Midstream (EQTNP) Financial Report Summaries

Risks

• We generate a substantial majority of our revenues from EQT. Therefore, we are subject to the business and liquidity risks of EQT, and any decrease in EQT's drilling or completion activity (or significant production curtailments) or a shift in such activity away from our assets could adversely affect our business and operating results.
• Expanding our business by constructing new midstream assets subjects us to construction, business, economic, competitive, regulatory, judicial, environmental, political and legal uncertainties that are beyond our control.
• Impairments of our assets, including property, plant, and equipment, intangible assets, goodwill and our equity method investment in the MVP Joint Venture, previously have significantly reduced our earnings, and additional impairments could further reduce our earnings.
• Cyberattacks aimed at us or those third parties on which we rely, as well as any noncompliance by us or such third parties with applicable laws and regulations governing cybersecurity and/or data privacy, could materially adversely affect us.
• Our subsidiaries’ significant indebtedness, and any future indebtedness, as well as the restrictions under our subsidiaries’ debt agreements, could adversely affect our operating flexibility, business, financial condition, results of operations, liquidity and ability to pay dividends to our shareholders.
• If we, our subsidiaries or our joint ventures are unable to obtain needed capital or financing on satisfactory terms, our ability to execute our business strategy and pay dividends to our shareholders may be diminished. Additionally, financing transactions may increase our financial leverage or could cause dilution to our shareholders.
• Increasing scrutiny and changing stakeholder expectations and disclosures in respect of ESG and sustainability practices may adversely impact our business and our stock price and impose additional costs or expose us to new or additional risks.
• Our business is subject to climate change-related transitional risks (including evolving climate-focused regulation and climate change-driven trends emphasizing the financing of non-fossil fuel businesses and prompting the pursuit of emissions reductions, lower-carbon technologies, and alternative forms of energy), as well as physical risks that could significantly increase our operating expenses and capital costs, adversely affect our customers’ development plans, and reduce demand for our products and services.
• We are exposed to the credit risk of our counterparties and our credit risk management cannot completely eliminate such risk.
• Our future growth may be limited and our cash flows adversely affected if we do not complete organic growth projects, realize revenue generating volume growth on our systems and/or identify and complete inorganic strategic transactions and realize anticipated benefits therefrom, which could have a material adverse effect on our business, financial condition, results of operations, liquidity and ability to pay dividends to our shareholders. Additionally, our Board of Directors is engaged in a process with third parties that have expressed interest in strategic transactions involving the Company, and there is no assurance as to the outcome of that process.
• We have incurred and expect to incur costs and expenses as a result of or arising in relation to the Rager Mountain natural gas storage field incident in November 2022, which has included and may include potential additional regulatory penalties or other sanctions, which could, depending on their scope and timing, materially adversely affect our business, financial condition, results of operations, liquidity and ability to pay dividends to our shareholders.
• We are subject to numerous operational risks and hazards, as well as unforeseen interruptions.
• We may not be able to renew or replace expiring contracts at favorable rates, on a long-term basis or at all, and disagreements have occurred and may arise with contractual counterparties on the interpretation of existing or future contractual terms.
• We may not be able to increase our customer throughput and resulting revenue due to competition and other factors, which could limit our ability to grow.
• If third-party pipelines and other facilities interconnected to our pipelines and facilities become unavailable to transport or process natural gas or do not accept deliveries of natural gas from us, our business, financial condition, results of operations, liquidity and ability to pay dividends to our shareholders could be adversely affected.
• A substantial majority of the services we provide on our transmission and storage system are subject to long-term, fixed-price “negotiated rate” contracts that are subject to limited or no adjustment, even if our cost to perform such services exceeds the revenues received from such contracts, and, as a result, our costs could exceed our revenues received under such contracts, we could be unable to achieve the expected investment return under such contracts, and/or our business, financial condition, results of operations, liquidity and ability to pay dividends to our shareholders could be adversely affected.
