Equitrans Midstream Corporation (NYSE: ETRN), today, announced
financial and operational results for the second quarter 2021.
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.
Q2 2021 Highlights:
- Generated $40 million of net income and achieved $272 million
of adjusted EBITDA
- Delivered adjusted EBITDA ahead of forecast
- Achieved $383 million of net cash provided by operating
activities and $220 million of free cash flow
- Recorded 67% of total operating revenue from firm reservation
fees
- Raised full-year 2021 adjusted EBITDA and free cash flow
guidance
"Our second quarter results demonstrate the stability and
strength of our base business," said Thomas F. Karam, ETRN chairman
and chief executive officer. "Our stable cash flow profile coupled
with higher volume than forecasted in our gathering and
transmission segments allowed us to generate meaningful free cash
flow and increase our full-year guidance."
"ETRN remains focused on advancing our sustainability efforts,"
said Diana M. Charletta, ETRN president and chief operating
officer. "We recently published our annual corporate sustainability
report which expanded our range of material ESG topics, outlined
progress made to date, and highlighted our future endeavors. We
recognize that providing sustainable energy solutions is critical
for our customers, shareholders, and other stakeholders, and we are
proud that ESG is becoming part of ETRN's DNA."
SECOND QUARTER 2021 SUMMARY RESULTS
$ millions (except per share metrics)
Net income attributable to ETRN common
shareholders
$
22.5
Adjusted net income attributable to ETRN
common shareholders
$
57.0
Earnings per diluted share attributable to
ETRN common shareholders
$
0.05
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.13
Net income
$
40.1
Adjusted EBITDA
$
271.6
Deferred revenue
$
74.5
Net cash provided by operating
activities
$
382.6
Free cash flow
$
220.3
Retained free cash flow
$
155.4
Net income attributable to ETRN common shareholders for the
second quarter 2021 was impacted by a $56.2 million impairment of
long-lived assets associated with ETRN's water assets located in
Ohio, which were acquired from Rice Midstream Partners LP in 2018
(the Ohio water assets). Additionally, net income attributable to
ETRN common shareholders for the second quarter 2021 was impacted
by a $9.4 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
beginning with the quarter in which Mountain Valley Pipeline (MVP)
is placed in-service through the fourth quarter of 2024. The
contract is accounted for as a derivative with the fair value
marked-to-market at each quarter-end.
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 second
quarter 2021, deferred revenue was $74.5 million.
Operating revenue for the second quarter increased compared to
the same quarter last year by $7.7 million, primarily from
increased gathered volume and higher transmission throughput and
was partially offset by decreased water services volume. Operating
expenses increased by $50.0 million compared to the second quarter
2020, primarily as a result of a $56.2 million impairment of
long-lived assets associated with the Ohio water assets in the
second quarter 2021. Additionally, operating and maintenance
expense decreased versus the prior year quarter while selling,
general and administrative and depreciation expenses increased.
QUARTERLY DIVIDEND
For the second quarter 2021, ETRN will pay a quarterly cash
dividend of $0.15 per common share on August 13, 2021 to ETRN
common shareholders of record at the close of business on August 4,
2021.
TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS
$ millions
Three Months Ended June 30,
2021
Six Months Ended
June 30, 2021
Full-Year 2021
Forecast
MVP
$73
$82
$255 - $305
Gathering(1)
$55
$103
$235 - $265
Transmission(2)
$9
$14
$30 - $50
Water
$5
$10
$20
Total
$142
$209
$540 - $640
(1)
Excludes $4.1 million and $5.8 million of
capital expenditures related to noncontrolling interest in Eureka
Midstream Holdings, LLC (Eureka) for the three and six months ended
June 30, 2021, respectively. Full-year forecast excludes
approximately $15-$20 million of capital expenditures related to
the noncontrolling interest in Eureka, and includes $2 million of
headquarters capital expenditures.
(2)
Includes capital contributions to Mountain
Valley Pipeline, LLC (MVP JV) for the MVP Southgate project.
OUTLOOK
$ millions
Q3 2021
Net income
$55 - $75
Adjusted EBITDA
$245 - $265
Deferred revenue
$75
$ millions
Full-Year 2021
Net income
$215 - $285
Adjusted EBITDA
$1,070 - $1,140
Deferred revenue
$296
Free cash flow
$380 - $450
Retained free cash flow
$120 - $190
BUSINESS AND PROJECT UPDATES
Outstanding Debt and Liquidity
As of June 30, 2021, ETRN reported $6.4 billion of consolidated
long-term debt; $350 million of borrowings and $274 million of
letters of credit outstanding under EQM Midstream Partners, LP's
(EQM) revolving credit facility; $300 million of borrowings under
Eureka's revolving credit facility; and $243 million of cash.
