UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) |
April 24, 2014 |
EQT Midstream Partners, LP
(Exact
name of registrant as specified in its charter)
DELAWARE |
1-35574 |
37-1661577 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
625 Liberty Avenue, Suite 1700, Pittsburgh, Pennsylvania |
15222 |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code |
(412) 553-5700 |
(Former name
or former address, if changed since last report)
None
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below) :
⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
Today, EQT Midstream Partners, LP (EQT Midstream Partners) issued a press release announcing its first quarter 2014 earnings. A copy of EQT Midstream Partners’ press release is attached hereto and furnished as Exhibit 99.1 and is incorporated in this report by reference.
The information in this Form 8-K, including the accompanying Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (Exchange Act), or otherwise subject to the liability of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of the general incorporation language of such filing, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
99.1 Press release dated April 24, 2014 issued by EQT Midstream Partners, LP
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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EQT Midstream Partners, LP |
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(Registrant) |
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By: |
EQT Midstream Services, LLC, its General Partner |
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By: |
/s/ Philip P. Conti |
Philip P. Conti |
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Senior Vice President and Chief Financial Officer |
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Date: |
April 24, 2014 |
EXHIBIT INDEX
Exhibit No. |
Document Description |
99.1 |
Press release dated April 24, 2014 issued by EQT Midstream Partners, LP |
Exhibit 99.1
EQT Midstream Partners Reports Q1 2014 Results
Increases Adjusted EBITDA and Distributable Cash Flow Guidance
PITTSBURGH--(BUSINESS WIRE)--April 24, 2014--EQT Midstream Partners, LP (NYSE: EQM), an EQT Corporation (EQT) company, today announced first quarter 2014 financial and operating results. Net income for the quarter totaled $34.9 million and adjusted EBITDA was $41.1 million. Distributable cash flow was $38.9 million for the quarter. Adjusted operating income was $34.6 million, or 22% higher than the same quarter last year. The non-GAAP financial measures are reconciled in the Non-GAAP Disclosures section included in this news release.
Additional Highlights:
In December 2013, EQT Midstream Partners (Partnership) entered into a capital lease with EQT for the lease of its Allegheny Valley Connector facilities (AVC), which includes a 200-mile, FERC-regulated pipeline that EQT acquired as part of the sale of Equitable Gas Company, LLC (EGC). The Partnership operates the AVC as part of its transmission and storage system. Revenue and expenses associated with the AVC are included in the Partnership’s financial statements; however, the monthly lease payment to EQT offsets the impact on the Partnership’s distributable cash flow. As a result, first quarter 2014 operating results are discussed on an adjusted basis, excluding the AVC. Payments due under the lease totaled $7.0 million for the first quarter. The revenues and expenses associated with AVC are found in the reconciliation table in the Non-GAAP Disclosures section of this news release.
First quarter adjusted operating revenues increased $9.2 million, or 21%, compared to the same quarter last year. The increase was primarily due to increased contracted firm transmission capacity from EQT and third-parties. In December 2013, EQT completed the sale of EGC. At the time of the sale closing, the Partnership extended its existing 448 BBtu per day transmission and storage contract with EGC for 20 years. Revenues from EGC were affiliate revenues prior to the sale and are third party revenues subsequent to the sale. After normalizing for EGC, the first quarter affiliate adjusted revenue was 15% higher than the same quarter last year and third party adjusted revenue was 27% higher. In the first quarter 2014, third parties accounted for nearly 50% of total adjusted operating revenue. Adjusted operating expenses increased $3.1 million versus the first quarter of 2013, consistent with the growth of the business.
Quarterly Distribution
The Partnership announced a quarterly
cash distribution of $0.49 per unit for the first quarter of 2014. The
distribution will be paid on May 15, 2014 to all unitholders of record
at the close of business on May 6, 2014. The quarterly cash distribution
is $0.03 per unit, or 7% higher, than the fourth quarter of 2013 and
$0.12 per unit, or 32% higher, than the first quarter of 2013. The
Partnership expects to continue to increase the per unit distribution by
$0.03 each quarter through at least 2015, which is supported by expected
accretion from the Sunrise acquisition in 2013 and organic growth
projects for third-parties.
Guidance
The Partnership forecasts second quarter 2014
adjusted EBITDA to be $44 - $45 million and increases its full-year 2014
adjusted EBITDA forecast to $186 - $188 million and distributable cash
flow forecast to $164 - $166 million. The increase in the 2014 forecast
is primarily related to first quarter results above plan and higher
projected throughput from EQT and third party Marcellus producers. The
financial and distribution guidance does not include financial impacts
of potential acquisitions.
