CANONSBURG, Pa.--(BUSINESS WIRE)--#ETRN--Equitrans Midstream Corporation (NYSE: ETRN), today, announced financial and operational results for the full-year and fourth quarter 2020. 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.

2020 Highlights:

• Generated $638 million of net income and achieved $1,215 million of adjusted EBITDA
• Recorded 66% of total operating revenue from firm reservation fees
• Increased total gathered volumes by approximately 5% year-over-year
• Reduced gathering operating and maintenance expense per gathered volume by 14% year-over-year

“The past year was transformational on many fronts,” said Thomas F. Karam, ETRN chairman and chief executive officer. “During 2020, our employees remained resilient – navigating the unprecedented times related to the pandemic and strengthening our company by delivering on our ability to generate predictable and stable revenue in any operating environment. We simplified our corporate structure, emerging as a single C-Corp entity; executed a gathering agreement that allows us to optimize our assets and realize meaningful capital savings; and acted with fiscal discipline by controlling costs and deploying capital efficiently in order to strengthen our balance sheet.”

“Looking ahead, we acknowledge the reality of climate change as one of the most critical issues of our time and we continue to embrace the importance of sustainability for future generations,” said Diana M. Charletta, ETRN president and chief operating officer. “Similar to our proactive safety culture, Equitrans’ ESG initiatives are becoming part of our DNA – from biodiversity considerations and the sourcing of our materials, to stakeholder engagement and transparent corporate governance.”

Charletta continued, “In January, we published our initial Climate Policy, which underscores a comprehensive commitment to environmental excellence in every aspect of our operations. As our society transitions to a lower-carbon economy, we will continue to take steps to reduce greenhouse gas emissions and build resiliency in our business to effectively manage the risks and opportunities. Every day must be a step in the right direction and as the journey continues, we will work to achieve our near-term actions, as well as our Net Zero Carbon Goals by 2050.”

2020 YEAR-END AND FOURTH QUARTER SUMMARY RESULTS

Net income attributable to ETRN common shareholders was impacted by a $21.3 million unrealized loss on derivative instruments for the fourth quarter 2020 and a $16.5 million unrealized gain on derivative instruments for the full-year 2020. The unrealized gain/loss is reported within other income and relates to the contractual agreement with EQT Corporation (EQT) in which ETRN will receive cash from EQT conditioned on the quarterly average of certain Henry Hub natural gas prices exceeding certain thresholds during the three years following the Mountain Valley Pipeline's (MVP) in-service, but in no case extending beyond December 2024. The contract is accounted for as a derivative with the fair value marked-to-market at each quarter-end.

For the full-year 2020, net income attributable to ETRN common shareholders was impacted by several non-recurring items including a $55.6 million impairment of long-lived assets associated with the Hornet gathering system, a $24.9 million loss on early extinguishment of debt associated with the retirement of the ETRN Term Loan B and termination of ETRN's revolving credit facility, $23.8 million of transaction costs primarily related to the acquisition of the outstanding common units of EQM Midstream Partners, LP (EQM), and a $27.3 million premium associated with the redemption of a portion of EQM’s Series A Perpetual Convertible Preferred Units.

As a result of the gathering agreement with EQT entered into in February 2020, revenue from the contracted minimum volume commitment (MVC) is recognized utilizing an average rate applied over the 15-year contract life. The difference between the cash received from the contracted MVC and the revenue recognized results in the deferral of revenue into future periods. For the fourth quarter 2020, deferred revenue was $76.9 million and for the full-year 2020, deferred revenue was $225.7 million.

Operating revenue for the fourth quarter was lower compared to the same quarter last year by $58.7 million, primarily from the impact of deferred revenue. The reduction in operating revenue was partially offset by increased revenue from higher MVCs. Operating expenses decreased by $577.2 million compared to the fourth quarter 2019, primarily as a result of a $583.7 million impairment of goodwill in the fourth quarter 2019. Additionally, operating and maintenance expense decreased versus the prior year quarter while selling, general and administrative and depreciation expense increased.

QUARTERLY DIVIDEND

For the fourth quarter 2020, ETRN paid a quarterly cash dividend of $0.15 per common share on February 12, 2021 to common shareholders of record at the close of business on February 3, 2021.

TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS

FINANCIAL OUTLOOK

CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS OUTLOOK

BUSINESS AND PROJECT UPDATES

Outstanding Debt and Liquidity

As of December 31, 2020, ETRN reported $6.4 billion of consolidated long-term debt; $485 million of borrowings and $246 million of letters of credit outstanding under the $3 billion revolving credit facility; and $208 million of cash.

Bond Offering

In January 2021, ETRN's wholly owned subsidiary, EQM, completed its issuance of $800 million of 4.50% senior notes due 2029 and $1,100 million of 4.75% senior notes due 2031. Proceeds from the offering were used to repay $1.4 billion of term loan borrowings and to complete a tender of $500 million of aggregate principal of EQM's 4.75% senior notes due 2023.

Mountain Valley Pipeline

On January 15, 2021, the U.S. Bureau of Land Management granted a right-of-way permit related to MVP’s crossing in the Jefferson National Forest. At present, the only major regulatory authorization outstanding is the approval to cross streams and wetlands. With total project work roughly 92% complete, the MVP JV has applied for a U.S. Army Corps of Engineers’ Individual Permit for certain waterbody crossings that will utilize the open-cut method and, through a Certificate Amendment application to the Federal Energy Regulatory Commission, is seeking authorization to use trenchless construction methods for the remainder of the crossings that were previously approved as open-cut.

