Equitrans Midstream Corporation (NYSE: ETRN), today, announced
financial and operational results for the third quarter 2020.
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.
Q3 2020 Highlights:
- Delivered third quarter 2020 results ahead of guidance
- Generated $168 million of net income and achieved $282 million
of adjusted EBITDA
- Recorded 68% of total operating revenue from firm reservation
fees
- Raised full-year 2020 adjusted EBITDA and free cash flow
guidance
"Our third quarter results demonstrate our ability to generate
predictable and stable revenue in any type of operating
environment," said Thomas F. Karam, ETRN chairman and chief
executive officer. "The transformative actions that we took earlier
in the year have allowed us to focus on controlling costs and
efficiently deploying capital, which ultimately enables us to
strengthen our balance sheet and generate substantial free cash
flow."
"Our results also reflect the benefits we are realizing as a
result of the new gathering agreement executed earlier this year,"
said Diana M. Charletta, ETRN president and chief operating
officer. "This new agreement allows us to optimize our assets by
eliminating redundancies, scheduling efficient construction plans,
and safely streamlining operations, all of which lead to meaningful
capital reductions."
Charletta continued, "In addition, as our nation continues to
navigate the uncertainties of the COVID-19 pandemic, ETRN is proud
to play a part in safely transporting critical energy resources
during these unprecedented times. By implementing strict
pandemic-related working protocols early on, our operations teams
have continued to provide safe, reliable, and uninterrupted
midstream services for our customers."
THIRD QUARTER 2020 SUMMARY RESULTS
$ millions (except per share metrics)
Net income attributable to ETRN common
shareholders
$
149.8
Adjusted net income attributable to ETRN
common shareholders
$
135.1
Earnings per diluted share attributable to
ETRN common shareholders
$
0.35
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.31
Net income
$
168.4
Adjusted EBITDA
$
281.6
Deferred revenue
$
74.6
Net cash provided by operating
activities
$
231.2
Free cash flow
$
44.6
Retained free cash flow
$
(20.3)
Net income attributable to ETRN common shareholders for the
third quarter 2020 was impacted by a $21.0 million unrealized gain
on derivative instruments. The unrealized gain is reported within
other income and relates to the contractual agreement with EQT
Corporation (EQT) in which ETRN will receive cash from EQT
conditioned on the quarterly average of certain Henry Hub natural
gas prices exceeding certain thresholds during the three years
following the Mountain Valley Pipeline's (MVP) in-service, but in
no case extending beyond December 2024. The contract is accounted
for as a derivative with the fair value marked-to-market at each
quarter-end.
As a result of the gathering agreement with EQT entered into in
February 2020, revenue from the contracted minimum volume
commitment (MVC) is recognized utilizing an average rate applied
over the 15-year contract life. The difference between the cash
received from the contracted MVC and the revenue recognized results
in the deferral of revenue into future periods. In the third
quarter 2020, deferred revenue was $74.6 million.
Operating revenue for the third quarter was lower compared to
the same quarter last year by $58.4 million, primarily from the
impact of deferred revenue. The reduction in operating revenue was
partially offset by increased revenue from higher MVCs. Operating
expenses decreased by $297.4 million compared to the third quarter
2019, primarily as a result of a $305.5 million impairment of
goodwill in the third quarter 2019. Additionally, operating and
maintenance expense decreased versus the prior year quarter while
selling, general and administrative and depreciation expense
increased.
QUARTERLY DIVIDEND For the third quarter 2020, ETRN will
pay a quarterly cash dividend of $0.15 per common share on November
13, 2020 to ETRN common shareholders of record at the close of
business on November 3, 2020.
TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS
$ millions
Three Months Ended September
30, 2020
Nine Months Ended September
30, 2020
Full-Year 2020
Forecast
MVP
$63
$142
$265 - $275
Gathering(1)
$77
$266
$330 - $340
Transmission(2)
$9
$36
$45 - $55
Water
$3
$8
$15
Headquarters
$1
$3
$5
Total
$153
$455
$660 - $690
(1)
Excludes $13.5 million and $37.1 million
of capital expenditures related to noncontrolling interests in
Eureka Midstream Holdings, LLC (Eureka) for the three and nine
months ended September 30, 2020, respectively. Full-year 2020
forecast excludes approximately $45 million of capital expenditures
related to the noncontrolling interests in Eureka.
