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Share Name | Share Symbol | Market | Type |
---|---|---|---|
EQM Midstream Partners LP | NYSE:EQM | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 21.43 | 0 | 01:00:00 |
(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER
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001-35574
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Delaware
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37-1661577
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Units Representing Limited Partner Interests
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EQM
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New York Stock Exchange
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Large Accelerated Filer
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☒
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Accelerated Filer
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☐
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Emerging Growth Company
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☐
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Non-Accelerated Filer
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☐
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Smaller Reporting Company
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☐
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Page No.
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Abbreviations
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Measurements
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ASC - Accounting Standards Codification
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Btu = one British thermal unit
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ASU – Accounting Standards Update
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BBtu = billion British thermal units
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FASB – Financial Accounting Standards Board
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Bcf = billion cubic feet
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FERC – U.S. Federal Energy Regulatory Commission
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Mcf = thousand cubic feet
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GAAP – United States Generally Accepted Accounting Principles
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MMBtu = million British thermal units
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IDRs – incentive distribution rights
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MMcf = million cubic feet
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NYMEX -- New York Mercantile Exchange
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MMgal = million gallons
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NYSE - New York Stock Exchange
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SEC – U.S. Securities and Exchange Commission
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Three Months Ended
March 31, |
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2020
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2019
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(Thousands, except per unit amounts)
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Operating revenues (a)
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$
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453,113
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$
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389,782
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Operating expenses:
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Operating and maintenance (b)
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38,422
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27,883
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Selling, general and administrative (b)
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27,897
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32,920
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Separation and other transaction costs
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4,104
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3,513
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Depreciation
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61,114
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47,065
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Amortization of intangible assets
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14,581
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10,387
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Impairments of long-lived assets (c)
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55,581
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—
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Total operating expenses
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201,699
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121,768
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Operating income
|
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251,414
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268,014
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Equity income (d)
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54,072
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31,063
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Other income (e)
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4,330
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2,210
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Net interest expense (f)
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54,531
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49,356
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Net income
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255,285
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251,931
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Net income attributable to noncontrolling interest
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3,607
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—
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Net income attributable to EQM
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$
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251,678
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$
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251,931
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Calculation of limited partner common unit interest in net income:
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Net income attributable to EQM
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$
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251,678
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$
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251,931
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Less: Series A Preferred Units interest in net income
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(25,501
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)
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—
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Limited partner interest in net income
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$
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226,177
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$
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251,931
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Net income per limited partner common unit – basic(g)
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$
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1.13
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$
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1.63
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Net income per limited partner common unit – diluted(g)
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$
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1.08
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$
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1.56
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Weighted average limited partner common units outstanding – basic
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200,495
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154,259
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Weighted average limited partner common units outstanding – diluted
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232,100
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161,259
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Cash distributions declared per common unit (h)
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$
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0.3875
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$
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1.145
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(a)
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Operating revenues included related party revenues from EQT of approximately $303.8 million and $284.5 million for the three months ended March 31, 2020 and 2019, respectively.
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(b)
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For the three months ended March 31, 2020 and 2019, operating and maintenance expense included approximately $12.5 million and $10.5 million of charges from Equitrans Midstream Corporation (NYSE: ETRN) (Equitrans Midstream), respectively. For the three months ended March 31, 2020 and 2019, selling, general and administrative expense included charges from Equitrans Midstream of approximately $23.3 million and $27.9 million, respectively. See Note 7.
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(c)
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See Note 3 for disclosures regarding impairments of long-lived assets.
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(d)
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Represents equity income from the MVP Joint Venture. See Note 8.
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(e)
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See Note 10 for disclosures regarding derivative instruments.
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(f)
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Net interest expense included interest income on the Preferred Interest in EES of approximately $1.5 million and $1.6 million for the three months ended March 31, 2020 and 2019, respectively. In addition, for the three months ended March 31, 2020, net interest expense included interest income on the Intercompany Loan and Rate Relief Note (both defined herein) of approximately $3.6 million and $1.3 million, respectively.
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(g)
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See Note 11 for disclosure regarding EQM's calculation of net income per limited partner unit (basic and diluted).
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(h)
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Represents the cash distributions declared related to the period presented. See Note 11.
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Three Months Ended
March 31, |
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2020
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2019
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(Thousands)
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Cash flows from operating activities:
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Net income
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$
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255,285
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$
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251,931
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Adjustments to reconcile net income to net cash provided by operating activities:
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Depreciation
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61,114
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47,065
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Amortization of intangible assets
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14,581
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10,387
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|
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Impairments of long-lived assets (a)
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55,581
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—
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Equity income(b)
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(54,072
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)
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(31,063
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)
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AFUDC – equity
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(236
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)
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(2,346
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)
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Non-cash long-term compensation expense
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285
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255
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Gain on derivative instruments
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(4,170
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)
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—
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Changes in other assets and liabilities:
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Accounts receivable
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2,346
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(4,950
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)
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Accounts payable
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(5,506
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)
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(72,188
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)
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Other assets and other liabilities
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(40,072
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)
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(38,118
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)
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Net cash provided by operating activities
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285,136
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160,973
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Cash flows from investing activities:
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Capital expenditures
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(151,932
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)
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(206,735
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)
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Capital contributions to the MVP Joint Venture
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(45,150
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)
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(144,763
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)
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Intercompany Loan to Equitrans Midstream
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(650,000
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)
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—
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Principal payments received on the Preferred Interest
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1,225
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1,141
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Net cash used in investing activities
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(845,857
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)
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(350,357
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)
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Cash flows from financing activities:
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Proceeds from revolving credit facility borrowings
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1,170,000
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602,000
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Payments on revolving credit facility borrowings
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(350,000
|
)
|
|
(145,000
|
)
|
||
Payments for credit facility amendment fees
|
(2,740
|
)
|
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—
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|
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Distributions paid to common unitholders
|
(232,531
|
)
|
|
(211,292
|
)
|
||
Distributions paid to Series A Preferred unitholders
|
(25,501
|
)
|
|
—
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Net cash provided by financing activities
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559,228
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|
|
245,708
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||
|
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|
||||
Net change in cash, restricted cash and cash equivalents
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(1,493
|
)
|
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56,324
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|
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Cash, restricted cash and cash equivalents at beginning of period
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15,760
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|
17,515
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|
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Cash, restricted cash and cash equivalents at end of period (c)
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$
|
14,267
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|
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$
|
73,839
|
|
|
|
|
|
||||
Cash paid during the period for:
|
|
|
|
|
|
||
Interest, net of amount capitalized
|
$
|
88,081
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|
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$
|
88,240
|
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(a)
|
See Note 3 for disclosure regarding impairments of long-lived assets.
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(b)
|
Represents equity income from the MVP Joint Venture. See Note 8.
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(c)
|
Includes $23.8 million of cash and cash equivalents and $50.0 million of cash escrowed as of March 31, 2019 associated with the Bolt-on Acquisition (as defined in Note 2).
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March 31,
2020 |
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December 31,
2019 |
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|
(Thousands)
|
||||||
ASSETS
|
|
||||||
Current assets:
|
|
|
|
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|
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Cash and cash equivalents
|
$
|
14,267
|
|
|
$
|
15,760
|
|
|
|
|
|
||||
Accounts receivable (net of allowance for credit losses of $3,047 and allowance for doubtful accounts of $285 as of March 31, 2020 and December 31, 2019, respectively) (a)(b)
|
249,061
|
|
|
254,109
|
|
||
Other current assets
|
39,279
|
|
|
25,004
|
|
||
Total current assets
|
302,607
|
|
|
294,873
|
|
||
|
|
|
|
||||
Property, plant and equipment
|
8,561,359
|
|
|
8,572,499
|
|
||
Less: accumulated depreciation
|
(821,128
|
)
|
|
(857,377
|
)
|
||
Net property, plant and equipment
|
7,740,231
|
|
|
7,715,122
|
|
||
|
|
|
|
||||
Investment in unconsolidated entity
|
2,465,827
|
|
|
2,324,108
|
|
||
Goodwill
|
486,698
|
|
|
486,698
|
|
||
Net intangible assets
|
765,205
|
|
|
797,439
|
|
||
Notes receivable from Equitrans Midstream (c)
|
845,820
|
|
|
—
|
|
||
Other assets
|
251,666
|
|
|
196,779
|
|
||
Total assets
|
$
|
12,858,054
|
|
|
$
|
11,815,019
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
103,814
|
|
|
$
|
126,786
|
|
Due to Equitrans Midstream
|
30,297
|
|
|
39,009
|
|
||
Capital contributions payable to the MVP Joint Venture
|
87,647
|
|
|
45,150
|
|
||
Accrued interest
|
44,662
|
|
|
73,366
|
|
||
Accrued liabilities
|
31,009
|
|
|
31,550
|
|
||
Total current liabilities
|
297,429
|
|
|
315,861
|
|
||
|
|
|
|
||||
Revolving credit facility borrowings (d)
|
1,722,500
|
|
|
902,500
|
|
||
Long-term debt
|
4,860,096
|
|
|
4,859,499
|
|
||
Contract liability (e)
|
247,342
|
|
|
—
|
|
||
Regulatory and other long-term liabilities
|
78,099
|
|
|
78,397
|
|
||
Total liabilities
|
7,205,466
|
|
|
6,156,257
|
|
||
|
|
|
|
||||
Equity:
|
|
|
|
|
|
||
Series A Preferred Units (24,605,291 units issued and outstanding at each of March 31, 2020 and December 31, 2019)
|
1,183,814
|
|
|
1,183,814
|
|
||
Common (200,457,630 units issued and outstanding at each of March 31, 2020 and December 31, 2019, respectively)
|
4,003,188
|
|
|
4,020,601
|
|
||
Class B (7,000,000 units issued and outstanding at each of March 31, 2020 and December 31, 2019, respectively)
|
4,810
|
|
|
(2,822
|
)
|
||
Noncontrolling interest (f)
|
460,776
|
|
|
457,169
|
|
||
Total equity
|
5,652,588
|
|
|
5,658,762
|
|
||
Total liabilities and equity
|
$
|
12,858,054
|
|
|
$
|
11,815,019
|
|
(a)
|
Accounts receivable as of March 31, 2020 and December 31, 2019 included approximately $183.4 million and $175.2 million, respectively, of related party accounts receivable from EQT.
