Q3 2015 Results Announced for EQT Midstream Partners and EQT GP Holdings

PITTSBURGH–(BUSINESS WIRE)–EQT Midstream Partners, LP (NYSE: EQM) and EQT GP Holdings, LP (NYSE: EQGP) today announced third quarter 2015 financial and operating results. EQT Midstream Partners, LP (EQM) net income for the quarter totaled $94.1 million, adjusted EBITDA was $113.4 million, and distributable cash flow was $101.8 million. EQM adjusted operating income was $102.2 million, or 28% higher than the same quarter last year. Net income attributable to EQT GP Holdings, LP (EQGP) for the third quarter totaled $38.1 million. The non-GAAP financial measures are reconciled in the Non-GAAP Disclosures section of this news release.

In December 2013, EQM entered into a capital lease with EQT Corporation (EQT) for its Allegheny Valley Connector facilities (AVC), which includes a 200-mile pipeline regulated by the Federal Energy Regulatory Commission (FERC). EQM operates the AVC and the related revenue and expenses are included in the financial statements; however, the monthly lease payment to EQT offsets the impact on distributable cash flow. As a result, third quarter 2015 operating results are discussed on an adjusted basis, excluding the AVC. Payments due under the lease totaled $3.1 million for the third quarter. The revenue and expenses associated with the AVC are found in the reconciliation table in the Non-GAAP Disclosures section of this news release.

EQM third quarter adjusted operating revenue increased $27.9 million, or 24%, compared to the same quarter last year. The increase was primarily due to an increase in contracted firm transmission and gathering capacity and an increase in gathered volume. Adjusted operating expenses were up $5.4 million versus the third quarter of 2014, consistent with the growth of the business.

QUARTERLY DISTRIBUTION

EQM

For the third quarter of 2015, EQM will pay a quarterly cash distribution of $0.675 per unit. The distribution will be paid on November 13, 2015 to EQM unitholders of record at the close of business on November 2, 2015. The quarterly cash distribution is $0.035 per unit, or 5.5% higher than the second quarter of 2015 and $0.125 per unit or 23% higher than the third quarter of 2014.

EQGP

For the third quarter of 2015, EQGP will pay a quarterly cash distribution of $0.104 per unit. The distribution represents a 13% increase to the equivalent full-quarter distribution for the second quarter 2015. The distribution will be paid on November 23, 2015 to EQGP unitholders of record at the close of business on November 2, 2015. For the quarter, EQGP expects to receive $28.6 million of cash distributions from EQM and will distribute $27.7 million.

GUIDANCE

EQM forecasts full-year 2015 adjusted EBITDA of $440 – $445 million and full-year distributable cash flow of $395 – $400 million. EQM is targeting annual distribution growth of 20% through 2017, which will result in more than 40% annual distribution growth at EQGP over the same time period. The financial and distribution guidance does not include financial impacts of potential acquisitions.

EQM CAPITAL EXPENDITURES

Expansion

Total expansion capital expenditures, including capital contributions to Mountain Valley Pipeline, LLC (MVP), totaled $110 million in the third quarter. EQM forecasts 2015 total expansion capital expenditures, including capital contributions to MVP, of approximately $450 – $480 million.

During the third quarter, EQM continued its gathering infrastructure expansion with approximately $52 million in investments related to gathering pipeline and compression projects for EQT and third-party producers. A majority of the investment was related to the Jupiter Gathering System (Jupiter) and the Northern West Virginia Marcellus Gathering System (NWV Gathering). EQM forecasts total gathering related investments of approximately $195 – $205 million in 2015.

EQM invested approximately $21 million in the Ohio Valley Connector (OVC) project during the third quarter. The OVC is estimated to cost $300 million, of which approximately $100 – $110 million is expected to be invested in 2015.

EQM invested $7 million during the quarter in other transmission expansion projects; with a total of approximately $50 million expected for transmission projects in 2015.

During the third quarter, EQM made a capital contribution of $30 million to MVP; and expects total capital contributions to MVP of $105 – $115 million in 2015. EQM expects its investment in MVP to total approximately $1.8 billion based on its 54% ownership in MVP, with a majority of the expenditures occurring in 2017 and 2018 during the construction phase.