Mountain Valley Pipeline
In February 2021, MVP JV initiated a permitting process with the
U.S. Army Corps of Engineers (Army Corps) and the Federal Energy
Regulatory Commission (FERC) related to the project’s remaining
waterbody and wetland crossings. In early June 2021, FERC issued a
notice of schedule for the MVP JV’s certificate amendment
application, which requests a change to utilize boring methodology
for approximately 120 water crossings. FERC is expected to issue an
environmental assessment in mid-August. In late June 2021, the Army
Corps directed the West Virginia Department of Environmental
Protection and Virginia Department of Environmental Quality to
complete the Section 401 review process for approximately 300 water
crossings by November 29, 2021 and December 31, 2021,
respectively.
The expected permitting timelines for both FERC and Army Corps
are in-line with ETRN's expectations. Accordingly, ETRN continues
to target a full in-service date during the summer of 2022 at a
total project cost of approximately $6.2 billion. Through June 30,
2021, ETRN had funded approximately $2.3 billion and, based on the
total project cost estimate, expects to fund a total of
approximately $3.1 billion and to have an approximate 47.8%
ownership interest in MVP. ETRN will operate the pipeline.
MVP Southgate
Based on MVP's targeted full in-service date and current
expectations regarding timing of MVP Southgate permit approvals,
ETRN is targeting commencing construction during 2022 and placing
the project in-service during the spring of 2023. The approximately
75-mile pipeline is designed to receive gas from MVP in Virginia
for transport 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.
2021 Corporate Sustainability Report
On July 29, 2021, ETRN published its annual corporate
sustainability report, which was produced in accordance with the
Global Reporting Initiative (GRI) core reporting option and also
incorporated the Sustainability Accounting Standards Board (SASB)
Oil & Gas Midstream Standards. The report content reflects
materiality assessment results, which identify the Environmental,
Social, and Governance (ESG) topics most significant to ETRN's
business and stakeholders. The report can be viewed online at
csr.equitransmidstream.com.
Water Services
Water operating loss was $55.6 million and water EBITDA was $8.7
million in the second quarter 2021. Water operating loss is
forecast to be approximately $60 million for the full-year 2021 and
water EBITDA is forecast to be approximately $30 million for the
full-year 2021.
Q2 2021 Earnings Conference Call Information
ETRN will host a conference call with security analysts today,
August 3, 2021, at 10:30 a.m. (ET) to discuss second quarter 2021
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: 4529988.
ETRN management speaks 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 and unrealized
gain (loss) on derivative instruments, 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
June 30, 2021.
Reconciliation of Adjusted Net Income Attributable to ETRN
Common Shareholders and Adjusted Earnings per Diluted Share
Attributable to ETRN Common Shareholders
Three Months Ended June
30,
(Thousands, except per share
information)
2021
2020
Net income attributable to ETRN common
shareholders
$
22,485
$
26,990
Add back / (deduct):
Premium on redemption of EQM Series A
Preferred Units
—
27,253
Transaction costs
—
11,453
Impairments of long-lived assets
56,178
—
Unrealized gain on derivative
instruments
(9,434
)
(12,554
)
Noncontrolling interest impact of non-GAAP
items
—
4,559
Tax impact of non-GAAP items(1)
(12,270
)
(909
)
Adjusted net income attributable to ETRN
common shareholders
$
56,959
$
56,792
Diluted weighted average common shares
outstanding
433,464
260,883
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.13
$
0.22
(1)
The adjustments were tax effected at
ETRN’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 extinguishment of debt, 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
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 June 30, 2021.
