To be majority interest owner and operator of Mountain Valley
Pipeline
Company Website:
http://www.eqtmidstreampartners.com
PITTSBURGH -- (Business Wire)
EQT Midstream Partners, LP (NYSE: EQM), an EQT Corporation (EQT)
company, today announced third quarter 2014 financial and operating
results. Net income for the quarter totaled $56.5 million and adjusted
EBITDA was $71.4 million. Distributable cash flow was $61.8 million for
the quarter. Adjusted operating income was $62.3 million, or 16% higher
than the same quarter last year. The non-GAAP financial measures are
reconciled in the Non-GAAP Disclosures section, found below.
Additional Highlights:
-
The Partnership will assume EQT’s interest in Mountain Valley
Pipeline, LLC
-
Mountain Valley Pipeline, LLC secures 2 Bcf per day of capacity
commitments
-
The Jefferson compressor station was placed into service
-
Third quarter distribution per unit was 28% higher than the same
period last year
In December 2013, EQT Midstream Partners (Partnership) entered into a
capital lease with EQT for the lease of its Allegheny Valley Connector
facilities (AVC), which includes a 200-mile FERC-regulated pipeline. The
Partnership operates the AVC and the related revenues and expenses are
included in the Partnership’s financial statements; however, the monthly
lease payment to EQT offsets the impact on the Partnership’s
distributable cash flow. As a result, third quarter 2014 operating
results are discussed on an adjusted basis, excluding the AVC. Payments
due under the lease totaled $3.6 million for the third quarter. The
revenues and expenses associated with the AVC are found in the
reconciliation table in the Non-GAAP Disclosures section of this news
release.
Third quarter adjusted operating revenues increased $12.3 million, or
16%, compared to the same quarter last year. The increase was primarily
due to increased contracted firm transmission capacity and throughput
from third-parties and EQT. Adjusted operating expenses increased $4.0
million versus the third quarter of 2013, consistent with the growth of
the business.
Mountain Valley Pipeline
EQT announced today that the Partnership will assume EQT’s interest in
Mountain Valley Pipeline, LLC, a joint venture with a subsidiary of
NextEra Energy, Inc. The Mountain Valley Pipeline (MVP) will extend from
the Partnership’s existing transmission and storage system in Wetzel
County, West Virginia to Pittsylvania County, Virginia. The Partnership
expects to own a majority interest in the joint venture and will operate
the estimated 300-mile pipeline.
The joint venture has secured a total of 2 Bcf per day of firm capacity
commitments at 20-year terms, and is currently in negotiation with
additional shippers who have expressed interest in the MVP project. As a
result, the final project scope, including pipe diameter and total
capacity, is not yet determined.
The pipeline, which is subject to Federal Energy Regulatory Commission
(FERC) approval, will provide Marcellus and Utica natural gas supply to
the growing demand markets in the southeast region. The pre-filing
process with FERC is expected to begin this month; and the pipeline is
expected to be in-service during the fourth quarter of 2018. For more
information on the project please visit www.mountainvalleypipeline.info.
Long-term Debt Offering
On August 1, 2014, the Partnership closed its inaugural long-term debt
offering. The $500 million offering of 10-year senior notes was issued
at a 4.0% coupon and matures in August 2024. The Partnership ended the
third quarter with $155 million of cash and zero drawn on its $750
million credit facility.
Quarterly Distribution
The Partnership announced a quarterly cash distribution of $0.55 per
unit for the third quarter of 2014. The distribution will be paid on
November 14, 2014 to all unitholders of record at the close of business
on November 4, 2014. The quarterly cash distribution is $0.03 per unit,
or 6% higher than the second quarter of 2014 and $0.12 per unit, or 28%
higher than the third quarter of 2013. The Partnership expects to
continue to increase the per unit distribution by $0.03 each quarter
through at least 2016.
Guidance
The Partnership’s full-year 2014 adjusted EBITDA and distributable cash
flow forecasts are $254 million and $221 million, respectively. The
forecasts reflect lower expected fourth quarter gathered volumes on the
Jupiter natural gas gathering system due to EQT’s revised production
volume forecast.
