Provide 2019 Guidance; Business and Project Updates
PITTSBURGH--(BUSINESS WIRE)--
Equitrans Midstream Corporation (NYSE:ETRN) and EQM Midstream Partners,
LP (NYSE:EQM) today announced full-year and fourth quarter 2018 results.
2018 Highlights:
-
Launched Equitrans Midstream Corporation as a leading, independent
midstream company
-
Generated 92% of transmission operating revenue from firm reservation
fees
-
Generated 45% of gathering operating revenue from firm reservation fees
-
Averaged a record 7.0 Bcf per day gathered volume in the fourth quarter
-
Reduced gathering operating and maintenance expense per gathered
volume by 29% year-over-year
-
Completed 70% of construction for the Mountain Valley Pipeline
Recent Activities:
-
Executed agreement to eliminate the EQM incentive distribution rights
-
ETRN acquired EQGP Holdings, LP; delisted EQGP from the NYSE
-
EQM declared a $1.13 per unit cash distribution for Q4 2018
-
ETRN declared initial dividend of $0.41 per share for Q4 2018
-
ETRN expects $1.80 dividend per share in 2019
“During 2018, we successfully completed our business separation and
launched ETRN as a strong, independent midstream company," said Thomas
F. Karam, chief executive officer of ETRN and EQM. "Additionally, today
we announced the elimination of the EQM IDRs, demonstrating our previous
commitment to simplify our structure, strengthen EQM's financial
profile, and create long-term value for our shareholders and
unitholders. Building on the momentum of the past year, we look forward
to continuing to execute on our growth strategy."
Diana Charletta, chief operating officer, added, "In 2018, EQM more than
doubled its asset base through the acquisitions of Rice Midstream
Partners, and the Strike Force and Olympus gathering systems; and we
completed several significant organic growth projects -- collectively
culminating in a transformational year for our company. By the end of
2019, we anticipate the in-service of several key projects, including
MVP, Hammerhead, and the Equitrans expansion project; and we also expect
to begin integrating our Pennsylvania gathering systems for our largest
customer. We remain focused on leveraging our asset footprint and
providing innovative commercial solutions, which we believe will
ultimately reflect tremendous benefits for our customers."
2018 YEAR-END AND FOURTH QUARTER RESULTS
ETRN today announced net income attributable to ETRN of $218 million for
2018 and net loss attributable to ETRN of $48 million for the fourth
quarter 2018.
For the year, net income attributable to EQM totaled $668 million,
adjusted EBITDA was $998 million, net cash provided by operating
activities was $1,187 million, and distributable cash flow was $809
million. For the fourth quarter 2018, EQM reported a net loss
attributable to EQM of $36 million, adjusted EBITDA was $302 million,
net cash provided by operating activities was $322 million, and
distributable cash flow was $228 million. The Non-GAAP Disclosures
section of this news release provides reconciliations of non-GAAP
financial measures to their most comparable GAAP financial measure.
ETRN and EQM net income for the fourth quarter and full-year were
impacted by a $262 million impairment charge to goodwill. The impairment
was primarily driven by production curtailments behind the Rice Energy
midstream assets, which were acquired by EQT Corporation (EQT) in 2017
and subsequently purchased by EQM in 2018.
On July 23, 2018, EQM closed the acquisition of Rice Midstream Partners
LP (RMP). Effective May 1, 2018, EQM acquired the Olympus gathering
system and a 75% interest in the Strike Force gathering system
(Drop-Down Transaction) from EQT. Also, on May 1, 2018, EQM purchased
the remaining 25% interest in the Strike Force gathering system from
Gulfport Energy. As a result of the RMP acquisition and the Drop-Down
Transaction, EQM's financial statements have been retrospectively recast
to include the pre-acquisition results of each acquisition from the time
common control began on November 13, 2017, the date on which EQT closed
its acquisition of Rice Energy.
For the fourth quarter, ETRN received $117 million cash from its
ownership in EQM, which consists of 37.2 million limited partner units,
the general partner interest, and 100% of the incentive distribution
rights.
During the fourth quarter, ETRN incurred $37 million of expenses related
to the separation from EQT and other transaction costs. ETRN also
incurred $2 million of selling, general and administrative (SG&A)
expenses related to public company costs.
EQM fourth quarter 2018 operating revenue increased $92 million, a 32%
increase compared to the same quarter last year. The RMP acquisition and
the Drop-Down Transaction accounted for $86 million of the increase,
with the remaining increase resulting from higher contracted firm
transmission and gathering capacities. Operating expenses, excluding the
impairment charge, increased $37 million compared to the fourth quarter
of 2017, with approximately $23 million resulting from the RMP
acquisition and the Drop-Down Transaction. EQM also had approximately $5
million of non-recurring SG&A costs. The remaining increase was
primarily related to higher system throughput and additional assets
placed in-service, consistent with the growth in the business.
SIMPLIFICATION TRANSACTION
As announced in a separate news release today, ETRN, EQM, and certain of
their affiliates entered into a definitive agreement to exchange and
cancel the EQM Incentive Distribution Rights (IDRs) and restructure the
economic general partner interest in EQM for 80 million newly issued EQM
common units, 7 million newly issued EQM Class B units, and a
non-economic general partner interest. The EQM Class B units are not
entitled to receive cash distributions from EQM until they become
convertible into EQM common units. At the holder's option, the Class B
units will be convertible into EQM common units in three tranches: 2.5
million units convertible on April 1, 2021; 2.5 million units
convertible on April 1, 2022; and 2 million units convertible on April
1, 2023. The transaction is expected to close in February 2019. At
closing, ETRN will beneficially own the non-economic general partner
interest and an approximate 60% limited partner interest in EQM. For
more details, please refer to the separate news release issued today.