|
(b)
|
See Note 1 for a discussion of the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
|
(c)
|
See Notes 6 and 7 for disclosures regarding the notes receivable from Equitrans Midstream.
|
(d)
|
As of March 31, 2020, EQM had aggregate borrowings outstanding of approximately $1,430 million and $293 million on its Amended $3 Billion Facility and the Eureka Credit Facility, respectively (as each is defined in Note 9). As of December 31, 2019, EQM had aggregate borrowings outstanding of approximately $610 million and $293 million on its Amended $3 Billion Facility and the Eureka Credit Facility, respectively. See Note 9 for further detail.
|
(e)
|
See Note 6 for disclosure regarding EQM's contract liabilities.
|
(f)
|
Noncontrolling interest as of March 31, 2020 and December 31, 2019 represents third-party ownership in Eureka Midstream Holdings, LLC (Eureka Midstream). See Note 2 for further information.
|
|
|
Limited Partners
|
|
|
|
|
|
|
||||||||||||||||
|
|
Series A Preferred Units
|
|
Common Units
|
|
Class B Units
|
|
General Partner
|
|
Noncontrolling Interest
|
|
Total Equity
|
||||||||||||
|
(Thousands, except per unit amounts)
|
|||||||||||||||||||||||
Balance at January 1, 2019
|
|
$
|
—
|
|
|
$
|
4,783,673
|
|
|
$
|
—
|
|
|
$
|
29,626
|
|
|
$
|
—
|
|
|
$
|
4,813,299
|
|
Net income
|
|
—
|
|
|
246,699
|
|
|
3,465
|
|
|
1,767
|
|
|
—
|
|
|
251,931
|
|
||||||
Equity-based compensation plans
|
|
—
|
|
|
255
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
255
|
|
||||||
Distributions paid to common unitholders
($1.13 per common unit) |
|
—
|
|
|
(136,117
|
)
|
|
—
|
|
|
(75,175
|
)
|
|
—
|
|
|
(211,292
|
)
|
||||||
Net contributions from EQT
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Equity restructuring associated with the EQM IDR Transaction (as defined in Note 1)
|
|
—
|
|
|
(42,305
|
)
|
|
(1,477
|
)
|
|
43,782
|
|
|
—
|
|
|
—
|
|
||||||
Balance at March 31, 2019
|
|
$
|
—
|
|
|
$
|
4,852,205
|
|
|
$
|
1,988
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4,854,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Balance at January 1, 2020
|
|
$
|
1,183,814
|
|
|
$
|
4,020,601
|
|
|
$
|
(2,822
|
)
|
|
$
|
—
|
|
|
$
|
457,169
|
|
|
$
|
5,658,762
|
|
Net income
|
|
25,501
|
|
|
218,545
|
|
|
7,632
|
|
|
—
|
|
|
3,607
|
|
|
255,285
|
|
||||||
Equity-based compensation plans
|
|
—
|
|
|
285
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
285
|
|
||||||
Distributions paid to common unitholders ($1.16 per common unit)
|
|
—
|
|
|
(232,531
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(232,531
|
)
|
||||||
Distributions paid to Series A Preferred unitholders ($1.0364 per Series A Preferred Unit (as defined in Note 1))
|
|
(25,501
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,501
|
)
|
||||||
Adoption of Topic 326 (see Note 1)
|
|
—
|
|
|
(3,712
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,712
|
)
|
||||||
Balance at March 31, 2020
|
|
$
|
1,183,814
|
|
|
$
|
4,003,188
|
|
|
$
|
4,810
|
|
|
$
|
—
|
|
|
$
|
460,776
|
|
|
$
|
5,652,588
|
|
1.
|
Financial Statements
|
|
Accounts Receivable
|
|
Contract Asset (a)
|
|
Preferred Interest in EES (b)
|
|
Total
|
||||||||
Balance at December 31, 2019
|
$
|
(285
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(285
|
)
|
Adoption of Topic 326
|
(2,702
|
)
|
|
—
|
|
|
(1,010
|
)
|
|
(3,712
|
)
|
||||
Provision for expected credit losses
|
(60
|
)
|
|
(116
|
)
|
|
(11
|
)
|
|
(187
|
)
|
||||
Balance at March 31, 2020
|
$
|
(3,047
|
)
|
|
$
|
(116
|
)
|
|
$
|
(1,021
|
)
|
|
$
|
(4,184
|
)
|
(a)
|
Included in other current assets in the consolidated balance sheets.
|
(b)
|
Included in other assets in the consolidated balance sheets.
|
(in thousands)
|
|
Preliminary Purchase Price Allocation
(As initially reported)
|
|
Measurement Period Adjustments(a)
|
|
Purchase Price Allocation
(As adjusted)
|
||||||
Consideration given:
|
|
|
|
|
|
|
||||||
Cash consideration(b)
|
|
$
|
861,250
|
|
|
$
|
(11,404
|
)
|
|
$
|
849,846
|
|
Buyout of portion of Eureka Midstream Class B Units and incentive compensation
|
|
2,530
|
|
|
—
|
|
|
2,530
|
|
|||
Total consideration
|
|
863,780
|
|
|
(11,404
|
)
|
|
852,376
|
|
|||
|
|
|
|
|
|
|
||||||
Fair value of liabilities assumed:
|
|
|
|
|
|
|
||||||
Current liabilities
|
|
52,458
|
|
|
(9,857
|
)
|
|
42,601
|
|
|||
Long-term debt
|
|
300,825
|
|
|
—
|
|
|
300,825
|
|
|||
Other long-term liabilities
|
|
10,203
|
|
|
—
|
|
|
10,203
|
|
|||
Amount attributable to liabilities assumed
|
|
363,486
|
|
|
(9,857
|
)
|
|
353,629
|
|
|||
|
|
|
|
|
|
|
||||||
Fair value of assets acquired:
|
|
|
|
|
|
|
||||||
Cash
|
|
15,145
|
|
|
—
|
|
|
15,145
|
|
|||
Accounts receivable
|
|
16,817
|
|
|
—
|
|
|
16,817
|
|
|||
Inventory
|
|
12,991
|
|
|
(26
|
)
|
|
12,965
|
|
|||
Other current assets
|
|
882
|
|
|
—
|
|
|
882
|
|
|||
Net property, plant and equipment
|
|
1,222,284
|
|
|
(8,906
|
)
|
|
1,213,378
|
|
|||
Intangible assets (c)
|
|
317,000
|
|
|
(6,000
|
)
|
|
311,000
|
|
|||
Other assets
|
|
14,567
|
|
|
—
|
|
|
14,567
|
|
|||
Amount attributable to assets acquired
|
|
1,599,686
|
|
|
(14,932
|
)
|
|
1,584,754
|
|
|||
|
|
|
|
|
|
|
||||||
Noncontrolling interests
|
|
(486,062
|
)
|
|
7,602
|
|
|
(478,460
|
)
|
|||
|
|
|
|
|
|
|
||||||
Goodwill as of April 10, 2019
|
|
$
|
113,642
|
|
|
$
|
(13,931
|
)
|
|
$
|
99,711
|
|
Impairment of goodwill (d)
|
|
|
|
|
|
(99,711
|
)
|
|||||
Goodwill as of March 31, 2020
|
|
|
|
|
|
$
|
—
|
|
(a)
|
EQM recorded measurement period adjustments to its preliminary acquisition date fair values due to the refinement of its valuation models, assumptions and inputs. The measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.
|
(b)
|
The cash consideration for the Bolt-on Acquisition was adjusted by approximately $11.4 million related to working capital adjustments and the release of all escrowed indemnification funds to EQM.
|
(c)
|
After considering the refinements to the valuation models, EQM estimated the fair value of the customer-related intangible assets acquired as part of the Bolt-on Acquisition to be $311.0 million. As a result, the fair value of the customer-related intangible assets was decreased by $6.0 million on September 30, 2019 with a corresponding increase to goodwill. In addition, the change to the provisional amount resulted in a decrease in amortization expense and accumulated amortization of approximately $0.4 million.
|
(d)
|
During the third quarter of 2019, EQM identified impairment indicators that suggested the fair value of its goodwill was more likely than not below its carrying amount. As such, EQM performed an interim goodwill impairment assessment, which resulted in EQM recognizing impairment to goodwill of approximately $261.3 million, of which $99.7 million was associated with its Eureka/Hornet reporting unit, bringing the reporting unit's goodwill balance to zero.
|
3.
|
Impairments of Long-Lived Assets and Other-Than-Temporary Decline in Value
|
4.
|
Equity
|
|
Limited Partner Interests
|
|
|
|
|
|||||||||
|
Series A Preferred Units
|
|
Common Units
|
|
Class B Units
|
|
General Partner Units
|
|
Total
|
|||||
Balance at January 1, 2019
|
—
|
|
|
120,457,638
|
|
|
—
|
|
|
1,443,015
|
|
|
121,900,653
|
|
Unit cancellation
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
EQM IDR Transaction (a)
|
—
|
|
|
80,000,000
|
|
|
7,000,000
|
|
|
(1,443,015
|
)
|
|
85,556,985
|
|
Issuance of Series A Preferred Units
|
24,605,291
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at December 31, 2019
|
24,605,291
|
|
|
200,457,630
|
|
|
7,000,000
|
|
|
—
|
|
|
232,062,921
|
|
Balance at March 31, 2020 (b)
|
24,605,291
|
|
|
200,457,630
|
|
|
7,000,000
|
|
|
—
|
|
|
232,062,921
|
|
(a)
|
Refer to Note 1 for a discussion on the EQM IDR Transaction.
