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
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210223005287/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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