Equitrans Midstream Corporation (NYSE: ETRN), today, announced
financial and operational results for the first quarter 2024.
Included in the "Non-GAAP Disclosures" section of this news release
are important disclosures regarding the use of non-GAAP
supplemental financial measures, including information regarding
their most comparable GAAP financial measure.
Q1 2024 Highlights:
- Announced proposed acquisition by EQT Corporation in an
all-stock transaction
- Reported $111.9 million of net income and $271.8 million of
Adjusted EBITDA
- Generated $177.5 million of net cash from operating
activities
- Recorded 67% of total operating revenue from firm reservation
fees
“With all of the waterbody and wetland crossings complete and
less than one mile of pipeline to install, we are nearing
completion of MVP’s forward construction activities,” said Diana M.
Charletta, Equitrans Midstream’s President & CEO. “Permanent
restoration work is ongoing, and we expect to complete construction
and final commissioning activities on or about May 31, 2024, with
MVP’s total project cost estimated at approximately $7.85 billion.
As part of the regulatory process, on April 22, 2024, Mountain
Valley Pipeline filed a formal request for authorization from the
Federal Energy Regulatory Commission to place the MVP project into
service following the mechanical completion of all project
facilities. We are pleased to be so close to completing this
critical infrastructure project.”
2024 FIRST QUARTER SUMMARY RESULTS
Three Months Ended March
31,
$ millions (except per share metrics)
2024
Net income attributable to ETRN common
shareholders
$
94.4
Adjusted net income attributable to ETRN
common shareholders
$
102.1
Earnings per diluted share attributable to
ETRN common shareholders
$
0.21
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.23
Net income
$
111.9
Adjusted EBITDA
$
271.8
Deferred revenue
$
61.0
Net cash provided by operating
activities
$
177.5
Free cash flow
$
(346.5
)
Retained free cash flow
$
(411.6
)
Net income attributable to ETRN common shareholders for the
first quarter 2024 was impacted by several items, including
one-time transaction expenses of $5.7 million related to the
proposed acquisition by EQT Corporation (EQT) and a $4.7 million
unrealized loss on derivative instruments. The unrealized loss is
reported within other expense, net, and relates to the contractual
agreement with EQT in which ETRN will receive cash from EQT
conditioned on the quarterly average of certain Henry Hub natural
gas prices exceeding certain thresholds beginning with the quarter
in which the Mountain Valley Pipeline (MVP) long-term firm capacity
obligations become effective through the fourth quarter of 2024.
The contract is accounted for as a derivative with the fair value
marked-to-market at each quarter-end. Additionally, ETRN reported
first quarter equity income of $73.0 million, which is primarily
associated with allowance for funds used during construction
(AFUDC) related to resuming MVP forward construction in 2023 and
continuing forward construction in the first quarter of 2024.
As a result of the gathering agreement entered into with EQT in
February 2020 (EQT Global GGA), revenue from the contracted minimum
volume commitment (MVC) is recognized utilizing an average
gathering rate applied over the remaining contract life. The
difference between the cash received from the MVC and the revenue
recognized results in the deferral of revenue into future periods.
Deferred revenue for the first quarter 2024 was $61.0 million.
Operating revenue for the first quarter 2024 decreased by $12.1
million compared to the same quarter last year, primarily related
to one-time transmission and gathering contract buyouts by a
customer of $28.8 million that occurred in the first quarter 2023,
partially offset by increased gathering revenues from other
customers. Operating expenses increased by $22.0 million compared
to the first quarter 2023, primarily due to increased selling,
general and administrative expenses, one-time transaction expenses
related to the proposed acquisition by EQT, and higher operating
and maintenance and depreciation expenses, partially offset by a
decrease in expenses related to the Rager Mountain natural gas
storage field incident.
QUARTERLY DIVIDEND
For the first quarter 2024, ETRN will pay a quarterly cash
dividend of $0.15 per common share on May 15, 2024 to ETRN common
shareholders of record at the close of business on May 7, 2024.
TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS
Three Months Ended March
31,
$ millions
2024
MVP
$423
Gathering(1)
$49
Transmission(2)
$18
Water
$10
Total
$500
(1)
Excludes approximately $5.0 million of
capital expenditures related to the noncontrolling interest in
Eureka Midstream Holdings, LLC (Eureka) for the three months ended
March 31, 2024.
(2)
Includes capital contributions to Mountain
Valley Pipeline, LLC (MVP JV) for the Southgate project.
2024 GUIDANCE
Due to the pending transaction with EQT, ETRN has discontinued
providing quarterly and annual financial guidance. Accordingly,
investors should not rely on any previously disclosed financial
guidance and are cautioned not to rely on historical
forward-looking statements as those forward-looking statements were
the estimates of management only as of the date provided and were
subject to the specific risks and uncertainties that accompanied
such forward-looking statements.
Full-Year 2024 Capital Expenditures and Capital Contribution
Outlook
$ millions
MVP(1)
$700
Gathering(2)
$220 - $270
Transmission(3)
$70 - $80
Water
$25 - $35
Total
$1,015 - $1,085
(1)
Assumes, among other things, MVP construction completion on or
about 5/31/2024.
(2)
Excludes approximately $15 million of capital expenditures
related to the noncontrolling interest in Eureka.
(3)
Includes capital contributions to MVP JV for the Southgate
project.
All guidance items exclude the impact of the proposed
acquisition by EQT.
