CANONSBURG, Pa.--(BUSINESS WIRE)--#ETRN--Equitrans Midstream Corporation (NYSE: ETRN), today, announced financial and operational results for the second quarter 2021. 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.

Q2 2021 Highlights:

• Generated $40 million of net income and achieved $272 million of adjusted EBITDA
• Delivered adjusted EBITDA ahead of forecast
• Achieved $383 million of net cash provided by operating activities and $220 million of free cash flow
• Recorded 67% of total operating revenue from firm reservation fees
• Raised full-year 2021 adjusted EBITDA and free cash flow guidance

"Our second quarter results demonstrate the stability and strength of our base business," said Thomas F. Karam, ETRN chairman and chief executive officer. "Our stable cash flow profile coupled with higher volume than forecasted in our gathering and transmission segments allowed us to generate meaningful free cash flow and increase our full-year guidance."

"ETRN remains focused on advancing our sustainability efforts," said Diana M. Charletta, ETRN president and chief operating officer. "We recently published our annual corporate sustainability report which expanded our range of material ESG topics, outlined progress made to date, and highlighted our future endeavors. We recognize that providing sustainable energy solutions is critical for our customers, shareholders, and other stakeholders, and we are proud that ESG is becoming part of ETRN's DNA."

SECOND QUARTER 2021 SUMMARY RESULTS

Net income attributable to ETRN common shareholders for the second quarter 2021 was impacted by a $56.2 million impairment of long-lived assets associated with ETRN's water assets located in Ohio, which were acquired from Rice Midstream Partners LP in 2018 (the Ohio water assets). Additionally, net income attributable to ETRN common shareholders for the second quarter 2021 was impacted by a $9.4 million unrealized gain on derivative instruments. The unrealized gain 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 beginning with the quarter in which Mountain Valley Pipeline (MVP) is placed in-service through the fourth quarter of 2024. The contract is accounted for as a derivative with the fair value marked-to-market at each quarter-end.

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. In the second quarter 2021, deferred revenue was $74.5 million.

Operating revenue for the second quarter increased compared to the same quarter last year by $7.7 million, primarily from increased gathered volume and higher transmission throughput and was partially offset by decreased water services volume. Operating expenses increased by $50.0 million compared to the second quarter 2020, primarily as a result of a $56.2 million impairment of long-lived assets associated with the Ohio water assets in the second quarter 2021. Additionally, operating and maintenance expense decreased versus the prior year quarter while selling, general and administrative and depreciation expenses increased.

QUARTERLY DIVIDEND

For the second quarter 2021, ETRN will pay a quarterly cash dividend of $0.15 per common share on August 13, 2021 to ETRN common shareholders of record at the close of business on August 4, 2021.

TOTAL CAPITAL EXPENDITURES AND CAPITAL CONTRIBUTIONS

OUTLOOK

BUSINESS AND PROJECT UPDATES

Outstanding Debt and Liquidity

As of June 30, 2021, ETRN reported $6.4 billion of consolidated long-term debt; $350 million of borrowings and $274 million of letters of credit outstanding under EQM Midstream Partners, LP's (EQM) revolving credit facility; $300 million of borrowings under Eureka's revolving credit facility; and $243 million of cash.

Mountain Valley Pipeline

In February 2021, MVP JV initiated a permitting process with the U.S. Army Corps of Engineers (Army Corps) and the Federal Energy Regulatory Commission (FERC) related to the project’s remaining waterbody and wetland crossings. In early June 2021, FERC issued a notice of schedule for the MVP JV’s certificate amendment application, which requests a change to utilize boring methodology for approximately 120 water crossings. FERC is expected to issue an environmental assessment in mid-August. In late June 2021, the Army Corps directed the West Virginia Department of Environmental Protection and Virginia Department of Environmental Quality to complete the Section 401 review process for approximately 300 water crossings by November 29, 2021 and December 31, 2021, respectively.

The expected permitting timelines for both FERC and Army Corps are in-line with ETRN's expectations. Accordingly, ETRN continues to target a full in-service date during the summer of 2022 at a total project cost of approximately $6.2 billion. Through June 30, 2021, ETRN had funded approximately $2.3 billion and, based on the total project cost estimate, expects to fund a total of approximately $3.1 billion and to have an approximate 47.8% ownership interest in MVP. ETRN will operate the pipeline.

MVP Southgate

Based on MVP's targeted full in-service date and current expectations regarding timing of MVP Southgate permit approvals, ETRN is targeting commencing construction during 2022 and placing the project in-service during the spring of 2023. The approximately 75-mile pipeline is designed to receive gas from MVP in Virginia for transport to new delivery points in Rockingham and Alamance Counties, North Carolina. With a total project cost estimate of approximately $450 million to $500 million, MVP Southgate is backed by a 300 MMcf per day firm capacity commitment from Dominion Energy North Carolina and, as designed, the pipeline has expansion capabilities that could provide up to 900 MMcf per day of total capacity. ETRN has a 47.2% ownership interest in MVP Southgate and will operate the pipeline.

2021 Corporate Sustainability Report

On July 29, 2021, ETRN published its annual corporate sustainability report, which was produced in accordance with the Global Reporting Initiative (GRI) core reporting option and also incorporated the Sustainability Accounting Standards Board (SASB) Oil & Gas Midstream Standards. The report content reflects materiality assessment results, which identify the Environmental, Social, and Governance (ESG) topics most significant to ETRN's business and stakeholders. The report can be viewed online at csr.equitransmidstream.com.

Water Services

Water operating loss was $55.6 million and water EBITDA was $8.7 million in the second quarter 2021. Water operating loss is forecast to be approximately $60 million for the full-year 2021 and water EBITDA is forecast to be approximately $30 million for the full-year 2021.

Q2 2021 Earnings Conference Call Information

ETRN will host a conference call with security analysts today, August 3, 2021, at 10:30 a.m. (ET) to discuss second quarter 2021 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: 4529988.

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

NON-GAAP DISCLOSURES

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

Adjusted net income 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 and unrealized gain (loss) on derivative instruments, 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 Quarterly Report on Form 10-Q for the three months ended June 30, 2021.

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 extinguishment of debt, 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 gain (loss) 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 Quarterly Report on Form 10-Q for the three months ended June 30, 2021.

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, premiums paid on extinguishment of debt, 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 Quarterly Report on Form 10-Q for the three months ended June 30, 2021.

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. Net income (loss) includes the impact of depreciation expense, income tax expense, the revenue impact of changes in the projected fair value of derivative instruments prior to settlement, potential changes in estimates for certain contract liabilities and unbilled revenues and certain other items that impact comparability between periods and the tax effect of such items, which may be significant and difficult to project with a reasonable degree of accuracy. Therefore, a reconciliation of projected adjusted EBITDA to projected net income is not available without unreasonable effort.

ETRN is unable to project net cash provided by operating activities because this metric includes the impact of changes in operating assets and liabilities related to the timing of cash receipts and disbursements that may not relate to the period in which the operating activities occurred. ETRN is unable to project these timing differences with any reasonable degree of accuracy to a specific day, three or more months in advance.

Analyst inquiries:
Nate Tetlow – Vice President, Corporate Development and Investor Relations
412-553-5834
This email address is being protected from spambots. You need JavaScript enabled to view it.

Media inquiries:
Natalie Cox – Communications and Corporate Affairs
This email address is being protected from spambots. You need JavaScript enabled to view it.