical Marcellus wells are expected to produce first month
average daily flow rates of between 500 and 700 Mcfe. In response to these
results, the company plans to increase the pace of Marcellus development
and drill 75 high pressure Marcellus wells by the end of 2009.
Equitable Midstream
Equitable Midstream had second quarter operating income of $23.6
million compared to $20.7 million reported for the same period last year.
Net operating revenues for the second quarter were $60.6 million, 22%
higher than last year's $49.5 million. The increase in net operating
revenues was driven by higher gathering rates, higher natural gas liquid
sales prices and revenues from the Big Sandy Pipeline, which came on-line
in the quarter. The increase was partially offset by lower gathered volumes
attributable to the contribution of assets dedicated to the Nora joint
venture in the second quarter 2007. Operating expenses increased
year-over-year to $36.9 million from $28.8 million, attributable to higher
costs associated with the business expansion at Midstream.
The Midstream group continued to make progress on its three major
infrastructure projects during the quarter. The Big Sandy pipeline is
complete and on-line; the Mayking Corridor Project - Phase I is ahead of
schedule and commissioning is currently underway; and construction of the
Langley processing plant continues to progress towards a third quarter
startup. Once operational, the combined takeaway capacity of these three
projects is expected to support Production's growth targets.
In July, the Board of Directors approved $100 million for Midstream's
initial Marcellus gathering and processing projects, consisting of
gathering pipe and two, 20 MMcf per day, skid-mounted, stripping plants.
One project is focused on southwestern Pennsylvania Marcellus development;
the other will support northern West Virginia development. These projects
will support the initial ramp-up of Equitable Production's Marcellus
drilling and could potentially be expanded to accommodate third-party
production.
Equitable Distribution
Equitable Distribution's operating income totaled $2.0 million for 2008
compared to $3.4 million for the same period last year. Net operating
revenues were $30.1 million for 2008, slightly lower than the $31.3 million
for 2007, attributable to warmer weather.
Operating expenses increased $0.2 million, to $28.1 million. Expenses
totaling $4.3 million incurred in the second quarter 2007, for the now
terminated agreement to acquire The Peoples Natural Gas Company and Hope
Gas, Inc., were offset by an increase in bad debt expense related to
increased participation in customer assistance plans, an increase in
maintenance activities and costs incurred in connection with the recently
completed holding company reorganization.
On June 30, 2008, Equitable Gas Company filed a request with the
Pennsylvania Public Utility Commission (PUC) to increase the rates it
charges consumers and businesses for delivery of natural gas. The requested
$51.9 million annual increase is the first base rate case in more than 10
years.
Other Business
2008 Daily Sales Guidance
Equitable expects to exceed the previous daily sales rate guidance of
235,000 Mcfe by year-end as a result of the increased pace of developmental
drilling; the completion of the Big Sandy pipeline and the Mayking Corridor
- Phase I; as well as the company's confidence in the timely completion of
the Langley processing plant.
Capital Budget
In July 2008, the company's Board of Directors approved an increase to
the company's capital and exploratory commitments for the Production and
Midstream operations. The additional 2008 approval reflects the
acceleration of the company's Marcellus development program, including
pipeline infrastructure projects and acreage purchases, and the
acceleration of other Production and Midstream development projects. The
company now forecasts total capital and exploratory expenditures of
approximately $1.6 billion for 2008.
Equity Issuance
On May 12, 2008, the company completed a public offering of 8,625,000
shares of its common stock at an offering price to the public of $67.75 per
share. The proceeds from the offering are being used to fund the drilling
program and infrastructure projects.
Executive Performance Incentive Program
The company has an Executive Performance Incentive Program (EPIP)
designed to align management's long-term incentive compensation with the
absolute and relative returns earned by the company's shareholders. The
expense of this program, which ends on December 31, 2008, varies based on
several factors, including changes in Equitable's stock price. The recent
reduction in stock price resulted in no EPIP charge in the second quarter
2008. In the second quarter 2007, the company recorded a $20.8 million
charge for the EPIP.
