Exhibit 99.1
Contact: | | Patrick Kane |
| | (412) 553-7833 |
Equitable Resources Reports Earnings of $0.38 per Share
PITTSBURGH, October 27, 2005/ PRNewswire-FirstCall/ — Equitable Resources, Inc. (NYSE: EQT) today announced third quarter 2005 earnings of $0.38 per diluted share. This compares with diluted earnings of $0.28 per share in the third quarter 2004. In the quarter, the Company recognized a $19.4 million gain on the sale of approximately 0.4 million shares of Kerr-McGee Corporation (KMG) and a $12.7 million pension settlement expense.
Quarterly Results by Business
Equitable Utilities
Equitable Utilities had an operating loss for the third quarter of $7.5 million compared to $3.7 million of operating income reported for the same period last year. Net operating revenues for the three months ended September 30, 2005, were $36.2 million compared to $35.0 million for the same period last year. The $1.2 million increase in net operating revenues was primarily due to increased energy marketing revenues, partially offset by decreases in distribution and pipeline revenues.
Total operating expenses for the quarter were $43.6 million, $12.3 million higher than the $31.3 million reported during the same period last year. The increase in expenses primarily resulted from a $12.7 million charge related to the conversion of pension benefits for 182 represented employees from a defined benefit plan to a defined contribution plan. Excluding the $12.7 million pension charge, the $0.4 million decrease in operating costs was due to a $1.4 million decrease in selling, general, and administrative expense (SG&A), resulting from a reduction in bad debt expense, and a $0.5 million decrease in depreciation, depletion, and amortization expense (DD&A), partially offset by a $1.5 million increase in operations and maintenance expense (O&M).
Equitable Supply
Equitable Supply had operating income for the quarter of $79.9 million, 36% higher than the $58.9 million earned in the same period last year. Total operating revenues were $127.3 million, $28.6 million higher than the previous year’s total operating revenue of $98.7 million. The increase in total operating revenues was due primarily to a 23% increase in the average well-head sales price and a 10% increase in total sales volumes, which was mainly attributable to the purchase of Eastern Seven Partners (ESP) earlier this year. Total operating revenues were also positively impacted by a 33% increase in gathering revenues, which was due to a 40% increase in the average gathering rates, partially offset by a 5% decline in gathered volumes.
Operating expenses for the quarter were $47.4 million compared to $39.7 million last year. $4.0 million of the increase in operating expenses resulted from the costs of operating properties purchased from ESP. The remaining $3.7 million increase in operating expenses was primarily due to increases of $2.3 million in production taxes, $1.1 million in DD&A, and $0.6 million in SG&A.
NORESCO
NORESCO’s operating income for the third quarter 2005 was $3.3 million, $0.2 million less than the $3.5 million in the same period last year. Net operating revenues increased to $9.3 million from $9.0 million in 2004, while operating expenses increased to $6.0 million from $5.5 million in the third quarter
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2004. Additionally, NORESCO recognized $1.5 million in equity earnings from its Panamanian power plant investment. NORESCO’s quarter-end backlog was $39 million, compared to $93 million a year earlier.
Other Business
Kerr-McGee Corp.
In the third quarter 2005, Equitable sold approximately 0.4 million KMG shares for proceeds of $40.6 million, and a gain of $19.4 million.
In October, the Company sold its remaining approximately 0.7 million shares for proceeds of $65.6 million. A gain of $30.0 million will be recorded in the fourth quarter.
Executive Performance Incentive Programs
The Company’s executive performance incentive programs are designed to align management’s long-term incentive compensation to the absolute and relative returns earned by the Company’s shareholders. The significant stock appreciation during the second and third quarters contributed to an expense of $15.3 million in the quarter and $29.9 million year-to-date.
2005 Earnings Guidance
The Company is reiterating its 2005 earnings guidance adjusted to reflect the impact of the third and fourth quarter sales of Kerr-McGee shares and the third quarter pension-related expense. The Company expects to earn between $2.15 and $2.18 per share.
