Equitrans Midstream Announces Third Quarter 2023 Results

Rhea-AI Summary

Equitrans Midstream Corporation (NYSE: ETRN) reported $129.7 million of net income and $249.9 million of Adjusted EBITDA for Q3 2023. The company generated $201.6 million of net cash from operating activities and recorded 71% of total operating revenue from firm reservation fees. Equitrans expects several years of mid-single digit annual volume growth based on direct connections to the Mountain Valley Pipeline (MVP) and available capacity provided by gathering and transmission assets.

Positive

• Equitrans reported $129.7 million of net income in Q3 2023, representing a positive financial take for the company.
• The company's Adjusted EBITDA for Q3 2023 was $249.9 million, indicating a strong financial performance.
• Equitrans generated $201.6 million of net cash from operating activities in Q3 2023, demonstrating a healthy cash flow.
• The company recorded 71% of total operating revenue from firm reservation fees in Q3 2023, highlighting a stable revenue source.
• Equitrans achieved 12% transmission pipeline throughput growth compared to the same quarter last year, indicating operational success.

Negative

• None.

CANONSBURG, Pa.--(BUSINESS WIRE)-- Equitrans Midstream Corporation (NYSE: ETRN), today, announced financial and operational results for the third quarter 2023. Included in the "Non-GAAP Disclosures" section of this news release are important disclosures regarding the use of non-GAAP supplemental financial measures, including information regarding their most comparable GAAP financial measure.

Q3 2023 Highlights:

• Reported $129.7 million of net income and $249.9 million of Adjusted EBITDA
• Generated $201.6 million of net cash from operating activities
• Recorded 71% of total operating revenue from firm reservation fees
• Achieved 12% transmission pipeline throughput growth versus same quarter last year

“Once in-service, there is little doubt MVP will be one of the most valuable pipelines in the U.S., directly connecting our country’s largest and lowest-cost natural gas resource and the rapidly growing demand of the mid-Atlantic and southeast markets,” said Thomas F. Karam, chairman and chief executive officer of Equitrans Midstream. “The revised guidance on cost and completion for MVP are certainly more than we would prefer. However, we must deliver on our commitments of deploying unprecedented environmental protocols while at the same time remaining vigilant to protect the safety of our contractors and employees, as well as the opposition who continue to trespass on the right of way."

Karam continued, “I am incredibly proud of the capabilities and perseverance displayed by our employees during these past few years, and, as we look to the future, I am very pleased to be passing my leadership reins to Diana, marking the start of a new chapter for Equitrans. Diana has proven herself as a respected leader and will bring a rare blend of operational expertise and strategic vision to the CEO role, and I am excited to see her plans in action as she continues to position Equitrans for long-term, sustainable success.”

“As demonstrated in our Q3 results, Equitrans’ operations continue to deliver, with our integrated gathering and transmission assets providing the flexibility to take on significant ramps in volume like we experienced this quarter,” said Diana M. Charletta, president and chief operating officer for Equitrans Midstream. “One element of our strategy for the last several years has been the deliberate focus on enhancing our backbone system to provide gas delivery for the major takeaway pipelines, including MVP. Looking ahead, we anticipate several years of mid-single digit annual volume growth, which is based primarily on possessing the direct connections to MVP, having currently available capacity provided by our gathering and transmission assets, and the world-class resource base that sits under our assets.”

2023 THIRD QUARTER SUMMARY RESULTS

	Three Months Ended September 30,
$ millions (except per share metrics)		2023
Net income attributable to ETRN common shareholders	$	112.8
Adjusted net income attributable to ETRN common shareholders	$	122.8
Earnings per diluted share attributable to ETRN common shareholders	$	0.26
Adjusted earnings per diluted share attributable to ETRN common shareholders	$	0.28
Net income	$	129.7
Adjusted EBITDA	$	249.9
Deferred revenue	$	82.6
Net cash provided by operating activities	$	201.6
Free cash flow	$	(132.9	)
Retained free cash flow	$	(197.9	)

Net income attributable to ETRN common shareholders for the third quarter 2023 was impacted by several items, including a $7.8 million write-down of a contract asset in the water segment, a $3.4 million unrealized loss on derivative instruments and $2.3 million of operating expense related to the November 2022 Rager Mountain natural gas storage field incident (discussed below). The unrealized loss is reported within other income, net, and relates to the contractual agreement with EQT Corporation (EQT) in which ETRN will receive cash from EQT conditioned on the quarterly average of certain Henry Hub natural gas prices exceeding certain thresholds beginning with the quarter in which the Mountain Valley Pipeline (MVP) is placed in-service through the fourth quarter of 2024. The contract is accounted for as a derivative with the fair value marked-to-market at each quarter-end. Additionally, ETRN reported third quarter equity income of $73.8 million, which is primarily associated with allowance for funds used during construction (AFUDC) relating to the resumption of MVP forward construction.

As a result of the gathering agreement entered into with EQT in February 2020, revenue from the contracted minimum volume commitment (MVC) is recognized utilizing an average gathering rate applied over the remaining contract life. The difference between the cash received from the MVC and the revenue recognized results in the deferral of revenue into future periods. Deferred revenue for the third quarter 2023 was $82.6 million.

