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EQT Midstream (EQM) Sees FY13 CapEx at $73M; Guides Adj.-EBITDA, DCF

December 4, 2012 7:11 AM EST Send to a Friend
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EQT Midstream Partners (NYSE: EQM) announced its 2013 financial and capital expenditure forecast. Adjusted EBITDA is expected to be $80 - $83 million and distributable cash flow is expected to be $61 - $64 million. Operating revenues are seasonal, based on utility customer contracts, and will be approximately $2 million per quarter higher in the first and fourth quarters, than in the second and third quarters.

CAPITAL EXPENDITURES:

For 2013, EQT Midstream Partners, LP (the Partnership) forecasts total capital expenditures to be approximately $73 million, and intends to increase Equitrans transmission capacity by 450 MMcf per day. The Partnership expects maintenance and regulatory capital expenditures to vary quarter-to-quarter, primarily based on more activity when weather is favorable. The forecast does not include acquisition capital or financial impacts of potential acquisitions.

Expansion

The Partnership forecasts expansion capital expenditures of $38 million for 2013. Approximately $25 million will be for the Low Pressure East Pipeline project, which will upgrade nearly 26 miles of existing pipeline in Greene, Washington and Allegheny counties of Pennsylvania. The project will add 150 MMcf per day of transmission capacity. The remaining expansion capital expenditures will fund new interconnects and dehydration upgrades, adding 300 MMcf per day of transmission capacity.

Ongoing Maintenance

The Partnership forecasts ongoing maintenance capital expenditures of $17.2 million for 2013. Ongoing maintenance capital expenditures are cash expenditures made to maintain, over the long term, the Partnership’s operating capacity or operating income. Ongoing maintenance capital expenditures exclude funded regulatory compliance capital expenditures and reimbursable maintenance capital expenditures.

Funded Regulatory Compliance

The Partnership forecasts funded regulatory compliance capital expenditures of $12 million for 2013. Funded regulatory compliance capital expenditures relate to discrete expenditures necessary to comply with two specific regulatory compliance initiatives; system segmentation and isolation, and valve pit remediation. In order to fund these two initiatives, the Partnership retained $32 million from the initial public offering (IPO). Funded regulatory compliance capital expenditures do not impact the calculation of distributable cash flow.

Reimbursable Maintenance

The Partnership forecasts reimbursable maintenance capital expenditures of $6 million in 2013 for the bare steel replacement program. EQT Corporation has agreed to reimburse the Partnership for bare steel replacement capital expenditures in the event that ongoing maintenance capital expenditures exceed $17.2 million in any year. EQT Corporation will reimburse the Partnership for the lesser of (i) the amount of bare steel replacement capital expenditures during such year; and (ii) the amount by which ongoing maintenance capital expenditures exceed $17.2 million. EQT Corporation will also reimburse the Partnership for plugging and abandonment expenditures, if any.

NON-GAAP DISCLOSURES:

Adjusted EBITDA and Distributable Cash Flow

As used in this press release, adjusted EBITDA means net income (loss) plus net interest expense, income tax expense, depreciation and amortization expense, and non-cash, long-term compensation expense less other income and the Sunrise lease payment. As used in this press release, distributable cash flow means adjusted EBITDA less net cash paid for interest expense, maintenance capital expenditures, and income taxes. Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of the Partnership’s financial statements, such as industry analysts, investors, lenders, and rating agencies, use to assess:

* the Partnership’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 the Partnership’s assets to generate sufficient cash flow to make distributions to the Partnership’s unitholders;
* the Partnership’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.

The Partnership believes that adjusted EBITDA and distributable cash flow provide useful information to investors in assessing the Partnership’s financial condition and results of operations. Adjusted EBITDA and distributable cash flow should not be considered alternatives to net income, operating income, cash flows from operating activities, or any other measure of financial performance or liquidity presented in accordance with generally accepted accounting principles (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 the industry, the Partnership’s definition of adjusted EBITDA and distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.




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