Equitrans Midstream Corporation (NYSE: ETRN), today, announced financial and operational results for the full-year and fourth 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.

2020 Highlights:

  • Generated $638 million of net income and achieved $1,215 million of adjusted EBITDA
  • Recorded 66% of total operating revenue from firm reservation fees
  • Increased total gathered volumes by approximately 5% year-over-year
  • Reduced gathering operating and maintenance expense per gathered volume by 14% year-over-year

“The past year was transformational on many fronts,” said Thomas F. Karam, ETRN chairman and chief executive officer. “During 2020, our employees remained resilient – navigating the unprecedented times related to the pandemic and strengthening our company by delivering on our ability to generate predictable and stable revenue in any operating environment. We simplified our corporate structure, emerging as a single C-Corp entity; executed a gathering agreement that allows us to optimize our assets and realize meaningful capital savings; and acted with fiscal discipline by controlling costs and deploying capital efficiently in order to strengthen our balance sheet.”

“Looking ahead, we acknowledge the reality of climate change as one of the most critical issues of our time and we continue to embrace the importance of sustainability for future generations,” said Diana M. Charletta, ETRN president and chief operating officer. “Similar to our proactive safety culture, Equitrans’ ESG initiatives are becoming part of our DNA – from biodiversity considerations and the sourcing of our materials, to stakeholder engagement and transparent corporate governance.”

Charletta continued, “In January, we published our initial Climate Policy, which underscores a comprehensive commitment to environmental excellence in every aspect of our operations. As our society transitions to a lower-carbon economy, we will continue to take steps to reduce greenhouse gas emissions and build resiliency in our business to effectively manage the risks and opportunities. Every day must be a step in the right direction and as the journey continues, we will work to achieve our near-term actions, as well as our Net Zero Carbon Goals by 2050.”

2020 YEAR-END AND FOURTH QUARTER SUMMARY RESULTS

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

$ millions (except per share metrics)

2020

 

2020

Net income attributable to ETRN common shareholders

$

117.8

 

 

$

364.4

 

Adjusted net income attributable to ETRN common shareholders

$

133.5

 

 

$

443.3

 

Earnings per diluted share attributable to ETRN common shareholders

$

0.27

 

 

$

1.06

 

Adjusted earnings per diluted share attributable to ETRN common shareholders

$

0.31

 

 

$

1.29

 

Net income

$

136.6

 

 

$

638.0

 

Adjusted EBITDA

$

286.4

 

 

$

1,214.6

 

Deferred revenue

$

76.9

 

 

$

225.7

 

Net cash provided by operating activities

$

316.7

 

 

$

1,140.9

 

Free cash flow

$

86.6

 

 

$

317.4

 

Retained free cash flow

$

21.8

 

 

$

(89.8

)

Net income attributable to ETRN common shareholders was impacted by a $21.3 million unrealized loss on derivative instruments for the fourth quarter 2020 and a $16.5 million unrealized gain on derivative instruments for the full-year 2020. The unrealized gain/loss 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.

For the full-year 2020, net income attributable to ETRN common shareholders was impacted by several non-recurring items including a $55.6 million impairment of long-lived assets associated with the Hornet gathering system, a $24.9 million loss on early extinguishment of debt associated with the retirement of the ETRN Term Loan B and termination of ETRN's revolving credit facility, $23.8 million of transaction costs primarily related to the acquisition of the outstanding common units of EQM Midstream Partners, LP (EQM), and a $27.3 million premium associated with the redemption of a portion of EQM’s Series A Perpetual Convertible Preferred Units.

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. For the fourth quarter 2020, deferred revenue was $76.9 million and for the full-year 2020, deferred revenue was $225.7 million.

Operating revenue for the fourth quarter was lower compared to the same quarter last year by $58.7 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 $577.2 million compared to the fourth quarter 2019, primarily as a result of a $583.7 million impairment of goodwill in the fourth 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 fourth quarter 2020, ETRN paid a quarterly cash dividend of $0.15 per common share on February 12, 2021 to common shareholders of record at the close of business on February 3, 2021.

TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

$ millions

 

2020

 

2020

MVP

 

$126

 

$268

Gathering(1)

 

$37

 

$303

Transmission(2)

 

$14

 

$50

Water

 

$4

 

$12

Headquarters

 

$1

 

$4

Total

 

$182

 

$637

(1)

Excludes $4.5 million and $41.6 million of capital expenditures related to noncontrolling interests in Eureka Midstream Holdings, LLC (Eureka) for the three and twelve months ended December 31, 2020, respectively.

(2)

Includes capital contributions to Mountain Valley Pipeline, LLC (MVP JV) for the MVP Southgate project.

FINANCIAL OUTLOOK

$ millions

Q1 2021

Net income

$45 - $65

Adjusted EBITDA

$280 - $300

Deferred revenue

$72

$ millions

Full-Year 2021

Net income

$335 - $405

Adjusted EBITDA

$1,035 - $1,105

Deferred revenue

$295

Free cash flow

$(180) - $(110)

Retained free cash flow

$(440) - $(370)

CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS OUTLOOK

$ millions

 

Full-Year 2021

MVP

 

$670 - $720

Gathering(1)

 

$305 - $335

Transmission(2)

 

$45 - $65

Water

 

$20

Total

 

$1,040 - $1,140

(1)

Includes approximately $30 million from ETRN’s 60% interest in Eureka.

(2)

Includes capital contributions of approximately $20 million to MVP JV for the MVP Southgate project.

BUSINESS AND PROJECT UPDATES

Outstanding Debt and Liquidity

As of December 31, 2020, ETRN reported $6.4 billion of consolidated long-term debt; $485 million of borrowings and $246 million of letters of credit outstanding under the $3 billion revolving credit facility; and $208 million of cash.

Bond Offering

In January 2021, ETRN's wholly owned subsidiary, EQM, completed its issuance of $800 million of 4.50% senior notes due 2029 and $1,100 million of 4.75% senior notes due 2031. Proceeds from the offering were used to repay $1.4 billion of term loan borrowings and to complete a tender of $500 million of aggregate principal of EQM's 4.75% senior notes due 2023.

Mountain Valley Pipeline

On January 15, 2021, the U.S. Bureau of Land Management granted a right-of-way permit related to MVP’s crossing in the Jefferson National Forest. At present, the only major regulatory authorization outstanding is the approval to cross streams and wetlands. With total project work roughly 92% complete, the MVP JV has applied for a U.S. Army Corps of Engineers’ Individual Permit for certain waterbody crossings that will utilize the open-cut method and, through a Certificate Amendment application to the Federal Energy Regulatory Commission, is seeking authorization to use trenchless construction methods for the remainder of the crossings that were previously approved as open-cut.

The MVP JV continues to target a full in-service date in late 2021. The total project cost estimate is $5.8 - $6.0 billion, of which ETRN expects to fund approximately $2.9 billion based on the midpoint. As of December 31, 2020, ETRN had funded approximately $2.2 billion. ETRN will operate the pipeline and, based on the midpoint of the total project cost estimate, expects to have an approximate 47.6% ownership interest in MVP.

Climate Policy

In January 2021, ETRN published its initial Climate Policy, extending the Company’s commitment to environmental excellence and establishing a multi-faceted approach for evaluating and mitigating ETRN’s carbon footprint. ETRN is responding to the critical issues related to climate change by taking near-term actions to reduce its overall greenhouse gas (GHG) emissions. In 2021, ETRN will establish a foundation for future commitments and will work to assess practicability, costs, and timing to achieve interim targets of a 50% reduction in methane by 2030 and a 50% reduction in total GHG by 2040, with a net zero carbon goal for 2050. The climate policy is available under the Sustainability section of the Company's website at www.equitransmidstream.com.

Full-Year and Fourth Quarter 2020 Earnings Conference Call Information

ETRN will host a conference call with security analysts today, February 23, 2021, at 10:30 a.m. (ET) to discuss full-year and fourth 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: 4233629.