Operating revenue for the third quarter 2023 increased by $6.8 million compared to the same quarter last year, primarily as a result of increased transmission usage volumes and higher water volumes, partially offset by lower gathering revenue. Operating expenses increased by $30.8 million compared to the third quarter 2022, primarily from the $7.8 million write-down of a contract asset in the water segment, a $7.5 million expense related to a one-time cash bonus awarded to Mr. Karam for his efforts in the inclusion of MVP provisions in the Fiscal Responsibility Act of 2023, $4.5 million of favorable net gas sales which occurred in the third quarter 2022, $2.3 million of expenses associated with the Rager Mountain natural gas storage field incident, and increased other operating and maintenance, selling, general and administrative expenses.

QUARTERLY DIVIDEND

For the third quarter 2023, ETRN will pay a quarterly cash dividend of $0.15 per common share on November 14, 2023 to ETRN common shareholders of record at the close of business on November 3, 2023.

TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS

$ millions		Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023		Full-Year 2023 Forecast
MVP(1)		$210		$280		$725 - $745
Gathering(2)		$64		$188		$240 - $260
Transmission(3)		$31		$55		$80 - $90
Water		$10		$32		$45
Total		$315		$555		$1,090 - $1,140

(1)	Full-year 2023 assumes MVP construction completion in Q1 2024 and a total project cost of approximately $7.2 billion.
(2)	Excludes approximately $3.3 million and $11.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream Holdings, LLC (Eureka) for the three and nine months ended September 30, 2023, respectively. Full-year 2023 forecast excludes approximately $15 million of capital expenditures related to the noncontrolling interest in Eureka.
(3)	Full-year 2023 includes an estimate of $5 - $10 million of capital expenditures related to the Rager Mountain natural gas storage field incident, based on current information.

2023 GUIDANCE

Financial Outlook^(1,2)

$ millions	Full-Year 2023
Net income	$425 - $445
Adjusted EBITDA	$1,020 - $1,040
Deferred Revenue	$325 - $330
Free cash flow	$(200) - $(180)
Retained free cash flow	$(460) - $(440)

(1)	Full-year 2023 includes an estimate of approximately $10 million of operating expenses related to the Rager Mountain natural gas storage field incident, based on current information.
(2)	Assumes MVP construction completion and in-service authorization by the FERC in Q1 2024 and assumes contractual obligations commence on April 1, 2024.

BUSINESS AND PROJECT UPDATES

Executive Succession

As previously announced, Diana M. Charletta will succeed Thomas F. Karam as chief executive officer, effective January 1, 2024. At that time, Mr. Karam will become ETRN's executive chairman. Both Ms. Charletta and Mr. Karam will continue to serve as members of the ETRN Board of Directors following the leadership transition.

Mr. Karam has served as chief executive officer since September 2018 and was appointed chairman of the Board in July 2019. Ms. Charletta has served as chief operating officer since September 2018, was appointed president and chief operating officer in July 2019, and was appointed to the Board in April 2022.

Outstanding Debt and Liquidity

As of September 30, 2023, ETRN reported $6.3 billion of consolidated debt; $525.0 million of borrowings and $220.7 million of letters of credit outstanding under EQM's revolving credit facility; $315.0 million of borrowings under Eureka's revolving credit facility; and $180.6 million of cash.

Rager Mountain Natural Gas Storage Field Incident Update

On August 24, 2023, ETRN submitted information to the Pipeline and Hazardous Materials Safety Administration (PHMSA) regarding the root cause investigation and analysis related to the Rager Mountain natural gas storage field incident that occurred in November 2022. The comprehensive root cause analysis was conducted by an independent, third-party company with expertise in reservoir management and well and corrosion engineering. Following PHMSA's approval of ETRN's subsequent injection plan, on October 5, 2023, ETRN resumed injections at the storage field.

In the third quarter, ETRN incurred expenses of $2.3 million related to post-incident response activities. For the full-year 2023, ETRN estimates that it will incur approximately $10 million of expenses related to post-incident response activities. For further information, refer to ETRN’s Annual Report on Form 10-K for the year ended December 31, 2022, as updated by subsequent Form 10-Qs.

Ohio Valley Connector Expansion Project

During the third quarter, ETRN commenced construction of the Ohio Valley Connector Expansion (OVCX) project. OVCX will increase deliverability on ETRN's Ohio Valley Connector pipeline by approximately 350 MMcf per day and is designed to meet growing demand in key markets in the mid-continent and Gulf Coast through existing interconnects with multiple long-haul pipelines in Clarington, OH. ETRN expects to invest a total of approximately $160 million in the project, including approximately $60 million in 2023. The project is primarily supported by a long-term firm capacity commitment of 330 MMcf per day and ETRN is targeting the incremental capacity to be in-service during the first half of 2024.

Mountain Valley Pipeline

On October 18, 2023, ETRN announced that the MVP Joint Venture revised the targeted project completion to the first quarter of 2024 at a total project cost of approximately $7.2 billion, which includes approximately $120 million of contingency. The revision was primarily a result of unexpected slowness in the ramp of the contractor workforce, less than expected construction progress in areas of challenging terrain and geology, in part because of the MVP Joint Venture’s commitment to, and application of, heightened environmental protocols, and several other factors that impact productivity and cost.