BUSINESS AND PROJECT UPDATES
Proposed EQT Acquisition of Equitrans Midstream
On March 11, 2024, Equitrans Midstream announced that it had
entered into a definitive agreement with EQT Corporation, whereby
EQT would acquire Equitrans in an all-stock transaction. Under the
terms of the merger agreement, unanimously approved by the boards
of directors of both companies, each outstanding share of Equitrans
common stock will be exchanged for 0.3504 shares of EQT common
stock. As a result of the transaction, EQT’s existing shareholders
are expected to own approximately 74% of the combined company and
Equitrans’ shareholders are expected to own approximately 26%.
Closing of the transaction is subject to certain conditions
described in the merger agreement, including the approval of EQT
shareholders and Equitrans shareholders and regulatory
clearance.
Mountain Valley Pipeline
As of April 28, 2024, the MVP JV has made substantial progress
on the MVP project including, among other things, completing:
- approximately 303 miles of pipeline installed (less than one
mile remaining to install);
- all waterbody and wetland crossing work;
- the hydrotesting of approximately 269 miles (approximately 35
miles of testing remains, inclusive of interconnect piping);
- the purging and packing of the pipeline through to the second
compressor station (total of approximately 77 miles);
- the commissioning of two of three MVP compressor stations;
and
- restoration of a substantial portion of the pipeline
right-of-way, with the majority of remaining pipeline restoration
to occur following MVP in-service.
Remaining forward construction includes the tying in of a
completed bore, the installation of pipe on a steep slope, and the
tying together of the final pipeline segments after completing
testing and commissioning activities.
In April 2024, the MVP JV filed its in-service authorization
request for the MVP project with the Federal Energy Regulatory
Commission (FERC). Construction, together with commissioning
activity and certain restoration work, is ongoing as of the date of
this news release, and ETRN expects to complete construction and
final commissioning of the pipeline on or about May 31, 2024. The
majority of the remaining restoration is to occur following MVP
in-service. MVP and MVP-related long-term firm capacity will begin
on the first day of the month immediately following the date MVP
receives FERC authorization to commence service and is able to
provide the applicable service level (with certain MVC step ups and
more significant gathering MVC fee declines under the EQT Global
GGA commencing effective the first day of the calendar quarter in
which the MVP long-term firm capacity obligations commence). Should
MVP be authorized and able to provide service, however its
long-term firm capacity obligations are not yet effective due to
timing, MVP would be available for interruptible or short-term firm
service until long-term firm capacity obligations commence.
While the MVP project has made substantial progress toward
completion, the total estimated project cost was adversely affected
by a number of factors, including that the pace of forward
construction and workforce draw down realized through April 28,
2024, were slower than anticipated resulting in additional labor,
equipment and support costs in April and May 2024. Project costs
were affected by challenging physical construction conditions,
certain equipment and other issues during now-completed boring
operations, unexpected challenges with certain pipeline cleaning
procedures, and inclement weather. Additionally, ETRN updated its
assumptions regarding the completion of certain restoration
efforts, including associated scope, permit-related activities, and
labor, as well as taking into account refreshed contractor bids.
Given these and certain other factors which may have potential
impacts on project completion, such as weather in the pre- or
post-MVP in-service periods, ETRN is targeting a total project cost
of approximately $7.85 billion (including contingency and excluding
allowance for funds used during construction (AFUDC)).
Through March 31, 2024, ETRN had funded approximately $3.8
billion to the MVP JV for the MVP project. Given ETRN’s expectation
to complete MVP project construction and final commissioning on or
about May 31, 2024, and its estimated total project cost of
approximately $7.85 billion (including contingency and excluding
AFUDC), ETRN expects it would incur approximately $4.1 billion of
the estimated total project cost, inclusive of approximately $255
million in excess of ETRN's ownership interest. ETRN's equity
ownership in the MVP project is anticipated to progressively
increase from approximately 48.9% to approximately 49.2%. Total
capital contributions made by ETRN to the MVP JV in 2024 are
expected to be approximately $700 million.
Ohio Valley Connector Expansion Project
The Ohio Valley Connector Expansion Project (OVCX) began
providing firm interim service on April 1, 2024, and ETRN expects
full in-service to occur on May 1, 2024. Total investment in the
project is expected to be approximately $160 million, including
approximately $40 million in 2024. The majority of the total
investment is expected to be made by year-end 2024. The project is
primarily supported by long-term firm capacity commitments of 330
MMcf per day.
Senior Notes Offering
On February 26, 2024, EQM Midstream Partners, LP (EQM) completed
the issuance of $600 million aggregate principal amount of its
6.375% senior notes due 2029. Net proceeds from the offering were
used to repay outstanding borrowings under EQM's revolving credit
facility and for general partnership purposes.
Volume Curtailment Update
First quarter 2024 gathered volumes and revenue were negatively
impacted by the approximately one Bcf per day of gross production
curtailments announced in March 2024 by EQT, as a substantial
portion of such curtailments were realized on ETRN systems
beginning in late February 2024. On April 23, 2024, EQT announced
it assumes curtailments of approximately one Bcf per day of its
operated production to continue through May 2024 and acknowledged
the potential for future curtailments depending on market
conditions. ETRN expects that EQT will continue to curtail
production on ETRN systems through May 2024 and that EQT and/or
other producers could curtail production further in 2024.
Outstanding Debt and Liquidity
As of March 31, 2024, ETRN reported $6.9 billion of consolidated
debt; $520.0 million of borrowings and $105.8 million of letters of
credit outstanding under EQM's revolving credit facility; $330.0
million of borrowings under Eureka's revolving credit facility; and
$51.3 million of cash.
