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Why Was EQT’s Free Cash Flow Lower in 1Q16?

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EQT’s cash flow

In this part of the series, we’ll be looking at EQT’s (EQT) cash flow. In 1Q16, EQT reported cash flow from operations (or CFO) of ~$285 million. This was ~37% lower than its CFO in 1Q15.

Lower cash flow stemmed from lower revenues, which in turn were affected by lower realized prices.

For 2016, EQT expects its CFO to be $700 million–$750 million. EQT’s 2015 CFO was ~$1.2 billion.

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EQT’s free cash flow trends

EQT’s free cash flow (or FCF), which is its CFO minus its capex (capital expenditure), has been negative for the past nine quarters, as you can see in the above graph. EQT’s FCF was -$113 million in 1Q16. However, as we can see in the graph, its FCF has been improving every quarter since 2Q15, concurrent with capital spending declining every quarter since 2Q15.

EQT’s capex in 2016

EQT provided a 2016 capex budget of $1 billion, which represents a 44.4% decline YoY.

Many upstream companies have slashed their 2016 capital expenditures amid low energy prices (USO) (UNG). Cabot Oil & Gas (COG) and Chesapeake Energy (CHK) announced capex cuts of ~58% and ~57%, respectively, compared to 2015 levels. All these companies make up ~4.4% of the Energy Select Sector SPDR ETF (XLE).

Continue to the next part to read about EQT’s historical valuation.

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