UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015
or
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   
 
 
 
FOR THE TRANSITION PERIOD FROM                TO               
 
 
 
COMMISSION FILE NUMBER 001-35574
 
EQT Midstream Partners, LP
(Exact name of registrant as specified in its charter)
 
DELAWARE
 
37-1661577
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
 
625 Liberty Avenue, Suite 1700, Pittsburgh, Pennsylvania
15222
(Address of principal executive offices)
(Zip code)
(412) 553-5700
(Registrant’s telephone number, including area code)

 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x   No   ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x   No   ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer
x
 
 
Accelerated Filer
¨
 
 
Non-Accelerated Filer
¨
 
 
Smaller reporting company
¨
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes   ¨   No  x
 
As of September 30, 2015 , there were 71,535,681 Common Units and 1,443,015 General Partner Units outstanding.


EQT MIDSTREAM PARTNERS, LP
 
Index
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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Glossary of Commonly Used Terms, Abbreviations and Measurements

adjusted EBITDA – a supplemental non-GAAP financial measure defined by EQT Midstream Partners, LP (EQM) as net income plus interest expense, depreciation and amortization expense,  income tax expense (if applicable) and non-cash long-term compensation expense less equity income, other income, capital lease payments, Jupiter adjusted EBITDA prior to the Jupiter Acquisition and NWV Gathering adjusted EBITDA prior to the NWV Gathering Acquisition.
 
AFUDC ( Allowance for Funds Used During Construction) – carrying costs for the construction of certain long-term regulated assets are capitalized and amortized over the related assets’ estimated useful lives. The capitalized amount for construction of regulated assets includes interest cost and a designated cost of equity for financing the construction of these regulated assets.

British thermal unit – a measure of the amount of energy required to raise the temperature of one pound of water one degree Fahrenheit.
 
distributable cash flow – a supplemental non-GAAP financial measure defined by EQM as adjusted EBITDA less interest expense, excluding capital lease interest and ongoing maintenance capital expenditures, net of expected reimbursements.
 
gas – all references to “gas” refer to natural gas.
 
omnibus agreement – the agreement, as amended, entered into among EQM, its general partner and EQT Corporation (EQT) in connection with EQM's initial public offering pursuant to which EQT agreed to provide EQM with certain general and administrative services and a license to use the name “EQT” and related marks in connection with EQM’s business. The omnibus agreement also provides for certain indemnification and reimbursement obligations between EQM and EQT.
 
Sunrise Merger – On July 22, 2013, Sunrise Pipeline, LLC (Sunrise) merged into Equitrans, L.P. (Equitrans), a subsidiary of EQM.

throughput – the volume of natural gas transported or passing through a pipeline, plant, terminal or other facility during a particular period.
 

Abbreviations

FASB – Financial Accounting Standards Board
FERC – Federal Energy Regulatory Commission
GAAP – United States Generally Accepted Accounting Principles
IPO – Initial Public Offering
IRS – Internal Revenue Service
NYSE – New York Stock Exchange
SEC – Securities and Exchange Commission

Measurements
 
Btu = one British thermal unit
BBtu = billion British thermal units
Bcf    = billion cubic feet
Dth  =  dekatherm or million British thermal units
MMBtu = million British thermal units
Mcf = thousand cubic feet
MDth = thousand dekatherms
MMcf   = million cubic feet
TBtu = trillion British thermal units
Tcfe = one trillion cubic feet equivalent

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PART I.  FINANCIAL INFORMATION
 
Item 1.    Financial Statements
 
EQT MIDSTREAM PARTNERS, LP
Statements of Consolidated Operations (Unaudited) (1)  
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands, except per unit amounts)
Operating revenues (2)
$
148,789

 
$
120,922

 
$
448,213

 
$
338,157

Operating expenses:
 

 
 

 
 

 
 

Operating and maintenance (3)
18,456

 
13,837

 
50,167

 
40,202

Selling, general and administrative (3)
14,205

 
12,674

 
43,585

 
38,094

Depreciation and amortization
13,217

 
12,545

 
37,402

 
32,978

Total operating expenses
45,878

 
39,056

 
131,154

 
111,274

Operating income
102,911

 
81,866

 
317,059

 
226,883

Equity income (4)
753

 
—

 
1,147

 
—

Other income
1,716

 
806

 
3,599

 
1,634

Interest expense (5)
11,264

 
8,660

 
34,361

 
20,944

Income before income taxes
94,116

 
74,012

 
287,444

 
207,573

Income tax expense
—

 
6,311

 
6,703

 
25,906

Net income
$
94,116

 
$
67,701

 
$
280,741

 
$
181,667

 
 
 
 
 
 
 
 
Calculation of limited partner interest in net income:
 

 
 

 
 

 
 

Net income
$
94,116

 
$
67,701

 
$
280,741

 
$
181,667

Less pre-acquisition net income allocated to parent
—

 
(11,168
)
 
(11,106
)
 
(43,701
)
Less general partner interest in net income
(14,515
)
 
(4,540
)
 
(36,153
)
 
(9,055
)
Limited partner interest in net income
$
79,601

 
$
51,993

 
$
233,482

 
$
128,911

 
 
 
 
 
 
 
 
Net income per limited partner unit – basic
$
1.12

 
$
0.86

 
$
3.44

 
$
2.38

Net income per limited partner unit – diluted
$
1.12

 
$
0.85

 
$
3.44

 
$
2.37

 
 
 
 
 
 
 
 
Weighted average limited partner units outstanding – basic
70,929

 
60,699

 
67,800

 
54,259

Weighted average limited partner units outstanding – diluted
71,086

 
60,827

 
67,960

 
54,384

 
 
 
 
 
 
 
 
Cash distributions declared per unit (6)
$
0.675

 
$
0.55

 
$
1.925

 
$
1.56

 

(1)
Financial statements for the nine months ended September 30, 2015 and the three months ended September 30, 2014 have been retrospectively recast to reflect the inclusion of the Northern West Virginia Marcellus gathering system (NWV Gathering). Financial statements for the nine months ended September 30, 2014 have been retrospectively recast to reflect the inclusion of NWV Gathering and the Jupiter natural gas gathering system (Jupiter). See Note B.
(2)
Operating revenues included affiliate revenues from EQT Corporation and subsidiaries (collectively, EQT) of $111.6 million and $86.7 million for the three months ended September 30, 2015 and 2014 , respectively, and $325.9 million and $233.9 million for the nine months ended September 30, 2015 and 2014 , respectively. See Note E.
(3)
Operating and maintenance expense included charges from EQT of $9.0 million and $7.7 million for the three months ended September 30, 2015 and 2014 , respectively, and $25.6 million and $21.6 million for the nine months ended September 30, 2015 and 2014 , respectively.  Selling, general and administrative expense included charges from EQT of $12.1 million and $10.8 million for the three months ended September 30, 2015 and 2014 , respectively, and $37.2 million and $31.2 million for the nine months ended September 30, 2015 and 2014 , respectively.  See Note E.
(4)
Equity income relates to EQM's interest in Mountain Valley Pipeline, LLC, which is a related party.
(5)
Interest expense included interest on a capital lease with an affiliate of $5.6 million and $4.7 million for the three months ended September 30, 2015 and 2014 , respectively, and $17.4 million and $15.0 million for the nine months ended September 30, 2015 and 2014 , respectively.
(6)
Represents the cash distributions declared related to the period presented. See Note J.
The accompanying notes are an integral part of these consolidated financial statements.

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EQT MIDSTREAM PARTNERS, LP
Statements of Consolidated Cash Flows (Unaudited) (1)  
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
(Thousands)
Cash flows from operating activities:
 

 
 

Net income
$
280,741

 
$
181,667

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
37,402

 
32,978

Deferred income taxes
2,998

 
13,745

Equity income
(1,147
)
 
—

Other income
(3,599
)
 
(1,634
)
Non-cash long-term compensation expense
1,133

 
2,584

Changes in other assets and liabilities:
 

 
 

Accounts receivable
3,306

 
(4,241
)
Accounts payable
1,577

 
14,440

Due to/from EQT affiliates
(3,450
)
 
(31,748
)
Other assets and liabilities
902

 
3,938

Net cash provided by operating activities
319,863

 
211,729

Cash flows from investing activities:
 

 
 

Capital expenditures
(304,567
)
 
(230,449
)
MVP Interest Acquisition and capital contributions
(76,037
)
 
—

Acquisitions – net assets from EQT
(386,791
)
 
(168,198
)
Purchase of preferred interest in EQT Energy Supply, LLC
(124,317
)
 
—

Net cash used in investing activities
(891,712
)
 
(398,647
)
Cash flows from financing activities:
 

 
 

Proceeds from the issuance of common units, net of offering costs
760,731

 
902,467

Acquisitions – purchase price in excess of net assets from EQT
(486,392
)
 
(952,802
)
Proceeds from short-term loans
561,500

 
450,000

Payments of short-term loans
(211,500
)
 
(450,000
)
Proceeds from the issuance of long-term debt
—

 
500,000

Discount, debt issuance costs and credit facility fees
—

 
(9,634
)
Sunrise Merger payment
—

 
(110,000
)
Distributions paid to unitholders
(149,866
)
 
(82,089
)
Capital contributions
1,781

 
382

Net (distributions to) contributions from EQT
(23,866
)
 
77,672

Capital lease principal payments
(5,472
)
 
(2,216
)
Net cash provided by financing activities
446,916

 
323,780

 
 
 
 
Net change in cash and cash equivalents
(124,933
)
 
136,862

Cash and cash equivalents at beginning of period
126,175

 
18,363

Cash and cash equivalents at end of period
$
1,242

 
$
155,225

 
 
 
 
Cash paid during the period for:
 

 
 

Interest paid
$
43,026

 
$
17,581

Non-cash activity during the period for :
 

 
 

Increase in capital lease asset/obligation
$
19,800

 
$
7,231

Elimination of net deferred tax liabilities
80,741

 
39,785

Limited partner and general partner units issued for acquisitions
52,500

 
59,000

Settlement of current income taxes payable/(receivable) with EQT
3,705

 
(6,294
)

(1)
Financial statements for the nine months ended September 30, 2015 have been retrospectively recast to reflect the inclusion of NWV Gathering. Financial statements for the nine months ended September 30, 2014 have been retrospectively recast to reflect the inclusion of NWV Gathering and Jupiter. See Note B.
The accompanying notes are an integral part of these consolidated financial statements.

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EQT MIDSTREAM PARTNERS, LP
Consolidated Balance Sheets (Unaudited) (1)  
 
 
September 30,
2015
 
December 31, 2014
ASSETS
(Thousands, except number of
units)
Current assets:
 

 
 

Cash and cash equivalents
$
1,242

 
$
126,175

Accounts receivable (net of allowance for doubtful accounts of $196 as of September 30, 2015 and $260 as of December 31, 2014)
13,186

 
16,492

Accounts receivable – affiliate
68,177

 
55,068

Other current assets
4,271

 
1,710

Total current assets
86,876

 
199,445

 
 
 
 
Property, plant and equipment
2,110,367

 
1,821,803

Less: accumulated depreciation
(246,542
)
 
(216,486
)
Net property, plant and equipment
1,863,825

 
1,605,317

 
 
 
 
Equity in nonconsolidated investments
77,184

 
—

Other assets
140,204

 
18,057

Total assets
$
2,168,089

 
$
1,822,819

 
 
 
 
LIABILITIES AND PARTNERS’ CAPITAL
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
33,952

 
$
43,785

Due to related party
17,387

 
33,342

Short-term loans
350,000

 
—

Accrued interest
3,514

 
8,338

Accrued liabilities
6,494

 
9,055

Total current liabilities
411,347

 
94,520

 
 
 
 
Deferred income taxes
—

 
78,583

Long-term debt
493,209

 
492,633

Lease obligation
162,523

 
143,828

Other long-term liabilities
7,242

 
7,111

Total liabilities
1,074,321

 
816,675

 
 
 
 
Partners’ capital:
 

 
 

Predecessor equity
—

 
315,105

Common units (71,535,681 and 43,347,452 units issued and outstanding at September 30, 2015 and December 31, 2014, respectively)
1,129,144

 
1,647,910

Subordinated units (17,339,718 units issued and outstanding at December 31, 2014)
—

 
(929,374
)
General partner interest (1,443,015 and 1,238,514 units issued and outstanding at September 30, 2015 and December 31, 2014, respectively)
(35,376
)
 
(27,497
)
Total partners’ capital
1,093,768

 
1,006,144

Total liabilities and partners’ capital
$
2,168,089

 
$
1,822,819

 
(1)           Financial statements as of December 31, 2014 have been retrospectively recast to reflect the inclusion of NWV Gathering. See Note B.
 
The accompanying notes are an integral part of these consolidated financial statements.


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EQT MIDSTREAM PARTNERS, LP
Statements of Consolidated Partners’ Capital (Unaudited) (1)  
 
 
 
 
Partners’ Capital
 
 
 
Predecessor
 
Limited Partners
 
General
 
 
 
Equity
 
Common
 
Subordinated
 
Partner
 
Total
 
(Thousands)
Balance at January 1, 2014
$
310,861

 
$
818,431

 
$
(175,996
)
 
$
1,753

 
$
955,049

Net income
43,701

 
88,903

 
40,008

 
9,055

 
181,667

Capital contributions
—

 
338

 
152

 
10

 
500

Equity-based compensation plans
—

 
2,828

 
—

 
—

 
2,828

Distributions to unitholders
—

 
(51,487
)
 
(25,489
)
 
(5,113
)
 
(82,089
)
Net contributions from EQT
59,350

 
—

 
—

 
—

 
59,350

Proceeds from issuance of common units, net of offering costs
—

 
902,467

 
—

 
—

 
902,467

Elimination of net current and deferred income tax liabilities
51,813

 
—

 
—

 
—

 
51,813

Jupiter net assets from EQT
(168,198
)
 
—

 
—

 
—

 
(168,198
)
Issuance of units
—

 
39,091

 
—

 
19,909

 
59,000

Purchase price in excess of net assets from EQT
—

 
(177,773
)
 
(778,429
)
 
(55,600
)
 
(1,011,802
)
Balance at September 30, 2014
$
297,527

 
$
1,622,798

 
$
(939,754
)
 
$
(29,986
)
 
$
950,585

 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2015
$
315,105

 
$
1,647,910

 
$
(929,374
)
 
$
(27,497
)
 
$
1,006,144

Net income
11,106

 
233,482

 
—

 
36,153

 
280,741

Capital contributions
—

 
7,260

 
—

 
148

 
7,408

Equity-based compensation plans
—

 
1,180

 
—

 
33

 
1,213

Distributions to unitholders
—

 
(113,527
)
 
(10,057
)
 
(26,282
)
 
(149,866
)
Conversion of subordinated units to common units (2)
—

 
(939,431
)
 
939,431

 
—

 
—

Net distributions to EQT
(23,866
)
 
—

 
—

 
—

 
(23,866
)
Proceeds from issuance of common units, net of offering costs
—

 
758,812

 
—

 
1,919

 
760,731

Elimination of net current and deferred tax liabilities
84,446

 
—

 
—

 
—

 
84,446

NWV Gathering net assets from EQT
(386,791
)
 
—

 
—

 
—

 
(386,791
)
Issuance of units
—

 
38,910

 
—

 
13,590

 
52,500

Purchase price in excess of net assets from EQT
—

 
(505,452
)
 
—

 
(33,440
)
 
(538,892
)
Balance at September 30, 2015
$
—

 
$
1,129,144

 
$
—

 
$
(35,376
)
 
$
1,093,768

 
(1)
Financial statements for the nine months ended September 30, 2015 have been retrospectively recast to reflect the inclusion of NWV Gathering. Financial statements for the nine months ended September 30, 2014 have been retrospectively recast to reflect the inclusion of NWV Gathering and Jupiter. See Note B.
(2)
All subordinated units were converted to common units on a one -for-one basis on February 17, 2015. For purposes of calculating net income per common and subordinated unit, the conversion of the subordinated units is deemed to have occurred on January 1, 2015. See Note I.

 
The accompanying notes are an integral part of these consolidated financial statements.


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EQT Midstream Partners, LP
Notes to Consolidated Financial Statements (Unaudited)
A.                         Financial Statements
 
Organization
 
EQT Midstream Partners, LP (EQM) is a growth-oriented Delaware limited partnership. EQT Midstream Services, LLC (EQM General Partner), a direct wholly owned subsidiary of EQT GP Holdings, LP (EQGP), is EQM’s general partner. EQT Corporation (EQT) formed EQGP to own EQT's partnership interests in EQM. References in these consolidated financial statements to EQT refer collectively to EQT Corporation and its consolidated subsidiaries.

Basis of Presentation
 
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the requirements of Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.  In the opinion of management, these unaudited consolidated financial statements include all adjustments (consisting of only normal recurring adjustments, unless otherwise disclosed in this Form 10-Q) necessary for a fair presentation of the financial position of EQM as of September 30, 2015 and December 31, 2014 , the results of its operations for the three and nine months ended September 30, 2015 and 2014 and its cash flows and partners' capital for the nine months ended September 30, 2015 and 2014 . Certain previously reported amounts have been reclassified to conform to the current year presentation.
 
The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.
 
NWV Gathering and Jupiter were businesses and the NWV Gathering and Jupiter Acquisitions (defined in Note B) were transactions between entities under common control; therefore, EQM recorded the assets and liabilities of NWV Gathering and Jupiter at their carrying amounts to EQT on the date of the respective transactions. The difference between EQT’s net carrying amount and the total consideration paid to EQT was recorded as a capital transaction with EQT, which resulted in a reduction in partners’ capital.  EQM recast its consolidated financial statements to retrospectively reflect the NWV Gathering Acquisition and Jupiter Acquisition as if the entities were owned for all periods presented; however, the consolidated financial statements are not necessarily indicative of the results of operations that would have occurred if EQM had owned them during the periods reported.
 
Due to the seasonal nature of EQM’s utility customer contracts, the interim statements for the three and nine months ended September 30, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015 .
 
For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 2014 included in EQM’s Current Report on Form 8-K, as filed on April 1, 2015 , as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein.
 