Hedging
During the third quarter, the Company increased its hedge position for 2005 through 2012. The new hedges are collars, which protect revenues from decreases in natural gas prices below a floor in exchange for upside exposure limited by the cap price. In addition to the new hedges, the Company has pre-existing swap contracts that set a specific sales price for the hedged natural gas. The approximate volumes and prices of Equitable’s hedges for the last quarter of 2005 through 2007 are:
| | 2005** | | 2006 | | 2007 | |
Swaps | | | | | | | |
Total Volume (Bcf) | | 15 | | 59 | | 56 | |
Average Price per Mcf (NYMEX)* | | $ | 4.89 | | $ | 4.77 | | $ | 4.74 | |
| | | | | | | | | | |
| | 2005** | | 2006 | | 2007 | |
Collars | | | | | | | |
Total Volume (Bcf) | | 2 | | 7 | | 7 | |
Average Floor Price per Mcf (NYMEX)* | | $ | 7.35 | | $ | 7.35 | | $ | 7.35 | |
Average Cap Price per Mcf (NYMEX)* | | $ | 10.84 | | $ | 10.84 | | $ | 10.84 | |
* The above price is based on a conversion rate of 1.05 MMbtu/Mcf
** October through December
Financing Activities
On August 11, 2005, the Company entered into a $650 million, 5-year revolving credit agreement, which is used to support the Company’s commercial paper program. This agreement replaces the Company’s previous $500 million, 3-year revolving credit agreement. The new facility has an expiration date of August 9, 2006, but the expiration date will automatically be extended to August 10, 2010, upon approval by the Pennsylvania Public Utility Commission (PUC). The facility’s size may be increased on a one-time basis up to $1 billion.
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On September 30, 2005, the Company issued $150 million of notes with a coupon rate of 5% and a maturity date of October 1, 2015, subject to PUC approval, which is required for long term debt issuances.
Stock Buyback
During the quarter, Equitable Resources repurchased nearly 0.9 million shares of Equitable stock. The total number of shares repurchased since October 1998 is approximately 41 million out of the current 50 million share repurchase authorization.
Operating Income and Earnings from Nonconsolidated Investments
The Company reports operating income and earnings (losses) from nonconsolidated investments 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
September 30, | | Nine Months Ended
September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
Operating income (thousands): | | | | | | | | | |
Equitable Utilities | | $ | (7,477 | ) | $ | 3,680 | | $ | 60,582 | | $ | 70,680 | |
Equitable Supply | | 79,901 | | 58,904 | | 208,424 | | 173,160 | |
NORESCO | | 3,285 | | 3,475 | | 9,881 | | 10,728 | |
Unallocated expenses | | (17,735 | ) | (1,532 | ) | (33,662 | ) | (23,357 | ) |
Operating Income | | $ | 57,974 | | $ | 64,527 | | $ | 245,225 | | $ | 231,211 | |
The following table reconciles earnings (losses) from nonconsolidated investments by segment as reported in this press release to the consolidated earnings (losses) from nonconsolidated investments reported in the Company’s financial statements:
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
Earnings (losses) from nonconsolidated investments (thousands): | | | | | | | | | |
Equitable Supply | | $ | 131 | | $ | 185 | | $ | 261 | | $ | 465 | |
NORESCO | | 1,509 | | 10 | | 9,383 | | (39,105 | ) |
Unallocated | | 85 | | 37 | | 152 | | 116 | |
Total | | $ | 1,725 | | $ | 232 | | $ | 9,796 | | $ | (38,524 | ) |
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 production supply, natural gas transmission and distribution, and leading-edge energy management services for customers throughout the United States.
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Equitable Resources management speaks to investors from time to time. Slides for these discussions will be available online on 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 program, production volumes, and earnings. 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, the following:
• the impact of adverse weather conditions on commodity prices, Equitable Utilities’ operations, and Equitable Supply’s well drilling program
• the volatility of the price of natural gas and the effect of changing prices on the Company’s revenues, hedging, well drilling activities, production taxes, and collections
• the need for, and availability and cost of, financing, including changes to the Company’s debt ratings by S&P and Moody’s
• the implementation and execution of operational enhancements and cost control initiatives
• the effect of curtailments or other disruptions in production and gathering
• the substance, timing and availability of regulatory and legislative actions, initiatives and proceedings
• the Company’s success in implementing acquisition or divestiture activities
• the ability of the Company to develop, produce, gather, and market reserves, including its ability to substantially increase well drilling activity
• the inherent uncertainty of estimating gas reserves and projecting future rates of production and reserve development
• the ability of the Company to acquire and apply technology to its operations
• the impact of competitive factors, including consolidation in the utility industry
• the ability of the Company to maintain good working relations with its represented employees and to retain its key personnel
• changes in the market price of the common stock of EQT and its peer group
• general economic and political conditions
• changes in accounting rules or their interpretation, and
• other factors discussed in other reports filed by the Company from time to time.
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.
