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(Mark One)
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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or
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER
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001-38629
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Pennsylvania
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83-0516635
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(State or other jurisdiction of incorporation or organization)
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(IRS Employer Identification No.)
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(Registrant's telephone number, including area code)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, no par value
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ETRN
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New York Stock Exchange
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Large Accelerated Filer
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☒
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Accelerated Filer
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☐
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Emerging Growth Company
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☐
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Non-Accelerated Filer
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☐
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Smaller Reporting Company
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☐
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Page No.
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Abbreviations
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Measurements
|
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ASC – Accounting Standards Codification
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Btu = one British thermal unit
|
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ASU – Accounting Standards Update
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BBtu = billion British thermal units
|
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FASB – Financial Accounting Standards Board
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Bcf = billion cubic feet
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FERC – U.S. Federal Energy Regulatory Commission
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Mcf = thousand cubic feet
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GAAP – United States Generally Accepted Accounting Principles
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MMBtu = million British thermal units
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IDRs – incentive distribution rights
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MMcf = million cubic feet
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NYMEX – New York Mercantile Exchange
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MMgal = million gallons
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NYSE – New York Stock Exchange
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SEC – U.S. Securities and Exchange Commission
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Three Months Ended March 31,
|
||||||
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2020
|
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2019
|
||||
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(Thousands, except per share amounts)
|
||||||
|
Operating revenues (a)
|
$
|
453,113
|
|
|
$
|
389,782
|
|
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Operating expenses:
|
|
|
|
|
|
||
|
Operating and maintenance (b)
|
38,422
|
|
|
27,883
|
|
||
|
Selling, general and administrative (b)
|
29,739
|
|
|
32,178
|
|
||
|
Separation and other transaction costs
|
11,360
|
|
|
8,782
|
|
||
|
Depreciation
|
61,348
|
|
|
50,511
|
|
||
|
Amortization of intangible assets
|
14,581
|
|
|
10,387
|
|
||
|
Impairments of long-lived assets (c)
|
55,581
|
|
|
—
|
|
||
|
Total operating expenses
|
211,031
|
|
|
129,741
|
|
||
|
Operating income
|
242,082
|
|
|
260,041
|
|
||
|
Equity income (d)
|
54,072
|
|
|
31,063
|
|
||
|
Other income (e)
|
4,163
|
|
|
1,861
|
|
||
|
Loss on early extinguishment of debt
|
24,864
|
|
|
—
|
|
||
|
Net interest expense (f)
|
66,754
|
|
|
60,949
|
|
||
|
Income before income taxes
|
208,699
|
|
|
232,016
|
|
||
|
Income tax expense
|
19,139
|
|
|
32,450
|
|
||
|
Net income
|
189,560
|
|
|
199,566
|
|
||
|
Net income attributable to noncontrolling interests
|
119,828
|
|
|
143,267
|
|
||
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Net income attributable to Equitrans Midstream
|
$
|
69,732
|
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|
$
|
56,299
|
|
|
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|
||||
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Earnings per share of common stock attributable to Equitrans Midstream - basic (g)
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$
|
0.28
|
|
|
$
|
0.22
|
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Earnings per share of common stock attributable to Equitrans Midstream - diluted (g)
|
$
|
0.28
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|
$
|
0.22
|
|
|
|
|
|
|
||||
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Weighted average common shares outstanding - basic
|
248,591
|
|
|
254,776
|
|
||
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Weighted average common shares outstanding - diluted
|
248,591
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|
|
254,827
|
|
||
|
|
|
|
|
||||
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Statement of comprehensive income (loss):
|
|
|
|
||||
|
Net income
|
$
|
189,560
|
|
|
$
|
199,566
|
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
||||
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Pension and other post-retirement benefits liability adjustment, net of tax expense of $10 and $8
|
30
|
|
|
(295
|
)
|
||
|
Other comprehensive income (loss)
|
30
|
|
|
(295
|
)
|
||
|
Comprehensive income
|
189,590
|
|
|
199,271
|
|
||
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Less: Comprehensive income attributable to noncontrolling interests
|
119,828
|
|
|
143,267
|
|
||
|
Comprehensive income attributable to Equitrans Midstream
|
$
|
69,762
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|
|
$
|
56,004
|
|
|
|
|
|
|
||||
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Dividends declared per common share
|
$
|
0.15
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$
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0.45
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(a)
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Operating revenues included related party revenues from EQT of approximately $303.8 million and $284.5 million for the three months ended March 31, 2020 and 2019, respectively. See Note 7.
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(b)
|
Operating and maintenance expense included charges to EQT of approximately $2.4 million for the three months ended March 31, 2019. Selling, general and administrative expense included charges from EQT of approximately $1.0 million for the three months ended March 31, 2019. See Notes 1 and 7.
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(c)
|
See Note 4 for disclosure regarding impairments of long-lived assets.
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(d)
|
Represents equity income from the MVP Joint Venture. See Note 8.
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(e)
|
See Note 10 for disclosures regarding derivative instruments.
|
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(f)
|
Net interest expense included interest income on the Preferred Interest in EES of approximately $1.5 million and $1.6 million for the three months ended March 31, 2020 and 2019, respectively.
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(g)
|
See Note 11 for disclosure regarding the Company's calculation of net income per share of common stock (basic and diluted).
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Three Months Ended March 31,
|
||||||
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2020
|
|
2019
|
||||
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(Thousands)
|
||||||
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Cash flows from operating activities:
|
|
|
|
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|
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Net income
|
$
|
189,560
|
|
|
$
|
199,566
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
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Depreciation
|
61,348
|
|
|
50,511
|
|
||
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Amortization of intangible assets
|
14,581
|
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10,387
|
|
||
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Deferred income taxes
|
18,710
|
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|
32,450
|
|
||
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Impairments of long-lived assets (a)
|
55,581
|
|
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—
|
|
||
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Equity income (b)
|
(54,072
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)
|
|
(31,063
|
)
|
||
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Other income
|
(4,306
|
)
|
|
(1,997
|
)
|
||
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Loss on early extinguishment of debt
|
24,864
|
|
|
—
|
|
||
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Share-based compensation plans
|
4,541
|
|
|
1,108
|
|
||
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Changes in other assets and liabilities:
|
|
|
|
||||
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Accounts receivable
|
(998
|
)
|
|
(9,989
|
)
|
||
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Accounts payable
|
6,067
|
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|
(47,827
|
)
|
||
|
Accrued interest
|
(28,793
|
)
|
|
(38,828
|
)
|
||
|
Other assets and other liabilities
|
(37,780
|
)
|
|
(42,117
|
)
|
||
|
Net cash provided by operating activities
|
249,303
|
|
|
122,201
|
|
||
|
Cash flows from investing activities:
|
|
|
|
|
|
||
|
Capital expenditures
|
(152,392
|
)
|
|
(208,966
|
)
|
||
|
Capital contributions to the MVP Joint Venture
|
(45,150
|
)
|
|
(144,763
|
)
|
||
|
Principal payments received on the Preferred Interest
|
1,225
|
|
|
1,141
|
|
||
|
Net cash used in investing activities
|
(196,317
|
)
|
|
(352,588
|
)
|
||
|
Cash flows from financing activities:
|
|
|
|
|
|
||
|
Proceeds from revolving credit facility borrowings
|
1,170,000
|
|
|
684,000
|
|
||
|
Payments on revolving credit facility borrowings
|
(350,000
|
)
|
|
(230,500
|
)
|
||
|
Payment for retirement of long-term debt
|
(594,000
|
)
|
|
—
|
|
||
|
Payments for credit facility amendment fees
|
(2,740
|
)
|
|
(1,500
|
)
|
||
|
Distributions paid to noncontrolling interest unitholders
|
(96,526
|
)
|
|
(94,030
|
)
|
||
|
Distributions paid to EQM Series A Preferred unitholders
|
(25,501
|
)
|
|
—
|
|
||
|
Dividends paid
|
(114,254
|
)
|
|
(104,251
|
)
|
||
|
Cash Shares and Cash Amount (defined in Note 6)
|
(52,323
|
)
|
|
—
|
|
||
|
Purchase of EQGP common units
|
—
|
|
|
(238,455
|
)
|
||
|
Net cash (used in) provided by financing activities
|
(65,344
|
)
|
|
15,264
|
|
||
|
|
|
|
|
||||
|
Net change in cash, restricted cash and cash equivalents
|
(12,358
|
)
|
|
(215,123
|
)
|
||
|
Cash, restricted cash and cash equivalents at beginning of period
|
88,322
|
|
|
294,172
|
|
||
|
Cash, restricted cash and cash equivalents at end of period (c)
|
$
|
75,964
|
|
|
$
|
79,049
|
|
|
|
|
|
|
||||
|
Cash paid during the period for:
|
|
|
|
|
|
||
|
Interest, net of amount capitalized
|
$
|
94,343
|
|
|
$
|
98,470
|
|
|
|
|
|
|
||||
|
Non-cash activity during the period for:
|
|
|
|
|
|
||
|
Contract liability
|
$
|
128,314
|
|
|
$
|
—
|
|
|
(a)
|
See Note 4 for disclosure regarding impairments of long-lived assets.
|
|
(b)
|
Represents equity income from the MVP Joint Venture. See Note 8.
|
|
(c)
|
Includes $29.0 million of cash and cash equivalents and $50.0 million of cash escrowed as of March 31, 2019 associated with the Bolt-on Acquisition (as defined in Note 3).
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
|
|
(Thousands)
|
||||||
|
ASSETS
|
|
||||||
|
Current assets:
|
|
|
|
|
|
||
|
Cash and cash equivalents
|
$
|
75,964
|
|
|
$
|
88,322
|
|
|
Accounts receivable (net of allowance for credit losses of $3,053 and allowance for doubtful accounts of $285 as of March 31, 2020 and December 31, 2019, respectively) (a)(b)
|
253,161
|
|
|
255,344
|
|
||
|
Other current assets
|
39,308
|
|
|
31,546
|
|
||
|
Total current assets
|
368,433
|
|
|
375,212
|
|
||
|
|
|
|
|
||||
|
Property, plant and equipment
|
8,573,862
|
|
|
8,583,124
|
|
||
|
Less: accumulated depreciation
|
(823,100
|
)
|
|
(859,157
|
)
|
||
|
Net property, plant and equipment
|
7,750,762
|
|
|
7,723,967
|
|
||
|
|
|
|
|
||||
|
Investment in unconsolidated entity
|
2,465,827
|
|
|
2,324,108
|
|
||
|
Goodwill
|
486,698
|
|
|
486,698
|
|
||
|
Net intangible assets
|
765,205
|
|
|
797,439
|
|
||
|
Deferred income taxes
|
45,396
|
|
|
90,597
|
|
||
|
Other assets
|
307,356
|
|
|
243,688
|
|
||
|
Total assets
|
$
|
12,189,677
|
|
|
$
|
12,041,709
|
|
|
|
|
|
|
||||
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
||
|
Current liabilities:
|
|
|
|
|
|
||
|
Current portion of long-term debt
|
$
|
—
|
|
|
$
|
6,000
|
|
|
Accounts payable
|
109,151
|
|
|
128,114
|
|
||
|
Capital contributions payable to the MVP Joint Venture
|
87,647
|
|
|
45,150
|
|
||
|
Accrued interest
|
44,662
|
|
|
73,455
|
|
||
|
Accrued liabilities
|
51,677
|
|
|
83,238
|
|
||
|
Total current liabilities
|
293,137
|
|
|
335,957
|
|
||
|
|
|
|
|
||||
|
Revolving credit facility borrowings (c)
|
1,722,500
|
|
|
902,500
|
|
||
|
EQM long-term debt
|
4,860,096
|
|
|
4,859,499
|
|
||
|
Long-term debt
|
—
|
|
|
562,484
|
|
||
|
Contract liability (d)
|
173,005
|
|
|
—
|
|
||
|
Regulatory and other long-term liabilities
|
96,621
|
|
|
99,189
|
|
||
|
Total liabilities
|
7,145,359
|
|
|
6,759,629
|
|
||
|
|
|
|
|
||||
|
Equity:
|
|
|
|
|
|
||
|
Common stock, no par value, 229,352 and 254,745 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
|
1,297,304
|
|
|
1,292,804
|
|
||
|
Retained deficit
|
(858,440
|
)
|
|
(618,062
|
)
|
||
|
Accumulated other comprehensive loss
|
(1,996
|
)
|
|
(2,026
|
)
|
||
|
Total common shareholders' equity
|
436,868
|
|
|
672,716
|
|
||
|
Noncontrolling interests
|
4,607,450
|
|
|
4,609,364
|
|
||
|
Total shareholders' equity
|
5,044,318
|
|
|
5,282,080
|
|
||
|
Total liabilities and shareholders' equity
|
$
|
12,189,677
|
|
|
$
|
12,041,709
|
|
|
(a)
|
Accounts receivable as of March 31, 2020 and December 31, 2019 included approximately $183.4 million and $175.2 million, respectively, of related party accounts receivable from EQT.
|
|
(b)
|
See Note 1 for a discussion of the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
|
|
(c)
|
As of March 31, 2020, the Company had aggregate borrowings outstanding of approximately $1,430 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively (as each is defined in Note 9). As of December 31, 2019, the Company had aggregate borrowings outstanding of approximately $610 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively. The Company had no borrowings outstanding under the Equitrans Midstream Credit Facility as of December 31, 2019. See Note 9 for further detail.
|
|
(d)
|
See Note 6 for disclosure regarding the Company's contract liabilities.