Recently Issued Accounting Standards
 
In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers . The standard requires an entity to recognize revenue in a manner that depicts the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 will supersede most of the existing revenue recognition requirements in GAAP when it becomes effective and is required to be adopted using one of two retrospective application methods. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date which approved a one year deferral of ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is permitted as of the original effective date for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. EQM is currently evaluating the method of adoption and impact this standard will have on its financial statements and related disclosures.

In February 2015, the FASB issued ASU No. 2015-02, Consolidation . The standard changes the analysis that a reporting entity
must perform to determine whether it should consolidate certain types of legal entities. The ASU will be effective for annual reporting periods beginning after December 15, 2015, including interim periods therein. EQM has evaluated this standard and determined the adoption of it will have no significant impact on reported results or disclosures.

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In April 2015, the FASB issued ASU No. 2015-05, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement . The ASU adds guidance that will help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement. The ASU will be effective for annual reporting periods beginning after December 15, 2015. EQM is currently evaluating the impact this standard will have on its financial statements and related disclosures.

In August 2015, the FASB issued ASU No. 2015-15, Interest - Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements . This ASU clarified that the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. EQM has adopted this standard which had no significant impact on reported results or disclosures.

B.                                     Acquisitions
 
NWV Gathering Acquisition

On March 10, 2015, EQM entered into a contribution and sale agreement (Contribution Agreement) pursuant to which, on March 17, 2015, EQT contributed NWV Gathering to EQM Gathering Opco, LLC (EQM Gathering), an indirect wholly owned subsidiary of EQM (the NWV Gathering Acquisition). EQM paid total consideration of approximately $925.7 million to EQT, consisting of approximately $873.2 million in cash, 511,973 EQM common units and 178,816 EQM general partner units. The cash portion of the purchase price was funded with the net proceeds from an equity offering of EQM common units and borrowings under EQM's credit facility.

On April 15, 2015, pursuant to the Contribution Agreement, EQM acquired a preferred interest in EQT Energy Supply, LLC (the Preferred Interest), a subsidiary of EQT that generates revenue from services provided to a local distribution company, from EQT for approximately $124.3 million . EQM accounts for the Preferred Interest as a cost method investment and included it in other assets on the consolidated balance sheets. EQT Energy Supply, LLC has been determined to be a variable interest entity because it has insufficient equity to finance its activities. EQM is not the primary beneficiary because it does not have the power to direct the activities of EQT Energy Supply, LLC that most significantly impact its economic performance.

MVP Interest Acquisition

On March 30, 2015, EQM assumed 100% of the membership interests in MVP Holdco, LLC (MVP Holdco), an indirect wholly owned subsidiary of EQT that owns a majority ownership interest (the MVP Interest) in Mountain Valley Pipeline, LLC (MVP Joint Venture) for approximately $54.2 million (MVP Interest Acquisition), which represented EQM's reimbursement to EQT for 100% of the capital contributions made by EQT to the MVP Joint Venture as of March 30, 2015. The MVP Joint Venture plans to construct the Mountain Valley Pipeline (MVP), an estimated 300 -mile natural gas interstate pipeline spanning from northern West Virginia to southern Virginia.  The MVP project is subject to FERC approval.  The voluntary pre-filing process with the FERC began in October 2014 and the pipeline is expected to be placed in-service during the fourth quarter of 2018. The MVP Joint Venture has been determined to be a variable interest entity because the MVP Joint Venture has insufficient equity to finance activities during the construction stage of the MVP. EQM is not the primary beneficiary because it does not have the power to direct the activities of the MVP Joint Venture that most significantly impact its economic performance. EQM accounted for the MVP Interest beginning on the date it was assumed from EQT as an equity method investment.

Jupiter Acquisition

On April 30, 2014, EQM entered into a contribution agreement pursuant to which, on May 7, 2014, EQT contributed to EQM Gathering certain assets constituting the Jupiter natural gas gathering system (Jupiter Acquisition). The aggregate consideration paid by EQM to EQT in connection with the Jupiter Acquisition was approximately $1,180 million , consisting of a $1,121 million cash payment and issuance of 516,050 EQM common units and  262,828 EQM general partner units. The cash portion of the purchase price was funded with the net proceeds from an equity offering of EQM common units and borrowings under EQM’s credit facility.

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C.                                     Partners' Capital

The following table summarizes EQM's common, subordinated and general partner units issued from January 1, 2014 through September 30, 2015 .
 
Limited Partner Units
 
General
 
 
 
Common
 
Subordinated
 
Partner Units
 
Total
Balance at January 1, 2014
30,468,902

 
17,339,718

 
975,686

 
48,784,306

May 2014 equity offering
12,362,500

 
—

 
—

 
12,362,500

Jupiter Acquisition consideration (see Note B)
516,050

 
—

 
262,828

 
778,878

Balance at December 31, 2014
43,347,452

 
17,339,718

 
1,238,514

 
61,925,684

Conversion of subordinated units to common units
17,339,718

 
(17,339,718
)
 
—

 
—

2014 EQM VDA issuance
21,063

 
—

 
430

 
21,493

March 2015 equity offering
9,487,500

 
—

 
25,255

 
9,512,755

NWV Gathering Acquisition consideration (see Note B)
511,973

 
—

 
178,816

 
690,789

$750 million "At the Market" (ATM) Program
827,975

 
—

 
—

 
827,975

Balance at September 30, 2015
71,535,681

 
—

 
1,443,015

 
72,978,696

 
See Note I for discussion of the conversion of the subordinated units in February 2015. In February 2015, EQM issued 21,063 common units under the 2014 EQM Value Driver Award (2014 EQM VDA). In connection with this issuance, the EQM General Partner purchased 430 EQM general partner units to maintain its 2.0% general partner interest.

On March 17, 2015, EQM completed an underwritten public offering of 8,250,000 common units. On March 18, 2015, the underwriters exercised their option to purchase 1,237,500 additional common units on the same terms as the offering. EQM received net proceeds of approximately $696.6 million after deducting the underwriters' discount and offering expenses which were used to finance a portion of the cash consideration paid to EQT in connection with the NWV Gathering Acquisition. In connection with the sale of the additional common units, the EQM General Partner purchased 25,255 EQM general partner units for approximately $1.9 million to maintain its 2.0% general partner interest.
 
During the third quarter of 2015, EQM entered into an equity distribution agreement that established an ATM common unit offering program, pursuant to which a group of managers, acting as EQM's sales agents, may sell EQM common units having an aggregate offering price of up to $750 million (the $750 million ATM Program). During the three months ended September 30, 2015 , EQM issued 827,975 common units at an average price per unit of $76.58 . EQM received net proceeds of approximately $62.2 million after deducting commissions of approximately $0.7 million and other offering expenses of approximately $0.5 million . EQM used the net proceeds from the sales for general partnership purposes. The EQM General Partner elected not to maintain its general partner ownership percentage at the previous level of 2.0% . From October 1, 2015 to October 22, 2015 , EQM issued 334,500 common units at an average price per unit of $70.82 and received net proceeds of approximately $23.5 million .

As of September 30, 2015 , EQGP and its subsidiaries owned 21,811,643 common units, representing a 29.89% limited partner interest, 1,443,015 general partner units, representing a 1.98% general partner interest, and all of the incentive distribution rights in EQM. As of September 30, 2015 , EQT owned a non-economic general partner interest and a 90.1% limited partner interest in EQGP.

D.                                     Financial Information by Business Segment
 
Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally and is subject to evaluation by the chief operating decision maker in deciding how to allocate resources. EQM reports its operations in two segments, which reflect its lines of business. Transmission and storage includes EQM’s FERC-regulated interstate pipeline and storage business. Gathering includes EQM's high-pressure gathering lines and FERC-regulated low pressure gathering system. The operating segments are evaluated on their contribution to EQM’s operating income. All of EQM’s operating revenues, income from operations and assets are generated or located in the United States.  

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Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands)
Revenues from external customers (including affiliates):
 

 
 

 
 

 
 

Transmission and storage
$
69,906

 
$
62,436

 
$
217,407

 
$
180,878

Gathering
78,883

 
58,486

 
230,806

 
157,279

Total
$
148,789

 
$
120,922

 
$
448,213

 
$
338,157

 
 
 
 
 
 
 
 
Operating income:
 

 
 

 
 

 
 

Transmission and storage
$
45,048

 
$
42,515

 
$
148,255

 
$
126,534

Gathering
57,863

 
39,351

 
168,804

 
100,349

Total operating income
$
102,911

 
$
81,866

 
$
317,059

 
$
226,883

 
 
 
 
 
 
 
 
Reconciliation of operating income to net income:
 
 
 

 
 

 
 

Equity income
753

 
—

 
1,147

 
—

Other income
1,716

 
806

 
3,599

 
1,634

Interest expense
11,264

 
8,660

 
34,361

 
20,944

Income tax expense
—

 
6,311

 
6,703

 
25,906

Net income
$
94,116

 
$
67,701

 
$
280,741

 
$
181,667

   
 
September 30, 2015
 
December 31, 2014
 
(Thousands)
Segment assets:
 

 
 

Transmission and storage
$
1,042,615

 
$
928,864

Gathering
914,875

 
765,090

Total operating segments
1,957,490

 
1,693,954

Headquarters, including cash
210,599

 
128,865

Total assets
$
2,168,089

 
$
1,822,819


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands)
Depreciation and amortization:
 

 
 

 
 

 
 

Transmission and storage
$
7,776

 
$
7,195

 
$
21,561

 
$
19,676

Gathering
5,441

 
5,350

 
15,841

 
13,302

Total
$
13,217

 
$
12,545

 
$
37,402

 
$
32,978

 
 
 
 
 
 
 
 
Expenditures for segment assets:
 
 
 
 
 
 
 
Transmission and storage
$
36,788

 
$
39,826

 
$
116,270

 
$
78,907

Gathering
55,387

 
64,321

 
160,685

 
155,176

Total (1)
$
92,175

 
$
104,147

 
$
276,955

 
$
234,083

 
 (1)  EQM accrues capital expenditures when work has been completed but the associated bills have not yet been paid.  These accrued amounts are excluded from capital expenditures on the statements of consolidated cash flows until they are paid in a subsequent period. Accrued capital expenditures were $23.5 million and $19.6 million at September 30, 2015 and 2014 , respectively. Additionally, EQM capitalizes certain labor overhead costs which include a portion of non-cash equity-based compensation. These non-cash capital expenditures in the table above were less than $0.1 million and approximately $0.1 million for the three months ended September 30, 2015 and 2014 , respectively, and less than $0.1 million and approximately $0.2 million for the nine months ended September 30, 2015 and 2014 , respectively.

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E.                         Related-Party Transactions
 
In the ordinary course of business, EQM has transactions with EQT and its affiliates including, but not limited to, transportation service and precedent agreements, storage agreements and gas gathering agreements.
 
Pursuant to an omnibus agreement, EQT performs centralized corporate, general and administrative services for EQM, such as legal, corporate recordkeeping, planning, budgeting, regulatory, accounting, billing, business development, treasury, insurance administration and claims processing, risk management, health, safety and environmental, information technology, human resources, investor relations, cash management and banking, payroll, internal audit, taxes and engineering. In exchange, EQM reimburses EQT for the expenses incurred in providing these services. The omnibus agreement further requires that EQM reimburse EQT for EQM’s allocable portion of the premiums on any insurance policies covering EQM’s assets. Effective January 1, 2015, EQM amended the omnibus agreement to provide for reimbursement by EQM of direct and indirect costs and expenses attributable to EQT's long-term incentive programs as these plans will be utilized to compensate and retain EQT employees who provide services to EQM.
 
Pursuant to an operation and management services agreement, EQT Gathering, LLC (EQT Gathering) provides EQM’s pipelines and storage facilities with certain operational and management services.  EQM reimburses EQT Gathering for such services pursuant to the terms of the omnibus agreement.  The expenses for which EQM reimburses EQT and its subsidiaries may not necessarily reflect the actual expenses that EQM would incur on a stand-alone basis and EQM is unable to estimate what those expenses would be on a stand-alone basis.

See also Note B for a discussion of the MVP Joint Venture and the Preferred Interest in EQT Energy Supply, LLC.
 
F.                         Income Taxes
 
As a result of its limited partnership structure, EQM is not subject to federal and state income taxes. For federal and state income tax purposes, all income, expenses, gains, losses and tax credits generated by EQM flow through to the unitholders; accordingly, EQM does not record a provision for income taxes. As discussed in Note B, EQM completed the NWV Gathering Acquisition on March 17, 2015 and the Jupiter Acquisition on May 7, 2014, each of which was a transaction between entities under common control. Prior to these transactions, the income from NWV Gathering and Jupiter was included in EQT’s consolidated federal tax return; therefore, the NWV Gathering and Jupiter financial statements included U.S. federal and state income tax.  The income tax effects associated with the operations of NWV Gathering and Jupiter prior to the NWV Gathering and Jupiter Acquisitions are reflected in EQM’s consolidated financial statements for those periods. In conjunction with the NWV Gathering Acquisition, approximately $84.4 million of net current and deferred income tax liabilities were eliminated through equity.
 
G.                          Short-term Loans
 
EQM has a $750 million credit facility that expires in February 2019. The credit facility is available to fund working capital requirements and capital expenditures, to purchase assets, to pay distributions, to repurchase units and for general partnership purposes.

As of September 30, 2015 , EQM had $350 million outstanding on the credit facility. There were no amounts outstanding as of December 31, 2014. The maximum amount of EQM’s outstanding short-term loans at any time during the three months ended September 30, 2015 and 2014 was $404 million and $330 million , respectively, and during the nine months ended September 30, 2015 and 2014 was $404 million and $450 million , respectively. The average daily balance of short-term loans outstanding was approximately $357 million and $133 million for the three months ended September 30, 2015 and 2014 , respectively, and was approximately $241 million and $159 million for the nine months ended September 30, 2015 and 2014 , respectively. Interest was incurred on the loans at a weighted average annual interest rate of approximately 1.7% for the three and nine months ended September 30, 2015 and 2014 .

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H.      Fair Value Measurements
The carrying value of cash and cash equivalents, accounts receivable, amounts due to/from related parties and accounts payable approximate fair value due to the short maturity of the instruments. The carrying value of short-term loans under EQM's credit facility approximates fair value as the interest rates are based on prevailing market rates. As of September 30, 2015 and December 31, 2014 , the estimated fair value of EQM's long-term debt was approximately $441 million and $496 million , respectively, and the carrying value of EQM's long-term debt was approximately $493 million at both dates.

I.                        Net Income per Limited Partner Unit
 
The table below presents EQM’s calculation of net income per limited partner unit for common and subordinated limited partner units. Net income attributable to NWV Gathering for periods prior to March 17, 2015 and to Jupiter for periods prior to May 7, 2014 were not allocated to the limited partners for purposes of calculating net income per limited partner unit.

The phantom units granted to the independent directors of the EQM General Partner will be paid in common units on a director’s termination of service on the EQM General Partner's Board of Directors. As there are no remaining service, performance or market conditions related to these awards, the weighted average phantom unit awards included in the calculation of basic weighted average limited partner units outstanding was 14,233 and 11,654 for the three months ended September 30, 2015 and 2014 , respectively, and 13,906 and 11,323 for the nine months ended September 30, 2015 and 2014 , respectively. Potentially dilutive securities included in the calculation of diluted weighted average limited partner units outstanding totaled 157,386 and 128,588 for the three months ended September 30, 2015 and 2014 , respectively, and 160,043 and 125,124 for the nine months ended September 30, 2015 and 2014 , respectively.
 
Conversion of subordinated units . From its inception through December 31, 2014, EQM paid equal distributions on common, subordinated and general partner units, excluding payments on the incentive distribution rights. Upon payment of the cash distribution for the fourth quarter of 2014, the financial requirements for the conversion of all subordinated units were satisfied. As a result, on February 17, 2015, the 17,339,718 subordinated units converted into common units on a one -for-one basis. For purposes of calculating net income per common and subordinated unit, the conversion of the subordinated units is deemed to have occurred on January 1, 2015. The conversion did not impact the amount of the cash distribution paid or the total number of EQM’s outstanding units representing limited partner interests.


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Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands, except per unit data)
Net income
$
94,116

 
$
67,701

 
$
280,741

 
$
181,667

Less:
 
 
 
 
 
 
 
Pre-acquisition net income allocated to parent
—

 
(11,168
)
 
(11,106
)
 
(43,701
)
General partner interest in net income – general partner units
(1,860
)
 
(1,130
)
 
(5,370
)
 
(2,759
)
General partner interest in net income – incentive distribution rights
(12,655
)
 
(3,410
)
 
(30,783
)
 
(6,296
)
Limited partner interest in net income
$
79,601

 
$
51,993

 
$
233,482

 
$
128,911

 
 
 
 
 
 
 
 
Net income allocable to common units - basic
$
79,601

 
$
37,138

 
$
233,482

 
$
88,903

Net income allocable to subordinated units - basic
—

 
14,855

 
—

 
40,008

Limited partner interest in net income - basic
$
79,601

 
$
51,993

 
$
233,482

 
$
128,911

 
 
 
 
 
 
 
 
Net income allocable to common units – diluted
$
79,601

 
$
37,150

 
$
233,482

 
$
88,932

Net income allocable to subordinated units – diluted
—

 
14,843

 
—

 
39,979

Limited partner interest in net income – diluted
$
79,601

 
$
51,993

 
$
233,482

 
$
128,911

 
 
 
 
 
 
 
 
Weighted average limited partner units outstanding – basic
 
 
 
 
 
 
 
Common units
70,929

 
43,359

 
67,800

 
36,919

Subordinated units
—

 
17,340

 
—

 
17,340

Total
70,929

 
60,699

 
67,800

 
54,259

 
 
 
 
 
 
 
 
Weighted average limited partner units outstanding – diluted
 
 
 
 
 
 
 
Common units
71,086

 
43,487

 
67,960

 
37,044

Subordinated units
—

 
17,340

 
—

 
17,340

Total
71,086

 
60,827

 
67,960

 
54,384

 
 
 
 
 
 
 
 
Net income per limited partner unit – basic
 
 
 
 
 
 
 
Common units
$
1.12

 
$
0.86

 
$
3.44

 
$
2.41

Subordinated units
—

 
0.86

 
—

 
2.31

Total
$
1.12

 
$
0.86

 
$
3.44

 
$
2.38

 
 
 
 
 
 
 
 
Net income per limited partner unit – diluted
 
 
 
 
 
 
 
Common units
$
1.12

 
$
0.85

 
$
3.44

 
$
2.40

Subordinated units
—

 
0.86

 
—

 
2.31

Total
$
1.12

 
$
0.85

 
$
3.44

 
$
2.37

 
J.                           Distributions
 
On October 20, 2015 , the Board of Directors of the EQM General Partner declared a cash distribution to EQM’s unitholders for the third quarter of 2015 of $0.675 per common unit. The cash distribution will be paid on November 13, 2015 to unitholders of record, including EQGP, at the close of business on November 2, 2015 . Based on the 71,870,181 EQM common units outstanding on October 22, 2015 , the corresponding cash distributions to EQGP in respect of its general partner interest and incentive distribution rights in EQM would be $1.2 million and $12.7 million , respectively. These distribution amounts to EQGP are subject to change if EQM issues additional common units on or prior to the record date for the third quarter 2015 distribution.

