Financial Information by Business Segment

3 Months Ended

Mar. 31, 2014

Financial Information by Business Segment

Financial Information by Business Segment

D. Financial Information by Business Segment

Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally and which are subject to evaluation by the Company’s chief operating decision maker in deciding how to allocate resources.

The Company reports its operations in two segments, which reflect its lines of business.  The EQT Production segment includes the Company’s exploration for, and development and production of, natural gas, natural gas liquids (NGLs) and a limited amount of crude oil in the Appalachian Basin.  EQT Midstream’s operations include the natural gas gathering, transportation, storage and marketing activities of the Company, including ownership and operation of the Partnership.

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.

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 Statements of Consolidated Income.

Substantially all of the Company’s operating revenues, income from operations and assets are generated or located in the United States.

	Three Months Ended
	March 31,
	2014		2013
	(Thousands)
Revenues from external customers:
EQT Production	$	467,745	$	250,511
EQT Midstream	166,226		146,688
Third-party transportation costs (a)	44,629		35,741
Less intersegment revenues, net (b)	(16,975)		(17,057)
Total	$	661,625	$	415,883
Operating income:
EQT Production	$	277,205	$	74,097
EQT Midstream	83,069		74,214
Unallocated expenses (c)	(3,483)		(3,832)
Total operating income	$	356,791	$	144,479

Reconciliation of operating income to income from continuing operations:
Other income	$		2,551	$	2,281
Interest expense	31,968			37,752
Income taxes	116,335			34,768
Income from continuing operations	$		211,039	$	74,240
	As ofMarch 31,			As ofDecember 31,
	2014			2013
	(Thousands)
Segment assets:
EQT Production	$	6,706,590		$	6,359,065
EQT Midstream	2,532,559			2,514,429
Total operating segments	9,239,149			8,873,494
Headquarters assets, including cash and short-term investments	1,007,157			918,559
Total assets	$	10,246,306		$	9,792,053

(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 $10.9 million for the three months ended March 31, 2013 of intercompany eliminations for transmission and storage services between EQT Midstream and the Company’s previously reported Distribution segment that were recast to discontinued operations as a result of the Equitable Gas Transaction. These recast adjustments had no impact on the Company’s net income for the three months ended March 31, 2013.

(c) Unallocated expenses consist primarily of incentive compensation expense, administrative costs and, for the three months ended March 31, 2013, corporate overhead charges previously allocated to the Distribution segment that were reclassified to Headquarters as part of the recast of the 2013 financial information in this Quarterly Report on Form 10-Q.

	Three Months Ended
	March 31,
	2014		2013
	(Thousands)
Depreciation, depletion and amortization:
EQT Production	$	131,239	$	124,909
EQT Midstream	21,009		18,219
Other	(137)		(92)
Total	$	152,111	$	143,036
Expenditures for segment assets (d):
EQT Production (e)	$	408,331	$	243,175
EQT Midstream	83,213		49,144
Other	560		348
Total	$	492,104	$	292,667

(d) Excludes non-cash capital expenditures of $4.5 million and $6.0 million for the three months ended March 31, 2014 and 2013, respectively.  The Company capitalizes certain labor overhead costs including a portion of non-cash stock-based compensation expense.

(e) Expenditures for segment assets in the EQT Production segment include $59.2 million and $12.7 million for property acquisitions during the three months ended March 31, 2014 and 2013, respectively.