(2)
Includes capital contributions to Mountain
Valley Pipeline, LLC (MVP JV) for the MVP Southgate project.
OUTLOOK
$ millions
Full-Year 2020
Net income attributable to ETRN
$430 - $450
Adjusted EBITDA
$1,200 - $1,220
Deferred revenue
$225
Free cash flow
$320 - $340
Retained free cash flow
$(90) - $(70)
BUSINESS AND PROJECT UPDATES Outstanding Debt and
Liquidity As of September 30, 2020, ETRN reported $6.4 billion
of consolidated long-term debt; $485 million of borrowings and $235
million of letters of credit outstanding under the $3 billion
revolving credit facility; and $182.5 million of cash.
Water Services Water operating income was $10.1 million
and water EBITDA was $18.2 million in the third quarter 2020. Water
EBITDA is forecast to be approximately $70 - $75 million for the
full-year 2020.
Volume Curtailment Update Third quarter 2020 gathered
volumes and revenue were impacted by temporary production
curtailments by EQT. The curtailed volumes averaged approximately
570 MMcf per day during the month of September and were brought
back online in a phased approach during the first half of
October.
Mountain Valley Pipeline Recently, the MVP JV obtained a
number of key permits and authorizations. In September, the MVP JV
received the project's new Biological Opinion, and the U.S. Army
Corps of Engineers (USACE) approved the project's Nationwide Permit
12 (NWP12); and in early October, the MVP JV received approval from
the U.S. Federal Energy Regulatory Commission (FERC) to resume
forward construction along the majority of the route. In
mid-October, the Fourth Circuit Court of Appeals issued a temporary
administrative stay of the project’s NWP12, which prevents
construction of waterbody crossings under the USACE's NWP12 program
until the Court rules on the full motion to stay. The Court has
scheduled oral arguments for November 9 on the full motion to stay.
Additionally, in late October, a challenge was filed against the
project's new Biological Opinion.
Due to unanticipated delays during the prime 2020 construction
seasons resulting from the current inability to complete certain
construction work related to the NWP12 and the remaining FERC stop
work order related to approximately 25 miles of the project, the
MVP JV is targeting a full in-service date for the project during
the second half of 2021. The total project cost estimate is $5.8 -
$6.0 billion, of which ETRN expects to fund approximately $2.9
billion. As of September 30, 2020, ETRN had funded approximately
$2.1 billion. Based on the midpoint of the total project cost
estimate, ETRN expects to have an approximate 47.6% ownership
interest in MVP and will operate the pipeline.
MVP Southgate In June 2020, the FERC issued the
Certificate of Public Convenience and Necessity for the MVP
Southgate project. In August 2020, North Carolina regulators denied
the MVP JV's application for a Section 401 water quality
certification, which was appealed in September 2020. Project
construction is expected to begin in 2021, upon receiving all
necessary permits and authorizations, and MVP Southgate is targeted
to enter service during 2022. The approximately 75-mile pipeline is
expected to receive gas from MVP in Virginia and transport the gas
to new delivery points in Rockingham and Alamance Counties, North
Carolina. With a total project cost estimate of approximately $450
million to $500 million, MVP Southgate is backed by a 300 MMcf per
day firm capacity commitment from Dominion Energy North Carolina
and, as designed, the pipeline has expansion capabilities that
could provide up to 900 MMcf per day of total capacity. ETRN has a
47.2% ownership interest in MVP Southgate and will operate the
pipeline.
Q3 2020 Earnings Conference Call Information ETRN will
host a conference call with security analysts today, November 3,
2020, at 10:30 a.m. (ET) to discuss third quarter 2020 financial
results, operating results, and other business matters.
Call Access: All participants must
pre-register online, in advance of the call. Upon
completion, registered participants will receive a confirmation
email that includes instructions for accessing the call, as well as
a unique registration ID and passcode. Please pre-register using
the appropriate online registration links below:
Security Analysts :: Audio
Registration Your email confirmation will contain dial-in
information, along with your unique ID and passcode.
All Other Participants :: Webcast
Registration Your email confirmation will contain the webcast link,
along with your unique ID and passcode.
Call Replay: For 14 days following the call, an audio
replay will be available at (800) 585-8367 or (416) 621-4642. The
ETRN conference ID: 7529126.
ETRN management speak to investors from time-to-time and the
presentation for these discussions, which is updated periodically,
is available via www.equitransmidstream.com.