Reconciliation of Adjusted EBITDA
Three Months Ended June
30,
(Thousands)
2021
2020
Net income
$
40,121
$
143,458
Add:
Income tax expense
12,564
34,267
Net interest expense
95,642
66,795
Depreciation
69,315
63,151
Amortization of intangible assets
16,205
16,205
Impairments of long-lived assets
56,178
—
Preferred Interest payments
2,746
2,762
Non-cash long-term compensation
expense
3,146
1,796
Transaction costs
—
11,453
Less:
Equity income
(5,921
)
(56,244
)
AFUDC – equity
(63
)
(246
)
Unrealized gain on derivative
instruments
(9,434
)
(12,554
)
Adjusted EBITDA attributable to
noncontrolling interest(1)
(8,946
)
(7,692
)
Adjusted EBITDA
$
271,553
$
263,151
(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 June 30, 2021 was calculated as
net income of $3.0 million plus depreciation of $2.9 million, plus
amortization of intangible assets of $2.1 million and plus interest
expense of $0.9 million. Adjusted EBITDA attributable to
noncontrolling interest for the three months ended June 30, 2020
was calculated as net income of $2.3 million, plus depreciation of
$2.7 million, plus amortization of intangible assets of $2.1
million, and plus interest expense of $0.6 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, premiums paid
on extinguishment of debt, 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 June 30,
2021.
Reconciliation of Free Cash Flow and Retained Free Cash
Flow
Three Months Ended June
30,
(Thousands)
2021
2020
Net cash provided by operating
activities
$
382,595
$
343,697
Add back / (deduct):
Principal payments received on the
Preferred Interest
1,295
1,242
Net cash provided by operating activities
attributable to noncontrolling interest(1)
(9,519
)
(6,561
)
ETRN Series A Preferred Shares
dividends(2)
(14,628
)
—
EQM Series A Preferred Unit
distributions(3)
—
(25,501
)
Redemption of EQM Series A Preferred
Units(4)
—
(17,338
)
Capital expenditures(5)(6)
(65,528
)
(107,115
)
Capital contributions to MVP JV
(73,932
)
(33,484
)
Free cash flow
$
220,283
$
154,940
Less:
Dividends paid to common shareholders
(7)
(64,874
)
(34,399
)
Distributions paid to noncontrolling
interest EQM common unitholders
—
(32,244
)
Retained free cash flow
$
155,409
$
88,297
(1)
Reflects 40% of $23.8 million and $16.4
million, which was Eureka’s standalone net cash provided by
operating activities for the three months ended June 30, 2021 and
2020, respectively, which represents the noncontrolling interest
portion for the three months ended June 30, 2021 and 2020,
respectively.
(2)
Reflects cash dividends paid of $0.4873
per ETRN Series A Perpetual Convertible Preferred Share.
(3)
Reflects cash distributions paid of
$1.0364 per EQM Series A Preferred Unit.
(4)
Redemption of EQM Series A Preferred Units
for the second quarter 2020 included approximately $11 million for
partial period distributions for the period 4/1/2020 through
6/17/2020 for the EQM Series A Preferred Units that were redeemed
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)
First quarter 2021 dividend of $0.15 per
ETRN common share was paid during the second quarter 2021.
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 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 cash spending and receipts 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 water operating
(loss) income plus depreciation and impairments of long-lived
assets 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 (loss) 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 June 30, 2021.
ETRN has not provided a reconciliation of projected water EBITDA
from projected water operating (loss) 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 (loss) income
is not available without unreasonable effort.
Reconciliation of Water EBITDA
Three Months Ended June
30,
(Thousands)
2021
2020
Water operating (loss) income
$
(55,640
)
$
12,303
Add: Depreciation
8,201
7,499
Add: Impairments of long-lived assets
56,178
—
Water EBITDA
$
8,739
$
19,802
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
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,” "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
services revenue and volume growth, including the anticipated
effects associated with the February 2020 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 operating (loss) income, 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 (including permitting timelines with respect
to the MVP project water crossings), final design (including
expansions or extensions and capital and incremental adjusted
EBITDA related thereto), ability to contract additional capacity
on, mitigate emissions from 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; 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, 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
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 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; future decisions of customers in respect of curtailing
natural gas production, 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 natural gas 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, commodity prices and
