Equitrans Midstream Corporation (NYSE: ETRN), today, announced
financial and operational results for the full-year and fourth
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.
2023 Highlights:
- Reported $454.8 million of net income and $1.1 billion of
Adjusted EBITDA
- Generated $1.0 billion of net cash from operating
activities
- Recorded ~70% of total operating revenue from firm reservation
fees
- Achieved ~8% transmission pipeline throughput growth versus
2022
- Achieved ~29% water operating revenue growth versus 2022
- Fiscal Responsibility Act of 2023 enacted in June 2023;
provisions for 'Expediting Completion of the MVP'
- Signed precedent agreements collectively providing 550 MMcf per
day firm capacity in support of an amended Southgate project
"Following enactment of the Fiscal Responsibility Act of 2023,
we have made substantial construction progress on the Mountain
Valley Pipeline, and the major tasks to complete the pipeline
continue to narrow,” said Diana M. Charletta, president and chief
executive officer for Equitrans Midstream. “As we exited 2023, we
continued to track to our prior guidance, despite challenging
construction conditions causing lower productivity than forecasted.
Along with unforeseen construction challenges, throughout much of
January, construction crews encountered adverse weather conditions,
including precipitation well above 20-year averages. While our
construction plans took into account the potential effects of
winter weather, these conditions were far worse and longer in
duration than anticipated, imposing a significant impact on
productivity, which, in turn, impeded our ability to reduce
construction headcount. Collectively, these factors resulted in our
updated timing and total project cost targets. ETRN is now
targeting construction completion and commissioning in the second
quarter of 2024, at a total estimated project cost ranging from
approximately $7.57 billion to approximately $7.63 billion."
Charletta continued, “As our teams continue to look for ways to
optimize and grow our asset base, we are pleased with the strong
results our business once again delivered for our stakeholders.
Notably, we made significant progress on our in-basin organic
projects, including the Ohio Valley Connector Expansion and a
booster compression project for a producer customer, both of which
are targeted for in-service in the first half of 2024, and we
continued the build out of our mixed-use water system. Looking
ahead, our well-integrated and strategically located system of
gathering, transmission, and water assets is uniquely positioned to
capture the benefits of MVP’s in-service.”
"Our Board of Directors has been engaged in a process with third
parties that have expressed interest in strategic transactions with
our Company,” said Thomas F. Karam, Equitrans’ executive chairman.
“This interest is not surprising given the expected near-term
completion of MVP, and our view of the strength of our underlying
assets. Our board has engaged outside advisors and the process is
ongoing. There is no guarantee that any transaction will result
from this process. The organization’s top priority remains safely
bringing MVP into service and continuing to provide superior
service to our customers."
2023 YEAR-END AND FOURTH QUARTER SUMMARY RESULTS
Three Months Ended December
31,
Year Ended December
31,
$ millions (except per share metrics)
2023
2023
Net income attributable to ETRN common
shareholders
$
134.2
$
386.7
Adjusted net income attributable to ETRN
common shareholders
$
138.9
$
398.4
Earnings per diluted share attributable to
ETRN common shareholders
$
0.31
$
0.89
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.32
$
0.91
Net income
$
150.0
$
454.8
Adjusted EBITDA
$
272.0
$
1,056.1
Deferred revenue
$
87.6
$
329.3
Net cash provided by operating
activities
$
291.2
$
1,016.1
Free cash flow
$
(240.6
)
$
(128.6
)
Retained free cash flow
$
(305.5
)
$
(388.5
)
Net income attributable to ETRN common shareholders for the
fourth quarter 2023 was impacted by several items, including a $5.9
million unrealized loss on derivative instruments. The unrealized
loss is reported within other (expense) 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
fourth quarter equity income of $77.6 million, which is primarily
associated with allowance for funds used during construction
(AFUDC) related to resuming MVP forward construction in 2023.
For the full-year 2023, net income attributable to ETRN common
shareholders was impacted by several items, including $9.4 million
of operating expense related to the November 2022 Rager Mountain
natural gas storage field incident; a $7.8 million write-down of a
contract asset in the water segment; a $1.5 million unrealized gain
on derivative instruments related to the previously described
contractual agreement with EQT; and $175.2 million of equity
income.
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 fourth quarter 2023 was $87.6 million and for the full-year
2023 was $329.3 million.