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
attributable to ETRN common shareholders and adjusted earnings 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 investors, may
use to make period-to-period comparisons of earnings trends.
Management believes that adjusted net income attributable to ETRN
common shareholders and adjusted earnings per diluted share
attributable to ETRN common shareholders as presented provide
useful information for investors for evaluating period-over-period
earnings. Adjusted net income attributable to ETRN common
shareholders and adjusted earnings per diluted share attributable
to ETRN common shareholders should not be considered as
alternatives to net income attributable to ETRN common
shareholders, earnings per diluted share attributable to ETRN
common shareholders or any other measure of financial performance
presented in accordance with GAAP. Adjusted net income attributable
to ETRN common shareholders and adjusted earnings per diluted share
attributable to ETRN common shareholders as presented have
important limitations as analytical tools because they exclude
some, but not all, items that affect net income attributable to
ETRN common shareholders and earnings per diluted share
attributable to ETRN common shareholders, including, as applicable,
the premium on redemption of a portion of EQM Midstream Partners,
LP (EQM) Series A Perpetual Convertible Preferred Units (EQM Series
A Preferred Units), separation and other transaction costs,
impairments of long-lived assets, changes in the fair value of
derivative instruments and loss on early extinguishment of debt,
which items affect the comparability of results period to period.
The impact of noncontrolling interests is also excluded from the
calculations of adjustment items to adjusted net income
attributable to ETRN common shareholders, as is the tax impact of
non-GAAP items. Additionally, because these non-GAAP metrics may be
defined differently by other companies in ETRN's industry, ETRN's
definitions of adjusted net income attributable to ETRN common
shareholders and adjusted earnings 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 attributable to ETRN common
shareholders and adjusted earnings per diluted share attributable
to ETRN common shareholders should not be viewed as indicative of
the actual amount of net income attributable to ETRN common
shareholders or actual earnings 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
attributable to ETRN common shareholders and earnings 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
September 30, 2020.
Reconciliation of Adjusted Net Income Attributable to ETRN
Common Shareholders and Adjusted Earnings per Diluted Share
Attributable to ETRN Common Shareholders
Three Months Ended September
30,
(Thousands, except per share
information)
2020
2019
Net income (loss) attributable to ETRN
common shareholders
$
149,838
$
(65,825)
Add back / (deduct):
Separation and other transaction costs
984
256
Impairments of long-lived assets
—
305,459
Unrealized gain on derivative
instruments
(21,005)
—
Noncontrolling interest impact of non-GAAP
items
—
(96,913)
Tax impact of non-GAAP items(1)
5,265
(54,909)
Adjusted net income attributable to ETRN
common shareholders
$
135,082
$
88,068
Diluted weighted average common shares
outstanding
432,821
254,915
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.31
$
0.35
(1)
The adjustments were tax effected at the
Company’s federal and state statutory tax rate for each period.
Adjusted EBITDA As used in this news release, Adjusted
EBITDA means net income, plus income tax expense, net interest
expense, loss on early extinguishment of debt (as applicable),
depreciation, amortization of intangible assets, impairments of
long-lived assets, payments on the preferred interest in EQT Energy
Supply, LLC (Preferred Interest), non-cash long-term compensation
expense (income), and separation and other transaction costs, less
equity income, AFUDC-equity, unrealized gain (loss) on derivative
instruments and adjusted EBITDA attributable to noncontrolling
interest.
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 September 30, 2020.
Reconciliation of Adjusted EBITDA
Three Months Ended September
30,
(Thousands)
2020
2019
Net income (loss)
$
168,439
$
(61,489)
Add:
Income tax expense
28,440
1,948
Net interest expense
86,411
65,606
Depreciation
66,772
59,460
Amortization of intangible assets
16,204
14,540
Impairments of long-lived assets
—
305,459
Preferred Interest payments
2,765
2,746
Non-cash long-term compensation expense
(income)
3,048
(718)
Separation and other transaction costs
984
256
Less:
Equity income
(60,917)
(44,448)
AFUDC – equity
(192)
(474)
Unrealized gain on derivative
instruments
(21,005)
—
Adjusted EBITDA attributable to
noncontrolling interest(1)
(9,363)
(9,149)
Adjusted EBITDA
$
281,586
$
333,737
(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 September 30, 2020 was
calculated as net income of $4.0 million plus depreciation of $2.8
million, plus amortization of intangible assets of $2.1 million and
plus interest expense of $0.5 million. Adjusted EBITDA attributable
to noncontrolling interest for the three months ended September 30,
2019 was calculated as net loss of $29.7 million, plus depreciation
of $2.6 million, plus amortization of intangible assets of $1.3
million, plus impairments of long-lived assets of $34.0 million and
plus interest expense of $1.0 million.
