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EQT production surge helps midstream MLP earnings given higher firm capacity

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EQT production surge helps midstream MLP earnings given higher firm capacity

EQT Corp. posted a $192.0 million net loss attributable to the company, or a loss of $1.11 per share, in the fourth quarter of 2016, compared to a loss of $134.6 million, or a loss of 88 cents per share, in the year-ago quarter.

Fourth-quarter adjusted net income attributable to EQT rose to $43.8 million, or 25 cents per share, from the prior-year period's loss of $10.5 million, or a loss of 7 cents per share. The S&P Capital IQ consensus normalized EPS estimate for the most recent quarter was a loss of 9 cents.

EQT Production reported a 28% year-over-year surge in production sales volume for the fourth quarter, amounting to 198.4 Bcfe, which was more than offset by a loss on derivatives not designated as hedges. Thus, fourth-quarter operating revenue went down by $227.8 million year over year, to $318.3 million.

Jefferies analysts attributed the EPS increase to "higher production and stronger gas price realizations than expected, offset somewhat by slightly higher production costs," while the production increase was "driven by liquids," according to a Feb. 2 note. Analysts at Tudor Pickering Holt see the volume increase as a "slight positive."

For the full year 2016, EQT reported a $453.0 million net loss attributable to the company, or a loss of $2.71 per share, compared to net income attributable to the company of $85.2 million, or 56 cents per share, in 2015.

2016 adjusted net loss attributable to EQT slid to $54.3 million, or a loss of 33 cents per share, from the previous year's adjusted net income attributable to EQT of $115.2 million, or 75 cents per share. The S&P Capital IQ consensus normalized EPS estimate for the full year was a loss of 63 cents.

EQT Production's production sales volume in 2016 saw a 26% boost over that of 2015, to 759.0 Bcfe, representing a record amount for the company. Operating revenue declined to $1.39 billion from 2015's $2.13 billion, as the increase in sales volume was more than offset by a lower average realized price and increased operating expenses.

EQT Midstream

In a separate earnings release, EQT Midstream Partners LP reported 2016 fourth-quarter net income of $135.7 million, or $1.31 per unit, an increase from $120.3 million, or $1.26 per unit, in the year-ago quarter. The S&P Capital IQ consensus GAAP EPS estimate for the fourth quarter was $1.32 per unit, with six analysts reporting.

Fourth-quarter adjusted EBITDA totaled $156.9 million, while distributable cash flow amounted to $135.2 million. Distribution coverage ratio for the fourth quarter was at 1.38x, representing $97.8 million in total distributions declared.

Operating revenues grew 14% to $195.0 million in the fourth quarter of 2016, from $170.7 million in the year-ago quarter. The increase was credited to higher firm transmission capacity and contracted firm gathering capacity. 91% of the operating revenue came from firm reservation fees, EQT Midstream said.

For the full year 2016, net income amounted to $537.9 million, or $5.21 per unit, up from the previous year's $455.1 million, or $4.70 per unit. The S&P Capital IQ consensus GAAP EPS estimate for the full year was $5.32 per unit.

EQT Midstream's adjusted EBITDA for 2016 was posted at $572.6 million, while DCF totaled $523.3 million, with a distribution coverage ratio of 1.48x, or $354.7 million in total distributions declared. Operating revenues increased to $735.6 million in 2016, compared to $632.9 million in 2015.

EQT Midstream declared a quarterly distribution of 85 cents per unit, which is 4% higher than the previous quarter and 20% higher than the year-ago quarter. It will be paid Feb. 14 to unit holders of record at the close of business on Feb. 3.

The partnership forecast full-year 2017 net income to be in a range of $555 million to $595 million. Adjusted EBITDA is expected to be $670 million to $710 million, and DCF was projected at $590 million to $630 million. EQT Midstream forecast a 20% growth in its annual per-unit distribution for 2017.

EQT GP Holdings

EQT GP Holdings LP reported fourth-quarter net income attributable to the partnership of $57.6 million, or 22 cents per unit, compared to $52.8 million, or 17 cents per unit, in the fourth quarter of 2015.

For the full year 2016, net income attributable to EQT GP Holdings amounted to $234.2 million, or 80 cents per unit, compared to $207.6 million, or 39 cents per unit, in the prior year.

EQT GP Holdings owns the general partner interest, all the incentive distribution rights and part of the limited partner interests in EQT Midstream. EQT owns a 90% limited partner interest in EQT GP Holdings.