Operating revenue for the fourth quarter 2023 increased by $5.4
million compared to the same quarter last year, primarily as a
result of increased gathered volumes, partially offset by lower
water volumes. Operating expenses were relatively flat compared to
the fourth quarter 2022, due to a $7.7 million decrease in expenses
related to the Rager Mountain natural gas storage field incident
compared to the fourth quarter 2022, offset by a $5.8 million
increase in selling, general and administrative expenses in the
fourth quarter 2023, due to an increase in personnel costs, and
increased depreciation expenses.
Operating revenue for the full-year increased by $36.2 million
compared to 2022, primarily from increased transmission revenues,
including a one-time transmission customer contract buyout of $23.8
million; a one-time gathering customer contract buyout of $5.0
million; and increased water service revenue, partially offset by
lower gathering revenues due to lower volumetric-based gathered
volumes. Operating expenses increased by $89.4 million compared to
2022 due to increased selling, general, and administrative expenses
and operating and maintenance expenses, primarily due to higher
incentive compensation, including an increase in personnel costs
related to the MVP performance award program, as well as an
increase in water expenses, including the $7.8 million write-down
of a contract asset, and increased depreciation expenses.
QUARTERLY DIVIDEND
For the fourth quarter 2023, ETRN paid a quarterly cash dividend
of $0.15 per common share on February 14, 2024 to ETRN common
shareholders of record at the close of business on February 6,
2024.
TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS
Three Months Ended December
31,
Year Ended December
31,
$ millions
2023
2023
MVP
$409
$689
Gathering(1)
$66
$253
Transmission(2)
$30
$85
Water
$14
$46
Total
$519
$1,073
(1)
Excludes approximately $2.8 million and
$14.3 million of capital expenditures related to the noncontrolling
interest in Eureka Midstream Holdings, LLC (Eureka) for the three
months and year ended December 31, 2023, respectively.
(2)
Includes capital contributions to MVP JV
for the Southgate project.
2024 GUIDANCE
Full-Year 2024 Financial Outlook(1)
$ millions
Net income
$375 - $455
Adjusted EBITDA
$1,235 - $1,315
Deferred Revenue
$145
Free cash flow
$(145) - $(65)
Retained free cash flow
$(405) - $(325)
(1)
Assumes MVP construction completion by
5/31/2024 and accordingly MVP and MVP-related firm capacity
contractual obligations would commence 6/1/2024 (with certain MVC
step ups and gathering fee relief under ETRN's February 2020 gas
gathering agreement with EQT Commencing 4/1/2024). Does not include
any of the potential $60 million Henry Hub bonus in 2024, which is
dependent on MVP in-service and natural gas prices exceeding
certain thresholds. The deferred revenue amounts are subject to the
ultimate in-service date of MVP.
Q1 2024 Financial Outlook(1)
$ millions
Net income
$120 - $140
Adjusted EBITDA
$265 - $285
Deferred Revenue
$60
(1)
Assumes MVP construction completion by
5/31/2024 and accordingly MVP and MVP-related firm capacity
contractual obligations would commence 6/1/2024 (with certain MVC
step ups and gathering fee relief under ETRN's February 2020 gas
gathering agreement with EQT Commencing 4/1/2024). The deferred
revenue amounts are subject to the ultimate in-service date of
MVP.
Full-Year 2024 Capital Expenditures and Capital Contribution
Outlook(1)
$ millions
MVP(1)
$540 - $575
Gathering(2)
$210 - $260
Transmission(3)
$75 - $85
Water
$25 - $35
Total
$850 - $955
(1)
Assumes MVP construction completion by
5/31/2024.
(2)
Excludes approximately $15 million of
capital expenditures related to the noncontrolling interest in
Eureka.
(3)
Includes capital contributions to MVP JV
for the Southgate project.
BUSINESS AND PROJECT UPDATES
Executive Succession
Effective January 1, 2024, Diana M. Charletta assumed the role
of president and chief executive officer, succeeding Thomas F.
Karam, who became ETRN's executive chairman. Both Ms. Charletta and
Mr. Karam continue to serve as members of the Equitrans Midstream
Corporation Board of Directors.
Mr. Karam served as chief executive officer since September 2018
and was appointed chairman of the board in July 2019. Ms. Charletta
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.
