EQT Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Figures below are in U.S. dollars; “billion” and “million” are rounded. EQT is an Appalachian natural gas producer. Results include assets acquired in the Alta Acquisition, which closed in July 2021.
Financial results and liquidity
| Metric | Q2 2022 | Comparable period / context |
|---|---|---|
| Sales of natural gas, NGLs and oil | $3.365 billion | Up 212% from Q2 2021, reflecting higher realized prices and 19% higher sales volume. |
| Derivative loss | $845 million | Compared with a $1.346 billion loss in Q2 2021. Fair-value changes are recorded in operating revenue; cash settlements can differ materially. |
| Total operating revenue | $2.528 billion | Q2 2021 was negative $260 million, largely reflecting a larger derivative loss. |
| Operating income | $1.362 billion | Compared with an operating loss of $1.218 billion in Q2 2021. |
| Net income attributable to EQT; diluted EPS | $891 million; $2.19 | Q2 2021 net loss attributable to EQT was $933 million, or $3.34 per diluted share. |
| Six-month net loss attributable to EQT | $625 million; diluted loss per share $1.68 | Compared with a $971 million loss and $3.48 diluted loss per share in H1 2021. The 2022 period included a $3.923 billion derivative loss. |
| Cash from operations, six months | $1.252 billion | Up from $443 million in H1 2021; included $2.639 billion of net cash derivative settlements paid. |
| Cash capital expenditures, six months | $685 million | Compared with $470 million in H1 2021. |
Prices and volume: Q2 sales volume was 5.511 Bcfe/day, up 19%. The average realized price, including cash-settled derivatives, was $3.21/Mcfe versus $2.37/Mcfe a year earlier. Higher benchmark and liquids prices were partly offset by unfavorable derivative settlements and basis differentials. The filing does not present a conventional operating margin measure.
Balance sheet at June 30: Cash was $44 million. Debt principal was $5.087 billion (carrying value $5.042 billion), including $100 million drawn on the credit facility; current debt carrying value was $441 million. Current assets were $4.086 billion and current liabilities $7.190 billion, including substantial derivative liabilities. EQT reported $4.568 billion of gross derivative liabilities and $1.409 billion of gross derivative assets; amounts are subject to netting and collateral arrangements.
The $2.5 billion credit facility was extended to June 2027, with two optional one-year extensions subject to lender approval. At June 30, letters of credit outstanding were approximately $208 million. Management said operating cash flows and credit-facility availability should be sufficient for expected needs for at least the next 12 months. EQT reported compliance with debt covenants.
Material changes and unusual items
- Higher commodity prices and the Alta-acquired assets lifted sales and production, while derivative fair-value losses remained a major source of earnings volatility. H1 total operating revenue was $1.948 billion, despite $5.852 billion of commodity sales, because of the derivative loss.
- H1 included a $184.9 million impairment of the Equitrans gathering-contract asset, following greater uncertainty about the Mountain Valley Pipeline’s timing. On July 8, 2022, EQT elected a contractual cash-payment option of approximately $196 million, subject to the agreement’s terms.
- H1 loss on debt extinguishment was $111.3 million, mainly related to Convertible Notes repurchases. EQT repurchased or redeemed debt, including the $569 million principal balance of its 3.00% notes due October 2022.
- During April 2022, EQT sold its remaining Equitrans Midstream shares for net proceeds of approximately $189 million. H1 financing cash use was $814 million, including debt repayments, $93 million of dividends and common-stock repurchases.
Outlook, risks and contingencies
- 2022 outlook: Expected sales volume of 1,950–2,050 Bcfe and capital expenditures of approximately $1.4–$1.5 billion, excluding amounts attributable to noncontrolling interests. Capital spending is largely discretionary and may be deferred depending on prices, costs, equipment, permits and other conditions.
- The board declared a subsequent quarterly dividend of $0.15 per share, payable September 1, 2022. EQT may also continue to consider debt or equity repurchases, subject to liquidity and market conditions.
- Commodity-price volatility and the hedging program are key risks. Hedge settlements can materially reduce cash realized from production when market prices exceed hedge prices; adverse derivative positions may also require collateral. As of July 22, EQT said potential collateral or other assurance requirements could reach approximately $0.9 billion, including about $0.5 billion already posted or outstanding.
- Other cited risks include drilling and operating costs, permits and regulation, Appalachian Basin concentration, reliance on Equitrans Midstream services, environmental and weather risks, and litigation. Management said pending legal matters were not expected to materially affect the company; no material updates to previously disclosed proceedings or risk factors were reported.
- Pennsylvania enacted a corporate income-tax rate reduction after quarter-end; EQT was evaluating the financial-statement impact.
Important facts for investors to verify
- How future derivative settlements and hedge positions affect realized prices, cash flow and potential collateral needs.
- Whether production and capital-spending guidance is achieved, and how Alta assets contribute to volume and costs.
- Mountain Valley Pipeline timing and the realization of the elected cash-payment option and remaining gathering-fee relief.
- Debt-repurchase activity, Convertible Notes conversion and settlement terms, and liquidity after debt service, dividends and capital spending.