QUARTERLY DIVIDEND AND DISTRIBUTION
ETRN
For the fourth quarter 2018, ETRN will pay a quarterly cash dividend of
$0.41 per share on February 27, 2019 to ETRN shareholders of record at
the close of business on February 15, 2019.
EQM
For the fourth quarter 2018, EQM paid a quarterly cash distribution of
$1.13 per unit on February 13, 2019 to EQM unitholders of record at the
close of business on February 1, 2019. The quarterly cash distribution
was 1% higher than the third quarter 2018 and 10% higher than the fourth
quarter 2017.
EQM EXPANSION AND ONGOING MAINTENANCE CAPITAL EXPENDITURES
Expansion
Expansion capital expenditures and capital contributions to Mountain
Valley Pipeline, LLC (MVP JV), totaled $682 million for the fourth
quarter 2018 and $1,716 million for the full-year 2018.
|
|
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$MM
|
|
Three Months Ended
December 31, 2018
|
|
Twelve Months Ended
December 31, 2018
|
Mountain Valley Pipeline
|
|
$467
|
|
$913
|
Gathering
|
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$183
|
|
$684
|
Transmission
|
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$26
|
|
$96
|
Water
|
|
$6
|
|
$23
|
Total
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$682
|
|
$1,716
|
Includes full-year Drop-Down Transaction and RMP expansion
capital expenditures. Approximately $52 million of expansion
capital expenditures were spent on the Drop-Down Transaction
assets prior to the Drop-Down Transaction. Approximately $85
million of expansion capital expenditures were spent on the RMP
assets prior to the RMP acquisition.
|
|
Ongoing Maintenance
Ongoing maintenance capital expenditures are cash expenditures made to
maintain, over the long term, EQM operating capacity or operating
income. EQM ongoing maintenance capital expenditures, net of
reimbursements, totaled $23 million in the fourth quarter 2018 and $47
million for the full-year.
GUIDANCE
ETRN Guidance
In 2019, ETRN expects to pay a quarterly dividend of $0.45 per share,
resulting in an annual dividend of $1.80 per share. ETRN expects to
increase the quarterly per share dividend once a year during each first
quarter.
ETRN forecasts approximately $5 million in public company costs annually
and expects approximately $5 million of transaction costs in the first
quarter 2019.
ETRN Long-term Outlook
-
Annual dividend growth target of 8%
EQM Financial Guidance
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Full-year 2019
|
Net Income ($B)
|
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|
|
$0.95
|
Adjusted EBITDA ($B)
|
|
|
|
$1.3
|
Annual Distribution Growth
|
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|
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6%
|
Coverage Ratio
|
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|
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1.0x - 1.1x
|
|
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|
|
Q1 2019
|
Net Income ($MM)
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|
|
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$215 - $235
|
Adjusted EBITDA ($MM)
|
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|
|
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$310 - $330
|
As a result of the separation from EQT, EQM will incur certain SG&A
expenses related to the establishment of independent functions and
systems that were previously used to support both EQM's midstream
business and EQT's production business. In 2019, EQM forecasts ongoing
quarterly SG&A expenses of $30 - $35 million and an incremental $5 - $10
million of separation and other transaction costs in the first quarter.
EQM Expansion Capital Expenditures & Capital Contributions
|
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$B
|
|
2019 Growth CAPEX
Forecast
|
Mountain Valley Pipeline
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$0.9
|
Gathering
|
|
$0.9
|
Transmission
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$0.1
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Water
|
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$0.1
|
Total
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$2.0
|
For full-year 2019, EQM forecasts ongoing maintenance capital
expenditures of approximately $60 million.
EQM Long-term Outlook
-
Annual distribution growth target of 6%
-
Distribution coverage target in excess of 1.2x beginning in 2020
-
Debt to EBITDA target of 3.5x - 4.0x beginning in 2020
-
Current project backlog expected to be funded with retained cash flow
and debt capacity
BUSINESS AND PROJECT UPDATES
Transmission - New Power Plant Connection
EQM recently executed a Precedent Agreement with ESC Brooke County Power
I, LLC to construct a natural gas pipeline for connection to a proposed
830 MW power plant in Brooke County, West Virginia. The agreement
includes a 10-year firm reservation commitment for 140 MMcf per day of
capacity. EQM expects to invest an estimated $80 million to construct
the approximately 16-mile long pipeline, which has a targeted in-service
date during mid-year 2022.
Water Services
EQM continues to develop its water services business by expanding its
Pennsylvania and Ohio freshwater assets, which include water pipelines,
impoundment facilities, pumping stations, and take point and measurement
facilities. EQM’s water services team recently finalized agreements with
EQT and four additional producers to provide fresh water services. The
water services business segment is expected to generate approximately
$100 million of EBITDA in 2019, a 64% increase over 2018.
Mountain Valley Pipeline
As of year-end 2018, the Mountain Valley Pipeline (MVP) project team
completed 70% of its construction activities, which included the welding
of nearly 175 miles of pipeline and the ongoing construction work of all
compressor stations and interconnects. The MVP JV is continuing with its
scaled-back construction efforts for the winter and continues to target
a full in-service date during the fourth quarter 2019 at an overall
project cost estimate of $4.6 billion, of which EQM will fund
approximately $2.2 billion. The MVP team also continues to work through
the project’s remaining legal challenges, which include securing a
Nationwide 12 Permit from the U.S. Army Corps of Engineers for stream
and waterbody crossings.