|
(b)
|
There were no changes to partnership interests outstanding during the first quarter of 2020.
|
5.
|
Financial Information by Business Segment
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
(Thousands)
|
||||||
Revenues from customers:
|
|
|
|
|
|
||
Gathering
|
$
|
310,047
|
|
|
$
|
261,881
|
|
Transmission
|
106,615
|
|
|
109,859
|
|
||
Water
|
36,451
|
|
|
18,042
|
|
||
Total operating revenues
|
$
|
453,113
|
|
|
$
|
389,782
|
|
|
|
|
|
||||
Operating income:
|
|
|
|
|
|
||
Gathering
|
$
|
155,228
|
|
|
$
|
182,078
|
|
Transmission
|
78,434
|
|
|
84,750
|
|
||
Water
|
17,752
|
|
|
1,186
|
|
||
Total operating income
|
$
|
251,414
|
|
|
$
|
268,014
|
|
|
|
|
|
||||
Reconciliation of operating income to net income:
|
|
|
|
|
|
||
Equity income (a)
|
$
|
54,072
|
|
|
$
|
31,063
|
|
Other income
|
4,330
|
|
|
2,210
|
|
||
Net interest expense
|
54,531
|
|
|
49,356
|
|
||
Net income
|
$
|
255,285
|
|
|
$
|
251,931
|
|
(a)
|
Equity income is included in the Transmission segment.
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
|
(Thousands)
|
||||||
Segment assets:
|
|
|
|
|
|
||
Gathering
|
$
|
7,830,525
|
|
|
$
|
7,572,911
|
|
Transmission (a)
|
4,034,646
|
|
|
3,903,707
|
|
||
Water
|
208,651
|
|
|
202,440
|
|
||
Total operating segments
|
12,073,822
|
|
|
11,679,058
|
|
||
Headquarters, including cash
|
784,232
|
|
|
135,961
|
|
||
Total assets
|
$
|
12,858,054
|
|
|
$
|
11,815,019
|
|
(a)
|
The equity investments in the MVP Joint Venture are included in the Transmission segment.
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
(Thousands)
|
||||||
Depreciation:
|
|
|
|
|
|
||
Gathering
|
$
|
40,440
|
|
|
$
|
28,116
|
|
Transmission
|
13,558
|
|
|
12,533
|
|
||
Water
|
7,116
|
|
|
6,416
|
|
||
Total
|
$
|
61,114
|
|
|
$
|
47,065
|
|
|
|
|
|
||||
Capital expenditures for segment assets:
|
|
|
|
||||
Gathering(a)(b)
|
$
|
111,454
|
|
|
$
|
207,717
|
|
Transmission(c)
|
10,798
|
|
|
18,762
|
|
||
Water
|
3,476
|
|
|
9,175
|
|
||
Total(d)
|
$
|
125,728
|
|
|
$
|
235,654
|
|
(a)
|
Includes approximately $12.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
|
(b)
|
Capital expenditures for the three months ended March 31, 2019 includes approximately $49.7 million related to non-operating assets acquired from Equitrans Midstream in the Shared Assets Transaction that primarily support EQM's gathering activities.
|
(c)
|
Transmission capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
|
(d)
|
EQM 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. Accrued capital expenditures were approximately $59.5 million and $85.8 million at March 31, 2020 and December 31, 2019, respectively. Accrued capital expenditures were approximately $137.8 million and $108.9 million at March 31, 2019 and December 31, 2018, respectively.
|
6.
|
Revenue from Contracts with Customers
|
|
|
Three Months Ended March 31, 2020
|
||||||||||||||
|
|
Gathering
|
|
Transmission
|
|
Water
|
|
Total
|
||||||||
|
|
(Thousands)
|
||||||||||||||
Firm reservation fee revenues(a)
|
|
$
|
152,079
|
|
|
$
|
99,597
|
|
|
$
|
12,776
|
|
|
$
|
264,452
|
|
Volumetric-based fee revenues
|
|
157,968
|
|
|
7,018
|
|
|
23,675
|
|
|
188,661
|
|
||||
Total operating revenues
|
|
$
|
310,047
|
|
|
$
|
106,615
|
|
|
$
|
36,451
|
|
|
$
|
453,113
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended March 31, 2019
|
||||||||||||||
|
|
Gathering
|
|
Transmission
|
|
Water
|
|
Total
|
||||||||
|
|
(Thousands)
|
||||||||||||||
Firm reservation fee revenues
|
|
$
|
128,959
|
|
|
$
|
99,224
|
|
|
$
|
2,884
|
|
|
$
|
231,067
|
|
Volumetric-based fee revenues
|
|
132,922
|
|
|
10,635
|
|
|
15,158
|
|
|
158,715
|
|
||||
Total operating revenues
|
|
$
|
261,881
|
|
|
$
|
109,859
|
|
|
$
|
18,042
|
|
|
$
|
389,782
|
|
(a)
|
For the three months ended March 31, 2020, firm reservation fee revenues associated with Gathering and Water included approximately $6.3 million and $5.0 million, respectively, of MVC unbilled revenues.
|
|
|
Unbilled Revenue
|
||
|
|
(Thousands)
|
||
Balance as of January 1, 2020
|
|
$
|
—
|
|
Revenue recognized in excess of amounts invoiced
|
|
11,305
|
|
|
Minimum volume commitments invoiced (a)
|
|
—
|
|
|
Balance as of March 31, 2020
|
|
$
|
11,305
|
|
(a)
|
Unbilled revenues are transferred to accounts receivable once EQM has an unconditional right to consideration from the customer.
|
|
|
Deferred Revenue
|
||
|
|
(Thousands)
|
||
Balance as of January 1, 2020
|
|
$
|
—
|
|
Amounts recorded during the period
|
|
247,342
|
|
|
Amounts transferred during the period (a)
|
|
—
|
|
|
Balance as of March 31, 2020
|
|
$
|
247,342
|
|
(a)
|
Deferred revenues are recognized as revenue upon satisfaction of EQM's performance obligation to the customer.
|
|
|
2020(a)
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
||||||||||||||
|
(Thousands)
|
|||||||||||||||||||||||||||
Gathering firm reservation fees
|
|
$
|
76,009
|
|
|
$
|
173,406
|
|
|
$
|
175,674
|
|
|
$
|
173,691
|
|
|
$
|
170,621
|
|
|
$
|
1,388,240
|
|
|
$
|
2,157,641
|
|
Gathering revenues supported by MVCs
|
|
385,305
|
|
|
575,014
|
|
|
611,077
|
|
|
643,745
|
|
|
638,807
|
|
|
5,408,429
|
|
|
8,262,377
|
|
|||||||
Transmission firm reservation fees
|
|
255,426
|
|
|
374,688
|
|
|
371,639
|
|
|
333,315
|
|
|
273,711
|
|
|
2,505,063
|
|
|
4,113,842
|
|
|||||||
Water revenues supported by MVCs
|
|
27,017
|
|
|
60,000
|
|
|
60,000
|
|
|
60,000
|
|
|
60,000
|
|
|
60,000
|
|
|
327,017
|
|
|||||||
Total
|
|
$
|
743,757
|
|
|
$
|
1,183,108
|
|
|
$
|
1,218,390
|
|
|
$
|
1,210,751
|
|
|
$
|
1,143,139
|
|
|
$
|
9,361,732
|
|
|
$
|
14,860,877
|
|
(a)
|
April 1, 2020 through December 31, 2020.
|
7.
|
Related Party Transactions
|
8.
|
Investments in Unconsolidated Entity
|
|
March 31,
2020 |
|
December 31,
2019 |
||||
|
(Thousands)
|
||||||
Current assets
|
$
|
218,073
|
|
|
$
|
102,638
|
|
Non-current assets
|
5,138,016
|
|
|
4,951,521
|
|
||
Total assets
|
$
|
5,356,089
|
|
|
$
|
5,054,159
|
|
|
|
|
|
||||
Current liabilities
|
$
|
195,105
|
|
|
$
|
223,645
|
|
Equity
|
5,160,984
|
|
|
4,830,514
|
|
||
Total liabilities and equity
|
$
|
5,356,089
|
|
|
$
|
5,054,159
|
|
|
Three Months Ended
March 31, |
||||||
|
2020
|
|
2019
|
||||
|
(Thousands)
|
||||||
Environmental remediation reserve
|
$
|
(265
|
)
|
|
$
|
(2,192
|
)
|
Other income
|
231
|
|
|
2,913
|
|
||
Net interest income
|
35,326
|
|
|
20,086
|
|
||
AFUDC - equity
|
82,428
|
|
|
46,868
|
|
||
Net income
|
$
|
117,720
|
|
|
$
|
67,675
|
|
•
|
certain defined terms in the $3 Billion Facility and the 2019 EQM Term Loan Agreement, as applicable, including:
|
◦
|
the Applicable Rate (as defined in the respective credit agreements) such that: (i) Base Rate Loans (as defined in the respective credit agreements) bear interest at a Base Rate (as defined in the respective credit agreements) plus a margin of 0.125% to 1.750% for borrowings under the Amended $3 Billion Facility or a margin of 0.000% to 1.625% for borrowings under the Amended 2019 EQM Term Loan Agreement, each determined on the basis of EQM’s then current credit rating, and (ii) Eurodollar Rate Loans (as defined in the respective credit agreements) bear interest at a Eurodollar Rate (as defined in the respective credit agreements) plus a margin of 1.125% to 2.750% for borrowings under the Amended $3 Billion Facility or a margin of 1.000% to 2.625% for borrowings under the Amended 2019 EQM Term Loan Agreement also determined on the basis of EQM’s then current credit rating; and
|
◦
|
“Consolidated EBITDA” to allow for adjustment of “Consolidated EBITDA” in any applicable period for the difference between the amount of revenue recognized with respect to all contractual performance obligations and the amount of consideration received with respect to all contractual performance obligations; and
|
•
|
certain negative covenants, including:
|
◦
|
the financial covenant pursuant to which, except for certain measurement periods following the consummation of certain acquisitions during which the consolidated leverage ratio cannot exceed the greater of 5.50 to 1.00 or the maximum ratio otherwise permitted for the applicable period, the consolidated leverage ratio cannot exceed,
|
◦
|
the lien covenant such that the specified percentage of Consolidated Net Tangible Assets (as defined in the respective credit agreements) applicable to the existing exception for liens securing obligations not to exceed such specified percentage at the time of creation, incurrence, assumption or imposition of such lien is reduced from 15% to 5% of Consolidated Net Tangible Assets; and
|
◦
|
the debt covenant such that the specified percentage of Consolidated Net Tangible Assets applicable to the existing exception for debt incurred by subsidiaries of EQM not to exceed such specified percentage at the time of incurrence is reduced from 15% to 5% of Consolidated Net Tangible Assets.