NON-GAAP DISCLOSURES
Adjusted Net Income Attributable to ETRN Common Shareholders
and Adjusted Earnings per Diluted Share Attributable to ETRN Common
Shareholders
Adjusted net income (loss) attributable to ETRN common
shareholders and adjusted earnings (loss) per diluted share
attributable to ETRN common shareholders are non-GAAP supplemental
financial measures that management and external users of ETRN’s
consolidated financial statements, such as industry analysts and
investors, may use to make period-to-period comparisons of earnings
trends. Management believes that adjusted net income (loss)
attributable to ETRN common shareholders and adjusted earnings
(loss) per diluted share attributable to ETRN common shareholders
as presented provide useful information for investors for
evaluating period-over-period earnings. Adjusted net income (loss)
attributable to ETRN common shareholders and adjusted earnings
(loss) per diluted share attributable to ETRN common shareholders
should not be considered as alternatives to net income (loss)
attributable to ETRN common shareholders, earnings (loss) per
diluted share attributable to ETRN common shareholders or any other
measure of financial performance presented in accordance with GAAP.
Adjusted net income (loss) attributable to ETRN common shareholders
and adjusted earnings (loss) per diluted share attributable to ETRN
common shareholders have important limitations as analytical tools
because they exclude some, but not all, items that affect net
income (loss) attributable to ETRN common shareholders and earnings
(loss) per diluted share attributable to ETRN common shareholders,
including as applicable, unrealized gain (loss) on derivative
instruments, expenses for the Rager Mountain natural gas storage
field incident (Rager Mountain incident), transaction costs,
contract asset write-down, and the related tax impacts of these
items, which items affect the comparability of results period to
period. Additionally, because these non-GAAP metrics may be defined
differently by other companies in ETRN’s industry, ETRN’s
definitions of adjusted net income (loss) attributable to ETRN
common shareholders and adjusted earnings (loss) per diluted share
attributable to ETRN common shareholders may not be comparable to
similarly titled measures of other companies, thereby diminishing
the utility of the measures. Adjusted net income (loss)
attributable to ETRN common shareholders and adjusted earnings
(loss) per diluted share attributable to ETRN common shareholders
should not be viewed as indicative of the actual amount of net
income (loss) attributable to ETRN common shareholders or actual
earnings (loss) per diluted share of ETRN in any given period.
The table below reconciles adjusted net income attributable to
ETRN common shareholders and adjusted earnings per diluted share
attributable to ETRN common shareholders with net income (loss)
attributable to ETRN common shareholders and earnings (loss) per
diluted share attributable to ETRN common shareholders as derived
from the statements of consolidated comprehensive income to be
included in ETRN’s Quarterly Report on Form 10-Q for the three
months ended March 31, 2024. Diluted weighted average common shares
outstanding assumes dilution for each applicable period.
Reconciliation of Adjusted Net Income Attributable to ETRN
Common Shareholders and Adjusted Earnings per Diluted Share
Attributable to ETRN Common Shareholders
Three Months Ended March
31,
(Thousands, except per share
information)
2024
2023
Net income attributable to ETRN common
shareholders
$
94,371
$
87,054
Add back (deduct):
Unrealized loss on derivative
instruments
4,672
8,494
Rager Mountain incident
—
4,122
Transaction costs
5,684
—
Tax impact of non-GAAP items(1)
(2,580
)
(3,272
)
Adjusted net income attributable to ETRN
common shareholders
$
102,147
$
96,398
Diluted weighted average common shares
outstanding, assuming dilution
440,561
434,254
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.23
$
0.22
(1)
The adjustments were tax effected at ETRN’s federal and state
statutory tax rate for each period including certain discrete
valuation allowance adjustments as necessary.
Adjusted EBITDA
Adjusted EBITDA excludes the impact of certain non-operating
income and expenses, non-cash items, and other items that ETRN
believes are not indicative of ETRN's ongoing operations or affect
the comparability of results period to period. As used in this news
release, Adjusted EBITDA means, as applicable, net income (loss),
plus income tax expense (benefit), net interest expense,
depreciation, amortization of intangible assets, payments on the
preferred interest in EQT Energy Supply, LLC (Preferred Interest),
non-cash long-term compensation expense, expenses for the Rager
Mountain incident, transaction costs, contract asset write-down,
ETRN's proportional ownership of MVP JV adjusted EBITDA, realized
gains on derivative instruments and less equity income,
AFUDC-equity, unrealized gain (loss) on derivative instruments, and
adjusted EBITDA attributable to noncontrolling interest. As used in
this news release, MVP JV adjusted EBITDA means, as applicable, MVP
JV net income plus net interest expense and depreciation.
The table below reconciles adjusted EBITDA with net income as
derived from the statements of consolidated comprehensive income to
be included in ETRN's Quarterly Report on Form 10-Q for the three
months ended March 31, 2024.
Reconciliation of Adjusted EBITDA
Three Months Ended March
31,
(Thousands)
2024
2023
Net income:
$
111,889
$
106,091
Add (deduct):
Income tax expense (benefit)
19,400
(3,784
)
Net interest expense
118,896
104,957
Depreciation
71,672
69,404
Amortization of intangible assets
16,205
16,205
Preferred Interest payments
2,764
2,746
Non-cash long-term compensation
expense
4,904
3,468
Rager Mountain incident
—
4,122
Transaction costs
5,684
—
Equity income
(73,005
)
(122
)
AFUDC – equity
(438
)
(206
)
Unrealized loss on derivative
instruments
4,672
8,494
Adjusted EBITDA attributable to
noncontrolling interest(1)
(10,873
)
(11,819
)
Adjusted EBITDA
$
271,770
$
299,556
(1)
Reflects adjusted EBITDA attributable to
noncontrolling interest associated with the third-party ownership
interest in Eureka. Adjusted EBITDA attributable to noncontrolling
interest for the three months ended March 31, 2024, was calculated
as net income of $2.9 million plus depreciation of $3.3 million,
plus amortization of intangible assets of $2.1 million, and plus
interest expense of $2.6 million. Adjusted EBITDA attributable to
noncontrolling interest for the three months ended March 31, 2023,
was calculated as net income of $4.4 million plus depreciation of
$3.2 million, plus amortization of intangible assets of $2.1
million, and plus interest expense of $2.1 million.