CAPITAL EXPENDITURES
Expansion
The Partnership completed the Jefferson compressor station expansion in
the third quarter 2014. The expansion added 550 BBtu per day of
transmission capacity.
The Partnership is constructing two transmission expansion projects for
Antero Resources and is constructing a gathering and transmission
expansion for Range Resources. In total, the Partnership expects to
spend $50 million in 2014 and $55 million in 2015 to complete these
expansion projects.
The Partnership has begun preliminary work on the 36-mile Ohio Valley
Connector (OVC) project, which will connect the Partnership’s
transmission and storage system in northern West Virginia to Clarington,
Ohio. The pipeline will provide 1.0 Bcf per day of transmission capacity
and is estimated to cost $300 million. The Partnership projects capital
expenditures of approximately $10 million in 2014 related to the OVC
project. The OVC is expected to be placed in-service by mid-year 2016.
In the fourth quarter 2014, the Partnership expects to install 350 MMcf
per day of compression capacity, along with gathering pipelines
associated with its Jupiter natural gas gathering system.
Expansion capital expenditures totaled $59.9 million in the third
quarter and $131.6 million year-to-date. The Partnership forecasts total
expansion capital expenditures of approximately $200 - $220 million in
2014.
Ongoing Maintenance
Ongoing maintenance capital expenditures are cash expenditures made to
maintain, over the long-term, the Partnership’s operating capacity or
operating income. Ongoing maintenance capital expenditures, net of
expected reimbursements, totaled $5.7 million in the third quarter 2014
and $10.5 million year-to-date. The Partnership forecasts ongoing
maintenance capital expenditures of approximately $17 - $18 million for
2014.
NON-GAAP DISCLOSURES
Adjusted EBITDA and Distributable Cash Flow
As used in this news release, adjusted EBITDA means net income plus net
interest expense, depreciation and amortization expense, income tax
expense (if applicable), non-cash long-term compensation expense and
other non-cash adjustments (if applicable), less other income, capital
lease payments and Jupiter adjusted EBITDA prior to acquisition (if
applicable). As used in this news release, distributable cash flow means
adjusted EBITDA less interest expense, excluding capital lease interest
and ongoing maintenance capital expenditures, net of expected
reimbursements. Distributable cash flow should not be viewed as
indicative of the actual amount of cash that the Partnership has
available for distributions from operating surplus or that the
Partnership plans to distribute. Adjusted EBITDA and distributable cash
flow are non-GAAP supplemental financial measures that management and
external users of the Partnership’s consolidated financial statements,
such as industry analysts, investors, lenders and rating agencies, use
to assess:
-
the Partnership’s operating performance as compared to other publicly
traded partnerships in the midstream energy industry without regard to
historical cost basis or, in the case of adjusted EBITDA, financing
methods;
-
the ability of the Partnership’s assets to generate sufficient cash
flow to make distributions to the Partnership’s unitholders;
-
the Partnership’s ability to incur and service debt and fund capital
expenditures; and
-
the viability of acquisitions and other capital expenditure projects
and the returns on investment of various investment opportunities.
The Partnership believes that adjusted EBITDA and distributable cash
flow provide useful information to investors in assessing the
Partnership’s financial condition and results of operations. Adjusted
EBITDA and distributable cash flow should not be considered as
alternatives to net income, operating income, net cash provided by
operating activities or any other measure of financial performance or
liquidity presented in accordance with GAAP. Adjusted EBITDA and
distributable cash flow have important limitations as analytical tools
because they exclude some, but not all, items that affect net income and
net cash provided by operating activities. Additionally, because
adjusted EBITDA and distributable cash flow may be defined differently
by other companies in its industry, the Partnership’s definition of
adjusted EBITDA and distributable cash flow may not be comparable to
similarly titled measures of other companies, thereby diminishing their
utility. The table below reconciles adjusted EBITDA and distributable
cash flow with net income and net cash provided by operating activities
as derived from the statements of consolidated operations and cash flows
to be included in the Partnership’s quarterly report on Form 10-Q for
the quarter ended September 30, 2014.