Ongoing Maintenance

Ongoing maintenance capital expenditures are cash expenditures made to maintain, over the long-term, EQM operating capacity or operating income. EQM ongoing maintenance capital expenditures, net of expected reimbursements, totaled $5.9 million in the third quarter 2015. EQM forecasts full-year 2015 ongoing maintenance capital expenditures of approximately $20 million.

Project Update

Jupiter Gathering System

EQM recently placed into service two compressor units; one in September and the other in October. Combined, the two compressors increased the firm gathering capacity by 200 MMcf per day, resulting in total firm gathering capacity on Jupiter of 775 MMcf per day. The expansion of Jupiter was completed on schedule as outlined when EQM acquired the gathering system from EQT in April 2014.

Mountain Valley Pipeline

On October 1, 2015, MVP announced that Roanoke Gas Company, an affiliate of RGC Resources, Inc. (RGC), will become a shipper on the pipeline in order to supply and expand its southwest Virginia customer base. In addition, RGC acquired a 1% ownership interest in MVP. EQM will be the operator of the proposed pipeline and holds a 54% majority owner interest in MVP. MVP expects to file a certificate application with the Federal Energy Regulatory Commission later this month and continues to target an in-service date of Q4 2018.

NON-GAAP DISCLOSURES

EQM Adjusted EBITDA and Distributable Cash Flow

As used in this news release, EQM adjusted EBITDA means EQM’s net income plus interest expense, depreciation and amortization expense, and non-cash long-term compensation expense less equity income, other income and capital lease payments. As used in this news release, distributable cash flow means EQM adjusted EBITDA less interest expense, excluding capital lease interest and ongoing maintenance capital expenditures, net of expected reimbursements. Distributable cash flow should not be viewed as indicative of the actual amount of cash that EQM has available for distributions from operating surplus or that EQM plans to distribute. Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of EQM’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, use to assess:

• EQM’s operating performance as compared to other publicly traded partnerships in the midstream energy industry without regard to historical cost basis or, in the case of adjusted EBITDA, financing methods;
• the ability of EQM’s assets to generate sufficient cash flow to make distributions to EQM unitholders;
• EQM’s ability to incur and service debt and fund capital expenditures; and
• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

EQM believes that adjusted EBITDA and distributable cash flow provide useful information to investors in assessing EQM’s financial condition and results of operations. Adjusted EBITDA and distributable cash flow should not be considered as alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDA and distributable cash flow have important limitations as analytical tools because they exclude some, but not all, items that affect net income and net cash provided by operating activities. Additionally, because adjusted EBITDA and distributable cash flow may be defined differently by other companies in its industry, EQM’s definition of adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The table below reconciles adjusted EBITDA and distributable cash flow with net income and net cash provided by operating activities as derived from the statements of consolidated operations and cash flows to be included in EQM’s quarterly report on Form 10-Q for the quarter ended September 30, 2015.

Reconciliation of EQM Adjusted EBITDA and Distributable Cash Flow

EQM Adjusted Operating Revenues, Adjusted Operating Expenses, Adjusted Operating Income and Adjusted Income Before Income Taxes

EQM adjusted operating revenues, adjusted operating expenses, adjusted operating income and adjusted income before income taxes, all of which exclude the impact of the AVC, are non-GAAP supplemental financial measures that are presented because they are important measures used by management to evaluate EQM’s performance. The AVC did not have a net positive or negative impact on EQM’s distributable cash flow. Adjusted operating revenues, adjusted operating expenses, adjusted operating income and adjusted income before income taxes should not be considered as alternatives to operating revenues, operating expenses, operating income or income before income taxes, or any other measure of financial performance presented in accordance with GAAP. The table below reconciles adjusted operating revenues, adjusted operating expenses, adjusted operating income and adjusted income before income taxes with operating revenues, operating expenses, operating income and income before income taxes as derived from the statements of consolidated operations to be included in EQM’s quarterly report on Form 10-Q for the quarter ended September 30, 2015.

Q3 2015 Webcast Information

EQM and EQGP will host a joint live webcast with security analysts today at 11:30 a.m. ET. Topics include third quarter 2015 financial results, operating results, and other matters. The webcast is available at www.eqtmidstreampartners.com, with a replay available for seven days following the call.

