EQT Midstream Partners Reports Q1 2014 Results

  EQT Midstream Partners Reports Q1 2014 Results

        Increases Adjusted EBITDA and Distributable Cash Flow Guidance

Business Wire

PITTSBURGH -- April 24, 2014

EQT Midstream Partners, LP (NYSE: EQM), an EQT Corporation (EQT) company,
today announced 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. The
non-GAAP financial measures are reconciled in the Non-GAAP Disclosures section
included in this news release.

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. The
revenues and expenses associated with AVC are found in the reconciliation
table in the Non-GAAP Disclosures section of this news release.

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.

NON-GAAP DISCLOSURES
Adjusted EBITDA and Distributable Cash Flow
As used in this news 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 capital lease payments. As
used in this news release, distributable cash flow means adjusted EBITDA less
interest expense, excluding capital lease interest and ongoing maintenance
capital expenditures, net of expected reimbursements. 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 cash
flows to be included in the Partnership’s quarterly report on Form 10-Q for
the quarter ended March 31, 2014.

                                                       
Reconciliation of Adjusted EBITDA and Distributable Cash Flow
                                                            
                                                            Three Months Ended
                                                            March 31, 2014
Operating revenues:                                         (in thousands)
Transmission and storage                                    $    59,317
Gathering                                                       3,256     
Total operating revenues                                         62,573
Operating expenses:
Operating and maintenance                                        8,124
Selling, general and administrative                              7,359
Depreciation and amortization                                   6,849     
Total operating expenses                                        22,332    
Operating income                                                 40,241
Other income, net                                                269
Interest expense, net                                           5,655     
Net income                                                  $    34,855    
Add:
Interest expense, net                                            5,655
Depreciation and amortization expense                            6,849
Non-cash long-term compensation expense                          978
Less:
Other income, net                                                (269      )
Capital lease payments                                          (6,979    )
Adjusted EBITDA                                             $    41,089    
Less:
Interest expense, excluding capital lease interest               (717      )
Ongoing maintenance capital expenditures, net of                (1,481    )
expected reimbursements
Distributable cash flow                                     $    38,891    
Distributions declared (a):
Limited Partner                                             $    23,426
General Partner                                                 1,525     
Total                                                       $    24,951
Coverage ratio                                                   1.56x
                                                            
(a)Reflects cash distribution of $0.49 per limited partner unit for the first
quarter.
                                                            
                                                            Three Months Ended
                                                            March 31, 2014
                                                           (in thousands)
Net cash provided by operating activities                   $    51,198
Adjustments:
Interest expense, net                                            5,655
Capital lease payments                                           (6,979    )
Other, including changes in working capital                     (8,785    )
Adjusted EBITDA                                             $    41,089    
                                                                           

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 of the AVC, are non-GAAP supplemental financial measures that are
presented because they are important measures used by management to evaluate
the Partnership’s performance. The AVC did not 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 as alternatives to
operating revenues, operating expenses, operating income or income before
income taxes, or any other measure of financial performance presented in
accordance with GAAP. 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, 2014.

                       Three Months Ended March 31,
                         2014                                     2013
                                      Adjustment     Adjusted
(in thousands)           Reported    to exclude    Results       Recast
                         Results      AVC            (excludes     Results^(1)
                                                     AVC)
Operating
Revenues:
Operating revenues     $ 27,129     $ (9      )    $ 27,120      $ 34,386
– affiliate^(2)
Operating revenues       35,444       (8,984  )      26,460       9,979
– third party^(2)
Total operating        $ 62,573     $ (8,993  )    $ 53,580      $ 44,365
revenues
                                                                   
Operating Expenses
Operating and          $ 8,124      $ (1,137  )    $ 6,987       $ 6,632
maintenance
Selling, general         7,359        (876    )      6,483         4,263
and administrative
Depreciation and         6,849        (1,300  )      5,549        5,041
amortization
Total operating         22,332      (3,313  )     19,019       15,936
expenses
Operating income       $ 40,241     $ (5,680  )    $ 34,561      $ 28,429
Other income, net        269          —              269           297
Interest expense,        5,655        (4,944  )      711           204
net
Income before          $ 34,855     $ (736    )    $ 34,119      $ 28,522
income taxes
                                                                   

^(1)  Q1 2013 has been recast to include the historical results of Sunrise
       Pipeline, LLC, which was merged into the Partnership on July 22, 2013.
       On December 17, 2013, EQT completed the sale of EGC. Prior to the sale,
^(2)   revenues from EGC were affiliate revenues. Subsequent to the sale, EGC
       revenues are third party revenues. In the first quarter 2013, revenues
       from EGC totaled $10.9 million.
       

