EQT Midstream Partners, LP

In January 2012, the Company formed EQM to own, operate, acquire and develop midstream assets in the Appalachian Basin. EQM provides midstream services to the Company and other third parties. EQM is consolidated in the Company's financial statements. The Company records the noncontrolling interest of the EQM public limited partners in its financial statements.

In connection with EQM's IPO in July 2012, EQM issued 17,339,718 subordinated units of EQM to the Company. On February 17, 2015, the subordinated units converted into common units representing limited partner interests in EQM on a one-for-one basis as a result of satisfaction of certain conditions for termination of the subordination period set forth in EQM's partnership agreement.

EQM Equity Offerings: The following table summarizes EQM's public offerings of its common units during the three years ended December 31, 2016.



	Common Units Issued ^(a)	GP Units Issued ^(b)	Price Per Unit		Net Proceeds		Underwriters' Discount and Other Offering Expenses
	(Thousands, except unit and per unit amounts)
May 2014 equity offering ^(c)	12,362,500	—	$	75.75	$	902,467	$	33,992
March 2015 equity offering ^(d)	9,487,500	25,255	76.00		696,582		24,468
$750 million At the Market (ATM) Program in 2015 ^(e)	1,162,475	—	74.92		85,483		1,610
November 2015 equity offering ^(f)	5,650,000	—	71.80		399,937		5,733
$750 million ATM Program in 2016 ^(g)	2,949,309	—	$	74.42	$	217,102	$	2,381


(a)	Includes the issuance of additional common units pursuant to the exercise of the underwriters' over-allotment options, as applicable.


(b)	Represents general partner units issued to EQT Midstream Services, LLC, the general partner of EQM (the EQM General Partner), in exchange for its proportionate capital contribution.


(c)	The net proceeds of the May 2014 equity offering were used by EQM to finance a portion of the cash consideration paid to EQT in connection with the Jupiter Transaction discussed below.

(d)

The underwriters exercised their option to purchase additional common units. The EQM General Partner purchased 25,255 EQM general partner units for approximately $1.9 million to maintain its then 2.0% general partner ownership percentage. In connection with the offering, the Company recorded a $122.3 million gain to additional paid-in-capital, a decrease in noncontrolling interest in consolidated subsidiary of $195.8 million and an increase to deferred tax liability of $73.5 million. EQM used the proceeds from the offering to fund a portion of the purchase price for the NWV Gathering Transaction discussed below.

(e)

In 2015, EQM entered into an equity distribution agreement that established an "At the Market" (ATM) common unit offering program, pursuant to which a group of managers, acting as EQM's sales agents, may sell EQM common units having an aggregate offering price of up to $750 million (the $750 million ATM Program). The price per unit represents an average price for all issuances under the $750 million ATM Program in 2015. The underwriters' discount and other offering expenses in the table include commissions of approximately $0.9 million and other offering expenses of approximately $0.7 million. In connection with the offerings, the Company recorded a $12.4 million gain to additional paid-in-capital, a decrease in noncontrolling interest in consolidated subsidiary of $19.8 million and an increase to deferred tax liability of $7.4 million. EQM used the net proceeds from the sales for general partnership purposes.


(f)	EQM used the net proceeds for general partnership purposes and to repay amounts outstanding under EQM's credit facility. In connection with the offering, the Company recorded a $52.1 million gain to additional paid-in-capital, a decrease in noncontrolling interest in consolidated subsidiary of $83.5 million and an increase to deferred tax liability of $31.3 million.

(g)

The price per unit represents an average price for all issuances under the $750 million ATM Program in 2016. The underwriters' discount and offering expenses in the table include commissions of approximately $2.2 million. In connection with these sales, the Company recorded a $24.9 million gain to additional paid-in-capital, a decrease in noncontrolling interest in consolidated subsidiary of $39.9 million and an increase to deferred tax liability of $15.0 million. EQM used the net proceeds for general partnership purposes.

Transactions between EQT and EQM: On May 7, 2014, EQT Gathering, LLC, an indirect wholly owned subsidiary of the Company, contributed the Jupiter gathering system to EQM in exchange for $1.18 billion (the Jupiter Transaction).

On March 17, 2015, the Company contributed the Northern West Virginia Marcellus gathering system to EQM in exchange for total consideration of $925.7 million (the NWV Gathering Transaction). On April 15, 2015, the Company transferred a preferred interest (the Preferred Interest) in EQT Energy Supply, LLC, an indirect subsidiary of the Company, to EQM in exchange for total consideration of $124.3 million. EQT Energy Supply, LLC generates revenue from services provided to a local distribution company.

