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EQT Midstream Partners Reports First Quarter 2013 Results

  EQT Midstream Partners Reports First Quarter 2013 Results

Business Wire

PITTSBURGH -- April 25, 2013

EQT Midstream Partners, LP (NYSE: EQM), an EQT Corporation company, today
announced first quarter 2013 financial and operating results. Net income for
the quarter totaled $22.2 million and adjusted EBITDA was $26.7 million.
Distributable cash flow was $24.4 million for the quarter. Adjusted operating
income when compared to the same quarter last year was higher by about $6.5
million, or 40%. The non-GAAP financial measures are reconciled in the
Non-GAAP Disclosures section of this press release.

Highlights for the first quarter 2013:

  *Announced increase in quarterly cash distribution to $0.37 per unit, a 6%
    increase over the prior quarter cash distribution;
  *Increasing adjusted EBITDA guidance for 2013 to between $90 and $95
    million; and
  *Increasing distributable cash flow guidance for 2013 to between $71 and
    $76 million.

EQT Midstream Partners, LP (Partnership) closed its initial public offering
(IPO) on July 2, 2012. Results for periods prior to the IPO are attributable
to its predecessor, Equitrans, LP (Equitrans).

The Partnership has a capital lease with EQT Corporation (EQT) for the lease
of the Sunrise Pipeline (Sunrise), and operates the pipeline as part of its
transmission and storage system. Revenues and expenses associated with Sunrise
are included in the Partnership’s financial statements; however, the monthly
lease payment to EQT Corporation offsets the impact on the Partnership’s
distributable cash flow; therefore, first quarter 2013 results are discussed
on an adjusted basis, excluding Sunrise.

Adjusted operating revenues increased $5.9 million or 19% compared to
operating revenues for the same quarter last year. The increase was primarily
due to higher system throughput related to growth in Marcellus Shale
development and increased contracted transmission capacity associated with the
Blacksville Compressor project which was completed in September 2012. In the
first quarter, the Partnership recorded approximately $2 million of revenue
from interruptible throughput that the Partnership does not expect to
recognize in the second quarter. At the end of the first quarter, three
storage related contracts expired and were not renewed. The Partnership
realized about $0.5 million of revenue in the first quarter related to these
storage contracts. Adjusted operating expenses decreased $0.7 million versus
the first quarter of 2012.

Operating revenues are seasonal, and based on utility customer contracts, are
currently expected to be about $2 million per quarter higher in the first and
fourth quarters of each year. In addition, operating expenses are typically
lower in the first quarter compared to other quarters due to less maintenance
work performed in the coldest months. First quarter adjusted operating
expenses were approximately $1 million lower than projected average adjusted
operating expenses for the remaining three quarters of 2013.

Quarterly Distribution

The Partnership announced a quarterly cash distribution of $0.37 per unit for
the first quarter of 2013. The distribution will be paid on May 15, 2013 to
all unitholders of record at the close of business on May 6, 2013.

Guidance

Today, the Partnership announced an increase to its 2013 forecast for adjusted
EBITDA and distributable cash flow. Adjusted EBITDA is expected to be
approximately $90 - $95 million and distributable cash flow is expected to be
approximately $71 - $76 million, approximately 17% higher than previous
guidance. The increase in the 2013 forecast is primarily related to higher
than expected system throughput from Marcellus Shale development. The
Partnership forecasts second quarter adjusted EBITDA to be approximately $22 -
$24 million. The guidance does not include financial impacts of potential
acquisitions.

CAPITAL EXPENDITURES

Expansion

First quarter expansion capital expenditures totaled $5.0 million, of which
$2.5 million related to new interconnects and $2.5 million related to the Low
Pressure East Pipeline project and other system upgrades. The Partnership
forecasts expansion capital expenditures of $38 million for 2013.
Approximately $25 million will be to complete the Low Pressure East Pipeline
project, which will upgrade nearly 26 miles of existing pipeline in Greene,
Washington and Allegheny counties of Pennsylvania. The project will add 150
MMcf per day of transmission capacity and is expected to be completed in the
fourth quarter of 2013. The remaining expansion capital expenditures will fund
new interconnects and dehydration upgrades, adding 300 MMcf per day of
transmission capacity mid-year 2013.