MVP Southgate
EQM recently increased its equity interest in the MVP Southgate project
by acquiring a portion of the interests previously owned by Con Edison
and PSNC Energy. As a result of these transactions, EQM now has a 47.2%
ownership interest in the project.
On November 6, 2018, MVP Southgate filed its certificate application
with the Federal Energy Regulatory Commission (FERC). The approximately
70-mile project is expected to receive gas from the MVP in Virginia and
transport to new delivery points in Rockingham and Alamance Counties,
North Carolina. MVP Southgate is backed by a 300 MMcf per day firm
capacity commitment from PSNC Energy. As designed, the pipeline has
expansion capabilities that could provide up to 900 MMcf per day of
total capacity. The project cost estimate is $450 - $500 million.
Subject to FERC approval, MVP Southgate has a targeted in-service date
during the fourth quarter 2020. EQM will serve as operator of the
pipeline.
Hammerhead Pipeline
The Hammerhead project is a gathering header pipeline that will traverse
approximately 64 miles from southwestern Pennsylvania to Mobley, West
Virginia, where both the MVP and the Ohio Valley Connector originate.
The pipeline is expected to provide 1.6 Bcf per day of capacity, of
which 1.2 Bcf per day is contracted under a firm capacity commitment by
EQT. The pipeline is estimated to cost $555 million and is expected to
be placed in-service during the fourth quarter 2019, in conjunction with
the MVP.
Equitrans Midstream Corporation Launched
On November 13, 2018, ETRN began "regular way" trading on the New York
Stock Exchange after completion of the spin-off from EQT. ETRN is now a
standalone, publicly traded company and, through its subsidiaries, is
one of the largest natural gas gatherers and transmission pipeline
operators in the United States, with a premier asset footprint in the
Marcellus and Utica Shale region.
Acquisition of EQGP Holdings, LP by ETRN
On December 31, 2018, ETRN closed several private purchases of common
units (EQGP Common Units) in EQGP Holdings, LP (EQGP) for $20.00 per
unit in cash (Private Purchases). As a result of the Private Purchases,
ETRN owned more than 95% of the outstanding EQGP Common Units, allowing
ETRN to exercise the Limited Call Right under EQGP's partnership
agreement. The Limited Call Right closed on January 10, 2019, at which
time the remaining holders of EQGP Common Units (other than ETRN and its
affiliates) received $20.00 per unit in cash. As a result of these
transactions, EQGP Common Units are no longer publicly traded.
ETRN financed the Private Purchases and the Limited Call Right with cash
proceeds from the issuance of a $600 million, five-year, senior secured
Term Loan B.
NON-GAAP DISCLOSURES
EQM Adjusted EBITDA and Distributable Cash Flow
As used in this news release, EQM adjusted EBITDA means net (loss)
income attributable to EQM plus net interest expense, depreciation,
amortization of intangible assets, impairment of goodwill, payments on
EQM's preferred interest in EQT Energy Supply, LLC (Preferred Interest),
non-cash long-term compensation expense and transaction costs less
equity income, AFUDC - equity and adjusted EBITDA of assets prior to
acquisition. As used in this news release, distributable cash flow means
EQM adjusted EBITDA less net interest expense excluding interest income
on the Preferred Interest, capitalized interest and AFUDC - debt, and
ongoing maintenance capital expenditures net of reimbursements and
transaction costs. Distributable cash flow should not be viewed as
indicative of the actual amount of cash that EQM has available for
distributions from operating surplus or that EQM plans to distribute.
Adjusted EBITDA and distributable cash flow are non-GAAP supplemental
financial measures that management and external users of EQM’s
consolidated financial statements, such as industry analysts, investors,
lenders and rating agencies, use to assess:
-
EQM’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 EQM’s assets to generate sufficient cash flow to make
distributions to EQM unitholders;
-
EQM’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.
EQM believes that adjusted EBITDA and distributable cash flow provide
useful information to investors in assessing EQM’s results of operations
and financial condition. Adjusted EBITDA and distributable cash flow
should not be considered as alternatives to net (loss) 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 (loss) 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, EQM’s
definitions of adjusted EBITDA and distributable cash flow may not be
comparable to similarly titled measures of other companies, thereby
diminishing the utility of the measures. The table below reconciles
adjusted EBITDA and distributable cash flow with net (loss) income and
net cash provided by operating activities as derived from the statements
of consolidated operations and cash flows to be included in EQM’s annual
report on Form 10-K for the year ended December 31, 2018.
EQM is unable to provide a reconciliation of its projected adjusted
EBITDA (defined as projected earnings before interest, taxes,
depreciation and amortization) to projected net income, the most
comparable financial measure calculated in accordance with GAAP, because
EQM does not provide guidance with respect to the intra-year timing of
its or the MVP JV's capital spending, which impact AFUDC - debt and
equity and equity earnings, among other items, that are reconciling
items between adjusted EBITDA and net income. The timing of the capital
expenditures is volatile as it depends on weather, regulatory approvals,
contractor availability, system performance and various other items. EQM
provides a range for the forecasts of net income and adjusted EBITDA to
allow for the variability in the timing of capital spending and the
impact on the related reconciling items, many of which interplay with
each other. Therefore, the reconciliation of projected adjusted EBITDA
to projected net income is not available without unreasonable effort.