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’s Series A Perpetual Convertible Preferred Units (EQM Series A Preferred Units), transaction costs, impairments of long-lived assets, unrealized loss (gain) on 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 Annual Report on Form 10-K for the year ended December 31, 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 December 31,

 

Twelve Months Ended December 31,

(Thousands, except per share information)

2020

 

2020

Net income attributable to ETRN common shareholders

$

117,812

 

 

$

364,372

 

Add back / (deduct):

 

 

 

Premium on redemption of EQM Series A Preferred Units

 

 

27,253

 

Transaction costs

 

 

23,797

 

Impairments of long-lived assets

 

 

55,581

 

Unrealized loss (gain) on derivative instruments

21,269

 

 

(16,460

)

Loss on early extinguishment of debt

 

 

24,864

 

Noncontrolling interest impact of non-GAAP items

 

 

(17,708

)

Tax impact of non-GAAP items(1)

(5,577

)

 

(18,373

)

Adjusted net income attributable to ETRN common shareholders

$

133,504

 

 

$

443,326

 

Diluted weighted average common shares outstanding

432,872

 

 

343,975

 

Adjusted earnings per diluted share attributable to ETRN common shareholders

$

0.31

 

 

$

1.29

 

(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, as applicable, 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 transaction costs, less equity income, AFUDC-equity, unrealized loss (gain) 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 Annual Report on Form 10-K for the year ended December 31, 2020.

Reconciliation of Adjusted EBITDA

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

(Thousands)

2020

 

2020

Net income

$

136,587

 

 

$

638,044

 

Add:

 

 

 

Income tax expense

23,485

 

 

105,331

 

Net interest expense

87,420

 

 

307,380

 

Loss on early extinguishment of debt

 

 

24,864

 

Depreciation

68,342

 

 

259,613

 

Amortization of intangible assets

16,205

 

 

63,195

 

Impairments of long-lived assets

 

 

55,581

 

Preferred Interest payments

2,766

 

 

11,057

 

Non-cash long-term compensation expense

2,913

 

 

12,301

 

Transaction costs

 

 

23,797

 

Less:

 

 

 

Equity income

(62,600

)

 

(233,833

)

AFUDC – equity

(144

)

 

(818

)

Unrealized loss (gain) on derivative instruments

21,269

 

 

(16,460

)

Adjusted EBITDA attributable to noncontrolling interest(1)

(9,854

)

 

(35,424

)

Adjusted EBITDA

$

286,389

 

 

$

1,214,628

 

(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 December 31, 2020 was calculated as net income of $4.1 million, plus depreciation of $3.0 million, plus amortization of intangible assets of $2.1 million and plus interest expense of $0.7 million. Adjusted EBITDA attributable to noncontrolling interest for the twelve months ended December 31, 2020 was calculated as net income of $14.0 million, plus depreciation of $11.0 million, plus amortization of intangible assets of $7.5 million and plus interest expense of $2.9 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 Annual Report on Form 10-K for the year ended December 31, 2020.

Reconciliation of Free Cash Flow and Retained Free Cash Flow

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

(Thousands)

2020

 

2020

Net cash provided by operating activities

$

316,691

 

 

$

1,140,886

 

Add back / (deduct):

 

 

 

Principal payments received on the Preferred Interest

1,277

 

 

5,003

 

Net cash provided by operating activities attributable to noncontrolling interest(1)

(9,934

)

 

(39,568

)

ETRN Series A Preferred Shares dividends(2)

(14,628

)

 

(16,879

)

EQM Series A Preferred Unit distributions(3)

 

 

(51,002

)

Redemption of Series A Preferred Units(4)

 

 

(28,267

)

Capital expenditures(5)(6)

(78,243

)

 

(419,995

)

Capital contributions to MVP JV

(128,537

)

 

(272,801

)

Free cash flow

$

86,626

 

 

$

317,377

 

Less:

 

 

 

Dividends paid to common shareholders (7)

(64,871

)

 

(278,395

)

Distributions paid to noncontrolling interest EQM common unitholders

 

 

(128,770

)

Retained free cash flow

$

21,755

 

 

$

(89,788

)

(1)

Reflects 40% of $24.8 million and $98.9 million, which was Eureka’s standalone net cash provided by operating activities for the three and twelve months ended December 31, 2020, respectively, which represents the noncontrolling interest portion for the three and twelve months ended December 31, 2020, respectively.

