UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2020
2021
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER001-38629
EQUITRANS MIDSTREAM CORPORATION
(Exact name of registrant as specified in its charter) 
Pennsylvania83-0516635
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)

2200 Energy Drive,, Canonsburg,, Pennsylvania15317
(Address of principal executive offices)     (Zip code)
(724) (724) 271-7600
(Registrant's telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, no par valueETRNNew York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒  No  ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒  No  ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
☒

Accelerated Filer                 ☐Emerging Growth Company☐
Non-Accelerated Filer☐Smaller Reporting Company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes  ☐  No  ☒
AsThe number of April 30, 2020, 229,330 shares of common stock outstanding (in thousands), no par value,as of the registrant were outstanding.April 30, 2021: 432,498



EXPLANATORY NOTE
As previously disclosed on Equitrans Midstream Corporation's (the Company or Equitrans Midstream) Current Report on Form 8-K filed with the Securities and Exchange Commission (SEC) on April 29, 2020, the filing of this Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the Quarterly Report) was delayed due to circumstances related to the coronavirus 2019 (COVID-19) pandemic. During the first quarter of 2020, the Company completed the implementation of the first phase of a new enterprise resources planning (ERP) system, which included, among other things, the cutover of a substantial majority of the Company's financial systems. The COVID-19 pandemic has resulted in very limited access to the Company's facilities, primarily due to (i) a mandatory work-from-home directive initiated by the Company's management for substantially all of the Company's workforce beginning on March 13, 2020 to ensure the safety of the Company's workforce and contractors as well as the Company's assets, and (ii) a state-wide stay-at-home order issued by the Governor of the Commonwealth of Pennsylvania on April 1, 2020, which have disrupted the timing of planned ERP system training for the Company's workforce and contractors involved in the preparation of this Quarterly Report. The Company relied on the SEC's March 25, 2020 Order (Release No. 34-88465) pursuant to Section 36 of the Securities Exchange Act of 1934, as amended (Exchange Act), to delay the filing of this Quarterly Report.


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EQUITRANS MIDSTREAM CORPORATION
Index
Page No.
43
Item 1.
65
��
7

8

910
1011
Item 2.
3329
Item 3.
4946
Item 4.
5149
Item 1.
5250
Item 1A.
5655
Item 2.
6157
Item 6.
6258
6460

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EQUITRANS MIDSTREAM CORPORATION
Glossary of Commonly Used Terms, Abbreviations and Measurements
Allowance for Funds Used During Construction (AFUDC) – carrying costs for the construction of certain long-lived regulated assets are capitalized and amortized over the related assets' estimated useful lives. The capitalized amount for construction of regulated assets includes interest cost and a designated cost of equity for financing the construction of these regulated assets.
Appalachian Basin – the area of the United States composed of those portions of West Virginia, Pennsylvania, Ohio, Maryland, Kentucky and Virginia that lie in the Appalachian Mountains.
associated gas – natural gas that is produced as a byproduct of principally oil production activities.
British thermal unit – a measure of the amount of energy required to raise the temperature of one pound of water one-degree Fahrenheit.
EQGPdelivery point – EQGP Holdings, LP (formerly known as EQT GP Holdings, LP) and its subsidiaries. the point where gas is delivered into a downstream gathering system or transmission pipeline.
EQM – EQM Midstream Partners, LP (formerly known as EQT Midstream Partners, LP) (NYSE: EQM) and its subsidiaries.
EQT – EQT Corporation (NYSE: EQT) and its subsidiaries.
EQT Global GGA – that certain Gas Gathering and Compression Agreement entered into on February 26, 2020 (the EQT Global GGA Effective Date) by the Company (through EQM) with EQT and certain affiliates of EQT for the provision of certain gas gathering services to EQT in the Marcellus and Utica Shales of Pennsylvania and West Virginia, as subsequently amended.
firm contracts – contracts for gathering, transmission, storage and water services that reserve an agreed upon amount of pipeline or storage capacity regardless of the capacity used by the customer during each month, and generally obligate the customer to pay a fixed, monthly charge.
firm reservation fee revenues – contractually obligated revenues that include fixed monthly charges under firm contracts and fixed volumetric charges under MVC (defined below) contracts.
gas – natural gas.
Minimumminimum volume commitments (MVC or MVCs) – contracts for gathering or water services that obligate the customer to pay for a fixed amount of volumes eitherdaily, monthly, annually or over the life of the contract.
Mountain Valley Pipeline (MVP) – an estimated 300 mile,300-mile, 42-inch diameter natural gas interstate pipeline with a targeted capacity of 2.0 Bcf per day that will span from the Company's existing transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia, providing access to the growing Southeast demand markets.
Mountain Valley Pipeline, LLC (MVP Joint Venture) – a joint venture among EQMthe Company and, as applicable, affiliates of each of NextEra Energy, Inc., Consolidated Edison, Inc. (Con Edison), AltaGas Ltd. and RGC Resources, Inc. that is constructing the MVP and the MVP Southgate (defined below). projects.
MVP Southgate – a proposed 75-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina.
natural gas liquids (NGLs) – those hydrocarbons in natural gas that are separated from the gas as liquids through the process of absorption, condensation, adsorption or other methods in gas processing plants. Natural gas liquids include ethane, propane, butane and iso-butane.
play– a proven geological formation that contains commercial amounts of hydrocarbons.
Preferred Interest – the preferred interest that EQMthe Company has in EQT Energy Supply, LLC (EES), a subsidiary of EQT.

Separation– the separation of EQT's midstream business, which was composed of the separately-operated natural gas gathering, transmission and storage and water services operations of EQT, from EQT's upstream business, which was composed of the natural gas, oil and natural gas liquids development, production and sales and commercial operations of EQT, which occurred on the Separation Date (defined below).

Separation Date– November 12, 2018.
throughput – the volume of natural gas transported or passing through a pipeline, plant, terminal or other facility during a particular period.
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Water Services Letter Agreement – that certain letter agreement entered into on February 26, 2020 by the Company (through EQM) and EQT, pursuant to which EQT agreed to utilize the Company for the provision of water services in Pennsylvania under existing water services agreements and new water services agreements if negotiated between the parties.
wellhead – the equipment at the surface of a well used to control the well's pressure and the point at which the hydrocarbons and water exit the ground. 
Unless context otherwise requires, a reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements contained in "Item 1. Financial Statements."

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AbbreviationsMeasurements
ASC – Accounting Standards Codification
Btu = one British thermal unit
ASU – Accounting Standards Update
BBtu = billion British thermal units
EPA– U.S. Environmental Protection Agency
Bcf   = billion cubic feet
FASB – Financial Accounting Standards Board
BcfMcf = billionthousand cubic feet
FERC – U.S. Federal Energy Regulatory Commission
Mcf MMBtu= thousand cubic feetmillion British thermal units
GAAP – United States Generally Accepted Accounting Principles
MMBtu  = million British thermal units
IDRs – incentive distribution rights
MMcf  = million cubic feet
NGA – Natural Gas Act of 1938
MMgal  = million gallons
NYMEX – New York Mercantile Exchange
MMgal = million gallons
NYSE – New York Stock Exchange

SEC – U.S. Securities and Exchange Commission

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PART I.  FINANCIAL INFORMATION
Item 1. Financial Statements

EQUITRANS MIDSTREAM CORPORATION
 Statements of Consolidated Comprehensive Income (Unaudited)
 Three Months Ended March 31,
 20212020
 (Thousands, except per share amounts)
Operating revenues (a)
$379,996 $453,113 
Operating expenses:  
Operating and maintenance34,099 38,422 
Selling, general and administrative35,494 29,739 
Transaction costs0 11,360 
Depreciation68,618 61,348 
Amortization of intangible assets16,205 14,581 
Impairments of long-lived assets (b)
0 55,581 
Total operating expenses154,416 211,031 
Operating income225,580 242,082 
Equity income (c)
3 54,072 
Other income (d)
7,599 4,163 
Loss on extinguishment of debt (e)
41,025 24,864 
Net interest expense (a)
95,144 66,754 
Income before income taxes97,013 208,699 
Income tax expense20,416 19,139 
Net income76,597 189,560 
Net income attributable to noncontrolling interests3,914 119,828 
Net income attributable to Equitrans Midstream72,683 69,732 
Preferred dividends (f)
14,628 0 
Net income attributable to Equitrans Midstream common shareholders$58,055 $69,732 
Earnings per share of common stock attributable to Equitrans Midstream common shareholders - basic (g)
$0.13 $0.28 
Earnings per share of common stock attributable to Equitrans Midstream common shareholders - diluted (g)
$0.13 $0.28 
Weighted average common shares outstanding - basic432,983 248,591 
Weighted average common shares outstanding - diluted433,158 248,591 
Statement of comprehensive income:
Net income$76,597 $189,560 
Other comprehensive income, net of tax:
Pension and other post-retirement benefits liability adjustment, net of tax expense of $12 and $1034 30 
Other comprehensive income34 30 
Comprehensive income76,631 189,590 
Less: Comprehensive income attributable to noncontrolling interests3,914 119,828 
Less: Comprehensive income attributable to preferred dividends (f)
14,628 0 
Comprehensive income attributable to Equitrans Midstream common shareholders$58,089 $69,762 
Dividends declared per common share$0.15 $0.15 
 Three Months Ended March 31,
 2020 2019
 (Thousands, except per share amounts)
Operating revenues (a)
$453,113
 $389,782
Operating expenses: 
  
Operating and maintenance (b)
38,422
 27,883
Selling, general and administrative (b)
29,739
 32,178
Separation and other transaction costs11,360
 8,782
Depreciation61,348
 50,511
Amortization of intangible assets14,581
 10,387
Impairments of long-lived assets (c)
55,581
 —
Total operating expenses211,031
 129,741
Operating income242,082
 260,041
Equity income (d)
54,072
 31,063
Other income (e)
4,163
 1,861
Loss on early extinguishment of debt24,864
 —
Net interest expense (f)
66,754
 60,949
Income before income taxes208,699
 232,016
Income tax expense19,139
 32,450
Net income189,560
 199,566
Net income attributable to noncontrolling interests119,828
 143,267
Net income attributable to Equitrans Midstream$69,732
 $56,299
    
Earnings per share of common stock attributable to Equitrans Midstream - basic (g)
$0.28
 $0.22
Earnings per share of common stock attributable to Equitrans Midstream - diluted (g)
$0.28
 $0.22
    
Weighted average common shares outstanding - basic248,591
 254,776
Weighted average common shares outstanding - diluted248,591
 254,827
    
Statement of comprehensive income (loss):   
Net income$189,560
 $199,566
Other comprehensive income (loss), net of tax:   
Pension and other post-retirement benefits liability adjustment, net of tax expense of $10 and $830
 (295)
Other comprehensive income (loss)30
 (295)
Comprehensive income189,590
 199,271
Less: Comprehensive income attributable to noncontrolling interests119,828
 143,267
Comprehensive income attributable to Equitrans Midstream$69,762
 $56,004
    
Dividends declared per common share$0.15
 $0.45

(a)Includes related party activity with EQT Corporation (EQT). See Note 6.
(b)See Note 3 for disclosure regarding impairments of long-lived assets.
(c)Represents equity income from Mountain Valley Pipeline, LLC (the MVP Joint Venture). See Note 7.
5

(a)Operating revenues included related party revenues from EQT of approximately $303.8 million and $284.5 million for the three months ended March 31, 2020 and 2019, respectively. See Note 7.
(b)Operating and maintenance expense included charges to EQT of approximately $2.4 million for the three months ended March 31, 2019. Selling, general and administrative expense included charges from EQT of approximately $1.0 million for the three months ended March 31, 2019. See Notes 1 and 7.
(c)See Note 4 for disclosure regarding impairments of long-lived assets.
(d)Represents equity income from the MVP Joint Venture. See Note 8.
(e)See Note 10 for disclosures regarding derivative instruments.
(f)Net interest expense included interest income on the Preferred Interest in EES of approximately $1.5 million and $1.6 million for the three months ended March 31, 2020 and 2019, respectively.
(g)See Note 11 for disclosure regarding the Company's calculation of net income per share of common stock (basic and diluted).
(d)See Note 9 for disclosures regarding derivative instruments.
(e)See Note 8 for disclosure regarding loss on extinguishment of debt.
(f)See Note 2for disclosure regarding the Equitrans Midstream Preferred Shares (as defined in Note 2).
(g)See Note 10 for disclosure regarding the Company's calculation of net income per share of common stock (basic and diluted).

The accompanying notes are an integral part of these consolidated financial statements.

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EQUITRANS MIDSTREAM CORPORATION
Statements of Consolidated Cash Flows (Unaudited)
 Three Months Ended March 31,
 2020 2019
 (Thousands)
Cash flows from operating activities: 
  
Net income$189,560
 $199,566
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation61,348
 50,511
Amortization of intangible assets14,581
 10,387
Deferred income taxes18,710
 32,450
Impairments of long-lived assets (a)
55,581
 —
Equity income (b)
(54,072) (31,063)
Other income(4,306) (1,997)
Loss on early extinguishment of debt24,864
 —
Share-based compensation plans4,541
 1,108
Changes in other assets and liabilities:   
Accounts receivable(998) (9,989)
Accounts payable6,067
 (47,827)
Accrued interest(28,793) (38,828)
Other assets and other liabilities(37,780) (42,117)
Net cash provided by operating activities249,303
 122,201
Cash flows from investing activities: 
  
Capital expenditures(152,392) (208,966)
Capital contributions to the MVP Joint Venture(45,150) (144,763)
Principal payments received on the Preferred Interest1,225
 1,141
Net cash used in investing activities(196,317) (352,588)
Cash flows from financing activities: 
  
Proceeds from revolving credit facility borrowings1,170,000
 684,000
Payments on revolving credit facility borrowings(350,000) (230,500)
Payment for retirement of long-term debt(594,000) —
Payments for credit facility amendment fees(2,740) (1,500)
Distributions paid to noncontrolling interest unitholders(96,526) (94,030)
Distributions paid to EQM Series A Preferred unitholders(25,501) —
Dividends paid(114,254) (104,251)
Cash Shares and Cash Amount (defined in Note 6)(52,323) —
Purchase of EQGP common units—
 (238,455)
Net cash (used in) provided by financing activities(65,344) 15,264
    
Net change in cash, restricted cash and cash equivalents(12,358) (215,123)
Cash, restricted cash and cash equivalents at beginning of period88,322
 294,172
Cash, restricted cash and cash equivalents at end of period (c)
$75,964
 $79,049
    
Cash paid during the period for: 
  
Interest, net of amount capitalized$94,343
 $98,470
    
Non-cash activity during the period for:
 
  
Contract liability$128,314
 $—


(a)See Note 4 for disclosure regarding impairments of long-lived assets.
(b)Represents equity income from the MVP Joint Venture. See Note 8.
(c)Includes $29.0 million of cash and cash equivalents and $50.0 million of cash escrowed as of March 31, 2019 associated with the Bolt-on Acquisition (as defined in Note 3).
The accompanying notes are an integral part of these consolidated financial statements.

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EQUITRANS MIDSTREAM CORPORATION
Consolidated Balance Sheets (Unaudited)
 March 31, 2020 December 31, 2019
 (Thousands)
ASSETS 
Current assets: 
  
Cash and cash equivalents$75,964
 $88,322
Accounts receivable (net of allowance for credit losses of $3,053 and allowance for doubtful accounts of $285 as of March 31, 2020 and December 31, 2019, respectively) (a)(b)
253,161
 255,344
Other current assets39,308
 31,546
Total current assets368,433
 375,212
    
Property, plant and equipment8,573,862
 8,583,124
Less: accumulated depreciation(823,100) (859,157)
Net property, plant and equipment7,750,762
 7,723,967
    
Investment in unconsolidated entity2,465,827
 2,324,108
Goodwill486,698
 486,698
Net intangible assets765,205
 797,439
Deferred income taxes45,396
 90,597
Other assets307,356
 243,688
Total assets$12,189,677
 $12,041,709
    
LIABILITIES AND EQUITY 
  
Current liabilities: 
  
Current portion of long-term debt$—
 $6,000
Accounts payable109,151
 128,114
Capital contributions payable to the MVP Joint Venture87,647
 45,150
Accrued interest44,662
 73,455
Accrued liabilities51,677
 83,238
Total current liabilities293,137
 335,957
    
Revolving credit facility borrowings (c)
1,722,500
 902,500
EQM long-term debt4,860,096
 4,859,499
Long-term debt—
 562,484
Contract liability (d)
173,005
 —
Regulatory and other long-term liabilities96,621
 99,189
Total liabilities7,145,359
 6,759,629
    
Equity: 
  
Common stock, no par value, 229,352 and 254,745 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively1,297,304
 1,292,804
Retained deficit(858,440) (618,062)
Accumulated other comprehensive loss(1,996) (2,026)
Total common shareholders' equity436,868
 672,716
Noncontrolling interests4,607,450
 4,609,364
Total shareholders' equity5,044,318
 5,282,080
Total liabilities and shareholders' equity$12,189,677
 $12,041,709


(a)Accounts receivable as of March 31, 2020 and December 31, 2019 included approximately $183.4 million and $175.2 million, respectively, of related party accounts receivable from EQT.
(b)
See Note 1 for a discussion of the adoption of ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.
(c)As of March 31, 2020, the Company had aggregate borrowings outstanding of approximately $1,430 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively (as each is defined in Note 9). As of December 31, 2019, the Company had aggregate borrowings outstanding of approximately $610 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively. The Company had 0 borrowings outstanding under the Equitrans Midstream Credit Facility as of December 31, 2019. See Note 9 for further detail.
(d)See Note 6 for disclosure regarding the Company's contract liabilities.

 Three Months Ended March 31,
 20212020
 (Thousands)
Cash flows from operating activities:  
Net income$76,597 $189,560 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation68,618 61,348 
Amortization of intangible assets16,205 14,581 
Deferred income taxes20,406 18,710 
Impairments of long-lived assets0 55,581 
Equity income(3)(54,072)
Other income(7,254)(4,306)
Loss on extinguishment of debt41,025 24,864 
Non-cash long-term compensation expense4,445 4,544 
Changes in other assets and liabilities:
Accounts receivable17,725 (998)
Accounts payable1,337 6,067 
Accrued interest(46,934)(28,793)
Deferred revenue72,019 0 
Other assets and other liabilities(34,634)(37,783)
Net cash provided by operating activities229,552 249,303 
Cash flows from investing activities:  
Capital expenditures(61,265)(152,392)
Capital contributions to the MVP Joint Venture(10,723)(45,150)
Principal payments received on the Preferred Interest (defined in Note 6)1,277 1,225 
Net cash used in investing activities(70,711)(196,317)
Cash flows from financing activities:  
Proceeds from revolving credit facility borrowings77,500 1,170,000 
Payments on revolving credit facility borrowings(70,000)(350,000)
Proceeds from the issuance of long-term debt1,900,000 0 
Debt discounts, debt issuance costs and credit facility origination fees(24,204)(2,740)
Payment for retirement of long-term debt(1,936,250)(594,000)
Distributions paid to noncontrolling interest EQM unitholders0 (96,526)
Distributions paid to holders of EQM Series A Preferred Units (as defined in Note 2)0 (25,501)
Dividends paid to holders of Equitrans Midstream Preferred Shares(14,628)0 
Dividends paid to common shareholders(64,871)(114,254)
Cash Shares and Cash Amount (as defined in Note 5)0 (52,323)
Distributions to Eureka Midstream Holdings, LLC non-controlling member(2,500)0 
Net cash used in financing activities(134,953)(65,344)
Net change in cash and cash equivalents23,888 (12,358)
Cash and cash equivalents at beginning of period208,023 88,322 
Cash and cash equivalents at end of period$231,911 $75,964 
Cash paid during the period for:  
Interest, net of amount capitalized$140,199 $94,343 
Non-cash activity during the period for:
  
Contract liability0 128,314 
The accompanying notes are an integral part of these consolidated financial statements.

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EQUITRANS MIDSTREAM CORPORATION
Statements of Consolidated EquityBalance Sheets (Unaudited)
March 31, 2021December 31, 2020
(Thousands)
ASSETS
Current assets:  
Cash and cash equivalents$231,911 $208,023 
Accounts receivable (net of allowance for credit losses of $4,281 and $4,699 as of March 31, 2021 and December 31, 2020, respectively) (a)
288,748 290,446 
Other current assets (a)
51,587 63,268 
Total current assets572,246 561,737 
Property, plant and equipment8,892,078 8,835,652 
Less: accumulated depreciation(1,076,120)(1,007,756)
Net property, plant and equipment7,815,958 7,827,896 
Investment in unconsolidated entity2,870,219 2,796,316 
Goodwill486,698 486,698 
Net intangible assets700,385 716,590 
Other assets (a)
343,341 336,615 
Total assets$12,788,847 $12,725,852 
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY  
Current liabilities:  
Current portion of revolving credit facility borrowings (b)
$310,000 $302,500 
Accounts payable67,663 72,098 
Capital contributions payable to the MVP Joint Venture72,995 10,723 
Accrued interest79,257 126,191 
Accrued liabilities44,909 83,366 
Total current liabilities574,824 594,878 
Long-term liabilities:
   Revolving credit facility borrowings (c)
485,000 485,000 
   Long-term debt6,426,670 6,443,312 
   Contract liability (a)(d)
470,769 398,750 
   Deferred income tax liability371,530 345,896 
   Regulatory and other long-term liabilities97,759 94,902 
Total liabilities8,426,552 8,362,738 
Mezzanine equity:
Equitrans Midstream Preferred Shares, 30,018 and 30,018 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively (e)
681,842 681,842 
Shareholders' equity:  
Common stock, no par value, 432,498 and 432,470 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively3,945,957 3,941,295 
Retained deficit(735,888)(728,959)
Accumulated other comprehensive loss(2,195)(2,229)
Total common shareholders' equity3,207,874 3,210,107 
Noncontrolling interests472,579 471,165 
Total shareholders' equity3,680,453 3,681,272 
Total liabilities, mezzanine equity and shareholders' equity$12,788,847 $12,725,852 
 Common Stock        
       Accumulated    
     Retained Other    
 Shares No Earnings Comprehensive Noncontrolling Total
 Outstanding Par Value (Deficit) Loss Interests Equity
 (Thousands, except per share and unit amounts)
Balance at January 1, 2019254,271
 $425,370
 $33,932
 $(1,509) $4,801,840
 $5,259,633
Other comprehensive income (net of tax):           
Net income—
 —
 56,299
 —
 143,267
 199,566
Pension and other post-retirement benefits liability adjustment, net of tax expense of $8—
 —
 316
 (295) —
 21
Dividends ($0.41 per share)—
 —
 (104,251) —
 —
 (104,251)
Share-based compensation plans413
 853
 —
 —
 255
 1,108
Distributions paid to noncontrolling interest unitholders ($1.13 per common unit for EQM)—
 —
 —
 —
 (94,030) (94,030)
Purchase of EQGP common units—
 (38,648) —
 —
 (199,807) (238,455)
Net changes in ownership of consolidated entities (See Note 2)—
 991,098
 —
 —
 (1,337,641) (346,543)
Balance at March 31, 2019254,684
 $1,378,673
 $(13,704) $(1,804) $3,313,884
 $4,677,049

(a)Includes related party activity with EQT. See Note 6.
(b)Includes aggregate borrowings outstanding on the Eureka Credit Facility (as defined in Note 8) as of March 31, 2021 and December 31, 2020. See Note 8 for further detail.
(c)Includes aggregate borrowings outstanding on the Amended EQM Credit Facility (as defined in Note 8) as of March 31, 2021 and December 31, 2020. See Note 8 for further detail.
(d)See Note 5 for disclosure regarding the Company's contract liabilities.
(e)See Note 2 for disclosures regarding the Equitrans Midstream Preferred Shares.
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 Common Stock        
       Accumulated    
     Retained Other    
 Shares No Earnings Comprehensive Noncontrolling Total
 Outstanding Par Value (Deficit) Loss Interests Equity
 (Thousands, except per share and unit amounts)
Balance at January 1, 2020254,745
 $1,292,804
 $(618,062) $(2,026) $4,609,364
 $5,282,080
Other comprehensive income (net of tax):           
Net income—
 —
 69,732
 —
 119,828
 189,560
Pension and other post-retirement benefits liability adjustment, net of tax expense of $10—
 —
 —
 30
 —
 30
Dividends ($0.45 per share)(178) —
 (115,400) —
 —
 (115,400)
Share-based compensation plans85
 4,500
 —
 —
 285
 4,785
Distributions paid to noncontrolling interest unitholders ($1.16 per common unit for EQM)—
 —
 —
 —
 (96,526) (96,526)
Distributions paid to holders of EQM Series A Preferred Units ($1.0364 per Series A Preferred Unit (as defined in Note 1))—
 —
 —
 —
 (25,501) (25,501)
Share Purchase Agreements (as defined in Note 6)(25,300) —
 (190,992) —
 —
 (190,992)
Adoption of Topic 326 (as defined in Note 1)—
 —
 (3,718) —
 —
 (3,718)
Balance at March 31, 2020229,352
 $1,297,304
 $(858,440) $(1,996) $4,607,450
 $5,044,318

The accompanying notes are an integral part of these consolidated financial statements.

