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Did EQT Midstream Partners Beat Earnings Estimates in 1Q16?

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EQT Midstream’s 1Q16 EBITDA

EQT Midstream Partners (EQM) reported its 1Q16 earnings on April 28, 2016. EQT Midstream Partners’ 1Q16 adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased to $141.6 million from $96.6 million in 1Q15, a YoY (year-over-year) jump of 31.8%. Plus, the partnership beat its 1Q16 EBITDA estimate by 8.1%. EQM Midstream Partners alone constitutes 3.8% of the Global MLP ETF (MLPA).

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EQT Midstream’s 1Q16 EBITDA drivers

The jump in EQM’s 1Q16 EBITDA was mainly driven by the following factors:

  • Gathering: EQM’s gathering revenue increased by 24% YoY driven by “higher contracted firm gathering capacity.” Under firm contracts, a fixed monthly fee is charged for reservation of pipeline capacity regardless of whether the capacity is used.
  • Transmission and storage: The partnership’s transmission and storage revenue increased by 10% YoY due to higher throughput volumes from its sponsor, EQT Corporation (EQT). This was slightly offset by lower third-party volumes and lower demand from utilities.

EQT Midstream’s distributions

EQT Midstream Partners declared a distribution of $0.75 per unit for 1Q16. This represents a 22.0% increase over 1Q15 and a 5% increase over 4Q15. EQM’s general partner, EQT GP Holdings (EQGP), declared a quarterly distribution of $0.13 per unit for 1Q16, which represents a 10% increase over 4Q15. EQM’s peers Western Gas Partners (WES), Antero Midstream Partners (AM), and Rice Midstream Partners (RMP) saw their distributions increase 12%, 31%, and 12%, respectively on a YoY basis.

EQT Midstream Partners’ distributable cash flow for 1Q16 was $111.9 million compared to $76.2 million in 4Q14, a YoY jump of 48.2%. The increase in distributable cash flow drove EQM’s coverage ratio. Despite 22% distribution growth, EQM posted a strong distribution coverage of 1.71x in 1Q16.

In the next part of this series, we’ll look at EQM’s updated guidance.

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