Through September 30, 2023, ETRN had funded approximately $3.0 billion and, if the project were to be completed in the first quarter of 2024 and at the updated total project cost of approximately $7.2 billion, ETRN expects to fund a total of approximately $3.7 billion and to have an approximate 48.8% ownership interest in MVP. ETRN will operate the pipeline.

MVP Southgate

The MVP JV continues to engage with the shipper and a prospective customer regarding refining the project's design, scope and/or timing in lieu of pursuing the project as originally contemplated. ETRN has a 47.2% ownership interest in MVP Southgate and is expected to operate the pipeline.

Water Services

In the third quarter, water operating loss was $(2.3) million and adjusted water EBITDA was $12.2 million. For 2023, ETRN expects adjusted water EBITDA of approximately $45 million.

Q3 2023 Earnings Conference Call Information

ETRN will host a conference call with security analysts today, October 31, 2023, at 10:30 a.m. (ET) to discuss third quarter 2023 financial results, operating results, and other business matters.

Call Access: A webcast/audio live stream of the call will be available on the internet, and participants are encouraged to pre-register online, in advance of the call. A link to the webcast/audio live stream will be available on the Investors page of ETRN’s website the day of the call.

Security Analysts :: Dial-In Participation
To participate in the Q&A session, security analysts may access the call in the U.S. toll free at (888) 330-3573; and internationally at (646) 960-0677. The ETRN conference ID is 6625542.

All Other Participants :: Webcast/Audio Live Stream Registration
Please Note: For optimal audio quality, the webcast is best supported through Google Chrome and Mozilla Firefox browsers.

Call Replay: For 14 days following the call, an audio replay will be available at (800) 770-2030 or (647) 362-9199. The ETRN conference ID: 6625542.

ETRN management speaks to investors from time-to-time and the presentation for these discussions, which is updated periodically, is available via www.equitransmidstream.com.

NON-GAAP DISCLOSURES

Adjusted Net Income Attributable to ETRN Common Shareholders and Adjusted Earnings per Diluted Share Attributable to ETRN Common Shareholders

Adjusted net income (loss) attributable to ETRN common shareholders and adjusted earnings (loss) per diluted share attributable to ETRN common shareholders are non-GAAP supplemental financial measures that management and external users of ETRN’s consolidated financial statements, such as industry analysts and investors, may use to make period-to-period comparisons of earnings trends. Management believes that adjusted net income (loss) attributable to ETRN common shareholders and adjusted earnings (loss) per diluted share attributable to ETRN common shareholders as presented provide useful information for investors for evaluating period-over-period earnings. Adjusted net income (loss) attributable to ETRN common shareholders and adjusted earnings (loss) per diluted share attributable to ETRN common shareholders should not be considered as alternatives to net income (loss) attributable to ETRN common shareholders, earnings (loss) per diluted share attributable to ETRN common shareholders or any other measure of financial performance presented in accordance with GAAP. Adjusted net income (loss) attributable to ETRN common shareholders and adjusted earnings (loss) per diluted share attributable to ETRN common shareholders have important limitations as analytical tools because they exclude some, but not all, items that affect net income (loss) attributable to ETRN common shareholders and earnings (loss) per diluted share attributable to ETRN common shareholders, including, as applicable, impairment of equity method investment, unrealized gain (loss) on derivative instruments, loss on extinguishment of debt, gain on the sale of gathering assets, expenses for the Rager Mountain natural gas storage field incident (Rager Mountain incident), contract asset write-down, and the related tax impacts of these items, which items affect the comparability of results period to period. Additionally, because these non-GAAP metrics may be defined differently by other companies in ETRN’s industry, ETRN’s definitions of adjusted net income (loss) attributable to ETRN common shareholders and adjusted earnings (loss) per diluted share attributable to ETRN common shareholders may not be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measures. Adjusted net income (loss) attributable to ETRN common shareholders and adjusted earnings (loss) per diluted share attributable to ETRN common shareholders should not be viewed as indicative of the actual amount of net income (loss) attributable to ETRN common shareholders or actual earnings (loss) per diluted share of ETRN in any given period.

The table below reconciles adjusted net income attributable to ETRN common shareholders and adjusted earnings per diluted share attributable to ETRN common shareholders with net income (loss) attributable to ETRN common shareholders and earnings (loss) per diluted share attributable to ETRN common shareholders as derived from the statements of consolidated comprehensive income to be included in ETRN’s Quarterly Report on Form 10-Q for the three months ended September 30, 2023. Diluted weighted average common shares outstanding assumes dilution for each applicable period.

Reconciliation of Adjusted Net Income Attributable to ETRN Common Shareholders and Adjusted Earnings per Diluted Share Attributable to ETRN Common Shareholders
	Three Months Ended September 30,
(Thousands, except per share information)		2023				2022
Net income (loss) attributable to ETRN common shareholders	$	112,804			$	(520,493	)
Add back (deduct):
Impairment of equity method investment		—				583,057
Unrealized loss on derivative instruments		3,445				815
Gain on sale of gathering assets		—				(3,719	)
Rager Mountain incident		2,273				—
Contract asset write-down		7,800				—
Tax impact of non-GAAP items(1)		(3,506	)			(21,607	)
Adjusted net income attributable to ETRN common shareholders	$	122,816			$	38,053
Diluted weighted average common shares outstanding, assuming dilution		439,034				434,187
Adjusted earnings per diluted share attributable to ETRN common shareholders	$	0.28			$	0.09

(1)	The adjustments were tax effected at ETRN’s federal and state statutory tax rate for each period including certain discrete valuation allowance adjustments.