Free Cash Flow
As used in this news release, free cash flow means, as
applicable, net cash provided by operating activities plus
principal payments received on the Preferred Interest,
distributions received from the MVP JV included in net cash
provided by (used in) investing activities, and less net cash
provided by operating activities attributable to noncontrolling
interest, dividends paid to Series A Preferred Shareholders,
capital expenditures (excluding the noncontrolling interest share
(40%) of Eureka capital expenditures), capital contributions to MVP
JV and distributions received from the MVP JV associated with MVP
financing activities.
Retained Free Cash Flow
As used in this news release, retained free cash flow means free
cash flow less dividends paid to common shareholders.
The table below reconciles free cash flow and retained free cash
flow with net cash provided by operating activities as derived from
the statements of consolidated cash flows to be included in ETRN's
Quarterly Report on Form 10-Q for the three months ended March 31,
2024.
Reconciliation of Free Cash Flow and Retained Free Cash
Flow
Three Months Ended March
31,
(Thousands)
2024
2023
Net cash provided by operating
activities
$
177,491
$
224,720
Add (deduct):
Principal payments received on the
Preferred Interest
1,529
1,429
Net cash provided by operating activities
attributable to noncontrolling interest(1)
(7,754
)
(9,528
)
ETRN Series A Preferred Shares
dividends(2)
(14,628
)
(14,628
)
Capital expenditures(3)(4)
(80,155
)
(73,259
)
Capital contributions to MVP JV
(422,985
)
(34,513
)
Free cash flow
$
(346,502
)
$
94,221
Less:
Dividends paid to common
shareholders(5)
(65,050
)
(64,964
)
Retained free cash flow
$
(411,552
)
$
29,257
(1)
Reflects 40% of $19.4 million and $23.8
million, which was Eureka’s standalone net cash provided by
operating activities for the three months ended March 31, 2024 and
2023, respectively, which represents the noncontrolling interest
portion for the three months ended March 31, 2024 and 2023,
respectively.
(2)
Reflects cash dividends paid of $0.4873
per ETRN Series A Perpetual Convertible Preferred Share during the
three months ended March 31, 2024 and 2023, respectively.
(3)
Does not reflect amounts related to the
noncontrolling interest share of Eureka.
(4)
ETRN accrues capital expenditures when the
work has been completed but the associated bills have not yet been
paid. Accrued capital expenditures are excluded from the statements
of consolidated cash flows until they are paid.
(5)
Fourth quarter 2023 dividend of $0.15 per
ETRN common share was paid during the first quarter 2024.
Adjusted EBITDA, free cash flow and retained free cash flow are
non-GAAP supplemental financial measures that management and
external users of ETRN's consolidated financial statements, such as
industry analysts, investors, lenders, and rating agencies, may use
to assess:
- ETRN’s operating performance as compared to other publicly
traded companies in the midstream energy industry without regard to
historical cost basis or, in the case of adjusted EBITDA, financing
methods
- The ability of ETRN’s assets to generate sufficient cash flow
to pay dividends to ETRN’s shareholders
- ETRN’s ability to incur and service debt and fund capital
expenditures and capital contributions
- The viability of acquisitions and other capital expenditure
projects and the returns on investment of various investment
opportunities.
ETRN believes that adjusted EBITDA, free cash flow, and retained
free cash flow provide useful information to investors in assessing
ETRN's financial condition and results of operations. Adjusted
EBITDA, free cash flow, and retained free cash flow should not be
considered as alternatives to net income (loss), operating income,
or net cash provided by operating activities, as applicable, or any
other measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EBITDA, free cash flow, and retained
free cash flow have important limitations as analytical tools
because they exclude some, but not all, items that affect net
income (loss), operating income and net cash provided by operating
activities. Additionally, because these non-GAAP metrics may be
defined differently by other companies in ETRN's industry, ETRN's
definitions of adjusted EBITDA, free cash flow, and retained free
cash flow may not be comparable to similarly titled measures of
other companies, thereby diminishing the utility of the measures.
Free cash flow and retained free cash flow should not be viewed as
indicative of the actual amount of cash that ETRN has available for
dividends or that ETRN plans to distribute and are not intended to
be liquidity measures.
About Equitrans Midstream Corporation:
Equitrans Midstream Corporation has a premier asset footprint in
the Appalachian Basin and, as the parent company of EQM Midstream
Partners, is one of the largest natural gas gatherers in the United
States. Through its strategically located infrastructure assets in
the Marcellus and Utica regions, Equitrans has an operational focus
on gas transmission and storage systems, gas gathering systems, and
water services that support natural gas development and production
across the Basin. With a rich 140-year history in the energy
industry, Equitrans was launched as a standalone company in 2018
with a vision to be the premier midstream services provider in
North America. While working to meet America's growing need for
clean-burning energy, Equitrans is proud of its environmental,
social, and governance (ESG) practices, striving every day to
preserve and protect the environment, provide an engaging workplace
for its employees, support and enrich its local communities, and to
deliver sustained value for customers and shareholders.
