EQT Midstream’s Leverage Situation Is Better than Peers’



EQT Midstream’s outstanding debt

In the previous article, we looked at EQT Midstream Partners’ (EQM) recent operating performance. In this article, we’ll analyze EQT Midstream’s balance sheet position.

EQT Midstream’s total outstanding debt by the end of the third quarter was $1.0 billion. EQT Midstream issued ~$561.5 million in short-term loans in the first nine months of 2015. At the same time, it repaid ~$211.5 million in short-term loans.

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EQT Midstream’s net debt-to-EBITDA

Based on analysts’ calculations, EQT Midstream’s net debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) was 2.2x at the end of the third quarter. The company’s leverage situation has deteriorated over the recent quarters, but it is still better than that of its MLP counterparts. Peer Western Gas Partners (WES) has a net debt-to-EBITDA of 3.3x, while large midstream MLPs such as Energy Transfer Partners (ETP) and Williams Partners (WPZ) have net debt-to-EBITDA multiples of 6.4x and 7.3x, respectively. EQT Midstream alone constitutes ~4.5% of the Global X MLP ETF (MLPA).

EQT Midstream’s EBITDA-to-interest expense ratio

EQT Midstream has an impressive EBITDA-to-interest expense ratio of 10.3x. The ratio indicates a company’s ability to service its interest expense. EQT Midstream’s high EBITDA-to-interest expense ratio can be attributed to its low outstanding debt and strong EBITDA growth.

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EQT Midstream’s means of financing

EQT Midstream is using equity to fund its organic projects. It announced its second major public offering of ~5.7 million common units in 2015 on November 9, 2015. Before this, the company announced an issuance of ~8.3 million units in March 2015. EQT Midstream, which is currently trading at a relatively low distribution yield of 4.2%, is in a better position for equity financing versus its MLP counterparts that trade at relatively higher yields. We’ll discuss this further in a later part of this series.

In response to a question about EQT Midstream’s capital market access plans, EQT Midstream president and chief executive officer Dave Porges said “we’ll continue to do it how we have with equity and debt capital markets at EQM. Well, obviously, there’s talk about other alternatives being discussed by some of our competitors and whatnot and we look at everything as well. But, for the time being, our objective will be to continue to raise capital—the lowest-cost capital we can at the time we need the capital.”


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