access to capital; ETRN’s ability to achieve its ESG and
sustainability goals (including goals set forth in its climate
policy); the effectiveness of ETRN’s information technology systems
and practices to defend against evolving cyber attacks on United
States critical infrastructure; 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, 2020 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 March 31, 2021 filed with the SEC, the
risk factors to be disclosed under Part II, “Item 1 A. Risk
Factors,” of ETRN’s Quarterly Report on Form 10-Q for the three
months ended June 30, 2021 to be 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 (UNAUDITED)
Three Months Ended June
30,
2021
2020
(Thousands, except per share
amounts)
Operating revenues
$
348,295
$
340,590
Operating expenses:
Operating and maintenance
38,162
41,663
Selling, general and administrative
35,482
32,821
Transaction costs
—
11,453
Depreciation
69,315
63,151
Amortization of intangible assets
16,205
16,205
Impairments of long-lived assets
56,178
—
Total operating expenses
215,342
165,293
Operating income
132,953
175,297
Equity income
5,921
56,244
Other income
9,453
12,979
Net interest expense
95,642
66,795
Income before income taxes
52,685
177,725
Income tax expense
12,564
34,267
Net income
40,121
143,458
Net income attributable to noncontrolling
interests
3,008
86,964
Net income attributable to ETRN
37,113
56,494
Preferred dividends
14,628
29,504
Net income attributable to ETRN common
shareholders
$
22,485
$
26,990
Earnings per share of common stock
attributable to ETRN common shareholders - basic
$
0.05
$
0.10
Earnings per share of common stock
attributable to ETRN common shareholders - diluted
$
0.05
$
0.10
Weighted average common shares outstanding
- basic
433,003
260,883
Weighted average common shares outstanding
- diluted
433,464
260,883
EQUITRANS MIDSTREAM
CORPORATION
GATHERING RESULTS OF
OPERATIONS
Three Months Ended June
30,
2021
2020
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues(1)
$
149,360
$
149,109
Volumetric-based fee revenues
90,592
72,422
Total operating revenues
239,952
221,531
Operating expenses:
Operating and maintenance
24,274
22,745
Selling, general and administrative
25,689
24,521
Depreciation
46,911
41,827
Amortization of intangible assets
16,205
16,205
Total operating expenses
113,079
105,298
Operating income
$
126,873
$
116,233
Other income(2)
$
9,434
$
12,554
OPERATIONAL DATA
Gathered volumes (BBtu per day):
Firm capacity(1)
5,279
5,079
Volumetric-based services
3,106
2,607
Total gathered volumes
8,385
7,686
Capital expenditures(3)
$
59,680
$
101,157
(1)
Includes revenues and volumes, as
applicable, from contracts with MVCs.
(2)
Other income includes the unrealized gains
on derivative instruments associated with the Henry Hub cash bonus
payment provision.
(3)
Includes approximately $4.1 million and
$11.1 million of capital expenditures related to noncontrolling
interests in Eureka for the three months ended June 30, 2021 and
2020, respectively.
EQUITRANS MIDSTREAM
CORPORATION
TRANSMISSION RESULTS OF
OPERATIONS
Three Months Ended June
30,
2021
2020
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues
$
83,797
$
83,764
Volumetric-based fee revenues
9,101
5,161
Total operating revenues
92,898
88,925
Operating expenses:
Operating and maintenance
8,478
9,630
Selling, general and administrative
8,632
5,905
Depreciation
13,826
13,570
Total operating expenses
30,936
29,105
Operating income
$
61,962
$
59,820
Equity income
$
5,921
$
56,244
OPERATIONAL DATA
Transmission pipeline throughput (BBtu per
day):
Firm capacity reservation
2,906
2,742
Volumetric-based services
12
7
Total transmission pipeline throughput
2,918
2,749
Average contracted firm transmission
reservation commitments
(BBtu per day)
3,780
3,767
Capital expenditures(1)
$
7,790
$
15,464
(1)
Transmission capital expenditures do not
include capital contributions made to the MVP JV for the MVP and
MVP Southgate projects of approximately $73.9 million and $33.5
million for the three months ended June 30, 2021 and 2020,
respectively.
EQUITRANS MIDSTREAM
CORPORATION
WATER RESULTS OF
OPERATIONS
Three Months Ended June
30,
2021
2020
FINANCIAL DATA
(Thousands, except MMgal
amounts)
Firm reservation fee revenues(1)
$
929
$
11,007
Volumetric based fee revenues
14,516
19,127
Water services revenues
15,445
30,134
Operating expenses:
Operating and maintenance
5,393
9,288
Selling, general and administrative
1,313
1,044
Depreciation
8,201
7,499
Impairments of long-lived assets
56,178
—
Total operating expenses
71,085
17,831
Operating (loss) income
$
(55,640
)
$
12,303
OPERATIONAL DATA
Water services volumes (MMgal)
Firm capacity reservation(1)
18
150
Volumetric based services
296
435
Total water volumes
314
585
Capital expenditures
$
4,820
$
2,371
(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/20210803005262/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 ncox@equitransmidstream.com
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