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EQUITRANS MIDSTREAM CORPORATION
Statements of Consolidated Shareholders' Equity and Mezzanine Equity (Unaudited)
Common Stock
Accumulated
Other
 SharesNoRetainedComprehensiveNoncontrollingTotal
 OutstandingPar ValueDeficitLossInterestsEquity
 (Thousands, except per share and unit amounts)
Balance at January 1, 2020254,745 $1,292,804 $(618,062)$(2,026)$4,609,364 $5,282,080 
Other comprehensive income (net of tax):
Net income— — 69,732 — 119,828 189,560 
Pension and other post-retirement benefits liability adjustment, net of tax expense of $10— — 0 30 — 30 
Dividends on common shares ($0.45 per share)(178)— (115,400)— — (115,400)
Share-based compensation plans85 4,500 — — 285 4,785 
Distributions paid to noncontrolling interest unitholders ($1.16 per common unit for EQM)— — — — (96,526)(96,526)
Distributions paid to holders of EQM Series A Preferred Units ($1.0364 per EQM Series A Preferred Unit)— — — — (25,501)(25,501)
Share Purchase Agreements (as defined in Note 5)(25,300)— (190,992)— — (190,992)
Adoption of Topic 326— 0 (3,718)— 0 (3,718)
Balance at March 31, 2020229,352 $1,297,304 $(858,440)$(1,996)$4,607,450 $5,044,318 
Mezzanine
Equity
Common Stock
AccumulatedEquitrans
OtherMidstream
SharesNoRetainedComprehensiveNoncontrollingTotalPreferred
OutstandingPar ValueDeficitLossInterestsEquityShares
(Thousands, except per share amounts)
Balance at January 1, 2021432,470 $3,941,295 $(728,959)$(2,229)$471,165 $3,681,272 $681,842 
Other comprehensive income (net of tax):
Net income— — 58,055 — 3,914 61,969 14,628 
Pension and other post-retirement benefits liability adjustment, net of tax expense of $12— — — 34 — 34 — 
Dividends on common shares ($0.15 per share)— — (64,984)— — (64,984)— 
Share-based compensation plans, net28 4,662 — — — 4,662 — 
Distributions paid to noncontrolling interest in Eureka— — — — (2,500)(2,500)— 
Distributions paid to holders of Equitrans Midstream Preferred Shares ($0.4873 per share)— — — — — — (14,628)
Balance at March 31, 2021432,498 $3,945,957 $(735,888)$(2,195)$472,579 $3,680,453 $681,842 
The accompanying notes are an integral part of these consolidated financial statements.
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EQUITRANS MIDSTREAM CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
1.
1.    Financial Statements
Organization. On November 12, 2018, Equitrans Midstream Corporation (the Company or Equitrans Midstream), EQT and, for certain limited purposes, EQT Production Company, a wholly owned subsidiary of EQT, entered into a Separation and Distribution Agreement (the Separation and Distribution Agreement), pursuant to which, among other things, EQT effected the Separation, including the transfer of certain assets and liabilities to Equitrans Midstream, and distributed 80.1% of the then outstanding shares of common stock, no par value, of Equitrans Midstream (Equitrans Midstream common stock) to EQT shareholders of record as of the close of business on November 1, 2018 (the Distribution). The Distribution was effective at 11:59 p.m., Eastern Time, on the Separation Date. As part of the Separation, EQT retained the remaining 19.9% of the outstanding shares in Equitrans Midstream.
EQM Merger.Nature of Business. On February 26, 2020, the Company, EQM LP Corporation, a wholly owned subsidiary of the Company (EQM LP), LS Merger Sub, LLC, a wholly owned subsidiary of EQM LP (Merger Sub), EQM, and EQGP Services, LLC, the general partner of EQM (the EQM General Partner), entered into an Agreement and Plan of Merger (the EQM Merger Agreement), pursuant to which Merger Sub will merge with and into EQM (the EQM Merger), with EQM continuing and surviving as a wholly owned subsidiary of the Company following the EQM Merger. Following the EQM Merger, EQM will no longer be a publicly traded entity. The Company expectsprovides midstream services to its customers in Pennsylvania, West Virginia and Ohio through its three primary assets: the EQM Merger to close in June 2020, subject to customary closing conditions, including approvalsgathering system, which includes predominantly dry gas gathering systems of EQM's limited partnershigh-pressure gathering lines; the transmission system, which includes FERC-regulated interstate pipelines and storage systems; and the Company's shareholders. See Note 3water service system, which consists of water pipelines, impoundment facilities, pumping stations, take point facilities and measurement facilities that support well completion activities and collect flowback and produced water for further information on the EQM Merger.
Preferred Restructuring Agreement. In addition, on February 26, 2020, the Company and EQM entered into a Preferred Restructuring Agreement (the Restructuring Agreement) with all of the holders of Series A Perpetual Convertible Preferred Units representing limited partner interests in EQM (such units, Series A Preferred Units and, such investors, collectively, the Investors), pursuant to which the parties thereto agreed that: (i) EQM will redeem $600 million aggregate principal amount of the Investors' Series A Preferred Units issued and outstanding immediately prior to the Restructuring Closing (as defined in Note 2) for cash at 101% of the Series A Preferred Unit Purchase Price (as defined in Note 2) plus any accrued and unpaid distribution amounts and partial period distribution amounts, and (ii) after giving effect to such redemption, each remaining issued and outstanding Series A Preferred Unit will be exchanged for 2.44 shares of a newly authorized and created series of preferred stock, without par value, of Equitrans Midstream, convertible into Equitrans Midstream common stock (the Equitrans Midstream Preferred Shares) on a one for one basis (the Equitrans Midstream Private Placement), in each case, in connection with the occurrence of the “Series A Change of Control” (as defined in the Fourth Amended and Restated Agreement of Limited Partnership of EQM (as amended, the EQM Partnership Agreement)) that will occur upon the closing of the EQM Merger (collectively, the Restructuring). The Restructuring is expected to close substantially concurrent with the closing of the EQM Merger, subject to the delivery of certain closing deliverables and certain closing conditions. See Note 2 for further information on the Restructuring Agreement.recycling or disposal.
Basis of Presentation. References in these financial statements to Equitrans Midstream or the Company refer collectively to Equitrans Midstream Corporation and as applicable, its consolidated subsidiaries for all periods presented.presented, unless otherwise indicated.
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAPgenerally accepted accounting principles in the United States (GAAP) for interim financial information and with the requirements of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, these unaudited consolidated financial statements include all adjustments (consisting of only normal, recurring adjustments, unless otherwise disclosed in this Quarterly Report on Form 10-Q) necessary for a fair presentation of the financial position of the Company as of March 31, 2020 and December 31, 2019,2021, the results of its operations and equity for the three months ended March 31, 20202021 and 20192020 and its cash flows for the three months ended March 31, 20202021 and 2019.2020. The consolidated balance sheet at December 31, 20192020 has been derived from the audited financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements. This Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2019,2020, which includes all disclosures required by GAAP.

Due to, among other things, the seasonal nature of EQM'sthe Company's utility customer contracts, as well as producers’ well completion activities and varying needs for fresh and produced water (which are partially driven by horizontal lateral lengths and the number of completion stages per well), the interim statements for the three months ended March 31, 20202021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.2021.

For further information, refer to the Company's annual consolidated financial statements and related notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2019,2020, as well as "Management'sPart I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" contained herein.

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Recently Issued Accounting Standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard amended guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, this standard eliminated the probable initial recognition threshold in then current GAAP, and, in its place, requires an entity to recognize its current estimate of all expected credit losses. The amendments affected loans, debt securities, trade receivables, contract assets, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of the standard that have the contractual right to receive cash. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326). The update provides entities with targeted transition relief that is intended to increase comparability of financial statement information for some entities that otherwise would have measured similar financial instruments using different measurement methodologies. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. The update clarifies and addresses stakeholders' specific issues in ASU 2016-13.
The Company adopted the standard on January 1, 2020, using the modified retrospective method for allconsolidated financial assets recorded at amortized cost. Results for reporting periods beginning after January 1, 2020 are presented under Topic 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company's current expected credit loss (CECL) methodology considers risksstatements as of collection based on a customer’s current credit status. The standard requires an entity to assess whether financial assets share similar risk characteristics and if so, group such assets in a pool. Customer balances are aggregated for evaluation based on their credit risk rating, which takes into account changes in economic factors that impact a customer’s ability to meet its financial obligations. The Company's CECL methodology assigns a reserve, even if remote, to each customer based on credit risk. The table below summarizes the changes in the allowance for credit losses by outstanding receivable for the three months ended March 31, 2020:
 Accounts Receivable 
Contract Asset (a)
 
Preferred Interest in EES (b)
 Total
Balance at December 31, 2019$(285) $—
 $—
 $(285)
Adoption of Topic 326(2,708) —
 (1,010) (3,718)
Provision for expected credit losses(60) (116) (11) (187)
Balance at March 31, 2020$(3,053) $(116) $(1,021) $(4,190)
(a)Included in other current assets in the consolidated balance sheets.
(b)Included in other assets in the consolidated balance sheets.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, Changes to the Disclosure Requirements for Fair Value Measurement, which makes a number of changes to the hierarchy associated with Level 1, 2 and 3 fair value measurements2021, and the related disclosure requirements. This guidance is effective for fiscal years beginning afterconsolidated balance sheet at December 15, 2019, including interim periods within those fiscal years. The Company adopted this standard on January 1, 2020. The adoption of this standard did not have an impact on31, 2020, reflect the Company's financial statements.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspectsclosing of the income tax accounting guidance including the elimination of certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim periodEQM Merger and the recognition of deferred tax liabilitiesRestructuring (each as defined in Note 2). See Note 2 for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company early-adopted the standard in the first quarter of 2020 with no significant effect on its financial statements or related disclosures.further information.
Recently Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for the Amended EQM Credit Facility the Amended 2019 EQM Term Loan Agreement and the Eureka Credit Facility (each as defined in Note 8), as well as for each dividend following March 31, 2024 for the Equitrans Midstream Preferred Shares, which each use the London Inter-Bank Offered Rate (LIBOR) as a reference rate, and israte. The ASU was effective immediately but is only available through December 31, 2022. The Company is currently evaluating the potential impact of this standard on its consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible debt and convertible preferred stock by removing the requirements to separately present certain conversion features in equity. In addition, the amendments in the ASU 2020-06 also simplify the guidance in ASC Subtopic 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity, by removing certain criteria that must be satisfied in order to classify a contract as equity. Finally, the amendments revise the guidance on calculating earnings per share, requiring use of the if-converted method for all convertible instruments and rescinding an entity’s ability to rebut the presumption of share settlement for instruments that may be settled in cash or other assets. The amendments will be effective for fiscal years beginning after December 15, 2021. Early adoption is permitted for fiscal years beginning after December 15, 2020. Adoption of the guidance must commence at the beginning of the annual fiscal year. The Company is currently evaluating the potential impact of this standard on its financial statements.

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2.2.    Investments in Consolidated, Non-Wholly Owned Entities
Investment in EQGP
EQGP Unit Purchases. On December 31, 2018, the Company closed on the acquisition of an aggregate of 14,560,281 common units representing limited partner interests in EQGP (EQGP common units) pursuant to certain unit purchase agreements with funds managed by Neuberger Berman Investment Adviser LP, funds managed by Goldman Sachs Asset Management, L.P., funds managed by Cushing Asset Management, LP, funds managed by Kayne Anderson Capital Advisors, L.P., and ZP Energy Fund, L.P. (the Initial Unit Purchase Closing) for an aggregate purchase price of $291.2 million.
On January 2, 2019 and January 3, 2019, the Company closed on the acquisition of an additional 804,140 EQGP common units purchased pursuant for an aggregate purchase price of $16.1 million (together with the Initial Unit Purchase Closing on December 31, 2018, the EQGP Unit Purchases).
Limited Call Right. Following the Initial Unit Purchase Closing, on December 31, 2018, the Company exercised a limited call right under EQGP's partnership agreement pursuant to which, on January 10, 2019, the Company closed on the acquisition of the remaining 11,097,287 outstanding EQGP common units not owned by the Company or its affiliates for an aggregate purchase price of $221.9 million (such acquisition, together with the EQGP Unit Purchases, the EQGP Buyout), and EQGP became a wholly owned subsidiary of the Company.
In connection with the completion of the EQGP Buyout on January 10, 2019, certain non-employee members of the Board of Directors of EQGP's general partner at the time stepped down from their roles and were paid $20.00 for each EQGP phantom unit that they held, which was the same purchase price paid by the Company for the units purchased in the EQGP Buyout. The total amount in the aggregate was 29,829 EQGP phantom units, including accrued distributions.
Termination of the EQGP Omnibus Agreement and EQGP Working Capital Facility. On January 10, 2019, in connection with the completion of the EQGP Buyout, EQGP's omnibus agreement with Equitrans Midstream and certain other parties and EQGP's $20 million working capital facility with the Company (the EQGP Working Capital Facility) were terminated. In connection with the termination of the EQGP Working Capital Facility, the Company agreed that all loans and other amounts outstanding and all other obligations of EQGP to the Company under the EQGP Working Capital Facility were deemed forgiven, satisfied, discharged and paid in full.
Investment in EQM
EQM IDR TransactionMerger. . On February 22, 2019, Equitrans Midstream completed a simplification transactionJune 17, 2020, pursuant to that certain Agreement and Plan of Merger, dated as of February 13, 2019,26, 2020, by and among Equitrans Midstream and certain related parties, pursuant to which, among other things, (i) Equitransthe Company, EQM LP Corporation, a wholly owned subsidiary of the Company (EQM LP), LS Merger Sub, LP merged with and into EQGP (the IDR Merger) with EQGP continuing as the surviving limited partnership andLLC, a wholly owned subsidiary of EQM LP (Merger Sub), EQM and (ii) each of (a) the IDRs in EQM, (b) the economic portion ofEQGP Services, LLC, the general partner interest inof EQM (the EQM General Partner), Merger Sub merged with and (c) the issuedinto EQM (the EQM Merger), with EQM continuing and outstanding common units representing limited partner interest in EQGP were canceled, and,surviving as consideration for such cancellation, certain affiliatesan indirect, wholly owned subsidiary of the Company. Upon consummation of the EQM Merger, the Company received on a pro rata basis 80,000,000 newly-issuedacquired all of the outstanding EQM common units and 7,000,000 newly-issued Class B units, both representing limited partner interests in EQM (EQM common unitsunits) that the Company and Class B units, respectively), andits subsidiaries did not already own. Following the EQM General Partner retained the non-economic general partner interest in EQM (such transactions, collectively, the EQM IDR Transaction). Additionally, as partclosing of the EQM IDR Transaction, 21,811,643Merger, EQM common units held by EQGP were canceled and 21,811,643 EQM common units were issued pro rata to certain subsidiaries of Equitrans Midstream. Aswas no longer a resultpublicly traded entity.
At the effective time of the EQM IDR Transaction, the EQM General Partner replaced EQM Midstream Services, LLC as the new general partner of EQM.
The Class B units are substantially similar in all respectsMerger (the Effective Time), subject to EQM's common units, except that the Class B units are not entitled to receive distributions of available cash until the applicable Class B unit conversion date (or, if earlier, a change of control). The Class B units are divided into three tranches, with the first tranche of 2,500,000 Class B units becoming convertible at the holder's option intotax withholding, (i) each outstanding EQM common units on April 1, 2021, the second tranche of 2,500,000 Class B units becoming convertible on April 1, 2022, and the third tranche of 2,000,000 Class B units becoming convertible on April 1, 2023 (each, a Class B unit, conversion date). Additionally, the Class B units will become convertible at the holder's option into EQM common units immediately before a change of control of EQM. After the applicable Class B unit conversion date (or, if earlier, a change of control), whether or not such Class B units have been converted into EQM common units, the Class B units will participate pro rata with the EQM common units in distributions of available cash.
The holders of Class B units vote together with the holders of EQM common units as a single class, except that Class B units owned by the general partner of EQM and its affiliates are excluded from voting ifother than EQM common units owned by such parties are excluded from voting. Holders of Class B units are entitledthe Company and its subsidiaries, was converted into the right to vote as a separate class on any matter that adversely affects

12


the rights or preferences of the Class B units in relation to other classes of EQM partnership interests in any material respect or as required by law.
After giving effect to the EQM IDR Transaction, including the issuance of Class B units, Equitrans Gathering Holdings, LLC (Equitrans Gathering Holdings), EQM GP Corporation (EQM GP Corp) and Equitrans Midstream Holdings, LLC (EMH), each a wholly owned subsidiaryreceive 2.44 shares of Equitrans Midstream held 89,505,616, 89,536 and 27,650,303 EQM common units, respectively. Additionally, Equitrans Gathering Holdings, EQM GP Corp and EMH held 6,153,907, 6,155 and 839,938 Class B units, respectively. Asstock (the Merger Consideration); (ii) (x) $600.0 million aggregate principal amount of March 31, 2020, the Company, through such subsidiaries, owned 117,245,455 EQM common units and 7,000,000 Class B units (collectivelySeries A Perpetual Convertible Preferred Units representing a 59.9% limited partner interestinterests in EQM excluding the(such units, EQM Series A Preferred Units) issued and outstanding immediately prior to the entire non-economic general partner interest inEffective Time were redeemed by EQM while the public owned a 40.1% limited partner interest in EQM (excluding the Series A Preferred Units).
During the first quarter of 2019, as a resultfor cash at 101% of the EQM IDR Transaction, the Company recorded, in the aggregate, a $991.1 million increase of common stock, no par value, a decrease in noncontrolling interest of $1.3 billion and a decrease in deferred tax asset of $346.5 million.
EQM Merger. See Note 3 for a discussion regarding the EQM Merger.
EQM Series A Preferred Units. On March 13, 2019, EQM entered into a Convertible Preferred Unit Purchase Agreement (inclusive of certain Joinder Agreements entered into on March 18, 2019, the Preferred Unit Purchase Agreement) with certain investors to issue and sell in a private placement (the EQM Private Placement) an aggregate of 24,605,291 Series A Preferred Units for a cash purchase price of $48.77 per Series A Preferred Unit (the Series A Preferred Unit Purchase Price), resulting in total gross proceeds of approximately $1.2 billion. The net proceeds from the EQM Private Placement were used in part to fund the purchase price in the Bolt-on Acquisition (defined in Note 3) and to pay certain fees and expenses related to the Bolt-on Acquisition, and the remainder was used for general partnership purposes. The EQM Private Placement closed concurrently with the closing of the Bolt-on Acquisition on April 10, 2019. See Note 3.
The Series A Preferred Units rank senior to all EQM common units and Class B units with respect to distribution rights and rights upon liquidation. The Series A Preferred Units vote on an as-converted basis with the EQM common units and Class B units and have certain other class voting rights with respect to any amendment to the EQM Partnership Agreement or its certificate of limited partnership that would be adverse (other than in a de minimis manner) to any of the rights, preferences or privileges of the Series A Preferred Units.
The holders of the Series A Preferred Units are entitled to receive cumulative quarterly distributions at a rate of $1.0364 per Series A Preferred Unit for the first twenty distribution periods following the EQM Private Placement, and thereafter the quarterly distributions on the Series A Preferred Units will be an amount per Series A Preferred Unit for such quarter equal to (i) the Series A Preferred Unit purchase price of $48.77 per such unit multiplied by (ii)(the EQM Series A Preferred Unit Purchase Price) plus any accrued and unpaid distribution amounts and partial period distribution amounts, and (y) immediately following such redemption, each remaining issued and outstanding EQM Series A Preferred Unit was exchanged for 2.44 shares of a percentage equalnewly authorized and created series of preferred stock, without par value, of Equitrans Midstream, convertible into Equitrans Midstream common stock (the Equitrans Midstream Preferred Shares) on a one for one basis, in each case, in connection with the occurrence of the "Series A Change of Control" (as defined in the Fourth Amended and Restated Agreement of Limited Partnership of EQM (as amended, the Former EQM Partnership Agreement)) that occurred upon the closing of the EQM Merger; and (iii) each outstanding phantom unit relating to an EQM common unit issued pursuant to the sum of (A) the greater of (x) the three-month LIBORAmended and Restated EQGP Services, LLC 2012 Long-Term Incentive Plan, dated as of February 22, 2019 (the EQM LTIP), and any other award issued pursuant to the EQM LTIP, whether vested or unvested, was converted into the right to receive, with respect to each EQM common unit subject thereto, the Merger Consideration (plus any accrued but unpaid amounts in relation to distribution equivalent rights). The limited partner interests in EQM owned by the Company and its subsidiaries remained outstanding as limited partner interests in the surviving entity. The EQM General Partner continued to own the non-economic general partner interest in the surviving entity.
No fractional shares of Equitrans Midstream common stock were issued in the EQM Merger; instead, all fractions of Equitrans Midstream common stock to which an EQM common unitholder otherwise would have been entitled were aggregated and the resulting fraction was rounded up to the nearest whole share of Equitrans Midstream common stock.
In connection with the EQM Merger at the Effective Time, the Company's omnibus and secondment agreements with EQM and certain other subsidiaries of the Company terminated, subject to the survival of certain license rights and indemnification obligations.
Because the Company controlled EQM both before and after the EQM Merger, the increase in the Company’s ownership interest in EQM resulting from the EQM Merger was accounted for as an equity transaction and reflected as a reduction of the noncontrolling interest associated with public ownership of EQM common units, offset by an increase in common stock, no par value, during the second London banking dayquarter of 2020. No gain or loss was recognized in the Company’s statements of consolidated comprehensive income as a result of the EQM Merger. In addition, the tax effects of the EQM Merger were reported as adjustments to deferred income taxes and Equitrans Midstream common stock, consistent with ASC 740, Income Taxes.
Immediately prior to the beginningcompletion of the applicable quarter and (y) 2.59%, and (B) 6.90%, multiplied by (iii) 25%. EQM will not be entitled to pay any distributions on any junior securities, including anyMerger, the public limited partners collectively owned a 40.1% interest in EQM, excluding the impact of the EQM Series A Preferred Units. The publicly-owned EQM common units, or Class Bprior to completion of the EQM Merger, were reflected within noncontrolling interest in the Company's consolidated balance sheets as of March 31, 2020. The portion of EQM earnings attributable to publicly held EQM common units prior to payingcompletion of the quarterly distributions payableEQM Merger was reflected in net income attributable to noncontrolling interests in the Company's statements of consolidated comprehensive income.
Additionally, for the periods prior to the holdersEQM Merger, the Company determined that EQM was a variable interest entity. Through the Company's ownership and control of Series A Preferred Units, including any previously accruedthe general partner of EQM during those periods, the Company had the power to direct the activities that most significantly affected EQM's economic performance. As a result of the EQM Merger, EQM is no longer a variable interest entity.
The Company recorded $11.4 million in expenses related to the EQM Merger and unpaid distributions.the EQT Global GGA (defined in Note 3) during the three months ended March 31, 2020. The expenses primarily included advisor, legal and accounting fees related to the transactions and are included in transaction costs in the statements of consolidated comprehensive income.
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Preferred Restructuring Agreement. As discussed in Note 1, onOn February 26, 2020, the Company and EQM entered into thea Preferred Restructuring Agreement (the Restructuring Agreement) with all of the Investors,holders of the EQM Series A Preferred Units (such investors, collectively, the Investors), pursuant to which, at the parties thereto agreed that, concurrently with the closing of the EQM Merger:Effective Time: (i) EQM will redeemredeemed $600 million aggregate principal amount of the Investors' EQM Series A Preferred Units issued and outstanding immediately prior to the effective time of the Restructuring Closing (defined herein)below), which occurred substantially concurrent with the closing of the EQM Merger, for cash at 101% of the EQM Series A Preferred Unit Purchase Price plus any accrued and unpaid distribution amounts and partial period distribution amounts, and (ii) after giving effect toimmediately following such redemption, each remaining issued and outstanding EQM Series A Preferred Unit will bewas exchanged for 2.44 Equitrans Midstream Preferred Shares, in each case, in connection with the occurrence of the “Series A Change of Control” (as defined in the Former EQM Partnership Agreement) that will occuroccurred upon the closing of the EQM Merger.Merger (collectively, the Restructuring and, the closing of the Restructuring, the Restructuring Closing). The Equitrans Midstream Preferred Shares to be issued willwere not be registered under the Securities Act of 1933, as amended (the Securities Act), in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

The Restructuring is expected to close substantially concurrent with the closingCompany's Second Amended and Restated Articles of the EQM MergerIncorporation (the Restructuring Closing), subject to the delivery of certain closing deliverables and certain closing conditions, including, among others: (i) the continued accuracy of the representations and warranties contained in the Restructuring Agreement; (ii) the performance by each party of its respective obligations under the Restructuring Agreement; (iii) the absence of any suit, action or proceeding by any governmental authority restraining, precluding, enjoining or prohibiting the Restructuring; (iv) the closing of the EQM Merger either prior to or concurrently with the Restructuring Closing; and (v) the execution of certain agreements and delivery

13


of certain documents related to the Restructuring, including the certificate of designations to be filed by the Company with the Pennsylvania Department of State at the Restructuring Closing (the Certificate of Designations) and a registration rights agreement to be entered into by and among the Company and the Investors (the Registration Rights Agreement).