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
EQT Midstream Partners, LP (EQM) is a growth-oriented Delaware limited partnership. EQM’s consolidated financial statements have been retrospectively recast for all periods presented to include the historical results of NWV Gathering, which was acquired on March 17, 2015, and Jupiter, which was acquired on May 7, 2014, as these were businesses and the transactions were between entities under common control. You should read the following discussion and analysis of financial condition and results of operations in conjunction with the consolidated financial statements, and the notes thereto, included elsewhere in this report. References in the following discussion and analysis to ‘‘EQT’’ refer collectively to EQT Corporation and its consolidated subsidiaries.
 
CAUTIONARY STATEMENTS
 
Disclosures in this Quarterly Report on Form 10-Q contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.  Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as “anticipate,” “estimate,” “could,” “would,” “will,” “may,” “forecast,” “approximate,” “expect,” “project,” “intend,” “plan,” “believe” and other words of similar meaning in connection with any discussion of future operating or financial matters.  Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the matters discussed in the section captioned “Outlook” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the expectations of plans, strategies, objectives, and growth and anticipated financial and operational performance of EQM and its subsidiaries, including guidance regarding EQM’s transmission and storage and gathering revenue and volume growth; revenue projections; infrastructure programs (including the timing, cost, capacity and sources of funding with respect to transmission and gathering expansion projects); the timing, cost, capacity and expected interconnections with facilities and pipelines of the Ohio Valley Connector (OVC) and Mountain Valley Pipeline (MVP) projects; the ultimate terms, partners and structure of the MVP Joint Venture; natural gas production growth in EQM’s operating areas for EQT and third parties; asset acquisitions, including EQM’s ability to complete asset acquisitions from EQT or third parties; the amount and timing of distributions, including expected increases; the effect of the Allegheny Valley Connector (AVC) facilities lease on distributable cash flow; future projected AVC lease payments; projected operating and capital expenditures, including the amount of capital expenditures reimbursable by EQT; liquidity and financing requirements, including sources and availability; the effects of government regulation and litigation; and tax position. The forward-looking statements included in this Quarterly Report on Form 10-Q involve risks and uncertainties that could cause actual results to differ materially from projected results.  Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results.  EQM has based these forward-looking statements on current expectations and assumptions about future events.  While EQM considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and are beyond EQM’s control. The risks and uncertainties that may affect the operations, performance and results of EQM’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors” in EQM’s Annual Report on Form 10-K for the year ended December 31, 2014 .
 
Any forward-looking statement speaks only as of the date on which such statement is made and EQM does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
 
In reviewing any agreements incorporated by reference in or filed with this Quarterly Report on Form 10-Q, please remember that such agreements are included to provide information regarding the terms of such agreements and are not intended to provide any other factual or disclosure information about EQM. The agreements may contain representations and warranties by EQM, which should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties to such agreements should those statements prove to be inaccurate. The representations and warranties were made only as of the date of the relevant agreement or such other date or dates as may be specified in such agreement and are subject to more recent developments.  Accordingly, these representations and warranties alone may not describe the actual state of affairs of EQM or its affiliates as of the date they were made or at any other time.

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EXECUTIVE OVERVIEW
 
For the three months ended September 30, 2015 , EQM reported net income of $94.1 million compared to $67.7 million for the three months ended September 30, 2014 . The increase resulted from higher gathering revenues of $20.4 million and increased transmission and storage revenues of $7.5 million , both of which related to production development in the Marcellus Shale, as well as lower income tax expense.  These items were partly offset by a $6.8 million increase in operating expenses and higher interest expense.

For the nine months ended September 30, 2015 , EQM reported net income of $280.7 million compared to $181.7 million for the nine months ended September 30, 2014 . The increase resulted from higher gathering revenues of $73.5 million and increased transmission and storage revenues of $36.5 million , both of which related to production development in the Marcellus Shale, as well as lower income tax expense.  These items were partly offset by a $19.9 million increase in operating expenses and higher interest expense of $13.4 million .

During the third quarter of 2015, EQM entered into an equity distribution agreement that established an "At the Market" common unit offering program, pursuant to which a group of managers, acting as EQM's sales agents, may sell EQM common units having an aggregate offering price of up to $750 million (the $750 million ATM Program). During the three months ended September 30, 2015 , EQM issued 827,975 common units at an average price per unit of $76.58 . EQM received net proceeds of approximately $62.2 million which were used for general partnership purposes.

EQM declared a cash distribution to unitholders of $0.675 per unit on October 20, 2015 , which was 5% higher than the second quarter 2015 distribution of $0.64 per unit and 23% higher than the third quarter 2014 distribution of $0.55 per unit.
 
Business Segment Results of Operations
 
Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally and is subject to evaluation by the chief operating decision maker in deciding how to allocate resources. Interest, equity income and other income are managed on a consolidated basis. EQM has presented each segment’s operating income and various operational measures in the sections below. Management believes that the presentation of this information provides useful information to management and investors regarding the financial condition, results of operations and trends of segments. EQM has reconciled each segment’s operating income to EQM’s consolidated operating income and net income in Note D to the consolidated financial statements.
 
EQM leases the AVC facilities from EQT and operates the facilities as part of its transmission and storage system under the rates, terms and conditions of its FERC-approved tariff. The AVC facilities include an approximately 200 mile pipeline that interconnects with EQM’s transmission and storage system and provides approximately 450 MMcf per day of additional capacity to EQM’s system. Operating revenues and operating expenses related to the AVC facilities do not have an impact on adjusted EBITDA or distributable cash flow as the excess of the AVC revenues over operating and maintenance and selling, general and administrative expenses is paid to EQT as the current monthly lease payment. All revenues related to the AVC facilities are from third parties.
 

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Table of Contents


TRANSMISSION AND STORAGE

RESULTS OF OPERATIONS
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
% Change
 
2015
 
2014
 
% Change
FINANCIAL DATA
(Thousands, other than per day amounts)
Firm reservation fee revenues
$
57,238

 
$
45,731

 
25.2

 
$
182,092

 
$
138,898

 
31.1

Volumetric based fee revenues:
 
 
 
 
 
 
 
 
 
 
 
Usage fees under firm contracts (1)
11,200

 
13,698

 
(18.2
)
 
30,217

 
33,983

 
(11.1
)
Usage fees under interruptible contracts
1,468

 
3,007

 
(51.2
)
 
5,098

 
7,997

 
(36.3
)
Total volumetric based fee revenues
12,668

 
16,705

 
(24.2
)
 
35,315

 
41,980

 
(15.9
)
Total operating revenues
69,906

 
62,436

 
12.0

 
217,407

 
180,878

 
20.2

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating and maintenance
8,910

 
6,776

 
31.5

 
23,604

 
17,226

 
37.0

Selling, general and administrative
8,172

 
5,950

 
37.3

 
23,987

 
17,442

 
37.5

Depreciation and amortization
7,776

 
7,195

 
8.1

 
21,561

 
19,676

 
9.6

Total operating expenses
24,858

 
19,921

 
24.8

 
69,152

 
54,344

 
27.2

Operating income
$
45,048

 
$
42,515

 
6.0

 
$
148,255

 
$
126,534

 
17.2

 
 
 
 
 
 
 
 
 
 
 
 
OPERATIONAL DATA
 

 
 

 
 

 
 

 
 

 
 

Transmission pipeline throughput (BBtu per day)
 
 
 
 
 
 
 
 
 
 
 
Firm capacity reservation
1,751

 
1,219

 
43.6

 
1,866

 
1,265

 
47.5

Volumetric based services (2)
300

 
598

 
(49.8
)
 
257

 
435

 
(40.9
)
Total transmission pipeline throughput
2,051
 
1,817
 
12.9

 
2,123
 
1,700
 
24.9

 
 
 
 
 
 
 
 
 
 
 
 
Average contracted firm transmission reservation commitments (BBtu per day)
2,390

 
1,784

 
34.0

 
2,567

 
1,847

 
39.0

 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
$
36,788

 
$
39,826

 
(7.6
)
 
$
116,270

 
$
78,907

 
47.4


(1) Includes commodity charges and fees on volumes transported in excess of firm contracted capacity.
(2) Includes volumes transported under interruptible contracts and volumes in excess of firm contracted capacity.

Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014
 
Transmission and storage revenues increased by $7.5 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 , reflecting production development in the Marcellus Shale by affiliate and third party producers. The increase primarily resulted from higher firm reservation fees of $11.5 million partly offset by lower usage fees under both firm and interruptible contracts. The decrease in usage fees was primarily due to customers contracting for additional firm capacity.

Operating expenses increased by $4.9 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 . The increase in operating and maintenance expense resulted from higher repairs and maintenance expenses of $1.4 million associated with increased throughput and higher allocations, including personnel costs, from EQT. Selling, general and administrative expenses increased primarily as a result of higher allocations and personnel costs from EQT, including incentive compensation.

Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014
 
Transmission and storage revenues increased by $36.5 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 , reflecting production development in the Marcellus Shale by affiliate and third party producers. The increase primarily resulted from higher firm reservation fees of $43.2 million partly offset by lower usage fees under both firm and interruptible contracts. The decrease in usage fees was primarily due to customers contracting for additional firm capacity.


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Table of Contents


Operating expenses increased by $14.8 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 . The increase in operating and maintenance expense resulted from higher repairs and maintenance expenses of $3.4 million associated with increased throughput, higher property taxes of $1.3 million and higher allocations, including personnel costs, from EQT. Selling, general and administrative expenses increased primarily as a result of higher allocations and personnel costs from EQT, including incentive compensation. The increase in depreciation and amortization expense was primarily a result of higher depreciation on the increased investment in transmission infrastructure.

GATHERING

RESULTS OF OPERATIONS
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2015
 
2014
 
% Change
 
2015
 
2014
 
% Change
FINANCIAL DATA
(Thousands, other than per day amounts)
Firm reservation fee revenues
$
64,091

 
$
12,647

 
406.8

 
$
182,440

 
$
21,079

 
765.5

Volumetric based fee revenues:
 
 
 
 
 
 
 
 
 
 
 
Usage fees under firm contracts (1)
8,562

 
16,385

 
(47.7
)
 
25,176

 
27,492

 
(8.4
)
Usage fees under interruptible contracts
6,230

 
29,454

 
(78.8
)
 
23,190

 
108,708

 
(78.7
)
Total volumetric based fee revenues
14,792

 
45,839

 
(67.7
)
 
48,366

 
136,200

 
(64.5
)
Total operating revenues
78,883

 
58,486

 
34.9

 
230,806

 
157,279

 
46.7

Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Operating and maintenance
9,546

 
7,061

 
35.2

 
26,563

 
22,976

 
15.6

Selling, general and administrative
6,033

 
6,724

 
(10.3
)
 
19,598

 
20,652

 
(5.1
)
Depreciation and amortization
5,441

 
5,350

 
1.7

 
15,841

 
13,302

 
19.1

Total operating expenses
21,020

 
19,135

 
9.9

 
62,002

 
56,930

 
8.9

Operating income
$
57,863

 
$
39,351

 
47.0

 
$
168,804

 
$
100,349

 
68.2

 
 
 
 
 
 
 
 
 
 
 
 
OPERATIONAL DATA
 

 
 

 
 

 
 

 
 

 
 

Gathering volumes (BBtu per day)
 
 
 
 
 
 
 
 
 
 
 
Firm reservation
1,120

 
231

 
384.8

 
1,059

 
130

 
714.6

Volumetric based services (2)
386

 
978

 
(60.5
)
 
409

 
935

 
(56.3
)
Total gathered volumes
1,506
 
1,209
 
24.6

 
1,468
 
1,065
 
37.8

 
 
 
 
 
 
 
 
 
 
 
 
Capital expenditures
$
55,387

 
$
64,321

 
(13.9
)
 
$
160,685

 
$
155,176

 
3.6


(1) Includes fees on volumes gathered in excess of firm contracted capacity.
(2) Includes volumes gathered under interruptible contracts and volumes in excess of firm contracted capacity.
 
Three Months Ended September 30, 2015 Compared to Three Months Ended September 30, 2014
 
Gathering revenues increased by $20.4 million primarily as a result of higher affiliate volumes gathered for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 , driven by production development in the Marcellus Shale. EQM significantly increased firm reservation fee revenues in 2015 compared to 2014 as a result of increased capacity under firm contracts with affiliates. The decrease in usage fees was primarily due to affiliates contracting for additional firm capacity.

Operating expenses increased by $1.9 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 . Operating and maintenance expense increased as a result of higher repairs and maintenance expenses of $1.6 million associated with increased throughput and higher allocations, including personnel costs, from EQT.

Nine Months Ended September 30, 2015 Compared to Nine Months Ended September 30, 2014
 
Gathering revenues increased by $73.5 million primarily as a result of higher affiliate volumes gathered for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 , driven by production development in the Marcellus Shale. EQM significantly increased firm reservation fee revenues in 2015 compared to 2014 as a result of increased capacity under firm contracts with affiliates. The decrease in usage fees was primarily due to affiliates contracting for additional firm capacity.

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Operating expenses increased by $5.1 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 . Operating and maintenance expense increased as a result of higher allocations, including personnel costs, from EQT of $2.8 million and higher repairs and maintenance expenses associated with increased throughput. The increase in depreciation and amortization expense resulted from additional assets placed in-service.

Other Income Statement Items
 
Equity income relates to EQM's interest in Mountain Valley Pipeline, LLC (MVP Joint Venture) and represents EQM's portion of the MVP Joint Venture's AFUDC related to construction of the Mountain Valley Pipeline (MVP).

Other income primarily represents the equity portion of AFUDC on EQM's regulated projects, which generally increases during periods of increased construction and decreases during periods of reduced construction. Other income increased $0.9 million for the three months ended September 30, 2015 and $2.0 million for the nine months ended September 30, 2015 , compared to the three and nine months ended September 30, 2014 , respectively. These increases are primarily related to increased spending on the OVC project.

Interest expense increased by $2.6 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 , primarily related to increased interest of $1.7 million incurred on EQM's long-term debt issued in August 2014 and increased borrowings under EQM's credit facility in 2015. Interest expense increased by $13.4 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 primarily related to increased interest of $11.7 million incurred on EQM's long-term debt issued in August 2014, increased interest of $2.4 million related to the AVC facilities capital lease and increased borrowings under EQM's credit facility in 2015.
 
EQM is not subject to U.S. federal and state income taxes. As previously noted, the NWV Gathering Acquisition (as defined in Note B) on March 17, 2015 and the Jupiter Acquisition (as defined in Note B) on May 7, 2014 were transactions between entities under common control for which the consolidated financial statements of EQM have been retrospectively recast to reflect the combined entities.  Accordingly, the income tax effects associated with NWV Gathering and Jupiter operations prior to the NWV Gathering Acquisition and the Jupiter Acquisition are reflected in the consolidated financial statements as NWV Gathering and Jupiter were previously part of EQT’s consolidated federal tax return. The decrease in income tax expense resulted from the timing of the acquisitions.
 
See “Investing Activities” and “Capital Requirements” in the “Capital Resources and Liquidity” section below for a discussion of capital expenditures.

Non-GAAP Financial Measures
 
EQM defines adjusted EBITDA as EQM's net income plus interest expense, depreciation and amortization expense, income tax expense (if applicable) and non-cash long-term compensation expense less equity income, other income, capital lease payments, Jupiter adjusted EBITDA prior to the Jupiter Acquisition and NWV Gathering adjusted EBITDA prior to the NWV Gathering Acquisition. EQM defines distributable cash flow as adjusted EBITDA less interest expense, excluding capital lease interest and ongoing maintenance capital expenditures, net of expected reimbursements.  Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of EQM’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, use to assess:

•
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.
 
EQM believes that adjusted EBITDA and distributable cash flow provide useful information to investors in assessing EQM’s financial condition and results of operations. Adjusted EBITDA and distributable cash flow should not be considered as alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income and net cash provided by operating activities. Additionally, because adjusted EBITDA and distributable cash flow may be defined differently by other companies in its industry, EQM’s adjusted EBITDA and distributable cash flow may not be comparable to similarly titled

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measures of other companies, thereby diminishing their utility. Distributable cash flow should not be viewed as indicative of the actual amount of cash that EQM has available for distributions from operating surplus or that EQM plans to distribute.