Visit www.equitransmidstream.com; and to learn more about our
ESG practices visit
www.equitransmidstream.com/sustainability-reporting/
Cautionary Statements
This news release contains certain forward-looking statements
within the meaning of Section 21E of the United States Securities
Exchange Act of 1934, as amended (the Exchange Act), and Section
27A of the United States Securities Act of 1933, as amended (the
Securities Act), concerning ETRN and other matters. These
statements may discuss goals, intentions and expectations as to
future plans, trends, events, results of operations or financial
condition, or otherwise, based on current beliefs of the management
of ETRN, as well as assumptions made by, and information currently
available to, such management. Forward-looking statements may be
identified by words such as “aim,” “anticipate,” “approximate,”
“aspire,” “assume,” “believe,” “budget,” “cause,” “continue,”
“could,” “depend,” “develop,” “design,” “estimate,” “expect,”
“focused,” “forecast,” “goal,” “guidance,” “impact,” “implement,”
“increase,” “intend,” “lead,” “maintain,” “may,” “might,”
“objective,” “opportunity,” “outlook,” “plan,” “position,”
“possible,” “potential,” “predict,” “project,” “pursue,” “reduce,”
“remain,” “result,” “scheduled,” “seek,” “should,” “strategy,”
“strive,” “target,” “view,” “will,” or “would” and other similar
words or expressions . The absence of such words or expressions
does not necessarily mean the statements are not forward-looking
statements. These statements are subject to various risks and
uncertainties, many of which are outside ETRN's control. Without
limiting the generality of the foregoing, forward-looking
statements contained in this communication may include the
following and/or statements with respect thereto, as applicable:
statements regarding (i) the proposed EQT acquisition of ETRN,
including the ability to consummate the Mergers (as defined in Note
2 of ETRN’s Quarterly Report on Form 10-Q for the period ended
March 31, 2024 to be filed with the SEC) in the expected time frame
or at all, including due to the inability to obtain all approvals
necessary or the failure of closing conditions and (ii) anticipated
or perceived benefits of the proposed EQT acquisition of ETRN,
including any synergies; the occurrence of any event, change or
other circumstances that could give rise to the termination of the
Merger Agreement (as defined in Note 2 of ETRN’s Quarterly Report
on Form 10-Q for the period ended March 31, 2024 to be filed with
the SEC); the possibility that shareholders of EQT may not approve
the issuance of EQT common stock in connection with the proposed
EQT acquisition of ETRN; the possibility that the shareholders of
ETRN may not adopt the Merger Agreement; the risk that EQT or ETRN
may be unable to obtain governmental and regulatory approvals
required for the proposed EQT acquisition of ETRN, or required
governmental and regulatory approvals may delay the Merger or
result in the imposition of conditions that could cause the parties
to abandon the Merger; the risk that the parties may not be able to
satisfy the conditions to the proposed transaction in a timely
manner or at all; risks related to disruption of management’s time
from ongoing business operations due to the proposed EQT
acquisition of ETRN; the risk that any announcements relating to
the proposed EQT acquisition of ETRN could have adverse effects on
the market price of EQT’s common stock or ETRN’s common stock; the
risk of any unexpected costs or expenses resulting from the
proposed EQT acquisition of ETRN; the risk of any litigation
relating to the proposed EQT acquisition of ETRN; the risk that the
proposed EQT acquisition of ETRN and its announcement could have an
adverse effect on the ability of EQT and ETRN to retain and hire
key personnel, on the ability of EQT or ETRN to attract third-party
customers and maintain their relationships with derivatives and
joint venture counterparties and on EQT’s and ETRN’s operating
results and businesses generally; the risk that problems may arise
in successfully integrating the businesses of EQT and ETRN, which
may result in the combined company not operating as effectively and
efficiently as expected; the risk that the combined company may be
unable to achieve synergies or other anticipated benefits of the
proposed EQT acquisition of ETRN or it may take longer than
expected to achieve those synergies or benefits and other important
factors that could cause actual results to differ materially from
those projected; the volatility in commodity prices for crude oil
and natural gas; the effect of future regulatory or legislative
actions on EQT and ETRN or the industry in which they operate,
including the risk of new restrictions with respect to oil and
natural gas development activities; the risk that the credit
ratings of the combined business may be different from what EQT and
ETRN expect; the ability of management to execute its plans to meet
its goals and other risks inherent in EQT’s and ETRN’s businesses;
public health crises, such as pandemics and epidemics, and any
related government policies and actions; the potential disruption
or interruption of EQT’s or ETRN’s operations due to war,
accidents, political events, civil unrest, severe weather, cyber
threats, terrorist acts, or other natural or human causes beyond
EQT’s or ETRN’s control; the combined company’s ability to identify
and mitigate the risks and hazards inherent in operating in the
global energy industry; expectations of plans, strategies,
objectives and growth and anticipated financial and operational
performance of ETRN and its affiliates, including guidance and any
changes in such guidance in respect of ETRN’s gathering,
transmission and storage and water services revenue and volume,
including the anticipated effects associated with the February 2020
Gas Gathering and Compression Agreement (and as subsequently
amended) entered into with EQT Corporation (EQT) and certain
affiliates (collectively, the EQT Global GGA); projected revenue
(including from firm reservation fees) and volumes, gathering
rates, deferred revenues, expenses and contract liabilities, and
the effects on liquidity, leverage, projected revenue, deferred
revenue and contract liabilities associated with the EQT Global GGA
and the MVP project (including changes in timing for such project);
the ultimate gathering MVC fee relief, and timing thereof, provided
to EQT under the EQT Global GGA and related agreements, and timing
of commencement of step ups in MVC thereunder; ETRN’s ability to
de-lever and timing and means thereof; the ultimate financial,
business, reputational and/or operational impacts resulting,
directly or indirectly, from the Rager Mountain incident; any
forecasted adjusted EBITDA (and incremental adjusted EBITDA with
MVP full in-service), water operating (loss) income, adjusted water
EBITDA, net (loss) income, free cash flow, retained free cash flow
(and usage thereof), leverage ratio, build multiples and deferred
revenue; the weighted average contract life of gathering,
transmission and storage contracts; infrastructure programs