Mountain Valley Pipeline
Mountain Valley Pipeline, LLC (the MVP JV) has made substantial
progress on the MVP project after resuming construction in late
summer 2023. The pace of forward progress, however, slowed at the
end of 2023 through early 2024 as a result of unforeseen
challenging construction conditions, combined with unexpected and
substantially adverse winter weather conditions throughout much of
January. As a result, the MVP JV retained a higher than planned
contractor headcount through January, and into February, to
maintain the right of way and address weather-induced issues, and
also to be in a position to improve the pace of forward progress as
soon as conditions became more favorable. While productivity has
since improved at the end of January and into February, the
combined effect of these unforeseen challenges significantly slowed
the previously anticipated pace of construction and adversely
affected project cost. As a result, ETRN is now targeting MVP
project completion and commissioning in the second quarter of 2024,
at a total estimated project cost ranging from approximately $7.57
billion to approximately $7.63 billion (excluding AFUDC).
Through December 31, 2023, ETRN had funded approximately $3.4
billion to the MVP JV for the MVP project. If the MVP project were
to be completed in the second quarter of 2024 and at a total
project cost ranging from approximately $7.57 billion to
approximately $7.63 billion (excluding AFUDC), the Company expects
its equity ownership in the MVP project would progressively
increase from approximately 48.4% to approximately 49.0%, and
expects it would incur a total of approximately $4.0 billion over
the project’s construction, inclusive of approximately $245 million
in excess of the Company’s ownership interest.
Strategic Process
The Company’s Board of Directors has been engaged in a process
with third parties that have expressed interest in strategic
transactions involving the Company. The board has engaged outside
advisors and the process is ongoing. There is no assurance that
such process will result in the execution, approval or completion
of any specific transaction or outcome.
Ohio Valley Connector Expansion Project
During the third quarter 2023, 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 $40 million in
2024. The project is primarily supported by long-term firm capacity
commitments of 330 MMcf per day, and ETRN is targeting the
incremental capacity to be placed in-service during the second
quarter of 2024.
Southgate Project
In late December 2023, the MVP JV entered into precedent
agreements with each of Public Service Company of North Carolina,
Inc. and Duke Energy Carolinas, LLC, which contemplate an amended
Southgate project that would extend from the terminus of MVP in
Pittsylvania County, VA to planned new delivery points in
Rockingham County, NC. The precedent agreements, among other
things, collectively provide for 550 MMcf per day of firm capacity
commitments. The MVP JV recently completed an open season for the
Southgate project and expects to finalize the project scope in the
coming months.
The project is estimated to cost approximately $370 million,
excluding AFUDC and certain costs incurred for purposes of the
original project, and is targeted for completion in June 2028. ETRN
is expected to operate Southgate and owned a 47.2% interest in
Southgate as of December 31, 2023.
Fifth Amendment to Revolving Credit Agreement
On February 15, 2024, EQM Midstream Partners, LP (EQM), a wholly
owned subsidiary of ETRN, entered into an amendment to its Third
Amended and Restated Credit Agreement to, among other things, amend
the financial covenant, such that the Consolidated Leverage Ratio
(as defined in the Amended EQM Credit Facility) (i) as of March 31,
2024, cannot exceed 6.00 to 1.00, (ii) as of June 30, 2024, cannot
exceed 6.25 to 1.00, (iii) as of September 30, 2024, cannot exceed
5.85 to 1.00 and (iv) as of the end of each fiscal quarter
thereafter, cannot exceed 5.50 to 1.00.
Outstanding Debt and Liquidity
As of December 31, 2023, ETRN reported $6.3 billion of
consolidated debt; $915.0 million of borrowings and $105.8 million
of letters of credit outstanding under EQM's revolving credit
facility; $315.0 million of borrowings under Eureka's revolving
credit facility; and $258.9 million of cash.
2023 Year-End Earnings Conference Call Information
ETRN will host a conference call with security analysts today,
February 20, 2024, at 10:30 a.m. (ET) to discuss year-end 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, unrealized gain (loss) on derivative
instruments, 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 Annual Report on Form 10-K for the year ended
December 31, 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 December
31,
Year Ended December
31,
(Thousands, except per share
information)
2023
2023
Net income attributable to ETRN common
shareholders
$
134,242
$
386,717
Add back (deduct):
Unrealized loss (gain) on derivative
instruments
5,946
(1,531
)
Rager Mountain incident
306
9,444
Contract asset write-down
—
7,800
Tax impact of non-GAAP items(1)
(1,622
)
(4,075
)
Adjusted net income attributable to ETRN
common shareholders
$
138,872
$
398,355
Diluted weighted average common shares
outstanding, assuming dilution
439,362
436,132
Adjusted earnings per diluted share
attributable to ETRN common shareholders
$
0.32
$
0.91
(1)
The adjustments were tax effected at
ETRN’s federal and state statutory tax rate for each period
including certain discrete valuation allowance adjustments as
necessary.