Free Cash Flow As used in this news release, free cash
flow means net cash provided by operating activities plus principal
payments received on the Preferred Interest, and less net cash
provided by operating activities attributable to noncontrolling
interest, capital expenditures (excluding the noncontrolling
interest share (40%) of Eureka capital expenditures), capital
contributions to MVP JV, and distributions/dividends and redemption
amounts paid to Series A Preferred unitholders/shareholders (as
applicable).
Retained Free Cash Flow As used in this news release,
retained free cash flow means free cash flow less dividends paid to
common shareholders and distributions paid to noncontrolling
interest EQM common unitholders (as applicable).
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 September
30, 2020.
Reconciliation of Free Cash Flow and Retained Free Cash
Flow
Three Months Ended September
30,
(Thousands)
2020
2019
Net cash provided by operating
activities
$
231,195
$
267,926
Add back / (deduct):
Principal payments received on the
Preferred Interest
1,259
1,173
Net cash provided by operating activities
attributable to noncontrolling interest(1)
(13,828)
(4,744)
ETRN Series A Preferred Shares
dividends(2)
(2,251)
—
EQM Series A Preferred Unit
distributions(3)
(10,929)
(22,979)
Capital expenditures(4)(5)
(95,243)
(280,394)
Capital contributions to MVP JV
(65,630)
(211,677)
Free cash flow
$
44,573
$
(250,695)
Less:
Dividends paid to common shareholders
(6)
(64,871)
(114,634)
Distributions paid to noncontrolling
interest EQM common unitholders
—
(96,526)
Retained free cash flow
$
(20,298)
$
(461,855)
(1)
Reflects 40% of $34.6 million and $11.9
million, or Eureka’s standalone net cash provided by operating
activities, representing the noncontrolling interest portion for
the three months ended September 30, 2020 and 2019,
respectively.
(2)
Reflects cash dividends paid of $0.075 per
ETRN Series A Perpetual Convertible Preferred Share.
(3)
Reflects partial period distributions paid
for the period 4/1/2020 through 6/17/2020 and cash distributions of
$1.0364 per EQM Series A Preferred Unit in the third quarter of
2019.
(4)
Does not reflect amounts related to the
noncontrolling interest share of Eureka.
(5)
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.
(6)
Second quarter 2020 dividend of $0.15 per
ETRN common share was paid during the third quarter 2020.
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, operating income, net
cash provided by operating activities 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, 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.
ETRN is unable to provide a reconciliation of projected adjusted
EBITDA from projected net income (loss), the most comparable
financial measure calculated in accordance with GAAP, or a
reconciliation of projected free cash flow or retained cash flow to
net cash provided by operating activities, the most comparable
financial measure calculated in accordance with GAAP. ETRN has not
provided a reconciliation of projected adjusted EBITDA to projected
net income (loss), the most comparable financial measure calculated
in accordance with GAAP, due to the inherent difficulty and
impracticability of predicting certain amounts required by GAAP
with a reasonable degree of accuracy. Net income (loss) includes
the impact of depreciation expense, income tax expense, the revenue
impact of changes in the projected fair value of derivative
instruments prior to settlement, potential changes in estimates for
certain contract liabilities and unbilled revenues and certain
other items that impact comparability between periods and the tax
effect of such items, which may be significant and difficult to
project with a reasonable degree of accuracy. Therefore, a
reconciliation of projected adjusted EBITDA to projected net income
(loss) is not available without unreasonable effort.
ETRN is unable to project net cash provided by operating
activities because this metric includes the impact of changes in
operating assets and liabilities related to the timing of cash
receipts and disbursements that may not relate to the period in
which the operating activities occurred. ETRN is unable to project
these timing differences with any reasonable degree of accuracy to
a specific day, three or more months in advance. Therefore, ETRN is
unable to provide projected net cash provided by operating
activities, or the related reconciliation of each of projected free
cash flow and projected retained free cash flow to projected net
cash provided by operating activities without unreasonable effort.
