Equitable Resources Announces 2006 Annual Earnings of $1.80 per Share1 February 2007
Equitable Resources, Inc. (NYSE: EQT) today announced 2006 annual earnings per diluted share (EPS) of $1.80 on net income of $220.3 million. This compares with EPS of $2.10 on net income of $260.1 million in 2005. Several non-operational factors, discussed below, should be considered when comparing 2006 and 2005 results, including a $110.3 million gain on the sale of Kerr-McGee Corporation (KMG) shares in 2005.
RESULTS BY SEGMENT
Equitable Utilities
Equitable Utilities had operating income of $125.2 million for 2006, compared with $98.3 million for 2005, a 27% increase. Net revenues increased $21.6 million or 9% over the previous year. Distribution net revenues were 9% lower as a result of record warm weather, which was 10% warmer than in 2005 and 15% warmer than the 30-year normal, as measured in heating degree-days. Pipeline net revenues increased $18.8 million or 35% over the prior year resulting from revenue associated with the rate case settlement in the first quarter and higher gathering activity. Marketing net revenues were $16.4 million higher than in 2005, benefiting from favorable storage asset optimization opportunities.
Total operating expenses for 2006 were 3% lower at $149.8 million, compared to $155.1 million in 2005. Expenses planning for the acquisition of Peoples Gas and Hope Gas totaled $12.3 million in 2006. Excluding these costs, lower pension-related expenses, lower bad debt expense and the partial reversal of a 2005 lease impairment were partially offset by higher pipeline expenses primarily associated with deferred rate-related costs and higher gathering expenses.
Operating income for the 2006 fourth quarter was $46.4 million, 23% higher than the $37.7 million earned in the year ago quarter. Net revenues were $90.7 million, $14.8 million higher than fourth quarter 2005 revenues of $75.9 million. Higher marketing and pipeline net revenues more than offset lower distribution net revenues resulting from warmer weather. Operating expenses in the quarter increased $6.2 million, to $44.4 million in 2006. The majority of that increase was due to $5.9 million spent in planning for the acquisition of Peoples Gas and Hope Gas.
Equitable Supply
Equitable Supply had operating income of $269.2 million in 2006, 8% lower than the $293.6 million in 2005. Total revenues for 2006 were $488.6 million, essentially flat in comparison with 2005 revenues. Lower commodity prices offset increased revenues from higher gathering rates and higher production sales volumes. Average well-head sales price declined 7% from $5.17 to $4.83 per Mcfe. Production sales volumes increased by 2.3 Bcfe to 76.2 Bcfe. Excluding 1.5 Bcfe from wells sold in May 2005, sales volumes increased by slightly over 5%. Higher gathering revenues were driven by a 24% increase in average gathering rates, partially offset by lower throughput resulting from volumes now reported at Utilities and volumes from properties sold in 2005.
Operating expenses increased from $195.6 million in 2005 to $219.4 million in 2006. Selling, general and administrative expenses were $9.2 million higher as the Company recorded reserves for a royalty dispute in West Virginia and bad debt costs totaling $9.9 million. Gathering and compression expense and depreciation, depletion and amortization expense were also higher, consistent with higher overall operating activity levels. Gathering and compression expense also included $3.3 million of pension and other post retirement benefits charges, in the fourth quarter, for an early retirement program.
Operating income for the 2006 fourth quarter totaled $68.5 million, $16.7 million lower than the $85.2 million of operating income in the fourth quarter 2005. Significantly lower commodity prices more than offset increased sales volumes. Operating expenses totaled $57.3 million, $6.0 million higher than last year. The factors driving increased costs for the full year also apply to the fourth quarter results; partially offsetting these increases were lower production taxes resulting from lower natural gas prices.
During 2006, the Company drilled 560 gross operated wells, including 5 horizontal wells, and 95 non-operated wells. The Company expects to drill approximately 650 gross operated wells in 2007, including at least 25 horizontal wells, a 16% increase. Sales volumes are estimated to be between 80 and 81 Bcfe in 2007.
Other Business
2006 Capital Expenditures
Equitable invested $405 million in capital projects during 2006. This included $200 million for well development, $137 million for Supply infrastructure, $65 million for Equitable Utilities, and $3 million for Headquarters.
2007 Capital Budget
Equitable forecasts $588 million of capital commitments for 2007. This forecast includes $237 million for well development, $256 million for Supply infrastructure, $92 million for Equitable Utilities and $3 million for Headquarters.
Hedging
There was no change to the Company's hedge position during the quarter. The approximate volumes and prices of Equitable's hedges for 2007 through 2009 are:
Swaps 2007 2008 2009
Total Volume (Bcf) 56 54 38
Average Price per Mcf (NYMEX)* $4.74 $4.64 $5.90
Collars 2007 2008 2009
Total Volume (Bcf) 10 10 10
Average Floor Price per Mcf (NYMEX)* $7.61 $7.61 $7.61
Average Cap Price per Mcf (NYMEX)* $11.27 $11.27 $11.27
* The above price is based on a conversion rate of 1.05 MMbtu/Mcf
Dividend
On January 24, 2007, the Board of Directors of Equitable Resources declared a regular quarterly cash dividend of 22 cents per share, payable March 1, 2007 to shareholders of record on February 9, 2007.
