Exhibit 99.1
Contact: Patrick Kane
(412) 553-7833
Equitable Resources Reports First Quarter Earnings;
Expands Horizontal Drilling Program
PITTSBURGH, April 26, 2007/ PRNewswire-FirstCall/ — Equitable Resources, Inc. (NYSE: EQT) today announced first quarter 2007 earnings per diluted share (EPS) of $0.46. This compares with diluted earnings of $0.59 per share reported for the first quarter 2006.
Quarterly Results by Business
Equitable Supply
Equitable Supply had operating income for the quarter of $54.9 million, 24% lower than the $72.0 million earned in the same period last year. Total revenues were $125.3 million, $2.9 million higher than the $122.4 million reported in 2006. Production revenues were $2.2 million lower than in 2006 as the impact of lower average well-head prices was partially offset by a 5.5% increase in production sales volumes. Gathered volumes and rates were both higher, driving an increase in gathering revenues over 2006.
Operating expenses for the quarter were $70.4 million compared to $50.5 million last year. Selling, general and administrative expenses were $13.4 million higher. Of the increase, $11.7 million resulted from increased reserves for certain royalty disputes and other legal expenses. Depreciation, depletion and amortization expense, gathering and compression expense and lease operating expense were higher, consistent with higher overall operating activity levels.
During the quarter, the Company drilled 110 gross operated wells, compared with 100 wells for the same period in 2006. The Company is on track to drill 650 gross operated wells in 2007, including at least 50 horizontal wells, a 100% increase from prior estimates.
Equitable Utilities
Equitable Utilities had first quarter operating income of $69.2 million compared to $61.0 million reported for the same period last year. Overall net operating revenues were 13% higher at $111.3 million. Distribution net operating revenues were $61.0 million, 13% higher than last year’s $54.1 million, as weather was 12% colder than last year.
Marketing net operating revenues were $32.2 million, $12.5 million higher than the first quarter 2006, primarily attributable to storage asset optimization resulting from gas price volatility. Pipeline net operating revenues decreased by $7.0 million over the first quarter 2006 to $18.1 million. Most of the decrease is associated with the first quarter 2006 recognition of $6.1 million in net operating revenues from prior periods.
Operating expenses increased year over year to $42.1 million from $37.8 million. The increase is primarily attributable to planning expenses for the acquisition of The Peoples Natural Gas Company and Hope Gas, Inc., which totaled $4.9 million in the quarter.
Other Business
Nora Field
On April 13, 2007, Equitable and Range Resources entered into an agreement to jointly develop the Nora Field in southwestern Virginia. To equalize ownership interests, Range will pay to Equitable and a newly formed gathering joint venture owned by the companies, an aggregate of $315 million, subject to customary adjustments. The transaction will reduce Equitable’s 2007 production sales by 3 Bcf thereby reducing the sales forecast to between 77 and 78 Bcf.
Peoples Gas and Hope Gas Acquisition
On April 13, 2007, the Pennsylvania Public Utility Commission approved Equitable’s acquisition of Peoples Gas. On the same day, the Federal Trade Commission filed a request for a preliminary injunction, in federal district court in Pittsburgh, to stop the acquisition. The Company is challenging this injunction request. The Company is also seeking approval by the Public Service Commission of West Virginia, for which a hearing is scheduled for May.
Executive Performance Incentive Programs
The Company has an Executive Performance Incentive Program (EPIP) designed to align management’s long-term incentive compensation to the absolute and relative returns earned by the Company’s shareholders. The expense of this program, which vests on December 31, 2008, varies based in part on changes in Equitable’s stock price. The significant stock appreciation in the first quarter resulted in changes to the Company’s assumptions used to calculate EPIP expense. The EPIP expense for the quarter was $25.5 million, and the estimated expense for 2007 is $49 million, assuming no further changes in assumptions.
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) | | 42 | | 54 | | 38 | |
Average Price per Mcf (NYMEX)* | | $ | 4.74 | | $ | 4.64 | | $ | 5.90 | |
| | | | | | | | | | | | |
Collars | | | | 2007** | | 2008 | | 2009 | |
Total Volume (Bcf) | | 8 | | 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
** April through December
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.
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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
March 31, | |
| | 2007 | | 2006 | |
Operating income (thousands): | | | | | |
Equitable Supply | | $ | 54,860 | | $ | 71,983 | |
Equitable Utilities | | 69,219 | | 61,022 | |
Unallocated expenses | | (25,225 | ) | (5,348 | ) |
Operating Income | | $ | 98,854 | | $ | 127,657 | |
The unallocated expenses are primarily due to executive compensation. 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 seven days.
Equitable Resources is an integrated energy company with emphasis on Appalachian area natural gas supply, transmission and distribution. For information, please visit 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 are 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, marketing revenues and margins, executive compensation, capital expenditures, the pending acquisition of The Peoples Natural Gas Company and Hope Gas, Inc. and the financing of that acquisition, the Company’s move to a holding company structure, and its pending sale of its interest in certain gas properties and the related gathering contribution agreement. 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 does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
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