CAPITAL EXPENDITURES
Expansion
The
Partnership expects the Jefferson compressor station expansion to be
completed in the third quarter 2014 and to add 550 BBtu per day of
transmission capacity. The Partnership is also constructing two projects
for Antero Resources, the West Side expansion and the East Side
expansion, which combined will provide 200 BBtu per day of transmission
capacity. The first 100 BBtu per day is expected to be in service by
year-end 2014 and the remaining 100 BBtu per day is expected to be in
service by mid-year 2015. The Partnership also will add 100 BBtu per day
of transmission capacity by the end of 2014 for Range Resources. The
Partnership expects total transmission system capacity of 3.0 TBtu per
day by the end of 2014. First quarter expansion capital expenditures
totaled $17.3 million, and the Partnership forecasts expansion capital
expenditures of approximately $100 - $105 million for 2014.
Ongoing Maintenance
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, net of expected reimbursements,
totaled $1.5 million in the first quarter 2014. The Partnership
forecasts ongoing maintenance capital expenditures of approximately $17
- $18 million for 2014.
NON-GAAP DISCLOSURES
Adjusted EBITDA and
Distributable Cash Flow
As used in this news release, adjusted
EBITDA means net income plus net interest expense, depreciation and
amortization expense, income tax expense (if applicable), non-cash
long-term compensation expense and other non-cash adjustments (if
applicable), less other income and capital lease payments. As used in
this news release, distributable cash flow means 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 the Partnership has available for distributions from
operating surplus or that the Partnership plans to distribute. Adjusted
EBITDA and distributable cash flow are non-GAAP supplemental financial
measures that management and external users of the Partnership’s
consolidated financial statements, such as industry analysts, investors,
lenders and rating agencies, use to assess:
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 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, 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. 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 the Partnership’s quarterly report on Form 10-Q for the quarter ended March 31, 2014.
Reconciliation of Adjusted EBITDA and Distributable Cash Flow |
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Three Months Ended | |||||||
March 31, 2014 | |||||||
Operating revenues: | (in thousands) | ||||||
Transmission and storage | $ | 59,317 | |||||
Gathering | 3,256 | ||||||
Total operating revenues | 62,573 | ||||||
Operating expenses: | |||||||
Operating and maintenance | 8,124 | ||||||
Selling, general and administrative | 7,359 | ||||||
Depreciation and amortization | 6,849 | ||||||
Total operating expenses | 22,332 | ||||||
Operating income | 40,241 | ||||||
Other income, net | 269 | ||||||
Interest expense, net | 5,655 | ||||||
Net income | $ | 34,855 | |||||
Add: | |||||||
Interest expense, net | 5,655 | ||||||
Depreciation and amortization expense | 6,849 | ||||||
Non-cash long-term compensation expense | 978 | ||||||
Less: | |||||||
Other income, net | (269 | ) | |||||
Capital lease payments | (6,979 | ) | |||||
Adjusted EBITDA | $ | 41,089 | |||||
Less: | |||||||
Interest expense, excluding capital lease interest |
(717 | ) | |||||
Ongoing maintenance capital expenditures, net of expected reimbursements |
(1,481 | ) | |||||
Distributable cash flow | $ | 38,891 | |||||
Distributions declared (a): | |||||||
Limited Partner | $ | 23,426 | |||||
General Partner | 1,525 | ||||||
Total | $ | 24,951 | |||||
Coverage ratio |
1.56x |
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(a) Reflects cash distribution of $0.49 per limited partner unit for the first quarter. |
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Three Months Ended | |||||||
March 31, 2014 | |||||||
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(in thousands) |
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Net cash provided by operating activities | $ | 51,198 | |||||
Adjustments: | |||||||
Interest expense, net | 5,655 | ||||||
Capital lease payments | (6,979 | ) | |||||
Other, including changes in working capital | (8,785 | ) | |||||
Adjusted EBITDA | $ | 41,089 | |||||
Adjusted Operating Revenues, Adjusted Operating Expenses, Adjusted
Operating Income and Adjusted Income Before Income Taxes
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 the Partnership’s performance. The AVC did not have a net
positive or negative impact on the Partnership’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 the Partnership’s quarterly report on Form
10-Q for the quarter ended March 31, 2014.