ETRN provides a range for the forecasts of net income attributable
to ETRN, adjusted EBITDA, free cash flow and retained free cash
flow to allow for the inherent difficulty of predicting certain
amounts and the variability in the timing of spending and the
impact on the related reconciling items, many of which interplay
with each other.
Water EBITDA As used in this news release, water EBITDA
means the earnings before interest, taxes, depreciation and
amortization of ETRN’s water services business. Water EBITDA is a
non-GAAP supplemental financial measure that management and
external users of ETRN’s consolidated financial statements, such as
industry analysts, investors, lenders and rating agencies, use to
assess the impact of ETRN’s water services business on ETRN’s
operating performance and ETRN’s ability to incur and service debt
and fund capital expenditures. Water EBITDA should not be
considered as an alternative to ETRN’s net income, operating income
or any other measure of financial performance presented in
accordance with GAAP. Water EBITDA has important limitations as an
analytical tool because the measure excludes some, but not all,
items that affect net income and operating income. Additionally,
because water EBITDA may be defined differently by other companies
in ETRN’s industry, the definition of water EBITDA may not be
comparable to similarly titled measures of other companies, thereby
diminishing the utility of the measure. The table below reconciles
water EBITDA from ETRN's water operating income as derived from
ETRN's statements of consolidated comprehensive income to be
included in ETRN's Quarterly Report on Form 10-Q for the three
months ended September 30, 2020.
ETRN has not provided a reconciliation of projected water EBITDA
from projected water operating income, the most comparable measure
calculated in accordance with GAAP. ETRN does not allocate certain
costs, such as interest expenses, to individual assets within its
business segments. Therefore, the reconciliation of projected water
EBITDA from projected water operating income is not available
without unreasonable effort. ETRN has provided a range for the
forecast of water EBITDA to allow for the variability in the timing
of spending and the impact on the related reconciling items, many
of which interplay with each other.
Reconciliation of Water EBITDA
Three Months Ended September
30,
(Thousands)
2020
2019
Water operating income
$
10,118
$
7,722
Add: Depreciation
8,105
6,907
Water EBITDA
$
18,223
$
14,629
About Equitrans Midstream Corporation: Equitrans
Midstream Corporation (ETRN) 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 assets in the Marcellus
and Utica regions, ETRN 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 135-year history in the energy industry,
ETRN was launched as a standalone company in 2018 with the vision
to be the premier midstream services provider in North America.
ETRN is helping to meet America’s growing need for clean-burning
energy, while also providing a rewarding workplace and enriching
the communities where its employees live and work.
For more information on Equitrans Midstream Corporation, visit
www.equitransmidstream.com; and to learn more about our
environmental, social, and governance practices visit
https://csr.equitransmidstream.com.
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. Words such
as “could,” “will,” “may,” “assume,” “forecast,” “position,”
“predict,” “strategy,” “expect,” “intend,” “plan,” “estimate,”
“anticipate,” “believe,” “project,” “budget,” “potential,”
“target,” "expect," "intend" or “continue,” and similar expressions
are used to identify 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 specifically include 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 regarding ETRN’s
gathering, transmission and storage and water service revenue and
volume growth, including the anticipated effects associated with
the new Gas Gathering and Compression Agreement and related
documents entered into with EQT Corporation (EQT) (collectively,
the EQT Global GGA); projected revenue (including from firm
reservation fees), deferred revenues, expenses, and contract
liabilities, and the effects on projected revenue, deferred revenue
and contract liabilities associated with the EQT Global GGA and the
MVP project (including changes in the targeted full in-service date
for such project); the ultimate gathering fee relief provided to
EQT under the EQT Global GGA and related agreements, including the
exercise by EQT of any cash-out option as an alternative to
receiving a portion of such relief; ETRN’s ability to de-lever;
forecasted adjusted EBITDA (and incremental adjusted EBITDA with
MVP full in-service), water EBITDA, net income attributable to
ETRN, free cash flow, retained free cash flow, leverage ratio, and
deferred revenue; the weighted average contract life of gathering,
transmission and storage contracts; infrastructure programs
