Investor Relations Presentation
October 2018
Disclosures in this presentation 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 presentation specifically include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of EQGP Holdings, LP (EQGP) and its subsidiaries, including EQM Midstream Partners, LP (EQM), including guidance regarding EQM’s gathering, transmission and storage and water revenue and volume growth; revenue and expense projections; infrastructure programs (including the timing, cost, capacity and sources of funding with respect to gathering, transmission and water projects); the cost, capacity, timing of regulatory approvals and anticipated in-service date of the Mountain Valley Pipeline (MVP) and MVP Southgate projects; the ultimate terms, partners and structure of, and EQM's ownership interests in, the MVP joint venture; the timing of the proposed separation of EQT Corporation’s (EQT) production and midstream businesses, and EQT’s and Equitrans Midstream Corporation’s (ETRN) ability to complete the separation and the effects of the change of control of EQM and EQGP on the partnerships; the expected synergies resulting from the streamlining transactions and the expected dis-synergies associated with the separation of EQT’s production and midstream businesses; asset acquisitions, including EQM’s ability to complete any asset purchases and anticipated synergies and accretion associated with any acquisition; the expected benefits to EQM resulting from EQT's acquisition of Rice Energy Inc. and EQM’s acquisition of Rice Midstream Partners, LP (RMP); internal rate of return (IRR); compound annual growth rate (CAGR); capital commitments, projected capital contributions and capital and operating expenditures, including the amount and timing of capital expenditures reimbursable by EQT, capital budget and sources of funds for capital expenditures including EQM’s plan to increase its borrowing capacity to $3 billion; projected capital avoidance; liquidity and financing requirements, including funding sources and availability; distribution amounts, rates and growth; projected net income, projected adjusted EBITDA, projected firm project EBITDA, projected water EBITDA, projected distributable cash flow, and projected coverage ratio and projected return on capital employed (ROCE); the timing and amount of future issuances of EQM common units; the structure and timing of any simplification of the midstream structure to address EQM’s incentive distribution rights (IDRs), if pursued and implemented; changes in EQM’s credit ratings; 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, 2017 as filed with the Securities and Exchange Commission (SEC) and Item 1A, “Risk Factors” of EQGP’s Form 10-K for the year ended December 31, 2017 as filed with the SEC, in each case as may be updated by any subsequent Form 10-Qs. 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.
2
Cautionary Statements
EQM adjusted EBITDA means net income attributable to EQM plus net interest expense, depreciation, amortization of intangible assets, payments on EQM's preferred interest in EQT
Energy Supply, LLC (Preferred Interest), non-cash long-term compensation expense and transaction costs less equity income, AFUDC - equity and adjusted EBITDA of assets prior to
acquisition. Adjusted EBITDA attributable to Rice Midstream Partners, LP (RMP) for the three months ended September 30, 2018 was calculated as net income plus net interest
expense, depreciation and non-cash compensation expense. Run rate adjusted EBITDA as used in this presentation means EQM’s adjusted EBITDA for the third quarter of 2018 plus the
RMP adjusted EBITDA prior to merger, annualized for four quarters. As used in this presentation, distributable cash flow means EQM adjusted EBITDA less net interest expense
excluding interest income on the Preferred Interest, capitalized interest and AFUDC - debt, ongoing maintenance capital expenditures net of expected reimbursements and transaction
costs. 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, run rate 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, run rate adjusted EBITDA and distributable cash flow provide useful information to investors in assessing EQM’s results of operations and financial
condition. Adjusted EBITDA, run rate 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, run rate 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 definitions of adjusted EBITDA, run rate adjusted EBITDA and
distributable cash flow may not be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measures.
3
EQM Midstream Partners, LP Non-GAAP Measures
Projected firm project EBITDA means the projected earnings before interest, taxes and depreciation of EQM’s firm capacity gathering and transmission projects, including
the Hammerhead, Equitrans Expansion and other gathering projects, plus EQM’s proportionate interest of the projected earnings before interest, taxes and depreciation of
Mountain Valley Pipeline, LLC’s MVP and MVP Southgate projects. Projected water EBITDA means the projected earnings before interest, taxes and depreciation of EQM’s
water services business. Projected firm project EBITDA and projected water EBITDA 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 the anticipated impact of EQM’s firm capacity
projects, both on an aggregate and project-by-project basis, and EQM’s water services business on EQM’s operating performance, the project returns on firm capacity
projects and EQM’s ability to incur and service debt and fund capital expenditures. Firm project EBITDA and water EBITDA should not be considered as alternatives to net
income, operating income or any other measure of financial performance presented in accordance with GAAP. Firm project EBITDA and water EBITDA have important
limitations as analytical tools because they exclude some, but not all, items that affect net income. Additionally, because firm project EBITDA and water EBITDA may be
defined differently by other companies in EQM’s industry, the definitions of firm project EBITDA and water EBITDA may not be comparable to similarly titled measures of
other companies, thereby diminishing the utility of the measures.
