Financial Information by Business Segment

12 Months Ended

Dec. 31, 2013

Financial Information by Business Segment

Financial Information by Business Segment

4. Financial Information by Business Segment

Operating segments are evaluated on their contribution to the Company’s consolidated results based on operating income. Other income, interest and income taxes are managed on a consolidated basis. Headquarters’ costs are billed to the operating segments based upon an allocation of the headquarters’ annual operating budget.  Differences between budget and actual headquarters’ expenses are not allocated to the operating segments. As part of the 2012 budgeting process, the Company allocated additional corporate overhead charges to the operating segments.

The Company’s management reviews and reports the EQT Production segment results with third-party transportation costs reflected as a deduction from operating revenues. Third-party transportation costs are recorded as a portion of purchased gas costs in the Consolidated Statements of Income.

	Years Ended December 31,
	2013		2012		2011
			(Thousands)
Revenues from external customers:
EQT Production	$	1,168,657	$	793,773	$	791,285
EQT Midstream	614,042		505,498		525,345
Third-party transportation costs (a)	142,281		126,783		87,034
Less intersegment revenues, net (b)	(62,969)		(48,832)		(79,835)
Total	$	1,862,011	$	1,377,222	$	1,323,829
Operating income:
EQT Production	$	371,245	$	187,913	$	387,098
EQT Midstream (c)	328,782		237,324		416,611
Unallocated expenses (d)	(45,423)		(35,608)		(42,538)
Total operating income	$	654,604	$	389,629	$	761,171
Reconciliation of operating income to income from continuing operations:
Other income	$	9,242	$	15,536	$	33,276
Interest expense	142,688		184,786		136,328
Income taxes	175,186		71,461		238,537
Income from continuing operations	$	345,972	$	148,918	$	419,582

	As of December 31,
	2013		2012
	(Thousands)
Segment assets:
EQT Production	$	6,359,065	$	5,675,534
EQT Midstream	2,514,429		2,046,558
Total operating segments	8,873,494		7,722,092
Headquarters assets, including cash and short-term investments	918,559		1,127,770
Total assets	$	9,792,053	$	8,849,862

EQT Production and EQT Midstream had segment assets of $5,256.6 million and $1,785.1 million, respectively, as of December 31, 2011.

(a) This amount reflects the reclassification of third-party transportation costs from operating revenues to purchased gas costs at the consolidated level.

(b) Includes entries to eliminate intercompany natural gas sales from EQT Production to EQT Midstream. The Company also had $37.6 million, $36.8 million and $37.9 million for the years ended December 31, 2013, 2012 and 2011, respectively, of intercompany eliminations for transmission and storage services between EQT Midstream and Distribution that have been recast to discontinued operations as a result of the Equitable Gas Transaction. Additionally, the Company had $2.6 million, $11.7 million and $64.5 million for the years ended December 31, 2013, 2012 and 2011, respectively, of intercompany eliminations for retail business activity between Distribution and EQT Midstream that have been recast to discontinued operations. These recast adjustments had no impact on the Company’s net income for any period.

(c) Gains on dispositions of $19.6 million and $202.9 million are included in EQT Midstream operating income for 2013 and 2011, respectively.  See Note 7.

(d) Unallocated expenses consist primarily of incentive compensation, administrative costs and corporate overhead charges previously allocated to the Distribution segment that were reclassified to Headquarters as part of the recast of this Annual Report on Form 10-K to reflect the discontinued operations presentation requirements.

	Years Ended December 31,
	2013		2012		2011
			(Thousands)
Depreciation, depletion and amortization:
EQT Production	$	578,641	$	409,628	$	257,144
EQT Midstream	75,032		64,782		57,135
Other	(541)		207		(411)
Total	$	653,132	$	474,617	$	313,868
Expenditures for segment assets:
EQT Production (e)	$	1,423,185	$	991,775	$	1,087,840
EQT Midstream	369,399		375,731		242,886
Other	4,292		3,134		4,855
Total	$	1,796,876	$	1,370,640	$	1,335,581

(e) Expenditures for segment assets in the EQT Production segment include $186.2 million, $134.6 million and $57.2 million for property acquisitions in 2013, 2012 and 2011, respectively.  Expenditures for segment assets in the EQT Production segment also include $92.6 million of liabilities assumed in exchange for producing properties as part of the ANPI transaction, as described in Note 8, in 2011.