Equitrans Midstream Corporation (NYSE: ETRN), today, announced
financial and operational results for the third quarter 2023.
Included in the "Non-GAAP Disclosures" section of this news release
are important disclosures regarding the use of non-GAAP
supplemental financial measures, including information regarding
their most comparable GAAP financial measure.
Q3 2023 Highlights:
- Reported $129.7 million of net income and $249.9 million of
Adjusted EBITDA
- Generated $201.6 million of net cash from operating
activities
- Recorded 71% of total operating revenue from firm reservation
fees
- Achieved 12% transmission pipeline throughput growth versus
same quarter last year
“Once in-service, there is little doubt MVP will be one of the
most valuable pipelines in the U.S., directly connecting our
country’s largest and lowest-cost natural gas resource and the
rapidly growing demand of the mid-Atlantic and southeast markets,”
said Thomas F. Karam, chairman and chief executive officer of
Equitrans Midstream. “The revised guidance on cost and completion
for MVP are certainly more than we would prefer. However, we must
deliver on our commitments of deploying unprecedented environmental
protocols while at the same time remaining vigilant to protect the
safety of our contractors and employees, as well as the opposition
who continue to trespass on the right of way."
Karam continued, “I am incredibly proud of the capabilities and
perseverance displayed by our employees during these past few
years, and, as we look to the future, I am very pleased to be
passing my leadership reins to Diana, marking the start of a new
chapter for Equitrans. Diana has proven herself as a respected
leader and will bring a rare blend of operational expertise and
strategic vision to the CEO role, and I am excited to see her plans
in action as she continues to position Equitrans for long-term,
sustainable success.”
“As demonstrated in our Q3 results, Equitrans’ operations
continue to deliver, with our integrated gathering and transmission
assets providing the flexibility to take on significant ramps in
volume like we experienced this quarter,” said Diana M. Charletta,
president and chief operating officer for Equitrans Midstream. “One
element of our strategy for the last several years has been the
deliberate focus on enhancing our backbone system to provide gas
delivery for the major takeaway pipelines, including MVP. Looking
ahead, we anticipate several years of mid-single digit annual
volume growth, which is based primarily on possessing the direct
connections to MVP, having currently available capacity provided by
our gathering and transmission assets, and the world-class resource
base that sits under our assets.”
2023 THIRD QUARTER SUMMARY RESULTS
Three Months Ended September
30,
$ millions (except per share metrics)
2023
Net income attributable to ETRN common
shareholders
$
112.8
Adjusted net income attributable to ETRN
common shareholders
$
122.8
Earnings per diluted share attributable to
ETRN common shareholders
$
0.26
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.28
Net income
$
129.7
Adjusted EBITDA
$
249.9
Deferred revenue
$
82.6
Net cash provided by operating
activities
$
201.6
Free cash flow
$
(132.9
)
Retained free cash flow
$
(197.9
)
Net income attributable to ETRN common shareholders for the
third quarter 2023 was impacted by several items, including a $7.8
million write-down of a contract asset in the water segment, a $3.4
million unrealized loss on derivative instruments and $2.3 million
of operating expense related to the November 2022 Rager Mountain
natural gas storage field incident (discussed below). The
unrealized loss is reported within other income, net, 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 the 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. Additionally, ETRN
reported third quarter equity income of $73.8 million, which is
primarily associated with allowance for funds used during
construction (AFUDC) relating to the resumption of MVP forward
construction.
As a result of the gathering agreement entered into with EQT in
February 2020, revenue from the contracted minimum volume
commitment (MVC) is recognized utilizing an average gathering rate
applied over the remaining contract life. The difference between
the cash received from the MVC and the revenue recognized results
in the deferral of revenue into future periods. Deferred revenue
for the third quarter 2023 was $82.6 million.
Operating revenue for the third quarter 2023 increased by $6.8
million compared to the same quarter last year, primarily as a
result of increased transmission usage volumes and higher water
volumes, partially offset by lower gathering revenue. Operating
expenses increased by $30.8 million compared to the third quarter
2022, primarily from the $7.8 million write-down of a contract
asset in the water segment, a $7.5 million expense related to a
one-time cash bonus awarded to Mr. Karam for his efforts in the
inclusion of MVP provisions in the Fiscal Responsibility Act of
2023, $4.5 million of favorable net gas sales which occurred in the
third quarter 2022, $2.3 million of expenses associated with the
Rager Mountain natural gas storage field incident, and increased
other operating and maintenance, selling, general and
administrative expenses.
QUARTERLY DIVIDEND
For the third quarter 2023, ETRN will pay a quarterly cash
dividend of $0.15 per common share on November 14, 2023 to ETRN
common shareholders of record at the close of business on November
3, 2023.
TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS
$ millions
Three Months Ended September
30, 2023
Nine Months Ended September
30, 2023
Full-Year 2023
Forecast
MVP(1)
$210
$280
$725 - $745
Gathering(2)
$64
$188
$240 - $260
Transmission(3)
$31
$55
$80 - $90
Water
$10
$32
$45
Total
$315
$555
$1,090 - $1,140
(1)
Full-year 2023 assumes MVP construction
completion in Q1 2024 and a total project cost of approximately
$7.2 billion.
(2)
Excludes approximately $3.3 million and
$11.5 million of capital expenditures related to the noncontrolling
interest in Eureka Midstream Holdings, LLC (Eureka) for the three
and nine months ended September 30, 2023, respectively. Full-year
2023 forecast excludes approximately $15 million of capital
expenditures related to the noncontrolling interest in Eureka.
(3)
Full-year 2023 includes an estimate of $5
- $10 million of capital expenditures related to the Rager Mountain
natural gas storage field incident, based on current
information.
2023 GUIDANCE
Financial Outlook(1,2)
$ millions
Full-Year 2023
Net income
$425 - $445
Adjusted EBITDA
$1,020 - $1,040
Deferred Revenue
$325 - $330
Free cash flow
$(200) - $(180)
Retained free cash flow
$(460) - $(440)
(1)
Full-year 2023 includes an estimate of
approximately $10 million of operating expenses related to the
Rager Mountain natural gas storage field incident, based on current
information.
(2)
Assumes MVP construction completion and
in-service authorization by the FERC in Q1 2024 and assumes
contractual obligations commence on April 1, 2024.
BUSINESS AND PROJECT UPDATES
Executive Succession
As previously announced, Diana M. Charletta will succeed Thomas
F. Karam as chief executive officer, effective January 1, 2024. At
that time, Mr. Karam will become ETRN's executive chairman. Both
Ms. Charletta and Mr. Karam will continue to serve as members of
the ETRN Board of Directors following the leadership
transition.
Mr. Karam has served as chief executive officer since September
2018 and was appointed chairman of the Board in July 2019. Ms.
Charletta has served as chief operating officer since September
2018, was appointed president and chief operating officer in July
2019, and was appointed to the Board in April 2022.
Outstanding Debt and Liquidity
As of September 30, 2023, ETRN reported $6.3 billion of
consolidated debt; $525.0 million of borrowings and $220.7 million
of letters of credit outstanding under EQM's revolving credit
facility; $315.0 million of borrowings under Eureka's revolving
credit facility; and $180.6 million of cash.
Rager Mountain Natural Gas Storage Field Incident
Update
On August 24, 2023, ETRN submitted information to the Pipeline
and Hazardous Materials Safety Administration (PHMSA) regarding the
root cause investigation and analysis related to the Rager Mountain
natural gas storage field incident that occurred in November 2022.
The comprehensive root cause analysis was conducted by an
independent, third-party company with expertise in reservoir
management and well and corrosion engineering. Following PHMSA's
approval of ETRN's subsequent injection plan, on October 5, 2023,
ETRN resumed injections at the storage field.
In the third quarter, ETRN incurred expenses of $2.3 million
related to post-incident response activities. For the full-year
2023, ETRN estimates that it will incur approximately $10 million
of expenses related to post-incident response activities. For
further information, refer to ETRN’s Annual Report on Form 10-K for
the year ended December 31, 2022, as updated by subsequent Form
10-Qs.
Ohio Valley Connector Expansion Project
During the third quarter, ETRN commenced construction of the
Ohio Valley Connector Expansion (OVCX) project. OVCX will increase
deliverability on ETRN's Ohio Valley Connector pipeline by
approximately 350 MMcf per day and is designed to meet growing
demand in key markets in the mid-continent and Gulf Coast through
existing interconnects with multiple long-haul pipelines in
Clarington, OH. ETRN expects to invest a total of approximately
$160 million in the project, including approximately $60 million in
2023. The project is primarily supported by a long-term firm
capacity commitment of 330 MMcf per day and ETRN is targeting the
incremental capacity to be in-service during the first half of
2024.
Mountain Valley Pipeline
On October 18, 2023, ETRN announced that the MVP Joint Venture
revised the targeted project completion to the first quarter of
2024 at a total project cost of approximately $7.2 billion, which
includes approximately $120 million of contingency. The revision
was primarily a result of unexpected slowness in the ramp of the
contractor workforce, less than expected construction progress in
areas of challenging terrain and geology, in part because of the
MVP Joint Venture’s commitment to, and application of, heightened
environmental protocols, and several other factors that impact
productivity and cost.
Through September 30, 2023, ETRN had funded approximately $3.0
billion and, if the project were to be completed in the first
quarter of 2024 and at the updated total project cost of
approximately $7.2 billion, ETRN expects to fund a total of
approximately $3.7 billion and to have an approximate 48.8%
ownership interest in MVP. ETRN will operate the pipeline.