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 are all maintenance
capital expenditures other than funded regulatory compliance capital
expenditures and reimbursable maintenance capital expenditures. First quarter
2013 included $2.1 million of ongoing maintenance capital expenditures. The
Partnership forecasts ongoing maintenance capital expenditures of $17.2
million for 2013. Maintenance-related capital expenditures are expected to
vary quarter-to-quarter, primarily based on more activity when weather is
favorable.

Reimbursable Maintenance

Plugging and abandonment and bare steel replacement capital expenditures are
referred to as reimbursable maintenance capital expenditures in the
Reconciliation table in the Non-GAAP Disclosures section of this press
release.

Plugging and abandonment

EQT has agreed, for ten years following the IPO, to reimburse the Partnership
for plugging and abandonment expenditures associated with certain identified
wells. Plugging and abandonment capital expenditures totaled $0.5 million in
the first quarter. EQT will reimburse the Partnership $0.5 million related to
plugging and abandonment expenditures incurred in the first quarter.

Bare Steel Replacement Program

EQT has agreed, for ten years following the IPO, to reimburse the Partnership
for bare steel replacement capital expenditures in the event that ongoing
maintenance capital expenditures and bare steel capital expenditures exceed
$17.2 million in any calendar year. EQT Corporation will reimburse the
Partnership for the lesser of (i) the amount of bare steel replacement capital
expenditures during such year; and (ii) the amount by which ongoing
maintenance capital expenditures and bare steel capital expenditures exceed
$17.2 million. First quarter 2013 bare steel capital expenditures totaled $0.6
million.

The Partnership forecasts ongoing maintenance capital expenditures of $17.2
million plus bare steel capital expenditures of $6.0 million in 2013, which
results in a forecasted reimbursement of $6.0 million in 2013. EQT will
reimburse the Partnership $0.6 million related to the bare steel replacement
program expenditures incurred in the first quarter.

Funded Regulatory Compliance

Funded regulatory compliance capital expenditures relate to discrete
expenditures necessary to comply with certain regulatory and other legal
requirements. The Partnership has identified two specific regulatory
compliance initiatives, system segmentation and isolation; and valve pit
remediation. In order to fund these two initiatives, the Partnership retained
$32 million from the IPO. Funded regulatory compliance capital expenditures do
not impact the calculation of distributable cash flow. First quarter 2013
included $2.3 million of funded regulatory compliance capital expenditures.
Since the IPO, the Partnership has incurred $9.1 million of funded regulatory
compliance capital expenditures and forecasts $12 million in 2013.

SUNRISE PIPELINE

On June 18, 2012, Equitrans transferred ownership of Sunrise, an approximately
40 mile Federal Energy Regulatory Commission (FERC) regulated transmission
pipeline, to EQT Corporation. At the time of the transfer, the Partnership
entered into a capital lease with EQT Corporation for the lease of the
pipeline. Under the lease, the Partnership operates the pipeline as part of
its transmission and storage system under the rates, terms and conditions of
its FERC-approved tariff. Sunrise was placed into service during the third
quarter of 2012. Revenues and expenses associated with Sunrise are included in
the Partnership’s financial statements. The lease payment, which totaled $6.9
million in the first quarter, is not expected to have a net positive or
negative impact on distributable cash flow. The revenues and expenses
associated with Sunrise are set forth in the Reconciliation table in the
Non-GAAP Disclosures section of this press release.