Reconciliation of Non-GAAP Measures
 
The following table presents a reconciliation of the non-GAAP measures adjusted EBITDA and distributable cash flow with the most directly comparable EQM GAAP financial measures of net income and net cash provided by operating activities.
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands)
Net income
$
94,116

 
$
67,701

 
$
280,741

 
$
181,667

Add:
 
 
 
 
 
 
 
Interest expense
11,264

 
8,660

 
34,361

 
20,944

Depreciation and amortization expense
13,217

 
12,545

 
37,402

 
32,978

Income tax expense
—

 
6,311

 
6,703

 
25,906

Non-cash long-term compensation expense
328

 
779

 
1,133

 
2,584

Less:
 
 
 
 
 
 
 
Equity income
(753
)
 
—

 
(1,147
)
 
—

Other income
(1,716
)
 
(806
)
 
(3,599
)
 
(1,634
)
Capital lease payments for AVC (1)
(3,078
)
 
(3,565
)
 
(15,349
)
 
(14,760
)
Adjusted EBITDA attributable to Jupiter prior to acquisition (2)
—

 
—

 
—

 
(34,733
)
Adjusted EBITDA attributable to NWV Gathering prior to acquisition (3)
—

 
(20,178
)
 
(19,841
)
 
(43,236
)
Adjusted EBITDA
$
113,378

 
$
71,447

 
$
320,404

 
$
169,716

Less:
 
 
 
 
 
 
 
Interest expense, excluding capital lease interest
(5,697
)
 
(3,939
)
 
(16,971
)
 
(5,931
)
Ongoing maintenance capital expenditures, net of expected reimbursements (4)
(5,902
)
 
(5,718
)
 
(8,827
)
 
(10,539
)
Distributable cash flow
$
101,779

 
$
61,790

 
$
294,606

 
$
153,246

 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
80,761

 
$
76,397

 
$
319,863

 
$
211,729

Adjustments:
 
 
 
 
 
 
 
Interest expense
11,264

 
8,660

 
34,361

 
20,944

Current tax expense
—

 
343

 
3,705

 
12,161

Capital lease payments for AVC (1)
(3,078
)
 
(3,565
)
 
(15,349
)
 
(14,760
)
Adjusted EBITDA attributable to Jupiter prior to acquisition (2)
—

 
—

 
—

 
(34,733
)
Adjusted EBITDA attributable to NWV Gathering prior to acquisition (3)
—

 
(20,178
)
 
(19,841
)
 
(43,236
)
Other, including changes in working capital
24,431

 
9,790

 
(2,335
)
 
17,611

Adjusted EBITDA
$
113,378

 
$
71,447

 
$
320,404

 
$
169,716

 
(1)   Capital lease payments presented are the amounts incurred on an accrual basis and do not reflect the timing of actual cash payments. These lease payments are generally made monthly on a one month lag.

(2)   Adjusted EBITDA attributable to Jupiter prior to acquisition for the periods presented was excluded from EQM’s adjusted EBITDA calculations as these amounts were generated by Jupiter prior to EQM’s acquisition; therefore, they were not amounts that could have been distributed to EQM’s unitholders.  Adjusted EBITDA attributable to Jupiter for the nine months ended September 30, 2014 was calculated as net income of $20.1 million plus depreciation and amortization expense of $2.1 million plus income tax expense of $12.5 million .

(3)   Adjusted EBITDA attributable to NWV Gathering prior to acquisition for the periods presented was excluded from EQM’s adjusted EBITDA calculations as these amounts were generated by NWV Gathering prior to EQM’s acquisition;  therefore, they were not amounts that could have been distributed to EQM’s unitholders.  Adjusted EBITDA attributable to NWV

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Gathering for the nine months ended September 30, 2015 was calculated as net income of $11.1 million plus depreciation and amortization expense of $2.0 million plus income tax expense of $6.7 million . Adjusted EBITDA attributable to NWV Gathering for the three and nine months ended September 30, 2014 was calculated as net income of $11.2 million and $23.6 million , respectively, plus depreciation and amortization expense of $2.7 million and $6.2 million , respectively, plus income tax expense of $6.3 million and $13.4 million, respectively.

(4)
Ongoing maintenance capital expenditures, net of expected reimbursements excludes ongoing maintenance attributable to NWV Gathering prior to acquisition of $0.3 million for the nine months ended September 30, 2015 and 2014 . Additionally, it excludes ongoing maintenance capital expenditures that EQM expects to be reimbursed or that was reimbursed by EQT under the terms of EQM's omnibus agreement of $ 5.7 million for the three months ended September 30, 2015 and $7.4 million and $0.5 million for the nine months ended September 30, 2015 and 2014 , respectively.
 
EQM's adjusted EBITDA increased by $41.9 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 and $150.7 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 , primarily a result of higher operating income due to increased firm reservation fee revenues related to production development in the Marcellus Shale and the acquisitions, which resulted in EBITDA subsequent to the transactions being reflected in adjusted EBITDA. Distributable cash flow increased by $40.0 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 and $141.4 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 , mainly attributable to the increase in adjusted EBITDA which was partly offset by an increase in interest expense, excluding capital lease interest. 

Outlook
 
EQM’s principal business objective is to increase the quarterly cash distributions that it pays to its unitholders over time while ensuring the ongoing growth of its business. EQM believes that it is well positioned to achieve growth based on the combination of its relationship with EQT and its strategically located assets, which cover portions of the Marcellus and Utica Shales that lack substantial natural gas pipeline infrastructure. EQM believes it will have a competitive advantage in pursuing economically attractive organic expansion projects in its areas of operations, which EQM believes will be a key driver of growth in the future. EQM is also currently pursuing organic growth projects that are expected to provide access to markets in the Midwest, Gulf Coast and Southeast regions. Additionally, EQM may acquire additional midstream assets from EQT or pursue asset acquisitions from third parties. Should EQT choose to pursue midstream asset sales, it is under no contractual obligation to offer the assets to EQM.

EQM expects that the following expansion projects will allow it to capitalize on drilling activity by EQT and other third party producers:

•
Third Party Projects . In July 2015, EQM announced its agreement with Range Resources - Appalachia, LLC to construct a natural gas header pipeline in southwestern Pennsylvania to support Marcellus and Utica development at a cost of approximately $250 million (the Range Resources project). The pipeline is contracted to provide 550 MDth per day of firm capacity and is backed by a ten-year firm capacity reservation commitment. EQM plans to complete the project in two phases, with phase one expected to be in-service by the third quarter of 2016 and phase two by mid-year 2017. The majority of EQM's capital investment for the project is expected throughout 2016 and the first half of 2017. EQM expects to invest approximately $30 million to $40 million on this and other gathering infrastructure projects for third party producers during 2015.

•
Gathering System Expansions . EQM expects capital expenditures of approximately $100 million in 2015 related to expansion in the Jupiter development area that will raise total firm gathering capacity in that area to 775 MMcf per day. The Jupiter expansion is fully subscribed and was recently placed into service. In addition, EQM expects to invest a total of approximately $370 million, of which approximately $65 million is expected to be spent during 2015, related to expansion in the NWV Gathering development area. These expenditures are part of an additional fully subscribed expansion project expected to raise total firm gathering capacity in the NWV Gathering development area from the current 460 MMcf per day to 640 MMcf per day by year-end 2017.

•
Ohio Valley Connector . The OVC includes a 36-mile pipeline that will extend EQM's transmission and storage system from northern West Virginia to Clarington, Ohio, at which point it will interconnect with the Rockies Express Pipeline and the Texas Eastern Pipeline. EQM submitted the OVC certificate application, which also includes related transmission expansion projects described below, to the FERC in December of 2014 and anticipates receiving the certificate in the fourth quarter of 2015. Subject to FERC approval, construction is scheduled to begin shortly thereafter and the pipeline is expected to be in-service in the third quarter of 2016. The

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OVC will provide approximately 850 BBtu per day of transmission capacity and the greenfield portion is estimated to cost approximately $300 million, of which $100 million to $110 million is expected to be spent in 2015. EQM has entered into a 20-year precedent agreement for a total of 650 BBtu per day of firm transmission capacity on the OVC.

•
Transmission Expansion Projects . EQM also plans to begin several multi-year transmission expansion projects to support the continued growth of the Marcellus and Utica development. The projects may include pipeline looping, compression installation and new pipeline segments, which combined are expected to increase transmission capacity by approximately 1.0 Bcf per day by year-end 2017. Combined with the Antero Resources (Antero) transmission project which was completed in the second quarter of 2015, EQM expects to spend approximately $50 million on these transmission projects during 2015.

•
Mountain Valley Pipeline . On March 30, 2015, EQM assumed EQT's majority interest in the MVP Joint Venture, a joint venture with affiliates of each of NextEra Energy, Inc., WGL Holdings, Inc.,Vega Energy Partners, Ltd. and RGC Resources, Inc. EQM, which currently owns a majority interest in the MVP Joint Venture, also assumed the role of operator of the MVP to be constructed by the joint venture. The estimated 300-mile MVP is currently targeted at 42" in diameter and a minimum capacity of 2.0 Bcf per day, and will extend from EQM's existing transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia. As currently designed, the MVP is estimated to cost a total of $3.0 billion to $3.5 billion, excluding AFUDC, with EQM funding its proportionate share through capital contributions made to the joint venture. In 2015, EQM expects to spend approximately $105 million to $115 million for its acquisition of the MVP Interest from EQT and capital contributions to the MVP Joint Venture, primarily in support of environmental and land assessments, design work and materials. Expenditures are expected to increase substantially as construction commences, with the bulk of the expenditures expected to be made in 2017 and 2018. The MVP Joint Venture has secured a total of 2.0 Bcf per day of 20-year firm capacity commitments, including an approximately 1.3 Bcf per day firm capacity commitment by EQT, and is currently in negotiation with additional shippers who have expressed interest in the MVP project. As a result, the final project scope and total capacity has not yet been determined; however, the voluntary pre-filing process with the FERC began in October 2014. The pipeline, which is subject to FERC approval, is expected to be in-service during the fourth quarter of 2018.

Capital Resources and Liquidity
 
EQM’s principal liquidity requirements are to finance its operations, fund capital expenditures and acquisitions, make cash distributions and satisfy any indebtedness obligations. EQM’s ability to meet these liquidity requirements will depend on its ability to generate cash in the future as well as its ability to raise capital in banking, capital and other markets. EQM’s available sources of liquidity include cash generated from operations, borrowing under EQM's credit facility, cash on hand, debt offerings and issuances of additional EQM partnership units.
 
Operating Activities
 
The increase in net cash provided by operating activities of $108.1 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 was driven by higher operating income for which contributing factors are discussed in the “Executive Overview” and "Business Segment Results of Operations" sections herein, and timing of payments between the two periods.
 
Investing Activities
 
The increase in net cash used in investing activities of $493.1 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 was primarily attributable to the acquisition of the NWV Gathering net assets from EQT, the purchase of the preferred interest in EQT Energy Supply, LLC, increased capital expenditures and the acquisition of EQT's interest in the MVP Joint Venture (MVP Interest Acquisition) as well as the capital contributions to the MVP Joint Venture in the third quarter of 2015. See discussion of capital expenditures in the “Capital Requirements” section below.
 
Financing Activities
 
Net cash provided by financing activities totaled $446.9 million for the first nine months of 2015 compared to $323.8 million for the first nine months of 2014 .  Cash inflows for the first nine months of 2015 from equity offerings and net short-term loans were partly offset by cash payments for the NWV Gathering Acquisition in excess of net assets acquired and distributions to

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unitholders. Cash inflows for the first nine months of 2014 related to the equity and debt offerings which were partly offset by cash payments for the Jupiter Acquisition in excess of net assets acquired, the Sunrise Merger payment and distributions to unitholders.

Capital Requirements
 
The transmission, storage and gathering businesses are capital intensive, requiring significant investment to develop new facilities and to maintain and upgrade existing operations. Capital expenditures for the three and nine months ended September 30, 2015 and 2014 were as follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2015
 
2014
 
2015
 
2014
 
(Thousands)
Expansion capital expenditures (1)
$
80,078

 
$
95,582

 
$
257,932

 
$
216,761

Maintenance capital expenditures:
 
 
 
 
 
 
 
Ongoing maintenance
11,562

 
5,702

 
16,572

 
11,373

Funded regulatory compliance
535

 
2,863

 
2,451

 
5,949

Total maintenance capital expenditures
12,097

 
8,565

 
19,023

 
17,322

Total capital expenditures (2)
$
92,175

 
$
104,147

 
$
276,955

 
$
234,083

 
(1)          Expansion capital expenditures do not include capital contributions made to the MVP Joint Venture. During the third quarter of 2015, EQM made capital contributions to the MVP Joint Venture of approximately $30 million. In addition, in conjunction with EQM's acquisition of EQT's majority ownership interest in the MVP Joint Venture, EQM reimbursed EQT for EQT's capital contributions to the MVP Joint Venture as described in Note B.

(2)          EQM accrues capital expenditures when work has been completed but the associated bills have not yet been paid.  These accrued amounts are excluded from capital expenditures on the statements of consolidated cash flows until they are paid in a subsequent period. Accrued capital expenditures were $23.5 million and $19.6 million at September 30, 2015 and 2014 , respectively. Additionally, EQM capitalizes certain labor overhead costs which include a portion of non-cash equity-based compensation. These non-cash capital expenditures in the table above were less than $0.1 million and approximately $0.1 million for the three months ended September 30, 2015 and 2014 , respectively, and less than $0.1 million and approximately $0.2 million for the nine months ended September 30, 2015 and 2014 , respectively.

Expansion capital expenditures decreased by $15.5 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 as a result of the timing of spending on projects. In the third quarter of 2015, expansion capital expenditures primarily related to the following projects: Jupiter gathering expansion, the OVC and NWV Gathering expansion. In the third quarter of 2014, expansion capital expenditures primarily related to the following projects: the NWV Gathering and Jupiter expansions, the OVC, the Jefferson compressor station expansion, third party projects and the Antero transmission projects. The Jefferson compressor station expansion project was placed into service in September 2014. Third party projects were completed in the fourth quarter of 2014. The first Antero transmission project was placed into service during the fourth quarter of 2014 and the second Antero transmission project was placed into service in the second quarter of 2015.

Expansion capital expenditures increased by $41.2 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 as a result of the timing of spending on projects. For the nine months ended September 30, 2015 , expansion capital expenditures primarily related to the following projects: the OVC, the Jupiter and NWV Gathering expansions and the Antero transmission project. For the nine months ended September 30, 2014 , expansion capital expenditures primarily related to the following projects: the NWV Gathering and Jupiter expansions, third party projects, the Jefferson compressor station expansion, the OVC and the Antero transmission projects.

Ongoing maintenance capital expenditures are cash expenditures made to maintain, over the long term, EQM operating capacity or operating income. Ongoing maintenance capital expenditures increased by $5.9 million for the three months ended September 30, 2015 compared to the three months ended September 30, 2014 and $5.2 million for the nine months ended September 30, 2015 compared to the nine months ended September 30, 2014 primarily related to the timing of projects.

Funded regulatory compliance capital expenditures decreased by $2.3 million and $3.5 million for the three and nine months ended September 30, 2015 compared to the three and nine months ended September 30, 2014 , respectively. EQM identified two

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specific regulatory compliance initiatives prior to its IPO in 2012 for which it retained approximately $32 million from the net proceeds of the IPO. EQM has spent approximately $28.9 million since the IPO on these initiatives.

In 2015 , expansion capital expenditures and MVP capital contributions, including the MVP Interest Acquisition, are expected to total $450 million to $480 million. EQM’s future capital investments may vary significantly from period to period based on the available investment opportunities and will grow substantially in future periods for the OVC project, MVP capital contributions and the Range Resources project. Maintenance related capital expenditures are also expected to vary quarter to quarter. EQM expects to fund future capital expenditures primarily through cash on hand, cash generated from operations, availability under its credit facility, debt offerings and the issuance of additional EQM partnership units. EQM does not forecast capital expenditures associated with potential midstream projects not committed as of the filing of this Quarterly Report on Form 10-Q.
 
Short-term Borrowings

EQM has a $750 million credit facility that expires in February 2019 and had $350 million outstanding as of September 30, 2015 . The credit facility is available to fund working capital requirements and capital expenditures, to purchase assets, to pay distributions and to repurchase units and for general partnership purposes. Subject to certain terms and conditions, the credit facility has an accordion feature that allows EQM to increase the available revolving borrowings under the facility by up to an additional $250 million. In addition, the credit facility includes a sublimit up to $75 million for same-day swing line advances and a sublimit up to $150 million for letters of credit. EQM has the right to request that one or more lenders make term loans to it under the credit facility subject to the satisfaction of certain conditions, which term loans will be secured by cash and qualifying investment grade securities. EQM’s obligations under the revolving portion of the credit facility are unsecured.

EQM’s credit facility contains various provisions that, if not complied with, could result in termination of the credit facility, require early payment of amounts outstanding or similar actions. The covenants and events of default under the credit facility relate to maintenance of permitted leverage ratio, limitations on transactions with affiliates, limitations on restricted payments, insolvency events, nonpayment of scheduled principal or interest payments, acceleration of and certain other defaults under other financial obligations and change of control provisions. Under the credit facility, EQM is required to maintain a consolidated leverage ratio of not more than 5.00 to 1.00 (or not more than 5.50 to 1.00 for certain measurement periods following the consummation of certain acquisitions). As of September 30, 2015 , EQM was in compliance with all credit facility provisions and covenants.

Security Ratings

The table below sets forth the credit ratings for debt instruments of EQM at September 30, 2015 . Changes in credit ratings may affect EQM’s cost of future borrowings (including interest rates and fees under its credit facility), collateral requirements under joint venture arrangements and construction contracts and access to the credit markets.
Rating Service
 
Senior Notes
 
Outlook
Moody’s Investors Service
 
Ba1
 
Stable
Standard & Poor’s Ratings Services
 
BBB-
 
Stable
Fitch Ratings
 
BBB-
 
Stable

EQM’s credit ratings are subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. EQM cannot ensure that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a credit rating agency if, in its judgment, circumstances so warrant. If the credit rating agencies downgrade EQM’s ratings, particularly below investment grade, EQM’s access to the capital markets may be limited, borrowing costs could increase, counterparties may request additional assurances and the potential pool of investors and funding sources may decrease. In order to be considered investment grade, a company must be rated BBB- or higher by S&P, Baa3 or higher by Moody’s or BBB- or higher by Fitch. Anything below these ratings, including EQM's current credit rating of Ba1 by Moody's, is considered non-investment grade. Having a non-investment grade rating may result in greater borrowing costs and collateral requirements than would be available to EQM if all its credit ratings were investment grade.


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EQM At the Market Equity Program

During the third quarter of 2015 , EQM established the $750 million ATM Program. As of October 22, 2015 , EQM had approximately $663 million in remaining capacity under the program.