Pursuant to the Restructuring Agreement, in connection with the Restructuring Closing, the Company will file a statement with respect to shares, attaching the Certificate of Designations, with the Pennsylvania Department of State to, among other things, authorize and establishRestated Articles) set forth the designations, rights and preferences of the Equitrans Midstream Preferred Shares.
The Equitrans Midstream Preferred Shares will bewere a new class of security that willsecurities as of June 2020. They rank pari passu with any other outstanding class or series of preferred stock of Equitrans Midstreamthe Company and senior to Equitrans Midstream common stock with respect to dividend rights and rights upon liquidation. The Equitrans Midstream Preferred Shares will vote on an as-converted basis with Equitrans Midstream common stock and will have certain other class voting rights with respect to any amendment to the Certificate of Designations or the Company’s Amended and Restated Articles of Incorporation that would be adverse (other than in a de minimis manner) to any of the rights, preferences or privileges of the Equitrans Midstream Preferred Shares.

The holders of the Equitrans Midstream Preferred Shares will receive cumulative quarterly dividends at a rate per annum of 9.75% for each quarter ending on or before March 31, 2024, and thereafter the quarterly dividends at a rate per annum equal to the sum of (i) three-month LIBOR as of the LIBOR Determination Date (as defined in the Certificate of Designations)Restated Articles) in respect of the applicable quarter and (ii) 8.15%; provided that such rate per annum in respect of periods after March 31, 2024 will not be less than 10.50%. The Company willis not be entitledpermitted to pay any dividends on any junior securities, including on Equitrans Midstream common stock, prior to paying the quarterly dividends payable to the Equitrans Midstream Preferred Shares, including any previously accrued and unpaid dividends.

Each holder of the Equitrans Midstream Preferred Shares may upon issuance elect to convert all or any portion of the Equitrans Midstream Preferred Shares owned by it into Equitrans Midstream common stock initially on a one-for-one basis, subject to certain anti-dilution adjustments and an adjustment for any dividends that have accrued but not been paid when due and partial period dividends (referred to as the “conversion rate”)conversion rate), at any time (but not more often than once per fiscal quarter) after April 10, 2021 (or earlierimmediately prior to a liquidation, dissolution or winding up of the Company), provided that any conversion involves an aggregate number of Equitrans Midstream Preferred Shares of at least $20$20.0 million (calculated based on the closing price of the Equitrans Midstream common stock on the trading day preceding notice of the conversion) or such lesser amount if such conversion relates to all of a holder’s remaining Equitrans Midstream Preferred Shares or if such conversion is approved by the Company's Board of Directors.Directors (Board).
So long as the holders of the Equitrans Midstream Preferred Shares have not elected to convert all of their Equitrans Midstream Preferred Shares into Equitrans Midstream common stock, Equitrans Midstreamthe Company may elect to convert all of the Equitrans Midstream Preferred Shares forinto Equitrans Midstream common stock, at the then-applicable conversion rate, at any time after April 10, 2021, if (i) the shares of Equitrans Midstream common stock are listed for, or admitted to, trading on a national securities exchange, (ii) the closing price per share of Equitrans Midstream common stock on the national securities exchange on which the shares of Equitrans Midstream common stock are listed for, or admitted to, trading exceeds $27.99 for the 20 consecutive trading days immediately preceding notice of the conversion, (iii) the average daily trading volume of the Equitrans Midstream common stock on the national securities exchange on which the shares of Equitrans Midstream common stock are listed for, or admitted to, trading exceeds 1,000,000 shares (subject to certain adjustments) of Equitrans Midstream common stock for the 20 consecutive trading days immediately preceding notice of the conversion, (iv) the Company has an effective registration statement on file with the SEC covering resales of the shares of Equitrans Midstream common stock to be received by such holders upon any such conversion and (v) the Company has paid all prior accumulated and unpaid dividends in cash in full to the holders.

Upon certain events involving a Change of Control (as defined in the Certificate of Designations)Restated Articles) in which more than 90% of the consideration payable to the Company, or to the holders of the Equitrans Midstream common stock, is payable in cash, the Equitrans Midstream Preferred Shares will automatically convert into Equitrans Midstream common stock at a conversion ratio equal to the greater of (i) the quotient of (a) the sum of (x) $19.99 (such per share price, at which the Equitrans Midstream Preferred Shares will be issued, the Equitrans Midstream Preferred Share Issue Price
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Price) plus (y) any accrued and unpaid dividends onas of such date, including any partial period dividends, with respect to the Equitrans Midstream Preferred Shares, on such date, divided by (b) the Equitrans Midstream Preferred Share Issue Price and (ii) the quotient of (a) the sum of (x)(1) the Equitrans Midstream Preferred Share Issue Price multiplied by (2) 110% plus (y) any accrued and unpaid dividends on such date, including any partial period dividends with respect to the Equitrans Midstream Preferred Shares, on such date, divided by (ii)(b) the volume weighted average price of the shares of Equitrans Midstream common stock for the 30-day period ending immediately prior to the execution of definitive documentation relating to the Change of Control.


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In connection with other Change of Control events that do not satisfy the 90% cash consideration threshold described above, in addition to certain other conditions, each holder of Equitrans Midstream Preferred Shares may elect to (i) convert all, but not less than all, of its Equitrans Midstream Preferred Shares into Equitrans Midstream common stock at the then applicablethen-applicable conversion rate, (ii) if the Company is not the surviving entity (or if the Company is the surviving entity, but Equitrans Midstream common stock will cease to be listed), require the Company to use commercially reasonable efforts to cause the surviving entity in any such transaction to issuedeliver, in exchange for such holder's Equitrans Midstream Preferred Shares, a substantially equivalent security that has rights, preferences and privileges substantially equivalent to the Equitrans Midstream Preferred Shares (or if the Company is unable to cause such substantially equivalent securities to be issued, to exercise the option described in clause (i) or (iv) hereof or elect to convert such Equitrans Midstream Preferred Shares at a conversion ratio reflecting a multiple of invested capital), (iii) if the Company is the surviving entity, continue to hold the Equitrans Midstream Preferred Shares or (iv) require the Company to redeem the Equitrans Midstream Preferred Shares at a price per share equal to 101% of the Equitrans Midstream Preferred Share Issue Price, plus accrued and unpaid dividends, including any partial period dividends, on the applicable Equitrans Midstream Preferred Shares onas of such date, which redemption price may be payable in cash, Equitrans Midstream common stock or a combination thereof at the election of the Company's Board of Directors (and, if payable in Equitrans Midstream common stock, such Equitrans Midstream common stock will be issued at 95% of the volume-weighted average price of Equitrans Midstream common stock for the 20-day period ending on the fifth trading day immediately preceding the consummation of the Change of Control). Any holder of Equitrans Midstream Preferred Shares that requires the Company to redeem its Equitrans Midstream Preferred Shares pursuant to clause (iv) above will have the right to withdraw such election with respect to all, but not less than all, of its Equitrans Midstream Preferred Shares at any time prior to the fifth trading day immediately preceding the consummation of the Change of Control and instead elect to be treated in accordance with any of clauses (i), (ii) or (iii) above.

At any time on or after January 1, 2024, the Company will have the right, subject to applicable law, to redeem the Equitrans Midstream Preferred Shares, in whole or in part, by paying cash for each Equitrans Midstream Preferred Share to be redeemed in an amount equal to the greater of (a) the sum of (i)(1) the Equitrans Midstream Preferred Share Issue Price multiplied by (2) 110%, plus (ii) any accrued and unpaid dividends, including partial period dividends, with respect to the Equitrans Midstream Preferred Shares onas of such date and (b) the amount the holder of such Equitrans Midstream Preferred Share would receive if such holder had converted such Equitrans Midstream Preferred Share into shares of Equitrans Midstream common stock at the then-applicable conversion ratio and the Company liquidated immediately thereafter.
Pursuant to the terms of the Restructuring Agreement, in connection with the Restructuring Closing, the Company has agreed to enterentered into a registration rights agreement with the Investors (the Registration Rights AgreementAgreement) pursuant to which, among other things, the Company will givegave the Investors certain rights to require the Company to file and maintain one or more registration statements with respect to the resale of the Equitrans Midstream Preferred Shares and the shares of Equitrans Midstream common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares, and certain Investors have the right to require the Company to initiate underwritten offerings for the Equitrans Midstream Preferred Shares and the shares of Equitrans Midstream common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares.
Shared Assets Transaction. On March 31, 2019, EQM entered into an Assignment and Bill of Sale (the Assignment and Bill of Sale) with the Company pursuant to which EQM acquired certain assets and assumed certain leases that primarily support EQM's operations for an aggregate cash purchase price of $49.7 million (the initial purchase price), which reflected the net book value of in-service assets and expenditures made for assets not yet in-service (collectively, and inclusive of the additional assets subsequently acquired as described in the following sentences, the Shared Assets Transaction). Further, pursuant to the Assignment and Bill of Sale, EQM acquired, effective on the first day of the second quarter of 2019, certain additional assets from the Company for $8.9 million in cash consideration, reflecting the net book value of in-service assets and expenditures made in respect of assets not yet in-service as of June 30, 2019, which subsequent purchase price was subject to certain adjustments. Additionally, pursuant to the Assignment and Bill of Sale, EQM acquired, effective on the first day of the third quarter of 2019, additional assets from the Company for a de minimis dollar amount reflecting the net book value of such assets as of September 30, 2019. The initial and subsequent purchase prices were funded utilizing the Amended EQM Credit Facility (defined in Note 9). Prior to the Shared Assets Transaction, EQM made quarterly payments to the Company based on fees allocated from the Company for use of in-service assets transferred to EQM in the Shared Assets Transaction. In connection with the entry into the Assignment and Bill of Sale, the omnibus agreement among the Company, EQM and the EQM General Partner (as successor to the former EQM general partner) was amended and restated in order to, among other things, govern the Company’s use, and payment for such use, of the acquired assets following their conveyance to EQM and provide for reimbursement of EQM by the Company for expenses incurred by EQM in connection with such use.
EQM Cash Distribution. On April 27, 2020, the Board of Directors of the EQM General Partner declared a cash distribution to EQM's common unitholders for the first quarter of 2020 of $0.3875 per EQM common unit. The cash distribution was paid on May 14, 2020 to EQM's common unitholders of record at the close of business on May 5, 2020. Cash distributions paid by EQM to the Company were approximately $45.4 million with respect to the Company's limited partner interest in EQM.

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In addition, on April 27, 2020, the Board of Directors of the EQM General Partner declared a quarterly cash distribution on the Series A Preferred Units for the first quarter of 2020 of $1.0364 per Series A Preferred Unit. The cash distribution was paid on May 14, 2020 to holders of Series A Preferred Units of record at the close of business on May 5, 2020.
3.Acquisitions and Mergers
EQM Merger. As discussed in Note 1, on February 26, 2020, the Company, EQM, EQM LP, Merger Sub and the EQM General Partner entered into the EQM Merger Agreement, pursuant to which Merger Sub will merge with and into EQM, with EQM continuing and surviving as an indirect wholly owned subsidiary of the Company following the EQM Merger. Following the EQM Merger, EQM will no longer be a publicly traded entity. The Company expects the EQM Merger to close in June 2020, subject to customary closing conditions, including approvals of EQM's limited partners and the Company's shareholders. The Equitrans Midstream Special Meeting (defined herein)Preferred Shares are considered redeemable securities under GAAP due to the possibility of redemption outside the Company’s control. They are therefore presented as temporary equity in the mezzanine equity section of the Company’s consolidated balance sheets and the EQM Special Meeting (defined herein) are both schedulednot considered to be helda component of shareholders’ equity on June 15, 2020.
Under the terms of the EQM Merger Agreement, and subject to the satisfaction or waiver of certain conditions therein, at the effective time of the EQM Merger (the Effective Time), subject to applicable tax withholding, (i) each outstanding EQM common unit, other than EQM common units owned by the Company and its subsidiaries, will be converted into the right to receive (assuming no adjustment contemplated in the EQM Merger Agreement) 2.44 shares of Equitrans Midstream common stock (the Merger Consideration); (ii) (x) $600.0 million aggregate principal amount of the Series A Preferred Units issued and outstanding immediately prior to the Effective Time will be redeemed by EQM for cash at 101% of the Series A Preferred Unit Purchase Price plus any accrued and unpaid distribution amounts and partial period distribution amounts and, (y) after giving effect to such redemption, each remaining issued and outstanding Series A Preferred Unit will be exchanged for 2.44consolidated balance sheets. The Equitrans Midstream Preferred Shares; and (iii) each outstanding phantom unit relating to an EQM common unit issued pursuant to the Amended and Restated EQGP Services, LLC 2012 Long-Term Incentive Plan, datedShares were recorded at fair value as of February 22, 2019 (the EQM LTIP),the date of issuance, and any other award issued pursuant toincome allocations increase the EQM LTIP, whether vested or unvested, will be converted intocarrying value and declared dividends decrease the right to receive, with respect to each EQM common unit subject thereto, the Merger Consideration (plus any accrued but unpaid amounts in relation to distribution equivalent rights). The limited partner interests in EQM owned by the Company and its subsidiaries (including the Class B units) will remain outstanding as limited partner interests in the surviving entity. The EQM General Partner will continue to own the non-economic general partner interest in the surviving entity.
EQM agreed to, and the EQM General Partner will use its reasonable best efforts to cause its and EQM's and its subsidiaries' representatives to, cease and cause to be terminated any discussions or negotiations with any person conducted prior to the execution of the EQM Merger Agreement with respect to an alternative proposal, not to directly or indirectly solicit competing acquisition proposals or to enter into discussions concerning, or provide confidential information in connection with, any unsolicited alternative business combinations, subject to certain exceptions with respect to unsolicited proposals received by EQM. In addition, EQM has agreed to call a special meeting of the limited partners of EQM (the EQM Special Meeting) to approve the EQM Merger Agreement. The Conflicts Committee of the Board of Directors of the EQM General Partner (the EQM Conflicts Committee) may, subject to certain conditions, change its recommendation in favor of approval of the EQM Merger Agreement and the EQM Merger if, in connection with receipt of a superior proposal or the occurrence of a Partnership Changed Circumstance (as defined in the EQM Merger Agreement), it determines in good faith that failure to take such action would constitute a breach of, or otherwise be inconsistent with, its duties under applicable law, as modified by the EQM Partnership Agreement. However, even if the EQM Conflicts Committee changes its recommendation, the EQM Merger Agreement requires EQM to submit the EQM Merger Agreement for approval by the limited partners of EQM.
The EQM Merger Agreement contains representations and warranties from the parties and indemnification obligations, and each party has agreed to certain covenants, including, among others, covenants relating to, among others, (i) the conduct of business during the interim period between the execution of the EQM Merger Agreement and the Effective Time and (ii) the obligation to use reasonable best efforts to cause the EQM Merger to be consummated.
Completion of the EQM Merger is conditioned upon, among others: (i) approval (the Partnership Approval) of the EQM Merger Agreement and the EQM Merger by holders of a majority of the outstanding EQM common units, Class B units, and Series A Preferred Units, with such Series A Preferred Units treated as EQM common units on an as-converted basis, voting together as a single class at the EQM Special Meeting; (ii) approval (the Equitrans Midstream Shareholder Approval) of the issuance of Equitrans Midstream common stock as Merger Consideration and the issuancecarrying value of the Equitrans Midstream Preferred Shares by a majority of votes cast at a special meeting of holders of shares of Equitrans Midstream common stock (the Equitrans Midstream Special Meeting); (iii) there being no law or injunction prohibiting consummation of the transactions contemplated under the EQM Merger Agreement; (iv) the effectiveness of a registration statement on Form S-4, and no stop order suspending the effectiveness of such registration statement, relating to the issuance of shares of Equitrans Midstream common stock pursuant to the EQM Merger Agreement; (v) approval for listing on the NYSE of the shares of Equitrans Midstream common stock issuable pursuant to the EQM Merger Agreement; (vi) subject to specified materiality standards, the

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accuracy of certain representations and warranties of each party; (vii) the delivery of a tax opinion to the Company in form and substance approved by EQT, satisfying the requirements of an unqualified tax opinion (as defined in the Tax Matters Agreement, dated November 12, 2018, between EQT and the Company (the Tax Matters Agreement)) with respect to the transactions contemplated by the EQM Merger Agreement; (viii) compliance with, or waiver, if permissible, by the respective parties in all material respects with their respective covenants; and (ix) closing of the Restructuring.
The EQM Merger Agreement contains provisions granting each of the Company and EQM the right to terminate the EQM Merger Agreement for certain reasons, including, among others, (i) by the mutual written consent of the Company and EQM; (ii) if the EQM Merger has not been consummated on or before August 26, 2020; (iii) if any law, injunction, judgment or ruling enacted, promulgated, issued, entered, amended or enforced by any governmental authority shall be in effect, and has become final and nonappealable, enjoining, restraining, preventing or prohibiting the consummation of the transactions contemplated by the EQM Merger Agreement or making the consummation of the transactions contemplated by the EQM Merger Agreement illegal; (iv) if the EQM Special Meeting shall have concluded and the Partnership Approval shall not have been obtained; (v) ifShares. As the Equitrans Midstream Special Meeting shall have concludedPreferred Shares are not currently redeemable and not probable of becoming redeemable, adjustment to the initial carrying amount is not necessary and would only be required if it becomes probable that the Equitrans Midstream Shareholder Approval shall not have been obtained; or (vi) if a Partnership Adverse Recommendation Change (as defined in the EQM Merger Agreement) shall have occurred prior to receipt of the Partnership Approval (provided that EQM may only terminate as a result of Partnership Changed Circumstances (as defined in the EQM Merger Agreement)).Preferred Shares would become redeemable.
The EQM Merger Agreement contains provisions granting the Company the right to terminate the EQM Merger Agreement for certain reasons, including, (a) if EQM or the EQM General Partner shall have breached or failed to perform its representations, warranties, covenants or agreements set forth in the EQM Merger Agreement, which breach or failure (x) would give rise to a failure of certain of the conditions to the Company’s obligations to consummate the transactions contemplated by the EQM Merger Agreement and (y) is incapable of being cured or is not cured within the earlier of 30 days of written notice of such breach or failure by the Company, provided the Company shall not have the right to terminate if the Company, EQM LP or Merger Sub are in material breach of any of their representations, warranties, covenants or agreements contained in the EQM Merger Agreement, or (b) prior to receipt of Partnership Approval, EQM is in Willful Breach (as defined in the EQM Merger Agreement) of its obligations set forth under the non-solicitation provisions of the EQM Merger Agreement, provided the Company shall not have the right to terminate if the Company, EQM LP or Merger Sub are in material breach of any of its representations, warranties, covenants or agreements contained in the EQM Merger Agreement.
The EQM Merger Agreement contains provisions granting EQM the right to terminate the EQM Merger Agreement if (a) the Company has breached or failed to perform its representations, warranties, covenants or agreements set forth in the EQM Merger Agreement, which breach or failure (1) would give rise to a failure of certain of the conditions to EQM’s obligations to consummate the transactions under the EQM Merger Agreement and (2) is incapable of being cured or is not cured within the earlier of 30 days of written notice of such breach or failure by EQM, provided EQM shall not have the right to terminate if EQM or the EQM General Partner is in material breach of any of its representations, warranties, covenants or agreements contained in the EQM Merger Agreement or (b) prior to receipt of the Partnership Approval, in order to enter into an agreement providing for a Superior Proposal (as defined in the EQM Merger Agreement). Upon termination of the EQM Merger Agreement under certain circumstances, EQM will be obligated to (i) pay the Company a termination fee equal to $36.5 million and/or (ii) reimburse the Company for its expenses in an amount not to exceed $10 million. The EQM Merger Agreement also provides that upon termination of the EQM Merger Agreement under certain circumstances, the Company will be obligated to reimburse EQM for its expenses in an amount not to exceed $10 million.
The Company recorded $11.4 million in expenses related to the EQM Merger and the EQT Global GGA (defined in Note 4) during the three months ended March 31, 2020. The expenses primarily include advisor, legal and accounting fees related to the transactions and are included in separation and other transaction costs in the statements of consolidated comprehensive income.
Bolt-on Acquisition. On March 13, 2019, EQM entered into a Purchase and Sale Agreement with North Haven Infrastructure Partners II Buffalo Holdings, LLC (NHIP), an affiliate of Morgan Stanley Infrastructure Partners, pursuant to which EQM acquired from NHIP a 60% Class A interest in Eureka Midstream Holdings, LLC (Eureka Midstream) and a 100% interest in Hornet Midstream Holdings, LLC (Hornet Midstream) (collectively, the Bolt-on Acquisition) for total consideration of approximately $1.04 billion, composed of approximately $852 million in cash, net of purchase price adjustments, and approximately $192 million in assumed pro-rata debt. At the time of the acquisition, Eureka Midstream owned a 190-mile gathering header pipeline system in Ohio and West Virginia that services both dry Utica and wet Marcellus Shale production and Hornet Midstream owned a 15-mile, high-pressure gathering system in West Virginia that connects to the Eureka Midstream system. The Bolt-on Acquisition closed on April 10, 2019 and was funded through proceeds from the EQM Private Placement that closed concurrently with the Bolt-on Acquisition. See Note 2 for further information regarding the EQM Private Placement.

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The Bolt-on Acquisition was accounted for as a business combination using the acquisition method. As a result of the acquisition, the Company recognized $99.2 million of goodwill, which was allocated to the Gathering segment. Such goodwill primarily related to additional commercial opportunities, a diversified producer customer mix, increased exposure to dry Utica and wet Marcellus acreage and operating leverage within the Gathering segment. The purchase price allocation and related adjustments were finalized during the fourth quarter of 2019. The following table summarizes the final purchase price and allocation of the fair value of the assets acquired and liabilities assumed in the Bolt-on Acquisition as of April 10, 2019 by the Company, as well as certain measurement period adjustments made subsequent to the Company's initial valuation.
(in thousands) Preliminary Purchase Price Allocation (As initially reported) 
Measurement Period Adjustments (a)
 Purchase Price Allocation (As adjusted)
Consideration given:      
Cash consideration (b)
 $861,250
 $(11,404) $849,846
Buyout of portion of Eureka Midstream Class B Units and incentive compensation 2,530
 —
 2,530
Total consideration 863,780
 (11,404) 852,376
       
Fair value of liabilities assumed:      
Current liabilities 52,458
 (9,857) 42,601
Long-term debt 300,825
 —
 300,825
Other long-term liabilities 10,203
 —
 10,203
Amount attributable to liabilities assumed 363,486
 (9,857) 353,629
       
Fair value of assets acquired:      
Cash 15,145
 —
 15,145
Accounts receivable 16,817
 —
 16,817
Inventory 12,991
 (26) 12,965
Other current assets 882
 —
 882
Net property, plant and equipment 1,222,284
 (8,906) 1,213,378
Intangible assets (c)
 317,000
 (6,000) 311,000
Deferred tax asset 5,773
 (5,268) 505
Other assets 14,567
 —
 14,567
Amount attributable to assets acquired 1,605,459
 (20,200) 1,585,259
       
Noncontrolling interests (486,062) 7,602
 (478,460)
       
Goodwill as of April 10, 2019 $107,869
 $(8,663) $99,206
Impairment of goodwill (d)
     (99,206)
Goodwill as of March 31, 2020     $—

(a)The Company recorded measurement period adjustments to its preliminary acquisition date fair values due to the refinement of its valuation models, assumptions and inputs. The measurement period adjustments were based upon information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of the amounts recognized at that date.
(b)The cash consideration for the Bolt-on Acquisition was adjusted by approximately $11.4 million related to working capital adjustments and the release of all escrowed indemnification funds to EQM.
(c)After considering the refinements to the valuation models, the Company estimated the fair value of the customer-related intangible assets acquired as part of the Bolt-on Acquisition to be $311.0 million. As a result, the fair value of the customer-related intangible assets was decreased by $6.0 million on September 30, 2019 with a corresponding increase to goodwill. In addition, the change to the provisional amount resulted in a decrease in amortization expense and accumulated amortization of approximately $0.4 million.
(d)During the third quarter of 2019, the Company identified impairment indicators that suggested the fair value of its goodwill was more likely than not below its carrying amount. As such, the Company performed an interim goodwill impairment assessment, which resulted in the Company recognizing impairment to goodwill of approximately $268.1 million, of which $99.2 million was associated with its Eureka/Hornet reporting unit, bringing the reporting unit's goodwill balance to 0.
See Note 6 for a discussion regarding the Share Purchase Agreements.