Three Months Ended March 31, | ||||||||||||||
2014 | 2013 | |||||||||||||
(in thousands) |
Reported |
Adjustment |
Adjusted |
Recast |
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Operating Revenues: | ||||||||||||||
Operating revenues – affiliate(2) |
$ | 27,129 | $ | (9 | ) | $ | 27,120 | $ | 34,386 | |||||
Operating revenues – third party(2) |
35,444 | (8,984 | ) | 26,460 |
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9,979 | ||||||||
Total operating revenues | $ | 62,573 | $ | (8,993 | ) | $ | 53,580 | $ | 44,365 | |||||
Operating Expenses | ||||||||||||||
Operating and maintenance | $ | 8,124 | $ | (1,137 | ) | $ | 6,987 | $ | 6,632 | |||||
Selling, general and administrative | 7,359 | (876 | ) | 6,483 | 4,263 | |||||||||
Depreciation and amortization | 6,849 | (1,300 | ) | 5,549 |
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5,041 | ||||||||
Total operating expenses |
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22,332 |
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(3,313 | ) |
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19,019 |
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15,936 | |||||
Operating income | $ | 40,241 | $ | (5,680 | ) | $ | 34,561 | $ | 28,429 | |||||
Other income, net | 269 | — | 269 | 297 | ||||||||||
Interest expense, net | 5,655 | (4,944 | ) | 711 | 204 | |||||||||
Income before income taxes | $ | 34,855 | $ | (736 | ) | $ | 34,119 | $ | 28,522 | |||||
(1) |
Q1 2013 has been recast to include the historical results of Sunrise Pipeline, LLC, which was merged into the Partnership on July 22, 2013. |
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(2) |
On December 17, 2013, EQT completed the sale of EGC. Prior to the sale, revenues from EGC were affiliate revenues. Subsequent to the sale, EGC revenues are third party revenues. In the first quarter 2013, revenues from EGC totaled $10.9 million. |
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Affiliate and third party revenue adjusted for AVC and normalized for EGC |
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Three Months Ended March 31, |
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2014 | 2013 | |||||||||||||||||||
(in thousands) |
Adjusted |
Recast |
EGC |
Normalized |
2014 vs |
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Operating Revenues: |
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Operating revenues – affiliate | $ | 27,120 | $ | 34,386 | $ | (10,868 | ) | $ | 23,518 | 15 | % | |||||||||
Operating revenues – third party | 26,460 | 9,979 | 10,868 | 20,847 | 27 | % | ||||||||||||||
Total operating revenues | $ | 53,580 | $ | 44,365 | $ | — | $ | 44,365 | 21 | % | ||||||||||
(1) Q1 2013 has been recast to include the historical results of Sunrise Pipeline, LLC, which was merged into the Partnership on July 22, 2013. |
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Q1 2014 Webcast Information
EQT Midstream Partners will
host a live webcast with security analysts today at 11:30 a.m. ET.
Topics include first quarter 2014 financial results, operating results,
and other matters. The webcast is available at www.eqtmidstreampartners.com
and a replay will be available for seven days following the call.
EQT Corporation (EQT), which is the Partnership's general partner and owner of a 44.6% equity interest in the Partnership, will also host a webcast with security analysts today at 10:30 a.m. ET. The Partnership's unitholders are encouraged to listen-in, as the discussion may include topics relevant to the Partnership, such as EQT's financial and operational results, potential asset dropdown transactions, and specific reference to the Partnership's 2014 results. The webcast can be accessed via www.eqt.com and will be available as a replay 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
and storage system, and gathering system. 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 FERC-regulated,
low-pressure gathering lines.
Visit EQT Midstream Partners, LP at www.eqtmidstreampartners.com.
Cautionary Statements
The Partnership 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. 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 press release specifically include the expectations of plans, strategies, objectives and growth and anticipated financial and operational performance of the Partnership and its subsidiaries, including guidance regarding the Partnership’s transmission and storage and gathering revenue growth and volume growth; revenue projections; infrastructure programs (including the timing, cost, capacity and sources of funding with respect to such programs); the EQT subsidiary to own and construct the Ohio Valley Connector and/or Ohio Valley Express projects; natural gas production growth in the Partnership’s operating areas for EQT and third parties; asset acquisitions, including the Partnership’s ability to complete any asset purchases from EQT or third parties and anticipated synergies 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 rate 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 effects of government regulation, 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. The Partnership has based these forward-looking statements on current expectations and assumptions about future events. While the Partnership considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Partnership’s control. The risks and uncertainties that may affect the operations, performance and results of the Partnership’s business and forward-looking statements include, but are not limited to, those set forth under Item 1A, “Risk Factors” of the Partnership’s Form 10-K for the year ended December 31, 2013 and as 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 the Partnership does not intend to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
Information in this press release regarding EQT Corporation and its subsidiaries, other than the Partnership, 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 the Partnership’s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of the Partnership’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 the Partnership, are treated as the withholding agents responsible for withholding on the distributions received by them on behalf of foreign investors.
