EQT Midstream’s stock price reaction
EQT Midstream Partners (EQM) rose 2.6% on Thursday following its earnings announcement. At the same time, the Alerian MLP ETF (AMLP), which comprises 24 midstream energy MLPs, closed 0.04% lower. EQM’s gain could be due to its strong 2Q16 earnings and upward revision in 2016 EBITDA and DCF (distributable cash flow) guidance.
The partnership has returned 4.0% since the beginning of 2016. EQM’s peers, Antero Midstream Partners (AM), Rice Midstream Partners (RMP), and Western Gas Partners (WES) have returned 11.3%, 40.9%, and 7.4%, respectively in 2016.
EQM’s 2016 EBITDA guidance
EQT Midstream Partners increased its 2016 adjusted EBITDA and DCF (distributable cash flow) in its 2Q16 earnings release. This is the second time EQM has increased its 2016 guidance. The new EBITDA and DCF guidance are $555 million–$565 million and $495 million–$505 million, respectively. The new adjusted EBITDA guidance at the midpoint represents a 24.7% increase over fiscal 2015 adjusted EBITDA. Plus, EQM reiterated its “20% per unit distribution growth target in 2017.”
EQT Corporation drilling activity
EQT Corporation (EQT), EQM’s sponsor is expecting to increase its drilling capacity in 2H16. This might directly benefit EQM in future. According to Randy Crawford, EQM’s CFO, “We are currently working with EQT production to determine their gathering needs for their new development. The increased drilling activity will not change our CapEx plan for this year and any incremental gathering investments will be included in our 2017 capital budget, which we plan to announce in December. The increased activity is a clear positive indicator with throughput growth in 2017 and beyond.”