(including the targeted or ultimate timing, cost, capacity and
sources of funding with respect to gathering, transmission and
storage and water projects); the cost to construct or restore
right-of-way for, capacity of, shippers for, timing and durability
of regulatory approvals and concluding litigation, final design
(including project scope, expansions, extensions or refinements and
capital and incremental adjusted EBITDA related thereto), ability
and timing to contract additional capacity on, mitigate emissions
from, targeted in-service dates of, and completion (including
potential timing of such completion) of current, planned or
in-service projects or assets, in each case as applicable; the
effect of the Fiscal Responsibility Act of 2023 on the MVP JV's
ability to complete the MVP project; the ability to construct,
complete and place in-service the MVP project; the targeted timing
and cost of completing the MVP project (and risks related thereto);
the targeted total MVP project cost and schedule, including the
timing for contractual obligations to commence, and the ability to
continue construction, potential receipt of in-service
authorization, and the realizability of the perceived benefits of
the MVP project; views as to having finalized the scope of
Southgate and the ability to permit, construct, complete and place
in-service Southgate; the targeted total project cost and timing
for completing (and ability to complete) Southgate, including the
satisfaction, if any, of conditions precedent with respect to the
relevant precedent agreements, timing for forecasted capital
expenditures related thereto, and the realizability of the
perceived benefits of the amended project design, scope and
provisions included in the relevant precedent agreements, and any
potential extensions of the terms of the precedent agreements; the
MVP JV's ability to execute any additional agreements for firm
capacity for Southgate; the potential for future bipartisan support
for, and the potential timing for, additional federal energy
infrastructure permitting reform legislation to be enacted; the
ultimate terms, partner relationships and structure of the MVP JV
and ownership interests therein; the realizability of all or any
portion of the potential Henry Hub bonus payments; the impact of
changes in assumptions and estimates relating to the potential
completion and full in-service timing of the MVP project (as well
as changes in such timing) on, among other things, the fair value
of the Henry Hub cash bonus payment provision of the EQT Global
GGA, gathering rates, the amount of gathering MVC fee relief and
the estimated transaction price allocated to ETRN's remaining
performance obligations under certain contracts with firm
reservation fees and MVCs; ETRN’s ability to identify and complete
opportunities to optimize its existing asset base and/or expansion
projects in ETRN’s operating areas and in areas that would provide
access to new markets; ETRN’s ability to bring, and targeted timing
for bringing, in-service extensions and expansions of its mixed-use
water system, and realize benefits therefrom in accordance with its
strategy for its water services business segment; ETRN’s ability to
identify and complete acquisitions and other strategic
transactions, including joint ventures, effectively integrate
transactions into ETRN’s operations, and achieve synergies, system
optionality, accretion and other benefits associated with
transactions, including through increased scale; the potential for
the MVP project, EQM Midstream Partners, LP’s (EQM) leverage, the
proposed EQT acquisition of ETRN, customer credit ratings changes,
defaults, acquisitions, dispositions and financings to impact EQM’s
credit ratings and the potential scope of any such impacts; the
effect and outcome of contractual disputes, litigation and other
proceedings, including regulatory investigations and proceedings;
the potential effects of any consolidation of or effected by
upstream gas producers, including acquisitions of midstream assets,
whether in or outside of the Appalachian Basin; the potential for,
timing, amount and effect of future issuances or repurchases of
ETRN’s securities; the effects of conversion, if at all, of ETRN’s
preferred shares; the effects of seasonality; expected cash flows,
cash flow profile (and support therefor from certain contract
structures) and MVCs, including those associated with the EQT
Global GGA, and the potential impacts thereon of the commission and
in-service timing (or absence thereof) and cost of the MVP project;
projected capital contributions and capital and operating
expenditures (which may be adjusted by management of the combined
company should the proposed EQT acquisition of ETRN close),
including the amount and timing of reimbursable capital
expenditures, capital budget and sources of funds for capital
expenditures; ETRN’s ability to recoup replacement and related
costs; future dividend amounts, timing and rates; statements
regarding macroeconomic factors effects on ETRN’s business,
including, future commodity prices, the impact of MVP in-service on
commodity prices or natural gas volumes in the Appalachian Basin,
and takeaway capacity constraints in the Appalachian Basin; beliefs
regarding future decisions of customers in respect of production
growth, curtailing natural gas production, timing of turning wells
in line, rig and completion activity and related impacts on ETRN’s
business, and the effect, if any, on such future decisions should
the MVP be brought in-service, as well as the potential for
increased volumes to flow to ETRN’s gathering and transmission
system to supply the MVP following in-service; ETRN’s liquidity and
financing position and requirements, including sources,
availability and sufficiency; statements regarding future interest
rates and/or reference rates and the potential impacts thereof; the
ability of ETRN’s subsidiaries (some of which are not wholly owned)
to service debt under, and comply with the covenants contained in,
their respective credit agreements; the MVP JV’s ability to raise
project-level debt, and the anticipated proceeds that ETRN expects
to receive therefrom; expectations regarding natural gas and water
volumes in ETRN’s areas of operations; ETRN’s ability to achieve
anticipated benefits associated with the execution of commercial
agreements; ETRN’s ability to position itself for a lower carbon
economy, achieve, and create value from, its ESG and sustainability
initiatives, targets and aspirations (including targets and
aspirations set forth in its climate policy) and respond, and
impacts of responding, to increasing stakeholder scrutiny in these
areas; the effectiveness of ETRN’s information technology and
operational technology systems and practices to detect and defend
against evolving cyberattacks on United States critical
infrastructure; the effects and associated cost of compliance with
existing or new government regulations including any quantification
of potential impacts of regulatory matters related to climate
change on ETRN; and future tax rates, status and position. These
forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from projected
results.