MVP Southgate
The MVP JV continues to engage with the shipper and a
prospective customer regarding refining the project's design, scope
and/or timing in lieu of pursuing the project as originally
contemplated. ETRN has a 47.2% ownership interest in MVP Southgate
and is expected to operate the pipeline.
Water Services
In the third quarter, water operating loss was $(2.3) million
and adjusted water EBITDA was $12.2 million. For 2023, ETRN expects
adjusted water EBITDA of approximately $45 million.
Q3 2023 Earnings Conference Call Information
ETRN will host a conference call with security analysts today,
October 31, 2023, at 10:30 a.m. (ET) to discuss third quarter 2023
financial results, operating results, and other business
matters.
Call Access: A webcast/audio live stream of the call will
be available on the internet, and participants are encouraged to
pre-register online, in advance of the call. A link to the
webcast/audio live stream will be available on the Investors page
of ETRN’s website the day of the call.
Security Analysts :: Dial-In
Participation To participate in the Q&A session, security
analysts may access the call in the U.S. toll free at (888)
330-3573; and internationally at (646) 960-0677. The ETRN
conference ID is 6625542.
All Other Participants :: Webcast/Audio
Live Stream Registration Please Note: For optimal audio
quality, the webcast is best supported through Google Chrome and
Mozilla Firefox browsers.
Call Replay: For 14 days following the call, an audio
replay will be available at (800) 770-2030 or (647) 362-9199. The
ETRN conference ID: 6625542.
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 (loss) attributable to ETRN common
shareholders and adjusted earnings (loss) per diluted share
attributable to ETRN common shareholders are non-GAAP supplemental
financial measures that management and external users of ETRN’s
consolidated financial statements, such as industry analysts and
investors, may use to make period-to-period comparisons of earnings
trends. Management believes that adjusted net income (loss)
attributable to ETRN common shareholders and adjusted earnings
(loss) per diluted share attributable to ETRN common shareholders
as presented provide useful information for investors for
evaluating period-over-period earnings. Adjusted net income (loss)
attributable to ETRN common shareholders and adjusted earnings
(loss) per diluted share attributable to ETRN common shareholders
should not be considered as alternatives to net income (loss)
attributable to ETRN common shareholders, earnings (loss) per
diluted share attributable to ETRN common shareholders or any other
measure of financial performance presented in accordance with GAAP.
Adjusted net income (loss) attributable to ETRN common shareholders
and adjusted earnings (loss) per diluted share attributable to ETRN
common shareholders have important limitations as analytical tools
because they exclude some, but not all, items that affect net
income (loss) attributable to ETRN common shareholders and earnings
(loss) per diluted share attributable to ETRN common shareholders,
including, as applicable, impairment of equity method investment,
unrealized gain (loss) on derivative instruments, loss on
extinguishment of debt, gain on the sale of gathering assets,
expenses for the Rager Mountain natural gas storage field incident
(Rager Mountain incident), contract asset write-down, and the
related tax impacts of these items, which items affect the
comparability of results period to period. Additionally, because
these non-GAAP metrics may be defined differently by other
companies in ETRN’s industry, ETRN’s definitions of adjusted net
income (loss) attributable to ETRN common shareholders and adjusted
earnings (loss) per diluted share attributable to ETRN common
shareholders may not be comparable to similarly titled measures of
other companies, thereby diminishing the utility of the measures.
Adjusted net income (loss) attributable to ETRN common shareholders
and adjusted earnings (loss) per diluted share attributable to ETRN
common shareholders should not be viewed as indicative of the
actual amount of net income (loss) attributable to ETRN common
shareholders or actual earnings (loss) per diluted share of ETRN in
any given period.
The table below reconciles adjusted net income attributable to
ETRN common shareholders and adjusted earnings per diluted share
attributable to ETRN common shareholders with net income (loss)
attributable to ETRN common shareholders and earnings (loss) per
diluted share attributable to ETRN common shareholders as derived
from the statements of consolidated comprehensive income to be
included in ETRN’s Quarterly Report on Form 10-Q for the three
months ended September 30, 2023. Diluted weighted average common
shares outstanding assumes dilution for each applicable period.
Reconciliation of Adjusted Net Income
Attributable to ETRN Common Shareholders and Adjusted Earnings per
Diluted Share Attributable to ETRN Common Shareholders
Three Months Ended September
30,
(Thousands, except per share
information)
2023
2022
Net income (loss) attributable to ETRN
common shareholders
$
112,804
$
(520,493
)
Add back (deduct):
Impairment of equity method investment
—
583,057
Unrealized loss on derivative
instruments
3,445
815
Gain on sale of gathering assets
—
(3,719
)
Rager Mountain incident
2,273
—
Contract asset write-down
7,800
—
Tax impact of non-GAAP items(1)
(3,506
)
(21,607
)
Adjusted net income attributable to ETRN
common shareholders
$
122,816
$
38,053
Diluted weighted average common shares
outstanding, assuming dilution
439,034
434,187
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.28
$
0.09
(1)
The adjustments were tax effected at
ETRN’s federal and state statutory tax rate for each period
including certain discrete valuation allowance adjustments.