(including the timing, cost, capacity and sources of funding with
respect to gathering, transmission and storage and water expansion
projects); the cost, capacity, shippers for, timing of regulatory
approvals, final design (including expansions or extensions and
capital and incremental adjusted EBITDA related thereto), ability
to contract additional capacity on and targeted in-service dates of
current or in-service projects or assets, in each case as
applicable; the ultimate terms, partners and structure of Mountain
Valley Pipeline, LLC (MVP JV) and ownership interests therein; the
impact of changes in the targeted full in-service date of the MVP
project on the fair value of the Henry Hub cash bonus provision of
the EQT Global GGA; expansion projects in ETRN’s operating areas
and in areas that would provide access to new markets; ETRN’s
ability to provide produced water handling services and realize
expansion opportunities and related capital avoidance; 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 and accretion associated with transactions, including
through increased scale; ETRN’s ability to access commercial
opportunities and new customers for its water services business,
and the timing and final terms of any definitive water services
agreement or agreements between EQT and ETRN entered into pursuant
to the letter agreement between the parties in respect of water
services (Water Services Letter Agreement); any credit rating
impacts associated with the MVP project, customer credit ratings
changes, including EQT's, and defaults, acquisitions, dispositions
and financings and any changes in EQM’s credit ratings; the impact
of a dispute with EQT (or resolution thereof) regarding the
Hammerhead gathering agreement and/or ownership of the Hammerhead
pipeline on ETRN’s business and results of operations; the impact
of such dispute (or resolution thereof) on investors’ perceptions
of ETRN’s commercial relationship with EQT; the effect and outcome
of future litigation and other proceedings, including regulatory
proceedings; effects of any consolidation of or effected by
upstream gas producers, whether in or outside of the Appalachian
Basin; the ability of ETRN’s contracts to survive a customer
bankruptcy or restructuring; the timing and amount of future
issuances or repurchases of ETRN’s securities; effects of
conversion, if at all, of ETRN’s preferred shares; effects of
seasonality; expected cash flows and MVCs, including those
associated with the EQT Global GGA and any definitive agreement or
agreements between EQT and ETRN related to the Water Services
Letter Agreement, and the potential impacts thereon of the
commission timing and cost of the MVP project; projected capital
contributions and capital and operating expenditures, including the
amount and timing of reimbursable capital expenditures, capital
budget and sources of funds for capital expenditures; dividend
amounts, timing and rates; changes in commodity prices and the
effect of commodity prices on ETRN's business, including future
decisions of customers in respect of curtailing (or subsequently
bringing back online) natural gas production, choke management,
timing of turning wells in line, rig and completion activity and
related impacts on ETRN’s business; liquidity and financing
requirements, including sources and availability; interest rates;
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; expectations
regarding production volumes in ETRN’s areas of operations; ETRN’s
ability to achieve the anticipated benefits associated with the
execution of the EQT Global GGA, the Water Services Letter
Agreement and related agreements; the impact on ETRN and its
subsidiaries of the coronavirus disease 2019 (COVID-19) pandemic,
including, among other things, effects on demand for natural gas
and ETRN’s services, the duration of the reduction or curtailment
of production of associated gas from basins such as the Permian
basin, commodity prices and access to capital; the effects of
government regulation; and tax 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 current expectations
and assumptions about future events. While ETRN considers these
expectations and assumptions to be reasonable, they are inherently
subject to significant business, economic, competitive, regulatory
and other risks and uncertainties, many of which are difficult to
predict and beyond ETRN’s control. 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 under Item 1A, "Risk Factors" in ETRN's
Annual Report on Form 10-K for the year ended December 31, 2019
filed with the Securities and Exchange Commission (the SEC), as
updated by the risk factors disclosed under Part II, Item 1A, "Risk
Factors," of ETRN’s Quarterly Report on Form 10-Q for the three
months ended June 30, 2020 filed with the SEC and ETRN's subsequent
Quarterly Reports on Form 10-Q. 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 laws, 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.