|
10.
|
Fair Value Measurements
|
11.
|
Net Income per Limited Partner Unit and Cash Distributions
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2020
|
|
2019
|
||||
|
(Thousands, except per unit data)
|
|||||||
Net income attributable to EQM
|
|
$
|
251,678
|
|
|
$
|
251,931
|
|
Less: Series A Preferred Units interest in net income
|
|
(25,501
|
)
|
|
—
|
|
||
Limited partner interest in net income
|
|
$
|
226,177
|
|
|
$
|
251,931
|
|
|
|
|
|
|
|
|
||
Net income allocable to common units
|
|
$
|
226,177
|
|
|
$
|
251,931
|
|
Net income allocable to Class B units
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
||
Weighted average limited partner common units outstanding - basic
|
|
200,495
|
|
|
154,259
|
|
||
Weighted average limited partner common units outstanding - diluted
|
|
232,100
|
|
|
161,259
|
|
||
|
|
|
|
|
||||
Net income per limited partner common unit - basic
|
|
$
|
1.13
|
|
|
$
|
1.63
|
|
Net income per limited partner common unit - diluted
|
|
$
|
1.08
|
|
|
$
|
1.56
|
|
•
|
guidance regarding EQM's gathering, transmission and storage and water service revenue and volume growth, including the anticipated effects associated with the EQT Global GGA;
|
•
|
projected revenue (including from firm reservation fees and deferred revenues), expenses and contract liabilities, and the effects on projected revenue and contract liabilities associated with the EQT Global GGA and the MVP project;
|
•
|
the weighted average contract life of gathering, transmission and storage contracts;
|
•
|
infrastructure programs (including the timing, cost, capacity and sources of funding with respect to gathering, transmission and storage and water expansion projects);
|
•
|
the cost, capacity, timing of regulatory approvals, final design and targeted in-service dates of current projects;
|
•
|
the ultimate terms, partners and structure of the MVP Joint Venture and ownership interests therein;
|
•
|
expansion projects in EQM's operating areas and in areas that would provide access to new markets;
|
•
|
EQM's ability to provide produced water handling services and realize expansion opportunities and related capital avoidance;
|
•
|
EQM's ability to identify and complete acquisitions and other strategic transactions, including the proposed EQM Merger and joint ventures, effectively integrate transactions into EQM's operations, and achieve synergies, system optionality and accretion associated with transactions, including through increased scale;
|
•
|
EQM's ability to access commercial opportunities and new customers for its water services business, and the timing and final terms of any definitive water services agreement or agreements between EQT and EQM (a Water Services Agreement) entered into pursuant to the terms of the Water Services Letter Agreement;
|
•
|
any further credit rating impacts associated with the MVP project, customer credit ratings changes, including EQT's, and defaults, acquisitions and financings and any further changes in EQM’s credit ratings;
|
•
|
the ability of EQM's contracts to survive a customer bankruptcy or restructuring;
|
•
|
the timing of the consummation of the EQM Merger;
|
•
|
the ability to obtain the requisite approvals related to the EQM Merger from Equitrans Midstream's shareholders or EQM's limited partners, as applicable, to consummate the EQM Merger;
|
•
|
the risk that a condition to closing of the EQM Merger may not be satisfied;
|
•
|
expected transaction expenses related to the EQM Merger and related transactions;
|
•
|
the possible diversion of management time on issues related to the EQM Merger;
|
•
|
the impact and outcome of threatened, pending and future litigation relating to the EQM Merger;
|
•
|
the timing and amount of future issuances or repurchases of securities, including in connection with the EQM Merger;
|
•
|
effects of conversion of EQM securities into Merger Consideration or Equitrans Midstream Preferred Shares, as applicable, in connection with the EQM Merger;
|
•
|
effects of seasonality;
|
•
|
expected cash flows and MVCs, including those associated with the EQT Global GGA and any definitive agreement or agreements between EQT and EQM related to the Water Services Letter Agreement, and the potential impacts thereon of the timing and cost of the MVP project;
|
•
|
capital commitments;
|
•
|
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;
|
•
|
distribution amounts, timing and rates;
|
•
|
the effect and outcome of pending and future litigation and regulatory proceedings;
|
•
|
changes in commodity prices and the effect of commodity prices on EQM's business;
|
•
|
liquidity and financing requirements, including sources and availability;
|
•
|
interest rates;
|
•
|
EQM’s and its subsidiaries’ respective abilities to service debt under, and comply with the covenants contained in, their respective credit agreements;
|
•
|
expectations regarding production volumes in EQM's areas of operations;
|
•
|
EQM’s ability to achieve the anticipated benefits associated with the execution of the EQT Global GGA, the Water Services Letter Agreement, the EQM Merger Agreement and related agreements;
|
•
|
the impact on EQM and its subsidiaries of the COVID-19 pandemic, including, among other things, effects on demand for natural gas and EQM's services, commodity prices and access to capital;
|
•
|
the effects of government regulation; and
|
•
|
tax status and position.
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|
% Change
|
|||||
|
(Thousands, except per day amounts)
|
||||||||||
FINANCIAL DATA
|
|
|
|
|
|
|
|||||
Firm reservation fee revenues(a)
|
|
$
|
152,079
|
|
|
$
|
128,959
|
|
|
17.9
|
|
Volumetric-based fee revenues
|
|
157,968
|
|
|
132,922
|
|
|
18.8
|
|
||
Total operating revenues
|
|
310,047
|
|
|
261,881
|
|
|
18.4
|
|
||
Operating expenses:
|
|
|
|
|
|
|
|||||
Operating and maintenance
|
|
18,878
|
|
|
15,253
|
|
|
23.8
|
|
||
Selling, general and administrative
|
|
21,235
|
|
|
22,534
|
|
|
(5.8
|
)
|
||
Separation and other transaction costs
|
|
4,104
|
|
|
3,513
|
|
|
16.8
|
|
||
Depreciation
|
|
40,440
|
|
|
28,116
|
|
|
43.8
|
|
||
Amortization of intangible assets
|
|
14,581
|
|
|
10,387
|
|
|
40.4
|
|
||
Impairments of long-lived assets
|
|
55,581
|
|
|
—
|
|
|
100.0
|
|
||
Total operating expenses
|
|
154,819
|
|
|
79,803
|
|
|
94.0
|
|
||
Operating income
|
|
$
|
155,228
|
|
|
$
|
182,078
|
|
|
(14.7
|
)
|
|
|
|
|
|
|
|
|||||
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
||
Gathered volumes (BBtu per day)
|
|
|
|
|
|
|
|||||
Firm capacity reservation(b)
|
|
3,282
|
|
|
2,572
|
|
|
27.6
|
|
||
Volumetric-based services
|
|
5,014
|
|
|
4,194
|
|
|
19.6
|
|
||
Total gathered volumes
|
|
8,296
|
|
|
6,766
|
|
|
22.6
|
|
||
|
|
|
|
|
|
|
|||||
Capital expenditures(c)
|
|
$
|
111,454
|
|
|
$
|
207,717
|
|
|
(46.3
|
)
|
(a)
|
For the three months ended March 31, 2020, firm reservation fee revenues included approximately $6.3 million of MVC unbilled revenue.
|
(b)
|
Includes volumes under agreements structured with MVCs.
|
(c)
|
Includes approximately $12.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
|
(d)
|
Capital expenditures for the three months ended March 31, 2019 includes approximately $49.7 million related to non-operating assets acquired from Equitrans Midstream in the Shared Assets Transaction that primarily support EQM's gathering activities.
