General | Quarterly / Earnings Reports | Second Quarter (2Q) Update
EQT Grows Midstream Portfolio in 2Q; Touts Jupiter Acquisition
Print
|
EQT Midstream Partners, LP has announced second quarter 2014 financial and operating results.
Net income for the quarter totaled $52.1 million and adjusted EBITDA was $57.2 million. Distributable cash flow was $52.6 million for the quarter. Adjusted operating income was $58.8 million, or 11% higher than the same quarter last year. The non-GAAP financial measures are reconciled in the Non-GAAP Disclosures section included in this news release.
Additional Highlights:
- Acquired the Jupiter Gathering System from EQT
- Moving forward with construction of the Ohio Valley Connector project
- Third-party transmission and storage revenue 50% higher than same quarter last year
- Increasing adjusted EBITDA guidance for 2014 to between $254 – $264 million
- Increasing distributable cash flow guidance for 2014 to between $221 - $231 million
- Forecasting $0.03 quarterly cash distribution per unit increases each quarter through 2016
In December 2013, EQT Midstream Partners (Partnership) entered into a capital lease with EQT for the lease of its Allegheny Valley Connector facilities (AVC), which includes a 200-mile, FERC-regulated pipeline that EQT acquired as part of the sale of Equitable Gas Company, LLC (EGC). The Partnership operates AVC as part of its transmission and storage system. Revenues and expenses associated with AVC 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, second quarter 2014 operating results are discussed on an adjusted basis, excluding AVC. Payments due under the lease totaled $4.2 million for the second quarter. The revenues and expenses associated with AVC are found in the reconciliation table in the Non-GAAP Disclosures section of this news release.
Second quarter adjusted operating revenues increased $9.5 million, or 13%, compared to the same quarter last year. The increase was primarily due to increased contracted firm transmission capacity from third-parties and EQT. Adjusted operating expenses increased $3.5 million versus the second quarter of 2013, consistent with the growth of the business.
Projects
Jupiter Gathering System Acquisition
On May 7, 2014, the Partnership acquired Jupiter from EQT for $1.18 billion. Jupiter was designed and constructed to gather EQT’s Marcellus production in portions of Greene and Washington counties, Pennsylvania. The gathering system consists of approximately 35-miles of pipeline and two compressor stations. The assets are supported by a gathering agreement with EQT that includes 10-year firm capacity reservation commitments on the available compression capacity. The compression capacity is currently 225 MMcf per day and is anticipated to grow to 775 MMcf per day by the end of 2015.
The Partnership’s second quarter reported results include a full quarter of the Jupiter Gathering System (Jupiter) and prior period financial statements have been recast to reflect the Jupiter acquisition. Second quarter 2014 adjusted EBITDA excludes Jupiter results prior to the acquisition. The Jupiter assets are forecast to generate EBITDA of $60 million in the second half of 2014, $130 million in 2015, and $150 million in 2016. The Partnership also expects ongoing maintenance capital expenditures related to Jupiter to be less than $2 million per year.
The Partnership financed the transaction with approximately $902 million of net proceeds from a follow-on equity offering, $59 million of common and general partner units, and the remainder from borrowings under its revolving credit facility.
Ohio Valley Connector
The Partnership also announced that it will construct and own the Ohio Valley Connector (OVC) pipeline, which will be regulated by the Federal Energy Regulatory Commission (FERC). OVC will connect the Partnership’s transmission and storage system in northern West Virginia to Clarington, Ohio. At Clarington, OVC will interconnect with the Rockies Express Pipeline and the Texas Eastern Pipeline. In addition to providing Marcellus producers access to pipelines serving Midwest and Gulf Coast markets, OVC will provide Utica producers, located along the route, direct access to the Partnerships’ extensive transmission system and is expected to be in-service by mid-year 2016.
Subject to FERC approval, the 36 mile pipeline extension will provide approximately 1.0 Bcf per day of transmission capacity and is estimated to cost $300 million. The Partnership has entered into a 20-year precedent agreement with EQT for a total of 650 MMcf per day of firm transmission capacity on OVC.
Mountain Valley Pipeline
On July 10, 2014, EQT completed a non-binding open season for the proposed Mountain Valley Pipeline project. The open season resulted in significant interest from many potential shippers. EQT is working toward binding precedent agreements with shippers and expects to have an update on the project within the next several months. EQT currently expects the 330-mile project, which is subject to Board and FERC approval, to extend from the Partnership’s transmission and storage system in West Virginia to southern Virginia, to provide approximately two billion cubic feet per day of firm transmission capacity and to be in-service by the end of 2018. The pipeline is expected to be constructed and owned by a joint venture between EQT or the Partnership and NextEra Energy, Inc.
Quarterly Distribution
The Partnership announced a quarterly cash distribution of $0.52 per unit for the second quarter of 2014. The distribution will be paid on August 14, 2014 to all unitholders of record at the close of business on August 5, 2014. The quarterly cash distribution is $0.03 per unit, or 6% higher, than the first quarter of 2014 and $0.12 per unit, or 30% higher, than the second quarter of 2013. The Partnership expects to continue to increase the per unit distribution by $0.03 each quarter through at least 2016.
Guidance
The Partnership increased its full-year 2014 adjusted EBITDA forecast to $254 - $264 million and distributable cash flow forecast to $221 - $231 million, which includes the impact of Jupiter. The Partnership also forecasts third quarter 2014 adjusted EBITDA of $68 - $73 million.
Capital Expenditures
Expansion
The Partnership expects to complete the Jefferson compressor station expansion in the third quarter 2014, which will add 550 BBtu per day of transmission capacity. The Partnership is also constructing two projects for Antero Resources, the West Side expansion and the East Side expansion, which combined will provide 200 BBtu per day of transmission capacity. The first 100 BBtu per day is expected to be in service by year-end 2014 and the remaining 100 BBtu per day is expected to be in service by mid-year 2015. The Partnership also will add 100 BBtu per day of transmission capacity by the end of 2014 for Range Resources. The Partnership expects total transmission system capacity of 3.0 TBtu per day by the end of 2014.
During 2014, the Partnership also expects to complete the addition of 350 MMcf per day of compression capacity and the installation of gathering pipelines associated with Jupiter.
The Partnership began preliminary work on OVC and projects related capital expenditures of approximately $10 million in 2014.
Second quarter expansion capital expenditures totaled $43.7 million, and the Partnership forecasts total expansion capital expenditures of approximately $200 - $220 million in 2014.
Ongoing Maintenance
Ongoing maintenance capital expenditures are cash expenditures made to maintain, over the long term, the Partnership’s operating capacity or operating income. Ongoing maintenance capital expenditures, net of expected reimbursements, totaled $3.3 million in the second quarter 2014. The Partnership forecasts ongoing maintenance capital expenditures of approximately $17 - $18 million for 2014.