Hedging
There was no change to the company's hedge position. The approximate
volumes and prices of the company's hedge position for 2008 through 2010
production are:
Swaps 2008** 2009 2010
Total Volume (Bcf) 25 37 35
Average Price per Mcf (NYMEX)* $4.62 $5.91 $5.96
Collars 2008** 2009 2010
Total Volume (Bcf) 7 23 21
Average Floor Price per Mcf (NYMEX)* $7.58 $7.34 $7.29
Average Cap Price per Mcf (NYMEX)* $12.28 $13.68 $13.51
* 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,
2008 2007 2008 2007
Operating income (thousands):
Equitable Production $74,177 $57,939 $134,509 $96,700
Equitable Midstream 23,628 20,662 84,482 72,303
Equitable Distribution 2,029 3,435 39,979 37,112
Unallocated income (expenses) 1,299 (20,517) (38,414) (45,742)
Operating Income $101,133 $61,519 $220,556 $160,373
Unallocated income (expenses) consist of differences between budget and
actual headquarters' expenses, including incentive compensation. For each
period presented, the difference between equity in earnings of
nonconsolidated investments as reported on the company's statements of
consolidated income and on Equitable Midstream's operational and financial
report is the earnings from the company's ownership interest in Appalachian
Natural Gas Trust. Other segment financial measures identified in this
press release are reconciled to the most comparable financial measures
calculated in accordance with generally accepted accounting practices
(GAAP) on the attached operational and financial reports.
Operating Cash Flows
Operating cash flow is presented because of its acceptance as an
indicator of an oil and gas exploration and production company's ability to
internally fund exploration and development activities and to service or
incur additional debt. The company has also included this information
because changes in operating assets and liabilities relate to the timing of
cash receipts and disbursements which the company may not control. In
addition, such receipts and disbursements may not relate to the period in
which the operating activities occurred. Operating cash flow should not be
considered in isolation or as a substitute for net cash provided by
operating activities prepared in accordance with generally accepted
accounting principles.
Operating cash flow for the three months ended June 30, 2008, includes
an approximate $45 million net operating loss generated by investment in
the recent quarter that can be carried back against taxable income realized
in 2006 and 2007. The table below reconciles operating cash flow with net
cash (used in) provided by operating activities.
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
Net Income (thousands): $55,391 $107,343 $125,911 $163,961
Add back (deduct):
Deferred income taxes 76,708 54,816 125,215 55,823
Depreciation, depletion,
and amortization 32,051 27,592 62,816 55,019
Other items, net (2,255) (4,193) (5,291) (9,356)
Gain on sale of
assets, net - (119,401) - (119,401)
Operating cash flow
(thousands): $161,895 $66,157 $308,651 $146,046
Add back (deduct):
Changes in margin
deposits $(161,577) $1,098 $(233,693) $(10,933)
Other changes in
operating assets and
liabilities (17,607) 19,308 13,786 176,920
Net cash (used in)
provided by operating
activities $(17,289) $86,563 $88,744 $312,033
Equitable's conference call 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' Chairman and CEO, Murry Gerber, is scheduled to
present at EnerCom's 2008 The Oil and Gas Conference(R) on Tuesday, August
12 at 10:25 a.m. ET. The presentation will be broadcast live on Equitable's
website, http://www.eqt.com, and will be available for seven days. The
slides for this presentation will be posted to the website before the NYSE
opens on August 12th.
Equitable Resources is a natural gas-focused energy company, with an
emphasis on Appalachian area natural gas activities, including production,
gathering, processing, transmission, storage and distribution. For
information please visit 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 may be updated periodically. (EQT-IR)
Cautionary Statements
The Securities and Exchange Commission (the "SEC") permits oil and gas
companies, in their filings with the SEC, to disclose only proved reserves
that a company has demonstrated by actual production or conclusive
formation tests to be economically and legally producible under existing
economic and operating conditions. The company uses the terms "probable",
"possible", "potential" and other descriptions of volumes of reserves that
may be recoverable through additional drilling or recovery techniques that
the SEC's guidelines would prohibit us from including in filings with the
SEC. These estimates are by their nature more speculative than estimates of
proved reserves and, accordingly, are subject to substantially greater risk
of being actually realized. Investors are urged to consider closely the
disclosure in the company's 2007 Form 10-K, File No. 001-03551 available
from the company at 225 North Shore Drive, Pittsburgh, PA 15212, Attention:
Corporate Secretary. You can also obtain the company's Form 10-K from the
SEC by calling 1-800-SEC- 0330.