The MVP JV continues to target a full in-service date in late 2021. The total project cost estimate is $5.8 - $6.0 billion, of which ETRN expects to fund approximately $2.9 billion based on the midpoint. As of December 31, 2020, ETRN had funded approximately $2.2 billion. ETRN will operate the pipeline and, based on the midpoint of the total project cost estimate, expects to have an approximate 47.6% ownership interest in MVP.

Climate Policy

In January 2021, ETRN published its initial Climate Policy, extending the Company’s commitment to environmental excellence and establishing a multi-faceted approach for evaluating and mitigating ETRN’s carbon footprint. ETRN is responding to the critical issues related to climate change by taking near-term actions to reduce its overall greenhouse gas (GHG) emissions. In 2021, ETRN will establish a foundation for future commitments and will work to assess practicability, costs, and timing to achieve interim targets of a 50% reduction in methane by 2030 and a 50% reduction in total GHG by 2040, with a net zero carbon goal for 2050. The climate policy is available under the Sustainability section of the Company's website at www.equitransmidstream.com.

Full-Year and Fourth Quarter 2020 Earnings Conference Call Information

ETRN will host a conference call with security analysts today, February 23, 2021, at 10:30 a.m. (ET) to discuss full-year and fourth quarter 2020 financial results, operating results, and other business matters.

Call Access: All participants must pre-register online, in advance of the call. Upon completion, registered participants will receive a confirmation email that includes instructions for accessing the call, as well as a unique registration ID and passcode. Please pre-register using the appropriate online registration links below:

Security Analysts :: Audio Registration
Your email confirmation will contain dial-in information, along with your unique ID and passcode.

All Other Participants :: Webcast Registration
Your email confirmation will contain the webcast link, along with your unique ID and passcode.

Call Replay: For 14 days following the call, an audio replay will be available at (800) 585-8367 or (416) 621-4642. The ETRN conference ID: 4233629.

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

NON-GAAP DISCLOSURES

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

Adjusted net income attributable to ETRN common shareholders and adjusted earnings 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 investors, may use to make period-to-period comparisons of earnings trends. Management believes that adjusted net income attributable to ETRN common shareholders and adjusted earnings per diluted share attributable to ETRN common shareholders as presented provide useful information for investors for evaluating period-over-period earnings. Adjusted net income attributable to ETRN common shareholders and adjusted earnings per diluted share attributable to ETRN common shareholders should not be considered as alternatives to net income attributable to ETRN common shareholders, earnings per diluted share attributable to ETRN common shareholders or any other measure of financial performance presented in accordance with GAAP. Adjusted net income attributable to ETRN common shareholders and adjusted earnings per diluted share attributable to ETRN common shareholders as presented have important limitations as analytical tools because they exclude some, but not all, items that affect net income attributable to ETRN common shareholders and earnings per diluted share attributable to ETRN common shareholders, including, as applicable, the premium on redemption of a portion of EQM’s Series A Perpetual Convertible Preferred Units (EQM Series A Preferred Units), transaction costs, impairments of long-lived assets, unrealized loss (gain) on derivative instruments and loss on early extinguishment of debt, which items affect the comparability of results period to period. The impact of noncontrolling interests is also excluded from the calculations of adjustment items to adjusted net income attributable to ETRN common shareholders, as is the tax impact of non-GAAP items. Additionally, because these non-GAAP metrics may be defined differently by other companies in ETRN's industry, ETRN's definitions of adjusted net income attributable to ETRN common shareholders and adjusted earnings 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 attributable to ETRN common shareholders and adjusted earnings per diluted share attributable to ETRN common shareholders should not be viewed as indicative of the actual amount of net income attributable to ETRN common shareholders or actual earnings 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 attributable to ETRN common shareholders and earnings per diluted share attributable to ETRN common shareholders as derived from the statements of consolidated comprehensive income to be included in ETRN’s Annual Report on Form 10-K for the year ended December 31, 2020.

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

Adjusted EBITDA

As used in this news release, Adjusted EBITDA means, as applicable, net income, plus income tax expense, net interest expense, loss on early extinguishment of debt (as applicable), depreciation, amortization of intangible assets, impairments of long-lived assets, payments on the preferred interest in EQT Energy Supply, LLC (Preferred Interest), non-cash long-term compensation expense (income), and transaction costs, less equity income, AFUDC-equity, unrealized loss (gain) on derivative instruments and adjusted EBITDA attributable to noncontrolling interest.

The table below reconciles adjusted EBITDA with net income as derived from the statements of consolidated comprehensive income to be included in ETRN's Annual Report on Form 10-K for the year ended December 31, 2020.

Reconciliation of Adjusted EBITDA

Free Cash Flow

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

Retained Free Cash Flow

As used in this news release, retained free cash flow means free cash flow less dividends paid to common shareholders and distributions paid to noncontrolling interest EQM common unitholders (as applicable).

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 Annual Report on Form 10-K for the year ended December 31, 2020.

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

ETRN is unable to provide a reconciliation of projected adjusted EBITDA from projected net income (loss), the most comparable financial measure calculated in accordance with GAAP, or a reconciliation of projected free cash flow or retained free cash flow to net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP. ETRN has not provided a reconciliation of projected adjusted EBITDA to projected net income (loss), the most comparable financial measure calculated in accordance with GAAP, due to the inherent difficulty and impracticability of predicting certain amounts required by GAAP with a reasonable degree of accuracy.

Analyst inquiries:
Nate Tetlow – Vice President, Corporate Development and Investor Relations
412-553-5834
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Media inquiries:
Natalie Cox – Communications and Corporate Affairs
412-395-3941
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