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|
% Change
|
|||||
|
(Thousands, except per day amounts)
|
||||||||||
FINANCIAL DATA
|
|
|
|
|
|
|
|||||
Firm reservation fee revenues
|
|
$
|
99,597
|
|
|
$
|
99,224
|
|
|
0.4
|
|
Volumetric-based fee revenues
|
|
7,018
|
|
|
10,635
|
|
|
(34.0
|
)
|
||
Total operating revenues
|
|
106,615
|
|
|
109,859
|
|
|
(3.0
|
)
|
||
Operating expenses:
|
|
|
|
|
|
|
|||||
Operating and maintenance
|
|
9,441
|
|
|
4,084
|
|
|
131.2
|
|
||
Selling, general and administrative
|
|
5,182
|
|
|
8,492
|
|
|
(39.0
|
)
|
||
Depreciation
|
|
13,558
|
|
|
12,533
|
|
|
8.2
|
|
||
Total operating expenses
|
|
28,181
|
|
|
25,109
|
|
|
12.2
|
|
||
Operating income
|
|
$
|
78,434
|
|
|
$
|
84,750
|
|
|
(7.5
|
)
|
|
|
|
|
|
|
|
|||||
Equity income
|
|
$
|
54,072
|
|
|
$
|
31,063
|
|
|
74.1
|
|
|
|
|
|
|
|
|
|||||
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
||
Transmission pipeline throughput (BBtu per day)
|
|
|
|
|
|
|
|||||
Firm capacity reservation
|
|
3,000
|
|
|
2,959
|
|
|
1.4
|
|
||
Volumetric-based services
|
|
15
|
|
|
105
|
|
|
(85.7
|
)
|
||
Total transmission pipeline throughput
|
|
3,015
|
|
|
3,064
|
|
|
(1.6
|
)
|
||
|
|
|
|
|
|
|
|||||
Average contracted firm transmission reservation commitments
(BBtu per day)
|
|
4,453
|
|
|
4,442
|
|
|
0.2
|
|
||
|
|
|
|
|
|
|
|||||
Capital expenditures (a)
|
|
$
|
10,798
|
|
|
$
|
18,762
|
|
|
(42.4
|
)
|
(a)
|
Transmission capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|
% Change
|
|||||
|
(Thousands)
|
||||||||||
FINANCIAL DATA
|
|
|
|
|
|
|
|||||
Firm reservation fee revenues(a)
|
|
$
|
12,776
|
|
|
$
|
2,884
|
|
|
343.0
|
|
Volumetric-based fee revenues
|
|
23,675
|
|
|
15,158
|
|
|
56.2
|
|
||
Total operating revenues
|
|
36,451
|
|
|
18,042
|
|
|
102.0
|
|
||
Operating expenses:
|
|
|
|
|
|
|
|||||
Operating and maintenance
|
|
10,103
|
|
|
8,546
|
|
|
18.2
|
|
||
Selling, general and administrative
|
|
1,480
|
|
|
1,894
|
|
|
(21.9
|
)
|
||
Depreciation
|
|
7,116
|
|
|
6,416
|
|
|
10.9
|
|
||
Total operating expenses
|
|
18,699
|
|
|
16,856
|
|
|
10.9
|
|
||
Operating income
|
|
$
|
17,752
|
|
|
$
|
1,186
|
|
|
1,396.8
|
|
|
|
|
|
|
|
|
|||||
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
||
Water services volumes (MMgal)
|
|
|
|
|
|
|
|||||
Firm capacity reservation(b)
|
|
210
|
|
|
90
|
|
|
133.3
|
|
||
Volumetric-based services
|
|
383
|
|
|
280
|
|
|
36.8
|
|
||
Total water volumes
|
|
593
|
|
|
370
|
|
|
60.3
|
|
||
|
|
|
|
|
|
|
|||||
Capital expenditures
|
|
$
|
3,476
|
|
|
$
|
9,175
|
|
|
(62.1
|
)
|
(a)
|
For the three months ended March 31, 2020, firm reservation fee revenues included approximately $5.0 million of MVC unbilled revenues.
|
(b)
|
Includes volumes under agreements structured with MVCs.
|
•
|
EQM'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 EQM's assets to generate sufficient cash flow to make distributions to EQM's unitholders;
|
•
|
EQM'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.
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2020
|
|
2019
|
||||
|
(Thousands)
|
|||||||
Net income
|
|
$
|
255,285
|
|
|
$
|
251,931
|
|
Add:
|
|
|
|
|
||||
Net interest expense
|
|
54,531
|
|
|
49,356
|
|
||
Depreciation
|
|
61,114
|
|
|
47,065
|
|
||
Amortization of intangible assets
|
|
14,581
|
|
|
10,387
|
|
||
Impairment of long-lived assets
|
|
55,581
|
|
|
—
|
|
||
Preferred Interest payments
|
|
2,764
|
|
|
2,746
|
|
||
Non-cash long-term compensation expense
|
|
285
|
|
|
255
|
|
||
Separation and other transaction costs
|
|
4,104
|
|
|
3,513
|
|
||
Less:
|
|
|
|
|
||||
Equity income
|
|
(54,072
|
)
|
|
(31,063
|
)
|
||
AFUDC – equity
|
|
(236
|
)
|
|
(2,346
|
)
|
||
Unrealized gain on derivatives
|
|
(4,170
|
)
|
|
—
|
|
||
Adjusted EBITDA attributable to noncontrolling interest(a)
|
|
(8,515
|
)
|
|
—
|
|
||
Adjusted EBITDA
|
|
$
|
381,252
|
|
|
$
|
331,844
|
|
Less:
|
|
|
|
|
||||
Net interest expense excluding interest income on the Preferred Interest(b)
|
|
(55,024
|
)
|
|
(50,962
|
)
|
||
Capitalized interest and AFUDC – debt(b)
|
|
(8,671
|
)
|
|
(4,687
|
)
|
||
Ongoing maintenance capital expenditures net of expected reimbursements(b)
|
|
(8,996
|
)
|
|
(9,398
|
)
|
||
Series A Preferred Unit distributions
|
|
(25,501
|
)
|
|
—
|
|
||
Distributable cash flow
|
|
$
|
283,060
|
|
|
$
|
266,797
|
|
|
|
|
|
|
||||
Net cash provided by operating activities
|
|
$
|
285,136
|
|
|
$
|
160,973
|
|
Adjustments:
|
|
|
|
|
||||
Capitalized interest and AFUDC – debt(b)
|
|
(8,671
|
)
|
|
(4,687
|
)
|
||
Principal payments received on the Preferred Interest
|
|
1,225
|
|
|
1,141
|
|
||
Ongoing maintenance capital expenditures net of expected reimbursements(b)
|
|
(8,996
|
)
|
|
(9,398
|
)
|
||
Adjusted EBITDA attributable to noncontrolling interest(a)
|
|
(8,515
|
)
|
|
—
|
|
||
Series A Preferred Unit distributions
|
|
(25,501
|
)
|
|
—
|
|
||
Other, including changes in working capital
|
|
48,382
|
|
|
118,768
|
|
||
Distributable cash flow
|
|
$
|
283,060
|
|
|
$
|
266,797
|
|
(a)
|
Reflects adjusted EBITDA attributable to noncontrolling interest associated with the third-party ownership interest in Eureka Midstream. Adjusted EBITDA attributable to noncontrolling interest for the three months ended March 31, 2020 was calculated as net income of $3.6 million, plus depreciation of $2.7 million, plus amortization of intangible assets of $1.2 million and plus interest expense of $1.0 million.
|
•
|
Mountain Valley Pipeline. The MVP Joint Venture is a joint venture among EQM and affiliates of each of NextEra Energy, Inc., Con Edison, AltaGas Ltd. and RGC Resources, Inc. that is constructing the MVP. As of March 31, 2020, EQM owned a 45.7% interest in the MVP project and will operate the MVP. The MVP is an estimated 300 mile, 42-inch diameter natural gas interstate pipeline with a targeted capacity of 2.0 Bcf per day that will span from EQM's existing transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia, providing access to the growing Southeast demand markets. During the three months ended March 31, 2020, EQM made capital contributions of approximately $45 million to the MVP Joint Venture for the MVP project. For the remainder of 2020, EQM expects to make capital contributions of approximately $550 million to $600 million to the MVP Joint Venture for purposes of the MVP. The MVP Joint Venture has secured a total of 2.0 Bcf per day of firm capacity commitments at 20-year terms and additional shippers have expressed interest in the MVP project. The MVP Joint Venture is evaluating an expansion opportunity that could add approximately 0.5 Bcf per day of capacity through the installation of incremental compression and is also evaluating other future pipeline extension projects.
|
•
|
Wellhead Gathering Expansion and Hammerhead Projects. During the three months ended March 31, 2020, EQM invested approximately $104 million in gathering expansion projects. For the remainder of 2020, EQM expects to invest approximately $300 million in gathering expansion projects (inclusive of expected capital expenditures related to the noncontrolling interest in Eureka Midstream). The expansion projects include infrastructure expansion of core development areas in the Marcellus and Utica Shales in southwestern Pennsylvania, eastern Ohio and northern West Virginia for EQT, Range Resources Corporation (Range Resources) and other producers, including the Hammerhead project. The Hammerhead project is a 1.6 Bcf per day gathering header pipeline that is primarily designed to connect natural gas produced in Pennsylvania and West Virginia to the MVP, is supported by a 20-year term, 1.2 Bcf per day, firm capacity commitment from EQT and is expected to cost approximately $555 million, of which approximately $490 million had been spent through March 31, 2020. For the remainder of 2020, EQM expects to invest approximately $30 million in the Hammerhead project. The Hammerhead project is expected to become operational in the second quarter of 2020 and will provide interruptible service until the MVP is placed in-service, at which time the firm capacity commitment will begin.
|
•
|
MVP Southgate Project. In April 2018, the MVP Joint Venture announced the MVP Southgate project, a proposed 75-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. The MVP Southgate project is backed by a 300 MMcf per day firm capacity commitment from Dominion Energy North Carolina. As designed, the MVP Southgate project has expansion capabilities that could provide up to 900 MMcf per day of total capacity. The MVP Southgate project is estimated to cost a total of approximately $450 million to $500 million, which is expected to be spent primarily in 2021. EQM is expected to fund approximately $225 million of the overall project cost. During the three months ended March 31, 2020, no capital contributions were made by EQM to the MVP Joint Venture for the MVP Southgate project. For 2020, EQM expects to make capital contributions of approximately $15 million to the MVP Joint Venture for the MVP Southgate project. EQM will operate the MVP Southgate pipeline and, as of March 31, 2020, owned a 47.2% interest in the MVP Southgate project. The MVP Joint Venture submitted the MVP Southgate certificate application to the FERC in November 2018. The Final Environmental Impact Statement for the MVP Southgate project was issued on February 14, 2020. The schedule also identifies May 14, 2020 as the deadline for other agencies to act on other federal authorizations required for the project (the FERC, however, is not subject to this deadline). Subject to approval by the FERC and other regulatory agencies, the MVP Southgate project is expected to be placed in-service in 2021.