Reconciliation of EQM Adjusted EBITDA and Distributable Cash
Flow
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(Thousands)
|
|
Three Months Ended
December 31, 2018
|
|
|
Twelve Months Ended
December 31, 2018
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to EQM
|
|
$
|
(36,107
|
)
|
|
$
|
668,002
|
|
Add:
|
|
|
|
|
|
|
Net interest expense
|
|
45,354
|
|
|
122,094
|
|
Depreciation
|
|
44,957
|
|
|
171,914
|
|
Amortization of intangible assets
|
|
10,387
|
|
|
41,547
|
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Impairment of goodwill
|
|
261,941
|
|
|
261,941
|
|
Preferred Interest payments
|
|
2,746
|
|
|
10,984
|
|
Non-cash long-term compensation expense
|
|
—
|
|
|
1,275
|
|
Transaction costs
|
|
250
|
|
|
7,761
|
|
Less:
|
|
|
|
|
|
|
Equity income
|
|
(25,942
|
)
|
|
(61,778
|
)
|
AFUDC – equity
|
|
(1,985
|
)
|
|
(5,570
|
)
|
Adjusted EBITDA attributable to RMP prior to merger
|
|
—
|
|
|
(160,128
|
)
|
Adjusted EBITDA attributable to the Drop-Down Transaction
|
|
—
|
|
|
(60,507
|
)
|
Adjusted EBITDA
|
|
$
|
301,601
|
|
|
$
|
997,535
|
|
Less:
|
|
|
|
|
|
|
Net interest expense excluding interest income on the Preferred
Interest
|
|
(46,441
|
)
|
|
(124,198
|
)
|
Capitalized interest and AFUDC – debt
|
|
(3,914
|
)
|
|
(9,873
|
)
|
Ongoing maintenance capital expenditures net of reimbursements
|
|
(22,778
|
)
|
|
(46,939
|
)
|
Transaction costs
|
|
(250
|
)
|
|
(7,761
|
)
|
Distributable cash flow
|
|
$
|
228,218
|
|
|
$
|
808,764
|
|
|
|
|
|
|
|
|
Distributions declared
(1)
:
|
|
|
|
|
|
|
Limited Partner
|
|
$
|
136,117
|
|
|
$
|
487,553
|
|
General Partner
|
|
75,176
|
|
|
265,604
|
|
Total
|
|
$
|
211,293
|
|
|
$
|
753,157
|
|
Coverage Ratio
|
|
1.08x
|
|
|
1.07x
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
$
|
321,757
|
|
|
$
|
1,187,239
|
|
Adjustments:
|
|
|
|
|
|
|
Capitalized interest and AFUDC – debt
|
|
(3,914
|
)
|
|
(9,873
|
)
|
Principal payments received on the Preferred Interest
|
|
1,125
|
|
|
4,406
|
|
Ongoing maintenance capital expenditures net of reimbursements
|
|
(22,778
|
)
|
|
(46,939
|
)
|
Adjusted EBITDA attributable to RMP prior to merger
|
|
—
|
|
|
(160,128
|
)
|
Adjusted EBITDA attributable to the Drop-Down Transaction
|
|
—
|
|
|
(60,507
|
)
|
Other, including changes in working capital
|
|
(67,972
|
)
|
|
(105,434
|
)
|
Distributable cash flow
|
|
$
|
228,218
|
|
|
$
|
808,764
|
|
(1)
|
|
Reflects cash distribution of $1.130 per limited partner unit for
the fourth quarter of 2018 and 120,457,638 limited partner units
outstanding as of December 31, 2018.
|
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|
EQM Water EBITDA
Projected EQM water EBITDA means the projected earnings before interest,
taxes, depreciation and amortization of EQM’s water services business.
Projected EQM water EBITDA is a non-GAAP supplemental financial measure
that management and external users of EQM’s consolidated financial
statements, such as industry analysts, investors, lenders and rating
agencies, use to assess the anticipated impact of EQM’s water services
business on EQM’s operating performance and EQM’s ability to incur and
service debt and fund capital expenditures. EQM water EBITDA should not
be considered as an alternative to EQM’s net income, operating income or
any other measure of financial performance presented in accordance with
GAAP. EQM water EBITDA has important limitations as an analytical tool
because the measure excludes some, but not all, items that affect net
income. Additionally, because EQM water EBITDA may be defined
differently by other companies in EQM’s industry, the definition of EQM
water EBITDA may not be comparable to similarly titled measures of other
companies, thereby diminishing the utility of the measure. EQM has not
provided a reconciliation of projected EQM water EBITDA to projected EQM
net income, the most comparable measure calculated in accordance with
GAAP. EQM does not allocate certain costs, such as interest expenses, to
individual assets within its business segments. Therefore, the
reconciliation of projected EQM water EBITDA to projected EQM net income
is not available without unreasonable effort.
Q4 2018 and Full-year 2018 Conference Call Information
ETRN and EQM will host a joint conference call with security analysts
today at 11:00 a.m. (ET) to discuss fourth quarter and full-year 2018
financial results, operating results, and other business matters. An
audio live stream of the call will be available on the internet via the
Investors page at www.equitransmidstream.com
and www.eqm-midstreampartners.com.
Security analysts may access the call: U.S. tollfree at (866) 393-4306;
and internationally at (734) 385-2655. The ETRN/EQM joint conference ID
is 7984534.
Call Replay:
For 14 days following the call, an audio
replay will be available at (855) 859-2056 or (404) 537-3406. The
ETRN/EQM conference ID: 7984534.
ETRN and EQM management speak to investors from time to time and the
analyst presentation for these discussions, which is updated
periodically, is available via the companies' respective websites at www.equitransmidstream.com
and www.eqm-midstreampartners.com.