Adjusted EBITDA

Adjusted EBITDA excludes the impact of certain non-operating income and expenses, non-cash items, and other items that ETRN believes are not indicative of ETRN's ongoing operations or affect the comparability of results period to period. As used in this news release, Adjusted EBITDA means, as applicable, net income (loss), plus income tax expense (benefit), net interest expense, loss on extinguishment of debt, depreciation, amortization of intangible assets, impairment of equity method investment, payments on the preferred interest in EQT Energy Supply, LLC (Preferred Interest), non-cash long-term compensation expense, expenses for the Rager Mountain incident, contract asset write-down and less equity income, AFUDC-equity, unrealized gain (loss) on derivative instruments, gain on sale of gathering assets, and adjusted EBITDA attributable to noncontrolling interest.

The table below reconciles adjusted EBITDA with net income as derived from the statements of consolidated comprehensive income to be included in ETRN's Quarterly Report on Form 10-Q for the three months ended September 30, 2023.

Reconciliation of Adjusted EBITDA
	Three Months Ended September 30,
(Thousands)		2023				2022
Net income (loss):	$	129,704			$	(502,933	)
Add (deduct):
Income tax benefit		(10,976	)			(366	)
Net interest expense		106,334				101,085
Depreciation		69,348				68,572
Amortization of intangible assets		16,204				16,204
Impairment of equity method investment		—				583,057
Preferred Interest payments		2,746				2,746
Non-cash long-term compensation expense		7,257				3,658
Rager Mountain incident		2,273				—
Contract asset write-down		7,800				—
Equity income		(73,810	)			(48	)
AFUDC – equity		(291	)			(78	)
Unrealized loss on derivative instruments		3,445				815
Gain on sale of gathering assets		—				(3,719	)
Adjusted EBITDA attributable to noncontrolling interest(1)		(10,148	)			(9,642	)
Adjusted EBITDA	$	249,886			$	259,351

(1)

Reflects adjusted EBITDA attributable to noncontrolling interest associated with the third-party ownership interest in Eureka. Adjusted EBITDA attributable to noncontrolling interest for the three months ended September 30, 2023 was calculated as net income of $2.3 million plus depreciation of $3.2 million, plus amortization of intangible assets of $2.1 million, and plus interest expense of $2.6 million. Adjusted EBITDA attributable to noncontrolling interest for the three months ended September 30, 2022 was calculated as net income of $2.9 million, plus depreciation of $3.1 million, plus amortization of intangible assets of $2.1 million, and plus interest expense of $1.5 million.

Free Cash Flow

As used in this news release, free cash flow means net cash provided by operating activities plus principal payments received on the Preferred Interest, and less net cash provided by operating activities attributable to noncontrolling interest, dividends paid to Series A Preferred Shareholders, premiums and fees paid on extinguishment of debt, capital expenditures (excluding the noncontrolling interest share (40%) of Eureka capital expenditures), and capital contributions to MVP JV.

Retained Free Cash Flow

As used in this news release, retained free cash flow means free cash flow less dividends paid to common shareholders.

The table below reconciles free cash flow and retained free cash flow with net cash provided by operating activities as derived from the statements of consolidated cash flows to be included in ETRN's Quarterly Report on Form 10-Q for the three months ended September 30, 2023.

Reconciliation of Free Cash Flow and Retained Free Cash Flow
	Three Months Ended September 30,
(Thousands)		2023				2022
Net cash provided by operating activities	$	201,586			$	209,567
Add (deduct):
Principal payments received on the Preferred Interest		1,469				1,389
Net cash provided by operating activities attributable to noncontrolling interest(1)		(7,166	)			(7,260	)
ETRN Series A Preferred Shares dividends(2)		(14,628	)			(14,628	)
Capital expenditures(3)(4)		(104,234	)			(105,867	)
Capital contributions to MVP JV		(209,938	)			(46,426	)
Free cash flow	$	(132,911	)		$	36,775
Less:
Dividends paid to common shareholders(5)		(64,989	)			(64,917	)
Retained free cash flow	$	(197,900	)		$	(28,142	)

(1)	Reflects 40% of $17.9 million and $18.2 million, which was Eureka’s standalone net cash provided by operating activities for the three months ended September 30, 2023 and 2022, respectively, which represents the noncontrolling interest portion for the three months ended September 30, 2023 and 2022, respectively.
(2)	Reflects cash dividends paid of $0.4873 per ETRN Series A Perpetual Convertible Preferred Share.
(3)	Does not reflect amounts related to the noncontrolling interest share of Eureka.
(4)	ETRN accrues capital expenditures when the work has been completed but the associated bills have not yet been paid. Accrued capital expenditures are excluded from the statements of consolidated cash flows until they are paid.
(5)	Second quarter 2023 dividend of $0.15 per ETRN common share was paid during the third quarter 2023.