|
•
|
Transmission Expansion. During the three months ended March 31, 2020, EQM invested approximately $9 million in transmission expansion projects. For the remainder of 2020, EQM expects to invest approximately $40 million to $50 million in transmission expansion projects, primarily attributable to the Allegheny Valley Connector (AVC), the Equitrans, L.P. Expansion project (EEP), which is designed to provide north-to-south capacity on the mainline Equitrans, L.P. system, including for deliveries to the MVP, and power plant projects. A portion of the EEP commenced operations with interruptible service in the third quarter of 2019. The EEP provides capacity of
|
•
|
Water Expansion. During the three months ended March 31, 2020, EQM invested approximately $3 million in the expansion of its fresh water delivery infrastructure. For the remainder of 2020, EQM expects to invest approximately $10 million to $15 million in the expansion of its fresh water delivery infrastructure in Pennsylvania and Ohio.
|
|
|
Three Months Ended
March 31, |
||||||
|
|
2020
|
|
2019
|
||||
|
(Thousands)
|
|||||||
Expansion capital expenditures (a)(b)(c)
|
|
$
|
115,551
|
|
|
$
|
176,509
|
|
Maintenance capital expenditures (b)
|
|
10,177
|
|
|
9,428
|
|
||
Total capital expenditures (d)
|
|
$
|
125,728
|
|
|
$
|
185,937
|
|
(a)
|
Expansion capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
|
(b)
|
Includes approximately $11.3 million of expansion capital expenditures and $1.2 million of maintenance capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
|
(c)
|
Expansion capital expenditures for the three months ended March 31, 2019 do not include approximately $49.7 million of non-operating assets acquired from Equitrans Midstream in the Shared Assets Transaction that primarily support EQM's gathering activities. See Note 2 to the consolidated financial statements for further detail.
|
(d)
|
EQM accrues capital expenditures when the capital work has been completed but the associated bills have not been paid. Accrued capital expenditures are excluded from the statements of consolidated cash flows until they are paid. See Note 5 to the consolidated financial statements.
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Sierra Club, et al. v. U.S. Army Corps of Engineers, et al., consolidated under Case No. 18-1173, Fourth Circuit Court of Appeals (Fourth Circuit). In February 2018, the Sierra Club filed a lawsuit in the Fourth Circuit against the U.S. Army Corps of Engineers (the U.S. Army Corps). The lawsuit challenges the verification by the Huntington District of the U.S. Army Corps that Nationwide Permit 12, which generally authorizes discharges of dredge or fill material into waters of the United States and the construction of pipelines across such waters under Section 404 of the Clean Water Act, could be utilized in the Huntington District (which covers all but the northernmost area of West Virginia) for the MVP project. The crux of Sierra Club's position was that the MVP Joint Venture, pursuant to its FERC license, planned to use a certain methodology (dry open cut creek crossing methodology) to construct the pipeline across streams in West Virginia that would take considerably longer than the 72 hours allowed for such activities pursuant to the terms of West Virginia's Clean Water Act Section 401 certification for Nationwide Permit 12. A three-judge panel of the Fourth Circuit agreed with the Sierra Club and on October 2, 2018, issued a preliminary order stopping the construction in West Virginia of that portion of the pipeline that is subject to Nationwide Permit 12. Following the issuance of the court's preliminary order, the U.S. Army Corps' Pittsburgh District (which had also verified use of Nationwide Permit 12 by MVP in the northern corner of West Virginia) suspended its verification that allowed the MVP Joint Venture to use Nationwide Permit 12 for stream and wetlands crossings in northern West Virginia. On November 27, 2018, the Fourth Circuit panel issued its final decision vacating the Huntington District's verification of the use of Nationwide Permit 12 in West Virginia. West Virginia subsequently revised its Section 401 certification for Nationwide Permit 12; however, unless and until the U.S. Army Corps' Huntington and Pittsburgh Districts re-verify the MVP Joint Venture's use of Nationwide Permit 12, or the MVP Joint Venture secures an individual Section 404 permit with the concurrence of both Districts, the MVP Joint Venture cannot perform any construction activities in any streams and wetlands in West Virginia. In June 2018, the Sierra Club filed a second petition in the Fourth Circuit
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WVDEP Rulemaking Proceedings - Section 401 Nationwide Permit. On April 13, 2017, the West Virginia Department of Environmental Protection (WVDEP) issued a 401 Water Quality Certification for the U.S. Army Corps Nationwide Permits. In August 2018, the WVDEP initiated an administrative process to revise this certification and requested public comment to, among other things, specifically revise the 72-hour limit for stream crossings noted as problematic by the Fourth Circuit as well as other conditions. The WVDEP issued a new notice and comment period for further modifications of the 401 certification. On April 24, 2019, the WVDEP submitted the modification to the United States Environmental Protection Agency (the EPA) for approval (since the WVDEP is also required to obtain the EPA's agreement to the modified 401 certification) and provided notice to the U.S. Army Corps. The EPA's agreement to the WVDEP's modification of its water quality certification was received in August 2019 and, accordingly, the MVP Joint Venture anticipates that it will once again secure from the U.S. Army Corps Districts within West Virginia verification that its activities, including stream crossings, may proceed under Nationwide Permit 12 as re-certified by the WVDEP. The U.S. Army Corps approved the WVDEP's modification of its Nationwide Permit on January 24, 2020. The MVP Joint Venture submitted a new permit application on January 28, 2020 anticipating a permit decision in mid-2020. However, the timing of the decision may be affected by the decision in Northern Plains Resource Council, outlined below. Further, the MVP Joint Venture cannot guarantee that the WVDEP's action will not be challenged or that the U.S. Army Corps Districts will act promptly or be deemed to have acted properly if challenged, in which case reverification may be further delayed.
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Sierra Club, et al. v. U.S. Forest Service, et al., consolidated under Case No. 17-2399, Fourth Circuit Court of Appeals. In a different Fourth Circuit appeal filed in December 2017, the Sierra Club challenged a Bureau of Land Management (BLM) decision to grant a right-of-way to the MVP Joint Venture and a U.S. Forest Service (USFS) decision to amend its management plan to accommodate MVP, both of which affect the MVP's 3.6-mile segment in the Jefferson National Forest in Virginia. On July 27, 2018, agreeing in part with the Sierra Club, the Fourth Circuit vacated the BLM and USFS decisions, finding fault with the USFS' analysis of erosion and sedimentation effects and the BLM's analysis of the practicality of alternate routes. On August 3, 2018, citing the court's vacatur and remand, the FERC issued a stop work order for the entire pipeline pending the agency actions on remand. The FERC modified its stop work order on August 29, 2018 to allow work to continue on all but approximately 25 miles of the project. On October 10, 2018, the Fourth Circuit granted a petition for rehearing filed by the MVP Joint Venture for the limited purpose of clarifying that the July 27, 2018 order did not vacate the portion of the BLM's Record of Decision authorizing a right-of-way and temporary use permit for MVP to cross the Weston and Gauley Bridge Turnpike Trail in Braxton County, West Virginia. On October 15, 2018, the MVP Joint Venture filed with the FERC a request to further modify the August 3, 2018 stop work order to allow the MVP Joint Venture to complete the bore and install the pipeline under the Weston and Gauley Bridge Turnpike Trail. On October 24, 2018, the FERC granted the MVP Joint Venture's request to further modify the stop work order and authorize construction. However, work on the 3.6-mile segment in the Jefferson National Forest must await a revised authorization, which the MVP Joint Venture is working to obtain.
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Challenges to FERC Certificate, Court of Appeals for the District of Columbia Circuit (DC Circuit). Multiple parties have sought judicial review of the FERC's order issuing a certificate of convenience and necessity to the MVP Joint Venture and/or the exercise by the MVP Joint Venture of eminent domain authority. On February 19, 2019, the DC Circuit issued an order rejecting multiple consolidated petitions seeking direct review of the FERC order under the Natural Gas Act and certain challenges to the exercise by the MVP Joint Venture of eminent domain authority in Appalachian Voices, et al. v. FERC, et al., consolidated under Case No. 17-1271. No petitions for rehearing or petitions for rehearing en banc were filed by the April 5, 2019 deadline. The mandate was issued on April 17, 2019. Another group of parties filed a complaint in the U.S. District Court for the District of Columbia asserting that the
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Mountain Valley Pipeline, LLC v. 6.56 Acres of Land et al., Case No. 18-1159, Fourth Circuit Court of Appeals. Several landowners filed challenges to the condemnation proceedings by which the MVP Joint Venture obtained access to their property in various U.S. District Courts. In each case, the district court found that the MVP Joint Venture was entitled to immediate possession of the easements, and the landowners appealed to the Fourth Circuit. The Fourth Circuit consolidated these cases and issued two opinions in 2019, one granting the MVP Joint Venture immediate access for construction of the pipeline and the other finding that the MVP Joint Venture did not have to condemn the interest of coal owners and that coal owners are not entitled to assert claims in the condemnation proceedings for lost coal on tracts for which they do not own a surface interest being condemned. A group of landowners filed a writ of certiorari with the United States Supreme Court regarding the Fourth Circuit’s ruling on immediate access which was denied on October 7, 2019. District court trials on just compensation are ongoing.