Annual Report
ETRN and EQM expect to file Annual Reports on Form 10-K for the fiscal
year ended December 31, 2018 with the Securities and Exchange Commission
(SEC) on February 14, 2019.
The EQM report will be available on EQM’s website at www.eqm-midstreampartners.com and
the ETRN report will be available on ETRN's website at www.equitransmidstream.com.
Both reports will also be available on the SEC website at www.sec.gov.
EQM unitholders may request printed copies of the EQM report, which
contains audited financial statements. Email to: investors@equitransmidstream.com;
or submit a written request to:
EQM Midstream Partners, LP
Attention: Investor Relations
625 Liberty Avenue, Suite 2000
Pittsburgh, PA 15222
About Equitrans Midstream Corporation:
Equitrans Midstream Corporation (ETRN) has a premier asset footprint in
the Appalachian Basin and is one of the largest natural gas gatherers in
the United States. With a rich 135-year history in the energy industry,
ETRN was launched as a standalone company in 2018 and, through its
subsidiaries, has an operational focus on gas gathering systems,
transmission and storage systems, and water services assets that support
natural gas producers across the Basin. 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. ETRN owns the general partner interest, the incentive
distribution rights, and a 30.6% limited partner interest in EQM.
Visit Equitrans Midstream Corporation at www.equitransmidstream.com
About EQM Midstream Partners:
EQM Midstream Partners, LP is a growth-oriented limited partnership
formed to own, operate, acquire, and develop midstream assets in the
Appalachian Basin. As one of the largest gatherers of natural gas in the
United States, EQM provides midstream services to producers, utilities,
and other customers through its strategically located natural gas
transmission, storage, and gathering systems, and water services to
support energy development and production in the Marcellus and Utica
regions. EQM owns approximately 950 miles of FERC-regulated interstate
pipelines and approximately 2,200 miles of high- and low-pressure
gathering lines.
Visit EQM Midstream Partners, LP at www.eqm-midstreampartners.com
Cautionary Statements
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 news release
specifically include the expectations of plans, strategies, objectives
and growth and anticipated financial and operational performance of ETRN
and its subsidiaries, including guidance regarding EQM’s gathering,
transmission and storage and water services revenue and volume growth;
projected revenue and expenses; infrastructure programs (including the
timing, cost, capacity and sources of funding with respect to gathering,
transmission and storage, and water projects); the cost, capacity,
timing of regulatory approvals and anticipated in-service dates of the
MVP mainline, MVP Southgate, Hammerhead and other projects; the ultimate
terms, partners and structure of the MVP JV, and EQM’s ownership
interests in the MVP JV; EQM’s ability to provide produced water
handling services; acquisitions and other strategic transactions,
including joint ventures, and ETRN’s and EQM’s ability to complete any
transactions, effectively integrate acquisitions and achieve anticipated
synergies and accretion associated with any transactions; the effects of
the change of control of EQM resulting from the separation of ETRN from
EQT; internal rate of return (IRR); compound annual growth rate (CAGR);
capital commitments, projected capital contributions and 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; ETRN’s and EQM’s abilities
to service debt under, and comply with the covenants contained in, their
respective credit agreements; dividend and distribution amounts, timing,
rates and growth; the timing of the closing of the simplification
transaction to exchange and cancel the IDRs and restructure the EQM
general partner interests; ETRN's ultimate ownership percentage in EQM
following the closing of the simplification transaction; effects of the
conversion, if at all, of the EQM Class B units; effect of commodity
prices; projected net income, projected adjusted EBITDA, projected
EBITDA, projected distributable cash flow, projected leverage and
projected coverage ratio; projected SG&A and separation and other
transaction costs; the timing and amount of future issuances of ETRN
common stock or EQM common units; changes in ETRN’s or EQM’s credit
ratings; the effects of government regulation, tariffs and 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. ETRN and EQM have based these forward-looking statements on
current expectations and assumptions about future events. While ETRN and
EQM consider these expectations and assumptions to be reasonable, they
are inherently subject to significant business, economic, competitive,
regulatory and other risks and uncertainties, many of which are
difficult to predict and beyond the ETRN’s and/or EQM’s control. The
risks and uncertainties that may affect the operations, performance and
results of ETRN’s and EQM’s business and forward-looking statements
include, but are not limited to, those set forth under (i) Item 1A,
“Risk Factors” of ETRN’s Form 10 registration statement filed with the
Securities and Exchange Commission (SEC) and Item 1A, “Risk Factors” of
ETRN’s Form 10-K for the year ended December 31, 2018 to be filed with
the SEC, and (ii) Item 1A, “Risk Factors” of EQM’s Form 10-K for the
year ended December 31, 2017 as filed with the SEC and Item 1A, “Risk
Factors” of EQM’s Form 10-K for the year ended December 31, 2018 to be
filed with the SEC, in each case as may be updated by any subsequent
Form 10-Qs. Any forward-looking statement speaks only as of the date on
which such statement is made, and neither ETRN nor EQM intends to
correct or update any forward-looking statement, whether as a result of
new information, future events or otherwise.
Information in this news release regarding EQT and its subsidiaries, 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
EQM’s distributions to foreign investors are attributable to income that
is effectively connected with a United States trade or business.