Adjusted EBITDA, free cash flow and retained free cash flow are non-GAAP supplemental financial measures that management and external users of ETRN's consolidated financial statements, such as industry analysts, investors, lenders, and rating agencies, may use to assess:

• ETRN’s operating performance as compared to other publicly traded companies in the midstream energy industry without regard to historical cost basis or, in the case of adjusted EBITDA, financing methods
• The ability of ETRN’s assets to generate sufficient cash flow to pay dividends to ETRN’s shareholders
• ETRN’s ability to incur and service debt and fund capital expenditures and capital contributions
• The viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

ETRN believes that adjusted EBITDA, free cash flow, and retained free cash flow provide useful information to investors in assessing ETRN's financial condition and results of operations. Adjusted EBITDA, free cash flow, and retained free cash flow should not be considered as alternatives to net income (loss), operating income, or net cash provided by operating activities, as applicable, or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA, free cash flow, and retained free cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income (loss), operating income and net cash provided by operating activities. Additionally, because these non-GAAP metrics may be defined differently by other companies in ETRN's industry, ETRN's definitions of adjusted EBITDA, free cash flow, and retained free cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measures. Free cash flow and retained free cash flow should not be viewed as indicative of the actual amount of cash that ETRN has available for dividends or that ETRN plans to distribute and are not intended to be liquidity measures.

ETRN is unable to provide a reconciliation of projected adjusted EBITDA from projected net income (loss), the most comparable financial measure calculated in accordance with GAAP, or a reconciliation of projected free cash flow or retained free cash flow to net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP. ETRN has not provided a reconciliation of projected adjusted EBITDA to projected net income (loss), the most comparable financial measure calculated in accordance with GAAP, due to the inherent difficulty and impracticability of predicting certain amounts required by GAAP with a reasonable degree of accuracy. Net income (loss) includes the impact of depreciation expense, income tax expense (benefit), the impact of changes in the projected fair value of derivative instruments prior to settlement, potential changes in estimates for certain contract liabilities and unbilled revenues and certain other items that impact comparability between periods and the tax effect of such items, which may be significant and difficult to project with a reasonable degree of accuracy. Therefore, a reconciliation of projected adjusted EBITDA to projected net income (loss) is not available without unreasonable effort.

ETRN is unable to project net cash provided by operating activities because this metric includes the impact of changes in operating assets and liabilities related to the timing of cash receipts and disbursements that may not relate to the period in which the operating activities occurred. ETRN is unable to project these timing differences with any reasonable degree of accuracy to a specific day, three or more months in advance. Therefore, ETRN is unable to provide projected net cash provided by operating activities, or the related reconciliation of each of projected free cash flow and projected retained free cash flow to projected net cash provided by operating activities, without unreasonable effort. ETRN provides a range for the forecasts of net income (loss), adjusted EBITDA, deferred revenue, free cash flow and retained free cash flow to allow for the inherent difficulty of predicting certain amounts and the variability in the timing of cash spending, receipts and project in-service (as applicable) and the impact on the related reconciling items, many of which interplay with each other.

Adjusted Water EBITDA

Adjusted water EBITDA excludes the impact of certain non-operating income and expenses, non-cash items, and other items ETRN believes are not indicative of ETRN's ongoing water operations or affects the comparability of water results period to period. As used in this news release, adjusted water EBITDA means water operating income (loss) plus, as applicable, depreciation and impairment of long-lived assets of ETRN's water business, and contract asset write-down. Adjusted water EBITDA is a non-GAAP supplemental financial measure that management and external users of ETRN’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, use to assess the impact of ETRN’s water services business on ETRN’s operating performance and ETRN’s ability to incur and service debt and fund capital expenditures. Adjusted water EBITDA should not be considered as an alternative to ETRN’s net income (loss), operating income or any other measure of financial performance presented in accordance with GAAP. Adjusted water EBITDA has important limitations as an analytical tool because the measure excludes some, but not all, items that affect net income (loss) and operating income. Additionally, because adjusted water EBITDA may be defined differently by other companies in ETRN’s industry, the definition of adjusted water EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measure. The table below reconciles adjusted water EBITDA from ETRN's water operating income (loss) as derived from ETRN's statements of consolidated comprehensive income to be included in ETRN's Quarterly Report on Form 10-Q for the three months ended September 30, 2023.

ETRN has not provided a reconciliation of projected adjusted water EBITDA from projected water operating income (loss), the most comparable measure calculated in accordance with GAAP. ETRN does not allocate certain costs, such as interest expense, to individual assets within its business segments. Water operating income (loss) includes the impact of depreciation expense, which may be significant and difficult to project with a reasonable degree of accuracy. Therefore, the reconciliation of projected adjusted water EBITDA from projected water operating income (loss) is not available without unreasonable effort.

Reconciliation of Adjusted Water EBITDA

	Three Months Ended September 30,
(Thousands)		2023				2022
Water operating (loss) income	$	(2,251	)		$	2,342
Add: Depreciation		6,655				5,162
Add: Contract asset write-down		7,800				—
Adjusted Water EBITDA	$	12,204			$	7,504

About Equitrans Midstream Corporation:

Equitrans Midstream Corporation has a premier asset footprint in the Appalachian Basin and, as the parent company of EQM Midstream Partners, is one of the largest natural gas gatherers in the United States. Through its strategically located infrastructure assets in the Marcellus and Utica regions, Equitrans has an operational focus on gas transmission and storage systems, gas gathering systems, and water services that support natural gas development and production across the Basin. With a rich 140-year history in the energy industry, Equitrans was launched as a standalone company in 2018 with a vision to be the premier midstream services provider in North America. While working to meet America's growing need for clean-burning energy, Equitrans is proud of its environmental, social, and governance (ESG) practices, striving every day to preserve and protect the environment, provide an engaging workplace for its employees, support and enrich its local communities, and to deliver sustained value for customers and shareholders.