Distributions
 
On October 20, 2015 , the Board of Directors of EQT Midstream Services, LLC (EQM General Partner) declared a cash distribution to EQM’s unitholders for the third quarter of 2015 of $0.675 per common unit. The cash distribution will be paid on November 13, 2015 to unitholders of record, including EQGP, at the close of business on November 2, 2015 . Based on the 71,870,181 EQM common units outstanding on October 22, 2015 , the corresponding cash distributions to EQGP in respect of its general partner interest and incentive distribution rights in EQM would be $1.2 million and $12.7 million , respectively. These distribution amounts to EQGP are subject to change if EQM issues additional common units on or prior to the record date for the third quarter 2015 distribution.

Commitments and Contingencies
 
In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against EQM.  While the amounts claimed may be substantial, EQM is unable to predict with certainty the ultimate outcome of such claims and proceedings. EQM accrues legal and other direct costs related to loss contingencies when actually incurred. EQM has established reserves it believes to be appropriate for pending matters, and after consultation with counsel and giving appropriate consideration to available insurance, EQM believes that the ultimate outcome of any matter currently pending against it will not materially affect its business, financial condition, results of operations, liquidity or ability to make distributions.

Off-Balance Sheet Arrangements

As of September 30, 2015 , EQM has issued a $110 million performance guarantee in favor of the MVP Joint Venture to provide performance assurances for MVP Holdco's obligations to fund its proportionate share of the construction budget for the MVP. Upon the FERC’s initial release to begin construction of the MVP, EQM's guarantee will terminate, and EQM will be obligated to issue a new guarantee in an amount equal to 33% of MVP Holdco’s remaining obligations to make capital contributions to the MVP Joint Venture in connection with the then remaining construction budget.
 
Critical Accounting Policies
 
EQM’s critical accounting policies are described in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the year ended December 31, 2014 contained in EQM’s Current Report on Form 8-K as filed on April 1, 2015 and are incorporated herein by reference.  Any new accounting policies or updates to existing accounting policies as a result of new accounting pronouncements have been included in the notes to EQM’s consolidated financial statements in Item 1 on this Quarterly Report on Form 10-Q for the period ended September 30, 2015 .  The application of EQM’s critical accounting policies may require management to make judgments and estimates about the amounts reflected in the consolidated financial statements.  Management uses historical experience and all available information to make these estimates and judgments.  Different amounts could be reported using different assumptions and estimates.

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Table of Contents



Item 3.  Quantitative and Qualitative Disclosures About Market Risk
 
Interest Rate Risk
 
Changes in interest rates affect the amount of interest EQM earns on cash, cash equivalents and short-term investments and the interest rates EQM pays on borrowings on its credit facility. EQM's long-term borrowings are fixed rate and thus do not expose EQM to fluctuations in its results of operations or liquidity from changes in market interest rates. Changes in interest rates do affect the fair value of EQM's fixed rate debt. See Note G to the consolidated financial statements for further discussion of EQM's borrowings and Note H to the consolidated financial statements for a discussion of fair value measurements. EQM may from time to time hedge the interest on portions of its borrowings under the credit facility in order to manage risks associated with floating interest rates.
 
Credit Risk
 
EQM is exposed to credit risk. Credit risk is the risk that EQM may incur a loss if a counterparty fails to perform under a contract. EQM manages its exposure to credit risk associated with customers through credit analysis, credit approval, credit limits and monitoring procedures. For certain transactions, EQM may request letters of credit, cash collateral, prepayments or guarantees as forms of credit support. EQM’s FERC tariff requires tariff customers that do not meet specified credit standards to provide three months of credit support; however, EQM is exposed to credit risk beyond this three month period when its tariff does not require its customers to provide additional credit support. For some of EQM’s more recent long-term contracts associated with system expansions, it has entered into negotiated credit agreements that provide for enhanced forms of credit support if certain credit standards are not met. EQM has historically experienced only minimal credit losses in connection with its receivables. EQM is also exposed to the credit risk of EQT, its largest customer. In connection with EQM's IPO in 2012, EQT guaranteed all payment obligations, up to a maximum of $50 million, due and payable to Equitrans by EQT Energy, LLC, one of Equitrans’ largest customers. The EQT guaranty will terminate on November 30, 2023 unless terminated earlier by EQT upon 10 days written notice. At September 30, 2015 , EQT’s public senior debt had an investment grade credit rating.
 
Other Market Risks
 
EQM's credit facility is underwritten by a syndicate of financial institutions, each of which is obligated to fund its pro-rata portion of any borrowings by EQM. No one lender of the large group of financial institutions in the syndicate holds more than 10% of the facility. EQM’s large syndicate group and relatively low percentage of participation by each lender is expected to limit EQM’s exposure to problems or consolidation in the banking industry.

Item 4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures
 
Under the supervision and with the participation of management of the EQM General Partner, including the EQM General Partner’s Principal Executive Officer and Principal Financial Officer, an evaluation of EQM’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) was conducted as of the end of the period covered by this report.  Based on that evaluation, the Principal Executive Officer and Principal Financial Officer of the EQM General Partner concluded that EQM’s disclosure controls and procedures were effective as of the end of the period covered by this report.
 
Changes in Internal Control over Financial Reporting
 
There were no changes in internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) that occurred during the third quarter of 2015 that have materially affected, or are reasonably likely to materially affect, EQM’s internal control over financial reporting.

26


PART II.  OTHER INFORMATION
 
Item 1. Legal Proceedings
 
In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against EQM. While the amounts claimed may be substantial, EQM is unable to predict with certainty the ultimate outcome of such claims and proceedings. EQM accrues legal and other direct costs related to loss contingencies when actually incurred. EQM has established reserves it believes to be appropriate for pending matters and, after consultation with counsel and giving appropriate consideration to available insurance, EQM believes that the ultimate outcome of any matter currently pending against it will not materially affect its business, financial condition, results of operations, liquidity or ability to make distributions.
 
Item 1A. Risk Factors
 
Information regarding risk factors is discussed in Part II, Item 1A, “Risk Factors” of EQM’s Annual Report on Form 10-K for the year ended December 31, 2014 .  There have been no material changes from the risk factors previously disclosed in EQM’s Annual Report on Form 10-K.
 
Item 6. Exhibits
 
10.1

 
Exhibit A to Second Amended and Restated Limited Liability Company Agreement of Mountain Valley Pipeline, LLC, dated March 10, 2015, by and among MVP Holdco, LLC, US Marcellus Gas Infrastructure, LLC, WGL Midstream, Inc., Vega Midstream MVP LLC, VED NPI IV, LLC, RGC Midstream, LLC and Mountain Valley Pipeline, LLC (as amended effective as of October 1, 2015).
10.2

 
Equity Distribution Agreement, dated as of August 27, 2015, by and among EQT Midstream Partners, LP and the Managers named therein.
10.3

 
Amended and Restated Confidentiality, Non-Solicitation and Non-Competition Agreement, dated July 29, 2015, between EQT Corporation and Theresa Z. Bone.
10.4

 
Termination of Amended and Restated Change of Control Agreement, dated July 29, 2015, between EQT Corporation and Theresa Z. Bone.
10.5

 
Transportation Service Agreement Applicable to Firm Transportation Service Under Rate Schedule FTS, Contract No. EQTR20242-852, dated September 24, 2014, between Equitrans, L.P. and EQT Energy, LLC.
31.1

 
Rule 13(a)-14(a) Certification of Principal Executive Officer.
31.2

 
Rule 13(a)-14(a) Certification of Principal Financial Officer.
32

 
Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.
101

 
Interactive Data File.


27

Signature
 
 
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
 
 
 
 
EQT Midstream Partners, LP
 
 
(Registrant)
 
 
 
 
 
By:
EQT Midstream Services, LLC, its General Partner
 
 
 
 
 
 
 
 
 
 
By:
/s/ Philip P. Conti
 
 
 
Philip P. Conti
 
 
 
Senior Vice President and Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
Date:  October 22, 2015

28


INDEX TO EXHIBITS
 
Exhibit No.
 
Document Description
 
Method of Filing
10.1

 
Exhibit A to Second Amended and Restated Limited Liability Company Agreement of Mountain Valley Pipeline, LLC, dated March 10, 2015, by and among MVP Holdco, LLC, US Marcellus Gas Infrastructure, LLC, WGL Midstream, Inc., Vega Midstream MVP LLC, VED NPI IV, LLC, RGC Midstream, LLC and Mountain Valley Pipeline, LLC (as amended effective as of October 1, 2015).
 
Filed herewith as Exhibit 10.1.
10.2

 
Equity Distribution Agreement, dated as of August 27, 2015, by and among EQT Midstream Partners, LP and the Managers named therein.
 
Filed as Exhibit 1.1 to Form 8-K (#001-35574) filed on August 27, 2015.
10.3

 
Amended and Restated Confidentiality, Non-Solicitation and Non-Competition Agreement, dated July 29, 2015, between EQT Corporation and Theresa Z. Bone.
 
Filed herewith as Exhibit 10.3.
10.4

 
Termination of Amended and Restated Change of Control Agreement, dated July 29, 2015, between EQT Corporation and Theresa Z. Bone.
 
Filed herewith as Exhibit 10.4.
10.5

 
Transportation Service Agreement Applicable to Firm Transportation Service Under Rate Schedule FTS, Contract No. EQTR20242-852, dated September 24, 2014, between Equitrans, L.P. and EQT Energy, LLC.
 
Filed herewith as Exhibit 10.5.
31.1

 
Rule 13(a)-14(a) Certification of Principal Executive Officer.
 
Filed herewith as Exhibit 31.1.
31.2

 
Rule 13(a)-14(a) Certification of Principal Financial Officer.
 
Filed herewith as Exhibit 31.2.
32

 
Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.
 
Furnished herewith as Exhibit 32.
101

 
Interactive Data File.
 
Filed herewith as Exhibit 101.


29
Exhibit 10.1

EXHIBIT A

MEMBERS

Name, Address, Fax and E-mail
Sharing
Ratio
Parent
Representative and Alternate Representatives

MVP HOLDCO, LLC

EQT Plaza
625 Liberty Avenue
Pittsburgh, Pennsylvania 15222
Fax: (412) 553-7781
Attention: Blue Jenkins
   [***]
   David Gray
   [***]
   Sean McGinty
   [***]

with a copy to:

Baker Botts L.L.P.
98 San Jacinto Blvd., Suite 1500
Austin, Texas 78701
Fax: (512) 322-8349
Attn: Michael L. Bengtson
         [***]



54%

EQT Corporation

David Gray – Representative


Blue Jenkins – Alternate Representative


US MARCELLUS GAS INFRASTRUCTURE, LLC

601 Travis Street
Suite 1900
Houston, Texas 77002
Fax: 713.751.0375
Attention: Lawrence A. Wall, Jr.
   [***]
   Karina Amelang
   [***]

 

35%

NextEra Energy Capital Holdings, Inc.

TJ Tuscai, Chief Executive Officer – Representative


Lawrence A. Wall, Jr., President – Alternate Representative

WGL MIDSTREAM, INC.

c/o WGL Holdings, Inc.
101 Constitution Avenue, N.W.
Washington, DC 20080
Fax: (202) 624-6655
Attn: Anthony M. Nee
         [***]

7%
WGL Holdings, Inc.
N/A
VEGA MIDSTREAM MVP LLC

c/o Vega Energy Partners, Ltd.
3701 Kirby Dr., Suite 1290
Houston, Texas 77098
Fax: (713) 527-0850
Attn: David A. Modesett
         [***]

with a copy to:

Norton Rose Fulbright
1301 McKinney St., Suite 5100
Houston, TX 77010
Fax: (713) 651-5246
Attn: Ned Crady
         [***]

3%
Vega Energy Partners, Ltd.
N/A
VEGA NPI IV, LLC

c/o Vega Energy Partners, Ltd.
3701 Kirby Dr., Suite 1290
Houston, Texas 77098
Fax: (713) 527-0850
Attn: David A. Modesett
         [***]

with a copy to:

Norton Rose Fulbright
1301 McKinney St., Suite 5100
Houston, TX 77010
Fax: (713) 651-5246
Attn: Ned Crady
         [***]

0%
Vega Energy Partners, Ltd.
N/A
RGC MIDSTREAM, LLC

519 Kimball Ave NE
Roanoke, Virginia 24016
Fax: (540) 777-2636
Attn: Paul Nester
         [***]


1%
RGC Resources, Inc.
N/A


Exhibit A
    
Exhibit 10.3

AMENDED AND RESTATED
CONFIDENTIALITY, NON‑SOLICITATION and
NON‑COMPETITION AGREEMENT
This AMENDED AND RESTATED CONFIDENTIALITY, NON-SOLICITATION AND NON-COMPETITION AGREEMENT (this “Agreement”) is entered into and effective as of July 29, 2015, by and between EQT Corporation, a Pennsylvania corporation (EQT Corporation and its subsidiary companies are hereinafter collectively referred to as the “Company”), and Theresa Z. Bone (the “Employee”). This Agreement amends and restates in its entirety that certain Confidentiality, Non-Solicitation and Non-Competition Agreement by and between the Company and the Employee originally dated as of September 8, 2008, as amended effective January 1, 2014 and January 1, 2015 (the “Original Agreement”).
WITNESSETH:
WHEREAS, during the course of Employee’s employment with the Company, the Company has imparted and will continue to impart to Employee proprietary and/or confidential information and/or trade secrets of the Company; and
WHEREAS, in order to protect the business and goodwill of the Company, the Company desires to obtain or continue to obtain certain confidentiality, non-competition and non‑solicitation covenants from the Employee; and
WHEREAS, the Employee is willing to agree to these confidentiality, non-competition and non-solicitation covenants by entering into this Agreement, which amends and restates the Original Agreement, in exchange for the Company's agreement to pay the severance benefits described in Section 3 below in the event that Employee's employment with the Company is terminated in certain circumstances; and
WHEREAS, the Company and the Employee are parties to that certain Amended and Restated Change of Control Agreement, originally dated as of September 8, 2008, and previously amended and restated as of February 19, 2013 (the “Change of Control Agreement”);
WHEREAS, the Company and Employee are terminating the Change of Control Agreement by mutual agreement pursuant to the Termination of Amended and Restated Change of Control Agreement (the “Termination Agreement”) being entered into concurrently herewith, and desire and intend that this Agreement shall replace and supersede the Change of Control Agreement in its entirety; and
WHEREAS, the Company and Employee acknowledge and agree that this Agreement shall not be effective unless and until the Termination Agreement shall have been executed and delivered by the Company and the Employee;
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and intending to be legally bound hereby, the parties hereto agree as follows:

1


1.     Restrictions on Competition and Solicitation . While the Employee is employed by the Company and for a period of twenty-four (24) months after the date of Employee's termination of employment with the Company for any reason Employee will not, directly or indirectly, expressly or tacitly, for himself/herself or on behalf of any entity conducting business anywhere in the Restricted Territory (as defined below): (i) act in any capacity for any business in which his/her duties at or for such business include oversight of or actual involvement in providing services which are competitive with the services or products being provided or which are being produced or developed by the Company, or were under investigation by the Company within the last two (2) years prior to the end of Employee's employment with the Company, (ii) recruit investors on behalf of an entity which engages in activities which are competitive with the services or products being provided or which are being produced or developed by the Company, or were under investigation by the Company within the last two (2) years prior to the end of Employee's employment with the Company, or (iii) become employed by such an entity in any capacity which would require Employee to carry out, in whole or in part, the duties Employee has performed for the Company which are competitive with the services or products being provided or which are being produced or developed by the Company, or were under active investigation by the Company within the last two (2) years prior to the end of Employee's employment with the Company. Notwithstanding the foregoing, the Employee may purchase or otherwise acquire up to (but not more than) 1% of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934. This covenant shall apply to any services, products or businesses under investigation by the Company within the last two (2) years prior to the end of Employee's employment with the Company only to the extent that Employee acquired or was privy to confidential information regarding such services, products or businesses. Employee acknowledges that this restriction will prevent Employee from acting in any of the foregoing capacities for any competing entity operating or conducting business within the Restricted Territory and that this scope is reasonable in light of the business of the Company.
Restricted Territory shall mean (i) the entire geographic location of any natural gas and oil play in which the Company owns, operates or has contractual rights to purchase natural gas-related assets (other than commodity trading rights and pipeline capacity contracts on non-affiliated or third-party pipelines), including but not limited to, storage facilities, interstate pipelines, intrastate pipelines, intrastate distribution facilities, liquefied natural gas facilities, propane-air facilities or other peaking facilities, and/or processing or fractionation facilities; or (ii) the entire geographic location of any natural gas and oil play in which the Company owns proved, developed and/or undeveloped natural gas and/or oil reserves and/or conducts natural gas or oil exploration and production activities of any kind; or (iii) the entire geographic location of any natural gas and oil play in which the Company has decided to make or has made an offer to purchase or lease assets for the purpose of conducting any of the business activities described in subparagraphs (i) and (ii) above within the six (6) month period immediately preceding the end of the Employee’s employment with the Company provided that Employee had actual knowledge of the offer or decision to make an offer prior to Employee’s separation from the Company. For geographic locations of natural gas and oil plays, refer to the maps produced by the United States Energy Information Administration located at www.eia.gov/maps.