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EQUITABLE RESOURCES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME (UNAUDITED)
(Thousands except per share amounts)
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
Operating revenues | | $ | 301,512 | | $ | 205,847 | | $ | 1,010,310 | | $ | 846,914 | |
Cost of sales | | 128,798 | | 63,238 | | 451,454 | | 354,416 | |
Net operating revenues | | 172,714 | | 142,609 | | 558,856 | | 492,498 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Operation and maintenance | | 22,891 | | 20,985 | | 71,599 | | 59,954 | |
Production | | 15,327 | | 11,111 | | 44,523 | | 32,587 | |
Selling, general and administrative | | 53,017 | | 24,177 | | 119,354 | | 103,560 | |
Impairment charges | | — | | — | | 7,835 | | — | |
Depreciation, depletion and amortization | | 23,505 | | 21,809 | | 70,320 | | 65,186 | |
Total operating expenses | | 114,740 | | 78,082 | | 313,631 | | 261,287 | |
| | | | | | | | | |
Operating income | | 57,974 | | 64,527 | | 245,225 | | 231,211 | |
| | | | | | | | | |
Gain on exchange of Westport for Kerr-McGee shares | | — | | — | | — | | 217,212 | |
| | | | | | | | | |
Charitable foundation contribution | | — | | — | | — | | (18,226 | ) |
| | | | | | | | | |
Gain on sale and tender of available-for-sale securities, net | | 19,438 | | — | | 80,257 | | 3,024 | |
| | | | | | | | | |
Equity in (losses) earnings of nonconsolidated investments: | | | | | | | | | |
International investments | | 1,505 | | (3 | ) | 9,352 | | (39,137 | ) |
Other | | 220 | | 235 | | 444 | | 613 | |
| | 1,725 | | 232 | | 9,796 | | (38,524 | ) |
| | | | | | | | | |
Other income, net | | — | | 1,602 | | 1,195 | | 2,178 | |
| | | | | | | | | |
Minority interest | | 94 | | (105 | ) | (652 | ) | (834 | ) |
| | | | | | | | | |
Interest expense | | 12,169 | | 12,191 | | 37,602 | | 35,953 | |
| | | | | | | | | |
Income before income taxes | | 67,062 | | 54,065 | | 298,219 | | 360,088 | |
Income taxes | | 20,571 | | 18,382 | | 111,003 | | 123,508 | |
| | | | | | | | | |
Net income | | $ | 46,491 | | $ | 35,683 | | $ | 187,216 | | $ | 236,580 | |
| | | | | | | | | |
Earnings per share of common stock: | | | | | | | | | |
Basic: | | | | | | | | | |
Weighted average common shares outstanding | | 121,181 | | 122,838 | | 121,359 | | 123,816 | |
Net income | | $ | 0.38 | | $ | 0.29 | | $ | 1.54 | | $ | 1.91 | |
| | | | | | | | | |
Diluted: | | | | | | | | | |
Weighted average common shares outstanding | | 123,576 | | 125,660 | | 124,016 | | 126,556 | |
Net income | | $ | 0.38 | | $ | 0.28 | | $ | 1.51 | | $ | 1.87 | |
(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 and nine month periods are not indicative of results for a full year.
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EQUITABLE UTILITIES
OPERATIONAL AND FINANCIAL REPORT
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
OPERATIONAL DATA | | | | | | | | | |
Heating degree days (30-year average: Qtr-124; YTD-3,759) | | 34 | | 88 | | 3,465 | | 3,533 | |
| | | | | | | | | |
Residential sales and transportation volume (MMcf) | | 1,292 | | 1,496 | | 16,838 | | 18,292 | |
Commercial and industrial volume (MMcf) | | 3,153 | | 4,375 | | 18,258 | | 22,130 | |
Total throughput (MMcf) - Distribution | | 4,445 | | 5,871 | | 35,096 | | 40,422 | |
Total throughput (Bbtu) - Pipeline | | 13,055 | | 15,750 | | 45,961 | | 54,384 | |
| | | | | | | | | |
Net operating revenues (thousands): | | | | | | | | | |
Distribution | | | | | | | | | |