EQM has not provided projected net income from the firm projects or the projected net income of EQM’s water business segment, the most comparable financial
measures calculated in accordance with GAAP, or reconciliation of projected firm project EBITDA or projected water EBITDA to projected net income of the firm projects or
projected net income of EQM’s water business segment. The projects are under construction projects that, upon completion, will be reported in EQM’s Gathering and
Transmission business segments. EQM does not allocate certain costs, such as interest expenses, to individual assets within its business segments. In addition, for the
MVP and MVP Southgate projects, EQM does not provide guidance with respect to the intra-year timing of its or Mountain Valley Pipeline, LLC’s capital spending, which
impact AFUDC-debt and equity and equity earnings, among other things, that are reconciling items between adjusted firm project EBITDA and net income of the projects.
The timing of capital expenditures is volatile as it depends on weather, regulatory approvals, contractor availability, system performance and various other items.
Therefore, the projected net income of the firm projects, in the aggregate or on a project-by-project basis, and the projected net income of EQM’s water business
segment, and reconciliations of projected firm project EBITDA and projected water EBITDA to projected net income of the firm projects and projected net income of EQM’s
water business segment are not available without unreasonable effort.
4
Continued
EQM Midstream Partners, LP Non-GAAP Measures
EQM is unable to project net cash provided by operating activities or provide the related reconciliation of projected net cash provided by operating activities to projected
distributable cash flow, the most comparable financial measure calculated in accordance with GAAP, because net cash provided by operating activities includes the impact
of changes in operating assets and liabilities. Changes in operating assets and liabilities relate to the timing of EQM’s cash receipts and disbursements that may not relate
to the period in which the operating activities occurred, and EQM is unable to project these timing differences with any reasonable degree of accuracy to a specific day,
three or more months in advance. EQM is also unable to provide a reconciliation of its projected adjusted EBITDA or run rate adjusted EBITDA to projected net income, the
most comparable financial measure calculated in accordance with GAAP, because EQM does not provide guidance with respect to the intra-year timing of its or Mountain
Valley Pipeline, LLC’s capital spending, which impact AFUDC-debt and equity and equity earnings, among other items, that are reconciling items between adjusted EBITDA
and net income. The timing of capital expenditures is volatile as it depends on weather, regulatory approvals, contractor availability, system performance and various other
items. EQM provides a range for the forecasts of net income, adjusted EBITDA and distributable cash flow to allow for the variability in the timing of cash receipts and
disbursements, capital spending and the impact on the related reconciling items, many of which interplay with each other. Therefore, the reconciliations of projected
distributable cash flow, run rate adjusted EBITDA and adjusted EBITDA to projected net cash provided by operating activities and net income, as applicable, are not
available without unreasonable effort.
RMP 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, may use to assess impact of the measures on EQM’s future financial results and cash flows.
EQM believes that RMP adjusted EBITDA and distributable cash flow provide useful information to investors in assessing its financial condition and results of operations.
RMP adjusted EBITDA and distributable cash flow should not be considered as alternatives to RMP’s net income, operating income, net cash provided by operating
activities or any other measure of financial performance or liquidity presented in accordance with GAAP. RMP 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 RMP
adjusted EBITDA and distributable cash flow may be defined differently by other companies in EQM’s industry, RMP adjusted EBITDA and distributable cash flow may not
be comparable to similarly titled measures of other companies, thereby diminishing the utility of the measures.
EQM Midstream Partners, LP Non-GAAP Measures
5
Continued
6
Investment Highlights
Growing
Third-party
Business
Significant
Revenue from
Capacity
Reservation
Charges
Growth Project
Backlog
Supported by
Firm
Commitments
Premier
Assets in the
Marcellus /
Utica
Revenue
Backed by
Long-term
Demand Based
Contracts
Strong
Balance Sheet
Targeting
3.5x-4.0x
Debt/EBITDA
1.2x EQM
Coverage Ratio
over trailing 12-
months
EQM Coverage Ratio includes RMP Distributable Cash Flow for Q2 2018.
Assets Overlay Prolific Nat Gas Play
7
Equitrans Transmission & Storage
• 4.4 Bcf/d current capacity
• 950 mile FERC-regulated interstate pipeline
• 43 Bcf of working gas storage capacity
• Ohio Valley Connector
• Placed into service October 2016
• Allegheny Valley Connector
• Acquired October 2016
Assets traverse core Marcellus
Transmission and Storage Assets
Asset statistics as of December 31, 2017.