|
Reconciliation of Adjusted EBITDA and Distributable Cash Flow |
| |
|
| | Three Months Ended |
| | September 30, 2014 |
Operating revenues: | |
(in thousands)
|
Transmission and storage
| |
$
|
62,436
| |
Gathering
| |
|
33,408
|
|
Total operating revenues | | | 95,844 | |
Operating expenses: | | |
Operating and maintenance
| | |
11,710
| |
Selling, general and administrative
| | |
9,901
| |
Depreciation and amortization
| |
|
9,846
|
|
Total operating expenses | |
| 31,457 |
|
Operating income | | | 64,387 | |
Other income, net
| | |
806
| |
Interest expense, net
| |
|
8,660
|
|
Net income | |
$
| 56,533 |
|
Add:
| | |
Interest expense, net
| | |
8,660
| |
Depreciation and amortization expense
| | |
9,846
| |
Non-cash long-term compensation expense
| |
779
| |
Less:
| | |
Other income, net
| | |
(806
|
)
|
Capital lease payments
| |
|
(3,565
|
)
|
Adjusted EBITDA | |
$
| 71,447 |
|
Less:
| | |
Interest expense, excluding capital lease interest
| | |
(3,939
|
)
|
Ongoing maintenance capital expenditures, net of expected
reimbursements
| |
|
(5,718
|
)
|
Distributable cash flow | |
$
| 61,790 |
|
Distributions declared (a): | | |
Limited Partner
| |
$
| 33,378 | |
General Partner
| |
| 4,161 |
|
Total | |
$
| 37,539 | |
Coverage ratio | | | 1.65x | |
(a) Reflects cash distribution of $0.55 per limited partner
unit for the third quarter. |
| |
|
| | Three Months Ended |
| | September 30, 2014 |
| |
(in thousands)
|
Net cash provided by operating activities | |
$
| 67,623 | |
Adjustments:
| | |
Interest expense, net
| | |
8,660
| |
Capital lease payments
| | |
(3,565
|
)
|
Other, including changes in working capital
| |
|
(1,271
|
)
|
Adjusted EBITDA | |
$
| 71,447 |
|
| | | |
|
Adjusted Operating Revenues, Adjusted Operating Expenses, Adjusted
Operating Income and Adjusted Income Before Income Taxes
Adjusted operating revenues, adjusted operating expenses, adjusted
operating income and adjusted income before income taxes, all of which
exclude the impact of the AVC, are non-GAAP supplemental financial
measures that are presented because they are important measures used by
management to evaluate the Partnership’s performance. The AVC did not
have a net positive or negative impact on the Partnership’s
distributable cash flow. Adjusted operating revenues, adjusted operating
expenses, adjusted operating income and adjusted income before income
taxes should not be considered as alternatives to operating revenues,
operating expenses, operating income or income before income taxes, or
any other measure of financial performance presented in accordance with
GAAP. The table below reconciles adjusted operating revenues, adjusted
operating expenses, adjusted operating income and adjusted income before
income taxes with operating revenues, operating expenses, operating
income and income before income taxes as derived from the statements of
consolidated operations to be included in the Partnership’s quarterly
report on Form 10-Q for the quarter ended September 30, 2014.