Residential | | $ | 11,856 | | $ | 12,459 | | $ | 72,771 | | $ | 75,829 | |
Commercial & industrial | | 4,903 | | 5,730 | | 33,553 | | 35,946 | |
Other | | 1,519 | | 1,272 | | 6,036 | | 4,557 | |
Pipeline | | 10,311 | | 11,112 | | 37,275 | | 38,239 | |
Marketing | | 7,575 | | 4,424 | | 27,867 | | 19,003 | |
| | $ | 36,164 | | $ | 34,997 | | $ | 177,502 | | $ | 173,574 | |
| | | | | | | | | |
Operating expenses as a% of net operating revenues | | 120.68 | % | 89.48 | % | 65.87 | % | 59.28 | % |
| | | | | | | | | |
Operating income (thousands): | | | | | | | | | |
Distribution | | $ | (16,362 | ) | $ | (3,777 | ) | $ | 22,898 | | $ | 37,316 | |
Pipeline | | 1,811 | | 3,502 | | 11,065 | | 15,817 | |
Marketing | | 7,074 | | 3,955 | | 26,619 | | 17,547 | |
Total | | $ | (7,477 | ) | $ | 3,680 | | $ | 60,582 | | $ | 70,680 | |
| | | | | | | | | |
Capital expenditures (thousands) | | $ | 18,710 | | $ | 13,857 | | $ | 40,283 | | $ | 43,427 | |
| | | | | | | | | |
FINANCIAL DATA (Thousands) | | | | | | | | | |
Utility revenues | | $ | 78,883 | | $ | 37,632 | | 369,097 | | $ | 302,265 | |
Marketing revenues | | 88,667 | | 56,665 | | 235,425 | | 211,983 | |
Total operating revenues | | 167,550 | | 94,297 | | 604,522 | | 514,248 | |
| | | | | | | | | |
Utility purchased gas costs | | 50,294 | | 7,059 | | 219,462 | | 147,694 | |
Marketing purchased gas costs | | 81,092 | | 52,241 | | 207,558 | | 192,980 | |
Net operating revenues | | 36,164 | | 34,997 | | 177,502 | | 173,574 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Operating and maintenance | | 14,465 | | 12,959 | | 42,982 | | 37,365 | |
Selling, general and administrative | | 22,174 | | 10,841 | | 49,723 | | 43,262 | |
Impairment charges | | — | | — | | 3,841 | | — | |
Depreciation, depletion and amortization | | 7,002 | | 7,517 | | 20,374 | | 22,267 | |
Total operating expenses | | 43,641 | | 31,317 | | 116,920 | | 102,894 | |
| | | | | | | | | |
Operating income | | $ | (7,477 | ) | $ | 3,680 | | $ | 60,582 | | $ | 70,680 | |
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EQUITABLE SUPPLY
OPERATIONAL AND FINANCIAL REPORT
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
OPERATIONAL DATA | | | | | | | | | |
| | | | | | | | | |
Capital expenditures (thousands) | | $ | 53,535 | | $ | 40,003 | | $ | 201,348 | | $ | 90,385 | |
| | | | | | | | | |
Production: | | | | | | | | | |
| | | | | | | | | |
Total sales volumes (MMcfe) | | 18,670 | | 17,002 | | 55,492 | | 50,842 | |
Average (well-head) sales price ($/Mcfe) | | $ | 5.43 | | $ | 4.43 | | $ | 4.98 | | $ | 4.40 | |
| | | | | | | | | |
Company usage, line loss (MMcfe) | | 1,334 | | 1,378 | | 3,681 | | 3,613 | |
| | | | | | | | | |
Natural gas inventory usage, net (MMcfe) | | — | | 80 | | (51 | ) | 9 | |
| | | | | | | | | |
Natural gas and oil production (MMcfe) | | 20,004 | | 18,460 | | 59,122 | | 54,464 | |
| | | | | | | | | |
Lease operating expense excluding production tax ($/Mcfe) | | $ | 0.29 | | $ | 0.28 | | $ | 0.31 | | $ | 0.27 | |
Production tax ($/Mcfe) | | $ | 0.48 | | $ | 0.32 | | $ | 0.44 | | $ | 0.32 | |
Production depletion ($/Mcfe) | | $ | 0.58 | | $ | 0.53 | | $ | 0.60 | | $ | 0.54 | |
| | | | | | | | | |
Gathering: | | | | | | | | | |
Gathered volumes (MMcfe) | | 29,227 | | 30,737 | | 91,339 | | 94,610 | |
Average gathering fee ($/Mcfe) | | $ | 0.81 | | $ | 0.58 | | $ | 0.77 | | $ | 0.59 | |
Gathering and compression expense ($/Mcfe) | | $ | 0.29 | | $ | 0.26 | | $ | 0.31 | | $ | 0.24 | |
Gathering and compression depreciation ($/Mcfe) | | $ | 0.13 | | $ | 0.11 | | $ | 0.11 | | $ | 0.11 | |