(2)

Reflects cash dividends paid of $0.4873 and $0.5623 per ETRN Series A Perpetual Convertible Preferred Share for the three and twelve months ended December 31, 2020, respectively.

(3)

Reflects cash distributions paid of $2.0728 per EQM Series A Preferred Unit.

(4)

Redemption of EQM Series A Preferred Units included approximately $22 million for partial period distributions for the period 4/1/2020 through 6/17/2020 for the EQM Series A Preferred Units and an approximately $6 million change of control premium (101% of ~$600 MM of such units).

(5)

Does not reflect amounts related to the noncontrolling interest share of Eureka.

(6)

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.

(7)

Third quarter 2020 dividend of $0.15 per ETRN common share was paid during the fourth 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, 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, 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 free 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, 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 Annual Report on Form 10-K for the year ended December 31, 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 December 31,

 

Twelve Months Ended December 31,

($ Thousands)

2020

 

2020

Water operating (loss) income

$

(1,417

)

 

$

38,756

 

Add: Depreciation

8,160

 

 

30,880

 

Water EBITDA

$

6,743

 

 

$

69,636

 

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," "outlook" 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) and volumes, deferred revenues, expenses, and contract liabilities, and the effects on liquidity, 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, 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 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, partner relationships 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, among other things, 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 the 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; the 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 outcome of any attempt to reject such contracts in such contexts (or related negotiations) and the impact on the Company’s results of operations and liquidity of a customer bankruptcy or restructuring; the timing and amount 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 and MVCs, including those associated with the EQT Global GGA and any definitive agreement or agreements between EQT and the Company 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 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; the MVP JV’s ability to raise project-level debt; expectations regarding production, gathered and water volumes in ETRN’s areas of operations; ETRN’s ability to achieve 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, levels of production of associated gas from basins such as the Permian basin, commodity prices and access to capital; ETRN’s ability to achieve its ESG goals (including goals set forth in its climate policy); 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, judicial and other risks and uncertainties, many of which are difficult to predict and are 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 September 30, 2020 filed with the SEC 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 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

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

(Thousands, except per share amounts)

Operating revenues

$

367,122

 

 

$

425,859

 

 

$

1,510,825

 

 

$

1,630,242

 

Operating expenses:

 

 

 

 

 

 

 

Operating and maintenance

40,119

 

 

47,907

 

 

154,109

 

 

165,367

 

Selling, general and administrative

35,783

 

 

29,362

 

 

129,969

 

 

112,915

 

Separation and other transaction costs

 

 

1,474

 

 

23,797

 

 

26,080

 

Depreciation

68,342

 

 

60,634

 

 

259,613

 

 

227,364

 

Amortization of intangible assets

16,205

 

 

14,581

 

 

63,195

 

 

53,258

 

Impairments of long-lived assets

 

 

583,664

 

 

55,581

 

 

969,258

 

Total operating expenses

160,449

 

 

737,622

 

 

686,264

 

 

1,554,242

 

Operating income (loss)

206,673

 

 

(311,763

)

 

824,561

 

 

76,000

 

Equity income

62,600

 

 

50,986

 

 

233,833

 

 

163,279

 

Other (expense) income

(21,781

)

 

24

 

 

17,225

 

 

2,661

 

Loss on early extinguishment of debt

 

 

 

 

24,864

 

 

 

Net interest expense

87,420

 

 

67,927

 

 

307,380

 

 

256,195

 

Income (loss) before income taxes

160,072

 

 

(328,680

)

 

743,375

 

 

(14,255

)

Income tax expense

23,485

 

 

4,836

 

 

105,331

 

 

50,704

 

Net income (loss)

136,587

 

 

(333,516

)

 

638,044

 

 