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,
depreciation, amortization of intangible assets, 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, ETRN's proportional
ownership of MVP JV adjusted EBITDA, realized gains on derivative
instruments and less equity income, AFUDC-equity, unrealized gain
(loss) on derivative instruments, and adjusted EBITDA attributable
to noncontrolling interest. As used in this news release, MVP JV
adjusted EBITDA means, as applicable, MVP JV net income plus net
interest expense and depreciation.
The table below reconciles adjusted EBITDA with net income as
derived from the statements of consolidated comprehensive income to
be included in ETRN's Annual Report on Form 10-K for the year ended
December 31, 2023.
Reconciliation of Adjusted EBITDA
Three Months Ended December
31,
Year Ended December
31,
(Thousands)
2023
2023
Net income:
$
150,039
$
454,754
Add (deduct):
Income tax benefit
(4,528
)
(18,823
)
Net interest expense
111,949
426,884
Depreciation
70,603
279,386
Amortization of intangible assets
16,205
64,819
Preferred Interest payments
2,746
10,984
Non-cash long-term compensation
expense
5,890
39,313
Rager Mountain incident
306
9,444
Contract asset write-down
—
7,800
Equity income
(77,597
)
(175,215
)
AFUDC – equity
(376
)
(1,068
)
Unrealized loss (gain) on derivative
instruments
5,946
(1,531
)
Adjusted EBITDA attributable to
noncontrolling interest(1)
(9,212
)
(40,649
)
Adjusted EBITDA
$
271,971
$
1,056,098
(1)
Reflects adjusted EBITDA attributable to
noncontrolling interest associated with the third-party ownership
interest in Eureka. Adjusted EBITDA attributable to noncontrolling
interest for the three months ended December 31, 2023, was
calculated as net income of $1.2 million plus depreciation of $3.2
million, plus amortization of intangible assets of $2.1 million,
and plus interest expense of $2.7 million. Adjusted EBITDA
attributable to noncontrolling interest for the year ended December
31, 2023, was calculated as net income of $9.5 million, plus
depreciation of $12.8 million, plus amortization of intangible
assets of $8.4 million, and plus interest expense of $9.9
million.
Free Cash Flow
As used in this news release, free cash flow means, as
applicable, net cash provided by operating activities plus
principal payments received on the Preferred Interest,
distributions received from the MVP JV included in net cash
provided by (used in) investing activities, and less net cash
provided by operating activities attributable to noncontrolling
interest, dividends paid to Series A Preferred Shareholders,
capital expenditures (excluding the noncontrolling interest share
(40%) of Eureka capital expenditures), capital contributions to MVP
JV and distributions received from the MVP JV associated with MVP
financing activities.
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
Annual Report on Form 10-K for the year ended December 31,
2023.
Reconciliation of Free Cash Flow and Retained Free Cash
Flow
Three Months Ended December
31,
Year Ended December
31,
(Thousands)
2023
2023
Net cash provided by operating
activities
$
291,218
$
1,016,078
Add (deduct):
Principal payments received on the
Preferred Interest
1,490
5,837
Net cash provided by operating activities
attributable to noncontrolling interest(1)
(5,733
)
(30,568
)
ETRN Series A Preferred Shares
dividends(2)
(14,628
)
(58,512
)
Capital expenditures(3)(4)
(103,969
)
(372,004
)
Capital contributions to MVP JV
(408,934
)
(689,405
)
Free cash flow
$
(240,556
)
$
(128,574
)
Less:
Dividends paid to common
shareholders(5)
(64,990
)
(259,920
)
Retained free cash flow
$
(305,546
)
$
(388,494
)
(1)
Reflects 40% of $14.3 million and $76.4
million, which was Eureka’s standalone net cash provided by
operating activities for the three months and year ended December
31, 2023, respectively, which represents the noncontrolling
interest portion for the three months and year ended December 31,
2023, respectively.
(2)
Reflects cash dividends paid of $0.4873
and $1.9492 per ETRN Series A Perpetual Convertible Preferred Share
for the three months and year ended December 31, 2023,
respectively.
(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)
Third quarter 2023 dividend of $0.15 per
ETRN common share was paid during the fourth 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.