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
Retained
|
|
Other
|
|
|
|
|
|||||||||||
|
|
Shares
|
|
No
|
|
Earnings
|
|
Comprehensive
|
|
Noncontrolling
|
|
Total
|
|||||||||||
|
|
Outstanding
|
|
Par Value
|
|
(Deficit)
|
|
Loss
|
|
Interests
|
|
Equity
|
|||||||||||
|
|
(Thousands, except per share and unit amounts)
|
|||||||||||||||||||||
|
Balance at January 1, 2019
|
254,271
|
|
|
$
|
425,370
|
|
|
$
|
33,932
|
|
|
$
|
(1,509
|
)
|
|
$
|
4,801,840
|
|
|
$
|
5,259,633
|
|
|
Other comprehensive income (net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net income
|
—
|
|
|
—
|
|
|
56,299
|
|
|
—
|
|
|
143,267
|
|
|
199,566
|
|
|||||
|
Pension and other post-retirement benefits liability adjustment, net of tax expense of $8
|
—
|
|
|
—
|
|
|
316
|
|
|
(295
|
)
|
|
—
|
|
|
21
|
|
|||||
|
Dividends ($0.41 per share)
|
—
|
|
|
—
|
|
|
(104,251
|
)
|
|
—
|
|
|
—
|
|
|
(104,251
|
)
|
|||||
|
Share-based compensation plans
|
413
|
|
|
853
|
|
|
—
|
|
|
—
|
|
|
255
|
|
|
1,108
|
|
|||||
|
Distributions paid to noncontrolling interest unitholders ($1.13 per common unit for EQM)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(94,030
|
)
|
|
(94,030
|
)
|
|||||
|
Purchase of EQGP common units
|
—
|
|
|
(38,648
|
)
|
|
—
|
|
|
—
|
|
|
(199,807
|
)
|
|
(238,455
|
)
|
|||||
|
Net changes in ownership of consolidated entities (See Note 2)
|
—
|
|
|
991,098
|
|
|
—
|
|
|
—
|
|
|
(1,337,641
|
)
|
|
(346,543
|
)
|
|||||
|
Balance at March 31, 2019
|
254,684
|
|
|
$
|
1,378,673
|
|
|
$
|
(13,704
|
)
|
|
$
|
(1,804
|
)
|
|
$
|
3,313,884
|
|
|
$
|
4,677,049
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|||||||||||
|
|
|
|
|
|
Retained
|
|
Other
|
|
|
|
|
|||||||||||
|
|
Shares
|
|
No
|
|
Earnings
|
|
Comprehensive
|
|
Noncontrolling
|
|
Total
|
|||||||||||
|
|
Outstanding
|
|
Par Value
|
|
(Deficit)
|
|
Loss
|
|
Interests
|
|
Equity
|
|||||||||||
|
|
(Thousands, except per share and unit amounts)
|
|||||||||||||||||||||
|
Balance at January 1, 2020
|
254,745
|
|
|
$
|
1,292,804
|
|
|
$
|
(618,062
|
)
|
|
$
|
(2,026
|
)
|
|
$
|
4,609,364
|
|
|
$
|
5,282,080
|
|
|
Other comprehensive income (net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
Net income
|
—
|
|
|
—
|
|
|
69,732
|
|
|
—
|
|
|
119,828
|
|
|
189,560
|
|
|||||
|
Pension and other post-retirement benefits liability adjustment, net of tax expense of $10
|
—
|
|
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
30
|
|
|||||
|
Dividends ($0.45 per share)
|
(178
|
)
|
|
—
|
|
|
(115,400
|
)
|
|
—
|
|
|
—
|
|
|
(115,400
|
)
|
|||||
|
Share-based compensation plans
|
85
|
|
|
4,500
|
|
|
—
|
|
|
—
|
|
|
285
|
|
|
4,785
|
|
|||||
|
Distributions paid to noncontrolling interest unitholders ($1.16 per common unit for EQM)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(96,526
|
)
|
|
(96,526
|
)
|
|||||
|
Distributions paid to holders of EQM Series A Preferred Units ($1.0364 per Series A Preferred Unit (as defined in Note 1))
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25,501
|
)
|
|
(25,501
|
)
|
|||||
|
Share Purchase Agreements (as defined in Note 6)
|
(25,300
|
)
|
|
—
|
|
|
(190,992
|
)
|
|
—
|
|
|
—
|
|
|
(190,992
|
)
|
|||||
|
Adoption of Topic 326 (as defined in Note 1)
|
—
|
|
|
—
|
|
|
(3,718
|
)
|
|
—
|
|
|
—
|
|
|
(3,718
|
)
|
|||||
|
Balance at March 31, 2020
|
229,352
|
|
|
$
|
1,297,304
|
|
|
$
|
(858,440
|
)
|
|
$
|
(1,996
|
)
|
|
$
|
4,607,450
|
|
|
$
|
5,044,318
|
|
|
1.
|
Financial Statements
|
|
|
Accounts Receivable
|
|
Contract Asset (a)
|
|
Preferred Interest in EES (b)
|
|
Total
|
||||||||
|
Balance at December 31, 2019
|
$
|
(285
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(285
|
)
|
|
Adoption of Topic 326
|
(2,708
|
)
|
|
—
|
|
|
(1,010
|
)
|
|
(3,718
|
)
|
||||
|
Provision for expected credit losses
|
(60
|
)
|
|
(116
|
)
|
|
(11
|
)
|
|
(187
|
)
|
||||
|
Balance at March 31, 2020
|
$
|
(3,053
|
)
|
|
$
|
(116
|
)
|
|
$
|
(1,021
|
)
|
|
$
|
(4,190
|
)
|
|
(a)
|
Included in other current assets in the consolidated balance sheets.
|
|
(b)
|
Included in other assets in the consolidated balance sheets.
|
|
2.
|
Investments in Consolidated, Non-Wholly Owned Entities
|
|
3.
|
Acquisitions and Mergers
|
|
(in thousands)
|
|
Preliminary Purchase Price Allocation (As initially reported)
|
|
Measurement Period Adjustments (a)
|
|
Purchase Price Allocation (As adjusted)
|
||||||
|
Consideration given:
|
|
|
|
|
|
|
||||||
|
Cash consideration (b)
|
|
$
|
861,250
|
|
|
$
|
(11,404
|
)
|
|
$
|
849,846
|
|
|
Buyout of portion of Eureka Midstream Class B Units and incentive compensation
|
|
2,530
|
|
|
—
|
|
|
2,530
|
|
|||
|
Total consideration
|
|
863,780
|
|
|
(11,404
|
)
|
|
852,376
|
|
|||
|
|
|
|
|
|
|
|
||||||
|
Fair value of liabilities assumed:
|
|
|
|
|
|
|
||||||
|
Current liabilities
|
|
52,458
|
|
|
(9,857
|
)
|
|
42,601
|
|
|||
|
Long-term debt
|
|
300,825
|
|
|
—
|
|
|
300,825
|
|
|||
|
Other long-term liabilities
|
|
10,203
|
|
|
—
|
|
|
10,203
|
|
|||
|
Amount attributable to liabilities assumed
|
|
363,486
|
|
|
(9,857
|
)
|
|
353,629
|
|
|||
|
|
|
|
|
|
|
|
||||||
|
Fair value of assets acquired:
|
|
|
|
|
|
|
||||||
|
Cash
|
|
15,145
|
|
|
—
|
|
|
15,145
|
|
|||
|
Accounts receivable
|
|
16,817
|
|
|
—
|
|
|
16,817
|
|
|||
|
Inventory
|
|
12,991
|
|
|
(26
|
)
|
|
12,965
|
|
|||
|
Other current assets
|
|
882
|
|
|
—
|
|
|
882
|
|
|||
|
Net property, plant and equipment
|
|
1,222,284
|
|
|
(8,906
|
)
|
|
1,213,378
|
|
|||
|
Intangible assets (c)
|
|
317,000
|
|
|
(6,000
|
)
|
|
311,000
|
|
|||
|
Deferred tax asset
|
|
5,773
|
|
|
(5,268
|
)
|
|
505
|
|
|||
|
Other assets
|
|
14,567
|
|
|
—
|
|
|
14,567
|
|
|||
|
Amount attributable to assets acquired
|
|
1,605,459
|
|
|
(20,200
|
)
|
|
1,585,259
|
|
|||
|
|
|
|
|
|
|
|
||||||
|
Noncontrolling interests
|
|
(486,062
|
)
|
|
7,602
|
|
|
(478,460
|
)
|
|||
|
|
|
|
|
|
|
|
||||||
|
Goodwill as of April 10, 2019
|
|
$
|
107,869
|
|
|
$
|
(8,663
|
)
|
|
$
|
99,206
|
|
|
Impairment of goodwill (d)
|
|
|
|
|
|
(99,206
|
)
|
|||||
|
Goodwill as of March 31, 2020
|
|
|
|
|
|
$
|
—
|
|
||||
|
(a)
|
The Company recorded measurement period adjustments to its preliminary acquisition date fair values due to the refinement of its valuation models, assumptions and inputs. The measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.
|
|
(b)
|
The cash consideration for the Bolt-on Acquisition was adjusted by approximately $11.4 million related to working capital adjustments and the release of all escrowed indemnification funds to EQM.
|
|
(c)
|
After considering the refinements to the valuation models, the Company estimated the fair value of the customer-related intangible assets acquired as part of the Bolt-on Acquisition to be $311.0 million. As a result, the fair value of the customer-related intangible assets was decreased by $6.0 million on September 30, 2019 with a corresponding increase to goodwill. In addition, the change to the provisional amount resulted in a decrease in amortization expense and accumulated amortization of approximately $0.4 million.
|
|
(d)
|
During the third quarter of 2019, the Company identified impairment indicators that suggested the fair value of its goodwill was more likely than not below its carrying amount. As such, the Company performed an interim goodwill impairment assessment, which resulted in the Company recognizing impairment to goodwill of approximately $268.1 million, of which $99.2 million was associated with its Eureka/Hornet reporting unit, bringing the reporting unit's goodwill balance to zero.
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
|
2020
|
|
2019
|
||||
|
|
(Thousands)
|
|||||||
|
Revenues from customers:
|
|
|
|
|
|
|
||
|
Gathering
|
|
$
|
310,047
|
|
|
$
|
261,881
|
|
|
Transmission
|
|
106,615
|
|
|
109,859
|
|
||
|
Water
|
|
36,451
|
|
|
18,042
|
|
||
|
Total operating revenues
|
|
$
|
453,113
|
|
|
$
|
389,782
|
|
|
Operating income:
|
|
|
|
|
|
|
||
|
Gathering
|
|
$
|
155,228
|
|
|
$
|
182,078
|
|
|
Transmission
|
|
78,434
|
|
|
84,750
|
|
||
|
Water
|
|
17,752
|
|
|
1,186
|
|
||
|
Other (a)
|
|
(9,332
|
)
|
|
(7,973
|
)
|
||
|
Total operating income
|
|
$
|
242,082
|
|
|
$
|
260,041
|
|
|
|
|
|
|
|
||||
|
Reconciliation of operating income to net income:
|
|
|
|
|
|
|||
|
Equity income (b)
|
|
$
|
54,072
|
|
|
$
|
31,063
|
|
|
Other income
|
|
4,163
|
|
|
1,861
|
|
||
|
Loss on early extinguishment of debt
|
|
24,864
|
|
|
—
|
|
||
|
Net interest expense
|
|
66,754
|
|
|
60,949
|
|
||
|
Income tax expense
|
|
19,139
|
|
|
32,450
|
|
||
|
Net income
|
|
$
|
189,560
|
|
|
$
|
199,566
|
|
|
(a)
|
Includes separation and other transaction costs and other operating expenses incurred by the Company separate from and in addition to similar costs incurred by EQM.
|
|
(b)
|
Equity income is included in the Transmission segment.