Adjusted EBITDA
Adjusted EBITDA excludes the impact of certain non-operating
income and expenses, non-cash items, and other items that ETRN
believes are not indicative of ETRN's ongoing operations or affect
the comparability of results period to period. As used in this news
release, Adjusted EBITDA means, as applicable, net income (loss),
plus income tax expense (benefit), net interest expense, loss on
extinguishment of debt, depreciation, amortization of intangible
assets, impairment of equity method investment, payments on the
preferred interest in EQT Energy Supply, LLC (Preferred Interest),
non-cash long-term compensation expense, expenses for the Rager
Mountain incident, contract asset write-down and less equity
income, AFUDC-equity, unrealized gain (loss) on derivative
instruments, gain on sale of gathering assets, and adjusted EBITDA
attributable to noncontrolling interest.
The table below reconciles adjusted EBITDA with net income as
derived from the statements of consolidated comprehensive income to
be included in ETRN's Quarterly Report on Form 10-Q for the three
months ended September 30, 2023.
Reconciliation of Adjusted
EBITDA
Three Months Ended September
30,
(Thousands)
2023
2022
Net income (loss):
$
129,704
$
(502,933
)
Add (deduct):
Income tax benefit
(10,976
)
(366
)
Net interest expense
106,334
101,085
Depreciation
69,348
68,572
Amortization of intangible assets
16,204
16,204
Impairment of equity method investment
—
583,057
Preferred Interest payments
2,746
2,746
Non-cash long-term compensation
expense
7,257
3,658
Rager Mountain incident
2,273
—
Contract asset write-down
7,800
—
Equity income
(73,810
)
(48
)
AFUDC – equity
(291
)
(78
)
Unrealized loss on derivative
instruments
3,445
815
Gain on sale of gathering assets
—
(3,719
)
Adjusted EBITDA attributable to
noncontrolling interest(1)
(10,148
)
(9,642
)
Adjusted EBITDA
$
249,886
$
259,351
(1)
Reflects adjusted EBITDA attributable to
noncontrolling interest associated with the third-party ownership
interest in Eureka. Adjusted EBITDA attributable to noncontrolling
interest for the three months ended September 30, 2023 was
calculated as net income of $2.3 million plus depreciation of $3.2
million, plus amortization of intangible assets of $2.1 million,
and plus interest expense of $2.6 million. Adjusted EBITDA
attributable to noncontrolling interest for the three months ended
September 30, 2022 was calculated as net income of $2.9 million,
plus depreciation of $3.1 million, plus amortization of intangible
assets of $2.1 million, and plus interest expense of $1.5
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, dividends paid
to Series A Preferred Shareholders, premiums and fees paid on
extinguishment of debt, capital expenditures (excluding the
noncontrolling interest share (40%) of Eureka capital
expenditures), and capital contributions to MVP JV.
Retained Free Cash Flow
As used in this news release, retained free cash flow means free
cash flow less dividends paid to common shareholders.
The table below reconciles free cash flow and retained free cash
flow with net cash provided by operating activities as derived from
the statements of consolidated cash flows to be included in ETRN's
Quarterly Report on Form 10-Q for the three months ended September
30, 2023.
Reconciliation of Free Cash Flow and
Retained Free Cash Flow
Three Months Ended September
30,
(Thousands)
2023
2022
Net cash provided by operating
activities
$
201,586
$
209,567
Add (deduct):
Principal payments received on the
Preferred Interest
1,469
1,389
Net cash provided by operating activities
attributable to noncontrolling interest(1)
(7,166
)
(7,260
)
ETRN Series A Preferred Shares
dividends(2)
(14,628
)
(14,628
)
Capital expenditures(3)(4)
(104,234
)
(105,867
)
Capital contributions to MVP JV
(209,938
)
(46,426
)
Free cash flow
$
(132,911
)
$
36,775
Less:
Dividends paid to common
shareholders(5)
(64,989
)
(64,917
)
Retained free cash flow
$
(197,900
)
$
(28,142
)
(1)
Reflects 40% of $17.9 million and $18.2
million, which was Eureka’s standalone net cash provided by
operating activities for the three months ended September 30, 2023
and 2022, respectively, which represents the noncontrolling
interest portion for the three months ended September 30, 2023 and
2022, respectively.
(2)
Reflects cash dividends paid of $0.4873
per ETRN Series A Perpetual Convertible Preferred Share.
(3)
Does not reflect amounts related to the
noncontrolling interest share of Eureka.
