EQT Reports Third Quarter 2019 Results and Preliminary 2020 Outlook
Transformation underway: modern, technology-driven, efficient and value-focused
PITTSBURGH–(BUSINESS WIRE)–EQT Corporation (NYSE: EQT) today announced financial and operational performance results for the third quarter 2019 and preliminary financial and operational guidance for 2020.
Third Quarter Highlights:
- Achieved sales volumes of 381 Bcfe or 4.14 Bcfe/d
- Received an average realized price of $2.47 per Mcfe
- Capital expenditures of $475 million; full-year 2019 guidance reduced by $115 million, while maintaining full-year production guidance
- Executed an asset exchange transaction for 16,000 net mineral acres in West Virginia, solidifying core position for future large-scale development
- Step change in Marcellus horizontal drilling performance, improving rate of penetration by 50% over the second quarter of 2019
100-Day Plan Highlights:
- Hired all evolution leaders, adding proven leadership to the organization
- Migrated the workforce into a simplified organizational structure to enhance accountability
- Streamlined the organization, reducing overhead costs by approximately $65 million per year
- Successfully implemented digital work environment to align workforce with operational targets
- Standardized well designs across entire leasehold position to increase development consistency
- Established stable operations schedule through year-end 2020 to drive efficiencies
2020 Plan Highlights1:
- Sales volumes of 1,450 – 1,500 Bcfe, roughly flat to 2019 expected sales volumes
- Capital expenditures of $1.30 – $1.40 billion, a $525 million year-over-year reduction, compared to prior 2019 guidance2
- Adjusted free cash flow (a non-GAAP measure)3 of $200 – $300 million; 7-11% free cash flow yield (a non-GAAP measure)3,4
- Expect to reduce well costs, overhead, land and other capital expenditures by 25% relative to legacy costs
- Executing large-scale combo development: 50% of wells turned-in-line and 80% of wells spud
- Committed to reducing debt by at least $1.5 billion by mid-year
- 87% of 2020 gas production hedged at a weighted average floor price of $2.71 per Dth
President and CEO Toby Rice stated: “We are on track to transform EQT into a modern, digitally-enabled, efficient and values-driven natural gas producer. Over the past 100 days, our actions have been focused on delivering the foundational elements necessary for EQT’s transition toward efficiently executing large-scale development projects across our sizable undeveloped core inventory. The team has made significant progress, and the execution of our planned initiatives is expected to reduce capital expenditures by approximately $525 million in 2020, as compared to prior full-year 2019 guidance.”
Rice continued, “As such, I am pleased to share that our preliminary 2020 forecast will generate between $200 and $300 million of adjusted free cash flow, which highlights the durability of our business at cyclically low natural gas prices. Further, we are committed to allocating our capital responsibly and effectively, with the intent to reduce absolute debt by at least $1.5 billion by mid-year 2020 to maintain Investment Grade metrics.”
|
(1) Further detail is provided in our Investor Presentation, available on our website. |
THIRD QUARTER 2019 FINANCIAL AND OPERATIONAL PERFORMANCE
|
|
Three Months Ended |
|
|
|
% |
||||||||||
|
($ millions, except EPS) |
2019 |
|
2018 |
|
Change |
|
Change |
||||||||
|
Total sales volume (Bcfe) |
381 |
|
|
374 |
|
|
7 |
|
|
2 |
% |
||||
|
Loss from continuing operations |
$ |
(361 |
) |
|
$ |
(127 |
) |
|
$ |
(234 |
) |
|
(184 |
)% |
|
|
Adjusted net (loss) income from continuing operations (a non-GAAP measure) |
$ |
(14 |
) |
|
$ |
42 |
|
|
$ |
(56 |
) |
|
(133 |
)% |
|
|
Adjusted EBITDA from continuing operations (a non-GAAP measure) |
$ |
444 |
|
|
$ |
524 |
|
|
$ |
(80 |
) |
|
(15 |
)% |
|
|
Diluted earnings per share (EPS) from continuing operations |
$ |
(1.41 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.92 |
) |
|
(188 |
)% |
|
|
Adjusted EPS from continuing operations (a non-GAAP measure) |
$ |
(0.06 |
) |
|
$ |
0.16 |
|
|
$ |
(0.22 |
) |
|
(138 |
)% |
|
|
Net cash provided by operating activities |
$ |
319 |
|
|
$ |
904 |
|
|
$ |
(585 |
) |
|
(65 |
)% |
|
|
Adjusted free cash flow (a non-GAAP measure) |
$ |
(178 |
) |
|
$ |
(300 |
) |
|
$ |
122 |
|
|
41 |
% |
|
In the third quarter 2019, the Company reported a loss from continuing operations of $361 million, or $1.41 per diluted share, compared to a loss from continuing operations for the same period 2018 of $127 million, or a loss of $0.49 per diluted share. The increase in the reported loss was attributable primarily to the unrealized loss on the investment in Equitrans Midstream Corporation (Equitrans Midstream), lower operating revenues and higher proxy, transaction and reorganization and other selling, general and administrative (SG&A) costs, partly offset by lower impairment costs as a result of the Company’s divestitures of its Permian and Huron assets in 2018 (the 2018 Divestitures).
