Operational Updates | General | Quarterly / Earnings Reports | First Quarter (1Q) Update | Financial Results | Capital Markets
EQT Midstream Talks 1Q Financials, Operations
Email
Print 
Bookmark
EQT Midstream Partners, LP, an EQT Corporation (EQT) company, announced first quarter 2015 financial and operating results.
Net income for the quarter totaled $95.3 million and adjusted EBITDA was $96.6 million. Distributable cash flow was $90.0 million for the quarter. Adjusted operating income was $105.5 million, or 58% higher than the same quarter last year. The non-GAAP financial measures are reconciled in the Non-GAAP Disclosures section of this news release.
Additional Highlights:
- Reported Q1 adjusted EBITDA and distributable cash flow that are ahead of plan
- Completed accretive acquisition of Northern West Virginia Marcellus Gathering System
- Increasing adjusted EBITDA guidance for 2015 to $430 – $445 million
- Increasing distributable cash flow guidance for 2015 to $375 - $390 million
- Targeting 20% annual distribution growth through 2017
In December 2013, EQT Midstream Partners, LP (Partnership) entered into a capital lease with EQT for the lease of its Allegheny Valley Connector facilities (AVC), which includes a 200-mile pipeline regulated by the Federal Energy Regulatory Commission (FERC). The Partnership operates the AVC and the related revenues and expenses are included in the Partnership’s financial statements; however, the monthly lease payment to EQT offsets the impact on the Partnership’s distributable cash flow. As a result, first quarter 2015 operating results are discussed on an adjusted basis, excluding the AVC. Payments due under the lease totaled $8.8 million for the first quarter. The revenues and expenses associated with the AVC are found in the reconciliation table in the Non-GAAP Disclosures section of this news release.
First quarter adjusted EBITDA was $96.6 million or $9.6 million above the high-end of the previously provided Q1 2015 adjusted EBITDA guidance of $82 - $87 million. The previously provided guidance did not include the impact of the recent Northern West Virginia Marcellus Gathering System (NWV Gathering) acquisition, which contributed $4.6 million to adjusted EBITDA in the first quarter. The remaining $5.0 million variance to the high-end of guidance was primarily driven by higher than expected volumes on the Jupiter gathering system.
First quarter adjusted operating revenues increased $44.6 million, or 45%, compared to the same quarter last year. The increase was primarily due to increased contracted firm transmission capacity and increased gathered volumes. Adjusted operating expenses were up $6.1 million versus the first quarter of 2014, consistent with the growth of the business.
Northern West Virginia Marcellus Gathering System Acquisition
The Partnership recently completed the acquisition of NWV Gathering, along with a preferred interest in an EQT subsidiary, from EQT for $1.05 billion, of which $997.5 million was paid in cash and $52.5 million was paid in common and general partner units. The system was designed and constructed to gather natural gas production in the wet gas and dry gas regions of the Marcellus play in northern West Virginia. The system includes approximately 70 miles of natural gas gathering pipeline and nine compressor units with 25,000 horsepower of compression. In addition, the system includes a 30-mile, high-pressure wet gas header pipeline that moves wet gas from the development areas to the MarkWest Mobley processing facility. EQT contracted for 10-years of firm capacity on the system.
The Partnership’s first quarter earnings report includes a full quarter of results for NWV Gathering, and prior period financial statements have been recast to reflect the acquisition. First quarter 2015 adjusted EBITDA excludes NWV Gathering results prior to March 17, 2015. The acquired assets are forecast to generate EBITDA of $75 million for the remainder of 2015, $125 million in 2016, and $150 million in 2017.
The Partnership financed the cash portion of the transaction with $696 million of net proceeds from a follow-on equity offering, and borrowings under its revolving credit facility.
Quarterly Distribution
The Partnership announced a quarterly cash distribution of $0.61 per unit for the first quarter of 2015. The distribution will be paid on May 15, 2015 to all unitholders of record at the close of business on May 5, 2015. The quarterly cash distribution is $0.12 per unit, or 24% higher, than the first quarter of 2014. The Partnership is targeting annual distribution growth of 20% through 2017.
Guidance
The Partnership forecasts second quarter 2015 adjusted EBITDA of $108 - $113 million and is increasing its full-year 2015 adjusted EBITDA forecast to $430 - $445 million; and distributable cash flow forecast to $375 - $390 million. The increase in the 2015 forecast is primarily related to first quarter results above plan and the impact of NWV Gathering. The financial and distribution guidance does not include financial impacts of potential acquisitions.
Capital Expenditures
Expansion
During the first quarter, the Partnership assumed EQT’s ownership interest in Mountain Valley Pipeline, LLC and reimbursed EQT approximately $54 million for capital contributions made by EQT to the joint venture as of March 30, 2015. In 2015, the Partnership expects total capital contributions to Mountain Valley Pipeline of approximately $105 - $115 million, which includes the Q1 2015 reimbursement.
In the first quarter, the Partnership continued to expand its gathering infrastructure with approximately $35 million in investments related to gathering pipeline and compression projects for EQT and third-parties. The Partnership forecasts total gathering related investments of approximately $205 million in 2015.
The Partnership invested approximately $13 million in the Ohio Valley Connector (OVC) project during the first quarter. The OVC is estimated to cost $300 million, of which approximately $120 - $130 million will be invested in 2015.
The Partnership also invested $7 million in transmission expansion projects - the majority of which was in the east side expansion project for Antero Resources that will ultimately provide 100 MMcf per day of capacity and be fully in-service by mid-year. The Partnership expects to invest approximately $50 million on transmission projects in 2015.
Expansion capital expenditures totaled $55 million in the first quarter. The Partnership forecasts 2015 total expansion capital expenditures and capital contributions to Mountain Valley Pipeline, LLC of approximately $475 - $505 million.
Ongoing Maintenance
Ongoing maintenance capital expenditures are cash expenditures made to maintain, over the long term, the Partnership’s operating capacity or operating income. Ongoing maintenance capital expenditures, net of expected reimbursements, totaled $1 million in the first quarter 2015, which was lower than expected due to weather impacts on the ability to perform maintenance activity. The Partnership forecasts full-year 2015 ongoing maintenance capital expenditures of $25 - $30 million.
Project Update
Mountain Valley Pipeline
During the first quarter, Mountain Valley Pipeline, LLC, a joint venture between the Partnership and a subsidiary of NextEra Energy, Inc., announced that subsidiaries of WGL Holdings, Inc. (WGL) and Vega Energy Partners, Ltd. (Vega), have acquired ownership interests in the joint venture.
The ownership breakdown is:
- 55% - EQT Midstream Partners
- 35% - NextEra Energy
- 7% - WGL
- 3% - Vega
In addition to their ownership stake, WGL will be a shipper on the proposed pipeline and has committed to buying 500 MMcf per day of natural gas priced at Transco Station 165 in Pittsylvania County, Virginia – a highly marketable trading area along the east coast. Mountain Valley Pipeline has secured a total of 2 Bcf per day of firm capacity commitments at 20-year terms. The proposed 300-mile pipeline is currently specified at 42” diameter, with an approximate project cost of $3-$3.5 billion.
Mountain Valley Pipeline is well into the pre-filing process with the FERC and expects to submit the certificate of application to the FERC in the fourth quarter 2015. Subject to regulatory approval, the pipeline is expected to be in-service during the fourth quarter of 2018.