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4.3.     Impairments of Long-Lived Assets and Other-Than-Temporary Decline in Value
Goodwill. On February 26, 2020 (the EQT Global GGA Effective Date), EQMthe Company (through EQM) entered into a Gas Gathering and Compression Agreement (the(as amended, the EQT Global GGA) with EQT for the provision of certain gas gathering services to EQT in the Marcellus and Utica Shales of Pennsylvania and West Virginia (as further discussed in Note 6)5). Prior to the EQT Global GGA Effective Date, the Company operated 3 reportable operating segments and 7
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reporting units, which are one level below the operating segment level and are generally based on how segment management reviews the Company's operating results. Commencing with the EQT Global GGA Effective Date, the Company reduced its reporting units from 7 to 6 and maintained its 3 reportable operating segments. As of the EQT Global GGA Effective Date, the only reporting unit to which the Company had goodwill recorded related to the Pennsylvania gathering assets acquired in connection with EQM's merger withacquisition of Rice Midstream Partners LP and its general partner in July 2018 (RMP PA Gas Gathering reporting unit). As a result of the EQT Global GGA, the assets under, and operations associated with, the RMP PA Gas Gathering reporting unit and the reporting unit associated with the gas gathering and compression activities of EQM Gathering Opco, LLC, an indirect wholly owned subsidiary of EQMthe Company (EQM Opco reporting unit), were combined to service a collective MVCminimum volume commitment (MVC) under the agreement. Therefore, effective on the EQT Global GGA Effective Date, the RMP PA Gas Gathering reporting unit was merged with and into the EQM Opco reporting unit, with the EQM Opco reporting unit surviving.
During the first quarter of 2020, the Company identified impairment indicators in the form of significant declines in the unit price of EQM'sEQM common units and corresponding market capitalization. Management considered these declines as indicators that the fair value of the RMP PA Gas Gathering reporting unit was more likely than notmay have been below its carrying amount, and the performance of an interim quantitative goodwill impairment assessment was required. Additionally, as a result of the combination of the RMP PA Gas Gathering reporting unit and the EQM Opco reporting unit, the Company tested both the RMP PA Gas Gathering and the merged EQM Opco reporting units for goodwill impairment. In estimating the fair value of the RMP PA Gas Gathering and the merged EQM Opco reporting units, the Company used a combination of the income approach and the market approach. The Company used the income approach’s discounted cash flow method, which applies significant inputs not observable in the public market (Level 3), including estimates and assumptions related to the use of an appropriate discount rate, future throughput volumes, operating costs, capital spending and changes in working capital. The Company used the market approach’s comparable company and reference transaction methods. The comparable company method evaluates the value of a company using metrics of other businesses of similar size and industry. The reference transaction method evaluates the value of a company based on pricing multiples derived from similar transactions entered into by similar companies.
As a result of the interim assessment, the Company determined that the fair values of the RMP PA Gas Gathering reporting unit and the merged EQM Opco reporting unit as applicable, were greater than their respective carrying values. No impairment to goodwill was recorded during the three months ended March 31, 2020. The Company believes the estimates and assumptions used in estimating its reporting units’ fair values are reasonable and appropriate; however, different assumptions and estimates could materially affect the calculated fair values of the RMP PA Gas Gathering reporting unit and the merged EQM Opco reporting unit and the resulting conclusionconclusions on impairment of goodwill, which could materially affect the Company’s results of operations and financial position. Additionally, actual results could differ from these estimates.estimates and assumptions may not be realized.
As of March 31, 2021, the Company's goodwill balance was associated entirely with the EQM Opco reporting unit. During the three months ended March 31, 2021, no impairment indicators were identified that would indicate, in management's judgment, it is more likely than not that the fair value of the EQM Opco reporting unit was less than its carrying value. However, the EQM Opco reporting unit is susceptible to impairment risk from future adverse market or economic conditions and company-specific qualitative factors or other adverse factors such as unexpected future production curtailments by the Company's customers that have contracts with volumetric-based fees. Any additionalsuch adverse changes in the future could reduce the underlying cash flows used to estimate the fair value of the merged EQM Opco reporting unit and could result in a decline in fair value that could trigger future impairment charges relating to the EQM Opco reporting unit.
Long-lived assets, including intangible assets and equity method investments.Assets. As of March 31, 2020, the Company performed a recoverability test of the Hornet Midstream Holdings, LLC (Hornet Midstream) long-lived assets due to decreased producer activity. As a result of the recoverability test, management determined that the carrying value of the Hornet Midstream long-lived assets acquired in the Bolt-on Acquisition(which consisted of gathering assets and customer-related intangible assets) was not recoverable under ASC 360, Impairment Testing: Long-Lived Assets Classified as Held and Used. The Hornet Midstream asset group consists of gathering assets and customer-related intangible assets. During the first quarter of 2020, the Company estimated the fair value of the Hornet Midstream asset group and determined that the fair value was not in excess of the assets’ carrying value, which resulted in impairment charges of approximately $37.9 million to the gathering assets and approximately $17.7 million to the customer-related intangible assets both within the Company’s Gathering segment. The non-cash impairment charges were recognized during the first quarter of 2020 and are included in the impairments of long-lived assets line on the statements of consolidated comprehensive income forincome.
During the periodthree months ended March 31, 2020.2021, there were no events or changes in circumstance identified that would indicate, in management's judgment, that the carrying value of the Company's long-lived assets may not be recoverable.
TheEquity Method Investment. During 2020, the MVP Joint Venture received certain adverse court rulings in the U.S. Fourth Circuit Court of Appeals as described in “Item 1. Legal Proceedings” of Part II of this Quarterly Report on Form 10-Q. As a result, the Company is also required to evaluate EQM’sevaluated its equity method investments, including investmentsinvestment in the MVP Joint Venture to determine whether they are impaired under ASC 323, for impairment during the fourth quarter
15
Investments - Equity Method
of 2020 and Joint Ventures. The standard for determining whether an impairment must be recorded under ASC 323 is whether there occurred an other-than-temporary decline in value. The evaluation and measurement of impairments under ASC 323 involves the same uncertainties as described for long-lived assets that EQM owns directly and accounts for in accordance with ASC 360. The estimatesdetermined that the fair value of the investment continued to exceed the carrying value and, therefore, no impairment was necessary. The Company makes with respect to EQM's equity method investments areestimated the fair value of its investment in the MVP Joint Venture using an income approach that primarily considered probability-weighted scenarios of discounted future net cash flows based uponon the most recent estimate of total project costs and revenues as of December 31, 2020. These scenarios reflected assumptions that management believes are reasonable,and judgments regarding various future court decisions and regulatory authorizations and the impact that those decisions and authorizations may have on the timing and extent of variationsthe Company’s investment, including scenarios assuming the full resolution of permitting issues. The Company’s analysis took into account, among other things, growth expectations from additional compression expansion opportunities. The Company generally used an after-tax discount rate of 5.5% in these estimates or the underlying assumptions could be material. Additionally, ifanalysis derived based on a market participant approach. Based on the Company’s expectations for the MVP Joint Venture's projects, in which EQM holds these investments recognize an impairment under ASC 360,and taking into account, among other things, regulatory considerations, public support for the MVP project by the Chairman of the U.S. Senate Committee on Energy and Natural Resources, and other publicly available information, the Company would record its proportionateassigned higher probabilities for scenarios under which the Company received all required legal and regulatory approvals and authorizations and certain compression expansion opportunities are realized. A low probability was assigned to the scenario under which the project is cancelled.

19


share of that impairment loss and would evaluate its investment for an other-than-temporary decline in value under ASC 323. The Company has evaluated its equity method investments, including investmentsinvestment in the MVP Joint Venture as of March 31, 20202021, including the impact of recent legal and regulatory events, and determined that there was not an other-than-temporary decline in value.
There is risk that the carrying value of EQM's investmentsthe Company's investment in the MVP Joint Venture may be impaired in the future. There are ongoing legal and regulatory matters that must be resolved favorably before each of the MVP and MVP Southgate projects can be completed. Assumptions and estimates utilized to test EQM’s investmentsin assessing the Company’s investment in the MVP Joint Venture for impairment, including as of March 31, 2021, may change if adversedepending on the nature or delayedtiming of resolutions to these legal or regulatory matters wereor based on other relevant developments. Adverse changes in circumstances relevant to occur, whichthe likelihood of project completion could prompt the Company, in future assessments, to apply a lower probability of project completion. Such changes in assumptions or estimates (including probability) could have a material adverse effect on the fair value of EQM's investmentsthe Company's investment in the MVP Joint Venture.Venture and potentially result in an impairment.
5.4.    Financial Information by Business Segment
The Company through its control of EQM, reports its operations in 3 segments that reflect its 3 lines of business:business of Gathering, Transmission and Water.Water, which reflects the manner in which management evaluates the business for making operating decisions and assessing performance.
 Three Months Ended March 31,
 20212020
 (Thousands)
Revenues from customers:  
Gathering$250,076 $310,047 
Transmission111,419 106,615 
Water18,501 36,451 
Total operating revenues$379,996 $453,113 
Operating income:  
Gathering (a)
$139,854 $155,228 
Transmission81,488 78,434 
Water4,477 17,752 
Headquarters (b)
(239)(9,332)
Total operating income$225,580 $242,082 
Reconciliation of operating income to net income: 
Equity income (c)
$3 $54,072 
Other income (d)
7,599 4,163 
Loss on extinguishment of debt41,025 24,864 
Net interest expense95,144 66,754 
Income tax expense20,416 19,139 
Net income$76,597 $189,560 
16
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(a)Impairments of long-lived assets of $55.6 million for the three months ended March 31, 2020 were included in Gathering includes EQM's high-pressure gathering linesoperating income. See Note 3 for further information.
(b)Includes transaction costs and FERC-regulated low-pressure gathering lines;other unallocated corporate expenses.
(c)Equity income is included in the Transmission includes EQM's FERC-regulated interstate pipelines and storage system; and Water consists of EQM's water pipelines, impoundment facilities, pumping stations, take point facilities and measurement facilities. On April 30, 2020, EQM filed with the FERC its request to abandon the remaining 927 miles of its non-core, FERC-regulated low-pressure gathering pipelines (includedsegment.
(d)Includes unrealized gains on derivative instruments recorded in the Gathering segment)segment.
March 31, 2021December 31, 2020
 (Thousands)
Segment assets:  
Gathering$7,729,872 $7,739,836 
Transmission (a)
4,422,347 4,357,382 
Water174,803 185,802 
Total operating segments12,327,022 12,283,020 
Headquarters, including cash461,825 442,832 
Total assets$12,788,847 $12,725,852 
(a)The equity investment in the MVP Joint Venture is included in the Transmission segment.
 Three Months Ended March 31,
 20212020
 (Thousands)
Depreciation:  
Gathering$46,547 $40,440 
Transmission13,800 13,558 
Water8,175 7,116 
Headquarters96 234 
Total$68,618 $61,348 
Expenditures for segment assets:
Gathering (a)
$48,113 $111,454 
Transmission (b)
3,505 10,798 
Water4,807 3,476 
Headquarters1,157 1,876 
Total (c)
$57,582 $127,604 
(a)Includes approximately $1.7 million and 11$12.5 million of capital expenditures related compressor station facilities.to the noncontrolling interest in Eureka Midstream Holdings, LLC (Eureka Midstream) for the three months ended March 31, 2021 and 2020, respectively.
  Three Months Ended March 31,
  2020 2019
 (Thousands)
Revenues from customers:  
  
Gathering $310,047
 $261,881
Transmission 106,615
 109,859
Water 36,451
 18,042
Total operating revenues $453,113
 $389,782
Operating income:  
  
Gathering $155,228
 $182,078
Transmission 78,434
 84,750
Water 17,752
 1,186
Other (a)
 (9,332) (7,973)
Total operating income $242,082
 $260,041
     
Reconciliation of operating income to net income:    
Equity income (b)
 $54,072
 $31,063
Other income 4,163
 1,861
Loss on early extinguishment of debt 24,864
 —
Net interest expense 66,754
 60,949
Income tax expense 19,139
 32,450
Net income $189,560
 $199,566

(b)Transmission capital expenditures do not include aggregate capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of $10.7 million and $45.2 million for the three months ended March 31, 2021 and 2020, respectively.
(a)Includes separation and other transaction costs and other operating expenses incurred by the Company separate from and in addition to similar costs incurred by EQM.
(b)Equity income is included in the Transmission segment.

(c)The Company accrues capital expenditures when the work has been completed but the associated bills have not yet been paid. Accrued capital expenditures are excluded from the statements of consolidated cash flows until they are paid. The net impact of non-cash capital expenditures, including the effect of accrued capital expenditures, transfers to/from inventory as assets are completed/assigned to a project and capitalized share-based compensation costs, was $3.7 million and $24.8 million for the three months ended March 31, 2021 and 2020, respectively.
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 March 31, 2020 December 31, 2019
 (Thousands)
Segment assets: 
  
Gathering$7,633,394
 $7,572,911
Transmission (a)
4,034,646
 3,903,707
Water208,651
 202,440
Total operating segments11,876,691
 11,679,058
Headquarters, including cash312,986
 362,651
Total assets$12,189,677
 $12,041,709

(a)The equity investments in the MVP Joint Venture are included in the Transmission segment.
 Three Months Ended March 31,
 2020 2019
 (Thousands)
Depreciation: 
  
Gathering$40,440
 $28,116
Transmission13,558
 12,533
Water7,116
 6,416
Other234
 3,446
Total$61,348
 $50,511
Capital expenditures for segment assets:   
Gathering (a)
$111,454
 $158,000
Transmission (b)
10,798
 18,762
Water3,476
 9,175
Other1,876
 3,396
Total (c)
$127,604
 $189,333
(a)Includes approximately $12.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
(b)Transmission capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
(c)The Company accrues capital expenditures when the work has been completed but the associated bills have not yet been paid. Accrued capital expenditures are excluded from the statements of consolidated cash flows until they are paid. Accrued capital expenditures were approximately $61.0 million and $85.8 million at March 31, 2020 and December 31, 2019, respectively. Accrued capital expenditures were approximately $89.7 million and $109.3 million at March 31, 2019 and December 31, 2018, respectively.
6.5.    Revenue from Contracts with Customers
For the three months ended March 31, 20202021 and 2019,2020, all revenues recognized on the Company's statements of consolidated comprehensive income are from contracts with customers. As of March 31, 20202021 and December 31, 2019,2020, all receivables recorded on the Company's consolidated balance sheets representrepresented performance obligations that have been satisfied and for which an unconditional right to consideration exists.

Summary of Disaggregated Revenues.disaggregated revenues. The tables below provide disaggregated revenue information by business segment.

Three Months Ended March 31, 2021
GatheringTransmissionWaterTotal
(Thousands)
Firm reservation fee revenues (a)
$148,192 $101,389 $1,844 $251,425 
Volumetric-based fee revenues (b)
101,884 10,030 16,657 128,571 
Total operating revenues$250,076 $111,419 $18,501 $379,996 
Three Months Ended March 31, 2020
GatheringTransmissionWaterTotal
(Thousands)
Firm reservation fee revenues (a)
$152,079 $99,597 $12,776 $264,452 
Volumetric-based fee revenues157,968 7,018 23,675 188,661 
Total operating revenues$310,047 $106,615 $36,451 $453,113 
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  Three Months Ended March 31, 2020
  Gathering Transmission Water Total
  (Thousands)
Firm reservation fee revenues (a)
 $152,079
 $99,597
 $12,776
 $264,452
Volumetric-based fee revenues 157,968
 7,018
 23,675
 188,661
Total operating revenues $310,047
 $106,615
 $36,451
 $453,113
         
  Three Months Ended March 31, 2019
  Gathering Transmission Water Total
  (Thousands)
Firm reservation fee revenues $128,959
 $99,224
 $2,884
 $231,067
Volumetric-based fee revenues 132,922
 10,635
 15,158
 158,715
Total operating revenues $261,881
 $109,859
 $18,042
 $389,782

(a)For the three months ended March 31, 2020, firm reservation fee revenues associated with Gathering and Water included approximately $6.3 million and $5.0 million, respectively, of MVC unbilled revenues.
(a) For the three months ended March 31, 2021, firm reservation fee revenues associated with Gathering and Water included approximately $3.2 million and $0.5 million, respectively, of MVC unbilled revenues. For the three months ended March 31, 2020, firm reservation fee revenues associated with Gathering and Water included approximately $6.3 million and $5.0 million, respectively, of MVC unbilled revenues.
(b) For the three months ended March 31, 2021, volumetric-based fee revenues associated with Gathering included approximately $6.2 million of unbilled revenues.
Contract Assets.assets. The Company recognizes contract assets primarily in instances where billing occurs subsequent to revenue recognition and the Company's right to invoice the customer is conditioned on something other than the passage of time. The Company's contract assets primarily consist of revenue recognized under contracts containing MVC's wherebyMVCs (whereby management has concluded (i) it is probable there will be a MVC deficiency payment at the end of the then currentthen-current MVC period, which is typically the period beginning at the inception of such contracts through the successive twelve month periods after that date, and (ii) that a significant reversal of revenue recognized currently for the future MVC deficiency payment will not occur.occur), as well as certain other contractual commitments. As a result, the Company's contract assets related to the Company's future MVC deficiency payments are generally expected to be collected within the next twelve months and are primarily included in other current assets in the Company's consolidated balance sheetsheets until such time as the MVC deficiency payments are invoiced to the customer.
The following table presents changes in the Company's unbilled revenue balance during the three months ended March 31, 2021 and 2020:
Unbilled Revenue
20212020
(Thousands)
Balance as of beginning of period$18,618 $0 
  Revenue recognized in excess of amounts invoiced (a)
10,188 11,305 
  Minimum volume commitments invoiced (b)
(16,931)0 
Balance as of end of period$11,875 $11,305 
  Unbilled Revenue
  (Thousands)
Balance as of January 1, 2020 $—
  Revenue recognized in excess of amounts invoiced 11,305
  Minimum volume commitments invoiced (a)
 —
Balance as of March 31, 2020 $11,305

(a)Primarily includes revenues associated with unbilled MVCs that are generally included in firm reservation fee revenues within the Gathering and Water segments, as described in the Summary of Disaggregated Revenues table above, and other contractual commitments of approximately $6.2 million.
(a)Unbilled revenues are transferred to accounts receivable once the Company has an unconditional right to consideration from the customer.
(b)Unbilled revenues are transferred to accounts receivable once the Company has an unconditional right to consideration from the customer.
Contract Liabilities.liabilities. As of March 31, 2021 and December 31, 2020, the Company's contract liabilities consistconsisted of deferred revenue associated with the EQT Global GGA, in the form ofincluding advance payments from EQT associated with the Rate Relief Shares (as defined below) acquired by Equitrans Midstreamthe Company as consideration for certain commercial terms and the initial fair value of the Henry Hub cash bonus payment provision (as defined below). The contract liabilities are classified as current or non-current according to when such amounts are expected to be recognized. As of March 31, 2021 and December 31, 2020, the contract liabilities arewere classified as non-current as none of the deferred revenue is expected to be recognized in revenue during the next five years.
Contracts requiring advance payments and the recognition of contract liabilities are evaluated to determine whether the advance payments provide the Company with a significant financing benefit. This determination requires significant judgment and is based on the combined effect of the expected length of time between when the Company transfers the promised good or service to the customer and when the customer pays for those goods or services and the prevailing interest rates. The Company has assessed the EQT Global GGA and determined that this agreement does not contain a significant financing component.
The following table presents changes in the Company's deferred revenuecontract liability balances during the three months ended March 31, 2021 and 2020:

Contract Liability
20212020
(Thousands)
Balance as of beginning of period$398,750 $0 
  Amounts recorded during the period (a)
72,019 173,005 
  Amounts transferred during the period (b)
0 0 
Balance as of end of period$470,769 $173,005 
22(a)Includes deferred billed revenue during the three months ended March 31, 2021 associated with the EQT Global GGA.

Table(b)Deferred revenues are recognized as revenue upon satisfaction of Contentsthe Company's performance obligation to the customer.



  Deferred Revenue
  (Thousands)
Balance as of January 1, 2020 $—
  Amounts recorded during the period 173,005
  Amounts transferred during the period (a)
 —
Balance as of March 31, 2020 $173,005
(a)Deferred revenues are recognized as revenue upon satisfaction of the Company's performance obligation to the customer.
Summary of Remaining Performance Obligations.remaining performance obligations. The following table summarizes the estimated transaction price allocated to the Company's remaining performance obligations under all contracts with firm reservation fees and MVCs as of March 31, 20202021 that the Company will invoice or transfer from contract liabilities and recognize in future periods.
 
2020(a)
 2021 2022 2023 2024 Thereafter Total
2021(a)
2022202320242025ThereafterTotal
(Thousands) (Thousands)
Gathering firm reservation fees $76,009
 $173,406
 $175,674
 $173,691
 $170,621
 $1,388,240
 $2,157,641
Gathering firm reservation fees$119,725 $158,728 $158,635 $157,133 $149,626 $1,193,074 $1,936,921 
Gathering revenues supported by MVCs 382,384
 570,492
 606,232
 638,577
 633,626
 5,356,728
 8,188,039
Gathering revenues supported by MVCs381,065 562,069 601,269 561,891 563,413 4,811,434 7,481,141 
Transmission firm reservation fees 255,426
 374,688
 371,639
 333,315
 273,711
 2,505,063
 4,113,842
Transmission firm reservation fees261,713 386,931 346,599 284,527 248,850 2,391,273 3,919,893 
Water revenues supported by MVCs 27,017
 60,000
 60,000
 60,000
 60,000
 60,000
 327,017
Water revenues supported by MVCs1,500 35,000 60,000 60,000 60,000 85,000 301,500 
Total $740,836
 $1,178,586
 $1,213,545
 $1,205,583
 $1,137,958
 $9,310,031
 $14,786,539
Total (b)
Total (b)
$764,003 $1,142,728 $1,166,503 $1,063,551 $1,021,889 $8,480,781 $13,639,455 

(a)    April 1, 2021 through December 31, 2021.
(a)April 1, 2020 through December 31, 2020.
(b)    Includes assumptions regarding timing for placing certain projects in-service, including the MVP in summer 2022. Delays in the in-service dates for projects may substantially alter the remaining performance obligations for certain contracts with firm reservation fees and/or MVCs. See Note 12 to the consolidated financial statements for a discussion of the targeted timing of the in-service date of the MVP.
Based on total projected contractual revenues, including projected contractual revenues from future capacity expected from expansion projects that are not yet fully constructed for which the Company has executed firm contracts, the Company's firm gathering contracts and firm transmission and storage contracts had weighted average remaining terms of approximately 15 years and 14 years, respectively, as of March 31, 2020.2021.
EQT Global GGA. On the EQT Global GGA Effective Date, EQMthe Company entered into the EQT Global GGA with EQT for the provision by EQMthe Company of certain gas gathering services to EQT in the Marcellus and Utica Shales of Pennsylvania and West Virginia. Pursuant to the EQT Global GGA, EQT is subject to an initial annual MVC of 3.0 Bcf per day that gradually steps up to 4.0 Bcf per day for several years following the in-service date of the MVP. The EQT Global GGA runs from the EQT Global GGA Effective Date through December 31, 2035, and will renew annually thereafter unless terminated by EQT or EQMthe Company pursuant to its terms. Pursuant to the EQT Global GGA, EQMthe Company has certain obligations to build connections to connect EQT wells to itsthe Company's gathering system, which are subject to geographical limitations in relation to the dedicated area in Pennsylvania and West Virginia, as well as the distance of such connections to EQM'sthe Company's then-existing gathering system. Management has estimated the total consideration expected to be received over the life of the EQT Global GGA, including gathering MVC revenue with a declining rate structure, the fair value of the Rate Relief Shares (as defined below) and the initial fair value of the Henry Hub cash bonus payment provision. The total consideration is allocated proportionally to the performance obligation under the contract, which is to provide daily MVC capacity over the life of the contract, in order to recognize revenue in accordance with ASC 606, Revenue from Contracts with Customers. The performance
obligations will be satisfied during the life of the contract based on a units of production methodology for the daily MVC capacity provided to EQT. Due to the declining rate structure, there will be periods during which the billable gathering MVC revenue will exceed the allocated consideration to the performance obligation, which will result in billable gathering MVC revenue being deferred to the contract liability. The deferred consideration amounts are deferred until recognized in revenue when the associated performance obligation has been satisfied and are classified as current or non-current according to when such amounts are expected to be recognized. In addition to the estimated total consideration allocated to the daily MVC, the EQT Global GGA includes other fees based on variable or volumetric-based services that will be recognized in the period the services are provided. The Company applied judgment in determining the balance sheet classification of the elements of the EQT Global GGA and Share Purchase Agreements (defined below) under the applicable accounting guidance.
The EQT Global GGA provides for potential cash bonus payments payable by EQT to EQMthe Company during the period beginning on the first day of the calendar quarter in which the MVP in-service date occurs through the earlier of the twelfth calendar quarter from that point or the calendar quarter ending December 31, 2024 (the Henry Hub cash bonus payment provision). The potential cash bonus payments are conditioned upon the quarterly average of the NYMEXcertain Henry Hub Natural Gas First of the Month Closing Index Pricenatural gas prices exceeding certain price thresholds. The Henry Hub cash bonus payment provision meets the definition of an embedded derivative that shouldwas required to be bifurcated from the host contract and accounted for separately in accordance with ASC 815, Derivatives and Hedging. The embedded derivative was recorded as a derivative asset at its estimated fair value at inception of approximately $51.5 million and as part of the contract liability to be included in the total

23

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consideration to be allocated to the performance obligation under ASC 606. Subsequent changes to the fair value of the derivative instrument through the end of the contract are recognized in other income on the Company's statements of consolidated comprehensive income. As of March 31, 2020, the estimated fair value of the Henry Hub cash bonus payment provision was $55.7 million and is recorded in other assets on the Company's consolidated balance sheets.