Accordingly, all of EQM’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 EQM, are
treated as the withholding agents responsible for withholding on the
distributions received by them on behalf of foreign investors.
|
|
|
|
|
|
|
EQUITRANS MIDSTREAM CORPORATION
|
STATEMENTS OF CONSOLIDATED OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Twelve Months Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(Thousands, except per share amounts)
|
Operating revenues (1) |
|
|
$
|
384,791
|
|
|
|
$
|
292,378
|
|
|
|
$
|
1,495,098
|
|
|
|
$
|
895,558
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance
|
|
|
44,658
|
|
|
|
30,110
|
|
|
|
163,192
|
|
|
|
84,831
|
|
Selling, general and administrative
|
|
|
41,216
|
|
|
|
26,023
|
|
|
|
124,069
|
|
|
|
80,339
|
|
Separation and other transaction costs
|
|
|
37,449
|
|
|
|
79,728
|
|
|
|
85,444
|
|
|
|
85,124
|
|
Depreciation
|
|
|
48,586
|
|
|
|
32,483
|
|
|
|
175,821
|
|
|
|
96,674
|
|
Amortization of intangible assets
|
|
|
10,387
|
|
|
|
5,540
|
|
|
|
41,547
|
|
|
|
5,540
|
|
Impairment of goodwill
|
|
|
261,941
|
|
|
|
—
|
|
|
|
261,941
|
|
|
|
—
|
|
Total operating expenses
|
|
|
444,237
|
|
|
|
173,884
|
|
|
|
852,014
|
|
|
|
352,508
|
|
Operating (loss) income
|
|
|
(59,446
|
)
|
|
|
118,494
|
|
|
|
643,084
|
|
|
|
543,050
|
|
Equity income
|
|
|
25,942
|
|
|
|
6,758
|
|
|
|
61,778
|
|
|
|
22,171
|
|
Other income
|
|
|
1,818
|
|
|
|
863
|
|
|
|
5,011
|
|
|
|
4,439
|
|
Net interest expense
|
|
|
46,606
|
|
|
|
9,931
|
|
|
|
115,454
|
|
|
|
34,801
|
|
(Loss) Income before income taxes
|
|
|
(78,292
|
)
|
|
|
116,184
|
|
|
|
594,419
|
|
|
|
534,859
|
|
Income tax expense
|
|
|
39,748
|
|
|
|
144,045
|
|
|
|
83,142
|
|
|
|
212,402
|
|
Net (loss) income
|
|
|
(118,040
|
)
|
|
|
(27,861
|
)
|
|
|
511,277
|
|
|
|
322,457
|
|
Less: Net (loss) income attributable to noncontrolling interests
|
|
|
(69,817
|
)
|
|
|
99,264
|
|
|
|
292,879
|
|
|
|
349,613
|
|
Net (loss) income attributable to Equitrans Midstream Corporation
|
|
|
$
|
(48,223
|
)
|
|
|
$
|
(127,125
|
)
|
|
|
$
|
218,398
|
|
|
|
$
|
(27,156
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common stock outstanding - basic
|
|
|
$
|
(0.19
|
)
|
|
|
$
|
(0.50
|
)
|
|
|
$
|
0.86
|
|
|
|
$
|
(0.11
|
)
|
Net (loss) income per common stock outstanding - diluted
|
|
|
$
|
(0.19
|
)
|
|
|
$
|
(0.50
|
)
|
|
|
$
|
0.86
|
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common stock outstanding - basic
|
|
|
254,432
|
|
|
|
254,432
|
|
|
|
254,432
|
|
|
|
254,432
|
|
Weighted average common stock outstanding - diluted (2) |
|
|
254,432
|
|
|
|
254,432
|
|
|
|
255,033
|
|
|
|
254,432
|
|
(1)
|
|
Operating revenues included related party revenues from EQT for
the three months ended December 31, 2018 and December 31, 2017 of
approximately $283.5 million and $220.1 million, respectively, and
for the years ended December 31, 2018 and December 31, 2017 of
approximately $1.1 billion and $665.9 million, respectively.
|
|
(2)
|
|
For the three and twelve months ended December 31, 2017,
earnings per share shown in the statements of consolidated
operations was calculated based on the shares of Equitrans
Midstream common stock distributed in connection with the
Separation and Distribution and is considered pro forma in nature.
Prior to the Separation, the Company did not have any publicly
issued or outstanding common stock (other than shares owned by
EQT).