Compared to the same quarter last year, average realized price was 11% lower at $2.47 per Mcfe, due primarily to lower NYMEX prices and liquids sales, partly offset by cash settled derivatives and favorable average differential.
Net cash provided by operating activities decreased by 65% and adjusted free cash flow increased 41%. Adjusted free cash flow for the third quarter 2019 of $(178) million includes the impact of an increase in the royalty and litigation reserve of $37 million and $77 million of proxy, transaction and reorganization costs.
|
|
Nine Months Ended |
|
|
|
% |
||||||||||
|
($ millions, except EPS) |
2019 |
|
2018 |
|
Change |
|
Change |
||||||||
|
Total sales volume (Bcfe) |
1,134 |
|
|
1,094 |
|
|
40 |
|
|
4 |
% |
||||
|
Loss from continuing operations |
$ |
(45 |
) |
|
$ |
(1,783 |
) |
|
$ |
1,738 |
|
|
97 |
% |
|
|
Adjusted net income from continuing operations (a non-GAAP measure) |
$ |
220 |
|
|
$ |
254 |
|
|
$ |
(34 |
) |
|
(13 |
)% |
|
|
Adjusted EBITDA from continuing operations (a non-GAAP measure) |
$ |
1,615 |
|
|
$ |
1,708 |
|
|
$ |
(93 |
) |
|
(5 |
)% |
|
|
Diluted EPS from continuing operations |
$ |
(0.18 |
) |
|
$ |
(6.79 |
) |
|
$ |
6.61 |
|
|
97 |
% |
|
|
Adjusted EPS from continuing operations (a non-GAAP measure) |
$ |
0.86 |
|
|
$ |
0.96 |
|
|
$ |
(0.10 |
) |
|
(10 |
)% |
|
|
Net cash provided by operating activities |
$ |
1,634 |
|
|
$ |
2,445 |
|
|
$ |
(811 |
) |
|
(33 |
)% |
|
|
Adjusted free cash flow (a non-GAAP measure) |
$ |
(88 |
) |
|
$ |
(397 |
) |
|
$ |
309 |
|
|
78 |
% |
|
During the nine months ended September 30, 2019, the Company reported a loss from continuing operations of $45 million, or $0.18 per diluted share, compared to a loss from continuing operations for the same period 2018 of $1.8 billion, or $6.79 per diluted share. The decrease in the reported loss was attributable primarily to lower impairment costs as a result of the 2018 Divestitures, higher operating revenues and dividends received on the investment in Equitrans Midstream, partly offset by decreased income tax benefit, the unrealized loss on investment in Equitrans Midstream and increased proxy, transaction and reorganization and other SG&A costs.
Compared to the same period last year, average realized price was 7% lower at $2.74 per Mcfe, due primarily to lower NYMEX and liquids prices and, as a result of the 2018 Divestitures, lower liquids volumes and Btu uplift, partly offset by cash settled derivatives and favorable average differential. Excluding sales volumes related to the 2018 Divestitures, sales volumes of natural gas, oil and NGLs increased 8% in 2019.
Net cash provided by operating activities decreased by 33% and adjusted free cash flow increased 78%. Adjusted free cash flow for the nine months ended September 30, 2019 of $(88) million includes the impact of an increase in the royalty and litigation reserve of $82 million and $102 million of proxy, transaction and reorganization costs.