(4)
ETRN accrues capital expenditures when the
work has been completed but the associated bills have not yet been
paid. Accrued capital expenditures are excluded from the statements
of consolidated cash flows until they are paid.
(5)
Second quarter 2023 dividend of $0.15 per
ETRN common share was paid during the third quarter 2023.
Adjusted EBITDA, free cash flow and retained free cash flow are
non-GAAP supplemental financial measures that management and
external users of ETRN's consolidated financial statements, such as
industry analysts, investors, lenders, and rating agencies, may use
to assess:
- ETRN’s operating performance as compared to other publicly
traded companies in the midstream energy industry without regard to
historical cost basis or, in the case of adjusted EBITDA, financing
methods
- The ability of ETRN’s assets to generate sufficient cash flow
to pay dividends to ETRN’s shareholders
- ETRN’s ability to incur and service debt and fund capital
expenditures and capital contributions
- The viability of acquisitions and other capital expenditure
projects and the returns on investment of various investment
opportunities.
ETRN believes that adjusted EBITDA, free cash flow, and retained
free cash flow provide useful information to investors in assessing
ETRN's financial condition and results of operations. Adjusted
EBITDA, free cash flow, and retained free cash flow should not be
considered as alternatives to net income (loss), operating income,
or net cash provided by operating activities, as applicable, or any
other measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EBITDA, free cash flow, and retained
free cash flow have important limitations as analytical tools
because they exclude some, but not all, items that affect net
income (loss), operating income and net cash provided by operating
activities. Additionally, because these non-GAAP metrics may be
defined differently by other companies in ETRN's industry, ETRN's
definitions of adjusted EBITDA, free cash flow, and retained free
cash flow may not be comparable to similarly titled measures of
other companies, thereby diminishing the utility of the measures.
Free cash flow and retained free cash flow should not be viewed as
indicative of the actual amount of cash that ETRN has available for
dividends or that ETRN plans to distribute and are not intended to
be liquidity measures.
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 (benefit), the 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 (loss),
adjusted EBITDA, deferred revenue, 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,
receipts and project in-service (as applicable) and the impact on
the related reconciling items, many of which interplay with each
other.
Adjusted Water EBITDA
Adjusted water EBITDA excludes the impact of certain
non-operating income and expenses, non-cash items, and other items
ETRN believes are not indicative of ETRN's ongoing water operations
or affects the comparability of water results period to period. As
used in this news release, adjusted water EBITDA means water
operating income (loss) plus, as applicable, depreciation and
impairment of long-lived assets of ETRN's water business, and
contract asset write-down. Adjusted 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. Adjusted water EBITDA should not be
considered as an alternative to ETRN’s net income (loss), operating
income or any other measure of financial performance presented in
accordance with GAAP. Adjusted water EBITDA has important
limitations as an analytical tool because the measure excludes
some, but not all, items that affect net income (loss) and
operating income. Additionally, because adjusted water EBITDA may
be defined differently by other companies in ETRN’s industry, the
definition of adjusted water EBITDA may not be comparable to
similarly titled measures of other companies, thereby diminishing
the utility of the measure. The table below reconciles adjusted
water EBITDA from ETRN's water operating income (loss) as derived
from ETRN's statements of consolidated comprehensive income to be
included in ETRN's Quarterly Report on Form 10-Q for the three
months ended September 30, 2023.
ETRN has not provided a reconciliation of projected adjusted
water EBITDA from projected water operating income (loss), the most
comparable measure calculated in accordance with GAAP. ETRN does
not allocate certain costs, such as interest expense, to individual
assets within its business segments. Water operating income (loss)
includes the impact of depreciation expense, which may be
significant and difficult to project with a reasonable degree of
accuracy. Therefore, the reconciliation of projected adjusted water
EBITDA from projected water operating income (loss) is not
available without unreasonable effort.
Reconciliation of Adjusted Water EBITDA
Three Months Ended September
30,
(Thousands)
2023
2022
Water operating (loss) income
$
(2,251
)
$
2,342
Add: Depreciation
6,655
5,162
Add: Contract asset write-down
7,800
—
Adjusted Water EBITDA
$
12,204
$
7,504
About Equitrans Midstream Corporation:
Equitrans Midstream Corporation has a premier asset footprint in
the Appalachian Basin and, as the parent company of EQM Midstream
Partners, is one of the largest natural gas gatherers in the United
States. Through its strategically located infrastructure assets in
the Marcellus and Utica regions, Equitrans has an operational focus
on gas transmission and storage systems, gas gathering systems, and
water services that support natural gas development and production
across the Basin. With a rich 140-year history in the energy
industry, Equitrans was launched as a standalone company in 2018
with a vision to be the premier midstream services provider in
North America. While working to meet America's growing need for
clean-burning energy, Equitrans is proud of its environmental,
social, and governance (ESG) practices, striving every day to
preserve and protect the environment, provide an engaging workplace
for its employees, support and enrich its local communities, and to
deliver sustained value for customers and shareholders.