|
|
|
|
EQM MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
|
STATEMENTS OF CONSOLIDATED OPERATIONS
(1)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Twelve Months Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
(Thousands, except per unit amounts)
|
Operating revenues (2) |
|
|
$
|
384,791
|
|
|
|
$
|
292,378
|
|
|
|
$
|
1,495,098
|
|
|
|
$
|
895,558
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance
|
|
|
44,658
|
|
|
|
30,110
|
|
|
|
163,192
|
|
|
|
84,831
|
|
Selling, general and administrative
|
|
|
41,361
|
|
|
|
25,351
|
|
|
|
129,851
|
|
|
|
77,321
|
|
Depreciation
|
|
|
44,957
|
|
|
|
42,970
|
|
|
|
171,914
|
|
|
|
107,161
|
|
Amortization of intangibles assets
|
|
|
10,387
|
|
|
|
5,540
|
|
|
|
41,547
|
|
|
|
5,540
|
|
Impairment of goodwill
|
|
|
261,941
|
|
|
|
—
|
|
|
|
261,941
|
|
|
|
—
|
|
Total operating expenses
|
|
|
403,304
|
|
|
|
103,971
|
|
|
|
768,445
|
|
|
|
274,853
|
|
Operating (loss) income
|
|
|
(18,513
|
)
|
|
|
188,407
|
|
|
|
726,653
|
|
|
|
620,705
|
|
Equity income
|
|
|
25,942
|
|
|
|
6,758
|
|
|
|
61,778
|
|
|
|
22,171
|
|
Other income
|
|
|
1,818
|
|
|
|
863
|
|
|
|
5,011
|
|
|
|
4,439
|
|
Net interest expense
|
|
|
45,354
|
|
|
|
10,941
|
|
|
|
122,094
|
|
|
|
36,955
|
|
Net (loss) income
|
|
|
(36,107
|
)
|
|
|
185,087
|
|
|
|
671,348
|
|
|
|
610,360
|
|
Net income attributable to noncontrolling interest
|
|
|
—
|
|
|
|
734
|
|
|
|
3,346
|
|
|
|
734
|
|
Net (loss) income attributable to EQM
|
|
|
$
|
(36,107
|
)
|
|
|
$
|
184,353
|
|
|
|
$
|
668,002
|
|
|
|
$
|
609,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculation of limited partners' interest in net (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to EQM
|
|
|
$
|
(36,107
|
)
|
|
|
$
|
184,353
|
|
|
|
$
|
668,002
|
|
|
|
$
|
609,626
|
|
Less pre-acquisition net income allocated to parent
|
|
|
—
|
|
|
|
(37,722
|
)
|
|
|
(164,242
|
)
|
|
|
(37,722
|
)
|
Less general partner interest in net income – general partner units
|
|
|
1,041
|
|
|
|
(2,578
|
)
|
|
|
(6,104
|
)
|
|
|
(10,060
|
)
|
Less general partner interest in net income – incentive distribution
rights
|
|
|
(72,674
|
)
|
|
|
(41,080
|
)
|
|
|
(255,927
|
)
|
|
|
(143,531
|
)
|
Limited partners' interest in net (loss) income
|
|
|
$
|
(107,740
|
)
|
|
|
$
|
102,973
|
|
|
|
$
|
241,729
|
|
|
|
$
|
418,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per limited partner unit – basic
|
|
|
$
|
(0.89
|
)
|
|
|
$
|
1.28
|
|
|
|
$
|
2.43
|
|
|
|
$
|
5.19
|
|
Net (loss) income per limited partner unit – diluted
|
|
|
$
|
(0.89
|
)
|
|
|
$
|
1.28
|
|
|
|
$
|
2.43
|
|
|
|
$
|
5.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average limited partner units outstanding – basic
|
|
|
120,475
|
|
|
|
80,603
|
|
|
|
99,303
|
|
|
|
80,603
|
|
Weighted average limited partner units outstanding – diluted
|
|
|
120,475
|
|
|
|
80,603
|
|
|
|
99,303
|
|
|
|
80,603
|
|
(1)
|
|
EQM’s consolidated financial statements have been
retrospectively recast to include the pre-acquisition results of
EQM Olympus Midstream LLC, Strike Force Midstream Holdings LLC and
EQM West Virginia Midstream LLC, which were acquired by EQM
effective on May 1, 2018 (the Drop-Down Transaction), and Rice
Midstream Partners LP, which was merged with and into EQM
effective on July 23, 2018 (the EQM-RMP Merger).
|
|
|
|
(2)
|
|
Operating revenues included related party revenues from EQT for
the three months ended December 31, 2018 and December 31, 2017 of
approximately $283.5 million and $220.1 million, respectively, and
for the years ended December 31, 2018 and December 31, 2017 of
approximately $1.1 billion and $665.9 million, respectively.
|
|
|
|
|
|
|
|
EQM MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
|
GATHERING RESULTS OF OPERATIONS
(1)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Twelve Months Ended
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
FINANCIAL DATA
|
|
|
(Thousands, except per day amounts)
|
Firm reservation fee revenues
|
|
|
$
|
113,127
|
|
|
|
$
|
106,454
|
|
|
|
$
|
447,360
|
|
|
|
$
|
407,355
|
Volumetric-based fee revenues
|
|
|
152,503
|
|
|
|
72,517
|
|
|
|
549,710
|
|
|
|
102,612
|
Total operating revenues
|
|
|
265,630
|
|
|
|
178,971
|
|
|
|
997,070
|
|
|
|
509,967
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance
|
|
|
24,926
|
|
|
|
14,588
|
|
|
|
79,477
|
|
|
|
45,325
|
Selling, general and administrative
|
|
|
29,355
|
|
|
|
16,252
|
|
|
|
92,020
|
|
|
|
45,052
|
Depreciation
|
|
|
26,369
|
|
|
|
16,559
|
|
|
|
98,678
|
|
|
|
44,957
|
Amortization of intangible assets
|
|
|
10,387
|
|
|
|
5,540
|
|
|
|
41,547
|
|
|
|
5,540
|
Impairment of goodwill
|
|
|
261,941
|
|
|
|
—
|
|
|
|
261,941
|
|
|
|
—
|
Total operating expenses
|
|
|
352,978
|
|
|
|
52,939
|
|
|
|
573,663
|
|
|
|
140,874
|
Operating (loss) income
|
|
|
$
|
(87,348
|
)
|
|
|
$
|
126,032
|
|
|
|
$
|
423,407
|
|
|
|
$
|
369,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
Gathering volumes (BBtu per day)
|
|
|
|
|
|
|
|
|
|
|
|
|
Firm capacity reservation
|
|
|
2,088
|
|
|
|
1,956
|
|
|
|
2,044
|
|
|
|
1,826
|
Volumetric-based services
|
|
|
4,900
|
|
|
|
2,336
|
|
|
|
4,445
|
|
|
|
816
|
Total gathered volumes
|
|
|
6,988
|
|
|
|
4,292
|
|
|
|
6,489
|
|
|
|
2,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
$
|
202,179
|
|
|
|
$
|
103,794
|
|
|
|
$
|
717,251
|
|
|
|
$
|
254,522
|
(1)
|
|
EQM’s consolidated financial statements have been
retrospectively recast to include the pre-acquisition results of
the Drop-Down Transaction and the EQM-RMP Merger.