The Non-GAAP Disclosures section of this news release provides reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures, as well as important disclosures regarding certain projected non-GAAP financial measures.
Capital Expenditures
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
(millions) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||
|
Reserve development |
$ |
380 |
|
|
$ |
731 |
|
|
$ |
1,155 |
|
|
$ |
1,824 |
|
|
|
Land and lease |
49 |
|
|
61 |
|
|
144 |
|
|
164 |
|
|||||
|
Capitalized overhead |
18 |
|
|
36 |
|
|
59 |
|
|
101 |
|
|||||
|
Capitalized interest |
6 |
|
|
7 |
|
|
19 |
|
|
23 |
|
|||||
|
Other production infrastructure |
17 |
|
|
13 |
|
|
28 |
|
|
39 |
|
|||||
|
Property acquisitions |
2 |
|
|
5 |
|
|
8 |
|
|
24 |
|
|||||
|
Other corporate items |
3 |
|
|
2 |
|
|
4 |
|
|
6 |
|
|||||
|
Total capital expenditures attributable to continuing operations |
$ |
475 |
|
|
$ |
855 |
|
|
$ |
1,417 |
|
|
$ |
2,181 |
|
|
Operating Expenses Per Unit
The following presents certain of the Company’s operating expenses on a per unit basis.
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
($/Mcfe) |
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||
|
Gathering |
$ |
0.55 |
|
|
$ |
0.53 |
|
|
$ |
0.55 |
|
|
$ |
0.54 |
|
|
|
Transmission |
0.52 |
|
|
0.49 |
|
|
0.52 |
|
|
0.50 |
|
|||||
|
Processing |
0.08 |
|
|
0.10 |
|
|
0.08 |
|
|
0.12 |
|
|||||
|
LOE, excluding production taxes |
0.06 |
|
|
0.06 |
|
|
0.06 |
|
|
0.08 |
|
|||||
|
Production taxes |
0.04 |
|
|
0.06 |
|
|
0.05 |
|
|
0.06 |
|
|||||
|
Exploration |
0.01 |
|
|
0.01 |
|
|
0.01 |
|
|
0.01 |
|
|||||
|
SG&A |
0.21 |
|
|
0.14 |
|
|
0.19 |
|
|
0.14 |
|
|||||
|
Total selected operating costs per unit |
$ |
1.47 |
|
|
$ |
1.39 |
|
|
$ |
1.46 |
|
|
$ |
1.45 |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
Production depletion |
$ |
1.02 |
|
|
$ |
1.03 |
|
|
$ |
1.01 |
|
|
$ |
1.03 |
|
|
|
Adjusted SG&A per unit (a non-GAAP measure) |
$ |
0.11 |
|
|
$ |
0.10 |
|
|
$ |
0.12 |
|
|
$ |
0.10 |
|
|
During the nine months ended September 30, 2019, per Mcfe processing expense, lease operating expense (LOE) and production taxes were lower due to the 2018 Divestitures. Excluding the sales volumes related to the 2018 Divestitures, gathering expense per Mcfe was $0.56 during the nine months ended September 30, 2018. SG&A expense per Mcfe during the three and nine months ended September 30, 2019 was higher than the three and nine months ended September 30, 2018 as a result of $37 million and $82 million of royalty and litigation reserves, respectively.
Liquidity
As of September 30, 2019, the Company had credit facility borrowings of $161 million and no letters of credit outstanding under its $2.5 billion credit facility and $1 billion in borrowings under its unsecured term loan facility. Net debt (a non-GAAP measure) was $5,152 million as of September 30, 2019 compared to $5,494 million as of December 31, 2018.