8
Integrated asset footprint across core Marcellus & Utica development areas
Gathering Assets
PA Marcellus Gathering• 330 miles of high pressure pipeline
• 203,000 HP compression
• 1,035 MMcf per day firm capacity commitment from EQT
• 10-year demand based fixed-fee contracts
• 600 MMcf per day high pressure header pipeline for Range Resources
• 286,000 total gathering dedicated acres
• Supports development in prolific Greene and Washington counties
WV Marcellus Gathering• 150 miles high pressure pipeline
• 71,000 HP compression
• Supports wet & dry gas development
• 775 MMcf per day firm capacity commitment from EQT
• 10-year demand based fixed-fee contracts
OH Utica Gathering• 150 miles high pressure pipeline
• 31,000 HP compression
• 5-year Minimum Volume Commitment from Gulfport
• Dry gas gathering in core acreage in Belmont and Monroe counties
• 166,000 total acreage dedication
• ~320,000 acres in AMI*
Statistics based on EQM recast for the EQM/RMP mergers as of December 31, 2017.*Represents Strike Force AMI.
9
Complementary service with significant growth potential
Water Assets
2018 Expansion Projects
• Investing $25 MM in fresh water infrastructure• Installing 25 miles of pipe
Provides full service sourcing and hauling for drilling and completion activities
Approximately 140 miles of fresh water pipelines*
Fresh water access via major rivers and regional sources
• PA capacity: 29 MMgal per day* • OH capacity: 14 MMgal per day*
Customers include EQT, GPOR, CNX, Range, and XTO
Significant cost and safety advantage versus trucking
Potential for produced water solution provides upside
2018E EBITDA of approximately $65 MM**
• 50% EBITDA growth expected in 2019
*Recast for EQM/RMP mergers as of December 31, 2017.**See slide 4 for important disclosures regarding the non-GAAP financial measure projected water EBITDA.
Connect Supply and DemandExpand Supply Hub
Leverage existing asset footprint to expand
Marcellus/Utica supply hub
• Gathering 6.6 Bcf/d*
• Transmission capacity of 4.4 Bcf/d is a 7-fold increase from 2009
• Access to diverse sales points and providing shipper optionality
• Targeting 1.5 Bcf/d of incremental capacity
• Hammerhead Pipeline Project
• Equitrans Expansion Project
Extend network to connect supply hub to growing
demand markets
• Assets interconnect with all major interstate
pipelines in basin
• Ohio Valley Connector provides access to Midwest
markets
• Mountain Valley Pipeline will provide access to
growing Southeast markets
• Direct connects with power plants and industrial
users
• Potential demand driven partnership opportunities
10
Growth Strategies
*EQM gathered volumes for the three months ended September 30, 2018.
$MM
Run Rate Annual Adj.
EBITDA**$1,172
Plus: Firm Project
EBITDA$375
Run Rate Annual Adj.
EBITDA +
Firm Project EBITDA
$1,547
% Increase 32%
ProjectExpected
In-Service Date
EQM Capital
($MM)
Estimated Annual Firm
Project EBITDA ($MM)***
Mountain Valley Pipeline (MVP)* Q4 2019 $2,200 $220
Hammerhead Q4 2019 $555 $75
Equitrans Expansion Project Q4 2019 $140 $20
MVP Southgate* Q4 2020 $140 $20
Gathering - Firm Capacity Q3 2019 + $230 $40
Total Firm Projects $3,265 $375
11
Backlog includes $3.27 B of investments in projects backed by firm commitments
Near Term Growth Driven by Firm Projects
32% Increase in Current Run Rate Adjusted EBITDA from Firm Projects
*Represents EQM ownership percentage of MVP and MVP Southgate adjusted EBITDA. MVP and MVP Southgate will be accounted for as equity investments.**See slide 3 for important disclosures regarding the non-GAAP financial measure run rate annual adjusted EBITDA. ***See slide 4 for important disclosures regarding the non-GAAP financial measure firm project EBITDA.
-
5
10
15
20
25
30
35
40
45
50
2011 2014 2017 2020 2023 2026
Bcf
/d
Marcellus North Marcellus South Utica
Assets Overlay Heart of MarcellusMarcellus / Utica Supply Growth*
12
Marcellus / Utica basin becoming the leading supply source in the U.S.
Growth Strategy – Supply Hub
*Source: Wood Mackenzie Fall 2017 Long-Term Outlook
Transmission
Map depicts gas in place estimates
Project Scope
Gathering header pipeline
• 64-mile pipeline from Southwestern PA to
Mobley WV
• Aggregate supply from several existing PA gathering systems and future WV gathering systems
1.6 Bcf per day maximum capacity
• 1.2 Bcf per day firm commitment from EQT
Expecting Q4 2019 in-service
Approximately $555 MM capex
Expected annual firm project EBITDA of $75 MM*
Hammerhead Map
13
Hammerhead Pipeline Project
Growth Strategy – Supply Hub
*See slide 4 for important disclosures regarding the non-GAAP financial measure projected water EBITDA.
