CANONSBURG, Pa.--(BUSINESS WIRE)--Equitrans Midstream Corporation (NYSE: ETRN), today, announced financial and operational results for the first quarter 2024. Included in the "Non-GAAP Disclosures" section of this news release are important disclosures regarding the use of non-GAAP supplemental financial measures, including information regarding their most comparable GAAP financial measure.

Q1 2024 Highlights:

• Announced proposed acquisition by EQT Corporation in an all-stock transaction
• Reported $111.9 million of net income and $271.8 million of Adjusted EBITDA
• Generated $177.5 million of net cash from operating activities
• Recorded 67% of total operating revenue from firm reservation fees

"With all of the waterbody and wetland crossings complete and less than one mile of pipeline to install, we are nearing completion of MVP's forward construction activities," said Diana M. Charletta, Equitrans Midstream's President & CEO. "Permanent restoration work is ongoing, and we expect to complete construction and final commissioning activities on or about May 31, 2024, with MVP's total project cost estimated at approximately $7.85 billion. As part of the regulatory process, on April 22, 2024, Mountain Valley Pipeline filed a formal request for authorization from the Federal Energy Regulatory Commission to place the MVP project into service following the mechanical completion of all project facilities. We are pleased to be so close to completing this critical infrastructure project."

2024 FIRST QUARTER SUMMARY RESULTS

Net income attributable to ETRN common shareholders for the first quarter 2024 was impacted by several items, including one-time transaction expenses of $5.7 million related to the proposed acquisition by EQT Corporation (EQT) and a $4.7 million unrealized loss on derivative instruments. The unrealized loss is reported within other expense, net, and relates to the contractual agreement with EQT in which ETRN will receive cash from EQT conditioned on the quarterly average of certain Henry Hub natural gas prices exceeding certain thresholds beginning with the quarter in which the Mountain Valley Pipeline (MVP) long-term firm capacity obligations become effective through the fourth quarter of 2024. The contract is accounted for as a derivative with the fair value marked-to-market at each quarter-end. Additionally, ETRN reported first quarter equity income of $73.0 million, which is primarily associated with allowance for funds used during construction (AFUDC) related to resuming MVP forward construction in 2023 and continuing forward construction in the first quarter of 2024.

As a result of the gathering agreement entered into with EQT in February 2020 (EQT Global GGA), revenue from the contracted minimum volume commitment (MVC) is recognized utilizing an average gathering rate applied over the remaining contract life. The difference between the cash received from the MVC and the revenue recognized results in the deferral of revenue into future periods. Deferred revenue for the first quarter 2024 was $61.0 million.

Operating revenue for the first quarter 2024 decreased by $12.1 million compared to the same quarter last year, primarily related to one-time transmission and gathering contract buyouts by a customer of $28.8 million that occurred in the first quarter 2023, partially offset by increased gathering revenues from other customers. Operating expenses increased by $22.0 million compared to the first quarter 2023, primarily due to increased selling, general and administrative expenses, one-time transaction expenses related to the proposed acquisition by EQT, and higher operating and maintenance and depreciation expenses, partially offset by a decrease in expenses related to the Rager Mountain natural gas storage field incident.

QUARTERLY DIVIDEND

For the first quarter 2024, ETRN will pay a quarterly cash dividend of $0.15 per common share on May 15, 2024 to ETRN common shareholders of record at the close of business on May 7, 2024.

TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS

2024 GUIDANCE

Due to the pending transaction with EQT, ETRN has discontinued providing quarterly and annual financial guidance. Accordingly, investors should not rely on any previously disclosed financial guidance and are cautioned not to rely on historical forward-looking statements as those forward-looking statements were the estimates of management only as of the date provided and were subject to the specific risks and uncertainties that accompanied such forward-looking statements.

Full-Year 2024 Capital Expenditures and Capital Contribution Outlook

All guidance items exclude the impact of the proposed acquisition by EQT.

BUSINESS AND PROJECT UPDATES

Proposed EQT Acquisition of Equitrans Midstream

On March 11, 2024, Equitrans Midstream announced that it had entered into a definitive agreement with EQT Corporation, whereby EQT would acquire Equitrans in an all-stock transaction. Under the terms of the merger agreement, unanimously approved by the boards of directors of both companies, each outstanding share of Equitrans common stock will be exchanged for 0.3504 shares of EQT common stock. As a result of the transaction, EQT's existing shareholders are expected to own approximately 74% of the combined company and Equitrans' shareholders are expected to own approximately 26%. Closing of the transaction is subject to certain conditions described in the merger agreement, including the approval of EQT shareholders and Equitrans shareholders and regulatory clearance.

Mountain Valley Pipeline

As of April 28, 2024, the MVP JV has made substantial progress on the MVP project including, among other things, completing:

• approximately 303 miles of pipeline installed (less than one mile remaining to install);
• all waterbody and wetland crossing work;
• the hydrotesting of approximately 269 miles (approximately 35 miles of testing remains, inclusive of interconnect piping);
• the purging and packing of the pipeline through to the second compressor station (total of approximately 77 miles);
• the commissioning of two of three MVP compressor stations; and
• restoration of a substantial portion of the pipeline right-of-way, with the majority of remaining pipeline restoration to occur following MVP in-service.

Remaining forward construction includes the tying in of a completed bore, the installation of pipe on a steep slope, and the tying together of the final pipeline segments after completing testing and commissioning activities.