NON-GAAP DISCLOSURES

Adjusted EBITDA and Distributable Cash Flow

As used in this press release, adjusted EBITDA means net income plus net
interest expense, income tax expense (if applicable), depreciation and
amortization expense, non-cash long-term compensation expense and other
non-cash adjustments (if applicable), less other income and the Sunrise lease
payment. As used in this press release, distributable cash flow means adjusted
EBITDA less net cash paid for interest expense, ongoing maintenance capital
expenditures, and income taxes (if applicable). Adjusted EBITDA and
distributable cash flow are non-GAAP supplemental financial measures that
management and external users of the Partnership’s consolidated financial
statements, such as industry analysts, investors, lenders and rating agencies,
use to assess:

  *the Partnership’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 the Partnership’s assets to generate sufficient cash flow
    to make distributions to the Partnership’s unitholders;
  *the Partnership’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.

The Partnership believes that adjusted EBITDA and distributable cash flow
provide useful information to investors in assessing the Partnership’s
financial condition and results of operations. Adjusted EBITDA and
distributable cash flow should not be considered alternatives to net income,
operating income, cash flows from 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
income and net cash provided by operating activities. Additionally, because
adjusted EBITDA and distributable cash flow may be defined differently by
other companies in the industry, the Partnership’s definition of adjusted
EBITDA and distributable cash flow may not be comparable to similarly titled
measures of other companies, thereby diminishing their utility. The table
below reconciles adjusted EBITDA and distributable cash flow with net income
and net cash provided by operating activities as derived from the statements
of consolidated operations and the statements of consolidated cash flows, to
be included in the Partnership’s quarterly report on Form 10-Q for the quarter
ended March 31, 2013.

Reconciliation of Adjusted EBITDA and Distributable Cash Flow
                                                            
                                                            Q1 2013
                                                            (in thousands $)
Operating revenues:
Transmission and storage                                $   41,065
Gathering                                                   3,300
Total operating revenues                                    44,365
Operating expenses:
Operating and maintenance                                   6,632
Selling, general and administrative                         4,248
Depreciation and amortization                               7,348
Total operating expenses                                    18,228
Operating income                                            26,137
Other income                                                297
Interest expense                                            (4,204)
Net income                                              $   22,230
Add:
Depreciation and amortization                               7,348
Interest expense                                            4,204
Non-cash long-term compensation expense                     353
Non-cash reserve adjustment                                 (250)
Less:
Other income                                                (297)
Sunrise lease payment                                       (6,863)
Adjusted EBITDA                                         $   26,725
Less:
Cash interest, net                                          (219)
Ongoing maintenance capital expenditures                    (2,074)
Reimbursable plugging & abandonment capital                 (461)
expenditures
Reimbursable bare steel replacement capital                 (644)
expenditures
Add:
Reimbursement of plugging & abandonment capital             461
expenditures
Reimbursement of bare steel replacement capital             644
expenditures
Distributable cash flow                                 $   24,432
                                                            
Distributions declared (a)                              $   13,093
                                                            
Coverage ratio                                              1.87x

(a) Reflects quarterly cash distribution of $0.37 per unit for the first
quarter of 2013.


                                               Q1 2013
                                                (in thousands $)
                                                
Net cash provided by operating activities     $ 26,875
Add:
Interest expense, net                           4,204
Sunrise pipeline lease payment                  (6,863)
Other, including changes in working capital     2,509
Adjusted EBITDA                               $ 26,725
                                                

Adjusted Operating Revenues, Adjusted Operating Expenses, Adjusted Operating
Income and Adjusted Income Before Income Taxes

Adjusted operating revenues, adjusted operating expenses, adjusted operating
income and adjusted income before income taxes, all of which exclude the
impact associated with Sunrise, are non-GAAP supplemental financial measures
that are presented because they are important measures used by management to
evaluate the Partnership’s performance. Sunrise is not expected to have a net
positive or negative impact on the Partnership’s distributable cash flow.
Adjusted operating revenues, adjusted operating expenses, adjusted operating
income and adjusted income before income taxes should not be considered in
isolation or as a substitute for operating revenues, operating expenses,
operating income or income before income taxes. The table below reconciles
adjusted operating revenues, adjusted operating expenses, adjusted operating
income and adjusted income before income taxes with operating revenues,
operating expenses, operating income and income before income taxes as derived
from the statements of consolidated operations to be included in the
Partnership’s quarterly report on Form 10-Q for the quarter ended March 31,
2013.