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
|
|
(Thousands)
|
||||||
|
Segment assets:
|
|
|
|
|
|
||
|
Gathering
|
$
|
7,633,394
|
|
|
$
|
7,572,911
|
|
|
Transmission (a)
|
4,034,646
|
|
|
3,903,707
|
|
||
|
Water
|
208,651
|
|
|
202,440
|
|
||
|
Total operating segments
|
11,876,691
|
|
|
11,679,058
|
|
||
|
Headquarters, including cash
|
312,986
|
|
|
362,651
|
|
||
|
Total assets
|
$
|
12,189,677
|
|
|
$
|
12,041,709
|
|
|
(a)
|
The equity investments in the MVP Joint Venture are included in the Transmission segment.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
|
|
(Thousands)
|
||||||
|
Depreciation:
|
|
|
|
|
|
||
|
Gathering
|
$
|
40,440
|
|
|
$
|
28,116
|
|
|
Transmission
|
13,558
|
|
|
12,533
|
|
||
|
Water
|
7,116
|
|
|
6,416
|
|
||
|
Other
|
234
|
|
|
3,446
|
|
||
|
Total
|
$
|
61,348
|
|
|
$
|
50,511
|
|
|
Capital expenditures for segment assets:
|
|
|
|
||||
|
Gathering (a)
|
$
|
111,454
|
|
|
$
|
158,000
|
|
|
Transmission (b)
|
10,798
|
|
|
18,762
|
|
||
|
Water
|
3,476
|
|
|
9,175
|
|
||
|
Other
|
1,876
|
|
|
3,396
|
|
||
|
Total (c)
|
$
|
127,604
|
|
|
$
|
189,333
|
|
|
(a)
|
Includes approximately $12.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
|
|
(b)
|
Transmission capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
|
|
(c)
|
The Company accrues capital expenditures when the work has been completed but the associated bills have not yet been paid. Accrued capital expenditures are excluded from the statements of consolidated cash flows until they are paid. Accrued capital expenditures were approximately $61.0 million and $85.8 million at March 31, 2020 and December 31, 2019, respectively. Accrued capital expenditures were approximately $89.7 million and $109.3 million at March 31, 2019 and December 31, 2018, respectively.
|
|
|
|
Three Months Ended March 31, 2020
|
||||||||||||||
|
|
|
Gathering
|
|
Transmission
|
|
Water
|
|
Total
|
||||||||
|
|
|
(Thousands)
|
||||||||||||||
|
Firm reservation fee revenues (a)
|
|
$
|
152,079
|
|
|
$
|
99,597
|
|
|
$
|
12,776
|
|
|
$
|
264,452
|
|
|
Volumetric-based fee revenues
|
|
157,968
|
|
|
7,018
|
|
|
23,675
|
|
|
188,661
|
|
||||
|
Total operating revenues
|
|
$
|
310,047
|
|
|
$
|
106,615
|
|
|
$
|
36,451
|
|
|
$
|
453,113
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Three Months Ended March 31, 2019
|
||||||||||||||
|
|
|
Gathering
|
|
Transmission
|
|
Water
|
|
Total
|
||||||||
|
|
|
(Thousands)
|
||||||||||||||
|
Firm reservation fee revenues
|
|
$
|
128,959
|
|
|
$
|
99,224
|
|
|
$
|
2,884
|
|
|
$
|
231,067
|
|
|
Volumetric-based fee revenues
|
|
132,922
|
|
|
10,635
|
|
|
15,158
|
|
|
158,715
|
|
||||
|
Total operating revenues
|
|
$
|
261,881
|
|
|
$
|
109,859
|
|
|
$
|
18,042
|
|
|
$
|
389,782
|
|
|
(a)
|
For the three months ended March 31, 2020, firm reservation fee revenues associated with Gathering and Water included approximately $6.3 million and $5.0 million, respectively, of MVC unbilled revenues.
|
|
|
|
Unbilled Revenue
|
||
|
|
|
(Thousands)
|
||
|
Balance as of January 1, 2020
|
|
$
|
—
|
|
|
Revenue recognized in excess of amounts invoiced
|
|
11,305
|
|
|
|
Minimum volume commitments invoiced (a)
|
|
—
|
|
|
|
Balance as of March 31, 2020
|
|
$
|
11,305
|
|
|
(a)
|
Unbilled revenues are transferred to accounts receivable once the Company has an unconditional right to consideration from the customer.
|
|
|
|
Deferred Revenue
|
||
|
|
|
(Thousands)
|
||
|
Balance as of January 1, 2020
|
|
$
|
—
|
|
|
Amounts recorded during the period
|
|
173,005
|
|
|
|
Amounts transferred during the period (a)
|
|
—
|
|
|
|
Balance as of March 31, 2020
|
|
$
|
173,005
|
|
|
(a)
|
Deferred revenues are recognized as revenue upon satisfaction of the Company's performance obligation to the customer.
|
|
|
|
2020(a)
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
||||||||||||||
|
|
(Thousands)
|
|||||||||||||||||||||||||||
|
Gathering firm reservation fees
|
|
$
|
76,009
|
|
|
$
|
173,406
|
|
|
$
|
175,674
|
|
|
$
|
173,691
|
|
|
$
|
170,621
|
|
|
$
|
1,388,240
|
|
|
$
|
2,157,641
|
|
|
Gathering revenues supported by MVCs
|
|
382,384
|
|
|
570,492
|
|
|
606,232
|
|
|
638,577
|
|
|
633,626
|
|
|
5,356,728
|
|
|
8,188,039
|
|
|||||||
|
Transmission firm reservation fees
|
|
255,426
|
|
|
374,688
|
|
|
371,639
|
|
|
333,315
|
|
|
273,711
|
|
|
2,505,063
|
|
|
4,113,842
|
|
|||||||
|
Water revenues supported by MVCs
|
|
27,017
|
|
|
60,000
|
|
|
60,000
|
|
|
60,000
|
|
|
60,000
|
|
|
60,000
|
|
|
327,017
|
|
|||||||
|
Total
|
|
$
|
740,836
|
|
|
$
|
1,178,586
|
|
|
$
|
1,213,545
|
|
|
$
|
1,205,583
|
|
|
$
|
1,137,958
|
|
|
$
|
9,310,031
|
|
|
$
|
14,786,539
|
|
|
(a)
|
April 1, 2020 through December 31, 2020.
|
|
7.
|
Related Party Transactions
|
|
8.
|
Investments in Unconsolidated Entity
|
|
|
March 31, 2020
|
|
December 31, 2019
|
||||
|
|
(Thousands)
|
||||||
|
Current assets
|
$
|
218,073
|
|
|
$
|
102,638
|
|
|
Non-current assets
|
5,138,016
|
|
|
4,951,521
|
|
||
|
Total assets
|
$
|
5,356,089
|
|
|
$
|
5,054,159
|
|
|
|
|
|
|
||||
|
Current liabilities
|
$
|
195,105
|
|
|
$
|
223,645
|
|
|
Equity
|
5,160,984
|
|
|
4,830,514
|
|
||
|
Total liabilities and equity
|
$
|
5,356,089
|
|
|
$
|
5,054,159
|
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
|
|
(Thousands)
|
||||||
|
Environmental remediation reserve
|
$
|
(265
|
)
|
|
$
|
(2,192
|
)
|
|
Other income
|
231
|
|
|
2,913
|
|
||
|
Net interest income
|
35,326
|
|
|
20,086
|
|
||
|
AFUDC — equity
|
82,428
|
|
|
46,868
|
|
||
|
Net income
|
$
|
117,720
|
|
|
$
|
67,675
|
|
|
9.
|
Debt
|
|
•
|
certain defined terms in the EQM Credit Facility and the 2019 EQM Term Loan Agreement, as applicable, including:
|
|
◦
|
the Applicable Rate (as defined in the respective credit agreements) such that: (i) Base Rate Loans (as defined in the respective credit agreements) bear interest at a Base Rate (as defined in the respective credit agreements) plus a margin of 0.125% to 1.750% for borrowings under the Amended EQM Credit Facility or a margin of 0.000% to 1.625% for borrowings under the Amended 2019 EQM Term Loan Agreement, each determined on the basis of EQM’s then current credit rating, and (ii) Eurodollar Rate Loans (as defined in the respective credit agreements) bear interest at a Eurodollar Rate (as defined in the respective credit agreements) plus a margin of 1.125% to 2.750% for borrowings under the Amended EQM Credit Facility or a margin of 1.000% to 2.625% for borrowings under the Amended 2019 EQM Term Loan Agreement also determined on the basis of EQM’s then current credit rating; and
|
|
◦
|
“Consolidated EBITDA” to allow for adjustment of “Consolidated EBITDA” in any applicable period for the difference between the amount of revenue recognized with respect to all contractual performance obligations and the amount of consideration received with respect to all contractual performance obligations; and
|
|
•
|
certain negative covenants, including:
|
|
◦
|
the financial covenant pursuant to which, except for certain measurement periods following the consummation of certain acquisitions during which the consolidated leverage ratio cannot exceed the greater of 5.50 to 1.00 or the maximum ratio otherwise permitted for the applicable period, the consolidated leverage ratio cannot exceed, (a) for each fiscal quarter ending prior to the Loan Amendment Date, 5.00 to 1.00, (b) for each fiscal quarter ending on and after the Loan Amendment Date and on or prior to March 31, 2021, 5.75 to 1.00, (c) for each fiscal quarter ending on and after June 30, 2021 and on or prior to December 31, 2021, 5.50 to 1.00, (d) for each fiscal quarter ending on and after March 31, 2022 and on or prior to December 31, 2022, 5.25 to 1.00, and (e) for each fiscal quarter ending on and after March 31, 2023, 5.00 to 1.00; and
|
|
◦
|
the lien covenant such that the specified percentage of Consolidated Net Tangible Assets (as defined in the respective credit agreements) applicable to the existing exception for liens securing obligations not to exceed such specified percentage at the time of creation, incurrence, assumption or imposition of such lien is reduced from 15% to 5% of Consolidated Net Tangible Assets; and
|
|
◦
|
the debt covenant such that the specified percentage of Consolidated Net Tangible Assets applicable to the existing exception for debt incurred by subsidiaries of EQM not to exceed such specified percentage at the time of incurrence is reduced from 15% to 5% of Consolidated Net Tangible Assets.
|
|
10.
|
Fair Value Measurements
|
|
11.
|
Earnings Per Share
|
|
|
Three Months Ended March 31,
|
||||||||||||||
|
|
2020
|
|
2019
|
||||||||||||
|
|
Basic
|
|
Diluted
|
|
Basic
|
|
Diluted
|
||||||||
|
|
(In thousands, except per share data)
|
||||||||||||||
|
Net income
|
$
|
189,560
|
|
|
$
|
189,560
|
|
|
$
|
199,566
|
|
|
$
|
199,566
|
|
|
Net income attributable to noncontrolling interests (excluding Series A Preferred Units)
|
94,327
|
|
|
94,327
|
|
|
143,267
|
|
|
143,267
|
|
||||
|
Series A Preferred Units interest in net income
|
25,501
|
|
|
25,501
|
|
|
—
|
|
|
—
|
|
||||
|
Net income attributable to Equitrans Midstream (a)
|
$
|
69,732
|
|
|
$
|
69,732
|
|
|
$
|
56,299
|
|
|
$
|
56,299
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Basic weighted average common shares outstanding
|
248,591
|
|
|
248,591
|
|
|
254,776
|
|
|
254,776
|
|
||||
|
Dilutive securities (b)
|
—
|
|
|
—
|
|
|
—
|
|
|
51
|
|
||||
|
Diluted weighted average common shares outstanding
|
248,591
|
|
|
248,591
|
|
|
254,776
|
|
|
254,827
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
|
Earnings per share attributable to Equitrans Midstream
|
$
|
0.28
|
|
|
$
|
0.28
|
|
|
$
|
0.22
|
|
|
$
|
0.22
|
|
|
(a)
|
For all periods presented, the impact of EQM's dilutive securities did not have a material impact on the Company's diluted earnings per share.
|
|
(b)
|
For the three months ended March 31, 2020, the Company excluded 521,722 potentially dilutive securities because the impact would have been anti-dilutive.
|
|
13.
|
Consolidated Variable Interest Entities
|
|
(a)
|
Accounts receivable as of March 31, 2020 and December 31, 2019 included $183.4 million and $175.2 million, respectively, of related party accounts receivable from EQT.
|
|
(b)
|
As of March 31, 2020, EQM had credit facility borrowings outstanding of approximately $1,430 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively (both defined in Note 9). As of December 31, 2019, EQM had credit facility borrowings outstanding of approximately $610 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively. See Note 9 for further detail.
|
|
(c)
|
Includes approximately $74.3 million of contract liability that is eliminated by the Company in consolidation.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
|
|
(Thousands)
|
||||||
|
Operating revenues
|
$
|
453,113
|
|
|
$
|
389,782
|
|
|
Operating expenses
|
201,699
|
|
|
121,768
|
|
||
|
Other income (expenses), net
|
3,871
|
|
|
(16,083
|
)
|
||
|
Net income
|
$
|
255,285
|
|
|
$
|
251,931
|
|
|
|
|
|
|
||||
|
Net cash provided by operating activities
|
$
|
285,136
|
|
|
$
|
160,973
|
|
|
Net cash used in investing activities
|
$
|
(845,857
|
)
|
|
$
|
(350,357
|
)
|
|
Net cash provided by financing activities
|
$
|
559,228
|
|
|
$
|
245,708
|
|
|
14.