Visit www.equitransmidstream.com; and to learn more about our ESG practices visit www.equitransmidstream.com/sustainability-reporting/

Cautionary Statements

This news release contains certain forward-looking statements within the meaning of Section 21E of the United States Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the United States Securities Act of 1933, as amended (the Securities Act), concerning ETRN and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of the management of ETRN, as well as assumptions made by, and information currently available to, such management. Words such as “aim,” “anticipate,” “approximate,” “aspire,” “assume,” “believe,” “budget,” “continue,” “could,” “design,” “estimate,” “expect,” “focused,” “forecast,” “goal,” “guidance,” “intend,” “may,” “objective,” “opportunity,” “outlook,” “plan,” “position,” “potential,” “predict,” “project,” “pursue,” “scheduled,” “seek,” “should,” “strategy,” “strive,” “target,” “view,” “will,” or “would” and similar expressions are used to identify forward-looking statements. These statements are subject to various risks and uncertainties, many of which are outside ETRN's control. Without limiting the generality of the foregoing, forward-looking statements contained in this communication may include the following and/or statements with respect thereto, as applicable: expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of ETRN and its affiliates, including guidance and any changes in such guidance in respect of ETRN’s gathering, transmission and storage and water services revenue and volume, including the anticipated effects associated with the February 2020 Gas Gathering and Compression Agreement (and as subsequently amended) and related documents entered into with EQT Corporation (EQT) and certain affiliates (collectively, the EQT Global GGA); projected revenue (including from firm reservation fees) and volumes, gathering rates, deferred revenues, expenses, and contract liabilities, and the effects on liquidity, leverage, projected revenue, deferred revenue and contract liabilities associated with the EQT Global GGA and the MVP project (including changes in timing for such project); the ultimate gathering MVC fee relief, and timing thereof, provided to EQT under the EQT Global GGA and related agreements; ETRN’s ability to de-lever and timing and means thereof; the ultimate financial, business, reputational and/or operational impacts resulting, directly or indirectly, from the Rager Mountain incident; forecasted adjusted EBITDA (and incremental adjusted EBITDA with MVP full in-service), water operating (loss) income, adjusted water EBITDA, net (loss) income, free cash flow, retained free cash flow (and usage thereof), leverage ratio, build multiples and deferred revenue; the weighted average contract life of gathering, transmission and storage contracts; infrastructure programs (including the targeted or ultimate timing, cost, capacity and sources of funding with respect to gathering, transmission and storage and water projects); the cost to construct or restore right-of-way for, capacity of, shippers for, timing and durability of regulatory approvals and concluding litigation, final design (including project scope, expansions, extensions or refinements and capital and incremental adjusted EBITDA related thereto), ability and timing to contract additional capacity on, mitigate emissions from, targeted in-service dates of, and completion (including potential timing of such completion) of current, planned or in-service projects or assets, in each case as applicable; the effect of the Fiscal Responsibility Act of 2023 on the MVP JV's ability to complete the MVP project; the ability to achieve, and targeted timing for achieving, completion of the MVP project, risks related thereto, the realizability of the MVP performance award program, and the degree to which, if at all, the MVP PSU Amendment (as defined in Note 5 of ETRN’s Quarterly Report on Form 10-Q for the three months ended September 30, 2023 to be filed with the SEC) fosters ETRN completing the MVP project safely and in compliance with environmental standards; the targeted total MVP project cost and schedule, including the timing for contractual obligations to commence, and the ability to continue construction in the winter, potential receipt of in-service authorization, and the realizability of the perceived benefits of the MVP project; the potential for future bipartisan support for, and the potential timing for, additional federal energy infrastructure permitting reform legislation to be enacted; the ultimate terms, partner relationships and structure of the MVP JV and ownership interests therein the realizability of all or any portion of the potential Henry Hub bonus payments; the impact of changes in assumptions and estimates relating to the potential completion and full in-service timing of the MVP project (as well as changes in such timing) on, among other things, the fair value of the Henry Hub cash bonus payment provision of the EQT Global GGA, gathering rates, the amount of gathering MVC fee relief and the estimated transaction price allocated to ETRN's remaining performance obligations under certain contracts with firm reservation fees and MVCs; ETRN’s ability to identify and complete opportunities to optimize its existing asset base and/or expansion projects in ETRN’s operating areas and in areas that would provide access to new markets; ETRN’s ability to bring, and targeted timing for bringing, in-service the backbone of its mixed-use water system (and expansions thereto), and realize benefits therefrom in accordance with its strategy for its water services business segment; ETRN’s ability to identify and complete acquisitions and other strategic transactions, including joint ventures, effectively integrate transactions into ETRN’s operations, and achieve synergies, system optionality, accretion and other benefits associated with transactions, including through increased scale; the potential for the MVP project, EQM Midstream Partners, LP’s (EQM) leverage, customer credit ratings changes, defaults, acquisitions, dispositions and financings to impact EQM’s credit ratings and the potential scope of any such impacts; the effect and outcome of contractual disputes, litigation and other proceedings, including regulatory investigations and proceedings; the potential effects of any consolidation of or effected by upstream gas producers, including acquisitions of midstream assets, whether in or outside of the Appalachian Basin; the potential for, timing, amount and effect of future issuances or repurchases of ETRN’s securities; the effects of conversion, if at all, of ETRN’s preferred shares; the effects of seasonality; expected cash flows, cash flow profile (and support therefor from certain contract structures) and MVCs, including those associated with the EQT Global GGA, and the potential impacts thereon of the commission and in-service timing (or absence thereof) and cost of the MVP project; projected capital contributions and capital and operating expenditures, including the amount and timing of reimbursable capital expenditures, capital budget and sources of funds for capital expenditures; ETRN’s ability to recoup replacement and related costs; future dividend amounts, timing and rates; statements regarding macroeconomic factors effects on ETRN’s business, including, future commodity prices and takeaway capacity constraints in the Appalachian Basin; future decisions of customers in respect of production growth, curtailing natural gas production, timing of turning wells in line, rig and completion activity and related impacts on ETRN’s business, and the effect, if any, on such future decisions should the MVP be brought in-service, as well as the potential for increased volumes to flow to ETRN’s gathering and transmission system to supply the MVP following in-service; ETRN’s liquidity and financing position and requirements, including sources, availability and sufficiency; statements regarding future interest rates and/or reference rates and the potential impacts thereof; the ability of ETRN’s subsidiaries (some of which are not wholly owned) to service debt under, and comply with the covenants contained in, their respective credit agreements; the MVP JV’s ability to raise project-level debt, and the anticipated proceeds that ETRN expects to receive therefrom; expectations regarding natural gas and water volumes in ETRN’s areas of operations; ETRN’s ability to achieve anticipated benefits associated with the execution of the EQT Global GGA and other commercial agreements; ETRN’s ability to position itself for a lower carbon economy, achieve, and create value from, its ESG and sustainability initiatives, targets and aspirations (including targets and aspirations set forth in its climate policy) and respond, and impacts of responding, to increasing stakeholder scrutiny in these areas; the effectiveness of ETRN’s information technology and operational technology systems and practices to detect and defend against evolving cyberattacks on United States critical infrastructure; the effects and associated cost of compliance with existing or new government regulations including any quantification of potential impacts of regulatory matters related to climate change on ETRN; and future tax rates, status and 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. ETRN has based these forward-looking statements on management’s current expectations and assumptions about future events. While ETRN considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, judicial, construction and other risks and uncertainties, many of which are difficult to predict and are beyond ETRN’s control, including, as it pertains to the MVP project, risks and uncertainties such as the physical construction conditions, including steep slopes and any further unexpected geological impediments, continued crew availability and productivity realizable in the winter season, project opposition, the receipt of certain time of year and other variances and approvals, and potential winter weather. The risks and uncertainties that may affect the operations, performance and results of ETRN’s business and forward-looking statements include, but are not limited to, those set forth under Part I, "Item 1A. Risk Factors" in ETRN's Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (the SEC), as updated by any risk factors disclosed under Part II, "Item 1A. Risk Factors," of ETRN’s Quarterly Report on Form 10-Q for the three months ended March 31, 2023 filed with the SEC, ETRN's Quarterly Report on Form 10-Q for the three months ended June 30, 2023 filed with the SEC, and ETRN’s Quarterly Report on Form 10-Q for the three months ended September 30, 2023 to be filed with the SEC and ETRN's subsequent filings. Any forward-looking statement speaks only as of the date on which such statement is made, and ETRN does not intend to correct or update any forward-looking statement, unless required by securities laws, whether as a result of new information, future events or otherwise. As forward-looking statements involve significant risks and uncertainties, caution should be exercised against placing undue reliance on such statements.