Visit www.equitransmidstream.com; and to learn more about our
ESG practices visit
www.equitransmidstream.com/sustainability-reporting/
Cautionary Statements
This news release contains certain forward-looking statements
within the meaning of Section 21E of the United States Securities
Exchange Act of 1934, as amended (the Exchange Act), and Section
27A of the United States Securities Act of 1933, as amended (the
Securities Act), concerning ETRN and other matters. These
statements may discuss goals, intentions and expectations as to
future plans, trends, events, results of operations or financial
condition, or otherwise, based on current beliefs of the management
of ETRN, as well as assumptions made by, and information currently
available to, such management. Words such as “aim,” “anticipate,”
“approximate,” “aspire,” “assume,” “believe,” “budget,” “continue,”
“could,” “design,” “estimate,” “expect,” “focused,” “forecast,”
“goal,” “guidance,” “intend,” “may,” “objective,” “opportunity,”
“outlook,” “plan,” “position,” “potential,” “predict,” “project,”
“pursue,” “scheduled,” “seek,” “should,” “strategy,” “strive,”
“target,” “view,” “will,” or “would” 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 may include the following and/or statements with
respect thereto, as applicable: expectations of plans, strategies,
objectives and growth and anticipated financial and operational
performance of ETRN and its affiliates, including guidance and any
changes in such guidance in respect of ETRN’s gathering,
transmission and storage and water services revenue and volume,
including the anticipated effects associated with the February 2020
Gas Gathering and Compression Agreement (and as subsequently
amended) and related documents entered into with EQT Corporation
(EQT) and certain affiliates (collectively, the EQT Global GGA);
projected revenue (including from firm reservation fees) and
volumes, gathering rates, deferred revenues, expenses, and contract
liabilities, and the effects on liquidity, leverage, projected
revenue, deferred revenue and contract liabilities associated with
the EQT Global GGA and the MVP project (including changes in timing
for such project); the ultimate gathering MVC fee relief, and
timing thereof, provided to EQT under the EQT Global GGA and
related agreements; ETRN’s ability to de-lever and timing and means
thereof; the ultimate financial, business, reputational and/or
operational impacts resulting, directly or indirectly, from the
Rager Mountain incident; forecasted adjusted EBITDA (and
incremental adjusted EBITDA with MVP full in-service), water
operating (loss) income, adjusted water EBITDA, net (loss) income,
free cash flow, retained free cash flow (and usage thereof),
leverage ratio, build multiples and deferred revenue; the weighted
average contract life of gathering, transmission and storage
contracts; infrastructure programs (including the targeted or
ultimate timing, cost, capacity and sources of funding with respect
to gathering, transmission and storage and water projects); the
cost to construct or restore right-of-way for, capacity of,
shippers for, timing and durability of regulatory approvals and
concluding litigation, final design (including project scope,
expansions, extensions or refinements and capital and incremental
adjusted EBITDA related thereto), ability and timing to contract
additional capacity on, mitigate emissions from, targeted
in-service dates of, and completion (including potential timing of
such completion) of current, planned or in-service projects or
assets, in each case as applicable; the effect of the Fiscal
Responsibility Act of 2023 on the MVP JV's ability to complete the
MVP project; the ability to achieve, and targeted timing for
achieving, completion of the MVP project, risks related thereto,
the realizability of the MVP performance award program, and the
degree to which, if at all, the MVP PSU Amendment (as defined in
Note 5 of ETRN’s Quarterly Report on Form 10-Q for the three months
ended September 30, 2023 to be filed with the SEC) fosters ETRN
completing the MVP project safely and in compliance with
environmental standards; the targeted total MVP project cost and
schedule, including the timing for contractual obligations to
commence, and the ability to continue construction in the winter,
potential receipt of in-service authorization, and the
realizability of the perceived benefits of the MVP project; the
potential for future bipartisan support for, and the potential
timing for, additional federal energy infrastructure permitting
reform legislation to be enacted; the ultimate terms, partner
relationships and structure of the MVP JV and ownership interests
therein the realizability of all or any portion of the potential
Henry Hub bonus payments; the impact of changes in assumptions and
estimates relating to the potential completion and full in-service
timing of the MVP project (as well as changes in such timing) on,
among other things, the fair value of the Henry Hub cash bonus
payment provision of the EQT Global GGA, gathering rates, the
amount of gathering MVC fee relief and the estimated transaction
price allocated to ETRN's remaining performance obligations under
certain contracts with firm reservation fees and MVCs; ETRN’s
ability to identify and complete opportunities to optimize its
existing asset base and/or expansion projects in ETRN’s operating
areas and in areas that would provide access to new markets; ETRN’s
ability to bring, and targeted timing for bringing, in-service the
backbone of its mixed-use water system (and expansions thereto),
and realize benefits therefrom in accordance with its strategy for
its water services business segment; ETRN’s ability to identify and
complete acquisitions and other strategic transactions, including
joint ventures, effectively integrate transactions into ETRN’s
operations, and achieve synergies, system optionality, accretion
and other benefits associated with transactions, including through
increased scale; the potential for the MVP project, EQM Midstream
Partners, LP’s (EQM) leverage, customer credit ratings changes,
defaults, acquisitions, dispositions and financings to impact EQM’s