Accordingly, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. ETRN
has based these forward-looking statements on management’s current
expectations and assumptions about future events. While the Company
considers these expectations and assumptions to be reasonable, they
are inherently subject to significant business, economic,
competitive, regulatory, judicial, construction and other risks and
uncertainties, many of which are difficult to predict and are
beyond the Company's control, including, as it pertains to the MVP
project and its total cost and timing, risks and uncertainties such
as the physical construction and restoration conditions, including
steep slopes and any further unexpected geological impediments,
equipment issues, weather which could affect forward construction
and restoration, including the amount and severity of pipeline
slips, testing, commissioning, continued crew availability, ability
to meet workforce draw down plans, productivity ultimately
realized, assumptions related to, and the realizability of, bids
provided or to be provided and/or claims which could be made by or
against contractors, including relating to materials or
subcontractors, project opposition, and the receipt of any
necessary approvals, including in-service authorization. Further,
the commencement of MVP and MVP-related long-term firm capacity
contractual obligations, and certain MVC step ups, more significant
gathering MVC fee declines and potential Henry Hub cash bonus
payments under the EQT Global GGA, is dependent on MVP
authorization from the FERC and ability to commence service and
also the terms of the applicable contracts governing the timing of
such commencement, which generally provide that such firm capacity
obligations commence on the first day of the month immediately
following the date MVP is authorized and able to provide the
applicable service level and in the case of the EQT Global GGA
begin on the first day of the calendar quarter in which such MVP
firm capacity obligations commence. The risks and uncertainties
that may affect the operations, performance and results of ETRN’s
business and forward-looking statements include, but are not
limited to, those set forth above as well as under Part I, "Item
1A. Risk Factors" in ETRN's Annual Report on Form 10-K for the year
ended December 31, 2023 filed with the Securities and Exchange
Commission (the SEC), as updated by the risk factors to be
disclosed under Part II, "Item 1A. Risk Factors," of ETRN’s
Quarterly Report on Form 10-Q for the three months ended March 31,
2024 to be filed with the SEC, as applicable, and ETRN's subsequent
filings. Any forward-looking statement speaks only as of the date
on which such statement is made, and ETRN does not intend to
correct or update any forward-looking statement, unless required by
securities law, whether as a result of new information, future
events or otherwise. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements. All such
statements are expressly qualified by this cautionary
statement.
Important Information For Investors And Shareholders;
Additional Information And Where To Find It
In connection with the proposed transaction between EQT and
Equitrans, EQT intends to file with the U.S. Securities and
Exchange Commission (the “SEC”) a registration statement on Form
S-4 (the “registration statement”) that will include a joint proxy
statement of EQT and Equitrans and that will also constitute a
prospectus of EQT (the “joint proxy statement/prospectus”). EQT and
Equitrans also intend to file other documents regarding the
proposed transaction with the SEC. This document is not a
substitute for the joint proxy statement/prospectus or the
registration statement or any other document that EQT or Equitrans
may file with the SEC. BEFORE MAKING ANY VOTING DECISION, INVESTORS
ARE URGED TO CAREFULLY READ THE REGISTRATION STATEMENT, THE JOINT
PROXY STATEMENT/PROSPECTUS, AND ALL OTHER RELEVANT DOCUMENTS FILED
OR THAT MAY BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED
TRANSACTION, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE
DOCUMENTS, AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL
CONTAIN IMPORTANT INFORMATION ABOUT EQT, EQUITRANS, THE PROPOSED
TRANSACTION, THE RISKS THERETO AND RELATED MATTERS. After the
registration statement has been declared effective, a definitive
joint proxy statement/prospectus will be mailed to the shareholders
of EQT and the shareholders of Equitrans. Investors will be able to
obtain free copies of the registration statement and joint proxy
statement/prospectus and other relevant documents filed or that
will be filed with the SEC by EQT or Equitrans through the website
maintained by the SEC at www.sec.gov. Copies of the documents filed
with the SEC by EQT may be obtained free of charge on EQT’s website
at www.ir.eqt.com/investor-relations. Copies of the documents filed
with the SEC by Equitrans may be obtained free of charge on
Equitrans’ website at www.ir.equitransmidstream.com.
Participants In Solicitation
EQT and Equitrans and their respective directors, executive
officers and other members of management and employees may be
deemed to be participants in the solicitation of proxies in
connection with the proposed transaction contemplated by the joint
proxy statement/prospectus. Information regarding EQT’s directors
and executive officers and their ownership of EQT’s securities is
set forth in EQT’s filings with the SEC, including EQT’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2023 and
its Definitive Proxy Statement on Schedule 14A that was filed with
the SEC on March 1, 2024. To the extent such person’s ownership of
EQT’s securities has changed since the filing of such proxy
statement, such changes have been or will be reflected on
Statements of Changes in Beneficial Ownership on Form 4 filed with
the SEC. Information regarding Equitrans’ directors and executive
officers and their ownership of Equitrans’ securities is set forth
in Equitrans’ filings with the SEC, including Equitrans’ Annual
Report on Form 10-K for the fiscal year ended December 31, 2023 and
its Definitive Proxy Statement on Schedule 14A that was filed with
the SEC on March 4, 2024. To the extent such person’s ownership of
Equitrans’ securities has changed since the filing of such proxy
statement, such changes have been or will be reflected on
Statements of Changes in Beneficial Ownership on Form 4 filed with
the SEC. Additional information regarding the interests of those
persons and other persons who may be deemed participants in the
proposed transaction may be obtained by reading the joint proxy
statement/prospectus and other relevant materials that will be
filed with the SEC regarding the proposed transaction when such
documents become available. You may obtain free copies of these
documents as described in the preceding paragraph.