(64,959

)

Net income (loss) attributable to noncontrolling interests

4,147

 

 

(64,778

)

 

214,912

 

 

138,784

 

Net income (loss) attributable to ETRN

132,440

 

 

(268,738

)

 

423,132

 

 

(203,743

)

Preferred dividends

14,628

 

 

 

 

58,760

 

 

 

Net income (loss) attributable to ETRN common shareholders

$

117,812

 

 

$

(268,738

)

 

$

364,372

 

 

$

(203,743

)

 

 

 

 

 

 

 

 

Earnings (loss) per share of common stock attributable to ETRN common shareholders - basic

$

0.27

 

 

$

(1.05

)

 

$

1.06

 

 

$

(0.80

)

Earnings (loss) per share of common stock attributable to ETRN common shareholders - diluted

$

0.27

 

 

$

(1.05

)

 

$

1.06

 

 

$

(0.80

)

 

 

 

 

 

 

 

 

Weighted average common shares outstanding - basic

432,785

 

 

254,940

 

 

343,935

 

 

254,884

 

Weighted average common shares outstanding - diluted

432,872

 

 

254,940

 

 

343,975

 

 

254,884

 

EQUITRANS MIDSTREAM CORPORATION

GATHERING RESULTS OF OPERATIONS

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

FINANCIAL DATA

(Thousands, except per day amounts)

Firm reservation fee revenues(1)

$

148,999

 

 

$

149,598

 

 

$

595,720

 

 

$

581,118

 

Volumetric-based fee revenues

99,053

 

 

163,295

 

 

416,561

 

 

578,813

 

Total operating revenues

248,052

 

 

312,893

 

 

1,012,281

 

 

1,159,931

 

Operating expenses:

 

 

 

 

 

 

 

Operating and maintenance

25,082

 

 

28,880

 

 

87,388

 

 

96,740

 

Selling, general and administrative

25,384

 

 

20,457

 

 

93,070

 

 

80,822

 

Separation and other transaction costs

 

 

217

 

 

4,104

 

 

19,344

 

Depreciation

46,052

 

 

39,808

 

 

172,967

 

 

144,310

 

Amortization of intangible assets

16,205

 

 

14,581

 

 

63,195

 

 

53,258

 

Impairments of long-lived assets

 

 

475,520

 

 

55,581

 

 

854,307

 

Total operating expenses

112,723

 

 

579,463

 

 

476,305

 

 

1,248,781

 

Operating income (loss)

$

135,329

 

 

$

(266,570

)

 

$

535,976

 

 

$

(88,850

)

 

 

 

 

 

 

 

 

Unrealized (loss) gain on derivative instruments(2)

$

(21,269

)

 

$

 

 

$

16,460

 

 

$

 

 

 

 

 

 

 

 

 

OPERATIONAL DATA

 

 

 

 

 

 

 

Gathering volumes (BBtu per day):

 

 

 

 

 

 

 

Firm capacity reservation(1)

5,154

 

 

3,438

 

 

4,652

 

 

3,351

 

Volumetric-based services

3,490

 

 

5,016

 

 

3,553

 

 

4,493

 

Total gathered volumes

8,644

 

 

8,454

 

 

8,205

 

 

7,844

 

 

 

 

 

 

 

 

 

Capital expenditures(3)

$

41,810

 

 

$

148,534

 

 

$

344,873

 

 

$

834,712

 

(1)

Includes revenues and volumes, as applicable, from contracts with MVCs.

(2)

Other income in the Company's statements of consolidated comprehensive income includes the unrealized (loss) gain on derivative instruments associated with the Henry Hub cash bonus payment provision.

(3)

Includes approximately $4.5 million and $8.3 million of capital expenditures related to noncontrolling interests in Eureka for the three months ended December 31, 2020 and 2019, respectively, and $41.6 million and $25.9 million for the twelve months ended December 31, 2020 and 2019, respectively.