|
Stock-based Compensation Plans
|
|
•
|
guidance regarding EQM’s gathering, transmission and storage and water services revenue and volume growth, including the anticipated effects associated with the EQT Global GGA;
|
|
•
|
projected revenue (including from firm reservation fees and deferred revenues), expenses and contract liabilities, and the effects on projected revenue and contract liabilities associated with the EQT Global GGA and the MVP project;
|
|
•
|
the weighted average contract life of gathering, transmission and storage contracts;
|
|
•
|
infrastructure programs (including the timing, cost, capacity and sources of funding with respect to gathering, transmission and storage and water expansion projects);
|
|
•
|
the cost, capacity, timing of regulatory approvals, final design and targeted in-service dates of current projects;
|
|
•
|
the ultimate terms, partners and structure of the MVP Joint Venture and ownership interests therein;
|
|
•
|
expansion projects in EQM's operating areas and in areas that would provide access to new markets;
|
|
•
|
EQM's ability to provide produced water handling services and realize expansion opportunities and related capital avoidance;
|
|
•
|
Equitrans Midstream's and EQM's ability to identify and complete acquisitions and other strategic transactions, including the proposed EQM Merger and joint ventures, effectively integrate transactions into Equitrans Midstream's and EQM’s operations, and achieve synergies, system optionality and accretion associated with transactions, including through increased scale;
|
|
•
|
EQM's ability to access commercial opportunities and new customers for its water services business, and the timing and final terms of any definitive water services agreement or agreements between EQT and EQM (a Water Services Agreement) entered into pursuant to the terms of the Water Services Letter Agreement;
|
|
•
|
any further credit rating impacts associated with the MVP project, customer credit ratings changes, including EQT's, and defaults, acquisitions and financings and any further changes in EQM's credit ratings;
|
|
•
|
the ability of EQM's contracts to survive a customer bankruptcy or restructuring;
|
|
•
|
the timing of the consummation of the EQM Merger;
|
|
•
|
the ability to obtain the requisite approvals related to the EQM Merger from the Company's shareholders or EQM's limited partners, as applicable, to consummate the EQM Merger;
|
|
•
|
the risk that a condition to closing of the EQM Merger may not be satisfied;
|
|
•
|
expected transaction expenses related to the EQM Merger and the related transactions;
|
|
•
|
the possible diversion of management time on issues related to the EQM Merger;
|
|
•
|
the impact and outcome of threatened, pending and future litigation relating to the EQM Merger;
|
|
•
|
the timing and amount of future issuances or repurchases of securities, including in connection with the EQM Merger and the Restructuring;
|
|
•
|
effects of conversion of EQM securities into Merger Consideration or Equitrans Midstream Preferred Shares, as applicable, in connection with the EQM Merger;
|
|
•
|
effects of seasonality;
|
|
•
|
expected cash flows and MVCs, including those associated with the EQT Global GGA and any definitive agreement or agreements between EQT and EQM related to the Water Services Letter Agreement, and the potential impacts thereon of the timing and cost of the MVP project;
|
|
•
|
capital commitments;
|
|
•
|
projected capital contributions and capital and operating expenditures, including the amount and timing of reimbursable capital expenditures, capital budget and sources of funds for capital expenditures;
|
|
•
|
dividend and distribution amounts, timing and rates;
|
|
•
|
the effect and outcome of pending and future litigation and regulatory proceedings;
|
|
•
|
changes in commodity prices and the effect of commodity prices on Equitrans Midstream's business;
|
|
•
|
liquidity and financing requirements, including sources and availability;
|
|
•
|
interest rates;
|
|
•
|
the Company's, EQM's and EQM's subsidiaries' respective abilities to service debt under, and comply with the covenants contained in, their respective credit agreements;
|
|
•
|
expectations regarding production volumes in EQM's areas of operations;
|
|
•
|
Equitrans Midstream's and EQM’s abilities to achieve the anticipated benefits associated with the execution of the EQT Global GGA, the Water Services Letter Agreement, the EQM Merger Agreement and related agreements;
|
|
•
|
the impact on the Company and its subsidiaries of the COVID-19 pandemic, including, among other things, effects on demand for natural gas and the Company's services, commodity prices and access to capital;
|
|
•
|
the effects of government regulation; and
|
|
•
|
tax status and position.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
|
|
(Thousands)
|
||||||
|
Operating income attributable to EQM
|
$
|
251,414
|
|
|
$
|
268,014
|
|
|
Less:
|
|
|
|
||||
|
Separation and other transaction costs
|
7,256
|
|
|
5,269
|
|
||
|
Additional expenses, net
|
2,076
|
|
|
2,704
|
|
||
|
Operating income attributable to Equitrans Midstream
|
$
|
242,082
|
|
|
$
|
260,041
|
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|
%
Change |
|||||
|
|
(Thousands, except per day amounts)
|
|||||||||
|
FINANCIAL DATA
|
|
|||||||||
|
Firm reservation fee revenues (a)
|
$
|
152,079
|
|
|
$
|
128,959
|
|
|
17.9
|
|
|
Volumetric-based fee revenues
|
157,968
|
|
|
132,922
|
|
|
18.8
|
|
||
|
Total operating revenues
|
310,047
|
|
|
261,881
|
|
|
18.4
|
|
||
|
Operating expenses:
|
|
|
|
|
|
|||||
|
Operating and maintenance
|
18,878
|
|
|
15,253
|
|
|
23.8
|
|
||
|
Selling, general and administrative
|
21,235
|
|
|
22,534
|
|
|
(5.8
|
)
|
||
|
Separation and other transaction costs
|
4,104
|
|
|
3,513
|
|
|
16.8
|
|
||
|
Depreciation
|
40,440
|
|
|
28,116
|
|
|
43.8
|
|
||
|
Amortization of intangible assets
|
14,581
|
|
|
10,387
|
|
|
40.4
|
|
||
|
Impairments of long-lived assets
|
55,581
|
|
|
—
|
|
|
100.0
|
|
||
|
Total operating expenses
|
154,819
|
|
|
79,803
|
|
|
94.0
|
|
||
|
Operating income
|
$
|
155,228
|
|
|
$
|
182,078
|
|
|
(14.7
|
)
|
|
|
|
|
|
|
|
|||||
|
OPERATIONAL DATA
|
|
|
|
|
|
|||||
|
Gathered volumes (BBtu per day)
|
|
|
|
|
|
|||||
|
Firm capacity reservation (b)
|
3,282
|
|
|
2,572
|
|
|
27.6
|
|
||
|
Volumetric-based services
|
5,014
|
|
|
4,194
|
|
|
19.6
|
|
||
|
Total gathered volumes
|
8,296
|
|
|
6,766
|
|
|
22.6
|
|
||
|
|
|
|
|
|
|
|||||
|
Capital expenditures (c)
|
$
|
111,454
|
|
|
$
|
158,000
|
|
|
(29.5
|
)
|
|
(a)
|
For the three months ended March 31, 2020, firm reservation fee revenues included approximately $6.3 million of MVC unbilled revenue.
|
|
(b)
|
Includes volumes under agreements structured with MVCs.
|
|
(c)
|
Includes approximately $12.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|
%
Change |
|||||
|
|
(Thousands, except per day amounts)
|
|||||||||
|
FINANCIAL DATA
|
|
|||||||||
|
Firm reservation fee revenues
|
$
|
99,597
|
|
|
$
|
99,224
|
|
|
0.4
|
|
|
Volumetric-based fee revenues
|
7,018
|
|
|
10,635
|
|
|
(34.0
|
)
|
||
|
Total operating revenues
|
106,615
|
|
|
109,859
|
|
|
(3.0
|
)
|
||
|
Operating expenses:
|
|
|
|
|
|
|||||
|
Operating and maintenance
|
9,441
|
|
|
4,084
|
|
|
131.2
|
|
||
|
Selling, general and administrative
|
5,182
|
|
|
8,492
|
|
|
(39.0
|
)
|
||
|
Depreciation
|
13,558
|
|
|
12,533
|
|
|
8.2
|
|
||
|
Total operating expenses
|
28,181
|
|
|
25,109
|
|
|
12.2
|
|
||
|
Operating income
|
$
|
78,434
|
|
|
$
|
84,750
|
|
|
(7.5
|
)
|
|
|
|
|
|
|
|
|||||
|
Equity income
|
$
|
54,072
|
|
|
$
|
31,063
|
|
|
74.1
|
|
|
|
|
|
|
|
|
|||||
|
OPERATIONAL DATA
|
|
|
|
|
|
|||||
|
Transmission pipeline throughput (BBtu per day)
|
|
|
|
|
|
|||||
|
Firm capacity reservation
|
3,000
|
|
|
2,959
|
|
|
1.4
|
|
||
|
Volumetric-based services
|
15
|
|
|
105
|
|
|
(85.7
|
)
|
||
|
Total transmission pipeline throughput
|
3,015
|
|
|
3,064
|
|
|
(1.6
|
)
|
||
|
|
|
|
|
|
|
|||||
|
Average contracted firm transmission reservation commitments (BBtu per day)
|
4,453
|
|
|
4,442
|
|
|
0.2
|
|
||
|
|
|
|
|
|
|
|||||
|
Capital expenditures (a)
|
$
|
10,798
|
|
|
$
|
18,762
|
|
|
(42.4
|
)
|
|
(a)
|
Transmission capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
|
|
|
Three Months Ended March 31,
|
|||||||||
|
|
2020
|
|
2019
|
|
%
Change |
|||||
|
|
(Thousands)
|
|||||||||
|
FINANCIAL DATA
|
|
|||||||||
|
Firm reservation fee revenues (a)
|
$
|
12,776
|
|
|
$
|
2,884
|
|
|
343.0
|
|
|
Volumetric-based fee revenues
|
23,675
|
|
|
15,158
|
|
|
56.2
|
|
||
|
Total operating revenues
|
36,451
|
|
|
18,042
|
|
|
102.0
|
|
||
|
Operating expenses:
|
|
|
|
|
|
|||||
|
Operating and maintenance
|
10,103
|
|
|
8,546
|
|
|
18.2
|
|
||
|
Selling, general and administrative
|
1,480
|
|
|
1,894
|
|
|
(21.9
|
)
|
||
|
Depreciation
|
7,116
|
|
|
6,416
|
|
|
10.9
|
|
||
|
Total operating expenses
|
18,699
|
|
|
16,856
|
|
|
10.9
|
|
||
|
Operating income
|
$
|
17,752
|
|
|
$
|
1,186
|
|
|
1,396.8
|
|
|
|
|
|
|
|
|
|||||
|
OPERATIONAL DATA
|
|
|
|
|
|
|||||
|
Water services volumes (MMgal)
|
|
|
|
|
|
|||||
|
Firm capacity reservation (b)
|
210
|
|
|
90
|
|
|
133.3
|
|
||
|
Volumetric-based services
|
383
|
|
|
280
|
|
|
36.8
|
|
||
|
Total water volumes
|
593
|
|
|
370
|
|
|
60.3
|
|
||
|
|
|
|
|
|
|
|||||
|
Capital expenditures
|
$
|
3,476
|
|
|
$
|
9,175
|
|
|
(62.1
|
)
|
|
(a)
|
For the three months ended March 31, 2020, firm reservation fee revenues included approximately $5.0 million of MVC unbilled revenues.
|
|
(b)
|
Includes volumes under agreements structured with MVCs.
|
|
•
|
Mountain Valley Pipeline. The MVP Joint Venture is a joint venture among EQM and affiliates of each of NextEra Energy, Inc., Con Edison, AltaGas Ltd. and RGC Resources, Inc. that is constructing the MVP. As of March 31, 2020, EQM owned a 45.7% interest in the MVP project and will operate the MVP. The MVP is an estimated 300 mile, 42-inch diameter natural gas interstate pipeline with a targeted capacity of 2.0 Bcf per day that will span from EQM's existing transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia, providing access to the growing Southeast demand markets. During the three months ended March 31, 2020, EQM made capital contributions of approximately $45 million to the MVP Joint Venture for the MVP project. For the remainder of 2020, EQM expects to make capital contributions of approximately $550 million to $600 million to the MVP Joint Venture for purposes of the MVP. The MVP Joint Venture has secured a total of 2.0 Bcf per day of firm capacity commitments at 20-year terms and additional shippers have expressed interest in the MVP project. The MVP Joint Venture is evaluating an expansion opportunity that could add approximately 0.5 Bcf per day of capacity through the installation of incremental compression and is also evaluating other future pipeline extension projects.
|
|
•
|
Wellhead Gathering Expansion and Hammerhead Projects. During the three months ended March 31, 2020, EQM invested approximately $104 million in gathering expansion projects. For the remainder of 2020, EQM expects to invest approximately $300 million in gathering expansion projects (inclusive of expected capital expenditures related to the noncontrolling interest in Eureka Midstream). The expansion projects include infrastructure expansion of core development areas in the Marcellus and Utica Shales in southwestern Pennsylvania, eastern Ohio and northern West Virginia for EQT, Range Resources Corporation (Range Resources) and other producers, including the Hammerhead project. The Hammerhead project is a 1.6 Bcf per day gathering header pipeline that is primarily designed to connect natural gas produced in Pennsylvania and West Virginia to the MVP, is supported by a 20-year term, 1.2 Bcf per day, firm capacity commitment from EQT and is expected to cost approximately $555 million, of which approximately $490 million had been spent through March 31, 2020. For the remainder of 2020, EQM expects to invest approximately $30 million in the Hammerhead project. The Hammerhead project is expected to become operational in the second quarter of 2020 and will provide interruptible service until the MVP is placed in-service, at which time the firm capacity commitment will begin.
|
|
•
|
MVP Southgate Project. In April 2018, the MVP Joint Venture announced the MVP Southgate project, a proposed 75-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. The MVP Southgate project is backed by a 300 MMcf per day firm capacity commitment from Dominion Energy North Carolina. As designed, the MVP Southgate project has expansion capabilities that could provide up to 900 MMcf per day of total capacity. The MVP Southgate project is estimated to cost a total of approximately $450 million to $500 million, which is expected to be spent primarily in 2021. EQM is expected to fund approximately $225 million of the overall project cost. During the three months ended March 31, 2020, no capital contributions were made by EQM to the MVP Joint Venture for the MVP Southgate project. For 2020, EQM expects to make capital contributions of approximately $15 million to the MVP Joint Venture for the MVP Southgate project. EQM will operate the MVP Southgate pipeline and, as of March 31, 2020, owned a 47.2% interest in the MVP Southgate project. The MVP Joint Venture submitted the MVP Southgate certificate application to the FERC in November 2018. The Final Environmental Impact Statement for the MVP Southgate project was issued on February 14, 2020. The schedule also identifies May 14, 2020 as the deadline for other agencies to act on other federal authorizations required for the project (the FERC, however, is not subject to this deadline). Subject to approval by the FERC and other regulatory agencies, the MVP Southgate project is expected to be placed in-service in 2021.
|
|
•
|
Transmission Expansion. During the three months ended March 31, 2020, EQM invested approximately $9 million in transmission expansion projects. For the remainder of 2020, EQM expects to invest approximately $40 million to $50 million in transmission expansion projects, primarily attributable to the Allegheny Valley Connector (AVC), the Equitrans, L.P. Expansion project (EEP), which is designed to provide north-to-south capacity on the mainline Equitrans, L.P. system, including for deliveries to the MVP, and power plant projects. A portion of EEP commenced operations with interruptible service in the third quarter of 2019. EEP provides capacity of approximately 600 MMcf per day and offers access to several markets through interconnects with Texas Eastern Transmission, Dominion Transmission and Columbia Gas Transmission. EEP will also provide
|
|
•
|
Water Expansion. During the three months ended March 31, 2020, EQM invested approximately $3 million in the expansion of its fresh water delivery infrastructure. For the remainder of 2020 EQM expects to invest approximately $10 million to $15 million in the expansion of its fresh water delivery infrastructure in Pennsylvania and Ohio.