On March 30, 2015, the Company assigned 100% of the membership interest in MVP Holdco, LLC (MVP Holdco), which at the time was its indirect wholly owned subsidiary, to EQM and received $54.2 million, which represented EQM's reimbursement to the Company for 100% of the capital contributions made by the Company to Mountain Valley Pipeline, LLC (MVP Joint Venture) as of March 30, 2015. As of February 9, 2017, EQM owned a 45.5% interest (the MVP Interest) in the MVP Joint Venture. The MVP Joint Venture plans to construct the Mountain Valley Pipeline (MVP), an estimated 300-mile natural gas interstate pipeline spanning from northern West Virginia to southern Virginia. The MVP Joint Venture has secured a total of 2.0 Bcf per day of 20-year firm capacity commitments, including a 1.29 Bcf per day firm capacity commitment by the Company. See Note 11.

On October 13, 2016, the Company entered into a Purchase and Sale Agreement with EQM pursuant to which EQM acquired from the Company (i) 100% of the outstanding limited liability company interests of Allegheny Valley Connector, LLC and Rager Mountain Storage Company LLC and (ii) certain gathering assets located in southwestern Pennsylvania and northern West Virginia (collectively, the October 2016 Sale). The closing of the October 2016 Sale occurred on October 13, 2016 and was effective as of October 1, 2016. The aggregate consideration paid by EQM to the Company in connection with the October 2016 Sale was $275 million, which was funded with borrowings under EQM's $750 million revolving credit facility. Concurrent with the October 2016 Sale, the operating agreement of EQT Energy Supply, LLC was amended to include mandatory redemption of the Preferred Interest at the end of the preference period, which is expected to be December 31, 2034. As a result of this amendment, EQM's investment in EQT Energy Supply, LLC converted to a note receivable for accounting purposes effective October 13, 2016. The Company recorded an impairment of long-lived assets of approximately $59.7 million related to certain gathering assets sold to EQM in the October 2016 Sale. See Note 1.

EQM Borrowings: In August 2014, EQM issued 4.00% Senior Notes due 2024 (4.00% Senior Notes) in the aggregate principal amount of $500.0 million. The indenture governing the 4.00% Senior Notes contains covenants that limit EQM’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale and leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all of EQM’s assets.

On October 26, 2016, EQM entered into a $500 million, 364-day, uncommitted revolving loan agreement with EQT (the 364-Day Facility). The 364-Day Facility will mature on October 25, 2017 and will automatically renew for successive 364-day periods unless the Company delivers a non-renewal notice at least 60 days prior to the then current maturity date. EQM may terminate the 364-Day Facility at any time by repaying in full the unpaid principal amount of all loans together with interest thereon. The 364-Day Facility is available for general partnership purposes and does not contain any covenants other than the obligation to pay accrued interest on outstanding borrowings. Interest will accrue on any outstanding borrowings at an interest rate equal to the rate then applicable to similar loans under EQM's $750 Million revolving credit facility, or a successor revolving credit facility, less the sum of (i) the then applicable commitment fee under EQM's $750 Million revolving credit facility and (ii) 10 basis points. EQM had no borrowings outstanding under the 364-Day Facility as of December 31, 2016 or at any time during the year ended December 31, 2016.

In November 2016, EQM issued 4.125% Senior Notes due 2026 (the 4.125% Senior Notes) in the aggregate principal amount of $500 million. Net proceeds from the offering of $491.4 million were used to repay the outstanding borrowings under EQM’s credit facility and for general partnership purposes. The 4.125% Senior Notes contain covenants that limit EQM’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale and leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all of EQM’s assets.

On January 19, 2017, the Board of Directors of EQM’s general partner declared a cash distribution to EQM’s unitholders for the fourth quarter of 2016 of $0.85 per common unit. The cash distribution will be paid on February 14, 2017 to unitholders of record, including EQGP, at the close of business on February 3, 2017. Based on the 80,581,758 EQM common units outstanding on February 9, 2017, the aggregate cash distributions by EQM to EQGP will be approximately $47.9 million consisting of: $18.5 million in respect of its limited partner interest, $1.8 million in respect of its general partner interest and $27.6 million in respect of its IDRs.