Equitrans Midstream Corp (ETRN)·Q2 2023 Earnings Summary

Executive Summary

• Q2 2023 delivered mixed operating results: operating revenues fell to $318.5M, GAAP diluted EPS was $0.12, and adjusted EBITDA declined to $234.7M; operating cash flow was strong at $298.6M, driving $150.7M of free cash flow .
• Management raised FY 2023 net income guidance to $420–$470M and reaffirmed adjusted EBITDA at $1,000–$1,050M; Q3 guidance calls for net income of $115–$135M and adjusted EBITDA of $225–$245M .
• Significant regulatory/legal catalyst: Supreme Court vacated Fourth Circuit stays, enabling MVP construction to resume; company targets MVP completion by year‑end 2023 at ~$6.6B total cost, with ETRN funding to ~$3.4B and ~48.3% ownership on completion .
• Segment trends: Gathering revenues softened on lower volumes (7,420 vs 7,872 BBtu/d YoY), Transmission revenues modestly higher, Water revenue/volumes up materially; operating expenses increased due to MVP performance award program and Rager Mountain incident costs .

What Went Well and What Went Wrong

What Went Well

• MVP legal/regulatory breakthrough and construction resumption: “We have resumed construction and are focused on the responsible completion of MVP’s remaining construction. We continue to target completion of MVP by year-end 2023.” — CEO Thomas F. Karam .
• Strong cash generation: net cash from operating activities of $298.6M and free cash flow of $150.7M in Q2 .
• Water business scaling: total volumes rose to 282MMgal (vs 160MMgal YoY), with water EBITDA of $7.0M in Q2; second storage facility placed into service in July (total storage capacity 350,000 barrels) .

What Went Wrong

• Top‑line and profitability pressure: operating revenues declined YoY to $318.5M and adjusted EBITDA fell to $234.7M; gathering volumes decreased to 7,420 BBtu/d .
• Higher operating expenses: +$43.6M YoY, driven by $16.8M compensation expense from MVP performance award program, $2.7M Rager Mountain incident costs, and increased SG&A/O&M/depreciation .
• Deferred revenue dynamics continue: Q2 deferred revenue of $82.0M under the EQT MVC accounting framework, reflecting timing/recognition differences .

Financial Results

Income Statement & Cash Flow Summary

EPS (GAAP and Adjusted)

Deferred Revenue

Segment Breakdown (Q2)

KPIs

Drivers and non-GAAP adjustments: Q2 net income reflects a $19.4M unrealized derivative gain tied to Henry Hub price thresholds (EQT cash bonus provision), $23.7M equity income primarily AFUDC from MVP construction resumption, and $2.7M Rager Mountain incident Opex; adjusted EBITDA reconciles these items per disclosed methodology .

Guidance Changes

Notes: Guidance assumes MVP completion and in‑service authorization by year‑end 2023; excludes potential $60M Henry Hub bonus; includes ~$10M FY Opex and $5–$10M capex related to Rager Mountain incident .

Earnings Call Themes & Trends

Management Commentary

• “We are grateful for the full support of the White House, as well as the strong leadership of Democratic and Republican legislators in recognizing the MVP as a critical energy infrastructure project… We have resumed construction and are focused on the responsible completion of MVP’s remaining construction. We continue to target completion of MVP by year-end 2023.” — Thomas F. Karam, Chairman & CEO .
• “Our employees… have embraced the importance of elevating our ESG performance… Equitrans and its employees are proud to pursue safe and innovative solutions… and we believe that incorporating ESG into our culture will serve to create long-term value for all stakeholders.” — Diana M. Charletta, President & COO .

Q&A Highlights

• Analyst focus on MVP timeline, legal posture post‑FRA/SCOTUS, and operational readiness for year‑end completion; management reiterated resumed construction and year‑end 2023 target .
• Clarifications on guidance hinged on MVP in‑service assumptions, with FY ranges reflecting timing variability and exclusion of potential Henry Hub bonus .
• Discussion of segment dynamics and expense drivers (MVP performance award program, Rager Mountain costs), and water system commercialization .

Estimates Context

• S&P Global Wall Street consensus estimates for Q2 2023 were unavailable in our dataset due to a missing CIQ mapping; as a result, beat/miss vs consensus could not be determined. Values retrieved from S&P Global* were not accessible for this period.
• Given the absence of S&P consensus, we anchor evaluation on reported actuals and prior guidance and note that expenses related to compensation accruals and incident costs weighed on adjusted EBITDA while cash generation remained robust .

Key Takeaways for Investors

• Supreme Court/FRA developments materially de‑risk MVP completion; the resumption of construction and year‑end 2023 target are stock‑moving catalysts .
• FY 2023 net income guidance was raised and free cash flow range improved; near‑term Q3 outlook is constructive despite elevated Opex from incident‑related items .
• Gathering softness (lower volumes) and higher expense run‑rate (compensation accruals) compressed EBITDA; monitor how MVP in‑service shifts mix and margin .
• Water business continues to scale with infrastructure in place; expect steady EBITDA contribution and potential cross‑selling with producers .
• OVCX is advancing to construction with a long‑term contracted base, adding optionality and growth into 2024 .
• Balance sheet/liquidity stable (consolidated debt ~$6.3B; cash ~$107.1M at Q2 close); dividend maintained at $0.15/share, signaling capital return discipline .
• Near-term trading: sentiment levered to MVP execution milestones; medium-term thesis: de‑leveraging and cash flow uplift post MVP in‑service supported by firm reservation fee mix (73% of Q2 operating revenue) .