EQT(US:EQT)2024-07-24 20:16PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) EQT's unaudited financial statements report Q2 2024 net income of $9.2 million, a significant improvement, and six-month net income of $112.3 million Statements of Condensed Consolidated Operations EQT reported Q2 2024 operating revenues of $952.5 million and net income of $9.5 million, a turnaround from a prior-year loss Condensed Consolidated Operations Summary (Three Months Ended June 30) | Metric | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Total operating revenues | $952,512 | $1,018,751 | | Operating income (loss) | $2,971 | ($34,993) | | Net income (loss) attributable to EQT | $9,517 | ($66,626) | | Diluted EPS | $0.02 | ($0.18) | Condensed Consolidated Operations Summary (Six Months Ended June 30) | Metric | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Total operating revenues | $2,364,780 | $3,679,822 | | Operating income | $185,691 | $1,575,887 | | Net income attributable to EQT | $113,005 | $1,151,922 | | Diluted EPS | $0.25 | $2.94 | Condensed Consolidated Balance Sheets EQT's balance sheet as of June 30, 2024, shows total assets of $24.7 billion, liabilities at $9.6 billion, and equity at $15.1 billion Condensed Consolidated Balance Sheet Highlights | Metric | June 30, 2024 ($ thousands) | Dec 31, 2023 ($ thousands) | | :--- | :--- | :--- | | Total current assets | $1,229,827 | $2,012,975 | | Net property, plant and equipment | $23,176,286 | $22,950,170 | | Total assets | $24,706,469 | $25,285,098 | | Total current liabilities | $1,685,568 | $2,036,840 | | Total liabilities | $9,581,721 | $10,504,281 | | Total equity | $15,124,748 | $14,780,817 | Statements of Condensed Consolidated Cash Flows Net cash from operations for H1 2024 was $1.48 billion, a decrease from prior year, with significant cash used in investing and financing activities Cash Flow Summary (Six Months Ended June 30) | Metric | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,477,708 | $2,099,881 | | Net cash used in investing activities | ($879,212) | ($983,831) | | Net cash used in financing activities | ($649,499) | ($1,359,202) | | Net change in cash and cash equivalents | ($51,003) | ($243,152) | | Cash and cash equivalents at end of period | $29,974 | $1,215,492 | Notes to the Condensed Consolidated Financial Statements The notes detail revenue recognition, derivative hedging, debt structure, and key events including the NEPA asset divestiture and Equitrans Midstream Merger - On July 18, 2024, the company amended its Articles of Incorporation to increase the authorized number of common stock shares from 640 million to 1.28 billion20 Disaggregated Revenue from Contracts with Customers (Six Months Ended June 30) | Revenue Source | 2024 ($ thousands) | 2023 ($ thousands) | | :--- | :--- | :--- | | Natural gas sales | $1,852,279 | $2,478,088 | | NGLs sales | $295,884 | $166,727 | | Oil sales | $45,259 | $33,868 | | Total | $2,193,422 | $2,678,683 | Outstanding Debt Summary | Debt Instrument | Carrying Value (June 30, 2024, $ thousands) | Carrying Value (Dec 31, 2023, $ thousands) | | :--- | :--- | :--- | | Revolving credit facility | $47,000 | $0 | | Term Loan Facility | $497,680 | $1,244,265 | | Senior notes | $4,321,702 | $4,176,180 | | Note payable to EQM | $85,404 | $88,483 | | Total Debt | $4,951,786 | $5,795,113 | - On May 31, 2024, the company completed the NEPA Non-Operated Asset Divestiture, selling a 40% interest in non-operated assets for $500 million in cash and other assets, recognizing a gain of approximately $320 million107124 - On July 22, 2024, after the reporting period, the company completed its merger with Equitrans Midstream. Equitrans shareholders received 0.3504 shares of EQT common stock for each share held146135 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes Q2 2024 net income of $9.5 million to the NEPA asset divestiture, with six-month results impacted by lower commodity prices and the Equitrans Midstream Merger Results of Operations Q2 2024 sales volume increased 7.8% to 507.5 Bcfe, with revenue up 4.9% to $889.5 million, while six-month revenue decreased 18.1% to $2.19 billion - Q2 2024 net income was $9.5 million, compared to a net loss of $66.6 million in Q2 2023, primarily due to a gain on the NEPA Non-Operated Asset Divestiture159 - For the