OPERATED WELL STATISTICS
Net Wells Drilled (spud)
|
|
PA Marcellus |
|
WV Marcellus |
|
Ohio Utica |
|
|
Q3 2019 |
20 |
|
– |
|
8 |
|
|
Q4 2019 Forecast |
23 |
|
– |
|
– |
- Q3 2019 average lateral lengths: PA Marcellus 12,200′; Ohio Utica 10,400′
- Q4 2019 forecasted average lateral lengths: PA Marcellus 10,800′
Net Wells Turned-in-line (TIL)
|
|
PA Marcellus |
|
WV Marcellus |
|
Ohio Utica |
|
|
Q3 2019 |
27 |
|
– |
|
4 |
|
|
Q4 2019 Forecast |
27 |
|
– |
|
1 |
- Q3 2019 average lateral lengths: PA Marcellus 9,100′; Ohio Utica 13,600′
- Q4 2019 forecasted average lateral lengths: PA Marcellus 9,500′; Ohio Utica 11,400′
Operational Update
EQT has undergone a significant operational transformation during the third quarter. New leadership was added to the organization to drive cultural change, implement the digital work environment, establish a stable master operations schedule and execute a proven well design. These initiatives have driven enhanced operational performance and efficiencies during the quarter, while maintaining industry leading safety and regulatory protocols.
During the quarter, EQT horizontally drilled 15 Marcellus wells in Pennsylvania with an average lateral length of 12,820′, four Marcellus wells in West Virginia with an average lateral length of 7,100′, and three Utica wells in Ohio with an average lateral length of 8,650′. With a fresh perspective from a new management team, drilling speeds improved by 50% in the Marcellus and 20% in the Utica, as compared to the prior quarter. EQT is currently running three horizontal rigs and plans to remain at that level through the end of the year.
The Company also completed 27 Marcellus wells in Pennsylvania with an average lateral length of 11,300′ and four Utica wells in Ohio with an average lateral length of 11,340′. Water usage for the period was composed of 75% fresh water and 25% recycled produced water. EQT is currently running 3 frac crews and plans to remain at that level through the end of the year.
With the establishment of a stable operations schedule and improved visibility into future development, EQT is rebuilding its procurement management tools to better align with future development planning and end-state well cost targets. The Company also is renegotiating key service contracts and anticipates executing new agreements in the current favorable service cost environment.
Additionally, EQT executed an acreage exchange transaction in West Virginia for 16,000 net mineral acres with another large-scale operator. The transaction significantly enhances the continuity of EQT’s Wetzel and Marion County acreage position. Ultimately, this strategic trade will drive longer lateral lengths and ready this core acreage position for future combo development. As a result of this transaction, the Company placed a 25-well combo development run on the operations schedule in 2021, planned to develop approximately 315,000 horizontal feet. This project is a first-of-its-kind for EQT in West Virginia and is expected to deliver production and well costs in-line with the Company’s core Greene County Pennsylvania assets.
HEDGING (as of October 25, 2019)
During the third quarter of 2019, the Company terminated certain over the counter hedge positions related to years 2021 and onward. The value associated with these terminated positions was rolled into new hedge positions with the same counterparties for 2020. No cash was exchanged related to these terminations or the associated execution of new hedge positions.
The Company’s total natural gas production NYMEX hedge positions through 2023 are:
|
|
|
2019 (a) |
|
2020 |
|
2021 |
|
2022 |
|
2023 |
||||||||||
|
Swaps |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Volume (MMDth) |
|
272 |
|
|
1,096 |
|
|
166 |
|
|
3 |
|
|
2 |
|
|||||
|
Average Price ($/Dth) |
|
$ |
2.80 |
|
|
$ |
2.75 |
|
|
$ |
2.42 |
|
|
$ |
2.72 |
|
|
$ |
2.67 |
|
|
Calls – Net Short |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Volume (MMDth) |
|
61 |
|
|
392 |
|
|
209 |
|
|
157 |
|
|
77 |
|
|||||
|
Average Short Strike Price ($/Dth) |
|
$ |
3.02 |
|
|
$ |
2.99 |
|
|
$ |
2.82 |
|
|
$ |
2.79 |
|
|
$ |
2.96 |
|
|
Puts – Net Long |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Volume (MMDth) |
|
8 |
|
|
154 |
|
|
157 |
|
|
135 |
|
|
69 |
|
|||||
|
Average Long Strike Price ($/Dth) |
|
$ |
2.67 |
|
|
$ |
2.38 |
|
|
$ |
2.38 |
|
|
$ |
2.35 |
|
|
$ |
2.40 |
|
|
Fixed Price Sales (b) |
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Volume (MMDth) |
|
27 |
|
|
14 |
|
|
7 |
|
|
— |
|
|
— |
|
|||||
|
Average Price ($/Dth) |
|
$ |
2.81 |
|
|
$ |
2.78 |
|
|
$ |
2.57 |
|
|
$ |
— |
|
|
$ |
— |
|
|
(a) |
October 1 – December 31, 2019. |
|
|
(b) |
The difference between the fixed price and NYMEX is included in average differential on the Company’s price reconciliation. |
Third Quarter 2019 Earnings Conference Call Information
The Company’s third quarter earnings conference call begins at 10:30 a.m. ET today and will be broadcast live via investor information page of the Company’s website at ir.eqt.com, with a replay available for seven days following the call.