Daily sales volumes at period end is an operational estimate of the
daily sales volume on a typical day (excluding curtailments) at the end of
the applicable period.
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 and infrastructure
programs and initiatives, the expected decline curve, production and sales
volumes, reserves, reserve replacement ratio, capital expenditures, capital
budget, financing plans, growth rate and tax position. These statements
involve risks and uncertainties that could cause actual results to differ
materially from projected results. Accordingly, investors should not place
undue reliance on forward-looking statements as a prediction of actual
results. The company has based these forward-looking statements on current
expectations and assumptions about future events. While the company
considers these expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic, competitive,
regulatory and other risks and uncertainties, most of which are difficult
to predict and many of which are beyond the company's control. 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,
2008 2007 2008 2007
Operating revenues $334,009 $293,240 $869,783 $749,786
Cost of sales 118,352 116,953 389,530 336,965
Net operating revenues 215,657 176,287 480,253 412,821
Operating expenses:
Operation and maintenance 28,612 25,568 54,204 53,012
Production 20,369 16,008 36,889 32,238
Exploration 838 117 1,393 399
Selling, general and
administrative 32,654 45,483 104,395 111,780
Depreciation, depletion and
amortization 32,051 27,592 62,816 55,019
Total operating expenses 114,524 114,768 259,697 252,448
Operating income 101,133 61,519 220,556 160,373
Gain on sale of assets, net - 119,401 - 119,401
Gain on sale of available-for-sale
securities - - - 1,042
Other income 1,574 1,453 5,098 2,284
Equity in earnings of
nonconsolidated investments 1,697 666 2,991 775
Interest expense 14,327 10,936 27,980 24,047
Income before income taxes 90,077 172,103 200,665 259,828
Income taxes 34,686 64,760 74,754 95,867
Net income $55,391 $107,343 $125,911 $163,961
Earnings per share of common stock:
Basic:
Weighted average common shares
outstanding 126,243 121,356 124,372 121,289
Net income $0.44 $0.88 $1.01 $1.35
Diluted:
Weighted average common shares
outstanding 127,321 122,837 125,432 122,806
Net income $0.44 $0.87 $1.00 $1.34
(A) Due to the seasonal nature of the Company's natural gas distribution
and storage businesses, and the volatility of commodity prices, the
interim statements for the three and six month periods are not
indicative of results for a full year.
EQUITABLE PRODUCTION
OPERATIONAL AND FINANCIAL REPORT
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
OPERATIONAL DATA
Natural gas and oil production
(MMcfe) 21,543 21,024 42,564 41,440
Company usage, line loss (MMcfe) (1,587) (1,621) (2,893) (2,699)
Total sales volumes (MMcfe) 19,956 19,403 39,671 38,741
Average (well-head) sales price
($/Mcfe) $6.14 $4.79 $5.67 $4.61
Lease operating expenses, excluding
production taxes ($/Mcfe) $0.33 $0.30 $0.31 $0.31
Production taxes ($/Mcfe) $0.61 $0.45 $0.55 $0.46
Production depletion ($/Mcfe) $0.81 $0.70 $0.81 $0.70
Production depletion $17,502 $14,737 $34,593 $29,069
Other depreciation, depletion and
amortization 1,119 930 2,149 1,891
Total depreciation, depletion and
amortization $18,621 $15,667 $36,742 $30,960
Capital expenditures (thousands) $146,413 $67,623 $242,876 $124,388
FINANCIAL DATA (Thousands)
Total operating revenues $124,949 $95,491 $230,026 $183,469
Operating expenses:
Lease operating expense