|
|
|
Three Months Ended March 31,
|
||||||
|
|
2020
|
|
2019
|
||||
|
|
(Thousands)
|
||||||
|
Expansion capital expenditures (a)(b)
|
$
|
115,551
|
|
|
$
|
176,509
|
|
|
Maintenance capital expenditures (b)
|
10,177
|
|
|
9,428
|
|
||
|
Headquarters capital expenditures
|
1,876
|
|
|
3,396
|
|
||
|
Total capital expenditures (c)
|
$
|
127,604
|
|
|
$
|
189,333
|
|
|
(a)
|
Expansion capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
|
|
(b)
|
Includes approximately $11.3 million of expansion capital expenditures and $1.2 million of maintenance capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
|
|
(c)
|
The Company accrues capital expenditures when the capital work has been completed but the associated bills have not been paid. Accrued capital expenditures are excluded from the statements of consolidated cash flows until they are paid. See Note 5 to the consolidated financial statements.
|
|
|
EQM
|
||
|
|
Senior Notes
|
||
|
Rating Service
|
Rating
|
|
Outlook
|
|
Moody's
|
Ba2
|
|
Negative
|
|
S&P
|
BB
|
|
Stable
|
|
Fitch
|
BB
|
|
Negative
|
|
•
|
Sierra Club, et al. v. U.S. Army Corps of Engineers, et al., consolidated under Case No. 18-1173, Fourth Circuit Court of Appeals (Fourth Circuit). In February 2018, the Sierra Club filed a lawsuit in the Fourth Circuit against the U.S. Army Corps of Engineers (the U.S. Army Corps). The lawsuit challenges the verification by the Huntington District of the U.S. Army Corps that Nationwide Permit 12, which generally authorizes discharges of dredge or fill material into waters of the United States and the construction of pipelines across such waters under Section 404 of the Clean Water Act, could be utilized in the Huntington District (which covers all but the northernmost area of West Virginia) for the MVP project. The crux of Sierra Club's position was that the MVP Joint Venture, pursuant to its FERC license, planned to use a certain methodology (dry open cut creek crossing methodology) to construct the pipeline across streams in West Virginia that would take considerably longer than the 72 hours allowed for such activities pursuant to the terms of West Virginia's Clean Water Act Section 401 certification for Nationwide Permit 12. A three-judge panel of the Fourth Circuit agreed with the Sierra Club and on October 2, 2018, issued a preliminary order stopping the construction in West Virginia of that portion of the pipeline that is subject to Nationwide Permit 12. Following the issuance of the court's preliminary order, the U.S. Army Corps' Pittsburgh District (which had also verified use of Nationwide Permit 12 by MVP in the northern corner of West Virginia) suspended its verification that allowed the MVP Joint Venture to use Nationwide Permit 12 for stream and wetlands crossings in northern West Virginia. On November 27, 2018, the Fourth Circuit panel issued its final decision vacating the Huntington District's verification of the use of Nationwide Permit 12 in West Virginia. West Virginia subsequently revised its Section 401 certification for Nationwide Permit 12; however, unless and until the U.S. Army Corps' Huntington and Pittsburgh Districts re-verify the MVP Joint Venture's use of Nationwide Permit 12, or the MVP Joint Venture secures an individual Section 404
|
|
•
|
WVDEP Rulemaking Proceedings - Section 401 Nationwide Permit. On April 13, 2017, the West Virginia Department of Environmental Protection (WVDEP) issued a 401 Water Quality Certification for the U.S. Army Corps Nationwide Permits. In August 2018, the WVDEP initiated an administrative process to revise this certification and requested public comment to, among other things, specifically revise the 72-hour limit for stream crossings noted as problematic by the Fourth Circuit as well as other conditions. The WVDEP issued a new notice and comment period for further modifications of the 401 certification. On April 24, 2019, the WVDEP submitted the modification to the United States Environmental Protection Agency (the EPA) for approval (since the WVDEP is also required to obtain the EPA's agreement to the modified 401 certification) and provided notice to the U.S. Army Corps. The EPA's agreement to the WVDEP's modification of its water quality certification was received in August 2019 and, accordingly, the MVP Joint Venture anticipates that it will once again secure from the U.S. Army Corps Districts within West Virginia verification that its activities, including stream crossings, may proceed under Nationwide Permit 12 as re-certified by the WVDEP. The U.S. Army Corps approved the WVDEP's modification of its Nationwide Permit on January 24, 2020. The MVP Joint Venture submitted a new permit application on January 28, 2020 anticipating a permit decision in mid-2020. However, the timing of the decision may be affected by the decision in Northern Plains Resource Council, outlined below. Further, the MVP Joint Venture cannot guarantee that the WVDEP's action will not be challenged or that the U.S. Army Corps Districts will act promptly or be deemed to have acted properly if challenged, in which case reverification may be further delayed.
|
|
•
|
Sierra Club, et al. v. U.S. Forest Service, et al., consolidated under Case No. 17-2399, Fourth Circuit Court of Appeals. In a different Fourth Circuit appeal filed in December 2017, the Sierra Club challenged a Bureau of Land Management (BLM) decision to grant a right-of-way to the MVP Joint Venture and a U.S. Forest Service (USFS) decision to amend its management plan to accommodate MVP, both of which affect the MVP's 3.6-mile segment in the Jefferson National Forest in Virginia. On July 27, 2018, agreeing in part with the Sierra Club, the Fourth Circuit vacated the BLM and USFS decisions, finding fault with the USFS' analysis of erosion and sedimentation effects and the BLM's analysis of the practicality of alternate routes. On August 3, 2018, citing the court's vacatur and remand, the FERC issued a stop work order for the entire pipeline pending the agency actions on remand. The FERC modified its stop work order on August 29, 2018 to allow work to continue on all but approximately 25 miles of the project. On October 10, 2018, the Fourth Circuit granted a petition for rehearing filed by the MVP Joint Venture for the limited purpose of clarifying that the July 27, 2018 order did not vacate the portion of the BLM's Record of Decision authorizing a right-of-way and temporary use permit for MVP to cross the Weston and Gauley Bridge Turnpike Trail in Braxton County, West Virginia. On October 15, 2018, the MVP Joint Venture filed with the FERC a request to further modify the August 3, 2018 stop work order to allow the MVP Joint Venture to complete the bore and install the pipeline under the Weston and Gauley Bridge Turnpike Trail. On October 24, 2018, the FERC granted the MVP Joint Venture's request to further modify the stop work order and authorize construction. However, work on the 3.6-mile segment in the Jefferson National Forest must await a revised authorization, which the MVP Joint Venture is working to obtain.
|
|
•
|
Challenges to FERC Certificate, Court of Appeals for the District of Columbia Circuit (DC Circuit). Multiple parties have sought judicial review of the FERC's order issuing a certificate of convenience and necessity to the MVP Joint Venture and/or the exercise by the MVP Joint Venture of eminent domain authority. On February 19, 2019, the DC Circuit issued an order rejecting multiple consolidated petitions seeking direct review of the FERC order under the Natural Gas Act and certain challenges to the exercise by the MVP Joint Venture of eminent domain authority in Appalachian Voices, et al. v. FERC, et al., consolidated under Case No. 17-1271. No petitions for rehearing or
|
|
•
|
Mountain Valley Pipeline, LLC v. 6.56 Acres of Land et al., Case No. 18-1159, Fourth Circuit Court of Appeals. Several landowners filed challenges to the condemnation proceedings by which the MVP Joint Venture obtained access to their property in various U.S. District Courts. In each case, the district court found that the MVP Joint Venture was entitled to immediate possession of the easements, and the landowners appealed to the Fourth Circuit. The Fourth Circuit consolidated these cases and issued two opinions in 2019, one granting the MVP Joint Venture immediate access for construction of the pipeline and the other finding that the MVP Joint Venture did not have to condemn the interest of coal owners and that coal owners are not entitled to assert claims in the condemnation proceedings for lost coal on tracts for which they do not own a surface interest being condemned. A group of landowners filed a writ of certiorari with the United States Supreme Court regarding the Fourth Circuit’s ruling on immediate access which was denied on October 7, 2019. District court trials on just compensation are ongoing.
|
|
•
|
Greenbrier River Watershed Ass’n v. WVDEP, Circuit Court of Summers County, West Virginia. In August 2017, the Greenbrier River Watershed Association appealed the MVP Joint Venture's Natural Stream Preservation Act Permit obtained from the West Virginia Environmental Quality Board (WVEQB) for the Greenbrier River crossing. Petitioners alleged that the issuance of the permit failed to comply with West Virginia's Water Quality Standards for turbidity and sedimentation. The WVEQB dismissed the appeal in June 2018. In July 2018, the Greenbrier River Watershed Association appealed the decision to the Circuit Court of Summers County, asking the court to remand the permit with instructions to impose state-designated construction windows and pre- and post-construction monitoring requirements as well as a reversal of the WVEQB's decision that the permit was lawful. On September 18, 2018, the Circuit Court granted a stay. A hearing on the merits was held on October 23, 2018. The court has not yet issued a decision. In the event of an adverse decision, the MVP Joint Venture would appeal or work with the WVDEP to attempt to resolve the issues identified by the court.
|
|
•
|
Sierra Club et al. v. U.S. Dep’t of Interior et al., Case No. 18-1082, Fourth Circuit Court of Appeals. On August 6, 2018, the Fourth Circuit held that the National Park Service (NPS) acted arbitrarily and capriciously in granting the ACP a right-of-way permit across the Blue Ridge Parkway. Specifically, the Fourth Circuit found that the permit cited the wrong source of legal authority and the NPS failed to make a “threshold determination that granting the right-of-way is ‘not inconsistent with the use of such lands for parkway purposes’ and the overall National Park System to which it belongs.” Even though the MVP Joint Venture is not named in the ACP litigation, the MVP route crosses the Blue Ridge Parkway roughly midway between mileposts 246 and 247 of the pipeline route and implicates some of the same deficiencies addressed by the court. The MVP Joint Venture elected to request that the NPS temporarily suspend its Blue Ridge Parkway permit until the deficiencies identified in the ACP litigation are resolved. While the MVP and ACP rights-of-way share some of the same regulatory issues, unlike ACP the portion of the MVP pipeline that crosses the Blue Ridge Parkway is completely constructed. NPS granted the MVP Joint Venture the ability to continue final restoration efforts on that portion of the pipeline during the course of the suspended permit. The MVP Joint Venture is working with the NPS to address MVP-related right-of-way issues.
|
|
•
|
Wild Virginia et al. v. United States Department of the Interior; Case No. 19-1866, Fourth Circuit Court of Appeals. Petitioners filed a petition in the Fourth Circuit to challenge MVP’s Biological Opinion and Incidental Take Statement issued by the Department of the Interior’s Fish and Wildlife Service (FWS) which was approved in November 2017 (BiOp). Petitioners also requested a stay of the application of MVP’s BiOp during the pendency of the court case. FWS subsequently requested that the court approve a stay of the litigation until January 11, 2020. On August 15, 2019,
|
|
•
|
Cowpasture River Preservation Association, et al. v. U.S. Forest Service, et al., Case No. 18-1144, Fourth Circuit Court of Appeals. On December 13, 2018, in an unrelated case involving the ACP, the Fourth Circuit held that the USFS, which is part of the Department of Agriculture, lacked the authority to grant rights-of-way for oil and gas pipelines to cross the Appalachian Trail. Although the MVP Joint Venture obtained its grant to cross the Appalachian Trail from the BLM, a part of the Department of Interior, the rationale of the Fourth Circuit's opinion could apply to the BLM as well. On February 25, 2019, the Fourth Circuit denied ACP’s petition for en banc rehearing. The federal government and ACP filed petitions to the United States Supreme Court on June 26, 2019 seeking judicial review of the Fourth Circuit's decision. On October 4, 2019, the Supreme Court formally accepted the Petitioners' writ of certiorari. The oral arguments occurred on February 24, 2020. Based on general court practice, the Company anticipates that the Supreme Court will issue its decision before the end of the 2019-2020 term in June 2020. The MVP Joint Venture is continuing to pursue multiple options to address the Appalachian Trail issue, including but not limited to, administrative, regulatory and legislative options.
|
|
•
|
Grand Jury Subpoena. On January 7, 2019, the MVP Joint Venture received a letter from the U.S. Attorney's Office for the Western District of Virginia stating that it and the EPA are investigating potential criminal and/or civil violations of the Clean Water Act and other federal statutes as they relate to the construction of the MVP. The January 7, 2019 letter requested that the MVP Joint Venture and its members, contractors, suppliers and other entities involved in the construction of the MVP preserve documents related to the MVP generated from September 1, 2018 to the present. In a telephone call on February 4, 2019, the U.S. Attorney's Office confirmed that it has opened a criminal investigation. On February 11, 2019, the MVP Joint Venture received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Virginia requesting certain documents related to the MVP from August 1, 2018 to the present. The MVP Joint Venture is complying with the letter and subpoena but cannot predict whether any action will ultimately be brought by the U.S. Attorney's Office or what the outcome of such an action would be. The MVP Joint Venture began a rolling production of documents responsive to the subpoena after the U.S. Attorney’s office narrowed its subpoena inquiry to five farms in Virginia containing twenty streams or wetlands.