2


Employee agrees that for a period of twenty-four (24) months following the termination of Employee's employment with the Company for any reason, including without limitation termination for cause or without cause, Employee shall not, directly or indirectly, solicit the business of, or do business with: (i) any customer that Employee approached, solicited or accepted business from on behalf of the Company, and/or was provided confidential or proprietary information about while employed by the Company within the one (1) year period preceding Employee's separation from the Company; and (ii) any prospective customer of the Company who was identified to or by the Employee and/or who Employee was provided confidential or proprietary information about while employed by the Company within the one (1) year period preceding Employee's separation from the Company, for purposes of marketing, selling and/or attempting to market or sell products and services which are the same as or similar to any product or service the Company offers within the last two (2) years prior to the end of Employee's employment with the Company, and/or, which are the same as or similar to any product or service the Company has in process over the last two (2) years prior to the end of Employee's employment with the Company to be offered in the future.
While Employee is employed by the Company and for a period of thirty-six (36) months after the date of Employee's termination of employment with the Company for any reason, Employee shall not (directly or indirectly) on his/her own behalf or on behalf of any other person or entity solicit or induce, or cause any other person or entity to solicit or induce, or attempt to solicit or induce, any employee, consultant, vendor or independent contractor to leave the employ of or engagement by the Company or its successors, assigns or affiliates, or to violate the terms of their contracts with the Company.
2.     Confidentiality of Information and Nondisclosure . Employee acknowledges and agrees that his/her employment by the Company necessarily involves his/her knowledge of and access to confidential and proprietary information pertaining to the business of the Company. Accordingly, Employee agrees that at all times during the term of this Agreement and for as long as the information remains confidential after the termination of Employee's employment, he/she will not, directly or indirectly, without the express written authority of the Company, unless directed by applicable legal authority having jurisdiction over Employee, disclose to or use, or knowingly permit to be so disclosed or used, for the benefit of himself/herself, any person, corporation or other entity other than the Company, (i) any information concerning any financial matters, employees of the Company, customer relationships, competitive status, supplier matters, internal organizational matters, current or future plans, or other business affairs of or relating to the Company, (ii) any management, operational, trade, technical or other secrets or any other proprietary information or other data of the Company, or (iii) any other information related to the Company which has not been published and is not generally known outside of the Company. Employee acknowledges that all of the foregoing constitutes confidential and proprietary information, which is the exclusive property of the Company. Nothing in this Section 2 prohibits Employee from reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation.

3


3.     Severance Benefit . If the Employee’s employment is terminated by the Company for any reason other than Cause (as defined below) or if the Employee terminates his/her employment for Good Reason (as defined below), the Company shall provide Employee with the following:
(a) A lump sum payment payable within 60 days following Employee’s termination date equal to twenty-four (24) months of Employee’s base salary in effect at the time of such termination, or immediately prior to the event that serves as the basis for termination for Good Reason;
(b) A lump sum payment payable within 60 days following Employee’s termination date equal to two times the average annual incentive (bonus) payment earned by the Employee under the Company’s applicable Short-Term Incentive Plan (or any successor plan) for the three (3) full years prior to Employee’s termination date;
(c) A lump sum payment payable within 60 days following Employee’s termination date equal to the product of (i) twelve (12) and (ii) 100% of the then-current Consolidated Omnibus Budget Reconciliation Act of 1985 monthly rate for family coverage;
(d) A lump sum payment payable within 60 days following Employee’s termination date equal to $200,000;
(e) Subject to Section 14 of this Agreement, all stock options, restricted stock, restricted stock units and other time-vesting equity awards granted to Employee under the 2009 EQT Corporation Long-Term Incentive Plan (as amended, the “2009 LTIP”), the EQT Corporation 2014 Long-Term Incentive Plan (as amended from time to time, and including any successor plan thereto, the “2014 LTIP”), the EQT Midstream Services, LLC 2012 Long-Term Incentive Plan (as amended from time to time, and including any successor plan thereto, the “2012 LTIP”), the EQT GP Services, LLC 2015 Long-Term Incentive Plan (as amended from time to time, and including any successor plan thereto, the “2015 LTIP”), and any other long-term incentive plan of the Company (the 2009 LTIP, the 2014 LTIP, the 2012 LTIP, the 2015 LTIP and any other long-term incentive plan of the Company are, collectively, the “LTIPs”) shall immediately become vested and exercisable in full and/or all restrictions on such awards shall lapse (for avoidance of doubt, this provision shall supersede any provision to the contrary contained in any award agreement or program); and
(f) Subject to Section 14 of this Agreement, a ll performance-based equity awards granted to Employee by the Company under the LTIPs shall remain outstanding and shall be earned, if at all, based on actual performance through the end of the performance period as if Employee’s employment had not been terminated (for avoidance of doubt, this provision shall supersede any provision to the contrary contained in any award agreement or program ).
The payments provided under this Section 3 shall be subject to applicable tax and payroll withholdings, and shall be in addition to any payments and/or benefits to which the Employee would otherwise be entitled under the EQT Corporation Severance Pay Plan (as amended from

4


time to time). The Company’s obligation to provide the payments and benefits under this Section 3 shall be contingent upon the following:
(a) Employee’s execution of a release of claims in a form acceptable to the Company; and
(b) Employee’s compliance with his/her obligations hereunder, including, but not limited to, Employee’s obligations set forth in Sections 1 and 2 (the “Restrictive Covenants”).
Solely for purposes of this Agreement, “Cause” as a reason for the Employee’s termination of employment shall mean: (i) Employee’s conviction of a felony, a crime of moral turpitude or fraud or Employee having committed fraud, misappropriation or embezzlement in connection with the performance of his/her duties; (ii) Employee’s willful and repeated failures to substantially perform assigned duties; or (iii) Employee’s violation of any provision of a written employment-related agreement between Employee and the Company or express significant policies of the Company. If the Company terminates Employee’s employment for Cause, the Company shall give Employee written notice setting forth the reason for his/her termination not later than 30 days after such termination.
Solely for purposes of this Agreement, “Good Reason” shall mean Employee’s resignation within 90 days after: (i) a reduction in Employee’s base salary of 10% or more (unless the reduction is applicable to all similarly situated employees); (ii) a reduction in Employee’s annual short-term bonus target of 10% or more (unless the reduction is applicable to all similarly situated employees); (iii) a significant diminution in Employee’s job responsibilities, duties or authority; (iv) a change in the geographic location of Employee’s primary reporting location of more than 50 miles; and/or (v) any other action or inaction that constitutes a material breach by the Company of this Agreement. A termination by Employee shall not constitute termination for Good Reason unless Employee first delivers to the General Counsel of the Company written notice: (i) stating that Employee intends to resign for Good Reason pursuant to this Agreement; and (ii) setting forth with specificity the occurrence deemed to give rise to a right to terminate for Good Reason (which notice must be given no later than 90 days after the initial occurrence of such event). The Company shall have a reasonable period of time (not less than 30 days after receipt of Employee’s written notice that Employee is resigning for Good Reason) to take action to correct, rescind or substantially reverse the occurrence supporting termination for Good Reason as identified by Employee. Failure by the Company to act or respond to the written notice shall not be deemed to be an admission that Good Reason exists.
4.     Severability and Modification of Covenants . Employee acknowledges and agrees that each of the Restrictive Covenants is reasonable and valid in time and scope and in all other respects. The parties agree that it is their intention that the Restrictive Covenants be enforced in accordance with their terms to the maximum extent permitted by law. Each of the Restrictive Covenants shall be considered and construed as a separate and independent covenant. Should any part or provision of any of the Restrictive Covenants be held invalid, void, or unenforceable, such invalidity, voidness, or unenforceability shall not render invalid, void, or unenforceable any other part or provision of this Agreement or such Restrictive Covenant. If any of the provisions of the Restrictive Covenants should ever be held by a court of competent jurisdiction to exceed

5


the scope permitted by the applicable law, such provision or provisions shall be automatically modified to such lesser scope as such court may deem just and proper for the reasonable protection of the Company’s legitimate business interests and may be enforced by the Company to that extent in the manner described above and all other provisions of this Agreement shall be valid and enforceable.
5.     Reasonable and Necessary Agreement . The Employee acknowledges and agrees that: (i) this Agreement is necessary for the protection of the legitimate business interests of the Company; (ii) the restrictions contained in this Agreement are reasonable; (iii) the Employee has no intention of competing with the Company within the limitations set forth above; (iv) the Employee acknowledges and warrants that Employee believes that Employee will be fully able to earn an adequate livelihood for Employee and Employee’s dependents if the covenant not to compete contained in this Agreement is enforced against the Employee; and (v) the Employee has received adequate and valuable consideration for entering into this Agreement.
6.     Injunctive Relief and Attorneys’ Fees . The Employee stipulates and agrees that any breach of the Restrictive Covenants by the Employee will result in immediate and irreparable harm to the Company, the amount of which will be extremely difficult to ascertain, and that the Company could not be reasonably or adequately compensated by damages in an action at law. For these reasons, the Company shall have the right, without the need to post bond or prove actual damages, to obtain such preliminary, temporary or permanent injunctions, orders or decrees as may be necessary to protect the Company against, or on account of, any breach by the Employee of the Restrictive Covenants. In the event the Company obtains any such injunction, order, decree or other relief, in law or in equity, the duration of any violation of Section 1 shall be added to the applicable restricted period specified in Section 1. Employee understands and agrees that, if the parties become involved in a lawsuit regarding the enforcement of the Restrictive Covenants and if the Company prevails in such legal action, the Company will be entitled, in addition to any other remedy, to recover from Employee its reasonable costs and attorneys’ fees incurred in enforcing such covenants. The Company’s ability to enforce its rights under the Restrictive Covenants or applicable law against Employee shall not be impaired in any way by the existence of a claim or cause of action on the part of Employee based on, or arising out of, this Agreement or any other event or transaction arising out of the employment relationship.
7.     Binding Agreement . This Agreement (including the Restrictive Covenants) shall be binding upon and inure to the benefit of the successors and assigns of the Company.
8.     Employment at Will . Employee shall be employed at‑will and for no definite term. This means that either party may terminate the employment relationship at any time for any or no reason.
9.     Executive Alternative Work Arrangement Employment Status . As part of the Original Agreement, Employee elected to participate in the “Executive Alternative Work Arrangement” program upon Employee’s voluntary discontinuance of full-time status. The Executive Alternative Work Arrangement classification will be automatically assigned to Employee if and when Employee incurs a termination of employment that meets each of the

6


following conditions (an “Eligible Termination”): (a) Employee’s employment is terminated by the Company for any reason other than Cause or Employee gives the Company (delivered to the Vice President and Chief Human Resources Officer) at least 90 days’ advance written notice of Employee’s intention to discontinue employment, (b) Employee is a board-designated executive officer in good standing with EQT Corporation as of the time of his/her termination of employment, and (c) Employee’s employment shall not have been terminated by Employee for Good Reason. The terms and conditions of Employee’s Executive Alternative Work Arrangement, which were set forth in an Executive Alternative Work Arrangement Employment Agreement attached as Exhibit A to the Original Agreement, are being revised and updated currently herewith, and are set forth in the form of Executive Alternative Work Arrangement Employment Agreement attached as Exhibit A to this Agreement. Employee agrees to execute an Executive Alternative Work Arrangement Employment Agreement, in a form substantially similar to the one attached hereto as Exhibit A, within 90 days prior to Employee’s relinquishment of full-time status, which agreement will become effective automatically on the day following Employee’s Eligible Termination. Without limiting the foregoing, Employee agrees that he/she will not be eligible for the Executive Alternative Work Arrangement, including the post-employment benefits described therein if Employee’s termination of employment is not an Eligible Termination.
10.     Applicable Law; Exclusive Forum Selection; Consent to Jurisdiction . The Company and Employee agree that this Agreement shall be governed by and construed and interpreted in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to its conflicts of law principles. Except to the extent that a dispute is required to be submitted to arbitration as set forth in Section 11 below, Employee agrees that the exclusive forum for any action to enforce this Agreement, as well as any action relating to or arising out of this Agreement, shall be the state courts of Allegheny County, Pennsylvania or the United States District Court for the Western District of Pennsylvania, Pittsburgh Division. With respect to any such court action, Employee hereby (a) irrevocably submits to the personal jurisdiction of such courts; (b) consents to service of process; (c) consents to venue; and (d) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction, service of process, or venue. Both parties hereto further agree that such courts are convenient forums for any dispute that may arise herefrom and that neither party shall raise as a defense that such courts are not convenient forums.
11.     Agreement to Arbitrate . Employee and the Company agree that any controversy, claim, or dispute between Employee and the Company arising out of or relating to this Agreement or the breach thereof, or arising out of any matter relating to the Employee’s employment with the Company or the termination thereof, shall be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“AAA”), and judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitration shall be governed by the Federal Arbitration Act, shall be held in Pittsburgh, Pennsylvania, and shall be conducted before a panel of three (3) arbitrators (the “Arbitration Panel”). The Company and Employee shall each select one arbitrator from the AAA National Panel of Commercial Arbitrators (the “Commercial Panel”), and the AAA shall select a third arbitrator from the Commercial Panel. The Arbitration Panel

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shall render a reasoned opinion in writing in support of its decision. Any award rendered by the Arbitration Panel shall be final, binding, and confidential as between the parties. Notwithstanding this agreement to arbitrate, in the event that Employee breaches or threatens to breach any of Employee’s obligations under the Restrictive Covenants, the Company shall have the right to file an action in one of the courts specified in Section 10 above seeking temporary, preliminary or permanent injunctive relief to enforce Employee’s obligations under the Restrictive Covenants.
12.     Notification of Subsequent Employment .    Employee shall upon termination of his/her employment with the Company, as soon as practicable and for the length of the non-competition period described in Section 1 above, notify the Company: (i) of the name, address and nature of the business of his/her new employer; (ii) if self-employed, of the name, address and nature of his/her new business; (iii) that he/she has not yet secured new employment; and (iv) each time his/her employment status changes. In addition, Employee shall notify any prospective employer that this Agreement exists and shall provide a copy of this Agreement to the prospective employer prior to beginning employment with that prospective employer. Any notice provided under this Section 12 (or otherwise under this Agreement) shall be in writing directed to the General Counsel, EQT Corporation, 625 Liberty Avenue, Suite 1700, Pittsburgh, PA 15222-3111.
13.     Mandatory Reduction of Payments in Certain Events .
(a)    Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (such benefits, payments or distributions are hereinafter referred to as “Payments”) would, if paid, be subject to the excise tax (the “Excise Tax”) imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), then, prior to the making of any Payments to the Employee, a calculation shall be made comparing (i) the net after-tax benefit to the Employee of the Payments after payment by the Employee of the Excise Tax, to (ii) the net after-tax benefit to the Employee if the Payments had been limited to the extent necessary to avoid being subject to the Excise Tax. If the amount calculated under (i) above is less than the amount calculated under (ii) above, then the Payments shall be limited to the extent necessary to avoid being subject to the Excise Tax (the “Reduced Amount”). The reduction of the Payments due hereunder, if applicable, shall be made by first reducing cash Payments and then, to the extent necessary, reducing those Payments having the next highest ratio of Parachute Value to actual present value of such Payments as of the date of the change in control transaction, as determined by the Determination Firm (as defined in Section 13(b) below). For purposes of this Section 13, present value shall be determined in accordance with Section 280G(d)(4) of the Code. For purposes of this Section 13, the “Parachute Value” of a Payment means the present value as of the date of the change in control transaction of the portion of such Payment that constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as determined by the Determination Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

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(b)    All determinations required to be made under this Section 13, including whether an Excise Tax would otherwise be imposed, whether the Payments shall be reduced, the amount of the Reduced Amount, and the assumptions to be utilized in arriving at such determinations, shall be made by an independent, nationally recognized accounting firm or compensation consulting firm mutually acceptable to the Company and the Employee (the “Determination Firm”) which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days after the receipt of notice from the Employee that a Payment is due to be made, or such earlier time as is requested by the Company. All fees and expenses of the Determination Firm shall be borne solely by the Company. Any determination by the Determination Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Determination Firm hereunder, it is possible that Payments which the Employee was entitled to, but did not receive pursuant to Section 13(a), could have been made without the imposition of the Excise Tax (“Underpayment”), consistent with the calculations required to be made hereunder. In such event, the Determination Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee but no later than March 15 of the year after the year in which the Underpayment is determined to exist, which is when the legally binding right to such Underpayment arises.
(c)    In the event that the provisions of Code Section 280G and 4999 or any successor provisions are repealed without succession, this Section 13 shall be of no further force or effect.
14.     Internal Revenue Code Section 409A .
(a)     General . This Agreement shall be interpreted and administered in a manner so that any amount or benefit payable hereunder shall be paid or provided in a manner that is either exempt from or compliant with the requirements of Section 409A of the Code and applicable Internal Revenue Service guidance and Treasury Regulations issued thereunder. Nevertheless, the tax treatment of the benefits provided under the Agreement is not warranted or guaranteed. Neither the Company, nor its directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by Employee as a result of the application of Section 409A of the Code.
(b)     Separation from Service . For purposes of the Agreement, the term “termination,” when used in the context of a condition to, or the timing of, a payment hereunder, shall be interpreted to mean a “separation from service” as such term is used in Section 409A of the Code.
(c)     Six-Month Delay in Certain Circumstances . Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code (“Non-Exempt Deferred Compensation”) would otherwise be payable or distributable under this Agreement by reason of Employee’s separation from service during a period in which Employee is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Company

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under Treas. Reg. Section 1.409A-3(j)(4)(ii) (domestic relations order), (j)(4)(iii) (conflicts of interest), or (j)(4)(vi) (payment of employment taxes):
(i) the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following Employee’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following Employee’s separation from service (or, if Employee dies during such period, within thirty (30) days after Employee’s death) (in either case, the “Required Delay Period”); and
(ii) the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.
For purposes of this Agreement, the term “Specified Employee” has the meaning given such term in Code Section 409A and the final regulations thereunder.
(d)     Timing of Release of Claims . Whenever in this Agreement a payment or benefit is conditioned on Employee’s execution of a release of claims, such release must be executed and all revocation periods shall have expired within sixty (60) days after the date of termination; failing which such payment or benefit shall be forfeited. If such payment or benefit constitutes Non-Exempt Deferred Compensation, and if such 60-day period begins in one calendar year and ends in the next calendar year, the payment or benefit shall not be made or commence before the second such calendar year, even if the release becomes irrevocable in the first such calendar year. In other words, Employee is not permitted to influence the calendar year of payment based on the timing of his/her signing of the release.
15.     Entire Agreement . This Agreement contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements (including the Original Agreement and the Change of Control Agreement) and understandings, oral or written. This Agreement may not be changed, amended, or modified, except by a written instrument signed by the parties; provided, however, that the Company may amend this Agreement from time to time without Employee’s consent to the extent deemed necessary or appropriate, in its sole discretion, to effect compliance with Section 409A of the Code, including regulations and interpretations thereunder, which amendments may result in a reduction of benefits provided hereunder and/or other unfavorable changes to Employee.