Regional Supply/Demand Balance*
Shifting market dynamics requires new infrastructure solutions
EQM assets positioned to capitalize on demand driven opportunities
Access to Multiple Markets
14
Supply / demand dynamics creating new opportunities
Growth Strategy – Extend Pipeline Network
(20)
(10)
-
10
20
30
40
2017 2022 2027
Bcf
/ d
Supply less Demand
Northeast Gulf Region Southeast
*Source: Wood Mackenzie Fall 2017 Long-Term Outlook
Local
Demand
NortheastMidwest
Market Takeaway PipelinesNortheast TETCO, TCO, DTI, TGP, NFG
Midwest REX, ET RoverGulf TETCO, TCO, TGP
Southeast Transco (Q4 2019)Local Demand EGC / PNG
Overview
Pipeline to growing natural gas demand market in
southeast U.S.
• 300-mile FERC-regulated pipeline
• 42” pipe diameter
• $4.6 B estimated project cost
• Q4 2019 targeted in-service
JV with NextEra, ConEd, AltaGas, RGC Resources
• 45.5% EQM ownership interest
2 Bcf per day capacity commitments
• 20-year terms
• Expansion capability
Project Map
15
Mountain Valley Pipeline
Growth Strategy – Extend Pipeline Network
Overview
Demand pull pipeline project from MVP
• 70-mile extension to North Carolina
• $350 - $500 MM total estimated capital
• PSNC Energy is anchor shipper with 300 MMcfper day firm capacity
• Estimated capacity of 0.5 Bcf per day with expansion capability up to 1.0 Bcf per day
• Q4 2020 targeted in-service
• EQM ownership in project 33%
• EQM to operate pipeline
MVP Southgate Map
16
MVP Southgate
Growth Strategy – Extend Pipeline Network
EQM EQGP
17
Distribution Growth
$0.104
$0.134
$0.165
$0.191
$0.228
$0.258
$0.315
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
Q2
'15*
Q3
'15
Q4
'15
Q1
'16
Q2
'16
Q3
'16
Q4
'16
Q1
'17
Q2
'17
Q3
'17
Q4
'17
Q1
'18
Q2
'18
Q3
'18
Dis
trib
uti
on
s p
er
un
it
$0.350$0.370
$0.430
$0.490
$0.550
$0.610
$0.675
$0.745
$0.815
$0.890
$0.980
$1.065
$1.115
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
$1.20
Q3
'12
Q2
'13
Q1
'14
Q4
'14
Q3
'15
Q2
'16
Q1
'17
Q4
'17
Q3
'18
Dis
trib
uti
on
s p
er
un
it
• 1.0x target coverage• 1.2x coverage trailing 12-months
*Actual distribution was $0.04739 which reflected the prorated distribution for the 47 days after the IPO.EQM Coverage Ratio includes RMP Distributable Cash Flow for Q2 2018.
Long-term fixed-fee firm contracts
• 93% transmission revenue and 45% of gathering revenue from firm reservation fees in
Q3 2018
• 15-year weighted average transmission and storage contract life and 8-year weighted
average gathering contract life*
• ~80% of revenue from investment grade rated counterparties*
Balance sheet strength to support growth profile
• Targeting 3.5x – 4.0x Debt to EBITDA
• No equity issuance in the foreseeable future
Strong Cash Flow Profile and Balance Sheet
18
Predictable and growing cash flows
*Revenue from investment grade counterparties as of the nine months ended September 30, 2018. Contract life as of December 31, 2017.
19
Investment Highlights
Growing
Third-party
Business
Significant
Revenue from
Capacity
Reservation
Charges
Growth Project
Backlog
Supported by
Firm
Commitments
Premier
Assets in the
Marcellus /
Utica
Revenue
Backed by
Long-term
Demand Based
Contracts
Strong
Balance Sheet
Targeting
3.5x-4.0x
Debt/EBITDA
1.2x EQM
Coverage Ratio
over trailing 12-
months
Coverage Ratio includes RMP Distributable Cash Flow for Q2 2018.
Appendix
21
Post-Spinoff Structure
15.4 MM LP units12.7% ownership
276.0 MM LP units91.3% ownership
21.8 MM LP units1.4 MM GP units19.1% ownership100% IDR
Public
Public
8.7%ownership
68.2%ownership
Targeting 3.5x – 4.0x Debt to EBITDA
• Current ratings
• BBB- (S&P)
• BBB- (Fitch)
• Ba1 (Moody’s)
1.2x distribution coverage ratio over trailing 12-months
EQM Capitalized for Growth
22EQM Coverage Ratio includes RMP Distributable Cash Flow for Q2 2018.