Equitrans Midstream Corp (ETRN)·Q4 2023 Earnings Summary

Executive Summary

• Q4 2023 delivered solid results: Operating revenues of $360.6M, net income attributable to common shareholders of $134.2M ($0.31 diluted EPS), adjusted EPS of $0.32, and adjusted EBITDA of $272.0M .
• Management updated MVP timing and cost: construction completion and commissioning targeted for Q2 2024; total estimated project cost raised to $7.57–$7.63B (ex-AFUDC), citing unforeseen construction conditions and substantially adverse January weather as key drivers .
• 2024 outlook introduced: Adjusted EBITDA $1.235–$1.315B; FY net income $375–$455M; total capex and capital contributions $850–$955M; Q1 2024 adjusted EBITDA $265–$285M .
• Strategic process: Board engaged advisors amid third-party interest in strategic transactions; no assurance of outcome; potential near-term catalyst alongside MVP in-service progression .

What Went Well and What Went Wrong

What Went Well

• Throughput and mix supported revenue: Q4 operating revenue rose $5.4M YoY on increased gathered volumes; transmission volumetric revenues strengthened across 2023, with ~8% full-year transmission throughput growth vs 2022 .
• Water segment growth in 2023: Water operating revenue grew ~29% YoY, reflecting build-out of mixed-use water assets and contracts .
• Management confidence and project progress: “We have made substantial construction progress on the Mountain Valley Pipeline… major tasks to complete the pipeline continue to narrow,” said CEO Diana Charletta, while highlighting in-basin organic projects (OVCX and booster compression) targeted in-service in 1H24 .

What Went Wrong

• MVP delay and higher cost: Target moved to Q2 2024 and cost increased to $7.57–$7.63B due to challenging terrain, unforeseen conditions, and adverse winter weather, which slowed productivity and required higher contractor headcount longer than planned .
• Free cash flow pressured by MVP funding: Q4 free cash flow of $(240.6)M and retained free cash flow of $(305.5)M, primarily reflecting $408.9M MVP JV capital contributions in the quarter .
• Water volumes softened in Q4: Water total volumes fell to 356MMgal (vs 358MMgal in Q3), and Q4 water operating income was $2.6M (vs $11.1M in Q4 2022), reflecting lower volumetric activity and higher depreciation .

Financial Results

Consolidated results vs prior quarters

Segment operating revenues

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Following enactment of the Fiscal Responsibility Act of 2023, we have made substantial construction progress on the Mountain Valley Pipeline… ETRN is now targeting construction completion and commissioning in the second quarter of 2024, at a total estimated project cost ranging from approximately $7.57 billion to approximately $7.63 billion.” — Diana M. Charletta, President & CEO .
• “We made significant progress on our in-basin organic projects, including the Ohio Valley Connector Expansion… targeted for in-service in the first half of 2024… our well-integrated and strategically located system of gathering, transmission, and water assets is uniquely positioned to capture the benefits of MVP’s in-service.” — Diana M. Charletta .
• “Our Board of Directors has been engaged in a process with third parties that have expressed interest in strategic transactions… There is no guarantee that any transaction will result from this process.” — Thomas F. Karam, Executive Chairman .

Q&A Highlights

• Participants included analysts from Citi, Goldman Sachs, Wells Fargo, J.P. Morgan, Bank of America, and UBS, with focus on MVP timing/cost, leverage/covenants, and commercial outlook around Southgate and OVCX .
• Management reiterated MVP drivers of delay (weather, terrain, heightened environmental protocols) and highlighted 1H24 in-service for OVCX; credit facility amendment detailed separately in the 8-K (near-term leverage ratio thresholds) .
• Clarifications centered on the phasing of 2024 financials tied to MVP contractual commencement (assumed June 1) and MVC step-ups under the EQT gathering agreement beginning April 1 .

Estimates Context

• Wall Street consensus (S&P Global) was unavailable due to a Capital IQ mapping issue for ETRN, so we cannot provide beat/miss comparisons for Q4 2023. As a result, estimate comparisons are not included in this recap.
• Company guidance implies 2024 earnings/EBITDA phasing is back-half weighted given MVP contractual start (June 1 assumption) and EQT MVC step-ups/fee relief effective April 1, which may prompt sell-side model updates to reflect intra-year ramp timing .

Key Takeaways for Investors

• MVP update is the dominant narrative: timeline pushed to Q2 2024 and budget raised; watch for execution milestones and any additional weather/terrain impacts .
• 2024 guidance sets expectations: Adjusted EBITDA $1.235–$1.315B with MVP in-service assumption from June 1; near-term quarters (Q1) lower, with ramp in 2H24 as contracts commence .
• Segment fundamentals resilient: gathering and transmission revenues sequentially improved across 2023; transmission volumetric revenues and throughput support cash generation post-MVP .
• Liquidity and leverage monitored: credit facility covenant amendments provide flexibility into 2024; deleveraging should improve after MVP is online and cash flows step up .
• Corporate optionality: strategic process with third parties could act as a catalyst; outcome uncertain—position sizing should reflect process risk/reward .
• Watch water segment variability: strong 2023 growth but quarterly swings; continued build-out and contracts underpin medium-term contribution .
• Near-term trading: sensitivity to MVP headlines and project execution; medium-term thesis hinges on contracted cash flows, MVC step-ups, and deleveraging trajectory beginning post in-service .

Source Documents

• Q4 2023 8-K (including Item 2.02 press release and exhibits): .
• Q3 2023 8-K press release and financials: .
• Q2 2023 8-K press release and financials: .
• Earnings call transcript reference (Feb 20, 2024): .
• Company press release archive and event pages: .