(Signatures on following page)

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its officers thereunto duly authorized, and the Employee has hereunto set his/her hand, all as of the day and year first above written.

EQT CORPORATION                EMPLOYEE

By:     /s/ Charlene Petrelli                  /s/ Theresa Z. Bone            
Theresa Z. Bone
Name: Charlene Petrelli

Title: Vice President &
Chief Human Resources Officer













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EXHIBIT A

EXECUTIVE ALTERNATIVE WORK ARRANGEMENT EMPLOYMENT AGREEMENT
This is an Executive Alternative Work Arrangement Employment Agreement (“Agreement”) entered into between EQT Corporation (together with its subsidiaries, “EQT” or the “Company”) and Theresa Z. Bone (“Employee”).
WHEREAS, Employee is an executive officer of EQT who desires to relinquish that status and discontinue full-time employment with EQT but continue employment with EQT on a part-time basis; and
WHEREAS, EQT is interested in continuing to retain the services of Employee on a part-time basis for at least 100 (but no more than 400) hours per year; and
WHEREAS, Employee has elected to modify his/her employment status to Executive Alternative Work Arrangement;
NOW, THEREFORE, in consideration of the respective representations, acknowledgements, and agreements of the parties set forth herein, and intending to be legally bound, the parties agree as follows:
1. The term of this Agreement is for the one-year period commencing on the day after Employee’s full-time status with EQT ceases. During that period, Employee will hold the position of an Executive Alternative Work Arrangement employee of EQT. Employee’s status as Executive Alternative Work Arrangement (and this one-year Agreement) will automatically renew annually unless either party terminates this Agreement by written notice to the other not less than 30 days prior to the renewal date. The automatic annual renewals of this Agreement will cease, however, at the end of five years of Executive Alternative Work Arrangement employment status.
2. During each one‑year period in Executive Alternative Work Arrangement employment status, Employee is required to provide no less than 100 hours of service to EQT. During each one-year period, Employee will also make himself/herself available for up to 300 additional hours of service upon request from the Company. All such hours of service will occur during the Company’s regularly scheduled business hours (unless otherwise agreed by the parties), and no more than fifty (50) hours will be scheduled per month (unless otherwise agreed by the parties).
3. Employee shall be paid an hourly rate for Employee’s actual services provided under this Agreement. The hourly rate shall be Employee’s annual base salary in effect immediately prior to Employee’s change in employee classification to Executive Alternative Work Arrangement employment status divided by 2080. Employee shall submit monthly time sheets in a form agreed upon by the parties, and Employee will be paid on regularly scheduled payroll dates in accordance with the Company’s standard payroll practices following submission of his/her time sheets. Notwithstanding the foregoing, in the event that during any one-year period in Executive Alternative Work Arrangement employment status, EQT requests Employee to provide less than 100 hours of service, EQT shall pay Employee for a minimum of 100 hours



of service (regardless of the actual number of hours of service), with any remaining amount owed payable on the next regularly scheduled payroll date following the end of the applicable one-year period. If either party terminates the Executive Alternative Work Arrangement prior to the fifth anniversary hereof, no additional compensation will be paid to Employee pursuant to this Section 3.
4. Employee shall be eligible to continue to participate in the group medical (including prescription drug), dental and vision programs in which Employee participated immediately before the classification change to Executive Alternative Work Arrangement (as such plans might be modified by the Company from time-to-time), but Employee will be required to pay 100% of the Company’s premium (or premium equivalent) rates to the carriers (the full active employee premium rates – both the employee portion and the employer portion - as adjusted year-to-year) for participation in such group insurance programs. If Employee completes five years of Executive Alternative Work Arrangement employment status or if the Company terminates the Executive Alternative Work Arrangement prior to the fifth anniversary hereof other than pursuant to paragraph 17 hereof, Employee will be allowed to participate in such group insurance programs at 102% of the then-applicable full active employee premium rates (both the employee portion and the employer portion) until the earlier of: (i) Employee becomes eligible to receive Medicare benefits and (ii) Employee reaches age 70, even though Employee is no longer employed by EQT. Employee acknowledges that, to the extent, if at all, the Company’s cost to include Employee in the group insurance programs pursuant to this paragraph exceeds the cost paid by the Employee, the benefits provided hereunder may result in taxable income to the Employee. All amounts required to be paid by Employee pursuant to this paragraph shall be due not later than 30 days after written notice thereof is sent by the Company. Company may terminate the benefits provided under this Agreement upon 30 days written notice of any failure by Employee to timely perform his/her payment obligation hereunder, unless such failure is earlier cured.
5. During the term of this Agreement, Employee will continue to receive service credit for purposes of calculating the value of the Medical Spending Account.
6. Employee shall not be eligible to participate in the Company’s life insurance and disability insurance programs, 401(k) Plan, ESPP, or any other retirement or welfare benefit programs or perquisites of the Company. Likewise, Employee shall not receive any paid vacation, paid holidays or car allowance.
7. Employee is not eligible to receive bonus payments under any short-term incentive plans of EQT, and is not eligible to receive any new grants under EQT’s long-term incentive plans, programs or arrangements.
8. Effective not later than the commencement of this Executive Alternative Work Arrangement, Employee shall be deemed to have retired for purposes of measuring vesting and/or post‑termination exercise periods of all forms of long term incentive awards. The timing of any payments for such awards will be as provided in the underlying plans, programs or arrangements and is subject to any required six-month delay in payment if Employee is a “specified employee” under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) at the time of Employee’s separation from service, with respect to payments made

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by reason of Employee’s separation from service. Nothing in this paragraph 8, or in paragraph 7, shall prevent (a) the continued vesting of previously granted long-term incentive awards to the extent the award agreement therefore expressly contemplates continued vesting while the recipient serves as a member of the Board of Directors of the Company or an affiliate or (b) grants of non-employee director awards to an individual solely because such individual serves on the Board of Directors of the Company or an affiliate. Notwithstanding anything contained herein to the contrary, any special vesting and/or payment provisions applicable to Employee’s long-term incentive awards pursuant to that certain Amended and Restated Confidentiality, Non-Solicitation and Non-Competition Agreement between EQT and Employee dated July 29, 2015 (as amended from time to time, the “Non-Competition Agreement”) shall apply and be given effect.
9. The Company shall either pay on behalf of Employee or reimburse Employee for the cost of (i) monthly dues for one country club and one dining club (such clubs to be approved by the Company’s Chief Executive Officer), and (ii) executive level physicals (currently “gold” level) and related health and wellness services for Employee and Employee’s spouse (up to a maximum annual benefit of $15,000), in each case during the term of this Agreement or, if the Company terminates the Executive Alternative Work Arrangement prior to the fifth anniversary hereof other than pursuant to paragraph 17 hereof, through the fifth anniversary hereof in accordance with and on the dates specified in the Company’s policies; provided, however, that no such payments or reimbursements shall be made until the first day following the six-month anniversary of Employee’s separation from service if Employee is a specified employee at the time of separation from service, all within the meaning of Section 409A of the Code; provided, further, that to the extent reimbursed or paid, all reimbursements and payments with respect to expenses incurred within a particular year shall be made no later than the end of Employee’s taxable year following the taxable year in which the expense was incurred. The amount of payments or reimbursable expenses incurred in one taxable year of Employee shall not affect the amount of reimbursable expenses in a different taxable year, and such payments or reimbursement shall not be subject to liquidation or exchange for another benefit.
10. Employee shall continue to have mobile telephone service and reasonable access to the Company’s Help Desk during the term of this Agreement or, if the Company terminates the Executive Alternative Work Arrangement prior to the fifth anniversary hereof other than pursuant to paragraph 17 hereof, through the fifth anniversary hereof; provided, however, if the provision of such service will result in taxable income to Employee, then no such taxable service shall be provided until the first day following the six-month anniversary of Employee’s separation from service if Employee is a specified employee at the time of separation from service, all within the meaning of Section 409A of the Code.
11. Employee shall receive tax, estate and financial planning services from providers approved in advance by the Company during the term of this Agreement or, if the Company terminates the Executive Alternative Work Arrangement prior to the fifth anniversary hereof other than pursuant to paragraph 17 hereof, through the fifth anniversary hereof, in amount not to exceed $15,000 per calendar year, to be paid directly by the Company in accordance with and on the dates specified in the Company’s policies; provided, however, that no such payments or reimbursements shall be made until the first day following the six-month anniversary of Employee’s separation from service if Employee is a specified employee at the time of

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separation from service, all within the meaning of Section 409A of Code; provided, further, that to the extent reimbursed or paid, all reimbursements and payments with respect to expenses incurred within a particular year shall be made no later than the end of Employee’s taxable year following the taxable year in which the expense was incurred. The amount of payments or reimbursable expenses incurred in one taxable year of Employee shall not affect the amount of payments or reimbursable expenses in a different taxable year, and such payments or reimbursement shall not be subject to liquidation or exchange for another benefit.
12. During the term of this Agreement, Employee shall maintain an ownership level of Company stock equal to not less than one-half of the value last required as a full-time Employee. In the event that at any time during the term of this Agreement Employee does not maintain the required ownership level, Employee shall promptly notify the Company and increase his or her ownership to at least the required level. Any failure of Employee to maintain at least the required ownership level for more than three months during the term of this Agreement shall constitute and be deemed to be an immediate termination by Employee of his or her Executive Alternative Work Arrangement.
13. This Agreement sets forth all of the payments, benefits, perquisites and entitlements to which Employee shall be entitled upon assuming Executive Alternative Work Arrangement employment status. Employee shall not be entitled to receive any gross-up payments for any taxes or other amounts with respect to amounts payable under this Agreement.
14. Nothing in this Agreement shall prevent or prohibit the Company from modifying any of its employee benefits plans, programs, or policies.
15. Non-Competition and Non-Solicitation . The covenants as to non-competition and non-solicitation contained in Section 1, and as to notification of subsequent employment in Section 12, in each case of the Non-Competition Agreement shall remain in effect throughout Employee’s employment with EQT in Executive Alternative Work Arrangement employment status and for a period of twenty-four (24) months, in the case of non-competition covenants; twenty-four (24), in the case of non-solicitation covenants relating to customers and prospective customers; and thirty-six (36) months, in the case of non-solicitation covenants relating to employees, consultants, vendors or independent contractors, in each case after the termination of Employee’s employment as an Executive Alternative Work Arrangement employee. It is understood and agreed that if Employee’s employment as an Executive Alternative Work Arrangement employee terminates for any reason in the midst of any one-year term period as provided under this Agreement (including, without limitation, a termination pursuant to Sections 4, 12 or 17 of this Agreement), the covenants as to non-competition and non-solicitation contained in the Non-Competition Agreement shall remain in effect throughout the remainder of that one-year term and for a period of twenty-four (24) months, in the case of non-competition covenants, and thirty-six (36) months, in the case of non-solicitation covenants, months thereafter.
16. Confidential Information and Non-Disclosure . Employee acknowledges and agrees that Employee’s employment by the Company necessarily involves Employee’s knowledge of and access to confidential and proprietary information pertaining to the business of the Company. Accordingly, Employee agrees that at all times during the term of this Agreement

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and for as long as the information remains confidential after the termination of Employee's employment, Employee will not, directly or indirectly, without the express written authority of the Company, unless directed by applicable legal authority having jurisdiction over Employee, disclose to or use, or knowingly permit to be so disclosed or used, for the benefit of Employee, any person, corporation or other entity other than the Company, (i) any information concerning any financial matters, employees of the Company, customer relationships, competitive status, supplier matters, internal organizational matters, current or future plans, or other business affairs of or relating to the Company, (ii) any management, operational, trade, technical or other secrets or any other proprietary information or other data of the Company, or (iii) any other information related to the Company which has not been published and is not generally known outside of the Company. Employee acknowledges that all of the foregoing constitutes confidential and proprietary information, which is the exclusive property of the Company. Nothing in this Section 16 prohibits Employee from reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, or from making other disclosures that are protected under the whistleblower provisions of federal, state, or local law or regulation.
17. EQT may terminate this Agreement and Employee’s employment at any time for Cause. Solely for purposes of this Agreement, “Cause” shall mean: (i) Employee’s conviction of a felony, a crime of moral turpitude or fraud or Employee having committed fraud, misappropriation or embezzlement in connection with the performance of his/her duties; (ii) Employee’s willful and repeated failures to substantially perform assigned duties; or (iii) Employee’s violation of any provision of this Agreement or express significant policies of the Company. If the Company terminates Employee’s employment for Cause, the Company shall give Employee written notice setting forth the reason for his/her termination not later than 30 days after such termination.
18. Except as otherwise provided herein, in the event of any controversy, dispute or claim arising out of, or relating to this Agreement, or the breach thereof, or arising out of any other matter relating to the Employee's employment with EQT or the termination of such employment, EQT may seek recourse for injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, EQT and the Employee agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Pittsburgh, Pennsylvania in accordance with this Section 18 of this Agreement and the Commercial Arbitration Rules of the American Arbitration Association (“AAA”). The matter shall be heard and decided, and awards, if any, rendered by a panel of three (3) arbitrators (the “Arbitration Panel”). EQT and the Employee shall each select one arbitrator from the AAA National Panel of Commercial Arbitrators (the “Commercial Panel”) and AAA shall select a third arbitrator from the Commercial Panel. Any award rendered by the Arbitration Panel shall be final, binding and confidential as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof.
19. EQT shall have the authority and the right to deduct or withhold, or require Employee to remit to EQT, an amount sufficient to satisfy federal, state, and local taxes (including Employee’s FICA obligation) required by law to be withheld with respect to any payment or benefit provided pursuant to this Agreement. The obligations of EQT under this Agreement will be conditioned on such payment or arrangements and EQT will, to the extent

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permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to Employee.
20. It is understood and agreed that upon Employee’s discontinuation of full-time employment and transition to Executive Alternative Work Arrangement employment status hereunder, Employee has no continuing rights under Section 3 of the Non-Competition Agreement and such section shall have no further force or effect.
21. The provisions of this Agreement are severable. To the extent that any provision of this Agreement is deemed unenforceable in any court of law, the parties intend that such provision be construed by such court in a manner to make it enforceable.
22. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company.
23. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without regard to conflict of law principles.
24. This Agreement supersedes all prior agreements and understandings between EQT and Employee with respect to the subject matter hereof (oral or written), including but not limited to Section 3 of the Non-Competition Agreement. It is understood and agreed, however, that the covenants as to non-competition, non-solicitation, confidentiality and nondisclosure contained in Sections 1 and 2 of the Non-Competition Agreement remain in effect as modified herein, along with the provisions in Sections 4, 5, 6, 7, 8, 11 and 12 of the Non-Competition Agreement.
25. This Agreement may not be changed, amended, or modified except by a written instrument signed by both parties, provided that the Company may amend this Agreement from time to time without Employee’s consent to the extent deemed necessary or appropriate, in its sole discretion, to effect compliance with Section 409A of the Code, including regulations and interpretations thereunder, which amendments may result in a reduction of benefits provided hereunder and/or other unfavorable changes to Employee.
(Signatures on following page)

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IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set forth below.
EQT CORPORATION
By: __________________________________
_____________________________________  
Title
_____________________________________
                                 Date
 
EMPLOYEE
_____________________________________
Name: Theresa Z. Bone
_____________________________________
                                 Date








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Exhibit 10.4

TERMINATION OF AMENDED AND RESTATED
CHANGE OF CONTROL AGREEMENT

This Termination Agreement (the “Termination Agreement”) is entered into and is effective as of July 29, 2015, by and between EQT Corporation, a Pennsylvania corporation (the “Company”), and Theresa Z. Bone (the “Employee”).

W I T N E S S E T H :

WHEREAS, the Company and Employee are parties to that certain Amended and Restated Change of Control Agreement, originally dated as of September 8, 2008, and amended and restated as of February 19, 2013 (the “Change of Control Agreement”); and

WHEREAS, the Company and Employee are parties to that certain Confidentiality, Non-Solicitation and Non-Competition Agreement, originally dated as of September 8, 2008, and being amended and restated concurrently herewith (the “Non-Competition Agreement”); and
    
WHEREAS, in connection with amending and restating the Non-Competition Agreement as of the date hereof, the Company and Employee desire to terminate the Change of Control Agreement; and

WHEREAS, the Board of Directors of the Company has approved the termination of the Change of Control Agreement pursuant to this Termination Agreement;

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1.     The parties hereby agree that, notwithstanding anything contained in the Change in Control Agreement to the contrary, the Change of Control Agreement is hereby terminated effective as of July 29, 2015, and shall be replaced and superseded by the Non-Competition Agreement in all respects. For avoidance of doubt, the parties acknowledge and agree that this Termination Agreement shall specifically supersede the term provisions contained in Section 1 of the Change in Control Agreement. Employee agrees and acknowledges that he/she has no further rights or obligations under the Change of Control Agreement. Furthermore, the parties agree and acknowledge that the Company, its affiliates and successors have no further rights or obligations under the Change of Control Agreement.

2.     Governing Law . This Termination Agreement shall be construed in all respects in accordance with, and governed by, the laws of the Commonwealth of Pennsylvania.

3.     Counterparts . This Termination Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.
[Signatures on Next Page]

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IN WITNESS WHEREOF, the Company has caused this Termination Agreement to be executed by its officers thereunto duly authorized, and the Employee has hereunto set her hand, all as of the day and year first above written.

EQT CORPORATION                EMPLOYEE

By:     /s/ Charlene Petrelli                  /s/ Theresa Z. Bone            
Theresa Z. Bone
Name: Charlene Petrelli

Title: Vice President &
Chief Human Resources Officer



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Exhibit 10.5

EQUITRANS, L.P.
TRANSPORTATION SERVICE AGREEMENT
APPLICABLE TO FIRM TRANSPORTATION
SERVICE UNDER RATE SCHEDULE FTS
Contract No. EQTR20242-852
Dated September 24, 2014

This Agreement is entered into by and between Equitrans, L.P. (“Equitrans”) and EQT ENERGY, LLC (“Customer”).
1. Agreement (CHECK ONE)
___ This is a new Agreement.
_ X _ This Agreement supersedes, terminates, and cancels Contract No. EQTR18679-852, dated December 20, 2013. The superseded contract is no longer in effect.