EQUITRANS MIDSTREAM
CORPORATION
STATEMENTS OF CONSOLIDATED
COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended September
30,
2020
2019
(Thousands, except per share
amounts)
Operating revenues
$
350,000
$
408,434
Operating expenses:
Operating and maintenance
33,905
43,021
Selling, general and administrative
31,626
24,151
Separation and other transaction costs
984
256
Depreciation
66,772
59,460
Amortization of intangible assets
16,204
14,540
Impairments of long-lived assets
—
305,459
Total operating expenses
149,491
446,887
Operating income (loss)
200,509
(38,453)
Equity income
60,917
44,448
Other income
21,864
70
Net interest expense
86,411
65,606
Income (loss) before income taxes
196,879
(59,541)
Income tax expense
28,440
1,948
Net income (loss)
168,439
(61,489)
Net income attributable to noncontrolling
interests
3,973
4,336
Net income (loss) attributable to ETRN
164,466
(65,825)
Preferred dividends
14,628
—
Net income (loss) attributable to ETRN
common shareholders
$
149,838
$
(65,825)
Earnings (loss) per share of common stock
attributable to ETRN common shareholders - basic
$
0.35
$
(0.26)
Earnings (loss) per share of common stock
attributable to ETRN common shareholders - diluted
$
0.35
$
(0.26)
Weighted average common shares outstanding
- basic
432,773
254,915
Weighted average common shares outstanding
- diluted
432,821
254,915
EQUITRANS MIDSTREAM
CORPORATION
GATHERING RESULTS OF
OPERATIONS
Three Months Ended September
30,
2020
2019
(Thousands, except per day
amounts)
FINANCIAL DATA
$
145,533
$
154,791
Firm reservation fee revenues(1)
87,118
144,700
Volumetric-based fee revenues
232,651
299,491
Total operating revenues
Operating expenses:
20,683
27,127
Operating and maintenance
21,930
18,462
Selling, general and administrative
—
256
Separation and other transaction costs
44,648
38,943
Depreciation
16,204
14,540
Amortization of intangible assets
—
298,652
Impairments of long-lived assets
103,465
397,980
Total operating expenses
$
129,186
$
(98,489)
Operating income (loss)
OPERATIONAL DATA
Gathering volumes (BBtu per day):
5,111
3,824
Firm capacity reservation(1)
3,080
4,406
Volumetric-based services
8,191
8,230
Total gathered volumes
$
90,452
$
271,860
Capital expenditures(2)
(1)
Includes revenues and volumes, as
applicable, from contracts with MVCs.
(2)
Includes approximately $13.5 million and
$6.7 million of capital expenditures related to noncontrolling
interests in Eureka for the three months ended September 30, 2020
and 2019, respectively.
EQUITRANS MIDSTREAM
CORPORATION
TRANSMISSION RESULTS OF
OPERATIONS
Three Months Ended September
30,
2020
2019
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues
$
84,612
$
81,990
Volumetric-based fee revenues
8,717
5,309
Total operating revenues
93,329
87,299
Operating expenses:
Operating and maintenance
8,653
8,976
Selling, general and administrative
7,557
5,286
Depreciation
13,659
13,347
Total operating expenses
29,869
27,609
Operating income
$
63,460
$
59,690
Equity income
$
60,917
$
44,448
OPERATIONAL DATA
Transmission pipeline throughput (BBtu per
day):
Firm capacity reservation
2,950
2,786
Volumetric-based services
29
29
Total transmission pipeline throughput
2,979
2,815
Average contracted firm transmission
reservation commitments (BBtu per day)
3,859
3,650
Capital expenditures(1)
$
6,721
$
16,296
(1)
Transmission capital expenditures do not
include capital contributions made to the MVP JV for the MVP and
MVP Southgate projects of approximately $65.6 million and $211.7
million for the three months ended September 30, 2020 and 2019,
respectively.
EQUITRANS MIDSTREAM
CORPORATION
WATER RESULTS OF
OPERATIONS
Three Months Ended September
30,
2020
2019
FINANCIAL DATA
(Thousands)
Firm reservation fee revenues(1)
$
9,005
$
840
Volumetric based fee revenues
15,015
20,804
Water services revenues
24,020
21,644
Operating expenses:
Operating and maintenance
4,569
6,918
Selling, general and administrative
1,228
97
Depreciation
8,105
6,907
Total operating expenses
13,902
13,922
Operating income
$
10,118
$
7,722
OPERATIONAL DATA
Water volumes (MMgal)
Firm capacity reservation(1)
126
42
Volumetric based services
307
481
Total water volumes
433
523
Capital expenditures
$
2,530
$
13,466
(1)
Includes revenues and volumes, as applicable, from contracts
with MVCs.
Source: Equitrans Midstream Corporation
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005131/en/
Analyst inquiries: Nate Tetlow – Vice President,
Corporate Development and Investor Relations 412-553-5834
ntetlow@equitransmidstream.com
Media inquiries: Natalie Cox – Communications and
Corporate Affairs 412-395-3941 ncox@equitransmidstream.com
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