|
| | Three Months Ended September 30, |
| | | 2014 |
| | 2013 |
(in thousands)
| | | Reported Results |
| | Adjustment to exclude AVC |
| | Adjusted Results (excludes AVC) | | | Recast Results(1) |
Operating Revenues: | | | | | | | | | | | | |
Operating revenues – affiliate(2) | |
$
|
61,641
| |
$
|
—
| | |
$
|
61,641
| |
$
|
67,377
|
Operating revenues – third party(2) | | |
34,203
| | |
(6,021
|
)
| | |
28,182
| | |
10,099
|
Total operating revenues
| | |
95,844
| | |
(6,021
|
)
| | |
89,823
| | |
77,476
|
| | | | | | | | | | | |
|
Operating Expenses
| | | | | | | | | | | | |
Operating and maintenance
| | |
11,710
| | |
(1,476
|
)
| | |
10,234
| | |
9,740
|
Selling, general and administrative
| | |
9,901
| | |
(980
|
)
| | |
8,921
| | |
7,188
|
Depreciation and amortization
| | |
9,846
| | |
(1,472
|
)
| | |
8,374
| | |
6,624
|
Total operating expenses
| | |
31,457
| | |
(3,928
|
)
| | |
27,529
| | |
23,552
|
Operating income
| | |
64,387
| | |
(2,093
|
)
| | |
62,294
| | |
53,924
|
Other income, net
| | |
806
| | |
—
| | | |
806
| | |
319
|
Interest expense, net
| | |
8,660
| | |
(4,721
|
)
| | |
3,939
| | |
196
|
Income before income taxes
| |
$
|
56,533
| |
$
|
2,628
|
| |
$
|
59,161
| |
$
|
54,047
|
(1) |
| Q3 2013 has been recast to include the historical results of
the Jupiter Gathering System, which was acquired on May 7, 2014. |
(2) | | On December 17, 2013, EQT completed the sale of Equitable Gas
Company, LLC (EGC). Prior to the sale, revenues from EGC were
affiliate revenues. Subsequent to the sale, EGC revenues are third
party revenues. In the third quarter 2013, revenues from EGC
totaled $8.9 million. |
| |
|
Affiliate and third party transmission and storage revenue adjusted
for AVC and normalized for EGC
In December 2013, EQT completed the sale of EGC. In conjunction with the
closing, the Partnership extended its existing 450 BBtu per day
transmission and storage contract with EGC for 20 years. Revenues from
EGC were affiliate revenues prior to the sale and are third party
revenues subsequent to the sale. After normalizing for EGC, the third
quarter affiliate adjusted transmission and storage revenue was 22%
higher than the same quarter last year and third party adjusted
transmission and storage revenue was 45% higher. In the third quarter
2014, third parties accounted for 46% of total adjusted transmission and
storage operating revenue.
|
| | Three Months Ended September 30, |
|
| |
| | | 2014 |
| | 2013 | | | |
Transmission and Storage
Operating Revenues
(in thousands) | | | Adjusted Results (excludes AVC) | | | Results |
| | EGC |
| | Normalized for EGC | | | 2014 vs 2013 |
Affiliate
| |
$
|
30,719
| |
$
|
34,102
| |
$
|
(8,906
|
)
| |
$
|
25,196
| | |
22
|
%
|
Third party
| | |
25,696
| | |
8,756
| | |
8,906
|
| | |
17,662
| | |
45
|
%
|
Total transmission and storage operating revenues
| |
$
|
56,415
| |
$
|
42,858
| |
$
|
—
| | |
$
|
42,858
| | |
32
|
%
|
Q3 2014 Webcast Information
EQT Midstream Partners will host a live webcast with security analysts
today at 11:30 a.m. ET. Topics include third quarter 2014 financial
results, operating results, and other matters. The webcast is available
at www.eqtmidstreampartners.com
and a replay will be available for seven days following the call.
EQT Corporation (EQT), which is the Partnership's general partner and
owner of a 36.4% equity interest in the Partnership, will also host a
webcast with security analysts today at 10:30 a.m. ET. The Partnership's
unitholders are encouraged to listen-in, as the discussion may include
topics relevant to the Partnership, such as EQT's financial and
operational results, potential asset dropdown transactions, and specific
reference to the Partnership's 2014 results. The webcast can be accessed
via www.eqt.com
and will be available as a replay for seven days following the call.
About EQT Midstream Partners:
EQT Midstream Partners, LP is a growth-oriented limited partnership
formed by EQT Corporation to own, operate, acquire, and develop
midstream assets in the Appalachian Basin. The Partnership provides
midstream services to EQT Corporation and third-party companies through
its strategically located transmission, storage, and gathering systems
that service the Marcellus and Utica regions. The Partnership owns 700
miles and operates an additional 200 miles of FERC-regulated interstate
pipelines; and also owns more than 1,600 miles of high- and low-pressure
gathering lines.
Visit EQT Midstream Partners, LP at www.eqtmidstreampartners.com
Cautionary Statements
EBITDA is defined as earnings before interest, taxes, depreciation, and
amortization and is not a financial measure calculated in accordance
with GAAP. EBITDA is a non-GAAP supplemental financial measure that the
Partnership’s management and external users of the Partnership’s
consolidated financial statements, such as industry analysts, investors,
lenders and rating agencies, use to assess: (i) the Partnership’s
operating performance as compared to other publicly traded partnerships
in the midstream energy industry without regard to historical cost basis
or, in the case of EBITDA, financing methods; (ii) the ability of the
Partnership’s assets to generate sufficient cash flow to make
distributions to the Partnership’s unitholders; (iii) the Partnership’s
ability to incur and service debt and fund capital expenditures; and
(iv) the viability of acquisitions and other capital expenditure
projects and the returns on investment of various investment
opportunities.