EQUITRANS MIDSTREAM CORPORATION STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)
	Three Months Ended September 30,
		2023				2022(1)
	(Thousands, except per share amounts)
Operating revenues	$	338,514			$	331,751
Operating expenses:
Operating and maintenance		43,046				35,297
Selling, general and administrative		55,627				33,348
Depreciation		69,348				68,572
Amortization of intangible assets		16,204				16,204
Total operating expenses		184,225				153,421
Operating income		154,289				178,330
Equity income		73,810				48
Impairment of equity method investment		—				(583,057	)
Other (expense) income, net		(3,037	)			2,465
Net interest expense		(106,334	)			(101,085	)
Income (loss) before income taxes		118,728				(503,299	)
Income tax benefit		(10,976	)			(366	)
Net income (loss)		129,704				(502,933	)
Net income attributable to noncontrolling interests		2,272				2,932
Net income (loss) attributable to ETRN		127,432				(505,865	)
Preferred dividends		14,628				14,628
Net income (loss) attributable to ETRN common shareholders	$	112,804			$	(520,493	)
Earnings (loss) per share of common stock attributable to ETRN common shareholders - basic	$	0.26			$	(1.20	)
Earnings (loss) per share of common stock attributable to ETRN common shareholders - diluted	$	0.26			$	(1.20	)
Weighted average common shares outstanding - basic		434,080				433,348
Weighted average common shares outstanding - diluted		439,034				433,348

(1)

In the course of its 2022 year-end process, ETRN identified immaterial corrections in its previously issued unaudited interim consolidated financial statements. ETRN has revised the prior periods presented to reflect these items. Refer to ETRN’s Annual Report on Form 10-K for the year ended December 31, 2022 for further information.