2. Service under this Agreement is provided pursuant to Subpart B or Subpart G of Part 284, Title 18, of the Code of Federal Regulations. Service under this Agreement is in all respects subject to and governed by the applicable Rate Schedule and the General Terms and Conditions of the Equitrans FERC Gas Tariff (“Tariff”) as they may be modified from time to time, and such are incorporated by reference. In the event that language of this Agreement or any Exhibit conflicts with Equitrans’ Tariff, the language of the Tariff will control.

3. Equitrans shall have the unilateral right to file with the Commission or other appropriate regulatory authority, in accordance with Section 4 of the Natural Gas Act, changes in Equitrans’ Tariff, including both the level and design of rates, charges, Retainage Factors and services, and the General Terms and Conditions.

4. Customer’s Maximum Daily Quantity (“MDQ”) of natural gas transported under this Agreement shall be the MDQ stated in Exhibit A to this Agreement. If service under this Agreement is associated with a firm storage agreement, Customer's Base MDQ and Winter MDQ are stated in Alternative Exhibit A.

5. The effective date, term and associated notice and renewal provisions of this Agreement are stated in Exhibit A to this Agreement.

6. The Receipt and Delivery Points are stated in Exhibit A to this Agreement.

7. Customer shall pay Equitrans the maximum applicable rate (including all other applicable charges and Retainage Factors authorized pursuant to Rate Schedule FTS and the Tariff) for services rendered under this Agreement, unless Customer and Equitrans execute Optional Exhibit B (Discounted Rate Agreement) or Optional Exhibit C (Negotiated Rate Agreement).


Contract # EQTR20242
Page 1 of 10

8. Exhibits are incorporated by reference into this Agreement upon their execution. Customer and Equitrans may amend any attached Exhibit by mutual agreement, which amendments shall be reflected in a revised Exhibit, and shall be incorporated by reference as part of this Agreement.


IN WITNESS WHEREOF, Customer and Equitrans have executed this Agreement by their duly authorized officers, effective as of the date indicated above.


CUSTOMER:
 
EQUITRANS, L.P.:
 
By _/s/ Paul Kress 9/30/2014_
 
By _/s/ Andrew L. Murphy 9/30/2014_
(Date)
 
(Date)
 
Title __Vice President _______________
 
 
Title __Vice President________________
 
 
 
 
 
 



Contract # EQTR20242
Page 2 of 10

EXHIBIT A
to the
TRANSPORTATION SERVICE AGREEMENT
between EQUITRANS, L.P.
and
EQT ENERGY, LLC,
pursuant to Rate Schedule FTS
Contract No. EQTR20242-852 Dated September 24, 2014

This Exhibit A is dated September 24, 2014.
Any previously executed Exhibit A under this Agreement is terminated and is no longer in effect.

1. Notices and Correspondence shall be sent to:
Equitrans, L.P.

EQT Plaza
625 Liberty Avenue Ste 1700
Pittsburgh, PA 15222-3111
Attn: Gas Transportation Dept.
Phone: (412) 395-3230
Facsimile: (412) 395-3347
E-mail Address: T&ENotify@eqt.com


EQT ENERGY, LLC

Address:
625 Liberty Avenue
Pittsburgh, PA 15222

Representative: Paul Kress
Phone: (412) 395-3232
Facsimile: (412) 395-2675
E-mail Address: [***]
DUNS: 03-585-8708
Federal Tax I.D. No.: 02-0750473
Other contact information if applicable:

2 . Service Under this Agreement is provided on:
 
X
 
Mainline System
 
 
 
 
 
X
 
Sunrise Transmission System
 
 
 
 
 
 
 
Allegheny Valley Connector
 
 
 
 


Contract # EQTR20242
Page 3 of 10

3. Maximum Daily Quantity (MDQ): Effective Date
1,046,000
Dth
 
October 1, 2014
1,076,000
Dth
 
November 1, 2014
1,035,000
Dth
 
August 1, 2016
630,000
Dth
 
July 1, 2023
325,000
Dth
 
September 1, 2023
30,000
Dth
 
October 1, 2024
4. Primary Receipt and Delivery Point(s)
Primary Receipt Point(s)**
 
Base
 
Winter
Effective
(Meter No. and/or Meter Name)
 
MDQ Allocation
 
MDQ Allocation
Date
11795 – Jupiter
 
270,000 dth
 
270,000 dth
10/1/2014
17112 – Callisto
 
225,000 dth
 
225,000 dth
10/1/2014
24605 - Mobley
 
540,990 dth
 
540,990 dth
10/1/2014
24990 – Pluto
 
10,000 dth
 
10,000 dth
10/1/2014
500017 – Mercury
 
10 dth
 
10 dth
10/1/2014
 
 
 
 
 
 
11795 – Jupiter
 
270,000 dth
 
270,000 dth
11/1/2014
17112 – Callisto
 
225,000 dth
 
225,000 dth
11/1/2014
24605 - Mobley
 
540,990 dth
 
540,990 dth
11/1/2014
24990 – Pluto
 
10,000 dth
 
10,000 dth
11/1/2014
500017 – Mercury
 
10 dth
 
10 dth
11/1/2014
5100080 - Applegate
 
30,000 dth
 
30,000 dth
11/1/2014
 
 
 
 
 
 
11795 – Jupiter
 
270,000 dth
 
270,000 dth
8/1/2016
17112 – Callisto
 
225,000 dth
 
225,000 dth
8/1/2016
24605 - Mobley
 
499,990 dth
 
499,990 dth
8/1/2016
24990 – Pluto
 
10,000 dth
 
10,000 dth
8/1/2016
500017 – Mercury
 
10 dth
 
10 dth
8/1/2016
5100080 - Applegate
 
30,000 dth
 
30,000 dth
8/1/2016
 
 
 
 
 
 
24605 - Mobley
 
499,990 dth
 
499,990 dth
7/1/2023
500017 – Mercury
 
10 dth
 
10 dth
7/1/2023
11795 – Jupiter
 
100,000 dth
 
100,000 dth
7/1/2023
17112 – Callisto
 
0 dth
 
0 dth
7/1/2023
24990 – Pluto
 
0 dth
 
0 dth
7/1/2023
5100080 - Applegate
 
30,000 dth
 
30,000 dth
7/1/2023
 
 
 
 
 
 
24605 - Mobley
 
195,000 dth
 
195,000 dth
9/1/2023
11795 – Jupiter
 
100,000 dth
 
100,000 dth
9/1/2023
5100080 - Applegate
 
30,000 dth
 
30,000 dth
9/1/2023
 
 
 
 
 
 
5100080 - Applegate
 
30,000 dth
 
30,000 dth
10/1/2024
** Receipt point MDQs do not include quantities required for retainage.


Contract # EQTR20242
Page 4 of 10


Primary Delivery Point(s)
 
Base
 
Winter
Effective
(Meter No. and/or Meter Name)
 
MDQ Allocation
 
MDQ Allocation
Date
 
 
 
 
 
 
18120 – TETCO Braden Run
 
180,000 dth
 
180,000 dth
10/1/2014
73705 – TETCO Morris II
 
225, 000 dth
 
225,000 dth
10/1/2014
73713 - TETCO Jefferson
 
641, 000 dth
 
641,000 dth
10/1/2014
 
 
 
 
 
 
18120 – TETCO Braden Run
 
180,000 dth
 
180,000 dth
11/1/2014
73705 – TETCO Morris II
 
225, 000 dth
 
225,000 dth
11/1/2014
73713 - TETCO Jefferson
 
641, 000 dth
 
641, 000 dth
11/1/2014
TBD - DTI Pratt II
 
30,000 dth
 
30,000 dth
11/1/2014
 
 
 
 
 
 
 
 
 
 
 
 
18120 – TETCO Braden Run
 
180,000 dth
 
180,000 dth
8/1/2016
73705 – TETCO Morris II
 
225, 000 dth
 
225,000 dth
8/1/2016
73713 - TETCO Jefferson
 
600, 000 dth
 
600,000 dth
8/1/2016
TBD - DTI Pratt II
 
30,000 dth
 
30,000 dth
8/1/2016
 
 
 
 
 
 
 
 
 
 
 
 
73713 - TETCO Jefferson
 
600, 000 dth
 
600, 000 dth
7/1/2023
18120 – TETCO Braden Run
 
0 dth
 
0 dth
7/1/2023
73705 – TETCO Morris II
 
0 dth
 
0 dth
7/1/2023
TBD - DTI Pratt II
 
30,000 dth
 
30,000 dth
7/1/2023
 
 
 
 
 
 
 
 
 
 
 
 
73713 - TETCO Jefferson
 
295, 000 dth
 
295, 000 dth
9/1/2023
TBD - DTI Pratt II
 
30,000 dth
 
30,000 dth
9/1/2023
 
 
 
 
 
 
 
 
 
 
 
 
TBD - DTI Pratt II
 
30,000 dth
 
30,000 dth
10/1/2024
 
 
 
 
 
 
 
 
 
 
 
 

5. Effective Date and Term: This Exhibit A is effective 10/01/2014 and continues in full force and effect through 10/31/2024.* For agreements twelve (12) months or longer, Customer and/or Equitrans may terminate the agreement at the end of the primary term by providing at least six (6) months prior written notice of such intent to terminate.
 

Contract # EQTR20242
Page 5 of 10

At the expiration of the primary term, this Exhibit A has the following renewal term
(choose one):
____ no renewal term
____ through _______________ *
____ for a period of _______________ *
_X__ year to year* (subject to termination on six (6) months prior written notice)
____ month to month (subject to termination by either party upon ___ days written notice prior to contract expiration)
____ other (described in section 6 below)

* In accordance with Section 6.21 of the General Terms and Conditions, a right of first refusal may apply; any contractual right of first refusal will be set forth in Section 6 of this Exhibit A.



Contract # EQTR20242
Page 6 of 10

6. Other Special Provisions:
None.


IN WITNESS WHEREOF, Customer and Equitrans have executed this Exhibit A by their duly authorized officers, effective as of the date indicated above.


CUSTOMER:
 
EQUITRANS, L.P.:
 
By __/s/ Paul Kress 9/30/2014__
 
By __/s/ Andrew L. Murphy 9/30/2014  
(Date)
 
(Date)
 
Title __Vice President _______________
 
 
Title __Vice President ______________
 
 
 
 
 
 


Contract # EQTR20242
Page 7 of 10

OPTIONAL EXHIBIT C
to the
TRANSPORTATION SERVICE AGREEMENT
between EQUITRANS, L.P.
and
EQT ENERGY, LLC,
pursuant to Rate Schedule FTS
Contract No. EQTR20242-852 Dated September 24, 2014

This Exhibit C is dated September 24, 2014.
Any previously executed Exhibit C under this Agreement is terminated and is no longer in effect.

Negotiated Rate Agreement
1. In accordance with Section 6.30 of the General Terms and Conditions of Equitrans’ Tariff, Equitrans and Customer agree that the following negotiated rate provisions will apply under the Agreement:
Rates Effective October 1, 2014 through October 31, 2014
 
 
Monthly Reservation Rate
$9.117 per MDQ
Commodity Rate
$0.00 per Dth
Authorized Overrun Rate
$0.25 per Dth
Customer shall pay the applicable FERC ACA surcharge.
 
 
 
 
Rates Effective November 1, 2014 through July 31, 2016
 
 
Monthly Reservation Rate
$9.074 per MDQ
Commodity Rate
$0.00 per Dth
Authorized Overrun Rate
$0.25 per Dth
Customer shall pay the applicable FERC ACA surcharge.
 
 
 
 
Rates Effective August 1, 2016 through June 30, 2023
 
 
Monthly Reservation Rate
9.133 per Dth
Commodity Rate
$0.00 per Dth
Authorized Overrun Rate
$0.25 per Dth
Customer shall pay the applicable FERC ACA surcharge.
 
 
 
 
Rates Effective July 1, 2023 through August 31, 2023
 
 
Monthly Reservation Rate
$8.782 per MDQ
Commodity Rate
$0.00 per Dth
Authorized Overrun Rate
$0.25 per Dth
Customer shall pay the applicable FERC ACA surcharge.

Contract # EQTR20242
Page 8 of 10


Rates Effective September 1, 2023 through October 31, 2024
 
 
Monthly Reservation Rate
$7.604 per MDQ
Commodity Rate
$0.00 per Dth
Authorized Overrun Rate
$0.25 per Dth
Customer shall pay the applicable FERC ACA surcharge.
 
 

In addition to the rates listed above Customer shall pay a fuel usage, lost and unaccounted for gas percentage retainage rate to recover actual fuel usage, lost and unaccounted for gas based on the following calculation.

Transporter will retain a percentage of Shipper’s nominated receipts volumes to recover fuel, lost and unaccounted for gas (“Estimated Retainage Rate”). The Estimated Retainage Rate will equal the difference between the actual measured Dths received and the actual measured Dths delivered (excluding gas used for company use and compressor fuel) for the preceding calendar year divided by actual annual measured Dth received. The Estimated Retainage Rate will be updated annually and made effective on April 1st of each year. The initial Estimated Retainage Rate under this Agreement will be 1.0%. To adjust for material changes in actual experienced fuel and lost and unaccounted for gas, Transporter shall have the right to change the Estimated Retainage Rate during the calendar year by providing Shipper 30 days advanced written notice. Any changes to the Estimated Retainage Rate will become effective on the first day of the calendar month following the thirty day advanced written notice.

Within 60 days after the end of each calendar quarter, Transporter will calculate for each month of the quarter actual fuel and lost and unaccounted for gas rate for Transporter’s combined Mainline and Sunrise Transmission Systems (“Actual Fuel and LUF Rate”) by taking the difference between monthly actual measured Dths received and monthly actual measured Dths delivered (excluding gas used for company use and compressor fuel) and dividing the difference by monthly actual measured Dth received. The Estimated Retainage Rate less Actual Fuel and LUF Rate will be multiplied by Shipper’s monthly nominated volumes during the preceding calendar quarter to determine the monthly volumes owed to either Transporter or Shipper (“True-up Volumes”). If the True-up Volumes are negative, gas is due to Transporter, and if the True-up Volumes are positive, gas is due to Shipper. Equitrans reserves the right to calculate and include the True-Up Volumes on Shipper’s invoice more frequently than quarterly.

Shipper and Transporter agree that payback of the True-up Volumes will take place over the 60 day period following notice by Transporter to Shipper of the True-up Volumes as calculated by the above methodology.

The retainage rates to recover actual fuel and lost and unaccounted for gas will only apply to nominations to off-system interstate pipeline interconnects. Any nominations to other points will be subject to the posted Tariff Retainage Rates and the Pipeline Safety Cost Rate.

Shipper shall also be subject to any FERC mandated surcharges, imposed by FERC on an industry wide and generally applicable basis to shippers on interstate pipelines. Transporter shall assess the

Contract # EQTR20242
Page 9 of 10

impact of any such FERC proposed surcharge on its Shippers and use commercially reasonable efforts to minimize the application or impact of such surcharge on Transporter’s Shippers, provided that such efforts by Transporter shall not include any obligation on or risk to Transporter of cost responsibility for such surcharge.
Except as expressly stated herein, Equitrans’ applicable maximum rates and charges set forth in the Statement of Rates of its Tariff continue to apply.

2. Customer acknowledges that it is electing Negotiated Rates as an alternative to the rates and charges set forth in the Statement of Rates of Equitrans’ Tariff applicable to Rate Schedule FTS, as revised from time to time.

3. This Exhibit C is effective 10/01/2014 and continues in effect through 10/31/2024.

4. In the event any provision of this Exhibit C is held to be invalid, illegal or unenforceable by any court, regulatory agency, or tribunal of competent jurisdiction, the validity, legality, and enforceability of the remaining provisions, terms or conditions shall not in any way be affected or impaired thereby, and the term, condition, or provision which is held illegal or invalid shall be deemed modified to conform to such rule of law, but only for the period of time such order, rule, regulation, or law is in effect.

5. Other Special Provisions:

None.

IN WITNESS WHEREOF, Customer and Equitrans have executed this Exhibit C by their duly authorized officers, effective as of the date indicated above.


CUSTOMER:
 
EQUITRANS, L.P.:
 
By __/s/ Paul Kress 9/30/2014_
 
By __/s/ Andrew L. Murphy 9/30/2014_
(Date)
 
(Date)
 
Title __Vice President ______________
 
 
Title __Vice President________________
 
 
 
 
 
 


Contract # EQTR20242
Page 10 of 10


Exhibit 31.1
 
CERTIFICATION
 
I, David L. Porges, certify that:
 
1.               I have reviewed this Quarterly Report on Form 10-Q of EQT Midstream Partners, LP;
 
2.               Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.               Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.               The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.               Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.               Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.              Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.               Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.               The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.               All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.               Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  October 22, 2015
 
EQT Midstream Partners, LP
 
 
 
/s/ David L. Porges
 
David L. Porges
 
Chairman, President and Chief Executive Officer, EQT Midstream Services, LLC, the registrant’s General Partner





Exhibit 31.2
CERTIFICATION
 
I, Philip P. Conti, certify that:
 
1.               I have reviewed this Quarterly Report on Form 10-Q of EQT Midstream Partners, LP;
 
2.               Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.             Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.               The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a.               Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
b.               Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
c.                Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d.               Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.               The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a.               All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
b.               Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  October 22, 2015
 
EQT Midstream Partners, LP
 
 
 
/s/ Philip P. Conti
 
Philip P. Conti
 
Senior Vice President and Chief Financial Officer, EQT Midstream Services, LLC, the registrant’s General Partner





Exhibit 32
CERTIFICATION
 
In connection with the Quarterly Report of EQT Midstream Partners, LP (“EQM”) on Form 10-Q for the period ended September 30, 2015 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned certify pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)               The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
(2)               The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of EQM.
 
 
 
/s/ David L. Porges
 
 
October 22, 2015
David L. Porges
Chairman, President and Chief Executive Officer, EQT Midstream Services, LLC, EQM’s General Partner
 
 
 
 
 
 
 
 
/s/ Philip P. Conti
 
 
October 22, 2015
Philip P. Conti
Senior Vice President and Chief Financial Officer, EQT Midstream Services, LLC, EQM’s General Partner