The Partnership is unable to provide a reconciliation of its projected
EBITDA and projected distributable cash flow to projected net income or
projected net cash provided by operating activities, the most comparable
financial measures calculated in accordance with generally accepted
accounting principles (GAAP), because of uncertainties associated with
projecting future net income and changes in assets and liabilities.
Disclosures in this news release contain certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and Section 27A of the Securities Act of 1933,
as amended. Statements that do not relate strictly to historical or
current facts are forward-looking. Without limiting the generality of
the foregoing, forward-looking statements contained in this press
release specifically include the expectations of plans, strategies,
objectives and growth and anticipated financial and operational
performance of the Partnership and its subsidiaries, including guidance
regarding the Partnership’s transmission and storage and gathering
revenue growth and volume growth; revenue projections; infrastructure
programs (including the timing, cost, capacity and sources of funding
with respect to such programs); the timing, cost, capacity and expected
interconnects with facilities and pipelines of the Ohio Valley Connector
(OVC) and Mountain Valley Pipeline (MVP) projects; the ultimate terms,
partners and structure of the MVP joint venture; natural gas production
growth in the Partnership’s operating areas for EQT and third parties;
asset acquisitions, including the Partnership’s ability to complete any
asset purchases from EQT or third parties and anticipated synergies
associated with any acquisition; internal rate of return (IRR); compound
annual growth rate (CAGR), capital commitments, projected capital and
operating expenditures, including the amount and timing of capital
expenditures reimbursable by EQT, capital budget and sources of funds
for capital expenditures; liquidity and financing requirements,
including funding sources and availability; distribution rate and
growth; projected EBITDA, and projected distributable cash flow,
including the effect of the AVC lease on distributable cash flows;
future AVC lease payments; the effects of government regulation,
litigation, and tax 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. The Partnership has based these forward-looking
statements on current expectations and assumptions about future events.
While the Partnership considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks and uncertainties,
most of which are difficult to predict and many of which are beyond the
Partnership’s control. With respect to the proposed pipeline projects,
these risks and uncertainties include, among others, the ability to
obtain regulatory permits and approvals, the ability to secure customer
contracts, the availability of skilled labor, equipment and materials.
Additional risks and uncertainties that may affect the operations,
performance and results of the Partnership’s business and
forward-looking statements include, but are not limited to, those set
forth under Item 1A, “Risk Factors” of the Partnership’s Form 10-K for
the year ended December 31, 2013 and as updated by any subsequent Form
10-Q’s. Any forward-looking statement speaks only as of the date on
which such statement is made and the Partnership does not intend to
correct or update any forward-looking statement, whether as a result of
new information, future events or otherwise.
Information in this press release regarding EQT Corporation and its
subsidiaries, other than the Partnership, is derived from publicly
available information published by EQT.
This release serves as qualified notice to nominees under Treasury
Regulation Sections 1.1446-4(b)(4) and (d). Please note that 100% of the
Partnership’s distributions to foreign investors are attributable to
income that is effectively connected with a United States trade or
business. Accordingly, all of the Partnership’s distributions to foreign
investors are subject to federal income tax withholding at the highest
effective tax rate for individuals or corporations, as applicable.