2005 Items
Kerr-McGee Corp.
In 2005, Equitable sold approximately 7 million KMG shares resulting in a net pre-tax gain of $110.3 million. These totals include 0.7 million shares sold in the fourth quarter for a gain of $30.0 million.
Executive Performance Incentive Programs
Executive Performance Incentive Program expenses were $5.4 million for the quarter and $21.1 million for the year and $13.9 million and $43.8 million, respectively, for 2005. There were two programs in effect during 2005 but only one program in 2006.
Tax
During 2005, the Company completed its review and implementation of the American Jobs Creation Act of 2004. The Company recognized a $15.3 million tax loss disallowance under Section 162(m) of the Internal Revenue Code of 1986.
Office Consolidation
In 2005, the Company completed its relocation to a new office building. The Company recognized a loss of $7.8 million in 2005 related to the move, of which $3.8 million was allocated to Utilities. Utilities reversed $2.4 million of the loss in the second quarter 2006 when it reutilized some of the vacated office space.
NORESCO
In December 2005, Equitable sold NORESCO for approximately $82 million. The sale resulted in reclassifying NORESCO as "discontinued operations." With amounts recorded net of tax, Equitable recorded income from discontinued operations in 2005 of $1.5 million. In the fourth quarter 2006, Equitable recorded income from discontinued operations of $4.3 million, primarily resulting from a reduced tax liability on the sale.
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 Year Ended
December 31, December 31,
2006 2005 2006 2005
Operating income (thousands):
Equitable Utilities $46,351 $37,672 $125,209 $98,254
Equitable Supply 68,508 85,157 269,164 293,581
Unallocated expenses (5,247) (14,361) (21,850) (48,023)
Operating Income $109,612 $108,468 $372,523 $343,812
Other segment financial measures identified in this press release are reconciled to the most comparable financial measures calculated in accordance with GAAP on the attached operational and financial reports.
Equitable's teleconference 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 replay for a seven day period.
Equitable Resources is an integrated energy company with emphasis on Appalachian area natural gas supply, transmission 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.
Forward-Looking Statements
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 programs and initiatives, infrastructure projects, production and sales volumes, capital expenditures, capital budget, the pending acquisition of The Peoples Natural Gas Company and Hope Gas, Inc. and the financing of that acquisition, and the Company's move to a holding company structure. A variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. 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 undertakes no obligation 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 Year Ended
December 31, December 31,
2006 2005 2006 2005
Operating revenues $353,783 $392,882 $1,267,910 $1,253,724
Cost of sales 137,244 180,565 504,329 511,169
Net operating revenues 216,539 212,317 763,581 742,555
Operating expenses:
Operation and maintenance 30,368 23,770 104,620 95,369
Production 15,308 16,960 63,273 61,483
Selling, general and
administrative 35,292 39,165 125,951 140,529
Office consolidation
impairment charges - - (2,908) 7,835
Depreciation, depletion and
amortization 25,959 23,954 100,122 93,527
Total operating expenses 106,927 103,849 391,058 398,743
Operating income 109,612 108,468 372,523 343,812
Gain on sale of available-for-
sale securities, net - 30,023 - 110,280
Equity in earnings of
nonconsolidated investments 140 349 260 762
Other income, net - - - 1,195
Interest expense 11,810 11,330 47,052 44,437
Income from continuing
operations before income
taxes 97,942 127,510 325,731 411,612
Income taxes 29,980 47,491 109,706 153,038
Income from continuing
operations 67,962 80,019 216,025 258,574
Income (loss) from
discontinued operations, net
of tax of ($3,246) for the
three months and year ended
December 31, 2006 and $5,029
and $10,485 for the three
months and year ended
December 31, 2005,
respectively 4,261 (7,180) 4,261 1,481
Net income $72,223 $72,839 $220,286 $260,055
Earnings per share of common
stock:
Basic:
Weighted average common shares
outstanding 120,629 120,392 120,124 121,099
Income from continuing
operations $0.56 $0.67 $1.79 $2.14
Income (loss) from
discontinued operations 0.04 (0.06) 0.04 0.01
Net income $0.60 $0.61 $1.83 $2.15
Diluted:
Weighted average common shares
outstanding 122,426 122,791 122,113 123,715
Income from continuing
operations $0.56 $0.65 $1.77 $2.09
Income (loss) from
discontinued operations 0.03 (0.06) 0.03 0.01
Net income $0.59 $0.59 $1.80 $2.10
(A) Due to the seasonal nature of the Company's natural gas distribution
and energy marketing business, and the volatility of gas and oil
commodity prices, the interim statements for the three month period are
not indicative of results for a full year.