EQUITRANS MIDSTREAM CORPORATION GATHERING RESULTS OF OPERATIONS
	Three Months Ended September 30,
		2023				2022(4)
FINANCIAL DATA	(Thousands, except per day amounts)
Firm reservation fee revenues(1)	$	147,137			$	144,730
Volumetric-based fee revenues		72,950				82,450
Total operating revenues		220,087				227,180
Operating expenses:
Operating and maintenance		23,799				27,855
Selling, general and administrative		30,365				21,717
Depreciation		48,585				49,125
Amortization of intangible assets		16,204				16,204
Total operating expenses		118,953				114,901
Operating income	$	101,134			$	112,279
Other (expense) income, net(2)	$	(3,445	)		$	2,904
OPERATIONAL DATA
Gathered volumes (BBtu per day)
Firm capacity(1)		5,628				5,125
Volumetric-based services		2,356				2,413
Total gathered volumes		7,984				7,538
Capital expenditures(3)	$	67,551			$	73,589

(1)	Includes revenues and volumes, as applicable, from contracts with MVCs.
(2)	Other (expense) income, net, includes the unrealized loss on derivative instruments associated with the Henry Hub cash bonus payment provision and gain on sale of gathering assets.
(3)	Includes approximately $3.3 million and $5.9 million of capital expenditures related to noncontrolling interests in Eureka for the three months ended September 30, 2023 and 2022, respectively.
(4)	In the course of its 2022 year-end process, ETRN identified immaterial corrections in its previously issued unaudited interim consolidated financial statements. ETRN has revised the prior periods presented to reflect these items. Refer to ETRN’s Annual Report on Form 10-K for the year ended December 31, 2022 for further information.

EQUITRANS MIDSTREAM CORPORATION TRANSMISSION RESULTS OF OPERATIONS
	Three Months Ended September 30,
		2023			2022
FINANCIAL DATA	(Thousands, except per day amounts)
Firm reservation fee revenues	$	82,508		$	84,584
Volumetric-based fee revenues		16,067			6,973
Total operating revenues		98,575			91,557
Operating expenses:
Operating and maintenance		13,559			4,143
Selling, general and administrative		15,204			9,428
Depreciation		14,004			13,909
Total operating expenses		42,767			27,480
Operating income	$	55,808		$	64,077
Equity income	$	73,810		$	48
Impairment of equity method investment	$	—			(583,057	)
OPERATIONAL DATA
Transmission pipeline throughput (BBtu per day)
Firm capacity reservation		3,496			3,058
Volumetric-based services		14			65
Total transmission pipeline throughput		3,510			3,123
Average contracted firm transmission reservation commitments (BBtu per day)		3,515			3,748
Capital expenditures(1)	$	31,332		$	12,429

(1)	Transmission capital expenditures do not include aggregate capital contributions made to the MVP JV for the MVP and MVP Southgate projects of approximately $209.9 million and $46.4 million for the three months ended September 30, 2023 and 2022, respectively.

EQUITRANS MIDSTREAM CORPORATION WATER RESULTS OF OPERATIONS
	Three Months Ended September 30,
		2023				2022
FINANCIAL DATA	(Thousands, except MMgal amounts)
Firm reservation fee revenues(1)	$	11,029			$	9,375
Volumetric-based fee revenues		8,823				3,639
Total operating revenues		19,852				13,014
Operating expenses:
Operating and maintenance		5,666				3,280
Selling, general and administrative		9,782				2,230
Depreciation		6,655				5,162
Total operating expenses		22,103				10,672
Operating (loss) income	$	(2,251	)		$	2,342
OPERATIONAL DATA
Water services volumes (MMgal)
Firm capacity reservation(1)		170				107
Volumetric-based services		188				96
Total water volumes		358				203
Capital expenditures	$	9,574			$	17,041

(1)	Includes revenues and volumes from contracts with MVCs or Annual Revenue Commitments (ARCs), as applicable.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231031382752/en/

Analyst inquiries:

Nate Tetlow – Vice President, Corporate Development and Investor Relations

412-553-5834

ntetlow@equitransmidstream.com



Media inquiries:

Natalie Cox – Communications and Corporate Affairs

ncox@equitransmidstream.com

Source: Equitrans Midstream Corporation

FAQ

What were Equitrans Midstream Corporation's net income and Adjusted EBITDA for Q3 2023?

Equitrans reported $129.7 million of net income and $249.9 million of Adjusted EBITDA for Q3 2023.

How much net cash did Equitrans generate from operating activities in Q3 2023?

Equitrans generated $201.6 million of net cash from operating activities in Q3 2023.

What percentage of Equitrans' total operating revenue came from firm reservation fees in Q3 2023?

Equitrans recorded 71% of total operating revenue from firm reservation fees in Q3 2023.

Did Equitrans experience any growth in transmission pipeline throughput in Q3 2023?

Equitrans achieved 12% transmission pipeline throughput growth compared to the same quarter last year.

What is Equitrans' outlook for future volume growth?

Equitrans expects several years of mid-single digit annual volume growth based on direct connections to the Mountain Valley Pipeline (MVP) and available capacity provided by gathering and transmission assets.