Nominees, and not the Partnership, are treated as the withholding agents
responsible for withholding on the distributions received by them on
behalf of foreign investors.
|
| | |
EQT Midstream Partners, LP |
Statements of Consolidated Operations
(unaudited) |
|
| | | Three Months Ended |
| | | September 30, |
(Thousands, except per unit amounts) | | | 2014 |
| |
2013(1) |
Operating Revenues: | | | | | | |
Operating revenues – affiliate(2) | |
$
|
61,641
| | |
$
|
67,377
| |
Operating revenues – third party(2) | | |
34,203
|
| | |
10,099
|
|
Total operating revenues
| | |
95,844
| | | |
77,476
| |
| | | | | |
|
Operating expenses:
| | | | | | |
Operating and maintenance
| | |
11,710
| | | |
9,740
| |
Selling, general and administrative
| | |
9,901
| | | |
7,188
| |
Depreciation and amortization
| | |
9,846
|
| | |
6,624
|
|
Total operating expenses
| | |
31,457
|
| | |
23,552
|
|
Operating income
| | |
64,387
| | | |
53,924
| |
Other income, net
| | |
806
| | | |
319
| |
Interest expense, net
| | |
8,660
|
| | |
196
|
|
Income before income taxes
| | |
56,533
| | | |
54,047
| |
Income tax expense
| | |
-
|
| | |
9,993
|
|
Net income
| |
$
|
56,533
|
| |
$
|
44,054
|
|
| | | | | |
|
Calculation of limited partner interest in net income:
| | | | | | |
Net income
| |
$
|
56,533
| | |
$
|
44,054
| |
Less:
| | | | | | |
Pre-acquisition net income allocated to parent
| | |
-
| | | |
(16,338
|
)
|
General partner interest in net income
| | |
(4,540
|
)
| | |
(755
|
)
|
Limited partner interest in net income
| |
$
|
51,993
|
| |
$
|
26,961
|
|
| | | | | |
|
Net income per limited partner unit - basic
| |
$
|
0.86
| | |
$
|
0.61
| |
Net income per limited partner unit - diluted
| |
$
|
0.85
| | |
$
|
0.60
| |
| | | | | |
|
Weighted average limited partner units outstanding – basic
| | |
60,699
| | | |
44,526
| |
Weighted average limited partner units outstanding – diluted
| | |
60,827
| | | |
44,639
| |
| | | | | | | |
|
(1) |
| Q3 2013 has been recast to include historical results of the
Jupiter Gathering System, which was acquired on May 7, 2014. |
(2) | | On December 17, 2013, EQT completed the sale of EGC. Prior to
the sale, revenues from EGC were affiliate revenues. Subsequent to
the sale, EGC revenues are third party revenues. In the third
quarter 2013, revenues from EGC totaled $8.9 million. |
| |
|
|
| |
EQT Midstream Partners, LP |
Operating Results |
| |
|
| | Three Months Ended |
| | September 30, |
| | 2014 |
|
2013(1) |
OPERATING DATA (in BBtu per day):
| | | | |
Transmission throughput (excluding AVC)
| | |
1,719
| | |
1,210
| |
AVC transmission throughput
| | |
98
| | |
—
| |
Gathered volumes
| | |
751
| | |
678
| |
| | | |
|
CAPITAL EXPENDITURES (in thousands):
| | | | |
Expansion capital expenditures
| |
$
|
59,927
| |
$
|
24,370
| |
Maintenance capital expenditures:
| | | | |
Ongoing maintenance(2) | | |
5,718
| | |
5,410
| |
Funded regulatory compliance
| |
|
2,863
| |
|
3,783
|
|
Total maintenance capital expenditures
| |
|
8,581
| |
|
9,193
|
|
Total capital expenditures
| |
$
|
68,508
| |
$
|
33,563
|
|
(1) |
| Q3 2013 has been recast to include historical results of the
Jupiter Gathering System, which was acquired on May 7, 2014. |
(2) | | No reimbursement is expected for third quarter 2014 ongoing
maintenance capital expenditures for the bare steel replacement
program. For the third quarter of 2013, $1.4 million of ongoing
maintenance capital expenditures were reimbursed by EQT.
Reimbursements are reflected as capital contributions when
received from EQT. |
Contacts:
EQT Midstream Partners
Analyst inquiries please contact:
Nate
Tetlow – Investor Relations Director, 412-553-5834
ntetlow@eqtmidstreampartners.com
or
Patrick
Kane – Chief Investor Relations Officer, 412-553-7833
pkane@eqtmidstreampartners.com
or
Media
inquiries please contact:
Natalie Cox – Corporate Director,
Communications, 412-395-3941
ncox@eqtmidstreampartners.com
Source: EQT Midstream Partners
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