Equitable Turns Into Prime Purchase Target after Banner 1Q
Equitable Resources said its aggressive M&A strategy is
beginning to pay off, as the company revealed a 40% jump in first
quarter 2000 earnings to $39.1 million compared to the same period
last year. The earnings were higher than Wall Street estimates and
may trigger purchase offers for the company, according to some
"In this first quarter we are beginning to realize the earnings
benefits of the Carnegie Natural Gas and Statoil E&P property
acquisitions. We anticipate that over the next several months we
will realize additional costs savings and operational improvements
as we complete the integration process of the Statoil oil
operations," said Murry S. Gerber, Equitable's CEO.
The lofty financials were not expected by PaineWebber analyst
Ron Barone, who raised his earnings per share estimate for
Equitable this year, as a result. Equitable's earnings per share
for the quarter was $1.23, 15 cents higher than barone's estimate.
"With a well-focused management team consistently delivering solid
earnings growth, Equitable Resources remains one of the top growth
and income plays...In addition, as the leading producer of natural
gas in the Northeast, Equitable has evolved into a prime
Barone added that the location of Equitable's reserves is the
key ingredient that will attract buyers. "[The company's
attractiveness as an acquisition candidate] is particularly true
given that unregulated power generators are increasingly seeking
access to strategically located natural gas reserves, pipelines and
The earnings improvement, Equitable said, was primarily
attributable to increased natural gas production relating to the
Statoil Appalachian property acquisition, improved natural gas and
crude oil prices, continuing benefit from cost structure
improvements, and increased industrial distribution throughput
resulting from the Carnegie acquisition. These earnings increases
were partially offset by weather that was 15% warmer than the
historical average, higher accruals relating to provisions for
incentive compensation, and costs related to a strategic refocusing
of the NORESCO unit.
The Statoil purchase was announced last February. Equitable
bought all of Statoil's Appalachia assets for $630 million. Once
complete, the move will vault Equitable to the top of the list of
Appalachia producers in terms of size of reserves with more than 2
Eqitable bought Carnegie Natural from USX-Marathon in June of
1999. The purchase increased Equitable's natural gas throughput 27%
and increased its production in Appalachia 9%.
The company's M&A activities have not stopped with these two
moves. "We also recently announced the combination of our Gulf
operations with Westport Oil and Gas for cash and a significant
minority interest. This transaction gives us a market valuation,
earnings recognition, and limits our Gulf of Mexico exposure.
Equitable Resources has never enjoyed such significant growth
opportunities on such a low risk business model," Gerber added.
Equitable Production had earnings before interest and taxes
(EBIT) for the first quarter of $31.5 million compared to $8.5
million for the 1999 quarter. Volume of produced natural gas and
crude oil that was sold increased to 23.2 Bcfe, as compared to 16.9
Bcfe for the same period last year.