credit ratings and the potential scope of any such impacts; the
effect and outcome of contractual disputes, litigation and other
proceedings, including regulatory investigations and proceedings;
the potential effects of any consolidation of or effected by
upstream gas producers, including acquisitions of midstream assets,
whether in or outside of the Appalachian Basin; the potential for,
timing, amount and effect of future issuances or repurchases of
ETRN’s securities; the effects of conversion, if at all, of ETRN’s
preferred shares; the effects of seasonality; expected cash flows,
cash flow profile (and support therefor from certain contract
structures) and MVCs, including those associated with the EQT
Global GGA, and the potential impacts thereon of the commission and
in-service timing (or absence thereof) and cost of the MVP project;
projected capital contributions and capital and operating
expenditures, including the amount and timing of reimbursable
capital expenditures, capital budget and sources of funds for
capital expenditures; ETRN’s ability to recoup replacement and
related costs; future dividend amounts, timing and rates;
statements regarding macroeconomic factors effects on ETRN’s
business, including, future commodity prices and takeaway capacity
constraints in the Appalachian Basin; future decisions of customers
in respect of production growth, curtailing natural gas production,
timing of turning wells in line, rig and completion activity and
related impacts on ETRN’s business, and the effect, if any, on such
future decisions should the MVP be brought in-service, as well as
the potential for increased volumes to flow to ETRN’s gathering and
transmission system to supply the MVP following in-service; ETRN’s
liquidity and financing position and requirements, including
sources, availability and sufficiency; statements regarding future
interest rates and/or reference rates and the potential impacts
thereof; the ability of ETRN’s subsidiaries (some of which are not
wholly owned) to service debt under, and comply with the covenants
contained in, their respective credit agreements; the MVP JV’s
ability to raise project-level debt, and the anticipated proceeds
that ETRN expects to receive therefrom; expectations regarding
natural gas and water volumes in ETRN’s areas of operations; ETRN’s
ability to achieve anticipated benefits associated with the
execution of the EQT Global GGA and other commercial agreements;
ETRN’s ability to position itself for a lower carbon economy,
achieve, and create value from, its ESG and sustainability
initiatives, targets and aspirations (including targets and
aspirations set forth in its climate policy) and respond, and
impacts of responding, to increasing stakeholder scrutiny in these
areas; the effectiveness of ETRN’s information technology and
operational technology systems and practices to detect and defend
against evolving cyberattacks on United States critical
infrastructure; the effects and associated cost of compliance with
existing or new government regulations including any quantification
of potential impacts of regulatory matters related to climate
change on ETRN; and future tax rates, status and position. These
forward-looking statements involve risks and uncertainties that
could cause actual results to differ materially from projected
results.
Accordingly, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. ETRN
has based these forward-looking statements on management’s current
expectations and assumptions about future events. While ETRN
considers these expectations and assumptions to be reasonable, they
are inherently subject to significant business, economic,
competitive, regulatory, judicial, construction and other risks and
uncertainties, many of which are difficult to predict and are
beyond ETRN’s control, including, as it pertains to the MVP
project, risks and uncertainties such as the physical construction
conditions, including steep slopes and any further unexpected
geological impediments, continued crew availability and
productivity realizable in the winter season, project opposition,
the receipt of certain time of year and other variances and
approvals, and potential winter weather. 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 Part I, "Item 1A.
Risk Factors" in ETRN's Annual Report on Form 10-K for the year
ended December 31, 2022 filed with the Securities and Exchange
Commission (the SEC), as updated by any 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, 2023 filed with
the SEC, ETRN's Quarterly Report on Form 10-Q for the three months
ended June 30, 2023 filed with the SEC, and ETRN’s Quarterly Report
on Form 10-Q for the three months ended September 30, 2023 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 September
30,
2023
2022(1)
(Thousands, except per share
amounts)
Operating revenues
$
338,514
$
331,751
Operating expenses:
Operating and maintenance
43,046
35,297
Selling, general and administrative
55,627
33,348
Depreciation
69,348
68,572
Amortization of intangible assets
16,204
16,204
Total operating expenses
184,225
153,421
Operating income
154,289
178,330
Equity income
73,810
48
Impairment of equity method investment
—
(583,057
)
Other (expense) income, net
(3,037
)
2,465
Net interest expense
(106,334
)
(101,085
)
Income (loss) before income taxes
118,728
(503,299
)
Income tax benefit
(10,976
)
(366
)
Net income (loss)
129,704
(502,933
)
Net income attributable to noncontrolling
interests
2,272
2,932
Net income (loss) attributable to ETRN
127,432
(505,865
)
Preferred dividends
14,628
14,628
Net income (loss) attributable to ETRN
common shareholders
$
112,804
$
(520,493
)
Earnings (loss) per share of common stock
attributable to ETRN common shareholders - basic
$
0.26
$
(1.20
)
Earnings (loss) per share of common stock
attributable to ETRN common shareholders - diluted
$
0.26
$
(1.20
)
Weighted average common shares outstanding
- basic
434,080
433,348
Weighted average common shares outstanding
- diluted
439,034
433,348
(1)
In the course of its 2022 year-end
process, ETRN identified immaterial corrections in its previously
issued unaudited interim consolidated financial statements. ETRN
has revised the prior periods presented to reflect these items.