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Greenbrier River Watershed Ass’n v. WVDEP, Circuit Court of Summers County, West Virginia. In August 2017, the Greenbrier River Watershed Association appealed the MVP Joint Venture's Natural Stream Preservation Act Permit obtained from the West Virginia Environmental Quality Board (WVEQB) for the Greenbrier River crossing. Petitioners alleged that the issuance of the permit failed to comply with West Virginia's Water Quality Standards for turbidity and sedimentation. The WVEQB dismissed the appeal in June 2018. In July 2018, the Greenbrier River Watershed Association appealed the decision to the Circuit Court of Summers County, asking the court to remand the permit with instructions to impose state-designated construction windows and pre- and post-construction monitoring requirements as well as a reversal of the WVEQB's decision that the permit was lawful. On September 18, 2018, the Circuit Court granted a stay. A hearing on the merits was held on October 23, 2018. The court has not yet issued a decision. In the event of an adverse decision, the MVP Joint Venture would appeal or work with the WVDEP to attempt to resolve the issues identified by the court.
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Sierra Club et al. v. U.S. Dep’t of Interior et al., Case No. 18-1082, Fourth Circuit Court of Appeals. On August 6, 2018, the Fourth Circuit held that the National Park Service (NPS) acted arbitrarily and capriciously in granting the ACP a right-of-way permit across the Blue Ridge Parkway. Specifically, the Fourth Circuit found that the permit cited the wrong source of legal authority and the NPS failed to make a “threshold determination that granting the right-of-way is ‘not inconsistent with the use of such lands for parkway purposes’ and the overall National Park System to which it belongs.” Even though the MVP Joint Venture is not named in the ACP litigation, the MVP route crosses the Blue Ridge Parkway roughly midway between mileposts 246 and 247 of the pipeline route and implicates some of the same deficiencies addressed by the court. The MVP Joint Venture elected to request that the NPS temporarily suspend its Blue Ridge Parkway permit until the deficiencies identified in the ACP litigation are resolved. While the MVP and ACP rights-of-way share some of the same regulatory issues, unlike ACP the portion of the MVP pipeline that crosses the Blue Ridge Parkway is completely constructed. NPS granted the MVP Joint Venture the ability to continue final restoration efforts on that portion of the pipeline during the course of the suspended permit. The MVP Joint Venture is working with the NPS to address MVP-related right-of-way issues.
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Wild Virginia et al. v. United States Department of the Interior; Case No. 19-1866, Fourth Circuit Court of Appeals. Petitioners filed a petition in the Fourth Circuit to challenge MVP’s Biological Opinion and Incidental Take Statement issued by the Department of the Interior’s Fish and Wildlife Service (FWS) which was approved in November 2017 (BiOp). Petitioners also requested a stay of the application of MVP’s BiOp during the pendency of the court case. FWS subsequently requested that the court approve a stay of the litigation until January 11, 2020. On August 15, 2019, the MVP Joint Venture submitted a project-wide voluntary suspension of construction activities that pose a risk of incidental take, based on the BiOp. On October 11, 2019, the Fourth Circuit issued an order approving the stay of the BiOp and held the litigation in abeyance until January 11, 2020 pending re-consultation between FWS and the FERC
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Cowpasture River Preservation Association, et al. v. U.S. Forest Service, et al., Case No. 18-1144, Fourth Circuit Court of Appeals. On December 13, 2018, in an unrelated case involving the ACP, the Fourth Circuit held that the USFS, which is part of the Department of Agriculture, lacked the authority to grant rights-of-way for oil and gas pipelines to cross the Appalachian Trail. Although the MVP Joint Venture obtained its grant to cross the Appalachian Trail from the BLM, a part of the Department of Interior, the rationale of the Fourth Circuit's opinion could apply to the BLM as well. On February 25, 2019, the Fourth Circuit denied ACP’s petition for en banc rehearing. The federal government and ACP filed petitions to the United States Supreme Court on June 26, 2019 seeking judicial review of the Fourth Circuit's decision. On October 4, 2019, the Supreme Court formally accepted the Petitioners' writ of certiorari. The oral arguments occurred on February 24, 2020. Based on general court practice, EQM anticipates that the Supreme Court will issue its decision before the end of the 2019-2020 term in June 2020. The MVP Joint Venture is continuing to pursue multiple options to address the Appalachian Trail issue, including but not limited to, administrative, regulatory and legislative options.
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Grand Jury Subpoena. On January 7, 2019, the MVP Joint Venture received a letter from the U.S. Attorney's Office for the Western District of Virginia stating that it and the EPA are investigating potential criminal and/or civil violations of the Clean Water Act and other federal statutes as they relate to the construction of the MVP. The January 7, 2019 letter requested that the MVP Joint Venture and its members, contractors, suppliers and other entities involved in the construction of the MVP preserve documents related to the MVP generated from September 1, 2018 to the present. In a telephone call on February 4, 2019, the U.S. Attorney's Office confirmed that it has opened a criminal investigation. On February 11, 2019, the MVP Joint Venture received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Virginia requesting certain documents related to the MVP from August 1, 2018 to the present. The MVP Joint Venture is complying with the letter and subpoena but cannot predict whether any action will ultimately be brought by the U.S. Attorney's Office or what the outcome of such an action would be. The MVP Joint Venture began a rolling production of documents responsive to the subpoena after the U.S. Attorney’s office narrowed its subpoena inquiry to five farms in Virginia containing twenty streams or wetlands.
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Northern Plains Resource Council, et al. v. Army Corps of Engineers., Case no. CV-19-44-GF-BMM, U.S. District Court for the District of Montana., In Northern Plains Resource Council, et al. v. Army Corps of Engineers, Judge Brian Morris of the U.S. District Court for the District of Montana found that the U.S. Army Corp was required to conduct Endangered Species Act (ESA) consultations with federal wildlife agencies when it last revised Nationwide Permit 12 in 2017, the general permit governing dredge-and-fill activities for pipeline and other utility line construction projects. The Court enjoined the U.S. Army Corps from authorizing any dredge or fill activities under Nationwide Permit 12 in Montana. Based on these findings, the order vacated Nationwide Permit 12, remanded it to the U.S. Army Corps to consult with the applicable federal wildlife agencies, and prohibited the U.S. Army Corps from authorizing projects under Nationwide Permit 12 until consultation is complete. Following the order, the U.S. Army Corps suspended Nationwide Permit 12 which could cause the U.S. Army Corps to decline to verify future construction activities submitted under Nationwide Permit 12 pending further court action. On April 28, 2020, the Court denied the Department of Justice's motion to stay the vacatur pending appeal but granted a motion for expedited briefing. On May 11, 2020, Judge Morris denied the U.S. Army Corps’ motion to stay the order pending appeal, and narrowed the original opinion’s scope to allow use of Nationwide Permit 12 on non-pipeline construction activities and routine maintenance, inspection and repair activities on existing Nationwide Permit 12 projects. The Department of Justice appealed the decision to, and requested an administrative stay from, the Ninth Circuit Court of Appeals on May 13, 2020. Such actions will take time and outcomes remain uncertain. If the ruling is applied nationwide, EQM expects a delay in obtaining approval of the MVP Joint Venture's pending Nationwide Permit 12 permits which were submitted to the U.S. Army Corps in January 2020.
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our customers may be adversely affected if the outbreak results in an economic downturn or recession and/or causes declines in the price of, demand for and production of natural gas or prevents such customers (particularly our largest customer) from conducting, or curtails their ability to conduct, field operations and continue natural gas production, which could reduce demand for our services, negatively affect throughput on our systems or heighten our exposure to risk of loss resulting from the nonpayment and/or nonperformance of its customers;
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our operations may be disrupted or become less efficient if a significant portion of our employees or contractors are unavailable due to illness or if our field operations, including in respect of projects in development, were to be suspended or temporarily shut down or restricted due to outbreak control measures;
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legal and regulatory processes relating to our projects in development, including the MVP project, may be disrupted or slowed, such as if relevant governmental authorities suffer reduced workforce availability due to the virus; and
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resultant disruption to, and instability in, financial and credit markets may adversely affect our access to capital, leverage and liquidity levels and credit ratings, as well as our counterparties’ access to capital, business continuity, financial stability, leverage and liquidity levels and credit ratings (which could heighten counterparty credit risk to which we are exposed in the ordinary course of its business).
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The Equitrans Midstream Preferred Shares are a new class of security that will rank pari passu with any other outstanding class or series of Equitrans Midstream’s preferred stock and senior to all shares of Equitrans Midstream’s common stock with respect to dividend rights and rights upon liquidation.
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The Equitrans Midstream Preferred Shares will vote on an as-converted basis with Equitrans Midstream common stock and will have certain other class voting rights with respect to any amendment to Equitrans Midstream’s Certificate of Designations relating to the Equitrans Midstream Preferred Shares or Equitrans Midstream’s Amended and Restated Articles of Incorporation that would be adverse (other than in a de minimis manner) to any of the rights, preferences or privileges of the Equitrans Midstream Preferred Shares.
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The holders of the Equitrans Midstream Preferred Shares will receive cumulative quarterly dividends at a rate per annum of 9.75% for each quarter ending on or before March 31, 2024, and thereafter the quarterly dividends at a rate per annum equal to the sum of (i) three-month LIBOR as of a LIBOR Determination Date (as defined in the Certificate of Designations) in respect of the applicable quarter and (ii) 8.15%; provided that the rate per annum in respect of periods after March 31, 2024 shall not be less than 10.50%.
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Equitrans Midstream will not be entitled to pay any dividends on any junior securities, including any shares of Equitrans Midstream common stock, prior to paying the quarterly dividends payable to the Equitrans Midstream Preferred Shares, including any previously accrued and unpaid dividends.
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Each holder of the Equitrans Midstream Preferred Shares may elect to convert all or any portion of the Equitrans Midstream Preferred Shares owned by it into Equitrans Midstream common stock initially on a one-for-one basis, subject to certain anti-dilution adjustments and an adjustment for any dividends that have accrued but not been paid when due and partial period dividends (referred to as the “conversion rate”), at any time (but not more often than once per fiscal quarter) after April 10, 2021 (or earlier liquidation, dissolution or winding up of us), provided that any conversion involves an aggregate number of Equitrans Midstream Preferred Shares of at least $20.0 million (calculated based on the closing price of our common stock on the trading day preceding notice of the conversion) or such lesser amount if such conversion relates to all of a holder’s remaining Equitrans Midstream Preferred Shares or if such conversion is approved by our Board of Directors.