2019 GUIDANCE
See the Non-GAAP Disclosures section for important information regarding the non-GAAP financial measures included in this news release, including reasons why the Company is unable to provide a projection of its 2019 net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP, to projected adjusted operating cash flow and adjusted free cash flow, a projection of its 2019 net income, the most comparable financial measure calculated in accordance with GAAP, to projected adjusted EBITDA, or a projection of its 2019 SG&A, the most comparable financial measure calculated in accordance with GAAP, to projected adjusted SG&A per unit.
|
Production |
|
Q4 2019 |
|
Full-Year 2019 |
|
Total sales volume (Bcfe) |
|
355 – 375 |
|
1,490 – 1,510 |
|
Liquids sales volume, excluding ethane (Mbbls) |
|
1,795 – 1,895 |
|
8,165 – 8,265 |
|
Ethane sales volume (Mbbls) |
|
1,045 – 1,145 |
|
4,085 – 4,185 |
|
Total liquids sales volume (Mbbls) |
|
2,840 – 3,040 |
|
12,250 – 12,450 |
|
|
|
|
|
|
|
Btu uplift (MMbtu / Mcf) |
|
|
|
1.04 – 1.05 |
|
|
|
|
|
|
|
Resource Counts |
|
Q4 2019 |
|
|
|
Top-hole Rigs |
|
1 – 2 |
|
|
|
Marcellus / Utica HZ Rigs |
|
3 – 4 |
|
|
|
Frac Crews |
|
3 – 4 |
|
|
|
|
|
|
|
|
|
Unit Costs ($ / Mcfe) |
|
|
|
Full-Year 2019 |
|
Gathering |
|
|
|
$0.54 – 0.56 |
|
Transmission |
|
|
|
$0.51 – 0.53 |
|
Processing |
|
|
|
$0.08 – 0.10 |
|
LOE, excluding production taxes |
|
|
|
$0.05 – 0.07 |
|
Production taxes |
|
|
|
$0.04 – 0.06 |
|
Adjusted SG&A (a non-GAAP measure) |
|
|
|
$0.11 – 0.13 |
|
|
|
|
|
|
|
Average differential ($ / Mcf) |
|
$(0.45) – (0.25) |
|
$(0.35) – (0.25) |
|
|
|
|
|
|
|
($ Billions) |
|
|
|
Full-Year 2019 |
|
Adjusted EBITDA (a non-GAAP measure) |
|
|
|
$2.025 – 2.075 |
|
Adjusted operating cash flow (a non-GAAP measure) |
|
|
|
$1.770 – 1.820 |
|
Capital expenditures |
|
|
|
$1.735 – 1.785 |
|
Adjusted free cash flow (a non-GAAP measure) |
|
|
|
$0.010 – 0.060 |
Based on average NYMEX natural gas price (October to December) of $2.42 per MMbtu as of September 30, 2019.
NON-GAAP DISCLOSURES
Adjusted Net (Loss) Income from Continuing Operations and Adjusted Earnings per Diluted Share (Adjusted EPS) from Continuing Operations
Adjusted net (loss) income from continuing operations and adjusted EPS from continuing operations are non-GAAP supplemental financial measures that are presented because they are important measures used by the Company’s management to evaluate period-to-period comparisons of earnings trends. Adjusted net (loss) income from continuing operations and adjusted EPS from continuing operations should not be considered as alternatives to loss from continuing operations or diluted EPS from continuing operations presented in accordance with GAAP. Adjusted net (loss) income from continuing operations as presented excludes the revenue impact of changes in the fair value of derivative instruments prior to settlement, impairment/loss on the sale/exchange of long-lived assets, impairment of intangible assets, lease impairments and expirations, proxy, transaction and reorganization costs and certain other items that impact comparability between periods. Management utilizes adjusted net (loss) income from continuing operations to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts; thus, the income from natural gas sales is not impacted by the often-volatile fluctuations in the fair value of derivatives prior to settlement. The measure also excludes other items that affect the comparability of results or that are not indicative of trends in the ongoing business. Management believes that adjusted net (loss) income from continuing operations as presented provides useful information for investors for evaluating period-over-period earnings.