EQUITRANS MIDSTREAM CORPORATION

TRANSMISSION RESULTS OF OPERATIONS

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

FINANCIAL DATA

(Thousands, except per day amounts)

Firm reservation fee revenues

$

96,560

 

 

$

93,518

 

 

$

364,533

 

 

$

356,569

 

Volumetric-based fee revenues

8,407

 

 

7,076

 

 

29,303

 

 

33,951

 

Total operating revenues

104,967

 

 

100,594

 

 

393,836

 

 

390,520

 

Operating expenses:

 

 

 

 

 

 

 

Operating and maintenance

9,911

 

 

10,847

 

 

37,635

 

 

33,989

 

Selling, general and administrative

7,648

 

 

6,239

 

 

26,292

 

 

26,865

 

Depreciation

13,753

 

 

13,461

 

 

54,540

 

 

51,935

 

Total operating expenses

31,312

 

 

30,547

 

 

118,467

 

 

112,789

 

Operating income

$

73,655

 

 

$

70,047

 

 

$

275,369

 

 

$

277,731

 

 

 

 

 

 

 

 

 

Equity income

$

62,600

 

 

$

50,986

 

 

$

233,833

 

 

$

163,279

 

 

 

 

 

 

 

 

 

OPERATIONAL DATA

 

 

 

 

 

 

 

Transmission pipeline throughput (BBtu per day):

 

 

 

 

 

 

 

Firm capacity reservation

3,034

 

 

2,901

 

 

2,932

 

 

2,823

 

Volumetric-based services

13

 

 

17

 

 

16

 

 

90

 

Total transmission pipeline throughput

3,047

 

 

2,918

 

 

2,948

 

 

2,913

 

 

 

 

 

 

 

 

 

Average contracted firm transmission reservation commitments (BBtu per day)

4,270

 

 

4,125

 

 

4,087

 

 

3,966

 

 

 

 

 

 

 

 

 

Capital expenditures(1)

$

12,236

 

 

$

13,026

 

 

$

45,219

 

 

$

59,313

 

(1)

Transmission capital expenditures do not include capital contributions made to the MVP JV for the MVP and MVP Southgate projects of approximately $128.5 million and $261.7 million for the three months ended December 31, 2020 and 2019, respectively, and $272.8 million and $774.6 million for the twelve months ended December 31, 2020 and 2019, respectively.

EQUITRANS MIDSTREAM CORPORATION

WATER RESULTS OF OPERATIONS

 

 

Three Months Ended December 31,

 

Twelve Months Ended December 31,

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

FINANCIAL DATA

(Thousands)

Firm reservation fee revenues(1)

$

9,010

 

 

$

6,659

 

 

$

41,798

 

 

$

11,190

 

Volumetric based fee revenues

5,093

 

 

5,713

 

 

62,910

 

 

68,601

 

Water services revenues

14,103

 

 

12,372

 

 

104,708

 

 

79,791

 

Operating expenses:

 

 

 

 

 

 

 

Operating and maintenance

5,171

 

 

8,180

 

 

29,131

 

 

34,638

 

Selling, general and administrative

2,189

 

 

753

 

 

5,941

 

 

2,933

 

Depreciation

8,160

 

 

7,114

 

 

30,880

 

 

26,915

 

Total operating expenses

15,520

 

 

16,047

 

 

65,952

 

 

64,486

 

Operating (loss) income

$

(1,417

)

 

$

(3,675

)

 

$

38,756

 

 

$

15,305

 

 

 

 

 

 

 

 

 

OPERATIONAL DATA

 

 

 

 

 

 

 

Water volumes (MMgal)

 

 

 

 

 

 

 

Firm capacity reservation(1)

210

 

 

89

 

 

697

 

 

249

 

Volumetric based services

95

 

 

207

 

 

1,219

 

 

1,559

 

Total water volumes

305

 

 

296

 

 

1,916

 

 

1,808

 

 

 

 

 

 

 

 

 

Capital expenditures

$

3,528

 

 

$

5,967

 

 

$

11,905

 

 

$

37,457

 

(1)

Includes revenues and volumes, as applicable, from contracts with MVCs.

Source: Equitrans Midstream Corporation

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