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) 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, and timing
of step ups in MVC thereunder; 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; the outcome of the Company's Board of Directors'
strategic process with respect to the Company; 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 construct,
complete and place in-service the MVP project; the targeted timing
and cost of completing the MVP project (and 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 8 of ETRN’s Annual Report on Form 10-K for the year ended
December 31, 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 , potential receipt of
in-service authorization, and the realizability of the perceived
benefits of the MVP project; finalizing the scope of Southgate and
the ability to permit, construct, complete and place in-service
Southgate; the targeted total project cost and timing for
completing (and ability to complete) Southgate, including the
satisfaction, if any, of conditions precedent with respect to the
relevant precedent agreements, timing for forecasted capital
expenditures related thereto, and the realizability of the
perceived benefits of the amended project design, scope and
provisions included in the relevant precedent agreements, and any
potential extensions of the terms of the precedent agreements; the
MVP JV's ability to execute any additional agreements for firm
capacity for Southgate; 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 extensions and expansions of its mixed-use
water system, 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, the impact of MVP in-service on commodity prices or natural
gas volumes in the Appalachian Basin, and takeaway capacity
constraints in the Appalachian Basin; beliefs regarding 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, ability to
meet contractor draw down plans, productivity realizable, project
opposition, the receipt of certain time of year and other variances
and approvals, if applicable, and 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 filed
with the SEC, the risk factors to be disclosed under Part I, "Item
1A. Risk Factors," in ETRN's Annual Report on Form 10-K for the
year ended December 31, 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 law, whether as a result of new information, future
events or otherwise. As forward-looking statements involve
significant risks and uncertainties, caution should be exercised
against placing undue reliance on such statements.
EQUITRANS MIDSTREAM
CORPORATION
STATEMENTS OF CONSOLIDATED
COMPREHENSIVE INCOME
Three Months Ended December
31,
Years Ended December
31,
2023
2022
2023
2022
(Thousands, except per share
amounts)
Operating revenues
$
360,609
$
355,239
$
1,393,929
$
1,357,747
Operating expenses:
Operating and maintenance
46,297
53,847
177,972
154,667
Selling, general and administrative
42,193
36,398
187,374
128,472
Depreciation
70,603
68,923
279,386
272,195
Amortization of intangible assets
16,205
16,205
64,819
64,819
Total operating expenses
175,298
175,373
709,551
620,153
Operating income
185,311
179,866
684,378
737,594
Equity income
77,597
77
175,215
168
Impairment of equity method investment
—
—
—
(583,057
)
Other (expense) income, net
(5,448
)
5,747
3,222
13,871
Loss on extinguishment of debt
—
—
—
(24,937
)
Net interest expense
(111,949
)
(105,010
)
(426,884
)
(394,333
)
Income (loss) before income taxes
145,511
80,680
435,931
(250,694
)
Income tax (benefit) expense
(4,528
)
(1,483
)
(18,823
)
6,444
Net income (loss)
150,039
82,163
454,754
(257,138
)
Net income attributable to noncontrolling
interests
1,169
1,549
9,525
12,204
Net income (loss) attributable to ETRN
148,870
80,614
445,229
(269,342
)
Preferred dividends
14,628
14,628
58,512
58,512
Net income (loss) attributable to ETRN
common shareholders
$
134,242
$
65,986
$
386,717
$
(327,854
)
Earnings (loss) per share of common stock
attributable to ETRN common shareholders - basic
$
0.31
$
0.15
$
0.89
$
(0.76
)
Earnings (loss) per share of common stock
attributable to ETRN common shareholders - diluted
$
0.31
$
0.15
$
0.89
$
(0.76
)
Weighted average common shares outstanding
- basic
434,102
433,365
433,963
433,341
Weighted average common shares outstanding
- diluted
439,362
434,347
436,132
433,341
EQUITRANS MIDSTREAM
CORPORATION
GATHERING RESULTS OF
OPERATIONS
Three Months Ended December
31,
Years Ended December
31,
2023
2022
2023
2022
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues(1)
$
143,954
$
147,015
$
572,899
$
562,947
Volumetric-based fee revenues
85,180
71,280
297,268
327,632
Total operating revenues
229,134
218,295
870,167
890,579
Operating expenses:
Operating and maintenance
26,532
29,223
96,863
101,194
Selling, general and administrative
25,391
22,539
113,710
82,590
Depreciation
49,226
49,106
196,547
195,059
Amortization of intangible assets
16,205
16,205
64,819
64,819
Total operating expenses
117,354
117,073
471,939
443,662
Operating income
$
111,780
$
101,222
$
398,228
$
446,917
Other (expense) income, net(2)
$
(5,946
)
$
5,102
$
1,531
$
13,312
OPERATIONAL DATA
Gathered volumes (BBtu per day)
Firm capacity(1)
5,567
5,248
5,441
5,211
Volumetric-based services
2,357
2,137
2,238
2,484
Total gathered volumes
7,924
7,385
7,679
7,695
Capital expenditures(3)
$
68,591
$
69,939
$
267,748
$
265,864
(1)
Includes revenues and volumes, as
applicable, from contracts with MVCs.