EQT, which owns EQGP’s general partner and holds a 90% limited partner interest in EQGP, will also host a webcast with security analysts today at 10:30 a.m. ET. EQM and EQGP unitholders are encouraged to listen-in, as the discussion may include topics relevant to EQM and EQGP, such as EQT’s financial and operational results, potential asset dropdown transactions, and specific reference to EQM and EQGP third quarter 2015 results. The webcast can be accessed via www.eqt.com, with a replay available for seven days following the call.

About EQT Midstream Partners:

EQT Midstream Partners, LP is a growth-oriented limited partnership formed by EQT Corporation to own, operate, acquire, and develop midstream assets in the Appalachian Basin. The Partnership provides midstream services to EQT Corporation and third-party companies through its strategically located transmission, storage, and gathering systems that service the Marcellus and Utica regions. The Partnership owns 700 miles and operates an additional 200 miles of FERC-regulated interstate pipelines; and also owns more than 1,600 miles of high- and low-pressure gathering lines.

Visit EQT Midstream Partners, LP at www.eqtmidstreampartners.com.

About EQT GP Holdings:

EQT GP Holdings, LP is a limited partnership that owns a 30% limited partner interest and 2% general partner interest, including 100% of the incentive distribution rights, in EQT Midstream Partners, LP. EQT Corporation owns a 90% limited partner interest in EQT GP Holdings, LP.

Visit EQT GP Holdings, LP at www.eqtmidstreampartners.com.

EQM and EQGP management speak to investors from time to time and the analyst presentation for these discussions, which is updated periodically, is available via the EQM and EQGP website at www.eqtmidstreampartners.com.

Cautionary Statements

EQM is unable to provide a reconciliation of its projected adjusted EBITDA and projected distributable cash flow to projected net income or projected net cash provided by operating activities, the most comparable financial measures calculated in accordance with generally accepted accounting principles (GAAP), because of uncertainties associated with projecting future net income and changes in assets and liabilities.

Disclosures in this news release contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Statements that do not relate strictly to historical or current facts are forward-looking. Without limiting the generality of the foregoing, forward-looking statements contained in this news release specifically include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of EQGP and its subsidiaries, including EQM, including guidance regarding EQM’s transmission and storage and gathering revenue and volume growth; revenue projections; infrastructure programs (including the timing, cost, capacity and sources of funding with respect to transmission and gathering projects); the timing, cost, capacity and expected interconnects with facilities and pipelines of the Ohio Valley Connector and Mountain Valley Pipeline (MVP); the ultimate terms, partners and structure of the MVP joint venture; natural gas production growth in EQM’s operating areas for EQT and third parties; asset acquisitions, including EQM’s ability to complete any asset purchases from EQT or third parties and anticipated synergies and accretion associated with any acquisition; internal rate of return (IRR); compound annual growth rate (CAGR); capital commitments, projected capital and operating expenditures, including the amount and timing of capital expenditures reimbursable by EQT, capital budget and sources of funds for capital expenditures; liquidity and financing requirements, including funding sources and availability; distribution amounts, rates and growth; projected adjusted EBITDA and projected distributable cash flow, including the effect of the AVC lease on distributable cash flows; future AVC lease payments; the timing and amount of future issuances of EQM common units under EQM’s $750 million at the market equity distribution program; the effects of government regulation and litigation; and tax position. These forward looking statements involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. EQM and EQGP have based these forward-looking statements on current expectations and assumptions about future events. While EQM and EQGP consider these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, many of which are difficult to predict and beyond the partnerships’ control. The risks and uncertainties that may affect the operations, performance and results of EQM’s and EQGP’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors” of EQM’s Form 10-K for the year ended December 31, 2014 and under Part II, Item 1A, “Risk Factors” of EQGP’s Form 10-Q for the quarter ended June 30, 2015, as each may be updated by any subsequent Form 10-Q’s. Any forward-looking statement speaks only as of the date on which such statement is made, and neither EQM nor EQGP intends to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

Information in this news release regarding EQT Corporation and its subsidiaries, other than EQM and EQGP, is derived from publicly available information published by EQT.

This release serves as qualified notice to nominees under Treasury Regulation Sections 1.1446-4(b)(4) and (d). Please note that 100% of EQM’s and EQGP’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of EQM’s and EQGP’s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals or corporations, as applicable. Nominees, and not EQM or EQGP, as applicable, are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.