EQT Midstream Partners Reports Third Quarter 2013 Results

  EQT Midstream Partners Reports Third Quarter 2013 Results

Business Wire

PITTSBURGH -- October 24, 2013

EQT Midstream Partners, LP (NYSE: EQM), an EQT Corporation (EQT) company,
today announced third quarter 2013 financial and operating results. Net income
for the quarter totaled $27.7 million and adjusted EBITDA was $33.1 million.
Distributable cash flow was $29.2 million for the quarter. Operating income
was $27.6 million, or 67% higher than the same quarter last year. The non-GAAP
financial measures are reconciled in the Non-GAAP Disclosures section below.

EQT Midstream Partners, LP (Partnership) acquired the Sunrise Pipeline
(Sunrise) from EQT on July 22, 2013. The Partnership’s third quarter results
include Sunrise and prior period financials have been recast to account for
the Sunrise acquisition.

For the third quarter, operating revenues increased $11.4 million, or 33%,
compared to the same quarter last year. The increase was primarily due to
increased contracted transmission capacity associated with Sunrise and the
Blacksville compressor station and higher system throughput related to growth
in Marcellus Shale development. Operating expenses increased $0.3 million
versus the third 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.

Quarterly Distribution

The Partnership announced a quarterly cash distribution of $0.43 per unit for
the third quarter of 2013. The distribution will be paid on November 14, 2013
to all unitholders of record at the close of business on November 4, 2013. The
quarterly cash distribution is $0.03 per unit or 8% higher than the second
quarter 2013 and $0.08 per unit or 23% higher than the third quarter 2012.

Guidance

The Partnership expects 2013 full-year adjusted EBITDA and distributable cash
flows to be near the high-end of the previously provided guidance, or $118
million and $100 million, respectively.

CAPITAL EXPENDITURES

Expansion

Third quarter expansion capital expenditures totaled $20.7 million, of which
$12.6 million related to the Low Pressure East Pipeline project, $5.3 million
related to the Jefferson compressor expansion project, and the remainder
related to new interconnects and dehydration upgrades.

The Partnership forecasts expansion capital expenditures of $45 million to $50
million for 2013. Approximately $25 million is for the Low Pressure East
Pipeline project, which upgrades nearly 26 miles of existing pipeline in
Greene, Washington and Allegheny counties of Pennsylvania. The project will
add 150 BBtu per day of transmission capacity and is expected to be completed
in the fourth quarter of 2013. A total of $5 million to $10 million is for the
Jefferson compressor expansion project, which will add 550 BBtu per day of
transmission capacity and is expected to be completed in the third quarter of
2014. The remaining $15 million is for new interconnects and dehydration
upgrades.

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. Ongoing
maintenance capital expenditures totaled $3.7 million in the third quarter
2013 and $7.8 million year-to-date. The Partnership forecasts ongoing
maintenance capital expenditures of $15 million for 2013, as
maintenance-related capital expenditures are expected to vary
quarter-to-quarter.

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 below.

Plugging and Abandonment

EQT has agreed, for ten years following the Partnership’s initial public
offering (IPO), to reimburse the Partnership for plugging and abandonment
expenditures associated with certain identified wells. There were no plugging
and abandonment capital expenditures in the third 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. Bare steel capital expenditures totaled $1.4 million in the
third quarter 2013 and $2.7 million year to date. The Partnership forecasts
bare steel capital expenditures of $6 million in 2013.

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 of proceeds from the IPO. Funded regulatory compliance capital
expenditures do not impact the calculation of distributable cash flow. Funded
regulatory compliance capital expenditures totaled $3.8 million in the third
quarter 2013 and $9.9 million year to date. Since the IPO, the Partnership has
incurred $16.7 million of funded regulatory compliance capital expenditures
and forecasts another $2 million in fourth quarter 2013.

NON-GAAP DISCLOSURES

Adjusted EBITDA and Distributable Cash Flow

As used in this press release, adjusted EBITDA means net income plus net
interest expense, depreciation and amortization expense, income tax expense
(if applicable), non-cash long-term compensation expense and other non-cash
adjustments (if applicable), less other income and the Sunrise lease payments
that were made prior to the Sunrise acquisition. As used in this press
release, distributable cash flow means adjusted EBITDA less net cash paid for
interest, ongoing maintenance capital expenditures and reimbursable
maintenance capital expenditures plus reimbursable maintenance capital
expenditures expected to be reimbursed by EQT. Distributable cash flow should
not be viewed as indicative of the actual amount of cash that the Partnership
has available for distributions from operating surplus or that the Partnership
plans to distribute. 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 as alternatives to net
income, operating income, net cash provided by 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 its 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 September 30, 2013.

