EQT Provides 2012 Guidance

EQT Corporation (EQT - Analyst Report) provided its financial estimation for 2012. It has predicted capital expenditure (capex) to be around $1.6 billion.

Out of the total capex, nearly $1.2 billion is allotted for EQT Production, $365 million for EQT Midstream and $35 million for distribution infrastructure projects and other corporate items.

The capex is expected to be funded by cash generated from operations, in addition to proceeds from the debt issuance in November. The company has projected 2012 operating cash flow to be around $1 billion, based on the current New York Mercantile Exchange (NYMEX) natural gas prices.

The sales of produced natural gas are projected in the range of 255–260 billion cubic feet of gas equivalent (Bcfe), approximately 32% higher than the 2011 estimate of 195 Bcfe.

About 80% of the drilling capital apportioned to EQT Production is expected to be utilized for drilling 132 Marcellus wells. Further, EQT Production also expects to drill 120 Huron wells with an average length of 5,200 feet of pay.

Another $10 million is likely to be spent on geological and geophysical activities supporting the drilling program. The balance of the EQT Production spending is intended for overhead, maintenance and completion of wells spud in 2011.

Around $155 million is likely to be spent on Equitrans’ transmission expansion and $125 million for Marcellus gathering. The Marcellus gathering investments are expected to boost capacity by 220 million cubic feet (MMcf) per day in Pennsylvania and 160 MMcf per day in West Virginia.

In 2012, the Equitrans expansion project is likely to augment transmission capacity by 450 MMcf per day. The remainder of the EQT Midstream costs is for maintenance and compliance activities.

In separate news, EQT reported that it plans to sell a limited partner interest in the master limited partnership (MLP) that would own portions of the assets of Equitrans, L.P., EQT’s interstate pipeline subsidiary.

After the completion of the IPO, EQT would own the general partner of the MLP that would own the incentive distribution rights and a substantial portion of the MLP's common units. Proceeds of the IPO would be used to finance the further acceleration of EQT’s Marcellus development.

The MLP is anticipated to focus on providing transmission and gathering services to producers in the Marcellus Shale, including EQT Production Company.

EQT holds a Zacks #3 Rank, which translates into a Hold rating for a period of one to three months. We maintain a Neutral rating on the stock, for the long term. So far, Spectra Energy Corporation (SE - Analyst Report) and Forest Oil Corporation (FST - Analyst Report) are the other companies that have given guidance for 2012.

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