The table below reconciles adjusted net (loss) income from continuing operations and adjusted EPS from continuing operations with loss from continuing operations and diluted EPS from continuing operations, respectively, the most comparable financial measures calculated in accordance with GAAP, each as derived from the Statements of Condensed Consolidated Operations to be included in the Company’s report on Form 10-Q for the quarter ended September 30, 2019.
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||
|
|
(Thousands, except per share information) |
|||||||||||||||
|
Loss from continuing operations |
$ |
(361,028 |
) |
|
$ |
(127,347 |
) |
|
$ |
(44,771 |
) |
|
$ |
(1,782,858 |
) |
|
|
Add back / (deduct): |
|
|
|
|
|
|
|
|||||||||
|
Impairment/loss on sale/exchange of long-lived assets |
13,935 |
|
|
259,279 |
|
|
13,935 |
|
|
2,706,438 |
|
|||||
|
Impairment of intangible assets |
15,411 |
|
|
— |
|
|
15,411 |
|
|
— |
|
|||||
|
Lease impairments and expirations |
49,601 |
|
|
12,176 |
|
|
127,719 |
|
|
35,584 |
|
|||||
|
Proxy, transaction and reorganization |
76,779 |
|
|
8,792 |
|
|
102,386 |
|
|
23,930 |
|
|||||
|
(Gain) loss on derivatives not designated as hedges |
(180,313 |
) |
|
3,075 |
|
|
(455,952 |
) |
|
(5,620 |
) |
|||||
|
Net cash settlements received (paid) on derivatives not designated as hedges |
162,639 |
|
|
(14,285 |
) |
|
152,149 |
|
|
(27,401 |
) |
|||||
|
Premiums received (paid) for derivatives that settled during the period |
9,405 |
|
|
(18 |
) |
|
16,611 |
|
|
453 |
|
|||||
|
Royalty and litigation reserves |
36,609 |
|
|
— |
|
|
82,395 |
|
|
— |
|
|||||
|
Unrealized loss on investment in Equitrans Midstream Corporation |
261,093 |
|
|
— |
|
|
276,779 |
|
|
— |
|
|||||
|
Tax impact of non-GAAP items (a) |
(98,480 |
) |
|
(100,172 |
) |
|
(67,141 |
) |
|
(696,900 |
) |
|||||
|
Adjusted net (loss) income from continuing operations |
$ |
(14,349 |
) |
|
$ |
41,500 |
|
|
$ |
219,521 |
|
|
$ |
253,626 |
|
|
|
Diluted weighted average common shares outstanding |
255,235 |
|
|
259,689 |
|
|
255,269 |
|
|
262,998 |
|
|||||
|
Diluted EPS from continuing operations |
$ |
(1.41 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.18 |
) |
|
$ |
(6.79 |
) |
|
|
Adjusted EPS from continuing operations |
$ |
(0.06 |
) |
|
$ |
0.16 |
|
|
$ |
0.86 |
|
|
$ |
0.96 |
|
|
|
(a) |
The tax impact of non-GAAP items represents the incremental tax expense that would have been incurred had these items been excluded from loss from continuing operations, which resulted in blended tax rates of 22.1% and 37.2% for the three months ended September 30, 2019 and 2018, respectively, and 20.3% and 25.5% for the nine months ended September 30, 2019 and 2018, respectively. These rates differ from the Company’s statutory tax rate due primarily to the impact of items specific to each respective quarter. In addition, the tax benefit that may be recorded in any quarter is limited to the amount of benefit expected for the entire year. |
Adjusted EBITDA
Adjusted EBITDA is defined as loss from continuing operations, plus interest expense, income tax benefit, depreciation and depletion, amortization of intangible assets, impairment/loss on the sale/exchange of long-lived assets, impairment of intangible assets, lease impairments and expirations, proxy, transaction and reorganization costs, the revenue impact of changes in the fair value of derivative instruments prior to settlement and certain other items that impact comparability between periods. Adjusted EBITDA is a non-GAAP supplemental financial measure that management and external users of the Company’s consolidated financial statements, such as industry analysts, lenders and ratings agencies use to assess the Company’s earnings trends. The Company believes that adjusted EBITDA is an important measure used by the Company’s management and investors in evaluating period-over-period comparisons of earnings trends. Adjusted EBITDA should not be considered as an alternative to the Company’s net income presented in accordance with GAAP. Adjusted EBITDA excludes the revenue impact of changes in the fair value of derivative instruments prior to settlement and other items that affect the comparability of results and are not trends in the ongoing business. Management utilizes adjusted EBITDA to evaluate earnings trends because the measure reflects only the impact of settled derivative contracts and thus the income from natural gas is not impacted by the often-volatile fluctuations in fair value of derivatives prior to settlement.