No Offer Or Solicitation
This news release relates to the proposed transaction between
EQT and Equitrans. This news release is for informational purposes
only and shall not constitute an offer to sell or exchange, or the
solicitation of an offer to buy or exchange, any securities or a
solicitation of any vote or approval, in any jurisdiction, pursuant
to the proposed transaction or otherwise, nor shall there be any
sale, issuance, exchange or transfer of the securities referred to
in this document in any jurisdiction in contravention of applicable
law. No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended.
EQUITRANS MIDSTREAM
CORPORATION
STATEMENTS OF CONSOLIDATED
COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended March
31,
2024
2023
(Thousands, except per share
amounts)
Operating revenues
$
364,274
$
376,337
Operating expenses:
Operating and maintenance
45,228
42,862
Selling, general and administrative
44,329
32,622
Transaction costs
5,684
—
Depreciation
71,672
69,404
Amortization of intangible assets
16,205
16,205
Total operating expenses
183,118
161,093
Operating income
181,156
215,244
Equity income
73,005
122
Other (expense) income, net
(3,976
)
(8,102
)
Net interest expense
(118,896
)
(104,957
)
Income before income taxes
131,289
102,307
Income tax expense (benefit)
19,400
(3,784
)
Net income
111,889
106,091
Net income attributable to noncontrolling
interests
2,890
4,409
Net income attributable to ETRN
108,999
101,682
Preferred dividends
14,628
14,628
Net income attributable to ETRN common
shareholders
$
94,371
$
87,054
Earnings per share of common stock
attributable to ETRN common shareholders - basic
$
0.22
$
0.20
Earnings per share of common stock
attributable to ETRN common shareholders - diluted
$
0.21
$
0.20
Weighted average common shares outstanding
- basic
434,497
433,707
Weighted average common shares outstanding
- diluted
440,561
434,254
EQUITRANS MIDSTREAM
CORPORATION
GATHERING RESULTS OF
OPERATIONS (UNAUDITED)
Three Months Ended March
31,
2024
2023
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues(1)
$
135,676
$
140,071
Volumetric-based fee revenues
88,964
70,681
Total operating revenues
224,640
210,752
Operating expenses:
Operating and maintenance
24,760
21,396
Selling, general and administrative
28,464
19,508
Depreciation
50,152
49,349
Amortization of intangible assets
16,205
16,205
Total operating expenses
119,581
106,458
Operating income
$
105,059
$
104,294
Other (expense) income, net(2)
$
(4,672
)
$
(8,494
)
OPERATIONAL DATA
Gathered volumes (BBtu per day)
Firm capacity(1)
4,777
5,292
Volumetric-based services
2,603
2,088
Total gathered volumes
7,380
7,380
Capital expenditures(3)
$
54,256
$
59,713
(1)
Includes revenues and volumes, as applicable, from contracts
with MVCs.
(2)
Other (expense) income, net, includes the unrealized loss on
derivative instruments associated with the Henry Hub cash bonus
payment provision.
(3)
Includes approximately $5.0 million and $3.2 million of capital
expenditures related to noncontrolling interests in Eureka for the
three months ended March 31, 2024 and 2023, respectively.
EQUITRANS MIDSTREAM
CORPORATION
TRANSMISSION RESULTS OF
OPERATIONS (UNAUDITED)
Three Months Ended March
31,
2024
2023
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues
$
100,323
$
101,722
Volumetric-based fee revenues
16,571
37,184
Total operating revenues
116,894
138,906
Operating expenses:
Operating and maintenance
11,753
14,390
Selling, general and administrative
13,676
11,706
Depreciation
14,383
13,888
Total operating expenses
39,812
39,984
Operating income
$
77,082
$
98,922
Equity income
$
73,005
$
122
OPERATIONAL DATA
Transmission pipeline throughput (BBtu per
day)
Firm capacity(1)
3,370
3,345
Interruptible capacity
49
3
Total transmission pipeline throughput
3,419
3,348
Average contracted firm transmission
reservation commitments (BBtu per day)
4,157
4,239
Capital expenditures(2)
$
17,704
$
9,189
(1)
Firm capacity includes volumes associated with firm capacity
contracts including volumes in excess of firm capacity.
(2)
Transmission capital expenditures do not include aggregate
capital contributions made to the MVP JV of approximately $423.0
million and $34.5 million for the three months ended March 31, 2024
and 2023, respectively.
EQUITRANS MIDSTREAM
CORPORATION
WATER RESULTS OF OPERATIONS
(UNAUDITED)
Three Months Ended March
31,
2024
2023
FINANCIAL DATA
(Thousands, except MMgal
amounts)
Firm reservation fee revenues(1)
$
9,375
$
9,375
Volumetric-based fee revenues
13,365
17,304
Total operating revenues
22,740
26,679
Operating expenses:
Operating and maintenance
8,693
7,045
Selling, general and administrative
2,025
1,398
Depreciation
7,034
5,863
Total operating expenses
17,752
14,306
Operating income
$
4,988
$
12,373
OPERATIONAL DATA
Water services volumes (MMgal)
Firm capacity(1)
127
108
Volumetric-based services
282
351
Total water volumes
409
459
Capital expenditures
$
10,047
$
11,076
(1)
Includes revenues and volumes from contracts with MVCs or Annual
Revenue Commitments (ARCs), as applicable.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240430332176/en/
Analyst inquiries: Anthony DeFabio – Treasurer and
Director, Investor Relations 412-518-7193
adefabio@equitransmidstream.com
Media inquiries: Natalie Cox – Communications and
Corporate Affairs ncox@equitransmidstream.com
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