The gathering MVC fees payable by EQT (or its affiliates) to EQMthe Company set forth in the EQT Global GGA are subject to potential reductions for certain contract years as set forth in the EQT Global GGA, conditioned upon the in-service date of the MVP, which provide for estimated aggregate fee relief of approximately $270 million in the first year after the in-service date of the MVP, approximately $230 million in the second year after the in-service date of the MVP and approximately $35 million in the third year after the in-service date of the MVP. In addition, if the MVP in-service date has not occurred bycommencing on January 1, 2022 EQT has an option, exercisable for a periodand continuing until the earlier of twelve months (or such shorter period if(i) the in-service date of the MVP occurs),and (ii) December 31, 2022, EQT will have an option to forgo approximately $145 million of the gathering fee relief in the first year after the MVP in-service date and approximately $90 million of the gathering fee relief in the second year after the MVP in-service date in exchange for a cash payment from EQMthe Company to EQT in the amount of approximately $196 million (the EQT Cash Option). As consideration for the additional rate relief subject to the EQT Cash Option, the Company purchased shares of its common stock (see Rate Relief Shares discussed and defined below) from EQT. The consideration received for future contractual rate relief associated with the Rate Relief Shares was recorded at a fair value of approximately $121.5 million as a contract liability in accordance with ASC 606 and will be recognized as revenue over the life of the contract. As of March 31, 2020, the total contract liability balance was approximately $173 million. For the three months ended March 31, 2020, 0 revenue was recognized related to the contract liability.

Water Services Letter Agreement. On February 26, 2020, EQMthe Company entered into a letter agreement with EQT, pursuant to which EQT agreed to utilize EQMthe Company for the provision of water services in Pennsylvania under one or moreexisting water services agreements to beand new water services agreements if negotiated between the parties (the(such letter agreement, the Water Services Letter Agreement). The Water Services Letter Agreement is effective as of the first day of the first month following the MVP in-service date and shallwill expire on the fifth anniversary of such date. During each year of the Water Services Letter Agreement, EQT agreed that fixed MVC fees payable to EQMthe Company for water services incurred on a volumetric basis, provided in accordance with existing agreements and new agreements entered into between the parties pursuant to the Water Services Letter Agreement (or the related agreements) shall, will be equal to or greater than $60 million per year.
Share Purchase Agreements. On February 26, 2020, the Company entered into 2 share purchase agreements (the Share Purchase Agreements) with EQT, pursuant to which the Company agreed to (i) purchase 4,769,496 shares of Equitrans Midstream common stock (the Cash Shares) from EQT in exchange for approximately $46 million in cash, (ii) purchase 20,530,256 shares of Equitrans Midstream common stock (the Rate Relief Shares and, together with the Cash Shares, the Share Purchases) from EQT in exchange for a promissory note in the aggregate principal amount of approximately $196 million (which EQT subsequently assigned to EQM as consideration for certain commercial terms under the EQT Global GGA), and (iii) pay EQT cash in the amount of approximately $7 million (the Cash Amount). On March 5, 2020, the Company completed the Share Purchases and paid the Cash Amount. The Company used proceeds from the EQM Credit Facility (defined in Note 9)8) to fund the purchase of the Cash Shares and to pay the Cash Amount in addition to other uses of proceeds. After the closing of the Share Purchases, the Company retired the Cash Shares and the Rate Relief Shares. Additionally, the Company recorded a $17.2 million deferred tax liability in conjunction with the Rate Relief Shares. FollowingOn September 29, 2020, the closingCompany made a prepayment to EQM of all principal, interest, fees and other obligations outstanding under the Share Purchases, as of March 31, 2020,promissory note EQT owned, directly or indirectly, 25,299,751 shares of Equitrans Midstream common stock.assigned to EQM and the promissory note was terminated.
7.Related Party Transactions
6.    Related Party Transactions with EQT
17

As of March 31, 2020,2021, EQT remained a related party of the Company due to its ownership of 25,299,75125,296,026 shares of Equitrans Midstream common stock, which represented an approximately 11.0%5.8% ownership interest in the Company.Company, excluding the impact of the Equitrans Midstream Preferred Shares. In the ordinary course of business, the Company through EQM, engaged, and continues to engage, as applicable, in transactions with EQT and its affiliates, including, but not limited to, entering into new or amending existing gathering agreements, (including the EQT Global GGA), transportation service and precedent agreements, storage agreements and water services agreements.
Tax Matters Agreement. On November 12, 2018, in connection withThe following table summarizes the Separation and Distribution, the Company and EQT entered into a the Tax Matters Agreement that governs the parties' respective rights, responsibilities and obligations with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Distribution and certainCompany's related transactions to qualify as generally tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and assistance and cooperation with respect to tax matters. In addition, the Tax Matters Agreement imposes certain restrictions on the Company and its subsidiaries, including restrictions on certain equity issuances, business combinations, sales of assets and similar transactions, that are designed to preserve the tax-free status of the Distribution and certain relatedparty transactions.

Three Months Ended March 31,
20212020
(Thousands)
Operating revenues$224,957 $303,800 
Equity income3 54,072 
Interest income from the preferred interest in EQT Energy Supply, LLC (the Preferred Interest)1,469 1,539 
Capital contributions to the MVP Joint Venture(10,723)(45,150)
Principal payments received on the Preferred Interest1,277 1,225 
24


The Tax Matters Agreement provides special rules that allocate tax liabilities infollowing table summarizes the event that the Distribution, together with certainCompany's related transactions, is not tax-free. In general, under the Tax Matters Agreement, each party is expected to be responsible for any taxes, whether imposed on the Company or EQT, that arise from (i) the failure of the Distribution, together with certain related transactions, to qualify for tax-free treatment, or (ii) if certain related transactions were to fail to qualify for their intended tax treatment, in each case, to the extent that the failure to qualify is attributable to actions, events or transactions relating to such party's respective stock, assets or business or a breach of the relevant representations or covenants made by that party in the Tax Matters Agreement.receivables and payables.
March 31, 2021December 31, 2020
(Thousands)
Accounts receivable$181,051 $199,674 
Contract asset500 2,207 
Investment in unconsolidated entity2,870,219 2,796,316 
Preferred Interest103,778 105,056 
Capital contributions payable to the MVP Joint Venture72,995 10,723 
Credit Letter Agreement. On February 26, 2020, in connection with the execution of the EQT Global GGA, EQMthe Company and EQT entered into a letter agreement (the Credit Letter Agreement) pursuant to which, among other things, (a) EQMthe Company agreed to relieve certain credit posting requirements for EQT, in an amount up to approximately $250 million, under its commercial agreements with EQM,EQT, subject to EQT maintaining a minimum credit rating from two of three rating agencies of (i) Ba3 with Moody’s Investors Service (Moody's), (ii) BB- with S&P Global Ratings (S&P) and (iii) BB- with Fitch Investor Services (Fitch) and (b) EQMthe Company agreed to use commercially reasonable good faith efforts to negotiate similar credit support arrangements for EQT in respect of its commitments to the MVP Joint Venture.
EQT Global GGA. See Notes 4 and 6Note 5 for further detail.
Water Services Letter Agreement. See Note 65 for further detail.
Share Purchase Agreements. See Note 65 for further detail.
8.Investments in Unconsolidated Entity
7.    Investment in Unconsolidated Entity
The MVP Joint Venture is constructing the MVP,Mountain Valley Pipeline (MVP), an estimated 300-mile natural gas interstate pipeline that will span from northern West Virginia to southern Virginia. EQMThe Company will operate the MVP and owned a 45.7%46.2% interest in the MVP project as of March 31, 2020.2021. On November 4, 2019, ConConsolidated Edison, Inc. (Con Edison) exercised an option to cap its investment in the MVP project at approximately $530 million (excluding AFUDC). EQMThe Company and NextEra Energy, Inc. are obligated to, and RGC Resources, Inc., another member of the MVP Joint Venture owning an interest in the MVP project, has opted to, fund the shortfall in Con Edison's capital contributions, on a pro rata basis. Such funding by the Company and funding by other members has and will correspondingly increase the Company's and such other funding members' respective interests in the MVP project and decrease Con Edison's interest in the MVP project. As a result, based on the MVP Joint Venture's current budget forproject's targeted cost of approximately $6.2 billion (excluding AFUDC), the project, EQM expects to fund an additional approximately $86 million (excluding AFUDC) in capital contributions to the MVP Joint Venture for the MVP project, and EQM'sCompany's equity ownership in the
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MVP Joint Venture wouldproject will progressively increase from 45.7%approximately 46.2% to approximately 47.0%47.8%. The MVP Joint Venture is a variable interest entity because it has insufficient equity to finance its activities during the construction stage of the project. The Company through EQM, is not the primary beneficiary of the MVP Joint Venture because the Company does not have the power to direct the activities that most significantly affect the MVP Joint Venture's economic performance. Certain business decisions, such as decisions to make distributions of cash, require a greater than 66 2/3% ownership interest approval, and no one member owns more than a 66 2/3% interest.
In April 2018, the MVP Joint Venture announced the MVP Southgate project, a proposed 75-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. EQMThe Company will operate the MVP Southgate pipeline and owned a 47.2% interest in the MVP Southgate project as of March 31, 2020.2021.
In February 2020,March 2021, the MVP Joint Venture issued a capital call notice for the funding of the MVP project to MVP Holdco, LLC (MVP Holdco), a wholly owned subsidiary of EQM,the Company, for $87.4$72.9 million, of which $10.0$14.6 million and $23.2$25.8 million was paid in April 20202021 and May 2020,2021, respectively, and $54.2$32.5 million is expected to be paid in June 2020.2021. The capital contributions payable and the corresponding increase to the investment balance are reflected on the consolidated balance sheet as of March 31, 2020.
The interests in the MVP and MVP Southgate projects are equity method investments for accounting purposes because EQM has the ability to exercise significant influence, but not control, over the MVP Joint Venture's operating and financial policies. Accordingly, EQM records adjustments to the investment balance for contributions to or distributions from the MVP Joint Venture and for EQM's pro-rata share of MVP Joint Venture earnings.
Equity income, which is primarily related to EQM's pro-rata share of the MVP Joint Venture's AFUDC on the construction of the MVP, is reported in equity income in the Company's statements of consolidated comprehensive income.2021.
Pursuant to the MVP Joint Venture's limited liability company agreement, MVP Holdco is obligated to provide performance assurances, which may take the form of a guarantee from EQM (provided that EQM's debt is rated as investment grade in accordance with the requirements of the MVP Joint Venture's limited liability company agreement), a letter of credit or cash collateral, in favor of the MVP Joint Venture to provide assurance as to the funding of MVP Holdco's proportionate share of the

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construction budget for the MVP project. In 2019, EQM issued performance guarantees in an amount equal to 33% of EQM's proportionate share of the then-remaining construction budget for the MVP project. As of December 31, 2019, EQM's performance guarantee was approximately $223 million, adjusted for capital contributions made by EQM during the fourth quarter of 2019.
In addition, pursuant to the MVP Joint Venture's limited liability company agreement, MVP Holdco is obligated to provide performance assurances in respect of MVP Southgate, which performance assurances may take the form of a guarantee from EQM (provided that EQM's debt is rated as investment grade in accordance with the requirements of the MVP Joint Venture's limited liability company agreement), a letter of credit or cash collateral. In 2019, EQM issued a performance guarantee of $14 million in favor of the MVP Joint Venture for the MVP Southgate project.
As a result of EQM’s credit rating downgrades in the first quarter of 2020, EQM delivered replacement credit support to the MVP Joint Venture in the form of letters of credit in the amounts of approximately $220.2 million and $14.2 million with respect to the MVP project and MVP Southgate project, respectively. In connection with delivering such letters of credit as replacement performance assurances, EQM's prior performance guarantees associated with the MVP and MVP Southgate projects were terminated. As of March 31, 2020,2021, the letters of credit with respect to the MVP project and MVP Southgate project were in the amounts of approximately $220.2$231.2 million and $14.2 million, respectively. As of May 4, 2021, based on the targeted project cost, MVP Holdco's obligation to deliver a replacement letter of credit with respect to the MVP project was in the amount of approximately $273.1 million. Upon the FERC’s initial release to begin construction of the MVP Southgate project, EQM’sthe Company’s current letter of credit to support MVP Southgate will be terminated, and EQMthe Company will be obligated to deliver a new letter of credit (or provide another allowable form of performance assurance) in an amount equal to 33% of MVP Holdco’s proportionate share of the remaining capital obligations for the MVP Southgate project under the applicable construction budget.
As of March 31, 2020, EQM's2021, the Company's maximum financial statement exposure related to the MVP Joint Venture was approximately $2,613$3,043 million, which consistsconsisted of the investment in unconsolidated entity balance on the consolidated balance sheet as of March 31, 2020,2021, net of capital contributions payable, and the letters of credit outstanding under the Amended EQM Credit Facility. As of May 4, 2021, in conjunction with MVP Holdco's obligation to deliver a replacement letter of credit with respect to the MVP project, the Company's maximum financial statement exposure related to the MVP Joint Venture was approximately $3,125 million.
The following tables summarize the unaudited condensed consolidated financial statements of the MVP Joint Venture in relation to the MVP project.
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Condensed Consolidated Balance Sheets
March 31, 2020 December 31, 2019March 31, 2021December 31, 2020
(Thousands)(Thousands)
Current assets$218,073
 $102,638
Current assets$108,467 $146,054 
Non-current assets5,138,016
 4,951,521
Non-current assets5,938,196 5,848,298 
Total assets$5,356,089
 $5,054,159
Total assets$6,046,663 $5,994,352 
   
Current liabilities$195,105
 $223,645
Current liabilities$185,003 $217,086 
Equity5,160,984
 4,830,514
Equity5,861,660 5,777,266 
Total liabilities and equity$5,356,089
 $5,054,159
Total liabilities and equity$6,046,663 $5,994,352 
Condensed Statements of Consolidated Operations
 Three Months Ended March 31,
 2020 2019
 (Thousands)
Environmental remediation reserve$(265) $(2,192)
Other income231
 2,913
Net interest income35,326
 20,086
AFUDC — equity82,428
 46,868
Net income$117,720
 $67,675

 Three Months Ended March 31,
 20212020
(Thousands)
Environmental remediation reserve$0 $(265)
Other income6 231 
Net interest income0 35,326 
AFUDC — equity0 82,428 
Net income$6 $117,720 

268.    Debt

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9.Debt
Equitrans Midstream Term Loan Facility. In December 2018, Equitrans Midstream entered into a term loan credit agreement (as amended in May 2019, the ETRN Term Loan Credit Agreement) that provided for a senior secured term loan facility in an aggregate principal amount of $600 million (the ETRN Term Loans). The Company received net proceeds from the ETRN Term Loans of $568.1 million, inclusive of a discount of $18.0 million and estimated debt issuance costs of $13.9 million. The net proceeds were primarily used to fund the EQGP Buyout, including certain fees, costs and expenses in connection therewith, and the remainder was used for general corporate purposes. On March 3, 2020, EQM drew $650.0 million under the Amended EQM Credit Facility and transferred such funds to the Company, pursuant to a senior unsecured term loan agreement with the Company. The Company utilized a portion of such funds to pay off all of the amounts outstanding under the ETRN Term Loans and the ETRN Term Loan Credit Agreement was terminated. As a result, the Company wrote off $24.4 million of unamortized discount and financing costs related to the ETRN Term Loan Credit Agreement. The write off charge is included in the loss on early extinguishment of debt line on the statements of consolidated comprehensive income. AsOn September 29, 2020, the Company made a prepayment to EQM of December 31, 2019, the current portion of the ETRN Term Loans was $6.0 millionall principal, interest, fees and was recorded in the current portion of long-term debt on the consolidated balance sheet. The Company had $594.0 million of borrowings outstanding and 0 letters of creditother obligations outstanding under the ETRN Term Loan Credit Agreement as of December 31, 2019.senior unsecured term loan agreement and terminated the agreement. During the period from January 1, 2020 to March 3, 2020, and for the three months ended March 31, 2019, the weighted average annual interest rates wererate was approximately 6.2% and 6.8%, respectively..
Equitrans Midstream Credit Facility. In October 2018, Equitrans Midstream entered into a senior secured revolving credit facility agreement that provided for $100 million in borrowing capacity (the Equitrans Midstream Credit Facility). Equitrans Midstream amended the Equitrans Midstream Credit Facility on December 31, 2018 to, among other things, permit the incurrence of the borrowings under the ETRN Term Loan Credit Agreement. The Equitrans Midstream Credit Facility, which was available for general corporate purposes and to fund ongoing working capital requirements, was terminated on March 3, 2020 in conjunction with the Company's payofftermination of the ETRN Term Loan Credit Agreement (see below)above). As a result, the Company wrote off $0.5 million of unamortized financing costs related to the Equitrans Midstream Credit Facility. The write off charge is included in the loss on early extinguishment of debt line on the statements of consolidated comprehensive income. The Company had 0 borrowings and 0 letters of credit outstanding under the Equitrans Midstream Credit Facility as of December 31, 2019 or during the period from January 1, 2020 to March 3, 2020. For the three months ended March 31, 2019, the maximum outstanding borrowings was approximately $44 million, the average daily balance was approximately $12 million, and the weighted average annual interest rate was approximately 4.2%. Commitment fees paid to maintain credit availability under the credit facilityEquitrans Midstream Credit Facility were approximately $0.1 million for both the three months endedperiod from January 1, 2020 to March 31, 2020 and March 31, 2019.3, 2020.
Amended EQM Revolving Credit Facility and 2019 EQM Term Loan Agreement.Facility. On October 31, 2018, EQM amended and restated its unsecured revolving credit facility to increase the borrowing capacity from $1 billion to $3 billion and extend the term to October 2023 (the EQM Credit Facility). In August 2019, EQM entered into a term loan agreement (the 2019 EQM Term Loan Agreement) that provided for unsecured term loans (the EQM Term Loans) in an aggregate principal amount of $1.4 billion.
On March 30, 2020, (the Loan Amendment Date), EQM entered into (i) an amendment (the EQM Credit Facility Amendment) to the EQM Credit Facility (as amended, by the EQM Credit Facility Amendment, the Amended EQM Credit Facility) and (ii) an amendment (the Term Loan Amendment) to the 2019 EQM Term Loan Agreement (as amended by the Term Loan Amendment, the Amended 2019 EQM Term Loan Agreement).
The EQM Credit Facility Amendment and the Term Loan Amendment each amended,which, among other things:
things, amended certain defined terms and negative covenants in the EQM Credit Facility and the 2019 EQM Term Loan Agreement, as applicable, including:
◦the Applicable Rate (as defined in the respective credit agreements) such that: (i) Base Rate Loans (as defined in the respective credit agreements) bear interest at a Base Rate (as defined in the respective credit agreements) plus a margin of 0.125% to 1.750% for borrowings under the Amended EQM Credit Facility or a margin of 0.000% to 1.625% for borrowings under the Amended 2019 EQM Term Loan Agreement, each determined on the basis of EQM’s then current credit rating, and (ii) Eurodollar Rate Loans (as defined in the respective credit agreements) bear interest at a Eurodollar Rate (as defined in the respective credit agreements) plus a margin of 1.125% to 2.750% for borrowings under the Amended EQM Credit Facility or a margin of 1.000% to 2.625% for borrowings under the Amended 2019 EQM Term Loan Agreement also determined on the basis of EQM’s then current credit rating; and
◦“Consolidated EBITDA” to allow for adjustment of “Consolidated EBITDA” in any applicable period for the difference between the amount of revenue recognized with respect to all contractual performance obligations and the amount of consideration received with respect to all contractual performance obligations; and

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certain negative covenants, including:
◦the financial covenant pursuant to which, except for certain measurement periods following the consummation of certain acquisitions during which the consolidated leverage ratio cannot exceed the greater of 5.50 to 1.00 or the maximum ratio otherwise permitted for the applicable period, the consolidated leverage ratio cannot exceed, (a) for each fiscal quarter ending prior to the Loan Amendment Date, 5.00 to 1.00, (b) for each fiscal quarter ending on and after the Loan Amendment Date and on or prior to March 31, 2021, 5.75 to 1.00, (c) for each fiscal quarter ending on and after June 30, 2021 and on or prior to December 31, 2021, 5.50 to 1.00, (d) for each fiscal quarter ending on and after March 31, 2022 and on or prior to December 31, 2022, 5.25 to 1.00, and (e) for each fiscal quarter ending on and after March 31, 2023, 5.00 to 1.00; and
◦the lien covenant such that the specified percentage of Consolidated Net Tangible Assets (as defined in the respective credit agreements) applicable to the existing exception for liens securing obligations not to exceed such specified percentage at the time of creation, incurrence, assumption or imposition of such lien is reduced from 15% to 5% of Consolidated Net Tangible Assets; and
◦the debt covenant such that the specified percentage of Consolidated Net Tangible Assets applicable to the existing exception for debt incurred by subsidiaries of EQM not to exceed such specified percentage at the time of incurrence is reduced from 15% to 5% of Consolidated Net Tangible Assets.
The EQM Credit Facility Amendment also amended various other defined terms, including the definition of "Change of Control", which result in conformity with the Amended 2019 EQM Term Loan Agreement.
The Amended EQM Credit Facility is available for general partnership purposes, including to purchase assets, to make investments, to fund working capital requirements and capital expenditures and to pay distributions and to repurchase units.distributions. Subject to satisfaction of
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certain conditions, the Amended EQM Credit Facility has an accordion feature that allows EQM to increase the available borrowings under the facility by up to an additional $750 million. The Amended EQM Credit Facility has a sublimit of up to $250 million for same-day swing line advances and a sublimit of up to $400 million for letters of credit. In addition, EQM has the ability to request that one or more lenders make available term loans under the Amended EQM Credit Facility, subject to the satisfaction of certain conditions. The Company’s obligations in respect of the revolving borrowings made under the Amended EQM Credit Facility are unsecured. As of March 31, 2020, no2021, 0 term loans were outstanding under the Amended EQM Credit Facility. Such term loans would be secured by cash, and qualifying investment grade securities.securities or a combination thereof.
As of each of March 31, 2021 and December 31, 2020, EQM had approximately $1,430$485 million of borrowings and $235 million of letters of credit outstanding under the Amended EQM Credit Facility. As of December 31, 2019, EQM had approximately $610 million of borrowings and $1$246 million of letters of credit outstanding under the Amended EQM Credit Facility. During the three months ended March 31, 2020,2021, the maximum outstanding borrowingsborrowing at any time werewas approximately $1,560$525 million and the average daily balance was approximately $1,027$489 million. EQM incurred interest at a weighted average annual interest rate of approximately 3.2%2.5% for the three months ended March 31, 2020.2021. During the three months ended March 31, 2019,2020, the maximum outstanding borrowingsborrowing at any time werewas approximately $1.1 billion and$1,560 million, the average daily balance was approximately $942 million. EQM incurred interest at a$1,027 million, and the weighted average annual interest rate ofwas approximately 3.9% for the three months ended March 31, 2019.3.2%. For the three months ended March 31, 20202021 and 2019,2020, commitment fees of $1.2$2.3 million and $1.0$1.2 million, respectively, were paid to maintain credit availability under the credit facility.Amended EQM Credit Facility.
TheSee Note 12 for discussion of the Second Amendment (as defined in Note 12) to the Amended EQM Credit Facility.
Amended 2019 EQM Term Loans matureLoan Agreement. In August 2019, EQM entered into a term loan agreement (the 2019 EQM Term Loan Agreement) that provided for unsecured term loans (the EQM Term Loans) in August 2022.an aggregate principal amount of $1.4 billion. On March 30, 2020, EQM received netentered into an amendment to the 2019 EQM Term Loan Agreement (as amended, the Amended 2019 EQM Term Loan Agreement) which, among other things, amended certain defined terms and negative covenants in the 2019 EQM Term Loan Agreement.
On January 8, 2021, EQM (i) applied a portion of the proceeds from the issuance of the EQM Term Loans of $1,397.4 million, inclusive of debt issuance costs of $2.6 million. The net proceeds were primarily used2021 Senior Notes (defined below) to repay borrowings under the Amended EQM Credit Facilityprepay all principal, interest, fees and the remainder was used for general partnership purposes. The Amended 2019 EQM Term Loan Agreement provides EQM with the right to request incremental term loans in an aggregate amount of up to $300 million, subject to, among other things, obtaining additional commitments from existing lenders or commitments from new lenders. EQM had $1.4 billion of borrowingsobligations outstanding under the Amended 2019 EQM Term Loan Agreement asand (ii) terminated the Amended 2019 EQM Term Loan Agreement and the loan documents associated therewith. EQM repaid outstanding loans with a principal amount of March 31, 2020$1.4 billion in connection with the termination of the Amended 2019 EQM Term Loan Agreement. Prior to its termination in January 2021, the Amended 2019 EQM Term Loan Agreement would have matured in August 2022. During the period from January 1, 2021 through January 7, 2021, and December 31, 2019. Duringduring the three months ended March 31, 2020, the weighted average annual interest rate for the period wasrates were approximately 3.2%.
The Amended EQM Credit Facility2.4% and the Amended 2019 EQM Term Loan Agreement each contain certain negative covenants that, among other things, limit restricted payments, the incurrence of debt, dispositions, mergers and fundamental changes, and transactions with affiliates. The EQM Credit Facility Amendment and Term Loan Amendment, as applicable, each added an additional negative covenant, which subject to certain exceptions, limits the ability of EQM and certain of its subsidiaries to enter into agreements that restrict (a) subsidiary dividends and distributions, (b) subsidiary guarantees of the obligations under the Amended EQM Credit Facility or Amended 2019 EQM Term Loan Agreement, or (c) creation of liens to secure obligations under the Amended EQM Credit Facility or the Amended 2019 EQM Term Loan Agreement.