The table below reconciles adjusted EBITDA with loss from continuing operations, the most comparable financial measure as calculated in accordance with GAAP, as reported in the Statements of Condensed Consolidated Operations to be included in the Company’s report on Form 10-Q for the quarter ended September 30, 2019.
|
|
Three Months Ended |
|
Nine Months Ended |
|||||||||||||
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|||||||||
|
|
(Thousands) |
|||||||||||||||
|
Loss from continuing operations |
$ |
(361,028 |
) |
|
$ |
(127,347 |
) |
|
$ |
(44,771 |
) |
|
$ |
(1,782,858 |
) |
|
|
Add back / (deduct): |
|
|
|
|
|
|
|
|||||||||
|
Interest expense |
47,709 |
|
|
56,180 |
|
|
154,785 |
|
|
171,211 |
|
|||||
|
Income tax benefit |
(86,343 |
) |
|
(71,961 |
) |
|
(9,244 |
) |
|
(596,723 |
) |
|||||
|
Depreciation and depletion |
390,993 |
|
|
388,016 |
|
|
1,154,519 |
|
|
1,152,418 |
|
|||||
|
Amortization of intangible assets |
7,755 |
|
|
10,341 |
|
|
28,439 |
|
|
31,025 |
|
|||||
|
Impairment/loss on sale/exchange of long-lived assets |
13,935 |
|
|
259,279 |
|
|
13,935 |
|
|
2,706,438 |
|
|||||
|
Impairment of intangible assets |
15,411 |
|
|
— |
|
|
15,411 |
|
|
— |
|
|||||
|
Lease impairments and expirations |
49,601 |
|
|
12,176 |
|
|
127,719 |
|
|
35,584 |
|
|||||
|
Proxy, transaction and reorganization |
76,779 |
|
|
8,792 |
|
|
102,386 |
|
|
23,930 |
|
|||||
|
(Gain) loss on derivatives not designated as hedges |
(180,313 |
) |
|
3,075 |
|
|
(455,952 |
) |
|
(5,620 |
) |
|||||
|
Net cash settlements received (paid) on derivatives not designated as hedges |
162,639 |
|
|
(14,285 |
) |
|
152,149 |
|
|
(27,401 |
) |
|||||
|
Premiums received (paid) for derivatives that settled during the period |
9,405 |
|
|
(18 |
) |
|
16,611 |
|
|
453 |
|
|||||
|
Royalty and litigation reserves |
36,609 |
|
|
— |
|
|
82,395 |
|
|
— |
|
|||||
|
Unrealized loss on investment in Equitrans Midstream Corporation |
261,093 |
|
|
— |
|
|
276,779 |
|
|
— |
|
|||||
|
Adjusted EBITDA from continuing operations |
$ |
444,245 |
|
|
$ |
524,248 |
|
|
$ |
1,615,161 |
|
|
$ |
1,708,457 |
|
|
Contacts
Analyst inquiries please contact:
Andrew Breese
[email protected]
412.395.2555
Media inquiries please contact:
Mike Laffin
[email protected]
412.395.2069