Refer to ETRN’s Annual Report on Form 10-K for the year ended
December 31, 2022 for further information.
EQUITRANS MIDSTREAM
CORPORATION
GATHERING RESULTS OF
OPERATIONS
Three Months Ended September
30,
2023
2022(4)
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues(1)
$
147,137
$
144,730
Volumetric-based fee revenues
72,950
82,450
Total operating revenues
220,087
227,180
Operating expenses:
Operating and maintenance
23,799
27,855
Selling, general and administrative
30,365
21,717
Depreciation
48,585
49,125
Amortization of intangible assets
16,204
16,204
Total operating expenses
118,953
114,901
Operating income
$
101,134
$
112,279
Other (expense) income, net(2)
$
(3,445
)
$
2,904
OPERATIONAL DATA
Gathered volumes (BBtu per day)
Firm capacity(1)
5,628
5,125
Volumetric-based services
2,356
2,413
Total gathered volumes
7,984
7,538
Capital expenditures(3)
$
67,551
$
73,589
(1)
Includes revenues and volumes, as
applicable, from contracts with MVCs.
(2)
Other (expense) income, net, includes the
unrealized loss on derivative instruments associated with the Henry
Hub cash bonus payment provision and gain on sale of gathering
assets.
(3)
Includes approximately $3.3 million and
$5.9 million of capital expenditures related to noncontrolling
interests in Eureka for the three months ended September 30, 2023
and 2022, respectively.
(4)
In the course of its 2022 year-end
process, ETRN identified immaterial corrections in its previously
issued unaudited interim consolidated financial statements. ETRN
has revised the prior periods presented to reflect these items.
Refer to ETRN’s Annual Report on Form 10-K for the year ended
December 31, 2022 for further information.
EQUITRANS MIDSTREAM
CORPORATION
TRANSMISSION RESULTS OF
OPERATIONS
Three Months Ended September
30,
2023
2022
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues
$
82,508
$
84,584
Volumetric-based fee revenues
16,067
6,973
Total operating revenues
98,575
91,557
Operating expenses:
Operating and maintenance
13,559
4,143
Selling, general and administrative
15,204
9,428
Depreciation
14,004
13,909
Total operating expenses
42,767
27,480
Operating income
$
55,808
$
64,077
Equity income
$
73,810
$
48
Impairment of equity method investment
$
—
(583,057
)
OPERATIONAL DATA
Transmission pipeline throughput (BBtu per
day)
Firm capacity reservation
3,496
3,058
Volumetric-based services
14
65
Total transmission pipeline throughput
3,510
3,123
Average contracted firm transmission
reservation commitments (BBtu per day)
3,515
3,748
Capital expenditures(1)
$
31,332
$
12,429
(1)
Transmission capital expenditures do not
include aggregate capital contributions made to the MVP JV for the
MVP and MVP Southgate projects of approximately $209.9 million and
$46.4 million for the three months ended September 30, 2023 and
2022, respectively.
EQUITRANS MIDSTREAM
CORPORATION
WATER RESULTS OF
OPERATIONS
Three Months Ended September
30,
2023
2022
FINANCIAL DATA
(Thousands, except MMgal
amounts)
Firm reservation fee revenues(1)
$
11,029
$
9,375
Volumetric-based fee revenues
8,823
3,639
Total operating revenues
19,852
13,014
Operating expenses:
Operating and maintenance
5,666
3,280
Selling, general and administrative
9,782
2,230
Depreciation
6,655
5,162
Total operating expenses
22,103
10,672
Operating (loss) income
$
(2,251
)
$
2,342
OPERATIONAL DATA
Water services volumes (MMgal)
Firm capacity reservation(1)
170
107
Volumetric-based services
188
96
Total water volumes
358
203
Capital expenditures
$
9,574
$
17,041
(1)
Includes revenues and volumes from
contracts with MVCs or Annual Revenue Commitments (ARCs), as
applicable.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231031382752/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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