excluding production taxes 7,054 6,354 13,016 12,887
Production taxes 13,114 9,530 23,337 19,103
Exploration expense 838 117 1,393 399
Selling, general and
administrative 11,145 5,884 21,029 23,420
Depreciation, depletion and
amortization 18,621 15,667 36,742 30,960
Total operating expenses 50,772 37,552 95,517 86,769
Operating income $74,177 $57,939 $134,509 $96,700
EQUITABLE MIDSTREAM
OPERATIONAL AND FINANCIAL REPORT
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
OPERATIONAL DATA
Gathering and processing:
Gathered volumes (MMBtu) 33,444 36,502 67,281 77,795
Average gathering fee ($/MBtu) $1.00 $0.83 $0.99 $0.84
Gathering and compression expense
($/MBtu) $0.38 $0.35 $0.36 $0.34
NGLs Sold (Mgal) 17,181 17,753 35,574 36,383
Average NGL sales price ($/gal) $1.57 $1.04 $1.47 $0.98
Net operating revenues (thousands):
Gathering and processing $42,398 $35,255 $87,181 $75,004
Transmission and storage 18,168 14,242 66,838 57,607
Total net operating revenues $60,566 $49,497 $154,019 $132,611
Net operating income (thousands):
Gathering and processing $17,056 $14,248 $39,178 $31,006
Transmission and storage 6,572 6,414 45,304 41,297
Total net operating income $23,628 $20,662 $84,482 $72,303
Depreciation and amortization
(thousands):
Gathering and processing $5,558 $4,787 $11,086 $9,847
Transmission and storage 2,285 1,751 3,975 3,566
Total depreciation and
amortization $7,843 $6,538 $15,061 $13,413
Capital expenditures (thousands) $152,099 $99,859 $247,664 $188,027
FINANCIAL DATA (Thousands)
Total operating revenues $153,777 $122,482 $375,102 $292,769
Purchased gas costs 93,211 72,985 221,083 160,158
Net operating revenues 60,566 49,497 154,019 132,611
Operating expenses:
Operating and maintenance 17,678 16,334 32,943 33,221
Selling, general and
administrative 11,417 5,963 21,533 13,674
Depreciation and amortization 7,843 6,538 15,061 13,413
Total operating expenses 36,938 28,835 69,537 60,308
Operating income $23,628 $20,662 $84,482 $72,303
Other income $1,464 $1,375 $4,847 $2,138
Equity in earnings of
nonconsolidated investments $1,471 $568 $2,626 $568
EQUITABLE DISTRIBUTION
OPERATIONAL AND FINANCIAL REPORT
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
OPERATIONAL DATA
Heating degree days (30-year
average: Qtr - 705; YTD - 3,635) 577 617 3,461 3,465
Residential sales and
transportation volume (MMcf) 2,647 3,301 14,710 15,251
Commercial and industrial volume
(MMcf) 5,224 5,632 16,835 15,638
Total throughput (MMcf) -
Distribution 7,871 8,933 31,545 30,889
Net operating revenues (thousands):
Residential $18,338 $19,093 $59,626 $60,268
Commercial & industrial 7,500 7,553 27,334 25,510
Off-system and energy services 4,304 4,653 9,248 10,963
Total net operating revenues $30,142 $31,299 $96,208 $96,741
Capital expenditures (thousands) $12,378 $9,143 $19,983 $20,963
FINANCIAL DATA (Thousands)
Total operating revenues $114,731 $133,099 $370,693 $384,480
Purchased gas costs 84,589 101,800 274,485 287,739
Net operating revenues 30,142 31,299 96,208 96,741
Operating expenses:
Operating and maintenance 11,202 9,873 21,318 20,132
Selling, general and
administrative 11,756 12,904 24,703 29,457
Depreciation and amortization 5,155 5,087 10,208 10,040
Total operating expenses 28,113 27,864 56,229 59,629
Operating income $2,029 $3,435 $39,979 $37,112
SOURCE Equitable Resources, Inc.
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Related links:
http://www.eqt.com/
CONTACT:
Patrick Kane, +1-412-553-7833, for Equitable
Resources, Inc.
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