• We have entered into joint ventures, and may in the future enter into additional or modify existing joint ventures, that might restrict our operational and corporate flexibility and divert our management’s time and our resources. In addition, we exercise no control over joint venture partners and it may be difficult or impossible for us to cause these joint ventures or partners to take actions that we believe would be in our or the joint venture’s best interests and these joint ventures are subject to many of the same risks to which we are subject.
• Strategic transactions that we enter into could reduce, rather than increase, our results of operations and liquidity, and adversely affect our ability to pay dividends to our shareholders.
• Significant portions of our assets have been in service for several decades. There could be unknown events or conditions, or increased maintenance or repair expenses and downtime, associated with our assets that could have a material adverse effect on our business, financial condition, results of operations, liquidity and ability to pay dividends to our shareholders.
• The loss or disengagement of key personnel or other workforce problems could adversely affect our ability to execute our strategic, operational and financial plans.
• We do not own all of the land on which our pipelines and facilities are located, which could disrupt our operations and future development.
• Our and the MVP Joint Venture’s natural gas gathering, transmission and storage services, as applicable, are subject to extensive regulation by federal, state and local regulatory authorities. Changes in or additional regulatory measures adopted by such authorities, and related litigation, could have a material adverse effect on our business, financial condition, results of operations, liquidity and ability to pay dividends.
• We are subject to stringent environmental and other laws and regulations that expose us to significant costs and liabilities that could exceed our expectations and affect our business. The current laws and regulations affecting our business are subject to change and in the future we may be subject to additional or revised laws, regulations and legal requirements, that could adversely impact our business.
• The adoption of legislation relating to hydraulic fracturing and the enactment of new or increased severance taxes and impact fees on natural gas production could cause our current and potential customers to reduce the number of wells they drill in the Marcellus and Utica Shales or curtail production of existing wells connected to our assets. If reductions are significant for those or other reasons, the reductions could have a material adverse effect on our business, financial condition, results of operations, liquidity and ability to pay dividends to our shareholders.
• If the IRS makes audit adjustments to EQM’s income tax returns for tax years beginning after 2017, the IRS (and some states) may assess and collect any resulting taxes (including any applicable penalties and interest) directly from EQM, in which case we may be required, and potentially former unitholders would be required, to reimburse EQM for such payments or, if EQM is required to bear such payments, such payments could have a material adverse effect on our business, financial position, results of operations, liquidity and ability to pay dividends to our shareholders.
• Our stock price has fluctuated and may fluctuate significantly.
• We cannot guarantee the timing, amount or payment of dividends on our common stock, and we may further reduce the amount of the cash dividend that we pay on our common stock or may not pay any cash dividends at all to our shareholders. Our ability to declare and pay cash dividends to our shareholders, if any, in the future will depend on various factors, many of which are beyond our control.
• Our shareholders’ percentage of ownership in us may be diluted by future issuances of stock, which could, among other things, have a dilutive effect on our earnings per share and related effects on the market price for our common stock.
• Anti-takeover provisions contained in our Second Amended and Restated Articles of Incorporation and Fifth Amended and Restated Bylaws, as well as provisions of Pennsylvania law, could impair an attempt to acquire us and limit the opportunity for our shareholders to receive a premium for their shares of our common stock.
• Our Fifth Amended and Restated Bylaws designate the state and federal courts sitting in the judicial district of the Commonwealth of Pennsylvania, County of Allegheny, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits and limit our shareholders’ ability to obtain a perceived favorable judicial forum for disputes with us, our directors or our officers.
• The Equitrans Midstream Preferred Shares by virtue of their terms and preferences present a number of risks to current and future holders of our common stock.
• If the Separation and Distribution, together with certain related transactions, does not continue to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, we, EQT, and our respective shareholders could be subject to significant tax liabilities and, in certain circumstances, we could be required to indemnify EQT for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
• Potential indemnification liabilities to or from EQT pursuant to agreements relating to the Separation and Distribution could materially and adversely affect us.