six months ended June 30, 2024, net income was $113.0 million, a decrease from $1,151.9 million in the same period of 2023, mainly due to a lower gain on derivatives and decreased commodity sales revenue186 Sales Volume and Revenue Comparison (Three Months Ended June 30) | Metric | 2024 (MMcfe) | 2023 (MMcfe) | % Change | | :--- | :--- | :--- | :--- | | Total sales volume | 507,512 | 470,839 | 7.8% | | Sales of natural gas, NGLs and oil ($ thousands) | $889,517 | $848,325 | 4.9% | | Average realized price ($/Mcfe) | $2.33 | $2.11 | 10.4% | Operating Expenses Per Unit ($/Mcfe) (Three Months Ended June 30) | Expense Category | 2024 ($/Mcfe) | 2023 ($/Mcfe) | | :--- | :--- | :--- | | Gathering | $0.59 | $0.68 | | Transmission | $0.35 | $0.33 | | LOE | $0.12 | $0.08 | | Production taxes | $0.08 | $0.04 | | Production depletion | $0.90 | $0.83 | Capital Resources and Liquidity EQT's liquidity is supported by $1.48 billion in H1 2024 operating cash flow, with significant investing and financing outflows, and revised capital expenditure guidance post-merger - Net cash provided by operating activities decreased to $1.48 billion for the first six months of 2024 from $2.10 billion in the prior year period, mainly due to lower cash operating revenues and working capital changes254 Capital Expenditures (Six Months Ended June 30) | Category | 2024 ($ millions) | 2023 ($ millions) | | :--- | :--- | :--- | | Reserve development | $912 | $792 | | Land and lease | $68 | $60 | | Total cash capital expenditures | $1,093 | $982 | - Following the Equitrans Midstream Merger, estimated total capital expenditures are $620-$720 million for Q3 2024 and $580-$680 million for Q4 2024223 - On July 16, 2024, the Board of Directors declared a quarterly cash dividend of $0.1575 per share228 Item 3. Quantitative and Qualitative Disclosures About Market Risk EQT manages primary market risks from natural gas and NGL price volatility through derivative hedging, also addressing interest rate and counterparty credit risks - The company's main market risk exposure is the volatility of natural gas and NGL prices, which it manages through a hedging program using derivative instruments like swaps and options297268 - A hypothetical 10% decrease in the NYMEX natural gas price as of June 30, 2024, would increase the fair value of the company's natural gas derivative instruments by approximately $537 million271 - A 1% increase in interest rates on variable-rate debt (revolving credit facility and Term Loan Facility) during the first six months of 2024 would have increased interest expense by approximately $3.0 million302 Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during Q2 2024 - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report (June 30, 2024)307 - No changes in internal control over financial reporting occurred during Q2 2024 that have materially affected, or are reasonably likely to materially affect, internal controls308 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reports no material updates to legal proceedings previously disclosed in its 2023 Annual Report on Form 10-K - There are no material updates to the legal proceedings disclosed in the company's 2023 Form 10-K309 Item 1A. Risk Factors New risks associated with the Equitrans Midstream Merger include potential failure to realize anticipated benefits, operational disruption, and higher-than-expected integration costs - The company may not achieve the anticipated benefits of the Equitrans Midstream Merger, which could disrupt current plans and operations281311 - The company expects to continue incurring significant, and potentially higher than anticipated, non-recurring transaction and integration costs related to the Equitrans Midstream Merger282320 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No equity securities were repurchased in Q2 2024, with approximately $1.4 billion remaining under the $2 billion share repurchase program expiring December 31, 2024 - No equity securities were repurchased during the second quarter of 2024283 - As of June 30, 2024, approximately $1.4 billion remains available for purchase under the company's $2 billion share repurchase program, which is set to expire on December 31, 2024321 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, gas gathering agreements, and officer certifications