|
|
•
|
Northern Plains Resource Council, et al. v. Army Corps of Engineers., Case no. CV-19-44-GF-BMM, U.S. District Court for the District of Montana. In Northern Plains Resource Council, et al. v. Army Corps of Engineers, Judge Brian Morris of the U.S. District Court for the District of Montana found that the U.S. Army Corp was required to conduct Endangered Species Act (ESA) consultations with federal wildlife agencies when it last revised Nationwide Permit 12 in 2017, the general permit governing dredge-and-fill activities for pipeline and other utility line construction projects. The Court enjoined the U.S. Army Corps from authorizing any dredge or fill activities under Nationwide Permit 12 in Montana. Based on these findings, the order vacated Nationwide Permit 12, remanded it to the U.S. Army Corps to consult with the applicable federal wildlife agencies, and prohibited the U.S. Army Corps from authorizing projects under Nationwide Permit 12 until consultation is complete. Following the order, the U.S. Army Corps suspended Nationwide Permit 12 which could cause the U.S. Army Corps to decline to verify future construction activities submitted under Nationwide Permit 12 pending further court action. On April 28, 2020, the Court denied the Department of Justice's motion to stay the vacatur pending appeal but granted a motion for expedited briefing. On May 11, 2020, Judge Morris denied the U.S. Army Corps' motion to stay the order pending appeal, and narrowed the original opinion's scope to allow use of Nationwide Permit 12 on non-pipeline construction activities and routine maintenance, inspection and repair activities on existing Nationwide Permit 12 projects. The Department of Justice appealed the decision to, and requested an administrative stay from, the Ninth Circuit Court of Appeals on May 13, 2020. Such actions will take time and outcomes remain uncertain. If the ruling is applied nationwide, Equitrans Midstream expects a delay in obtaining approval of the MVP Joint Venture's pending Nationwide Permit 12 permits which were submitted to the U.S. Army Corps in January 2020.
|
|
•
|
EQM’s customers may be adversely affected if the outbreak results in an economic downturn or recession and/or causes declines in the price of, demand for and production of natural gas or prevents such customers (particularly EQM’s largest customer) from conducting, or curtails their ability to conduct, field operations and continue natural gas production, which could reduce demand for EQM’s services, negatively affect throughput on EQM’s systems or heighten EQM’s exposure to risk of loss resulting from the nonpayment and/or nonperformance of its customers;
|
|
•
|
our and EQM’s operations may be disrupted or become less efficient if a significant portion of our employees or contractors are unavailable due to illness or if EQM’s field operations, including in respect of projects in development, were to be suspended or temporarily shut down or restricted due to outbreak control measures;
|
|
•
|
legal and regulatory processes relating to EQM’s projects in development, including the MVP project, may be disrupted or slowed, such as if relevant governmental authorities suffer reduced workforce availability due to the virus; and
|
|
•
|
resultant disruption to, and instability in, financial and credit markets may adversely affect our and EQM’s access to capital, leverage and liquidity levels and credit ratings, as well as EQM’s counterparties’ access to capital, business continuity, financial stability, leverage and liquidity levels and credit ratings (which could heighten counterparty credit risk to which EQM is exposed in the ordinary course of its business).
|
|
•
|
The Equitrans Midstream Preferred Shares are a new class of security that will rank pari passu with any other outstanding class or series of our preferred stock and senior to all shares of our common stock with respect to dividend rights and rights upon liquidation.
|
|
•
|
The Equitrans Midstream Preferred Shares will vote on an as-converted basis with our common stock and will have certain other class voting rights with respect to any amendment to our Certificate of Designations relating to the Equitrans Midstream Preferred Shares or our Amended and Restated Articles of Incorporation that would be adverse (other than in a de minimis manner) to any of the rights, preferences or privileges of the Equitrans Midstream Preferred Shares.
|
|
•
|
The holders of the Equitrans Midstream Preferred Shares will receive cumulative quarterly dividends at a rate per annum of 9.75% for each quarter ending on or before March 31, 2024, and thereafter the quarterly dividends at a rate per annum equal to the sum of (i) three-month LIBOR as of a LIBOR Determination Date (as defined in the Certificate of Designations) in respect of the applicable quarter and (ii) 8.15%; provided that the rate per annum in respect of periods after March 31, 2024 shall not be less than 10.50%.
|
|
•
|
We will not be entitled to pay any dividends on any junior securities, including any shares of our common stock, prior to paying the quarterly dividends payable to the Equitrans Midstream Preferred Shares, including any previously accrued and unpaid dividends.
|
|
•
|
Each holder of the Equitrans Midstream Preferred Shares may elect to convert all or any portion of the Equitrans Midstream Preferred Shares owned by it into our common stock initially on a one-for-one basis, subject to certain anti-dilution adjustments and an adjustment for any dividends that have accrued but not been paid when due and partial period dividends (referred to as the “conversion rate”), at any time (but not more often than once per fiscal quarter) after April 10, 2021 (or earlier liquidation, dissolution or winding up of us), provided that any conversion involves an aggregate number of Equitrans Midstream Preferred Shares of at least $20.0 million (calculated based on the closing price of our common stock on the trading day preceding notice of the conversion) or such lesser amount if such conversion relates to all of a holder’s remaining Equitrans Midstream Preferred Shares or if such conversion is approved by our Board of Directors.
|
|
•
|
So long as the holders of Equitrans Midstream Preferred Shares have not elected to convert all of their Equitrans Midstream Preferred Shares into our common stock, we may elect to convert all of the Equitrans Midstream Preferred Shares for our common stock at any time after April 10, 2021 if (i) our common stock is listed for, or admitted to, trading on a national securities exchange, (ii) the Equitrans Midstream Preferred Share Issue Price for the 20 consecutive trading days immediately preceding notice of the conversion, (iii) the average daily trading volume of our common stock on the national securities exchange on which our common stock is listed for, or admitted to, trading exceeds 1,000,000 shares of our common stock (subject to certain adjustments) for the 20 consecutive trading days immediately preceding notice of the conversion, (iv) we have an effective registration statement on file with the SEC covering resales of our common stock to be received by such holders upon any such conversion and (v) we have paid all accrued quarterly dividends in cash to the holders.
|
|
•
|
Upon certain events involving a Change of Control (as defined in the Certificate of Designations) in which more than 90% of the consideration payable to us, or to the holders of our common stock is payable in cash, the Equitrans Midstream Preferred Shares will automatically convert into our common stock at a conversion ratio equal to the greater of (i) the quotient of (a) the sum of (x) the Equitrans Midstream Preferred Share Issue Price plus (y) any accrued and unpaid dividends on such date, including any partial period dividends with respect to the Equitrans Midstream Preferred Shares on such date, divided by (b) the Equitrans Midstream Preferred Share Issue Price and (ii) the quotient of (a) the sum of (x) (1) the Equitrans Midstream Preferred Share Issue Price multiplied by (2) 110% plus (y) any accrued and unpaid dividends on such date, including any partial period dividends, with respect to the Equitrans Midstream Preferred Shares on such date, divided by (b) the volume weighted average price of the shares of our common stock for the 30-day period ending immediately prior to the execution of definitive documentation relating to the Change of Control.
|
|
•
|
In connection with other Change of Control events that do not satisfy the 90% cash consideration threshold described above, in addition to certain other conditions, each holder of Equitrans Midstream Preferred Shares may elect to (a) convert all, but not less than all, of its Equitrans Midstream Preferred Shares into our common stock at the then applicable conversion rate, (b) if we are not the surviving entity (or if we are the surviving entity, but our common
|
|
•
|
At any time on or after January 1, 2024, we will have the right, subject to applicable law, to redeem the Equitrans Midstream Preferred Shares, in whole or in part, by paying cash for each Equitrans Midstream Preferred Share to be redeemed in an amount equal to the greater of (a) the sum of (i)(1) the Equitrans Midstream Preferred Share Issue Price multiplied by (2) 110%, plus (ii) any accrued and unpaid dividends, including any partial period dividends, with respect to the Equitrans Midstream Preferred Shares on such date and (b) the amount the holder of such Equitrans Midstream Preferred Share would receive if such holder had converted such Equitrans Midstream Preferred Share into shares of our common stock at the then-applicable conversion ratio and we liquidated immediately thereafter.
|
|
•
|
Pursuant to the terms of the Restructuring Agreement, in connection with the closing of the Restructuring, we have agreed to enter into the Registration Rights Agreement pursuant to which, among other things, we will give the Investors certain rights to require us to file and maintain one or more registration statements with respect to the resale of the Equitrans Midstream Preferred Shares and the shares of our common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares, and which, upon request by certain Investors party to the Registration Rights Agreement, will require us to initiate underwritten offerings for the Equitrans Midstream Preferred Shares and the shares of our common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares and use our best efforts to cause the Equitrans Midstream Preferred Shares to be listed on the securities exchange on which the shares of our common stock are then listed.
|
|
Period
|
|
Total number of shares purchased (a)
|
|
Average price paid per share
|
|
Total number of shares purchased as part of publicly announced plans or programs
|
|
Approximate dollar value of shares that may yet be purchased under plans or programs
|
||||||
|
January 2020 (January 1 - January 31)
|
|
986
|
|
|
$
|
11.06
|
|
|
—
|
|
|
$
|
—
|
|
|
February 2020 (February 1 - February 29)
|
|
24,762
|
|
|
11.57
|
|
|
—
|
|
|
—
|
|
||
|
March 2020 (March 1 - March 31) (b)
|
|
25,303,440
|
|
|
6.25
|
|
|
—
|
|
|
—
|
|
||
|
Total
|
|
25,329,188
|
|
|
$
|
6.26
|
|
|
—
|
|
|
$
|
—
|
|
|
(a)
|
The number of shares withheld by the Company to pay taxes upon vesting of restricted stock included 986 shares, 24,762 shares and 3,688 shares in January 2020, February 2020 and March 2020, respectively.
|
|
(b)
|
Includes 25,299,752 shares purchased by the Company pursuant to the Share Purchase Agreements.
|
|
Exhibit No.
|
|
|
Document Description
|
|
Method of Filing
|
|
|
|
Agreement and Plan of Merger, dated as of February 26, 2020, by and among Equitrans Midstream Corporation, EQM LP Corporation, LS Merger Sub, LLC, EQM Midstream Partners, LP and EQGP Services, LLC.
|
|
Incorporated herein by reference to Exhibit 2.1 to EQM Midstream Partners, LP's Form 8-K (#001-35574) filed on February 28, 2020.
|
|
|
|
|
Second Amendment to Fourth Amended and Restated Agreement of Limited Partnership of EQM Midstream Partners, LP, dated as of February 26, 2020.
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Incorporated herein by reference to Exhibit 3.1 to EQM Midstream Partners, LP's Form 8-K (#001-35574) filed on February 28, 2020.
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Second Amended and Restated Limited Liability Company Agreement of EQGP Services, LLC, dated as of October 12, 2018.
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Incorporated herein by reference to Exhibit 3.5 to EQM Midstream Partners, LP’s Form 8-K (#001-35574) filed on February 22, 2019.
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Third Amendment to Fourth Amended and Restated Agreement of Limited Partnership of EQM Midstream Partners, LP, dated as of April 29, 2020.
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Incorporated herein by reference to Exhibit 3.1 to Form 8-K (#001-35574) filed by EQM Midstream Partners, LP on April 29, 2020.
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Preferred Restructuring Agreement, dated as of February 26, 2020, by and among Equitrans Midstream Corporation, EQM Midstream Partners, LP and the Investors party thereto.
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Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-38629) filed on February 28, 2020.
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Loan Agreement, dated as of March 3, 2020, by and between EQM Midstream Partners, LP and Equitrans Midstream Corporation.
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Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-38629) filed on March 6, 2020.
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Promissory Note, dated as of March 5, 2020, by and between Equitrans Midstream Corporation and EQM Midstream Partners, LP (as assignee of EQT Corporation).
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Incorporated herein by reference to Exhibit 10.2 to Form 8-K (#001-38629) filed on March 6, 2020.
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Gas Gathering and Compression Agreement, dated as of February 26, 2020, by and among EQT Corporation, EQT Production Company, Rice Drilling B LLC, EQT Energy, LLC and EQM Gathering Opco, LLC.
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Incorporated herein by reference to Exhibit 10.4 to Form 8-K/A (#001-38629) filed on March 13, 2020.
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Credit Letter Agreement, dated as of February 26, 2020, by and between EQM Midstream Partners, LP and EQT Corporation.
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Filed herewith as Exhibit 10.5.
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Water Services Letter Agreement, dated as of February 26, 2020, by and among EQT Production Company, Rice Drilling B LLC, EQM Gathering Opco, LLC and Equitrans Water Services (PA) LLC.
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Incorporated herein by reference to Exhibit 10.6 to Form 8-K/A (#001-38629) filed on March 13, 2020.
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First Amendment to Third Amended and Restated Credit Agreement, dated as of March 30, 2020, by and among EQM Midstream Partners, LP, the lender parties thereto and Wells Fargo Bank, National Association, as administrative agent.
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Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-38629) filed on March 30, 2020.
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First Amendment to Term Loan Agreement, dated as of March 30, 2020, by and among EQM Midstream Partners, LP, the lender parties thereto and Toronto Dominion (Texas) LLC, as administrative agent.
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Incorporated herein by reference to Exhibit 10.2 to Form 8-K (#001-38629) filed on March 30, 2020.
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Share Purchase Agreement, dated as of February 26, 2020, by and between Equitrans Midstream Corporation and EQT Corporation.
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Incorporated herein by reference to Exhibit 10.2 to Form 8-K (#001-38629) filed on February 28, 2020.
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Share Purchase Agreement, dated as of February 26, 2020, by and between Equitrans Midstream Corporation and EQT Corporation.
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Incorporated herein by reference to Exhibit 10.3 to Form 8-K (#001-38629) filed on February 28, 2020.