                         Three Months Ending March 31,
                           2013                                      2012
                                        Adjustment     Adjusted
(in thousands $)           Reported    to exclude    Results        Reported
                           Results      Sunrise        (excludes     Results
                                                       Sunrise)
REVENUES:
Operating revenues –     $ 34,386     $ (5,688)      $ 28,698       $ 24,234
affiliate
Operating revenues –       9,979        (1,796)        8,183          6,769
third party
Total operating            44,365     $ (7,484)      $ 36,881       $ 31,003
revenues                 $
                                                                      
OPERATING EXPENSES:
Operating and            $ 6,632      $ (244)        $ 6,388        $ 7,024
maintenance
Selling, general and       4,248        (376)          3,872          4,549
administrative
Depreciation and           7,348        (3,654)        3,694          3,038
amortization
Total operating          $ 18,228     $ (4,274)      $ 13,954       $ 14,611
expenses
Operating income           26,137       (3,210)        22,927         16,392
Plus: Other income,        297          -              297            2,471
net
Less: Interest             4,204        (3,993)        211            1,539
expense, net
Income before income     $ 22,230     $ (783)        $ 23,013       $ 17,324
taxes
                                                                      

Q1 2013 Webcast Information

EQT Midstream Partners will host a live webcast with security analysts today,
beginning at 11:30 a.m. Eastern Time. The topics of the webcast will be
financial results, operating results and other matters with respect to first
quarter of 2013. The webcast will be available at
www.eqtmidstreampartners.com; and a replay will be available for seven days
following the call.

EQT Corporation (EQT), which is the Partnership's general partner and majority
equity owner, will also host a teleconference with security analysts today,
beginning at 10:30 a.m. Eastern Time. The Partnership's unitholders are
encouraged to listen to the EQT teleconference, which is expected to cover
topics that are relevant to the Partnership, such as EQT's financial and
operational results and potential asset dropdown transactions involving the
Partnership. This teleconference may also include first quarter 2013 results
and other matters with respect to the Partnership. The webcast can be accessed
via www.eqt.com and will be available as a replay for seven days following the
call.

About EQT Midstream Partners:

EQT Midstream Partners, LP is a growth-oriented limited partnership formed by
EQT Corporation to own, operate, acquire and develop midstream assets in the
Appalachian basin. The Partnership provides midstream services to EQT
Corporation and third-party companies through two primary assets: the
Equitrans Transmission and Storage System and the Equitrans Gathering System.
The Partnership has a 700 mile FERC-regulated, interstate pipeline system and
more than 2,000 miles of FERC-regulated, low-pressure gathering lines.

Visit EQT Midstream Partners, LP at www.eqtmidstreampartners.com

Cautionary Statements

The Partnership is unable to provide a reconciliation of its projected
adjusted EBITDA and projected distributable cash flow to projected net income
or projected net cash provided by operating activities, the most comparable
financial measures calculated in accordance with generally accepted accounting
principles, because of uncertainties associated with projecting future net
income and changes in assets and liabilities.