Affiliate and third party revenue adjusted for AVC and normalized for EGC
                                                                         
                     Three Months Ended March 31,
                     2014         2013
                     Adjusted                                                   2014
(in                  Results       Recast         EGC          Normalized     vs
thousands)           (excludes     Results^(1)                   for EGC        2013
                     AVC)
Operating
Revenues:
Operating
revenues –         $ 27,120      $ 34,386        $ (10,868 )   $ 23,518         15 %
affiliate
Operating
revenues –           26,460        9,979           10,868       20,847         27 %
third
party
Total
operating          $ 53,580      $ 44,365        $ —           $ 44,365         21 %
revenues
                                                                                
^(1) Q1 2013 has been recast to include the historical results of Sunrise Pipeline,
LLC, which was merged into the Partnership on July 22, 2013.


Q1 2014 Webcast Information
EQT Midstream Partners will host a live webcast with security analysts today
at 11:30 a.m. ET. Topics include first quarter 2014 financial results,
operating results, and other matters. The webcast is 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 webcast with
security analysts today at 10:30 a.m. ET. The Partnership's unitholders are
encouraged to listen-in, as the discussion may include topics relevant to the
Partnership, such as EQT's financial and operational results, potential asset
dropdown transactions, and specific reference to the Partnership's 2014
results. 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 its strategically located
transmission and storage system, and gathering system. The Partnership owns
700 miles and operates an additional 200 miles of FERC-regulated interstate
pipelines, and also owns more than 1,600 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 (GAAP), because of uncertainties associated with projecting future
net income and changes in assets and liabilities.

Disclosures in this news 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); the EQT subsidiary to own and
construct the Ohio Valley Connector and/or Ohio Valley Express projects;
natural gas production growth in the Partnership’s operating areas for 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, including the effect of the AVC
lease on distributable cash flows; future AVC lease payments; 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, 2013 and 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 Consolidated Operations (unaudited)
                                                  
                                                         Three Months Ended
                                                         March 31,
(Thousands, except per unit amounts)                     2014        2013^(1)
Operating Revenues:
Operating revenues – affiliate^(2)                     $ 27,129     $ 34,386
Operating revenues – third party^(2)                     35,444      9,979  
Total operating revenues                                 62,573       44,365
                                                                      
Operating expenses:
Operating and maintenance                                8,124        6,632
Selling, general and administrative                      7,359        4,263
Depreciation and amortization                            6,849       5,041  
Total operating expenses                                 22,332      15,936 
Operating income                                         40,241       28,429
Other income, net                                        269          297
Interest expense, net                                    5,655       204    
Income before income taxes                               34,855       28,522
Income tax expense                                       —           1,733  
Net income                                             $ 34,855    $ 26,789 
                                                                      
Calculation of limited partner interest in net
income:
Net income                                             $ 34,855     $ 26,789
Less:
Pre-acquisition net income allocated to parent           —            (2,710 )
General partner interest in net income                   (1,723 )     (505   )
Limited partner interest in net income                 $ 33,132    $ 23,574 
                                                                      
Net income per limited partner unit - basic            $ 0.69       $ 0.68
Net income per limited partner unit - diluted          $ 0.69       $ 0.68
                                                                      
Weighted average limited partner units                   47,819       34,679
outstanding – basic
Weighted average limited partner units                   47,938       34,768
outstanding – diluted
                                                                             

^(1)  Q1 2013 has been recast to include historical results of Sunrise
       Pipeline, LLC, which was merged into the Partnership on July 22, 2013.
       On December 17, 2013, EQT completed the sale of EGC. Prior to the sale,
^(2)   revenues from EGC were affiliate revenues. Subsequent to the sale, EGC
       revenues are third party revenues. In the first quarter 2013, revenues
       from EGC totaled $10.9 million.
       



EQT Midstream Partners, LP



Operating Results
                                           
                                                Three Months Ended
                                                March 31,
                                                2014       2013^(1)
OPERATING DATA (in BBtu per day):
Transmission throughput (excluding AVC)           1,337        900
AVC transmission throughput                       263          —
CAPITAL EXPENDITURES (in thousands):
Expansion capital expenditures                  $ 17,261     $ 6,616
Maintenance capital expenditures:
Ongoing maintenance^(2)                           1,644        3,179
Funded regulatory compliance                     565         2,278
Total maintenance capital expenditures           2,209       5,457
Total capital expenditures                      $ 19,470     $ 12,073
                                                               

^(1)  Q1 2013 has been recast to include historical results of Sunrise
       Pipeline, LLC, which was merged into the Partnership on July 22, 2013.
       Approximately $0.2 million of the first quarter 2014 ongoing
^(2)   maintenance capital expenditures are expected to be reimbursed by EQT
       for the bare steel replacement program.
       

Contact:

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