General | Quarterly / Earnings Reports | First Quarter (1Q) Update
EQT Midstream Ramps Up Earnings, Cash Flow in 1Q; Details Spending
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EQT Midstream Partners, LP has reported first quarter 2014 financial and operating results.
Net income for the quarter totaled $34.9 million and adjusted EBITDA was $41.1 million. Distributable cash flow was $38.9 million for the quarter. Adjusted operating income was $34.6 million, or 22% higher than the same quarter last year.
Additional Highlights:
- Announced an increase in the quarterly cash distribution to $0.49 per unit, $0.03 or 7% higher than the fourth quarter of 2013 and $0.12 or 32% higher than first quarter of 2013
- Increasing adjusted EBITDA guidance for 2014 to between $186 - $188 million
- Increasing distributable cash flow guidance for 2014 to between $164 - $166 million
- Forecasting $0.03 quarterly cash distribution per unit increases through at least 2015, without additional dropdowns from EQT
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 the AVC as part of its transmission and storage system. Revenue and expenses associated with the 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, first quarter 2014 operating results are discussed on an adjusted basis, excluding the AVC. Payments due under the lease totaled $7.0 million for the first quarter.
First quarter adjusted operating revenues increased $9.2 million, or 21%, compared to the same quarter last year. The increase was primarily due to increased contracted firm transmission capacity from EQT and third-parties. In December 2013, EQT completed the sale of EGC. At the time of the sale closing, the Partnership extended its existing 448 BBtu per day transmission and storage contract with EGC for 20 years. Revenues from EGC were affiliate revenues prior to the sale and are third party revenues subsequent to the sale. After normalizing for EGC, the first quarter affiliate adjusted revenue was 15% higher than the same quarter last year and third party adjusted revenue was 27% higher. In the first quarter 2014, third parties accounted for nearly 50% of total adjusted operating revenue. Adjusted operating expenses increased $3.1 million versus the first quarter of 2013, consistent with the growth of the business.
Quarterly Distribution
The Partnership announced a quarterly cash distribution of $0.49 per unit for the first quarter of 2014. The distribution will be paid on May 15, 2014 to all unitholders of record at the close of business on May 6, 2014. The quarterly cash distribution is $0.03 per unit, or 7% higher, than the fourth quarter of 2013 and $0.12 per unit, or 32% higher, than the first quarter of 2013. The Partnership expects to continue to increase the per unit distribution by $0.03 each quarter through at least 2015, which is supported by expected accretion from the Sunrise acquisition in 2013 and organic growth projects for third-parties.
Guidance
The Partnership forecasts second quarter 2014 adjusted EBITDA to be $44 - $45 million and increases its full-year 2014 adjusted EBITDA forecast to $186 - $188 million and distributable cash flow forecast to $164 - $166 million. The increase in the 2014 forecast is primarily related to first quarter results above plan and higher projected throughput from EQT and third party Marcellus producers. The financial and distribution guidance does not include financial impacts of potential acquisitions.
Capital Expenditures
Expansion
The Partnership expects the Jefferson compressor station expansion to be completed in the third quarter 2014 and to 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. First quarter expansion capital expenditures totaled $17.3 million, and the Partnership forecasts expansion capital expenditures of approximately $100 - $105 million for 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 $1.5 million in the first quarter 2014. The Partnership forecasts ongoing maintenance capital expenditures of approximately $17 - $18 million for 2014.