| | | | | | | | | |
(in thousands) | | | | | | | | | |
Production operating income | | $ | 71,642 | | $ | 54,939 | | $ | 187,079 | | $ | 157,870 | |
Gathering operating income | | 8,259 | | 3,965 | | 21,345 | | 15,290 | |
Total | | $ | 79,901 | | $ | 58,904 | | $ | 208,424 | | $ | 173,160 | |
| | | | | | | | | |
Production depletion | | $ | 11,526 | | $ | 9,798 | | $ | 35,425 | | $ | 29,239 | |
Gathering and compression depreciation | | 3,760 | | 3,450 | | 10,485 | | 10,057 | |
Other depreciation, depletion and amortization | | 779 | | 643 | | 2,731 | | 2,427 | |
Total depreciation, depletion and amortization | | $ | 16,065 | | $ | 13,891 | | $ | 48,641 | | $ | 41,723 | |
| | | | | | | | | |
FINANCIAL DATA (Thousands) | | | | | | | | | |
Production revenues | | $ | 103,450 | | $ | 80,706 | | $ | 282,266 | | $ | 234,721 | |
Gathering revenues | | 23,802 | | 17,944 | | 70,470 | | 55,682 | |
Total revenues | | 127,252 | | 98,650 | | 352,736 | | 290,403 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Lease operating expense excluding production taxes | | 5,784 | | 5,124 | | 18,500 | | 14,955 | |
Production taxes | | 9,543 | | 5,987 | | 26,023 | | 17,632 | |
Gathering and compression | | 8,425 | | 8,027 | | 28,622 | | 22,596 | |
Selling, general and administrative | | 7,534 | | 6,717 | | 22,007 | | 20,337 | |
Impairment charges | | — | | — | | 519 | | — | |
Depreciation, depletion and amortization | | 16,065 | | 13,891 | | 48,641 | | 41,723 | |
Total operating expenses | | 47,351 | | 39,746 | | 144,312 | | 117,243 | |
| | | | | | | | | |
Operating income | | $ | 79,901 | | $ | 58,904 | | $ | 208,424 | | $ | 173,160 | |
| | | | | | | | | |
Other income | | $ | — | | $ | — | | $ | — | | $ | 576 | |
Equity earnings from nonconsolidated investments | | $ | 131 | | $ | 185 | | $ | 261 | | $ | 465 | |
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NORESCO
OPERATIONAL AND FINANCIAL REPORT
| | Three Months Ended
September 30, | | Nine Months Ended
September 30, | |
| | 2005 | | 2004 | | 2005 | | 2004 | |
| | | | | | | | | |
OPERATIONAL DATA | | | | | | | | | |
Revenue backlog, end of period (thousands) | | $ | 39,060 | | $ | 92,946 | | $ | 39,060 | | $ | 92,946 | |
| | | | | | | | | |
Gross profit margin | | 26.4 | % | 24.0 | % | 25.4 | % | 26.7 | % |
SG&A as a% of revenue | | 16.4 | % | 14.0 | % | 16.0 | % | 15.9 | % |
| | | | | | | | | |
Capital expenditures (thousands) | | $ | 143 | | $ | 193 | | $ | 434 | | $ | 385 | |
| | | | | | | | | |
FINANCIAL DATA (Thousands) | | | | | | | | | |
Energy service contract revenues | | $ | 35,156 | | $ | 37,366 | | $ | 112,484 | | $ | 106,992 | |
Energy service contract costs | | 25,858 | | 28,404 | | 83,866 | | 78,471 | |
Net operating revenues (gross profit margin) | | 9,298 | | 8,962 | | 28,618 | | 28,521 | |
| | | | | | | | | |
Operating expenses: | | | | | | | | | |
Selling, general and administrative | | 5,772 | | 5,242 | | 17,990 | | 17,047 | |
Depreciation and amortization | | 241 | | 245 | | 747 | | 746 | |
Total operating expenses | | 6,013 | | 5,487 | | 18,737 | | 17,793 | |
| | | | | | | | | |
Operating income | | $ | 3,285 | | $ | 3,475 | | $ | 9,881 | | $ | 10,728 | |
| | | | | | | | | |
Earnings from nonconsolidated investments: | | | | | | | | | |
International investments | | 1,505 | | (3 | ) | 9,352 | | (39,137 | ) |
Other | | 4 | | 13 | | 31 | | 32 | |
Minority interest | | 94 | | (105 | ) | (652 | ) | (834 | ) |
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