Disclosures in this press release contain certain forward-looking statements.
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 press release specifically
include the expectations of plans, strategies, objectives and growth and
anticipated financial and operational performance of the Partnership and its
subsidiaries, including guidance regarding the Partnership’s transmission and
storage and gathering revenue and volume growth; revenue projections;
infrastructure programs (including the timing, cost, capacity and sources of
funding with respect to such programs); natural gas production growth in the
Partnership’s operating areas for EQT Corporation (EQT) and third parties;
asset acquisitions, including the Partnership’s ability to complete any asset
purchases from EQT or third parties; internal rate of return (IRR); compound
annual growth rate (CAGR), capital commitments, projected 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; distribution rate and growth; projected adjusted
EBITDA and projected distributable cash flow, including the effect of the
Sunrise lease on distributable cash flow; future projected Sunrise lease
payments; the effects of government regulation; and tax position. These
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. The Partnership has based these forward-looking statements on current
expectations and assumptions about future events. While the Partnership
considers these expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic, competitive, regulatory
and other risks and uncertainties, most of which are difficult to predict and
many of which are beyond the Partnership’s control. The risks and
uncertainties that may affect the operations, performance and results of the
Partnership’s business and forward-looking statements include, but are not
limited to, those set forth under Item 1A, “Risk Factors” of the Partnership’s
Form 10-K for the year ended December 31, 2012, as updated by any subsequent
Form 10-Q’s. Any forward-looking statement speaks only as of the date on which
such statement is made and the Partnership does not intend to correct or
update any forward-looking statement, whether as a result of new information,
future events or otherwise.

Information in this press release regarding EQT Corporation and its
subsidiaries, other than the Partnership, 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 the Partnership’s
distributions to foreign investors are attributable to income that is
effectively connected with a United States trade or business. Accordingly, all
of the Partnership’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 the Partnership, are treated as
the withholding agents responsible for withholding on the distributions
received by them on behalf of foreign investors.

EQT Midstream Partners, LP
Statements of Operations (unaudited)
                                              
                                                  Three Months Ended March 31,
(in thousands, except per unit amounts)           2013               2012
REVENUES:
Operating revenues – affiliate                  $ 34,386         $    24,234
Operating revenues – third party                  9,979               6,769
Total operating revenues                          44,365              31,003
                                                                      
OPERATING EXPENSES:
Operating and maintenance                         6,632               7,024
Selling, general and administrative               4,248               4,549
Depreciation and amortization                     7,348               3,038
Total operating expenses                          18,228              14,611
Operating income                                  26,137              16,392
Other income, net                                 297                 2,471
Interest expense, net                             4,204               1,539
Income before income taxes                        22,230              17,324
Income tax expense                                —                   6,201
Net income                                      $ 22,230         $    11,123
                                                                      
Net income per limited partner unit - basic     $ 0.63                N/A
Net income per limited partner unit - diluted   $ 0.63                N/A
                                                                      
Weighted average limited partner units           34,679              N/A
outstanding – basic
Weighted average limited partner units           34,768              N/A
outstanding – diluted
                                                                      

Operating Results
                                              
                                                  Three Months Ended March 31,
                                                  2013               2012
OPERATING DATA (in BBtu per day):
Transmission pipeline throughput                  900                 462
                                                                      
CAPITAL EXPENDITURES (in thousands):
Expansion capital expenditures, excluding       $ 5,028          $    11,788
Sunrise project
Sunrise project capital expenditures              —                   35,346
Maintenance capital expenditures:
Ongoing maintenance                               2,074               2,478
Funded regulatory compliance                      2,278               —
Reimbursable P&A maintenance                      461                 1,518
Reimbursable bare steel maintenance               644                 110
Total maintenance capital expenditures            5,457               4,106
Total capital expenditures                      $ 10,485         $    51,240
                                                                      

Contact:

EQT Midstream Partners
Analyst inquiries please contact:
Nate Tetlow – Investor Relations Manager, 412-553-5834
ntetlow@eqtmidstreampartners.com
or
Patrick Kane – Chief Investor Relations Officer, 412-553-7833
pkane@eqtmidstreampartners.com
or
Media inquiries please contact:
Natalie Cox – Corporate Director, Communications, 412-395-3941
ncox@eqtmidstreampartners.com
 
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