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In addition, the Amended EQM Credit Facility and Amended 2019 EQM Term Loan Agreement contain certain specified events of default, including, among others, failure to make certain payments (subject to specified grace periods in some cases)3.2%, failure to observe covenants (subject to specified grace periods in some cases), cross-defaults to certain other material debt, certain specified insolvency or bankruptcy events and the occurrence of a change of control event, in each case, the occurrence of which would allow the lenders to accelerate EQM's payment obligations under the Amended EQM Credit Facility or Amended 2019 EQM Term Loan Agreement.respectively.
Eureka Credit Facility. Eureka Midstream, LLC (Eureka), a wholly owned subsidiary of Eureka Midstream, has a $400 million senior secured revolving credit facility that is available for general business purposes, including financing maintenance and expansion capital expenditures related to the Eureka system and providing working capital for Eureka’s operations (the(as amended, the Eureka Credit Facility). The Eureka Credit Facility matures on August 25, 2021. Subject to satisfaction of certain conditions, the Eureka Credit Facility has an accordion feature that allows Eureka to increase the available borrowings under the facility to an amount no greater than $500 million of total commitments.
As of each of March 31, 20202021 and December 31, 2019,2020, Eureka had approximately $293$310 million and $303 million, respectively, of borrowings outstanding under the Eureka Credit Facility. For the three months ended March 31, 2021, the maximum amount of outstanding borrowings under the Eureka Credit Facility at any time was approximately $310 million, the average daily balance was approximately $305 million, and Eureka incurred interest at a weighted average annual interest rate of approximately 2.4%. For the three months ended March 31, 2020, the maximum amount of outstanding borrowings under the Eureka Credit Facility at any time was approximately $293 million, the average daily balance was approximately $293 million and Eureka incurred interest at a weighted average annual interest rate of approximately 3.9%. For the three months ended March 31, 2021 and 2020, commitment fees of $0.1 million and $0.2 million, respectively, were paid to maintain credit availability under the credit facility.Eureka Credit Facility.
2021 Senior Notes. During the first quarter of 2021, EQM issued, in a private offering, $800 million aggregate principal amount of new 4.50% senior notes due 2029 (the 2029 Notes) and $1,100 million aggregate principal amount of new 4.75% senior notes due 2031 (the 2031 Notes and, together with the 2029 Notes, the 2021 Senior Notes) and received net proceeds from the offering of approximately $1,876.5 million (excluding costs related to the Tender Offers discussed below), inclusive of a discount of $19 million and debt issuance costs of $4.5 million. EQM used the net proceeds from the offering of the 2021 Senior Notes and cash on hand to repay all outstanding borrowings under the Amended 2019 EQM Term Loan Agreement, to purchase an aggregate principal amount of $500 million of its outstanding 4.75% notes due 2023 (2023 Notes) pursuant to tender offers for certain of EQM's outstanding indebtedness (such tender offers, the Tender Offers), and for general partnership purposes.
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The 2021 Senior Notes were issued under and are governed by an indenture, dated January 8, 2021 (the 2021 Indenture), between EQM and The Bank of New York Mellon Trust Company, N.A., as trustee. The 2021 Indenture contains covenants that limit EQM’s ability to, among other things, incur certain liens securing indebtedness, engage in certain sale and leaseback transactions, and enter into certain consolidations, mergers, conveyances, transfers or leases of all or substantially all of EQM’s assets. The 2029 Notes will mature on January 15, 2029 and interest on the 2029 Notes is payable semi-annually on January 15 and July 15 of each year, commencing July 15, 2021. The 2031 Notes will mature on January 15, 2031 and interest on the 2031 Notes is payable semi-annually on January 15 and July 15 of each year, commencing July 15, 2021.
The 2021 Senior Notes are unsecured and rank equally with all of EQM’s existing and future senior obligations. The 2021 Senior Notes are senior in right of payment to any of EQM’s future obligations that are, by their terms, expressly subordinated in right of payment to the 2021 Senior Notes. The 2021 Senior Notes are effectively subordinated to EQM’s secured obligations, if any, to the extent of the value of the collateral securing such obligations, and structurally subordinated to all indebtedness and obligations, including trade payables, of EQM’s subsidiaries, other than any subsidiaries that may guarantee the 2021 Senior Notes in the future.
EQM may, at its option, redeem some or all of the 2029 Notes and the 2031 Notes, in whole or in part, at any time prior to their maturity at the applicable redemption price as set forth in the 2021 Indenture.
Upon the occurrence of a Change of Control Triggering Event (as defined in the 2021 Indenture), EQM may be required to offer to purchase the 2021 Senior Notes at a purchase price equal to 101% of the aggregate principal amount of the 2021 Senior Notes repurchased, plus accrued and unpaid interest, if any, to, but excluding, the repurchase date.
The 2021 Indenture contains certain events of default, including the following: (1) default in the payment of interest on such 2021 Senior Notes when due that continues for 30 days; (2) default in the payment of principal of or premium, if any, on any such 2021 Senior Notes when due, whether at its stated maturity, upon redemption or otherwise; (3) failure by EQM or any subsidiary guarantor, if any, to comply for 90 days with the other agreements with respect to such 2021 Senior Notes contained in the 2021 Indenture after written notice by the trustee or by the holders of at least 25% in principal amount of the outstanding 2021 Senior Notes of such series; (4) certain events of bankruptcy, insolvency or reorganization of EQM or any subsidiary guarantor, if any, that is one of EQM’s Significant Subsidiaries (as defined in the 2021 Indenture); and (5) if such 2021 Senior Notes are guaranteed by a subsidiary guarantor that is one of EQM’s Significant Subsidiaries, (a) the guarantee of that subsidiary guarantor ceases to be in full force and effect, except as otherwise provided in the 2021 Indenture; (b) the guarantee of that subsidiary guarantor is declared null and void in a judicial proceeding; or (c) that subsidiary guarantor denies or disaffirms its obligations under the 2021 Indenture or its guarantee.
If an event of default occurs and is continuing with respect to any of the 2021 Senior Notes, the trustee or the holders of at least 25% in aggregate principal amount of the then outstanding 2021 Senior Notes of such series may declare the 2021 Senior Notes of such series to be due and payable. Upon such a declaration, such principal, premium, if any, and accrued and unpaid interest on such 2021 Senior Notes will be due and payable immediately. If an event of default relating to certain events of bankruptcy, insolvency or reorganization occurs, all outstanding 2021 Senior Notes will become due and payable immediately without further action or notice on the part of the trustee or any holders of the 2021 Senior Notes.
Tender Offers. On January 15, 2021 (the early tender deadline), the maximum principal amount for the Tender Offers was fully subscribed by the 2023 Notes tendered as of the early tender deadline and on January 20, 2021, EQM purchased an aggregate principal amount of $500 million of 2023 Notes at an aggregate cost of approximately $537 million (inclusive of the applicable early tender premium for the 2023 Notes described in that certain Offer to Purchase of EQM dated January 4, 2021, as amended, plus accrued interest).
The Company incurred a loss on the extinguishment of debt of $41.0 million during the three months ended March 31, 2021 related to the payment of the Tender Offer premium and write off of unamortized discounts and financing costs related to the prepayment of the EQM Term Loans under, and termination of, the Amended 2019 EQM Term Loan Agreement and purchase of 2023 Notes in the Tender Offers. This amount is included in the loss on extinguishment of debt line on the statements of consolidated comprehensive income.
As of March 31, 2020,2021, EQM and Eureka were in compliance with all debt provisions and covenants.
10.Fair Value Measurements
9.    Fair Value Measurements
Assets Measured at Fair Value on a Recurring Basis. The Company records derivative instruments at fair value on a gross basis in its consolidated balance sheets. The Henry Hub cash bonus payment provision, as described in Note 6,5, is recorded at its estimated fair value based on the quarterly averages of prices of NYMEX Henry Hub natural gas futures prices exceeding certain price thresholds applied to contractual MVCs with the EQT Global GGA, beginning with the first day of the calendar quarter in which the MVP in-service occurs and continuing through the earlier of the last day of the twelfth calendar quarter from that point, or the calendar quarter ending December 31, 2024. The fair value of the Henry Hub cash bonus payment provision is derived using a Monte Carlo simulation model. Significant inputs used in the fair value measurement include NYMEX Henry Hub natural gas futures prices as of the date of valuation, the targeted in-service date of the MVP, risk-free
22

interest rates based on U.S. Treasury rates, expected volatility of NYMEX Henry Hub natural gas futures prices and an estimated credit spread of EQT. The expected volatility of NYMEX Henry Hub natural gas futures prices used in the valuation methodology represents a significant unobservable input causing the Henry Hub cash bonus payment provision to be designated as a Level 3 fair value measurement. An expected average volatility of approximately 31% was utilized in the valuation model, which is based on market-quoted volatilities of relevant NYMEX Henry Hub natural gas forward prices. As of March 31, 2021 and December 31, 2020, the fair value of the Henry Hub cash bonus payment provision was $55.7$75.1 million and is$68.0 million, respectively, which was recorded in other assets on the Company's consolidated balance sheets. During the quarterthree months ended March 31, 2021 and 2020, the Company recognized a gaingains of $7.1 million and $4.2 million, respectively, representing the change in estimated fair value of the derivative instrument during the period.respective periods. The gain isgains are reflected in other income in the Company's statements of consolidated comprehensive income.
Other Financial Instruments. The carrying values of cash and cash equivalents, accounts receivable, amounts due to/from related parties and accounts payable approximate fair value due to the short maturity of the instruments; as such, their fair values are Level 1 fair value measurements. The carrying values of borrowings under the Amended EQM Credit Facility, the Eureka Credit Facility and the Amended 2019 EQM Term Loan Agreement (before its termination) approximate fair value as the interest rates are based on prevailing market rates; these are considered Level 1 fair value measurements. As EQM's borrowings under its senior notes are not actively traded, their fair values are estimated using an income approach model that applies a discount rate based on prevailing market rates for debt with similar remaining time-to-maturity and credit risk; as such, their fair values are Level 2 fair value measurements. Effective on March 3, 2020, the ETRN Term Loans were paid off with proceeds from the Amended EQM Credit Facility (see Note 9), and the ETRN Term Loan Credit Agreement was terminated. As of December 31, 2019, the estimated fair value of the ETRN Term Loans was approximately $595 million and the carrying value of the ETRN Term Loans was approximately $568 million. As of March 31, 20202021 and December 31, 2019,2020, the estimated fair valuevalues of EQM's senior notes waswere approximately $2,267$6,681 million and $3,421$5,495 million, respectively, and the carrying valuevalues of EQM's senior notes waswere approximately $3,463$6,427 million and $3,462$5,046 million, respectively. The fair value of the Preferred Interest is a Level 3 fair value measurement and is estimated using an income approach model that applies a market-based discount rate. As of March 31, 20202021 and December 31, 2019,2020, the estimated fair valuevalues of the Preferred Interest waswere approximately $120 million and $126$127 million, respectively, and the carrying valuevalues of the Preferred Interest waswere approximately $109$104 million and $110$105 million, respectively.
11.Earnings Per Share
10.    Earnings Per Share
The following table sets forth the computation of the basic and diluted earnings per share attributable to Equitrans Midstream:Midstream common shareholders for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,
20212020
BasicDilutedBasicDiluted
(In thousands, except per share data)
Net income$76,597 $76,597 $189,560 $189,560 
Less: Net income attributable to noncontrolling interests (excluding EQM Series A Preferred Units)3,914 3,914 94,327 94,327 
Less: EQM Series A Preferred Units interest in net income0 0 25,501 25,501 
Less: Preferred dividends14,628 14,628 0 0 
Net income attributable to Equitrans Midstream common shareholders$58,055 $58,055 $69,732 $69,732 
Basic weighted average common shares outstanding432,983 432,983 248,591 248,591 
Dilutive securities (a)
— 175 — 0 
Diluted weighted average common shares outstanding432,983 433,158 248,591 248,591 
Earnings per share of common stock attributable to Equitrans Midstream common shareholders$0.13 $0.13 $0.28 $0.28 
(a)For the three months ended March 31, 2021, the Company excluded 30,076 (in thousands) of weighted average anti-dilutive securities related to the Equitrans Midstream Preferred Shares and stock-based compensation awards. For the three months ended March 31, 2020, the Company excluded EQM’s anti-dilutive securities related to the EQM Series A Preferred Units and 522 (in thousands) of weighted average anti-dilutive securities related to stock-based compensation awards.
The Company grants Equitrans Midstream phantom units to certain non-employee directors that will be paid in Equitrans Midstream common stock upon the director's termination of service on the Board. As there are no remaining service, performance or market conditions related to these awards, 486 and 248 (in thousands) Equitrans Midstream phantom units were included in the computation of basic and diluted weighted average common shares outstanding for the three months ended March 31, 2021 and 2020, respectively.
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 Three Months Ended March 31,
 2020 2019
 Basic Diluted Basic Diluted
 (In thousands, except per share data)
Net income$189,560
 $189,560
 $199,566
 $199,566
Net income attributable to noncontrolling interests (excluding Series A Preferred Units)94,327
 94,327
 143,267
 143,267
Series A Preferred Units interest in net income25,501
 25,501
 —
 —
Net income attributable to Equitrans Midstream (a)
$69,732

$69,732

$56,299

$56,299
        
Basic weighted average common shares outstanding248,591
 248,591
 254,776
 254,776
Dilutive securities (b)
—
 —
 —
 51
Diluted weighted average common shares outstanding248,591

248,591

254,776

254,827
        
Earnings per share attributable to Equitrans Midstream$0.28

$0.28

$0.22

$0.22
(a)For all periods presented, the impact of EQM's dilutive securities did not have a material impact on the Company's diluted earnings per share.
(b)For the three months ended March 31, 2020, the Company excluded 521,722 potentially dilutive securities because the impact would have been anti-dilutive.
12.11.     Income Taxes

The Company's effective tax rate was 21.0% for the three months ended March 31, 2021, compared to 9.2% for the three months ended March 31, 2020. For the three months ended March 31, 2021 and 2020, comparedthe Company calculated the provision for income taxes for interim periods by applying an estimate of the annual effective tax rate for the full fiscal year to 14.0%"ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the periods. The effective tax rate was higher for the three months ended March 31, 2019. The effective tax rate was lower2021 compared to the three months ended March 31, 2020 primarily due to the impact ofdecrease in net income attributable to noncontrolling interests as a result of the EQM Merger and AFUDCrelated effect on lower income before taxes due to deferred revenue related to the EQT Global GGA and impairment expense. Excluding other items, theCompany's estimated annual effective tax ratesrate for both periods arethe three months ended March 31, 2021. The effective tax rate for the three months ended March 31, 2021 was lower than the statutory ratesrate primarily due to the impact of AFUDC - equity on the MVP project and because the Company does not record income tax expense on the portion of its income attributable to the noncontrolling member of Eureka Midstream. The effective tax rate for the three months ended March 31, 2020 was lower than the statutory rate because the Company did not record income tax expense on the portion of its income attributable to the noncontrolling limited partners of EQM for the periods prior to the closing of the EQM Merger, did not record income tax expense on the portion of its income attributable to the noncontrolling member of Eureka Midstream and due to the impact of AFUDC - equity on the MVP project.
12.     Subsequent Events
EQM Credit Facility. On April 16, 2021 (the Amendment Date), EQM entered into an amendment (the Second Amendment) to the Amended EQM Credit Facility. The Second Amendment amended, among other things:
•certain defined terms, including:
•the definition of “Applicable Rate” in the Amended EQM Credit Facility such that: (i) Base Rate Loans (as defined in the Amended EQM Credit Facility, as amended by the Second Amendment) bear interest at a base rate plus a margin of 0.125% to 2.000% determined on the basis of EQM’s then-current credit ratings and (ii) Eurodollar Rate Loans (as defined in the Amended EQM Credit Facility, as amended by the Second Amendment) bear interest at a Eurodollar Rate (as defined in the Amended EQM Credit Facility, as amended by the Second Amendment) plus a margin of 1.125% to 3.000% also determined on the basis of EQM’s then-current credit ratings; and
•the definition of “Qualified Project” in the Amended EQM Credit Facility and certain related definitions, which, collectively, have the effect of removing the designation of the MVP project and the Hammerhead project as Qualified Projects on a go-forward basis after March 31, 2021 under the Amended EQM Credit Facility, as amended by the Second Amendment, and eliminating certain addbacks to Consolidated EBITDA (as defined in the Amended EQM Credit Facility, as amended by the Second Amendment) that previously were available in connection with the MVP project and the Hammerhead project; and

•the financial covenant under the Amended EQM Credit Facility, pursuant to which, except for certain measurement periods following the consummation of certain acquisitions during which the Consolidated Leverage Ratio (as defined in the Amended EQM Credit Facility, as amended by the Second Amendment) cannot exceed the greater of 5.50 to 1.00 or the maximum ratio otherwise permitted under the Amended EQM Credit Facility, as amended by the Second Amendment, for the applicable period, the Consolidated Leverage Ratio cannot exceed, (i) for each fiscal quarter ending on and after June 30, 2021 and on or prior to September 30, 2022, 5.95 to 1.00, (ii) for the EQGP Buyout,fiscal quarter ending on December 31, 2022, 5.25 to 1.00, and (iii) for each fiscal quarter ending after December 31, 2022, 5.00 to 1.00.

The Second Amendment also reduced the noncontrolling limited partnersaggregate commitments available under the Amended EQM Credit Facility, as amended by the Second Amendment, to $2.25 billion, and the commitment of EQGP.each lender thereunder was reduced accordingly on a pro rata basis.

13. Consolidated Variable Interest Entities
AsMountain Valley Pipeline. Related to the MVP Joint Venture’s pursuit of authorizations to effect stream and wetland crossings on the MVP project route, on March 29, 2021 and April 26, 2021, the Virginia Department of Environmental Quality (the VADEQ) and the West Virginia Department of Environmental Protection (the WVDEP), respectively, requested additional time from the U.S. Army Corps of Engineers (the Army Corps) to address pending MVP Joint Venture applications for Section 401 water quality certification approvals or waivers. Based on the Company’s understanding of continuing discussions, including those held on May 3, 2021, involving the Army Corps, the VADEQ and the WVDEP that indicate a longer review period than the Company anticipated at March 31, 2020,2021, the Company determined EQM to be a variable interest entity. In addition,modified its targeted in-service date for the period from January 1, 2019MVP project in the second quarter of 2021 to January 10, 2019, EQGP was alsosummer 2022 at a variable interest entity. Through the Company's ownership and controltotal project cost of the general partners of EQGP and EQM, the Company had the power to direct the activities that most significantly affected EQGP's and EQM's economic performance during the periods presented.
Through the Company's limited partner interests in EQGP prior to the EQGP Buyout, general partner interest in EQGP, limited partner interests and IDRs in EQM prior to the EQM IDR Transaction, and limited partner interests in EQM following the EQM IDR Transaction, the Company had the right to receive benefits from, as well as the obligation to absorb the losses of, EQGP and EQM during the applicable periods.
On January 10, 2019, following the completion of the EQGP Buyout, EQGP becameapproximately $6.2 billion (excluding AFUDC). As a wholly owned subsidiary of the Company. Asresult, the Company is currently evaluating the primary beneficiaryimpact of and has a controlling financial interest in EQGP and EQM, the Company consolidated EQGP, which, priormodified targeted in-service date to the EQGP Buyout, consolidated EQM forEQT Global GGA and the periods presented. See Note 2. The Company continues to consolidate EQM and, through EQM, EQGP.
The risks associated with the operations
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Table of EQM are discussedContents


Company’s investment in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, as updated by any Quarterly Reports on Form 10-Q. See further discussion of the impact that Equitrans Midstream's ownership and control of EQM had on Equitrans Midstream's financial position,MVP to its future results of operations and cash flows included in Equitrans Midstream's Annual Report on Form 10-Kfinancial position. See Note 5 to the consolidated financial statements for a discussion of the year ended December 31, 2019, as updated by any Quarterly Reports on Form 10-Q, including in the sections captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations."

EQT Global GGA.
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The following table presents assets and liabilities included in the Company's consolidated balance sheets that were for the use or obligation of EQM, inclusive of receivables and payables due from or to related parties.
 March 31, 2020 December 31, 2019
 (Thousands)
ASSETS 
  
Cash and cash equivalents$14,267
 $15,760
Accounts receivable, net (a)
249,061
 254,109
Other current assets39,279
 25,004
Net property, plant and equipment7,740,231
 7,715,122
Investment in unconsolidated entity2,465,827
 2,324,108
Goodwill486,698
 486,698
Net intangible assets765,205
 797,439
Other assets251,666
 196,779
LIABILITIES   
Accounts payable$103,814
 $126,786
Capital contributions payable to the MVP Joint Venture87,647
 45,150
Accrued interest44,662
 73,366
Accrued liabilities31,009
 31,550
Revolving credit facility borrowings (b)
1,722,500
 902,500
EQM long-term debt4,860,096
 4,859,499
Contract liability (c)
247,342
 —
Regulatory and other long-term liabilities78,099
 78,397

(a)Accounts receivable as of March 31, 2020 and December 31, 2019 included $183.4 million and $175.2 million, respectively, of related party accounts receivable from EQT.
(b)As of March 31, 2020, EQM had credit facility borrowings outstanding of approximately $1,430 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively (both defined in Note 9). As of December 31, 2019, EQM had credit facility borrowings outstanding of approximately $610 million and $293 million on the Amended EQM Credit Facility and the Eureka Credit Facility, respectively. See Note 9 for further detail.
(c)Includes approximately $74.3 million of contract liability that is eliminated by the Company in consolidation.
The following table summarizes EQM's statements of consolidated operations and cash flows, inclusive of transactions with related parties.
 Three Months Ended March 31,
 2020 2019
 (Thousands)
Operating revenues$453,113
 $389,782
Operating expenses201,699
 121,768
Other income (expenses), net3,871
 (16,083)
Net income$255,285
 $251,931
    
Net cash provided by operating activities$285,136
 $160,973
Net cash used in investing activities$(845,857) $(350,357)
Net cash provided by financing activities$559,228
 $245,708

14. Stock-based Compensation Plans
2020 Performance Share Unit Program. Effective in 2020, the Management Development and Compensation Committee of the Board of Directors of the Company (the Compensation Committee) adopted the 2020 Performance Share Unit Program (2020 PSU Program) under the Equitrans Midstream Corporation 2018 Long-Term Incentive Plan. The 2020 PSU Program was

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established to align the interests of key employees with the interests of shareholders and the strategic objectives of the Company.
During the three months ended March 31, 2020, a total of 1,164,890 units were granted under the 2020 PSU Program. The vesting of the units under the 2020 PSU Program will occur upon payment after December 31, 2022 (the end of the three-year performance period), assuming continued employment with the Company. The 2020 PSU Program is composed of a Performance Period, which is January 1, 2020 to December 31, 2022, and three Sub-Periods which are the full calendar years of 2020, 2021 and 2022. The payout will vary between 0 and 200% of the number of outstanding units in the Performance Period and each Sub-Period, contingent upon the level of total shareholder return relative to a predefined peer group during each period. The Performance Period is weighted at 40% and each of the Sub-Periods are weighted at 20%. If earned at the target payout level of 100%, 737,390 of the 2020 PSU Program units are expected to be distributed in Company common stock and 427,500 of the 2020 PSU Program units are expected to be paid in cash.
2020 Restricted Stock and Restricted Stock Unit Awards. During the three months ended March 31, 2020, the Compensation Committee granted 491,640 restricted stock equity and 337,370 restricted stock unit liability awards. The restricted stock equity awards and restricted stock unit liability awards will be fully vested at the end of the three-year period commencing on January 1, 2020, assuming continued employment with the Company.

