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Analysis of EQT Midstream’s Segment-Wise Operating Performance

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EQT Midstream’s segments

EQT Midstream Partners (EQM) operates through two segments—gathering, and transmission and storage. In this article, we’ll analyze EQT Midstream’s recent segment-wise operating performance. But first let’s analyze the company’s recent overall operating results.

EQT Midstream’s adjusted operating income increased to $109.9 million in 3Q15 from $81.9 million, a YoY (year-over-year) increase of 25.7%, mainly driven by higher operating revenues.

More transmission and gathering firm contracts and higher gathering volumes were the main drivers of EQT Midstream’s operating revenues. Under firm contracts, a fixed monthly fee is charged for the reservation of pipeline capacity, regardless of whether the capacity is used.

The increase in firm reservation fees was offset by a decline in usage fees. Usage fees, or volumetric-based fees, are charged on volumes transported in excess of firm contracted capacity. Plus, under interruptible contracts, which are typically short term in nature, only a usage fee is charged.

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EQT Midstream’s gathering segment

EQT Midstream’s gathering segment mainly provides natural gas gathering and compression services. Antero Midstream Partners (AM), Rice Midstream Partners (RMP), and Crestwood Equity Partners (CEQP) are some examples of midstream MLPs that provide natural gas gathering and compression services. EQT Midstream alone constitutes ~4.5% of the Global X MLP ETF (MLPA).

In 2Q15, the company’s gathering segment surpassed its transmission and storage segment in terms of operating income, driven by the recent acquisition of gathering assets from its sponsor, EQT Corporation (EQT). EQT Midstream’s gathering segment’s recent performance was driven by higher gathering volumes under firm reservation contracts.

EQT Midstream’s transmission and storage segment

EQT Midstream’s transmission and storage segment focuses on natural gas transmission and storage. Higher transmission pipeline throughput under firm capacity reservation drove the segment’s recent performance. However, this was offset by a decline in the segment’s volumetric-based services.

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