EQT Midstream Partners, LP
Statements of Consolidated Operations (unaudited) |
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Three Months Ended | |||||||||||
March 31, | |||||||||||
(Thousands, except per unit amounts) | 2014 |
2013(1) |
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Operating Revenues: | |||||||||||
Operating revenues – affiliate(2) | $ | 27,129 | $ | 34,386 | |||||||
Operating revenues – third party(2) | 35,444 | 9,979 | |||||||||
Total operating revenues | 62,573 | 44,365 | |||||||||
Operating expenses: | |||||||||||
Operating and maintenance | 8,124 | 6,632 | |||||||||
Selling, general and administrative | 7,359 | 4,263 | |||||||||
Depreciation and amortization | 6,849 | 5,041 | |||||||||
Total operating expenses | 22,332 | 15,936 | |||||||||
Operating income | 40,241 | 28,429 | |||||||||
Other income, net | 269 | 297 | |||||||||
Interest expense, net | 5,655 | 204 | |||||||||
Income before income taxes | 34,855 | 28,522 | |||||||||
Income tax expense | — | 1,733 | |||||||||
Net income | $ | 34,855 | $ | 26,789 | |||||||
Calculation of limited partner interest in net income: | |||||||||||
Net income | $ | 34,855 | $ | 26,789 | |||||||
Less: | |||||||||||
Pre-acquisition net income allocated to parent | — | (2,710 | ) | ||||||||
General partner interest in net income | (1,723 | ) | (505 | ) | |||||||
Limited partner interest in net income | $ | 33,132 | $ | 23,574 | |||||||
Net income per limited partner unit - basic | $ | 0.69 | $ | 0.68 | |||||||
Net income per limited partner unit - diluted | $ | 0.69 | $ | 0.68 | |||||||
Weighted average limited partner units outstanding – basic | 47,819 | 34,679 | |||||||||
Weighted average limited partner units outstanding – diluted | 47,938 | 34,768 | |||||||||
(1) |
Q1 2013 has been recast to include historical results of Sunrise Pipeline, LLC, which was merged into the Partnership on July 22, 2013. |
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(2) |
On December 17, 2013, EQT completed the sale of EGC. Prior to the sale, revenues from EGC were affiliate revenues. Subsequent to the sale, EGC revenues are third party revenues. In the first quarter 2013, revenues from EGC totaled $10.9 million. |
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EQT Midstream Partners, LP
Operating Results |
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Three Months Ended | ||||||||||
March 31, | ||||||||||
2014 |
2013(1) |
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OPERATING DATA (in BBtu per day): | ||||||||||
Transmission throughput (excluding AVC) | 1,337 | 900 | ||||||||
AVC transmission throughput | 263 | — | ||||||||
CAPITAL EXPENDITURES (in thousands): |
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Expansion capital expenditures | $ | 17,261 | $ | 6,616 | ||||||
Maintenance capital expenditures: | ||||||||||
Ongoing maintenance(2) | 1,644 | 3,179 | ||||||||
Funded regulatory compliance | 565 | 2,278 | ||||||||
Total maintenance capital expenditures | 2,209 | 5,457 | ||||||||
Total capital expenditures | $ | 19,470 | $ | 12,073 | ||||||
(1) |
Q1 2013 has been recast to include historical results of Sunrise Pipeline, LLC, which was merged into the Partnership on July 22, 2013. |
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(2) |
Approximately $0.2 million of the first quarter 2014 ongoing maintenance capital expenditures are expected to be reimbursed by EQT for the bare steel replacement program. |
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CONTACT:
EQT Midstream Partners, LP
Analyst inquiries
please contact:
Nate Tetlow, 412-553-5834
Investor Relations
Manager
ntetlow@eqtmidstreampartners.com
or
Patrick
Kane, 412-553-7833
Chief Investor Relations Officer
pkane@eqtmidstreampartners.com
or
Media
inquiries please contact:
Natalie Cox, 412-395-3941
Corporate
Director, Communications
ncox@eqtmidstreampartners.com