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EQUITRANS MIDSTREAM CORPORATION
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of financial condition and results of operations in conjunction with the consolidated financial statements, and the notes thereto, included elsewhere in this report.
CAUTIONARY STATEMENTSCautionary Statements
Disclosures in this Quarterly Report on Form 10-Q contain certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and Section 27A of the Securities Act.Act of 1933, as amended (the Securities Act). Statements that do not relate strictly to historical or current facts are forward-looking and usually identified by the use of words such as "anticipate," "estimate," "could," "would," "will," "may," "forecast," "approximate," "expect," "project," "intend," "plan," "believe""believe," "target" and other words of similar meaning in connection with any discussion of future operating or financial matters. Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report on Form 10-Q include the matters discussed in the section captioned "Outlook" in "Management'sPart 1, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," and the expectations of plans, strategies, objectives, and growth and anticipated financial and operational performance of Equitrans Midstream and EQM,its affiliates, including:
•guidance and any changes in such guidance regarding EQM’sthe Company’s gathering, transmission and storage and water services revenue and volume growth, including the anticipated effects associated with the EQT Global GGA;GGA and related documents entered into with EQT;
•projected revenue (including from firm reservation feesfees) and volumes, deferred revenues),revenues, expenses and contract liabilities, and the effects on liquidity, projected revenue, deferred revenue and contract liabilities associated with the EQT Global GGA and the MVP project;project (including changes in the targeted full in-service date for such project);
•the ultimate gathering fee relief provided to EQT under the EQT Global GGA and related agreements, including the exercise by EQT of any cash-out option as an alternative to receiving a portion of such relief;
•the Company's ability to de-lever;
•the weighted average contract life of gathering, transmission and storage contracts;
•infrastructure programs (including the timing, cost, capacity and sources of funding with respect to gathering, transmission and storage and water expansion projects);
•the cost, capacity, shippers for, timing of regulatory approvals, final design (including expansions or extensions and capital related thereto), ability to contract additional capacity on and targeted in-service dates of current projects;or in-service projects or assets, in each case as applicable;
•the ultimate terms, partnerspartner relationships and structure of the MVP Joint Venture and ownership interests therein;
•the impact of changes in the targeted full in-service date of the MVP project on, among other things, the fair value of the Henry Hub cash bonus provision of the EQT Global GGA;
•expansion projects in EQM'sthe Company's operating areas and in areas that would provide access to new markets;
EQM's•the Company's ability to provide produced water handling services and realize expansion opportunities and related capital avoidance;
Equitrans Midstream's and EQM's•the Company's ability to identify and complete acquisitions and other strategic transactions, including the proposed EQM Merger and joint ventures, effectively integrate transactions into Equitrans Midstream's and EQM’sthe Company’s operations, and achieve synergies, system optionality and accretion associated with transactions, including through increased scale;
EQM's•the Company's ability to access commercial opportunities and new customers for its water services business, and the timing and final terms of any definitive water services agreement or agreements between EQT and EQM (a Water Services Agreement)the Company entered into pursuant to the terms of the Water Services Letter Agreement;
•any further credit rating impacts associated with the MVP project, customer credit ratings changes, including EQT's, and defaults, acquisitions, dispositions and financings and any further changes in EQM's credit ratings;
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•the impact of the dispute with EQT (or resolution thereof) regarding the Hammerhead gathering agreement and/or ownership of the Hammerhead pipeline on the Company's business and results of operations;
•the impact of such dispute (or resolution thereof) on investors' perceptions of the Company's commercial relationship with EQT;
•the effect and outcome of future litigation and other proceedings, including regulatory proceedings;
•the effects of any consolidation of or effected by upstream gas producers, whether in or outside of the Appalachian Basin;
•the ability of EQM'sthe Company's contracts to survive a customer bankruptcy or restructuring;
restructuring, the timingoutcome of the consummation of the EQM Merger;
the abilityany attempt to obtain the requisite approvalsreject such contracts in such contexts (or related to the EQM Merger from the Company's shareholders or EQM's limited partners, as applicable, to consummate the EQM Merger;
the risk that a condition to closing of the EQM Merger may not be satisfied;
expected transaction expenses related to the EQM Mergernegotiations) and the related transactions;impact on the Company’s results of operations and liquidity of a customer bankruptcy or restructuring;
the possible diversion of management time on issues related to the EQM Merger;

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the impact and outcome of threatened, pending and future litigation relating to the EQM Merger;
the timing and amount of future issuances or repurchases of securities, including in connection with the EQM Merger and Company's securities;
•the Restructuring;
effects of conversion, if at all, of EQM securities into Merger Consideration orthe Equitrans Midstream Preferred Shares, as applicable, in connection with Shares;
•the EQM Merger;
effects of seasonality;
•expected cash flows and MVCs, including those associated with the EQT Global GGA and any definitive agreement or agreements between EQT and EQMthe Company related to the Water Services Letter Agreement, and the potential impacts thereon of the commission timing and cost of the MVP project;
capital commitments;
•projected capital contributions and capital and operating expenditures, including the amount and timing of reimbursable capital expenditures, capital budget and sources of funds for capital expenditures;
•dividend and distribution amounts, timing and rates;
the effect and outcome of pending and future litigation and regulatory proceedings;
•changes in commodity prices and the effect of commodity prices on Equitrans Midstream'sthe Company's business;
•future decisions of customers in respect of curtailing natural gas production, choke management, timing of turning wells in line, rig and completion activity and related impacts on the Company's business;
•liquidity and financing requirements, including sources and availability;
•interest rates;
•the ability of the Company's EQM's and EQM's subsidiaries' respective abilitiessubsidiaries (some of which are not wholly owned) to service debt under, and comply with the covenants contained in, their respective credit agreements;
•expectations regarding production, gathered and water volumes in EQM'sthe Company's areas of operations;
Equitrans Midstream's and EQM’s abilities•the Company's ability to achieve the anticipated benefits associated with the execution of the EQT Global GGA, the Water Services Letter Agreement the EQM Merger Agreement and related agreements;
•the impact on the Company and its subsidiaries of the COVID-19coronavirus disease 2019 (COVID-19) pandemic, including, among other things, effects on demand for natural gas and the Company's services, levels of production of associated gas from basins such as the Permian Basin, commodity prices and access to capital;
•the Company's ability to achieve its environmental, social and governance (ESG) and sustainability goals (including goals set forth in its climate policy);
•the effects of government regulation; and
•tax status and position.
The forward-looking statements included in this Quarterly Report on Form 10-Q involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Equitrans MidstreamThe Company has based these forward-looking statements on management's current expectations and assumptions about future events. While Equitrans Midstreamthe Company considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory, judicial and other risks and uncertainties, many of which are difficult to predict and are beyond Equitrans Midstream'sthe Company's control. The risks and
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uncertainties that may affect the operations, performance and results of Equitrans Midstream's and EQM's businessesthe Company's business and forward-looking statements include, but are not limited to, those set forth under "Item 1A. Risk Factors" in Equitrans Midstream'sthe Company's Annual Report on Form 10-K for the year ended December 31, 2019,2020, as may beare updated by any subsequent Quarterly Reports on Form 10-Q, including this Quarterly Report on Form 10-Q.
Any forward-looking statement speaks only as of the date on which such statement is made and Equitrans Midstreamthe Company does not intend to correct or update any forward-looking statement, unless required by securities law, whether as a result of new information, future events or otherwise.

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Executive Overview

Net income attributable to Equitrans Midstream common shareholders was $58.1 million for the three months ended March 31, 2021 compared to $69.7 million for the three months ended March 31, 2020 compared with $56.3 million for the three months ended March 31, 2019.2020. The increasedecrease resulted primarily from higher gatheringlower operating revenues primarily associated withon Gathering (primarily due to impacts of the operating entities acquired with the Bolt-on Acquisition, higher water revenues, higherEQT Global GGA) and Water, lower equity income from the Company's investment in the MVP Joint Venture, higher net interest expense and additional loss on extinguishment of debt charges, partially offset by lower net income attributable to noncontrolling interests, and lower income tax expense, partially offset by impairments toimpairment charges associated with long-lived assets (as discussed inon Gathering and transaction costs during the first quarter of 2020. See Note 45 to the consolidated financial statements) and loss on early extinguishmentstatements for a discussion of debt (as discussed in Note 9 to the consolidated financial statements).
The following table reconciles the differences between operating income attributable to EQM as reported in EQM's Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and 2019 and operating income attributable to Equitrans Midstream for the same periods.
 Three Months Ended March 31,
 2020 2019
 (Thousands)
Operating income attributable to EQM$251,414
 $268,014
Less:   
Separation and other transaction costs7,256
 5,269
Additional expenses, net2,076
 2,704
Operating income attributable to Equitrans Midstream$242,082
 $260,041
Separation and Other Transaction Costs. Separation and other transaction costs represent expenses related to the EQM Merger, the Restructuring,deferred revenues under the EQT Global GGA and the Share Purchases of $7.3 million for the three months ended March 31, 2020 and the expenses related to the EQGP Buyout and the Separation of $5.3 million for the three months ended March 31, 2019.
During the second quarter of 2020, the Company expects to incur approximately $15 million to $20 million of additional transaction costs associated with the EQM Merger.GGA.
Additional Expenses, Net.
As a result of being a publicly traded company, the Company incurs other operating expenses separate from and in addition to similar costs incurred by EQM.

COVID-19 Update

The COVID-19 outbreak, which has resulted in a severe global economic downturn and has caused increased volatility in and intermittent disruptions to the global financial and credit markets, remains ongoing. While COVID-19 has significantly impacted the manner in which the Company’s employees and contractors perform their job functions, the outbreak of COVID-19has had, and continues to have, a minimal impact on the operations ofCompany’s overall operations. However, the Company, EQM and their subsidiaries during the three months ended March 31, 2020, the Company is unable to predict, in light of the ongoing and dynamic nature of the circumstances, any additional impact the outbreak may have on the Company’s and EQM’s business, results of operations and financial condition. The extent of COVID-19’s impact on the Company and EQM will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, duration of the outbreak and related economic effects and after effects (including on the natural gas industry), and actions taken to contain COVID-19 or its impact, among others.

As a result of the outbreak, the Company’s and EQM’s operations, including EQM’s field operations, may be disrupted or become less efficient and instability in financial and credit markets as a result of COVID-19 may adversely affect EQM’s customers, as well as the Company and EQM. Further, the Company’s and EQM’s suppliers and EQM’s customers may be adversely affected, including if the outbreak results in an economic downturn or recession, negatively affects the price of, demand for and production of natural gas or prevents or curtails continued natural gas production by EQM’s customers, which could reduce demand for EQM’s services or heighten EQM’s exposure to risk of nonpayment and/or nonperformance. While the natural gas forward strip price has increased since March 31, 2020 primarily reflecting expected declines in production of associated gas (partially due to measures implemented by federal, state and local governments to control the spread of COVID-19 and resulting declines in demand for oil and to a lesser extent natural gas and continued economic uncertainty, as well as the failure, in March 2020, of Saudi Arabia and Russia to agree to cut oil production, which contributed to a sharp drop in the price of oil and an imbalance between the supply of demand for oil), the natural gas forward strip price continued to trend downward during the first three months of 2020 and could be depressed for several years, including as a result of COVID-19, which could affect EQM’s customers and, in turn, EQM.


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For further information regarding the potential impact of COVID-19, see “The outbreak of COVID-19 (or any future pandemic), and related declines in economic output and associated demand for natural gas, could harm the business, results of operations and financial condition of each of EQM and us.” under Part II, "Item 1A. Risk Factors", in this Quarterly Report on Form 10-Q.

The situation surrounding COVID-19 remains fluid and the Company iscontinues to actively managingmanage its response to the COVID-19 pandemic in collaboration with relevant parties. As a midstream energy company,parties and to take steps intended to protect the safety and health of its employees, customers and communities, and to support the continued delivery of safe and reliable service to its customers and the communities it serves.
In response to COVID-19, the Company and EQM are recognized as an essential business under various regulations related to the COVID-19 pandemic and have continued to operate as permitted under these regulations. The Company and EQM havehas proactively undertaken and continued a number of companywide measures intended to promote the safety and health of field and non-field leveloffice-based employees and contractors (including establishing an Infectious Disease Response Team, instituting enhanced self-protection and office sanitation measures, eliminating non-essential business travel, implementing a mandatory work-from-home protocol, sharing the Company’s infectious disease response plan with suppliers and contractors, and timely communicating updates to employees and other relevant parties). The Company’s Infectious Disease Response Team continues to monitor and assist in implementing mitigation efforts in respect of potential areas of risk for the Company and EQM. Additionally, the Company has implemented business continuity plans and provided support to local communities through corporate giving and the Equitrans Midstream Foundation. The Company and EQMCompany's operations have been able to maintain a consistent level of effectiveness through the measures taken. These measures include, among other things, implementing a mandatory work-from-home protocol for a substantial majority of the Company’s employees that remains ongoing as of the filing date of this Quarterly Report on Form 10-Q, instituting enhanced self-protection and office sanitation measures (including face covering protocols and practicing social distancing where possible), eliminating non-essential business travel, providing certain medical benefit enhancements, and timely communicating updates to employees and other relevant parties. Further, additional mitigation efforts have been implemented in connection with the Company’s field operations and the Company has provided support to local communities through corporate giving and the Equitrans Midstream Foundation. The Company believes that it is following best practices under COVID-19 guidance and intends to continue to refine its practices as additional guidance is released and assess potential impacts from COVID-19 to its financial position and operating results, as well as any regulatory and legislative activities relating to COVID-19 that could impact its business.


Notwithstanding the outbreak’s minimal impact to date on the Company’s overall operations, the Company is unable to predict, in light of the ongoing and dynamic nature of the circumstances related to COVID-19 and infection levels, any future impact the outbreak may have on the Company’s business, results of operations and financial condition. The extent of COVID-19’s impact on the Company will depend on future developments, which are highly uncertain and cannot be predicted with any reasonable degree of certainty, including new information which may emerge concerning the severity of COVID-19 (or variants of the disease), the duration of the outbreak, spikes in infection rates and related economic effects and after effects (including on the natural gas industry), the pace and scale of economic recovery, and actions taken to contain COVID-19 or its impact, including vaccine acceptance, distribution and effectiveness, among others. For further information regarding the potential impact of COVID-19, see "The outbreak of COVID-19 (or any future pandemic), and related declines in economic output and demand for natural gas, could harm our business, results of operations and financial condition." under "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
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Business Segment Results
Operating segments are revenue-producing components of an enterprise for which separate financial information is produced internally and is subject to evaluation by the chief operating decision maker in deciding how to allocate resources. Other income, netHeadquarters costs consist primarily of transaction costs and other unallocated corporate expenses. Net interest expense, components of other income and income tax expense are managed on a consolidated basis. The Company has presented each segment's operating income, other income, equity income and various operational measures in the following sections. Management believes that the presentation of this information is useful to management and investors regarding the financial condition, results of operations and trends of its segments. The Company has reconciled each segment's operating income to the Company's consolidated operating income and net income in Note 54 to the consolidated financial statements.
GATHERING RESULTS OF OPERATIONS
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 Three Months Ended March 31,
 2020 2019 %
Change
 (Thousands, except per day amounts)
FINANCIAL DATA 
Firm reservation fee revenues (a)
$152,079
 $128,959
 17.9
Volumetric-based fee revenues157,968
 132,922
 18.8
Total operating revenues310,047
 261,881
 18.4
Operating expenses:     
Operating and maintenance18,878
 15,253
 23.8
Selling, general and administrative21,235
 22,534
 (5.8)
Separation and other transaction costs4,104
 3,513
 16.8
Depreciation40,440
 28,116
 43.8
Amortization of intangible assets14,581
 10,387
 40.4
Impairments of long-lived assets55,581
 —
 100.0
Total operating expenses154,819
 79,803
 94.0
Operating income$155,228
 $182,078
 (14.7)
      
OPERATIONAL DATA     
Gathered volumes (BBtu per day)     
Firm capacity reservation (b)
3,282
 2,572
 27.6
Volumetric-based services5,014
 4,194
 19.6
Total gathered volumes8,296
 6,766
 22.6
      
Capital expenditures (c)
$111,454
 $158,000
 (29.5)
Gathering Results of Operations
(a)For the three months ended March 31, 2020, firm reservation fee revenues included approximately $6.3 million of MVC unbilled revenue.
(b)Includes volumes under agreements structured with MVCs.
(c)Includes approximately $12.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
 Three Months Ended March 31,
20212020%
Change
(Thousands, except per day amounts)
FINANCIAL DATA
Firm reservation fee revenues (a)
$148,192 $152,079 (2.6)
Volumetric-based fee revenues (b)
101,884 157,968 (35.5)
Total operating revenues250,076 310,047 (19.3)
Operating expenses:
Operating and maintenance22,666 18,878 20.1 
Selling, general and administrative24,804 21,235 16.8 
Transaction costs— 4,104 (100.0)
Depreciation46,547 40,440 15.1 
Amortization of intangible assets16,205 14,581 11.1 
Impairments of long-lived assets— 55,581 (100.0)
Total operating expenses110,222 154,819 (28.8)
Operating income$139,854 $155,228 (9.9)
Other income (c)
$7,135 $4,170 71.1 
OPERATIONAL DATA   
Gathered volumes (BBtu per day)
Firm capacity (d)
5,244 3,282 59.8 
Volumetric-based services3,345 5,014 (33.3)
Total gathered volumes8,589 8,296 3.5 
Capital expenditures (e)
$48,113 $111,454 (56.8)
(a)For the three months ended March 31, 2021 and 2020, firm reservation fee revenues included approximately $3.2 million and $6.3 million, respectively, of MVC unbilled revenues.
(b)For the three months ended March 31, 2021, volumetric-based fee revenues included approximately $6.2 million of unbilled revenues.
(c)Other income includes the unrealized gains on derivative instruments associated with the Henry Hub cash bonus payment provision. See "Other Income Statement Items" below for further information.
(d)Includes volumes up to the contractual MVC under agreements structured with MVCs. Volumes in excess of the contractual MVC are reported under Volumetric-based services.
(e)Includes approximately $1.7 million and $12.5 million of capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2021 and 2020, respectively.
Three Months Ended March 31, 20202021 Compared to Three Months Ended March 31, 20192020
Gathering operating revenues increaseddecreased by $48.2$60.0 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019.2020. Firm reservation fee revenues increaseddecreased by $23.1$3.9 million primarily as a resultdue to $72.0 million of deferred revenue resulting from the EQT Global GGA, partly offset by $61.0 million of increased MVC revenues generated byresulting from the operating entities acquired in the Bolt-on Acquisition, increased unbilled revenue associated with MVC'sEQT Global GGA and increased revenues associated with higher rates on various wellhead expansion projects.firm capacity by other producers. Volumetric-based fee revenues increaseddecreased by $25.0$56.1 million primarily due to higher gatheringincreased MVC revenues attributable to volumes associated withthat previously were subject to volumetric-based fees prior to the EQT Global GGA. See Note 5 to the consolidated financial statements for a discussion of deferred revenues under the EQT Global GGA.
Gathering operating entities acquired in the Bolt-on Acquisition and increased usage fees.
Operating expenses increaseddecreased by $75.0$44.6 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 20192020 primarily as a result of a $55.6 million impairment charge in 2020,the impairments of which $37.9 million was associated with an impairment to certainlong-lived assets (which consisted of gathering assets and $17.7 million was related to an impairment ofcustomer-related intangible assets (as each is discussedtotaling $55.6 million, as described in Note 43 to the consolidated financial statements), an approximate $12.3 million increase and transaction costs associated with the EQM Merger and related transactions, in depreciation expense as

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2020, partially offset by a result of additional assets placed in-service, as well as depreciation on assets acquired in the Bolt-on Acquisition, a $4.2 million increase in amortization of intangible assets as a result of intangible assets acquired in the Bolt-on Acquisition and a $3.6$3.8 million increase in operating and maintenance expense in the first quarter of 2021 primarily associated with the operations of assets acquired in the Bolt-on Acquisition. In addition, for the three months ended March 31, 2020, EQM recognized an increase in separationrepairs and other transaction costs of $0.6 million primarily associated with the EQM Merger and related transactions. The increase in operating expense was partly offset by a $1.3 million decrease inmaintenance expense. In addition, selling, general and administrative expense associated with lower personnel costs, facilityincreased by $3.6
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million in the first quarter of 2021 primarily due to higher professional services fees and shareddepreciation expense increased by $6.1 million in the first quarter of 2021 as a result of additional assets fees.placed in-service.
See also “Outlook”"Outlook" and Note 63 to the consolidated financial statements for afurther discussion of the impairments of long-lived assets. See also “Outlook” for discussions of certain customer production curtailments during 2020 and Note 5 to the consolidated financial statements for discussions of the EQT Global GGA and the transactions related thereto, including the potential cashgathering fee relief to EQT in connection withthereunder. As was the MVP in-service date. Thecase for the Gathering operating revenues during the first quarter of 2021, the Company expects that the revenues resulting from the MVCs under the EQT Global GGA will increase the proportion of the Company's total operating revenues that are firm reservation fee revenues, and correspondingly decrease the portion of the Company's total operating revenues that are volumetric-based fee revenues, in future periods. Firm reservation fee revenues under the Company’s Hammerhead gathering agreement with EQT (which is subject to a pending dispute with EQT) are also expected to contribute to an increase in the Company’s firm reservation fee revenues. See also “Outlook” for discussions of the Hammerhead dispute with EQT and the Gulfport Energy Corporation (Gulfport) bankruptcy.
TRANSMISSION RESULTS OF OPERATIONS

31
 Three Months Ended March 31,
 2020 2019 %
Change
 (Thousands, except per day amounts)
FINANCIAL DATA 
Firm reservation fee revenues$99,597
 $99,224
 0.4
Volumetric-based fee revenues7,018
 10,635
 (34.0)
Total operating revenues106,615
 109,859
 (3.0)
Operating expenses:     
Operating and maintenance9,441
 4,084
 131.2
Selling, general and administrative5,182
 8,492
 (39.0)
Depreciation13,558
 12,533
 8.2
Total operating expenses28,181
 25,109
 12.2
Operating income$78,434
 $84,750
 (7.5)
      
Equity income$54,072
 $31,063
 74.1
      
OPERATIONAL DATA     
Transmission pipeline throughput (BBtu per day)     
Firm capacity reservation3,000
 2,959
 1.4
Volumetric-based services15
 105
 (85.7)
Total transmission pipeline throughput3,015
 3,064
 (1.6)
      
Average contracted firm transmission reservation commitments (BBtu per day)4,453
 4,442
 0.2
      
Capital expenditures (a)
$10,798
 $18,762
 (42.4)
(a)Transmission capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019Table of Contents


Transmission Results of Operations
 Three Months Ended March 31,
 20212020%
Change
(Thousands, except per day amounts)
FINANCIAL DATA
Firm reservation fee revenues$101,389 $99,597 1.8 
Volumetric-based fee revenues10,030 7,018 42.9 
Total operating revenues111,419 106,615 4.5 
Operating expenses:
Operating and maintenance7,282 9,441 (22.9)
Selling, general and administrative8,849 5,182 70.8 
Depreciation13,800 13,558 1.8 
Total operating expenses29,931 28,181 6.2 
Operating income$81,488 $78,434 3.9 
Equity income$3 $54,072 (100.0)
OPERATIONAL DATA   
Transmission pipeline throughput (BBtu per day)
Firm capacity reservation2,937 3,000 (2.1)
Volumetric-based services9 15 (40.0)
Total transmission pipeline throughput2,946 3,015 (2.3)
Average contracted firm transmission reservation commitments (BBtu per day)4,424 4,453 (0.7)
Capital expenditures (a)
$3,505 $10,798 (67.5)
(a)Transmission capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and storage revenues decreased by $3.2MVP Southgate projects of approximately $10.7 million and $45.2 million for the three months ended March 31, 2021 and 2020, respectively.
Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020
Transmission operating revenues increased by $4.8 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2019.2020. Firm reservation fee revenues were essentially flat and volumetric-basedincreased by $1.8 million primarily due to customers contracting for additional firm transmission capacity. Volumetric-based fee revenues decreasedincreased by $3.0 million primarily due to lower interruptiblehigher park and loan activity and increased usage and storage volumes.fees.
Operating expenses increased by $3.1$1.8 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 20192020 primarily as a result of increased operating and maintenance expense and increased depreciation expense as a result of additional assets placed in-service, partly offset by lowerhigher selling, general and administrative expense resulting from lowerincreased professional service fees and personnel costs, facilitypartly offset by lower operating and shared assets fees.maintenance expense primarily due to operational efficiencies.