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First Amendment to Third Amended and Restated Limited Liability Company Agreement of Mountain Valley Pipeline, LLC, dated as of February 5, 2020, by and among MVP Holdco, LLC, US Marcellus Gas Infrastructure, LLC, WGL Midstream, Inc., Con Edison Gas Pipeline and Storage, LLC and Mountain Valley Pipeline, LLC.
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Incorporated hereby by reference to Exhibit 10.21(b) to Form 10-K (#001-38629) for the year ended December 31, 2019.
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Transportation Service Agreement Applicable to Firm Transportation Service Under Rate Schedule FTS, Contract No. EQTR19837-1296, dated as of January 8, 2016 and amended through January 9, 2020, by and between Equitrans, L.P. and EQT Energy, LLC.
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|
Incorporated hereby by reference to Exhibit 10.37 to Form 10-K (#001-38629) for the year ended December 31, 2019.
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Equitrans Midstream Corporation 2020 Performance Share Unit Program.
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Filed herewith as Exhibit 10.13.
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Form of Participant Award Agreement under 2020 Performance Share Unit Program.
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Filed herewith as Exhibit 10.14.
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Form of Equitrans Midstream Corporation Restricted Stock Award Agreement (2020 Awards).
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Filed herewith as Exhibit 10.15.
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Amended and Restated Equitrans Midstream Corporation Short-Term Incentive Plan.
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|
Filed herewith as Exhibit 10.16.
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Confidentiality, Non-Solicitation and Change of Control Agreement, dated as of April 14, 2020, by and between Equitrans Midstream Corporation and Brian P. Pietrandrea.
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Filed herewith as Exhibit 10.17.
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Equitrans Midstream Corporation Amended and Restated Directors’ Deferred Compensation Plan.
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|
Filed herewith as Exhibit 10.18.
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Rule 13(a)-14(a) Certification of Principal Executive Officer.
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Filed herewith as Exhibit 31.1.
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Rule 13(a)-14(a) Certification of Principal Financial Officer.
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Filed herewith as Exhibit 31.2.
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Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.
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|
Furnished herewith as Exhibit 32.
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101
|
|
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Inline Interactive Data File.
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|
Filed herewith as Exhibit 101.
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|
104
|
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
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|
Filed herewith as Exhibit 104.
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Equitrans Midstream Corporation
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|
|
|
(Registrant)
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By:
|
/s/ Kirk R. Oliver
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|
|
|
Kirk R. Oliver
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|
|
|
Senior Vice President and Chief Financial Officer
|
|
Contract Id
|
Type
|
Effective Date
|
System
|
EQT Entity
|
Authority for Requesting Further Credit Support
|
|
LCW1011
(651)
|
FTS
|
01/12/12
|
Sunrise
|
EQT Energy LLC (guarantor: EQT Corp)
|
Credit Agreement 10/1/2011 §3
Tariff §6.27 [3(c)] (as to notice)
|
|
LCW1043 (1296)
|
FTS
|
10/1/16
|
OVC
|
EQT Energy LLC (guarantor: EQT Corp)
|
Credit Agreement 7/23/14 §3
Tariff §6.27 [3(c)] (as to notice)
|
|
CW2247445 (1462)
|
FTS
|
11/1/18
|
Redhook
|
EQT Energy LLC (guarantor: EQT Corp)
|
Credit Agreement 10/26/15 §3
Tariff §6.27 [3(c)] (as to notice)
|
|
CW2254833
(9707)
|
GGA
|
2/1/2018
|
Hammerhead
|
EQT Energy, LLC
|
Article 9
|
|
10025
|
GGA
|
11/19/2008
|
Equitrans Gathering
|
EQT Energy, LLC
|
Article XV
|
|
EQM Gathering OPCO WSA State Gamelands (CW2269115)
|
WSA
|
12/10/2018
|
Southwestern Pennsylvania Water Authority
|
EQT Production Company
|
Section 12.5
|
|
EQM Gathering WSA Kevech Smith Haywood (LCW9510)
|
WSA
|
12/3/2018
|
Washington and Greene Counties
|
EQT Production Company
|
Section 13
|
|
EQM Gathering OPCO WSA Steelhead (CW2269117)
|
WSA
|
12/3/2018
|
Southwestern Pennsylvania Water Authority
|
EQT Production Company
|
Section 12.5
|
|
EQM Gathering OPCO WSA Claysville (CW2262396)
|
WSA
|
7/13/2018
|
Southwestern Pennsylvania Water Authority
|
EQT Production Company
|
Section 12.5
|
|
Contract Id
|
Type
|
Effective Date
|
System
|
EQT Entity
|
Authority for Requesting Further Credit Support
|
|
CW2246988
(9705G)
|
GGA
|
2/12/2018
|
Marianna
|
EQT Energy LLC & EQT Production Company
|
Article 9
|
|
CW2274905 (9737G)
|
GGA
|
2/17/2012
|
Eureka
|
EQT Production
Company
|
Section 13.1
|
|
SEIF/US Energy GGA
(9718R)
|
GGA
|
11/25/2015
|
Whipkey
|
Rice Drilling B LLC
|
Section 13.6
|
|
(a)
|
Termination After Change of Control. With respect to any Participant’s award under the Program, and notwithstanding Section 9 of the 2018 Plan, in the event that following a Change of Control that is not a Qualifying Change of Control, (i) such Participant’s employment is terminated without Cause (as defined below), or (ii) such Participant resigns for Good Reason (as defined below), in each case prior to the second anniversary of the effective date of the Change of Control, the Participant shall (A) retain all of his or her Earned Performance Share Units, contingent upon the Participant executing and not revoking a full release of claims in a form acceptable to the Company within 30 days of his or her termination or resignation, as applicable, and (B) shall be eligible to earn any Performance Share Units not previously forfeited based on the Company’s achievement of the Relative TSR performance conditions set forth in Section 5 for the Performance Period and each uncompleted Sub Period (as applicable). A Participant’s Total Earned Performance Share Units under this paragraph shall be paid at the conclusion of the Performance Period according to Section 6.
|
|
(b)
|
Qualifying Change of Control. With respect to any Participant’s award under the Program, and notwithstanding Section 9 of the 2018 Plan, in the event of a Qualifying Change of Control, if such Qualifying Change of Control occurs after the completion of one or more Sub Periods, then the Earned Performance Share Units for each completed Sub Period shall be determined in accordance with Section 5 based on actual performance for each such completed Sub Period and shall be paid in accordance with Section 6.
|
|
(c)
|
Voluntary Termination With Continued Board Service. If a Participant’s employment is terminated voluntarily, including a Participant’s Retirement (as defined below), and the Participant remains on the board of directors of the Company or any Affiliate of the Company whose equity is publicly traded on the New York Stock Exchange or the NASDAQ Stock Market following such termination of employment, the Participant shall retain all of his or her Performance Share Units, contingent upon achievement of the Relative TSR performance conditions set forth in Section 5 for the Performance Period and each Sub Period (as applicable), for as long as the Participant remains on such board of directors, in which case any references herein to such Participant’s employment shall be deemed to include his or her continued service on such board. Except as set forth in the preceding sentence and subsections (a) and (e) of this Section 7, a Participant’s Performance Share Units shall be forfeited upon his or her resignation as an employee of the Company or an Affiliate.
|
|
(d)
|
Death or Disability. Except as provided in subsections (a) and (b) above, if the termination is due to the Participant’s death or Disability, the Participant (or the Participant’s estate or beneficiary) will retain all of his or her Performance Share Units, contingent upon the Participant (or the Participant’s estate or beneficiary) executing and not revoking a full release of claims in a form acceptable to the Company within 30 days of his or her death.
|
|
(e)
|
Retirement. Except as provided in subsections (a), (b) or (c) above, if the termination is due to the Participant’s Retirement, the Participant will retain a portion of his or her Performance Share Units applicable to the Performance Period and each Sub Period as of the date of the Participant’s Retirement (the number of Performance Share Units being retained is defined below as the “Pro Rata Amount”), contingent upon (A) the Participant executing and not revoking a full
|
|
(f)
|
Other Termination. If a Participant’s employment is terminated for any reason other than those described in subsections (a) – (e) above, the Participant’s Performance Share Units shall be forfeited. For purposes of clarity, in the event a Participant’s employment is terminated other than for performance reasons, the Committee may determine that all or a portion of the Performance Share Units shall be retained upon such Participant’s termination.
|
|
•
|
Determining the extent to which the Relative TSR performance conditions have been achieved prior to any payments under the Program,
|
|
•
|
Ensuring that the Program is administered in accordance with its provisions and the 2018 Plan,
|
|
•
|
Approving Program Participants,
|
|
•
|
Authorizing Performance Share Unit awards to Participants,
|
|
•
|
Adjusting Performance Share Unit awards to account for extraordinary events,
|
|
•
|
Serving as the final arbiter of any disagreement between Program Participants, Company management, Program administrators, and any other interested parties to the Program, and
|
|
•
|
Maintaining final authority to amend, modify or terminate the Program at any time.
|
|
|
Threshold
|
Target
|
Maximum
|
|
Performance Goal
|
At 25th percentile
|
50th percentile
|
At or above 75th percentile
|
|
Payout Factor
|
50%
|
100%
|
200%
|
|
Antero Midstream Corporation
|
|
Cheniere Energy Inc.
|
|
Crestwood Equity Partners LP
|
|
DCP Midstream LP
|
|
Enable Midstream Partners LP
|
|
EnLink Midstream LLC
|
|
Kinder Morgan Inc.
|
|
Magellan Midstream Partners LP
|
|
ONEOK Inc.
|
|
Targa Resources Corp
|
|
The Williams Companies Inc.
|
|
Western Midstream Partners LP
|
|
(a)
|
“Cause” means: (i) Grantee’s conviction of a felony, a crime of moral turpitude or fraud or Grantee’s having committed fraud, misappropriation or embezzlement in connection with the performance of Grantee’s duties; (ii) Grantee’s willful and repeated failures to substantially perform assigned duties; or (iii) Grantee’s violation of any provision of a written employment-related agreement between Grantee and the Company or express significant policies of the Company. If the Company terminates Grantee’s employment for Cause, the Company shall give Grantee written notice setting forth the reason for Grantee’s termination not later than 30 days after such termination.
|
|
(b)
|
“Good Reason” means Grantee’s resignation within 90 days after: (i) a reduction in Grantee’s base salary of 10% or more (unless the reduction is applicable to all similarly situated employees); (ii) a reduction in such Grantee’s annual short-term bonus target by the greater of (A) 10% and (B) 5
|
|
(c)
|
“Pro Rata Amount” is defined in Section 4 of this Agreement.
|
|
(d)
|
“Qualifying Change of Control” means a Change of Control (as then defined in the Plan) unless (i) Grantee’s Restricted Shares are assumed by the surviving entity of the Change of Control (or otherwise equitably converted or substituted in connection with the Change of Control in a manner approved by the Committee) or (ii) the Company is the surviving entity of the Change of Control.
|
|
(e)
|
“Retirement” means Grantee’s voluntary termination of employment with the Company and its Affiliates after Grantee has (i) a length of service of at least ten (10) years and (ii) a combined age and length of service equal to at least sixty (60) years. Grantee’s length of service will be determined by the Company, in its sole discretion, based on the Company’s internal payroll records. For purposes of this Section 1(e), service with EQT Corporation prior to November 13, 2018 shall be treated the same as service with the Company and its Affiliates. The termination of Grantee’s employment by the Company shall not qualify as Retirement.
|
|
(f)
|
“Restricted Period” means the period prior to the Vesting Date when the Restricted Shares are subject to the restrictions imposed under Section 2.
|
|
(g)
|
“Restricted Shares” means the number of restricted shares awarded to Grantee on the Grant Date as designated in the first paragraph of this Agreement.
|
|
(h)
|
“Vesting Commencement Date” means January 1, 2020.
|
|
(i)
|
“Vesting Date” is defined in Section 3 of this Agreement.
|
|
(a)
|
Notwithstanding Section 9 of the Plan, in the event that following a Change of Control that is not a Qualifying Change of Control, (i) Grantee’s employment is terminated without Cause or (ii) Grantee resigns for Good Reason, in each case prior to the second anniversary of the effective date of the Change of Control, the Restricted Shares will vest, each provided Grantee has continued in the employment of the Company and/or its Affiliates through such date.
|
|
(b)
|
Except as provided in Section 4(a) above, if Grantee’s termination is due to Grantee’s death or Disability, 100% of the Restricted Shares will vest, provided Grantee has continued in the employment of the Company and/or its Affiliates through such date.
|
|
(c)
|
Except as provided in Section 4(a) above, if Grantee’s termination is due to Grantee’s Retirement, a pro rata portion of the Restricted Shares will vest (the number of Restricted Shares then vesting is defined as the “Pro Rata Amount”), provided Grantee has continued in the employment of the Company and/or its Affiliates through such date. The Pro Rata Amount shall equal the total number of Restricted Shares granted pursuant to this Agreement multiplied by a fraction, the numerator of which is the number of months of continuous employment with the Company and/or an Affiliate from the Vesting Commencement Date through the date of Grantee’s Retirement and the denominator of which is 36. When determining the Pro Rata Amount, Grantee shall be considered to have been employed with the Company and/or an Affiliate for a full calendar month so long as Grantee is employed by such entity for at least one day during such calendar month.
|
|
(d)
|
Except as may be otherwise provided under any written employment-related agreement with Grantee, if any, in the event Grantee’s employment terminates for any other reason at any time prior to the applicable Vesting Date, all of Grantee’s Restricted Shares will immediately be forfeited without further consideration or any act or action by Grantee. For purposes of clarity, in the event Grantee’s employment is terminated other than for performance reasons, the Committee may determine that all or a portion of the Restricted Shares shall vest upon Grantee’s termination.