(2)
Other (expense) income, net, includes the
unrealized (loss) gain on derivative instruments associated with
the Henry Hub cash bonus payment provision and gain on sale of
gathering assets in the year ended December 31, 2022.
(3)
Includes approximately $2.8 million and
$2.7 million of capital expenditures related to noncontrolling
interests in Eureka for the three months ended December 31, 2023
and 2022, respectively, and $14.3 million and $20.3 million for the
years ended December 31, 2023 and 2022, respectively.
EQUITRANS MIDSTREAM
CORPORATION
TRANSMISSION RESULTS OF
OPERATIONS
Three Months Ended December
31,
Years Ended December
31,
2023
2022
2023
2022
FINANCIAL DATA
(Thousands, except per day
amounts)
Firm reservation fee revenues
$
94,939
$
98,640
$
361,416
$
370,769
Volumetric-based fee revenues
18,159
12,447
81,703
33,748
Total operating revenues
113,098
111,087
443,119
404,517
Operating expenses:
Operating and maintenance
12,875
17,456
55,180
33,429
Selling, general and administrative
14,707
11,512
57,446
37,782
Depreciation
14,260
13,907
56,056
55,614
Total operating expenses
41,842
42,875
168,682
126,825
Operating income
$
71,256
$
68,212
$
274,437
$
277,692
Equity income
$
77,597
$
77
$
175,215
$
168
Impairment of equity method investment
$
—
$
—
$
—
$
(583,057
)
OPERATIONAL DATA
Transmission pipeline throughput (BBtu per
day)
Firm capacity(1)
3,553
3,312
3,402
3,140
Interruptible capacity
50
10
24
33
Total transmission pipeline throughput
3,603
3,322
3,426
3,173
Average contracted firm transmission
reservation commitments (BBtu per day)
3,953
4,211
3,812
4,059
Capital expenditures(2)
$
29,328
$
12,977
$
84,224
$
35,971
(1)
Firm capacity includes volumes associated
with firm capacity contracts including volumes in excess of firm
capacity.
(2)
Transmission capital expenditures do not
include aggregate capital contributions made to the MVP JV for the
MVP and Southgate projects of approximately $408.9 million and
$41.4 million for the three months ended December 31, 2023 and
2022, respectively, and $689.4 million and $199.6 million for the
years ended December 31, 2023 and 2022, respectively.
EQUITRANS MIDSTREAM
CORPORATION
WATER RESULTS OF
OPERATIONS
Three Months Ended December
31,
Years Ended December
31,
2023
2022
2023
2022
FINANCIAL DATA
(Thousands, except MMgal
amounts)
Firm reservation fee revenues(1)
$
9,375
$
9,375
$
39,168
$
33,877
Volumetric-based fee revenues
9,002
16,482
41,475
28,774
Total operating revenues
18,377
25,857
80,643
62,651
Operating expenses:
Operating and maintenance
6,868
7,142
25,833
19,960
Selling, general and administrative
1,878
2,117
15,498
8,073
Depreciation
7,014
5,533
26,043
20,016
Total operating expenses
15,760
14,792
67,374
48,049
Operating income
$
2,617
$
11,065
$
13,269
$
14,602
OPERATIONAL DATA
Water services volumes (MMgal)
Firm capacity(1)
121
110
513
433
Volumetric-based services
235
348
942
706
Total water volumes
356
458
1,455
1,139
Capital expenditures
$
13,893
$
17,437
$
45,691
$
66,569
(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/20240220943165/en/
Analyst inquiries: Anthony DeFabio – Treasurer and
Director, Investor Relations 412-518-7193
adefabio@equitransmidstream.com
Media inquiries: Natalie Cox – Communications and
Corporate Affairs ncox@equitransmidstream.com
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