In April 2024, the MVP JV filed its in-service authorization request for the MVP project with the Federal Energy Regulatory Commission (FERC). Construction, together with commissioning activity and certain restoration work, is ongoing as of the date of this news release, and ETRN expects to complete construction and final commissioning of the pipeline on or about May 31, 2024. The majority of the remaining restoration is to occur following MVP in-service. MVP and MVP-related long-term firm capacity will begin on the first day of the month immediately following the date MVP receives FERC authorization to commence service and is able to provide the applicable service level (with certain MVC step ups and more significant gathering MVC fee declines under the EQT Global GGA commencing effective the first day of the calendar quarter in which the MVP long-term firm capacity obligations commence). Should MVP be authorized and able to provide service, however its long-term firm capacity obligations are not yet effective due to timing, MVP would be available for interruptible or short-term firm service until long-term firm capacity obligations commence.

While the MVP project has made substantial progress toward completion, the total estimated project cost was adversely affected by a number of factors, including that the pace of forward construction and workforce draw down realized through April 28, 2024, were slower than anticipated resulting in additional labor, equipment and support costs in April and May 2024. Project costs were affected by challenging physical construction conditions, certain equipment and other issues during now-completed boring operations, unexpected challenges with certain pipeline cleaning procedures, and inclement weather. Additionally, ETRN updated its assumptions regarding the completion of certain restoration efforts, including associated scope, permit-related activities, and labor, as well as taking into account refreshed contractor bids. Given these and certain other factors which may have potential impacts on project completion, such as weather in the pre- or post-MVP in-service periods, ETRN is targeting a total project cost of approximately $7.85 billion (including contingency and excluding allowance for funds used during construction (AFUDC)).

Through March 31, 2024, ETRN had funded approximately $3.8 billion to the MVP JV for the MVP project. Given ETRN's expectation to complete MVP project construction and final commissioning on or about May 31, 2024, and its estimated total project cost of approximately $7.85 billion (including contingency and excluding AFUDC), ETRN expects it would incur approximately $4.1 billion of the estimated total project cost, inclusive of approximately $255 million in excess of ETRN's ownership interest. ETRN's equity ownership in the MVP project is anticipated to progressively increase from approximately 48.9% to approximately 49.2%. Total capital contributions made by ETRN to the MVP JV in 2024 are expected to be approximately $700 million.

Ohio Valley Connector Expansion Project

The Ohio Valley Connector Expansion Project (OVCX) began providing firm interim service on April 1, 2024, and ETRN expects full in-service to occur on May 1, 2024. Total investment in the project is expected to be approximately $160 million, including approximately $40 million in 2024. The majority of the total investment is expected to be made by year-end 2024. The project is primarily supported by long-term firm capacity commitments of 330 MMcf per day.

Senior Notes Offering

On February 26, 2024, EQM Midstream Partners, LP (EQM) completed the issuance of $600 million aggregate principal amount of its 6.375% senior notes due 2029. Net proceeds from the offering were used to repay outstanding borrowings under EQM's revolving credit facility and for general partnership purposes.

Volume Curtailment Update

First quarter 2024 gathered volumes and revenue were negatively impacted by the approximately one Bcf per day of gross production curtailments announced in March 2024 by EQT, as a substantial portion of such curtailments were realized on ETRN systems beginning in late February 2024. On April 23, 2024, EQT announced it assumes curtailments of approximately one Bcf per day of its operated production to continue through May 2024 and acknowledged the potential for future curtailments depending on market conditions. ETRN expects that EQT will continue to curtail production on ETRN systems through May 2024 and that EQT and/or other producers could curtail production further in 2024.

Outstanding Debt and Liquidity

As of March 31, 2024, ETRN reported $6.9 billion of consolidated debt; $520.0 million of borrowings and $105.8 million of letters of credit outstanding under EQM's revolving credit facility; $330.0 million of borrowings under Eureka's revolving credit facility; and $51.3 million of cash.

NON-GAAP DISCLOSURES

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

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

The table below reconciles adjusted net income attributable to ETRN common shareholders and adjusted earnings per diluted share attributable to ETRN common shareholders with net income (loss) attributable to ETRN common shareholders and earnings (loss) per diluted share attributable to ETRN common shareholders as derived from the statements of consolidated comprehensive income to be included in ETRN's Quarterly Report on Form 10-Q for the three months ended March 31, 2024. Diluted weighted average common shares outstanding assumes dilution for each applicable period.

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

Adjusted EBITDA

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

The table below reconciles adjusted EBITDA with net income as derived from the statements of consolidated comprehensive income to be included in ETRN's Quarterly Report on Form 10-Q for the three months ended March 31, 2024.

Reconciliation of Adjusted EBITDA

Free Cash Flow

As used in this news release, free cash flow means, as applicable, net cash provided by operating activities plus principal payments received on the Preferred Interest, distributions received from the MVP JV included in net cash provided by (used in) investing activities, and less net cash provided by operating activities attributable to noncontrolling interest, dividends paid to Series A Preferred Shareholders, capital expenditures (excluding the noncontrolling interest share (40%) of Eureka capital expenditures), capital contributions to MVP JV and distributions received from the MVP JV associated with MVP financing activities.

Retained Free Cash Flow

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

The table below reconciles free cash flow and retained free cash flow with net cash provided by operating activities as derived from the statements of consolidated cash flows to be included in ETRN's Quarterly Report on Form 10-Q for the three months ended March 31, 2024.

Reconciliation of Free Cash Flow and Retained Free Cash Flow

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

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

ETRN believes that adjusted EBITDA, free cash flow, and retained free cash flow provide useful information to investors in assessing ETRN's financial condition and results of operations.

Analyst inquiries:
Anthony DeFabio – Treasurer and Director, Investor Relations
412-518-7193
adefabio@equitransmidstream.com

Media inquiries:
Natalie Cox – Communications and Corporate Affairs
ncox@equitransmidstream.com