|
|
(a)
|
Each Performance Period shall have specific metrics (the “Performance Metrics”). These Performance Metrics will support the business of the Company, or an affiliate of the Company, as applicable, and be based upon the specific performance measures established for the Performance Period.
|
|
(b)
|
The Performance Metrics for each Performance Period shall be determined in writing by the Committee; provided that in no event will Performance Metrics be established when the outcome of such Performance Metrics is no longer substantially uncertain.
|
|
(c)
|
The Performance Metrics determined by the Committee will be objectively determinable goals based upon one or more performance measures determined at the discretion of the Committee, including, by way of example but without limitation, the following:
|
|
•
|
earnings per share or unit
|
|
•
|
revenue
|
|
•
|
expenses
|
|
•
|
return on equity
|
|
•
|
return on total or invested capital
|
|
•
|
return on assets
|
|
•
|
earnings (such as net income, EBIT and similar measures)
|
|
•
|
cash flow and per share cash flow (such as EBITDA, after-tax cash flow, distributable cash flow, free cash flow, retained cash flow and similar measures)
|
|
•
|
share or unit price
|
|
•
|
debt reduction or leverage
|
|
•
|
gross margin
|
|
•
|
operating income
|
|
•
|
volumes metrics (such as volumes transported or processed and similar measures)
|
|
•
|
operating efficiency metrics (such as general and administrative (G&A) metrics, unit gathering, compression and water services expenses and other midstream efficiency measures, lost and unaccounted for gas metrics, compressor or processing downtime and similar measures)
|
|
•
|
construction efficiency metrics (such as timely completion, cost within budget and similar measures)
|
|
•
|
customer service measures (such as wait time, on-time service, calls answered and similar measures)
|
|
•
|
closing of a transaction
|
|
•
|
safety and environmental performance
|
|
•
|
total shareholder or unitholder return
|
|
(d)
|
The Performance Metrics may be based either on the performance of the Company, or an affiliate, branch, department or other portion thereof, for the applicable Performance Period and/or upon a comparison of such performance with the performance of a peer group of corporations and partnerships, prior Company performance or other comparative measure selected by the Committee before, at, or, subject to subsection (b) above, after the time of determining each Target Bonus (as defined in Section 6(a)) for the applicable Performance Period. Performance Metrics may be specified in absolute terms, on an adjusted basis, in percentages, or in terms of growth or reduction from period to period or growth or reduction rates over time, as well as measured relative to the performance of a group of comparator companies, or a published or special index, or a stock market index, that the Committee deems appropriate. Performance Metrics need not be based upon an increase or positive result under a business criterion and could include, for example, the maintenance of the status quo, the reduction of expenses or the limitation of economic losses (measured, in each case, by reference to a specific business criterion). Performance Metrics may, but need not, be determinable in conformance with generally accepted accounting principles.
|
|
(e)
|
When the Performance Metrics are determined by the Committee, the weighting assigned to, and the levels of achievement (e.g., Threshold, Target, Maximum) for, if any, each Performance Metric shall be specified. In addition, the Committee may specify that any determination of achievement of the Performance Metrics shall exclude or otherwise objectively adjust for any specified circumstance or event that occurs during the Performance Period, including, by way of example but without limitation, the following: (i) non-recurring, non-operational gains, losses and impairments (other than amounts attributable to the write-down, abandonment or disposition of assets never placed in service); (ii) the effect of changes in tax laws, accounting principles or other laws or provisions; and (iii) acquisitions or divestitures.
|
|
(a)
|
Subject to Section 10(a), a Participant’s target bonus is calculated by multiplying the Participant’s Target Incentive Percentage by (i) for exempt Participants, such Participant’s annualized base salary as of the first day of the applicable Performance Period, and (ii) for non-exempt Participants, such Participant’s total actual earnings during the applicable Performance Period (in each case, as applicable, “Target Bonus”).
|
|
(b)
|
A Participant’s award bonus (“Award Bonus”) is determined following the end of the applicable Performance Period. Award Bonuses for each Performance Period are calculated by multiplying (i) the Participant’s Target
|
|
(c)
|
The Committee shall have no discretion to increase any Award Bonus that would otherwise be payable based upon attainment of the Performance Metrics, but the Committee may in its discretion reduce or eliminate such Award Bonus (including in the event of the fatality of, or a serious injury to, a Company employee or contractor); provided, however, that the exercise of such negative discretion shall not be permitted to result in any increase in the amount of any Award Bonus payable to any other Participant. Notwithstanding the foregoing, the Committee shall have the discretion to designate an aggregate payment amount (a “Discretionary Pool”) that may be paid to any or all of the Participants in such amounts and to such Participants as determined by the CEO in his or her sole discretion; provided that, the Committee must approve any payment from the Discretionary Pool that is to be paid to a Designated Participant. In the event any payments are made from a Discretionary Pool, the timing of such payments shall be in accordance with the provisions of Section 6(e) or, if applicable, Section 9(d). For purposes of clarity, any payment to a Participant from the Discretionary Pool shall be in excess of the payment amount such Participant is entitled to based upon attainment of the Performance Goals under his or her award.
|
|
(d)
|
The maximum aggregate Award Bonus payable to any Participant for any calendar year is $5,000,000.
|
|
(e)
|
Except as provided in Section 7 of the Plan, Award Bonuses shall be paid in cash no later than 2½ months after the end of a Performance Period in which the right to payment is no longer subject to a substantial risk of forfeiture; provided, further, that the Committee has determined and certified in writing the extent to which the Performance Metrics have been attained and the Award Bonuses have been earned.
|
|
(a)
|
It is intended that nothing in this Plan shall cause the Participants in the Plan to be taxed currently under the Constructive Receipt or Economic Benefit Doctrines and as expressed in Sections 451 and 83 of the Internal Revenue Code of 1986, as amended (the “Code”). The terms, requirements and limitations of this Plan shall be interpreted and applied in a manner consistent with such intent.
|
|
(b)
|
It is intended that the Award Bonuses payable under the Plan shall either be exempt from the application of, or comply with, the requirements of Section 409A of the Code. The Plan shall be construed in a manner that effects such intent. Nevertheless, the tax treatment of the benefits provided under the Plan or any Award Bonus is not warranted or guaranteed. None of the Company, its affiliates and their respective directors, officers, employees or advisers shall be held liable for any taxes, interest, penalties or other monetary amounts owed by any Participant or other taxpayer as a result of the Plan or any Award Bonus.
|
|
(c)
|
Notwithstanding anything in the Plan to the contrary, to the extent that any Award Bonus would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code and would be payable or distributable under the Plan by reason of the occurrence of a Change of Control, or the Participant’s disability or separation from service, such amount or benefit will not be payable or distributable to the Participant by reason of such circumstance unless the circumstances giving rise to such Change of Control, disability or separation from service meet any description or definition of “change in control event”, “disability” or “separation from service”, as the case may be, in Section 409A of the Code and applicable regulations (without giving effect to any elective provisions that may be available under such definition). This provision does not prohibit the vesting of any Award Bonus upon a change of control, disability or separation from service, however defined. If this provision prevents the payment or distribution of any Award Bonus, such payment shall be made on the date that would have applied absent such designated event or circumstance.
|
|
(d)
|
Notwithstanding anything in the Plan to the contrary, to the extent that any Award Bonus would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Code and would otherwise be payable under this Plan by reason of a Participant’s separation from service during a period in which the Participant is a Specified Employee (as defined below), then, subject to any permissible acceleration of payment by the Committee 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
|
|
(a)
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New Hire, Transfer, Promotion. New employees hired on or prior to September 30 during any Performance Period are eligible to participate in the Plan and earn a pro rata Award Bonus for such Performance Period. Target Incentive Percentages for newly hired Designated Participants are determined by the Committee. Target Incentive Percentages for all other newly hired Participants are determined by the CEO. Target Incentive Percentages for employees who are promoted or transferred during a Performance Period may be adjusted on a pro rata basis to reflect the percentage that would be associated with the new position. Target Incentive Percentages for employees who experience a change in employment status during a Performance Period (e.g., due to a leave of absence, a change to part-time status, or other similar circumstances) may be adjusted on a pro-rata basis to reflect such change in employment status.
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(b)
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Termination. No amount shall be paid to an employee who resigns for any reason before such employee’s Award Bonus is paid; provided, however, a pro rata Award Bonus may be paid based on actual performance as of the end of the Performance Period in the event of the employee’s termination of employment as a result of his or her death, disability, or retirement; provided the employee otherwise qualifies for payment of an Award Bonus. In the event that an Award Bonus is paid on behalf of an employee who has terminated employment by reason of death, any such payments or other amounts due shall be paid to the employee’s estate in accordance with the provisions of Section 6(e) or, if applicable, Section 9(d), but subject to the
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i.
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A lump sum payment in an amount equal to twelve (12) months of the Employee’s base salary at the higher of the rate of salary in effect at the time of such termination or the rate of salary in effect immediately prior to the date of the Change of Control;
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ii.
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A lump sum payment in the amount of fifteen thousand dollars $15,0000; and
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iii.
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A lump sum payment 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.
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i.
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The Employee’s execution of a release of clams in a form acceptable to the Company; and
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ii.
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The Employee’s compliance with his/her obligations hereunder, including but not limited to the obligations set forth in Sections 1 and 3.
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i.
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The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a corporation with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of the Company’s Board of Directors is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding common stock and voting power immediately prior to such sale or disposition;
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ii.
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The acquisition in one (1) or more transactions by any person or group, directly or indirectly, of beneficial ownership of thirty percent (30%) or more of the outstanding shares of common stock or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of the Company’s Board of Directors; provided, however, that the following shall not constitute a Change of Control: (A) any acquisition by the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries and (B) an acquisition by any person or group of persons of not more than forty percent (40%) of the outstanding Shares or the combined voting power of the then outstanding voting securities of the Company if such acquisition resulted from the issuance of capital stock by the Company and the issuance and the acquiring person or group was approved in advance of such issuance by at least two-thirds (2/3) of the Continuing Directors (as defined below) then in office;
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iii.
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The Company’s termination of its business and liquidation of its assets;
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iv.
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There is consummated a merger, consolidation, reorganization, share exchange or similar transaction involving the Company (including a triangular merger), in any case, unless immediately following such transaction: (A) all or substantially all of the persons who were the beneficial owners of the outstanding common stock and outstanding voting securities of the Company immediately prior to the transaction beneficially own, directly or indirectly, more than fifty percent (50%) of the outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such transaction (including a corporation or other person which as a result of such transaction owns the Company or all or substantially all of the Company’s assets through one (1) or more subsidiaries (a “Parent Company”)) in substantially the same proportion as their ownership of the common stock and other voting securities of the Company immediately prior to the consummation of the transaction, (B) no person (other than (1) the Company, any employee benefit plan sponsored or maintained by the Company or, if reference was made to equity ownership of any Parent Company for purposes of determining whether the foregoing clause (A) is satisfied in connection with the transaction, such Parent Company, or (2) any person or group that satisfied the requirements of the foregoing subsection (ii)(B)) beneficially owns, directly or indirectly, thirty percent (30%) or more of the outstanding shares of common stock the combined voting power of the voting securities entitled to vote generally in the election of directors of the corporation resulting from such transaction and (C) individuals who were members of the Company’s Board of Directors immediately prior to the consummation of the transaction constitute at least a majority of the members of the board of directors resulting from such transaction (or, if reference was made to equity ownership of any Parent Company for purposes of determining whether the foregoing clause (A) is satisfied in connection with the transaction, such Parent Company); or
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v.
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The following individuals (sometimes referred to herein as “Continuing Directors”) cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the entire Board of Directors and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Company’s Board of Directors or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who
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i.
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any customer that the 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 the Employee's separation from the Company; and
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ii.
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any prospective customer of the Company who was identified to or by the Employee and/or who the Employee was provided confidential or proprietary information about while employed by the Company within the one (1) year period preceding the 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 the 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 the Employee's employment with the Company to be offered in the future.
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i.
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the amount of such Non-Exempt Deferred Compensation that would otherwise be payable during the six-month period immediately following the Employee’s separation from service will be accumulated through and paid or provided on the first day of the seventh month following the Employee’s separation from service (or, if the Employee dies during such period, within 30 days after the Employee’s death) (in either case, the “Required Delay Period”); and
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ii.
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the normal payment or distribution schedule for any remaining payments or distributions will resume at the end of the Required Delay Period.
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EQUITRANS MIDSTREAM CORPORATION
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EMPLOYEE:
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By: _/s/ Anne M. Naqi_______________
(Signature)
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_/s/ Brian P. Pietrandrea____________
(Signature)
Address:
__[***]_____________________________
__________________________________
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(i)
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awarded pursuant to an Awarding Plan; and
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(ii)
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which will be distributed to eligible Participants in the form and medium and on the date or permissible payment event specified in the Phantom Stock Agreement, which date or permissible payment event is deemed to be incorporated by reference herein.
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(i)
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Annual payments of a fixed amount which shall amortize the value of the Deferral Account over a period of five, ten or fifteen years (together, in the
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(ii)
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A lump sum.
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/s/ Thomas F. Karam
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Thomas F. Karam
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Chief Executive Officer
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/s/ Kirk R. Oliver
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Kirk R. Oliver
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Senior Vice President and Chief Financial Officer
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(1)
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The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Equitrans Midstream Corporation.
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/s/ Thomas F. Karam
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May 14, 2020
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Thomas F. Karam
Chief Executive Officer
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/s/ Kirk R. Oliver
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May 14, 2020
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Kirk R. Oliver
Senior Vice President and Chief Financial Officer
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