EQUITABLE UTILITIES
OPERATIONAL AND FINANCIAL REPORT
(UNAUDITED)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
OPERATIONAL DATA
Heating degree days (30-year
average: Qtr - 2,070; YTD -
5,829) 1,750 2,078 4,976 5,543
Residential sales and
transportation volume (MMcf) 6,846 7,842 21,014 24,680
Commercial and industrial volume
(MMcf) 5,982 7,110 23,841 25,368
Total throughput (MMcf) -
Distribution 12,828 14,952 44,855 50,048
Net Operating revenues (thousands):
Distribution (regulated)
Residential $27,443 $29,686 $92,497 $102,457
Commercial & industrial 12,825 13,304 42,519 46,857
Other 2,628 1,508 8,319 7,544
Total distribution
operations 42,896 44,498 143,335 156,858
Pipeline (regulated) 18,272 16,492 72,586 53,767
Marketing 29,567 14,872 59,089 42,739
Total $90,735 $75,862 $275,010 $253,364
Operating expenses as a % of net
operating revenues 48.92% 50.34% 54.47% 61.22%
Operating income (thousands):
Distribution (regulated) $9,279 $17,424 $34,807 $40,322
Pipeline (regulated) 8,297 6,280 33,240 17,345
Marketing 28,775 13,968 57,162 40,587
Total $46,351 $37,672 $125,209 $98,254
Capital expenditures (thousands) $19,431 $21,066 $64,974 $61,349
FINANCIAL DATA (Thousands)
Distribution revenues (regulated) $122,535 $164,590 $445,168 $469,102
Pipeline revenues (regulated) 18,592 20,258 74,010 57,534
Marketing revenues 117,435 119,745 380,149 365,625
Less: intrasegment revenues (14,726) (8,820) (56,163) (45,804)
Total operating revenues 243,836 295,773 843,164 846,457
Purchased gas costs 153,101 219,911 568,154 593,093
Net operating revenues 90,735 75,862 275,010 253,364
Operating expenses:
Operating and maintenance 15,892 14,333 58,186 57,315
Selling, general and
administrative 21,241 16,357 65,280 66,080
Office consolidation impairment
charges - - (2,396) 3,841
Depreciation, depletion and
amortization 7,251 7,500 28,731 27,874
Total operating expenses 44,384 38,190 149,801 155,110
Operating income $46,351 $37,672 $125,209 $98,254
EQUITABLE SUPPLY
OPERATIONAL AND FINANCIAL REPORT
(UNAUDITED)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
OPERATIONAL DATA
Capital expenditures
(thousands) $131,350 $62,747 $336,748 $264,095
Production:
Total sales volumes
(MMcfe) 19,270 18,417 76,156 73,909
Average (well-head)
sales price ($/Mcfe) $4.88 $5.73 $4.83 $5.17
Company usage, line loss
(MMcfe) 1,286 1,216 5,215 4,897
Natural gas inventory
usage, net (MMcfe) - - - (51)
Natural gas and oil
production (MMcfe) 20,556 19,633 81,371 78,755
Lease operating expense
excluding production
taxes ($/Mcfe) $0.30 $0.24 $0.30 $0.29
Production taxes
($/Mcfe) $0.45 $0.62 $0.48 $0.49
Production depletion
($/Mcfe) $0.62 $0.58 $0.62 $0.59
Gathering:
Gathered volumes (MMcfe) 28,319 29,705 108,592 121,044
Average gathering fee
($/Mcfe) $1.04 $0.96 $1.02 $0.82
Gathering and
compression expense
($/Mcfe) $0.51 $0.32 $0.42 $0.31
Gathering and
compression
depreciation ($/Mcfe) $0.14 $0.13 $0.14 $0.12
(in thousands)
Production operating
income $59,492 $73,852 $231,849 $260,931
Gathering operating
income 9,016 11,305 37,315 32,650
Total $68,508 $85,157 $269,164 $293,581
Production depletion $12,711 $11,325 $50,330 $46,750
Gathering and
compression
depreciation 4,012 3,827 15,411 14,312
Other depreciation,
depletion and
amortization 1,700 1,104 4,759 3,835
Total depreciation,
depletion and
amortization $18,423 $16,256 $70,500 $64,897
FINANCIAL DATA
(Thousands)
Production revenues $96,485 $108,024 $377,626 $390,290
Gathering revenues 29,319 28,431 110,945 98,901
Total revenues 125,804 136,455 488,571 489,191
Operating expenses:
Lease operating expense
excluding production
taxes 6,077 4,695 24,620 23,195
Production taxes 9,231 12,265 38,653 38,288
Gathering and
compression 14,313 9,479 45,860 38,101
Selling, general and
administrative 9,252 8,603 39,774 30,610
Office consolidation
impairment charges - - - 519
Depreciation, depletion
and amortization 18,423 16,256 70,500 64,897
Total operating
expenses 57,296 51,298 219,407 195,610
Operating income $68,508 $85,157 $269,164 $293,581
Source: prnewswire
All trademarks and copyrighted information contained herein are the property of their respective owners.
|