Reconciliation of Adjusted EBITDA and Distributable Cash Flow
                                                             Three Months
                                                             Ended
                                                             September 30,
                                                             2013
                                                             (in thousands $)
Operating revenues:
Transmission and storage                                 $   42,858
Gathering                                                    3,024        
Total operating revenues                                     45,882
Operating expenses:
Operating and maintenance                                    7,732
Selling, general and administrative                          5,279
Depreciation and amortization                                5,278        
Total operating expenses                                     18,289       
Operating income                                             27,593
Other income, net                                            319
Interest expense, net                                        (196         )
Net income                                               $   27,716       
Add:
Interest expense, net                                        196
Depreciation and amortization                                5,278
Non-cash long-term compensation expense                      210
Less:
Other income, net                                            (319         )
Adjusted EBITDA                                          $   33,081
Less:
Cash interest, net                                           (224         )
Ongoing maintenance capital expenditures                     (3,674       )
Reimbursable plugging & abandonment maintenance capital      -
expenditures
Reimbursable bare steel replacement maintenance capital      (1,390       )
expenditures
Add:
Reimbursement of plugging & abandonment maintenance          -
capital expenditures
Reimbursement of bare steel replacement maintenance          1,390        
capital expenditures
Distributable cash flow                                  $   29,183       
Distributions declared (a):
Limited Partner                                          $   20,557
General Partner                                          $   625          
Total                                                    $   21,182
Coverage ratio                                               1.38x
(a) Reflects quarterly cash distribution of $0.43 per limited partner
unit for the third quarter.
                                                                          

                                                        Three Months
                                                   Ended
                                                        September 30,
                                                        2013
                                                        (in thousands $)
                                                        
Net cash provided by operating activities             $ 35,468
Add:
Interest expense, net                                   196
Other, including changes in working capital             (2,583)
Adjusted EBITDA                                       $ 33,081

Q3 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 third
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 owner of
a 44.6% equity interest in the Partnership, 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
third 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.

The Partnership intends to provide on its website
(www.eqtmidstreampartners.com) a recast of historical quarterly financials
which reflects the Sunrise acquisition.

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 growth 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 and anticipated synergies associated with
any acquisition; 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; the effects of government regulation, litigation, and
tax 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. 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 September 30,
(Thousands, except per unit amounts)          2013                2012
Revenues:
Operating revenues – affiliate              $ 35,783           $   26,653
Operating revenues – third party              10,099              7,799    
Total operating revenues                      45,882               34,452
                                                                   
Operating expenses:
Operating and maintenance                     7,732                8,109
Selling, general and administrative           5,279                5,224
Depreciation and amortization                 5,278               4,645    
Total operating expenses                      18,289              17,978   
Operating income                              27,593               16,474
Other income, net                             319                  1,142
Interest (expense) income, net                (196     )           68       
Income before income taxes                    27,716               17,684
Income tax expense                            —                   (1,726   )
Net income                                  $ 27,716          $   15,958   
Calculation of limited partner interest in
net income:
Net income                                  $ 27,716           $   15,958
Less:
Pre-acquisition net income allocated to       -                    (1,868   )
parent
General partner interest in net income        (755     )           (312     )
Limited partner interest in net income      $ 26,961          $   13,778   
                                                                   
Net income per limited partner unit - basic $ 0.61             $   0.40
Net income per limited partner unit -       $ 0.60             $   0.40
diluted
                                                                   
Weighted average limited partner units        44,526               34,679
outstanding – basic
Weighted average limited partner units        44,639               34,684
outstanding – diluted
                                                                            

                                         
EQT Midstream Partners, LP

Operating Results

                                               Three Months Ended
                                               September 30,
                                               2013       2012
OPERATING DATA (in BBtu per day):
Transmission pipeline throughput               1,210      649
CAPITAL EXPENDITURES (in thousands):
Expansion capital expenditures               $ 20,693  $  31,033
Maintenance capital expenditures:
Ongoing maintenance                            3,674      5,337
Funded regulatory compliance                   3,783      3,036
Reimbursable P&A maintenance                   -          116
Reimbursable bare steel maintenance            1,390      1,746
Total maintenance capital expenditures         8,847      10,235
Total capital expenditures                   $ 29,540  $  41,268

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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