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So long as the holders of Equitrans Midstream Preferred Shares have not elected to convert all of their Equitrans Midstream Preferred Shares into Equitrans Midstream common stock, Equitrans Midstream may elect to convert all of the Equitrans Midstream Preferred Shares for Equitrans Midstream common stock at any time after April 10, 2021 if (i) Equitrans Midstream common stock is listed for, or admitted to, trading on a national securities exchange, (ii) the Equitrans Midstream Preferred Share Issue Price for the 20 consecutive trading days immediately preceding notice of the conversion, (iii) the average daily trading volume of Equitrans Midstream common stock on the national securities exchange on which Equitrans Midstream common stock is listed for, or admitted to, trading exceeds 1,000,000 shares of Equitrans Midstream common stock (subject to certain adjustments) for the 20 consecutive trading days immediately preceding notice of the conversion, (iv) Equitrans Midstream has an effective registration statement on file with the SEC covering resales of Equitrans Midstream common stock to be received by such holders upon any such conversion and (v) Equitrans Midstream has paid all accrued quarterly dividends in cash to the holders.
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Upon certain events involving a Change of Control (as defined in the Certificate of Designations) in which more than 90% of the consideration payable to us, or to the holders of Equitrans Midstream common stock is payable in cash, the
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In connection with other Change of Control events that do not satisfy the 90% cash consideration threshold described above, in addition to certain other conditions, each holder of Equitrans Midstream Preferred Shares may elect to (a) convert all, but not less than all, of its Equitrans Midstream Preferred Shares into our common stock at the then applicable conversion rate, (b) if Equitrans Midstream is not the surviving entity (or if Equitrans Midstream is the surviving entity, but Equitrans Midstream common stock will cease to be listed), require us to use commercially reasonable efforts to cause the surviving entity in any such transaction to issue a substantially equivalent security that has rights, preferences and privileges substantially equivalent to the Equitrans Midstream Preferred Shares (or if Equitrans Midstream is unable to cause such substantially equivalent securities to be issued, to exercise the option described in clause (a) or (d) hereof or elect to convert such Equitrans Midstream Preferred Shares at a conversion ratio reflecting a multiple of invested capital), (c) if Equitrans Midstream is the surviving entity, continue to hold the Equitrans Midstream Preferred Shares or (d) require us to redeem the Equitrans Midstream Preferred Shares at a price per share equal to 101% of the Equitrans Midstream Preferred Share Issue Price, plus accrued and unpaid dividends, including any partial period dividends, on the applicable Equitrans Midstream Preferred Shares on such date, which redemption price may be payable in cash, our common stock or a combination thereof at our election (and, if payable in our common stock, such common stock will be issued at 95% of the volume weighted average price of our common stock for the 20-day period ending on the fifth trading day immediately preceding the consummation of the Change of Control). Any holder of Equitrans Midstream Preferred Shares that requires us to redeem its Equitrans Midstream Preferred Shares pursuant to clause (d) above will have the right to withdraw such election with respect to all, but not less than all, of its Equitrans Midstream Preferred Shares at any time prior to the fifth trading day immediately preceding the consummation of the Change of Control and instead elect to be treated in accordance with any of clauses (a), (b) or (c) above.
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At any time on or after January 1, 2024, Equitrans Midstream will have the right, subject to applicable law, to redeem the Equitrans Midstream Preferred Shares, in whole or in part, by paying cash for each Equitrans Midstream Preferred Share to be redeemed in an amount equal to the greater of (a) the sum of (i)(1) the Equitrans Midstream Preferred Share Issue Price multiplied by (2) 110%, plus (ii) any accrued and unpaid dividends, including any partial period dividends, with respect to the Equitrans Midstream Preferred Shares on such date and (b) the amount the holder of such Equitrans Midstream Preferred Share would receive if such holder had converted such Equitrans Midstream Preferred Share into shares of our common stock at the then-applicable conversion ratio and Equitrans Midstream liquidated immediately thereafter.
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Pursuant to the terms of the Restructuring Agreement, in connection with the closing of the Restructuring, Equitrans Midstream has agreed to enter into the Registration Rights Agreement pursuant to which, among other things, Equitrans Midstream will give the Investors certain rights to require us to file and maintain one or more registration statements with respect to the resale of the Equitrans Midstream Preferred Shares and the shares of our common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares, and which, upon request by certain Investors party to the Registration Rights Agreement, will require us to initiate underwritten offerings for the Equitrans Midstream Preferred Shares and the shares of our common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares and use our best efforts to cause the Equitrans Midstream Preferred Shares to be listed on the securities exchange on which the shares of our common stock are then listed.
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Exhibit No.
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Document Description
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Method of Filing
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Agreement and Plan of Merger, dated as of February 26, 2020, by and among Equitrans Midstream Corporation, EQM LP Corporation, LS Merger Sub, LLC, EQM Midstream Partners, LP and EQGP Services, LLC.
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Incorporated herein by reference to Exhibit 2.1 to Form 8-K (#001-35574) filed on February 28, 2020.
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Second Amendment to Fourth Amended and Restated Agreement of Limited Partnership of EQM Midstream Partners, LP, dated as of February 26, 2020.
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Incorporated herein by reference to Exhibit 3.1 to Form 8-K (#001-35574) filed on February 28, 2020.
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Third Amendment to Fourth Amended and Restated Agreement of Limited Partnership of EQM Midstream Partners, LP, dated as of April 29, 2020.
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Incorporated herein by reference to Exhibit 3.1 to Form 8-K (#001-35574) filed on April 29, 2020.
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Preferred Restructuring Agreement, dated as of February 26, 2020, by and among Equitrans Midstream Corporation, EQM Midstream Partners, LP and the Investors party thereto.
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Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-35574) filed on February 28, 2020.
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Loan Agreement, dated as of March 3, 2020, by and between EQM Midstream Partners, LP and Equitrans Midstream Corporation.
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Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-35574) filed on March 6, 2020.
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Promissory Note, dated as of March 5, 2020, by and between Equitrans
Midstream Corporation and EQM Midstream Partners, LP (as assignee of
EQT Corporation).
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Incorporated herein by reference
to Exhibit 10.2 to Equitrans
Midstream Corporation's Form 8-K (#001-38629) filed on March 6, 2020.
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Gas Gathering and Compression Agreement, dated as of February 26, 2020, by and among EQT Corporation, EQT Production Company, Rice Drilling B LLC, EQT Energy, LLC and EQM Gathering Opco, LLC.
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Incorporated herein by reference to Exhibit 10.4 to Equitrans Midstream Corporation's Form 8-K/A (#001-38629) filed on March 13, 2020.
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Credit Letter Agreement, dated as of February 26, 2020, by and between EQM Midstream Partners, LP and EQT Corporation.
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Filed herewith as Exhibit 10.5.
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Water Services Letter Agreement, dated as of February 26, 2020, by and among EQT Production Company, Rice Drilling B LLC, EQM Gathering Opco, LLC and Equitrans Water Services (PA) LLC.
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Incorporated herein by reference to Exhibit 10.6 to Equitrans Midstream Corporation's Form 8-K/A (#001-38629) filed on March 13, 2020.
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First Amendment to Third Amended and Restated Credit Agreement, dated as of March 30, 2020, by and among EQM Midstream Partners, LP, the lender parties thereto and Wells Fargo Bank, National Association, as administrative agent.
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Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-35574) filed on March 30, 2020.
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First Amendment to Term Loan Agreement, dated as of March 30, 2020, by and among EQM Midstream Partners, LP, the lender parties thereto and Toronto Dominion (Texas) LLC, as administrative agent.
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Incorporated herein by reference to Exhibit 10.2 to Form 8-K (#001-35574) filed on March 30, 2020.
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Confidentiality, Non-Solicitation and Change of Control Agreement, dated as of April 14, 2020, by and between Equitrans Midstream Corporation and Brian P. Pietrandrea.
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Filed herewith as Exhibit 10.9.
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First Amendment to Third Amended and Restated Limited Liability Company Agreement of Mountain Valley Pipeline, LLC, dated as of February 5, 2020, by and among MVP Holdco, LLC, US Marcellus Gas Infrastructure, LLC, WGL Midstream, Inc., Con Edison Gas Pipeline and Storage, LLC and Mountain Valley Pipeline, LLC.
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Incorporated herein by reference to Exhibit 10.12(b) to Form 10-K (#001-35574) filed on February 27, 2020.
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Transportation Service Agreement Applicable to Firm Transportation Service Under Rate Schedule FTS, Contract No. EQTR19837-1296, dated as of January 8, 2016 and amended through January 9, 2020, by and between Equitrans, L.P. and EQT Energy, LLC.
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Incorporated herein by reference to Exhibit 10.27 to Form 10-K (#001-35574) filed on February 27, 2020.
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Rule 13(a)-14(a) Certification of Principal Executive Officer.
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Filed herewith as Exhibit 31.1.
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Rule 13(a)-14(a) Certification of Principal Financial Officer.
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Filed herewith as Exhibit 31.2.
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Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.
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Furnished herewith as Exhibit 32.
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101
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Inline Interactive Data File.
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Filed herewith as Exhibit 101.
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104
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Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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Filed herewith as Exhibit 104.
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EQM Midstream Partners, LP
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(Registrant)
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By:
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EQGP Services, LLC, its General Partner
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By:
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/s/ Kirk R. Oliver
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Kirk R. Oliver
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Senior Vice President and Chief Financial Officer
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