|
|
|
|
|
|
|
EQM MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
|
TRANSMISSION RESULTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
FINANCIAL DATA
|
|
|
(Thousands, except per day amounts)
|
Firm reservation fee revenues
|
|
|
$
|
94,059
|
|
|
$
|
91,969
|
|
|
$
|
356,725
|
|
|
$
|
348,193
|
Volumetric-based fee revenues
|
|
|
7,313
|
|
|
7,833
|
|
|
30,076
|
|
|
23,793
|
Total operating revenues
|
|
|
101,372
|
|
|
99,802
|
|
|
386,801
|
|
|
371,986
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Operating and maintenance
|
|
|
12,481
|
|
|
9,924
|
|
|
39,563
|
|
|
33,908
|
Selling, general and administrative
|
|
|
9,601
|
|
|
8,752
|
|
|
31,936
|
|
|
31,922
|
Depreciation
|
|
|
12,495
|
|
|
22,896
|
|
|
49,723
|
|
|
58,689
|
Total operating expenses
|
|
|
34,577
|
|
|
41,572
|
|
|
121,222
|
|
|
124,519
|
Operating income
|
|
|
$
|
66,795
|
|
|
$
|
58,230
|
|
|
$
|
265,579
|
|
|
$
|
247,467
|
|
|
|
|
|
|
|
|
|
|
Equity Income
|
|
|
$
|
25,942
|
|
|
$
|
6,758
|
|
|
$
|
61,778
|
|
|
$
|
22,171
|
|
|
|
|
|
|
|
|
|
|
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
Transmission pipeline throughput (BBtu per day)
|
|
|
|
|
|
|
|
|
|
Firm capacity reservation
|
|
|
3,040
|
|
|
2,472
|
|
|
2,903
|
|
|
2,399
|
Volumetric-based services
|
|
|
47
|
|
|
65
|
|
|
59
|
|
|
37
|
Total transmission pipeline throughput
|
|
|
3,087
|
|
|
2,537
|
|
|
2,962
|
|
|
2,436
|
|
|
|
|
|
|
|
|
|
|
Average contracted firm transmission reservation commitments (BBtu
per day)
|
|
|
4,230
|
|
|
3,952
|
|
|
3,909
|
|
|
3,627
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
$
|
29,933
|
|
|
$
|
37,423
|
|
|
$
|
114,450
|
|
|
$
|
111,102
|
|
|
|
|
|
|
EQM MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
|
WATER RESULTS OF OPERATIONS
(1)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
FINANCIAL DATA
|
|
|
(Thousands)
|
Water services revenues
|
|
|
$
|
17,789
|
|
|
$
|
13,605
|
|
|
$
|
111,227
|
|
|
$
|
13,605
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Operating and maintenance
|
|
|
7,251
|
|
|
5,598
|
|
|
44,152
|
|
|
5,598
|
Selling, general and administrative
|
|
|
2,405
|
|
|
347
|
|
|
5,895
|
|
|
347
|
Depreciation
|
|
|
6,093
|
|
|
3,515
|
|
|
23,513
|
|
|
3,515
|
Total operating expenses
|
|
|
15,749
|
|
|
9,460
|
|
|
73,560
|
|
|
9,460
|
Operating income
|
|
|
$
|
2,040
|
|
|
$
|
4,145
|
|
|
$
|
37,667
|
|
|
4,145
|
|
|
|
|
|
|
|
|
|
|
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
Water services volumes (MMgal)
|
|
|
348
|
|
|
226
|
|
|
2,088
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
$
|
6,179
|
|
|
$
|
6,233
|
|
|
$
|
23,537
|
|
|
$
|
6,233
|
(1)
|
|
EQM’s consolidated financial statements have been
retrospectively recast to include the pre-acquisition results of
the EQM-RMP Merger.
|
|
|
|
|
|
|
|
|
|
EQM MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
|
CAPITAL EXPENDITURE SUMMARY
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Twelve Months Ended
December 31,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
(Thousands)
|
Expansion capital expenditures (1) |
|
|
$
|
215,564
|
|
|
$
|
120,981
|
|
|
$
|
803,347
|
|
|
$
|
328,529
|
Maintenance capital expenditures
|
|
|
22,727
|
|
|
26,469
|
|
|
51,891
|
|
|
43,328
|
Total capital expenditures
|
|
|
$
|
238,291
|
|
|
$
|
147,450
|
|
|
$
|
855,238
|
|
|
$
|
371,857
|
(1)
|
|
Expansion capital expenditures do not include capital
contributions made to the MVP JV. Capital contributions to the MVP
JV were $467.2 million and $56.1 million for the three months
ended December 31, 2018 and 2017, respectively, and $913.2 million
and $159.6 million for the years ended December 31, 2018 and 2017,
respectively.
|
|
|
|
Source: Equitrans Midstream Corporation
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190214005260/en/
Analyst inquiries:
Nate Tetlow – Vice President,
Corporate Development and Investor Relations Director
412-553-5834
ntetlow@equitransmidstream.com
Media inquiries:
Natalie Cox – Director, Corporate
Communications
412-395-3941
ncox@equitransmidstream.com
Source: Equitrans Midstream Corporation