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The increase in equityEquity income of $23.0decreased by $54.1 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019 was related2020 due to the increasedecrease in the MVP Joint Venture's AFUDC on the MVP.MVP project for the three months ended March 31, 2021. Effective January 2021, the MVP Joint Venture temporarily suspended AFUDC on the MVP project until growth construction activities resume. Depending on the timing for when growth construction activities may resume, the Company’s equity income could be negatively impacted in future periods, and such impact could be substantial.
WATER RESULTS OF OPERATIONS

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 Three Months Ended March 31,
 2020 2019 %
Change
 (Thousands)
FINANCIAL DATA 
Firm reservation fee revenues (a)
$12,776
 $2,884
 343.0
Volumetric-based fee revenues23,675
 15,158
 56.2
Total operating revenues36,451
 18,042
 102.0
Operating expenses:     
Operating and maintenance10,103
 8,546
 18.2
Selling, general and administrative1,480
 1,894
 (21.9)
Depreciation7,116
 6,416
 10.9
Total operating expenses18,699
 16,856
 10.9
Operating income$17,752
 $1,186
 1,396.8
      
OPERATIONAL DATA     
Water services volumes (MMgal)     
Firm capacity reservation (b)
210
 90
 133.3
Volumetric-based services383
 280
 36.8
Total water volumes593
 370
 60.3
      
Capital expenditures$3,476
 $9,175
 (62.1)

(a)For the three months ended March 31, 2020, firm reservation fee revenues included approximately $5.0 million of MVC unbilled revenues.
(b)Includes volumes under agreements structured with MVCs.
Water Results of Operations
Three Months Ended March 31,
20212020%
Change
(Thousands)
FINANCIAL DATA
Firm reservation fee revenues (a)
$1,844 $12,776 (85.6)
Volumetric-based fee revenues16,657 23,675 (29.6)
Total operating revenues18,501 36,451 (49.2)
Operating expenses:
Operating and maintenance4,135 10,103 (59.1)
Selling, general and administrative1,714 1,480 15.8 
Depreciation8,175 7,116 14.9 
Total operating expenses14,024 18,699 (25.0)
Operating income$4,477 $17,752 (74.8)
OPERATIONAL DATA
Water services volumes (MMgal)
Firm capacity reservation (b)
36 210 (82.9)
Volumetric-based services380 383 (0.8)
Total water volumes416 593 (29.8)
Capital expenditures$4,807 $3,476 38.3 
(a)    For the three months ended March 31, 2021 and 2020, firm reservation fee revenues included approximately $0.5 million and $5.0 million, respectively, of MVC unbilled revenues.
(b)    Includes volumes up to the contractual MVC under agreements structured with MVCs. Volumes in excess of the contractual MVC are reported under Volumetric-based services.
Three Months Ended March 31, 20202021 Compared to Three Months Ended March 31, 20192020
Water operating revenues increaseddecreased by $18.4$18.0 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019.2020. Firm reservation fee revenues increaseddecreased by $9.9$10.9 million primarily as a result of increaseddecreased revenues generated under agreementsassociated with contractually lower MVCs, including increaseddecreased unbilled revenue associated with MVC's. Volumetric basedthe contractually lower MVCs. Volumetric-based fee revenues increased $8.5decreased $7.0 million primarily due to a 37% increase in fresh water distribution volumes associated with increased customer activity and increaseddecreased realized rates on a per gallon basis. A majority of the fresh water delivery fees EQMthe Company charges per gallon of water are tiered and thus are lower on a per gallon basis once certain volumetric thresholds are met.
Water operating expenses increaseddecreased by $1.8$4.7 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019 primarily2020 as a result of higherlower operating and maintenance expense associated with the timing ofprimarily due to overall lower customer activity resulting in lower fresh water and produced water costs, related to activities on drilling pads and increasedpartly offset by an increase in depreciation expense as a result of additional assets placed in-service.
EQM’sThe Company’s water services are directly associated with the timing of producers’ well completion activities and fresh and produced water needs (which are partially driven by horizontal lateral lengths and the number of completion stages per well), which will vary from quarter to quarter.. Therefore, the Water operating results traditionally fluctuate from year-to-year in response to producers’ well completion activities and water operating results for the three months ended March 31, 2020interim periods are not necessarily indicative of the results for any year, including the year ending December 31, 2020.
OTHER INCOME STATEMENT ITEMS2021.
Other Income Statement Items
Other Income
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Other income increased $2.3by $3.4 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 20192020. The increase was primarily associated withdue to a $4.2$3.0 million increase in unrealized gain on derivative instruments partially offset by a $2.1 million decreaseassociated with the Henry Hub cash bonus payment provision related to an increase in AFUDC - equity.

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NYMEX Henry Hub natural gas futures prices.
Loss on Early Extinguishment of Debt
Loss on extinguishment of debt increased $16.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. The Company incurred a loss on the early extinguishment of debt of $24.9$41.0 million during the three months ended March 31, 2021 related to the payment of the Tender Offer premium and write off of unamortized discounts and financing costs related to the prepayment of the EQM Term Loans under, and termination of, the Amended 2019 EQM Term Loan Agreement and purchase of 2023 Notes in the Tender Offers. During the three months ended March 31, 2020, the Company incurred a loss on the extinguishment of debt of $24.9 million related to the write off of unamortized discounts and financing costs onrelated to the prepayment and termination of the ETRN Term Loan Credit Agreement and the Equitrans Midstream Credit Facility. See Note 98 to the consolidated financial statements.statements for additional discussion.

Net Interest Expense

Net interest expense increased by $5.8$28.4 million for the three months ended March 31, 20202021 compared to the three months ended March 31, 20192020 primarily due to higher interest expense of $7.9$26.0 million on the EQM and ETRN Term Loans, higher interest expense of $2.0 million on EQM revolving credit facility borrowings associated with increased outstanding debtthe $700 million aggregate principal amount of 6.00% senior unsecured notes due 2025 and $900 million aggregate principal amount of 6.50% senior unsecured notes due 2027 issued by EQM in June 2020 and $20.9 million associated with the issuance of letters of credit with respect to the MVP2021 Senior Notes and MVP Southgate projects, partly offset by increaseddecreased capitalized interest and AFUDC - debt of $4.3 million.$8.1 million, partially offset by lower interest expense of $26.9 million primarily associated with the termination of the Amended 2019 EQM Term Loan Agreement and the ETRN Term Loan Credit Agreement, decreased borrowings under the Amended EQM Credit Facility and lower interest on the 2023 Notes as a result of the Tender Offers. As a result of the issuance of the 2021 Senior Notes and use of those proceeds to pay off other outstanding debt, the Company expects interest expense to increase in future periods.

See also Note 98 to the consolidated financial statements for a discussion of certain of the EQM Credit FacilityCompany's outstanding debt.

See Note 12 for discussion of the Second Amendment and the Term Loan Amendment. EQM expects higher net interest expense for the remainder of 2020 from borrowings under(as defined in Note 12) to the Amended EQM Credit Facility and the Amended 2019 EQM Term Loan Agreement due to an increase in the Applicable Rate (as defined in the Amended EQM Credit Facility and the Amended 2019 EQM Term Loan Agreement) and recent downgrades of EQM’s credit ratings.Facility.
Income Taxes
See Note 1211 to the consolidated financial statements for an explanation of the decreaseincrease in income taxes for the three months ended March 31, 20202021 compared to the three months ended March 31, 2019.2020.
The Company files a consolidated income tax return for federal income taxes and uses the asset and liability method to account for income taxes. EQM is and for the period prior to the EQGP Buyout, EQGP was, a limited partnership for U.S. federal and state income tax purposes. Eureka Midstream is a limited liability company for such purposes. EQM EQGP, and Eureka Midstream are not subject to U.S. federal or state income taxes.
All of EQM's and Eureka Midstream's income is, and for the period prior to the closing of the EQGP Buyout,EQM Merger all of EQGP'sEQM's income was, included in the Company’sCompany's pre-tax income; however, the Company does not record income tax expense on the portions of its income attributable to the noncontrolling limited partners of EQM, the noncontrolling member of Eureka Midstream and did not record income tax expense on the portions of its income attributable to the noncontrolling limited partners of EQM for the periodperiods prior to the closing of the EQGP Buyout, the noncontrolling limited partners of EQGP.EQM Merger. This reduces the Company's effective tax rate in periods when the Company has consolidated pre-tax income. The Company's effective tax rate for periods following the EQM Merger has been, and the Company expects its effective tax rate for future periods will be, generally higher than the pre-EQM Merger periods due to the decrease in net income attributable to noncontrolling interests as a result of the EQM Merger and related Restructuring.
Net Income Attributable to Noncontrolling Interests
ForNet income attributable to noncontrolling interests decreased $115.9 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily as a result of the Company'sreduction in noncontrolling interests were composed ofinterest in connection with the EQM Merger and the Restructuring.
The Company recorded net income attributable to noncontrolling interest for the third-party ownership interests in EQM (including the EQM Series A Preferred Units) and Eureka Midstream. For the three months ended March 31, 2019, the Company's noncontrolling interests were composed of the third-party ownership interests in EQM and, for the period from January 1, 2019 and through the closing of the EQGP Buyout on January 10, 2019, the third-party ownership interests in EQGP.
The noncontrolling interests described above resulted in net income allocations to noncontrolling interests in the statements of consolidated comprehensive income. Net income attributable to noncontrolling interests fluctuates based on the amount of net income earned by the entities with noncontrolling interests, the amount of net income allocated to EQM's IDRs prior toEQM Merger. Upon the closing of the EQM IDR Transaction, the amount of net income allocated to the Class B units subsequent to the closing of the EQM IDR Transaction, and any changes in the noncontrolling ownership percentages during the applicable periods.
Net income attributable to noncontrolling interests decreased for the three months ended March 31,Merger on June 17, 2020, compared to the three months ended March 31, 2019 as a result of the increase in the Company's ownershipremaining noncontrolling interest consists solely of EQM as a result of the EQM IDR Transaction partially offset by the net income attributable to the Series A Preferred Units and the third-party ownership interest in Eureka Midstream in the first quarterMidstream.
Capital Expenditures
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See "Investing Activities" and "Capital Requirements" under "Capital Resources and Liquidity" for discussion of capital expenditures.expenditures and capital contributions.

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Outlook
The Company's strategically-located assets overlay core acreage in the Appalachian Basin. The location of the Company's assets allows itits producer customers to access major demand markets in the U.S. The Company is one of the largest natural gas gatherers in the U.S., and its largest customer, EQT, iswas the largest natural gas producer in the U.S. based on producedaverage daily sales volumes as of MarchDecember 31, 2020. The Company maintains a stable cash flow profile, with approximately 58%66% of its revenue for the three months ended March 31, 20202021 generated by firm reservation fees, including revenues from MVCs.fees. Further, the percentage of the Company’sCompany's revenues that are generated by firm reservation fees and MVCs is expected to increase in future years as a result of the 15-year term EQT Global GGA, which includes an MVC that became effective on February 26,April 1, 2020 of 3.0 Bcf per day thatand gradually steps up to 4.0 Bcf per day for several years following the full in-service date of the MVP project. This contract structure enhances the stability of the Company's cash flows and limits its direct exposure to commodity price risk.
The Company's principal strategy is to achieve thegreater scale and scope and enhance the durability of a top-tier midstream companyits financial strength, which the Company expects will drive future growth and investment. The Company is implementing its strategy by leveraging its existing assets, executing on its growth projects (including through potential expansion and extension opportunities), focusing on ESG and sustainability initiatives, and, where appropriate, seeking and executing on strategically-aligned acquisition and joint venture opportunities and other strategic transactions, while strengthening its balance sheet through (i) through:
•highly predictable cash flows backed by firm reservation fees, (ii) fees;
•actions to deleverde-lever its balance sheet, (iii) sheet;
•disciplined capital spending, (iv) spending;
•operating cost controlcontrol; and (v)
•an appropriate dividend policy.
As part of its approach to organic growth, the Company is focused on buildingits projects and completing its key transmission and gathering growth projectsassets outlined below, many of which are supported by contracts with firm capacity or MVC commitments. Additionally, the Company is targeting growth from volumetric gathering and transmission services opportunities and from its water services business. The Company believes that this approach will enable the Company to achieve its strategic goals.
The Company expects that the following expansion projectsMVP project, together with the Hammerhead pipeline and Equitrans, L.P. Expansion Project (EEP), will primarily drive the Company's organic growth and that its future growth also will be supported by the primary organic growth drivers:MVP Southgate project and the water services business, as discussed in further detail below.
•
Mountain Valley Pipeline. The MVP Joint Venture is a joint venture among EQM and affiliates of each of NextEra Energy, Inc., Con Edison, AltaGas Ltd. and RGC Resources, Inc. that is constructing the MVP. As of March 31, 2020, EQM owned a 45.7% interest in the MVP project and will operate the MVP. The MVP is an estimated 300 mile, 42-inch diameter natural gas interstate pipeline with a targeted capacity of 2.0 Bcf per day that will span from EQM's existing transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia, providing access to the growing Southeast demand markets. During the three months ended March 31, 2020, EQM made capital contributions of approximately $45 million to the MVP Joint Venture for the MVP project. For the remainder of 2020, EQM expects to make capital contributions of approximately $550 million to $600 million to the MVP Joint Venture for purposes of the MVP. The MVP Joint Venture has secured a total of 2.0 Bcf per day of firm capacity commitments at 20-year terms and additional shippers have expressed interest in the MVP project. The MVP Joint Venture is evaluating an expansion opportunity that could add approximately 0.5 Bcf per day of capacity through the installation of incremental compression and is also evaluating other future pipeline extension projects.

•Mountain Valley Pipeline. The MVP is being constructed by a joint venture among the Company and affiliates of each of NextEra Energy, Inc., Con Edison, AltaGas Ltd. and RGC Resources, Inc. As of March 31, 2021, the Company owned an approximate 46.2% interest in the MVP project and will operate the MVP. The MVP is an estimated 300-mile, 42-inch diameter natural gas interstate pipeline with a targeted capacity of 2.0 Bcf per day that will span from the Company's existing transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia, providing access to the growing Southeast demand markets. The MVP Joint Venture has secured a total of 2.0 Bcf per day of firm capacity commitments at 20-year terms. Additional shippers have expressed interest in the MVP project and the MVP Joint Venture is evaluating an expansion opportunity that could add approximately 0.5 Bcf per day of capacity through the installation of incremental compression. The MVP Joint Venture is also evaluating other future pipeline extension projects.

In October 2017, the FERC issued the Certificate of Public Convenience and Necessity (the Certificate) for the MVP. In the first quarter of 2018, the MVP Joint Venture received limited notice to proceed with certain construction activities from the FERC and commenced construction. As discussedFollowing a comprehensive review of all outstanding stream and wetland crossings across the approximately 300-mile MVP project route, on February 19, 2021, the MVP Joint Venture submitted (i) a joint application package to each of the Huntington, Pittsburgh and Norfolk Districts of the U.S. Army Corps of Engineers (Army Corps) that requests an Individual Permit from the Army Corps to cross certain streams and wetlands utilizing open cut techniques (the Army Corps Individual Permit) and (ii) an application to amend the Certificate that seeks FERC authority to cross certain streams and wetlands utilizing alternative trenchless construction methods. Related to seeking the Army Corps Individual Permit, on March 4, 2021, the MVP Joint Venture submitted applications to each of the West Virginia Department of Environmental Protection (WVDEP) and the Virginia Department of Environmental Quality (VADEQ) seeking Section 401 water quality certification approvals or waivers (such approvals or waivers, the State 401 Approvals).
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While the MVP Joint Venture anticipated that the applications would be acted upon within approximately six months and the agencies are continuing to process the applications, both the VADEQ and WVDEP submitted requests to the Army Corps for additional time to address the applications. Based on the Company’s understanding of discussions occurring in April (which discussions continue, including as recently as May 3, 2021), involving the Army Corps and the VADEQ and WVDEP regarding the requested extensions, the Company expects that the Army Corps will grant the VADEQ and WVDEP additional review time and, in light of the agencies' rationales for seeking extensions, is supportive of that action. Taking into account that discussions regarding the extensions remain ongoing and the likelihood of a longer review period than originally anticipated and, as a result, the potential for certain time of year restrictions (unless waived or alternative crossing authority is obtained) and seasonal challenges to affect construction, as well as seasonal carrying costs, the Company is targeting a full in-service date for the MVP project in summer 2022 at a total project cost of approximately $6.2 billion (excluding AFUDC).

In order to complete the project in accordance with the targeted full in-service date and cost, the MVP Joint Venture must, among other things, timely receive the Army Corps Individual Permit (as well as timely receive the State 401 Approvals and, as necessary, certain other state-level approvals), and timely receive authorization from the FERC to amend the Certificate to utilize alternative trenchless construction methods for certain stream and wetland crossings. The MVP Joint Venture also must (i) maintain and, as applicable, timely receive required authorizations, including authorization to proceed with construction, related to the Jefferson National Forest (JNF) from the Bureau of Land Management (BLM), the U.S. Forest Service (USFS) and the FERC; (ii) continue to have available the orders previously issued by the FERC modifying its prior stop work orders and extending the MVP Joint Venture’s prescribed time to complete the MVP project; (iii) timely receive authorization from the FERC to complete construction work in the portion of the project route currently remaining subject to the FERC’s previous stop work order; and (iv) continue to be authorized to work under the Biological Opinion and Incidental Take Statement issued by the United States Department of the Interior’s Fish and Wildlife Service (FWS) for the MVP project. In each case, any such foregoing or other authorizations must remain in effect notwithstanding any pending or future challenge thereto. For further information regarding litigation and regulatory related delays affecting the completion of the MVP project, see "Item 1. Legal Proceedings" in Part II of this Quarterly Report on Form 10-Q. See also "The regulatory approval process for the construction of new midstream assets is very challenging, and recent decisions by regulatory and judicial authorities in pending or potential proceedings could impact EQM'sour or the MVP Joint Venture's ability to obtain or maintain in effect all approvals and authorizations necessary to complete certain projects on the projectedtargeted time frame or at all or EQM'sour ability to achieve the expected investment returns on the projects.projects." included in "Item 1A. Risk Factors – Risks Related to EQM's Business,"Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019, there are pending legal and regulatory challenges to or otherwise affecting certain aspects2020 for additional discussion of risks in respect of the MVP project that must be resolved before the MVP project can be completed. The MVP Joint Venture is working to resolve these challenges. The MVP Joint Venture has a narrow path to achieve the Company’s targeted late 2020 full in-service date at an overall projectand cost of approximately $5.4 billion (excluding AFUDC). Completion of the project in accordance with these targets will require, among other things, a favorable decision by the United States Supreme Court in the Cowpasture River Preservation Association case, timely issuance by the U.S. Fish and Wildlife Service of a new biological opinion and incidental take statement for the MVP project (and resolution of related litigation), receipt of authorizations from the Bureau of Land Management and U.S. Forest Service and the lifting of the stop work order issued by the FERC, and remediation of the Northern Plains Resource Council case relating to the Nationwide Permit 12 and timely approval of the MVP Joint Venture's pending Nationwide Permit 12 permits or utilization of alternative permitting authority and/or construction methods to cross streams and wetlands in a manner not requiring a Nationwide Permit 12. See the discussion of the litigation and regulatory-related delays affecting the completion of the MVP set forth in Part II, "Item 1. Legal Proceedings". Based on the MVP Joint Venture's current budget for the project, EQM is expected to fund approximately $2.7 billion (inclusive of additional contributions required due to the Con Edison cap describeddiscussed above.

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below) of the overall project cost, including approximately $105 million to $120 million in excess of EQM's ownership interest.
On November 4, 2019, Con Edison exercised an option to cap its investment in the MVP project at approximately $530 million (excluding AFUDC). EQMThe Company and NextEra Energy, Inc. are obligated, to, and RGC Resources, Inc., another member of the MVP Joint Venture owning an interest in the MVP project, has opted, to fund the shortfall in Con Edison's capital contributions on a pro rata basis. As a result, based on the MVP Joint Venture's current budget for the project, EQM expects to fund an additional approximately $86 million (excluding AFUDC) in capital contributions to the MVP Joint Venture. AnySuch funding by EQMthe Company and funding by other members has and will correspondingly increase theirthe Company's and such other members' respective interests in the MVP project and decrease Con Edison's interest in the MVP project. As a result, EQM's equitybased on the MVP project's approximate $6.2 billion (excluding AFUDC) targeted cost, the Company's ownership interest in the MVP project will progressively increase from 45.7%approximately 46.2% to approximately 47.0%47.8%.
In light
Through March 31, 2021, based on the MVP project's targeted cost, the Company had funded approximately $2.3 billion of litigation and regulatory proceedings affecting or which have affectedits estimated total capital contributions of approximately $3.1 billion (inclusive of additional contributions required due to the constructionCon Edison cap described above), including approximately $160 million in excess of the MVP,Company's ownership interest. For 2021, the Company expects thatto make total capital contributions of $265 million to $315 million to the MVP Joint Venture will declare by May 31, 2020 eventsfor purposes of force majeure under the precedent agreements (MVP Precedent Agreements) entered into with shippers (MVP Shippers) that have subscribed for capacityMVP project, depending on the MVP. The Company expects thattiming of construction of the project, of which approximately $9.1 million had been contributed to the MVP Joint Venture will take such action as an administrative matterof March 31, 2021.

•Wellhead Gathering Expansion Projects and Hammerhead Pipeline. During the three months ended March 31, 2021, the Company invested approximately $48.1 million in ordergathering projects (inclusive of capital expenditures related to extendthe noncontrolling interest in accordance withEureka Midstream). For 2021, the termsCompany expects to invest approximately $285 million to $315 million in gathering projects (inclusive of expected capital expenditures related to the noncontrolling interest in Eureka Midstream). The primary projects include infrastructure expansion of core development areas in the Marcellus and Utica Shales in southwestern Pennsylvania, southeastern Ohio and northern West Virginia for EQT, Range Resources Corporation (Range Resources) and other producers.
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The Hammerhead pipeline is a 1.6 Bcf per day gathering header pipeline that is primarily designed to connect natural gas produced in Pennsylvania and West Virginia to the MVP, Texas Eastern Transmission and Dominion Transmission, is supported by a 20-year term, 1.2 Bcf per day, firm capacity commitment from EQT and cost approximately $540 million. The Company believes the Hammerhead pipeline was placed in-service effective August 1, 2020. For more information, see "Hammerhead Pipeline" below.
•Transmission Projects. During the three months ended March 31, 2021, the Company invested approximately $3.5 million in transmission projects. For 2021, the Company expects to invest approximately $30 million to $50 million in transmission projects.

The EEP is designed to provide north-to-south capacity on the mainline Equitrans, L.P. system, including primarily for deliveries to the MVP. A portion of the MVP Precedent Agreements various milestone datesEEP commenced operations with interruptible service in the agreements during the pendencythird quarter of the force majeure events, including service commencement dates. Such action does not adversely affect the targeted in-service date for the project.
•
Wellhead Gathering Expansion and Hammerhead Projects. During the three months ended March 31, 2020, EQM invested approximately $104 million in gathering expansion projects. For the remainder of 2020, EQM expects to invest approximately $300 million in gathering expansion projects (inclusive of expected capital expenditures related to the noncontrolling interest in Eureka Midstream).2019. The expansion projects include infrastructure expansion of core development areas in the Marcellus and Utica Shales in southwestern Pennsylvania, eastern Ohio and northern West Virginia for EQT, Range Resources Corporation (Range Resources) and other producers, including the Hammerhead project. The Hammerhead project is a 1.6 Bcf per day gathering header pipeline that is primarily designed to connect natural gas produced in Pennsylvania and West Virginia to the MVP, is supported by a 20-year term, 1.2 Bcf per day, firm capacity commitment from EQT and is expected to cost approximately $555 million, of which approximately $490 million had been spent through March 31, 2020. For the remainder of 2020, EQM expects to invest approximately $30 million in the Hammerhead project. The Hammerhead project is expected to become operational in the second quarter of 2020 and will provide interruptible service until the MVP is placed in-service, at which time the firm capacity commitment will begin.
•
MVP Southgate Project. In April 2018, the MVP Joint Venture announced the MVP Southgate project, a proposed 75-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. The MVP Southgate project is backed by a 300 MMcf per day firm capacity commitment from Dominion Energy North Carolina. As designed, the MVP Southgate project has expansion capabilities that could provide up to 900 MMcf per day of total capacity. The MVP Southgate project is estimated to cost a total of approximately $450 million to $500 million, which is expected to be spent primarily in 2021. EQM is expected to fund approximately $225 million of the overall project cost. During the three months ended March 31, 2020, no capital contributions were made by EQM to the MVP Joint Venture for the MVP Southgate project. For 2020, EQM expects to make capital contributions of approximately $15 million to the MVP Joint Venture for the MVP Southgate project. EQM will operate the MVP Southgate pipeline and, as of March 31, 2020, owned a 47.2% interest in the MVP Southgate project. The MVP Joint Venture submitted the MVP Southgate certificate application to the FERC in November 2018. The Final Environmental Impact Statement for the MVP Southgate project was issued on February 14, 2020. The schedule also identifies May 14, 2020 as the deadline for other agencies to act on other federal authorizations required for the project (the FERC, however, is not subject to this deadline). Subject to approval by the FERC and other regulatory agencies, the MVP Southgate project is expected to be placed in-service in 2021.
•
Transmission Expansion. During the three months ended March 31, 2020, EQM invested approximately $9 million in transmission expansion projects. For the remainder of 2020, EQM expects to invest approximately $40 million to $50 million in transmission expansion projects, primarily attributable to the Allegheny Valley Connector (AVC), the Equitrans, L.P. Expansion project (EEP), which is designed to provide north-to-south capacity on the mainline Equitrans, L.P. system, including for deliveries to the MVP, and power plant projects. A portion of EEP commenced operations with interruptible service in the third quarter of 2019. EEP provides capacity of approximately 600 MMcf per day and offers access to several markets through interconnects with Texas Eastern Transmission, Dominion Transmission and Columbia Gas Transmission. EEP will also provide

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delivery intoapproximately 600 MMcf per day and offers access to several markets through interconnects with Texas Eastern Transmission, Dominion Transmission and Columbia Gas Transmission. Once the MVP and once the MVP is fully placed in service, firm transportation agreements for 550 MMcf per day of capacity will commence under 20-year terms.
•
Water Expansion. During the three months ended March 31, 2020, EQM invested approximately $3 million in the expansion of its fresh water delivery infrastructure. For the remainder of 2020 EQM expects to invest approximately $10 million to $15 million in

•MVP Southgate Project. In April 2018, the MVP Joint Venture announced the MVP Southgate project, a proposed 75-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. The MVP Southgate project is backed by a 300 MMcf per day firm capacity commitment from Dominion Energy North Carolina. As designed, the MVP Southgate project has expansion capabilities that could provide up to 900 MMcf per day of total capacity. The MVP Southgate project is estimated to cost a total of approximately $450 million to $500 million, which is expected to be spent primarily in 2022. The Company expects to fund approximately $225 million of the overall project cost. During the three months ended March 31, 2021, the Company made approximately $1.6 million of capital contributions to the MVP Joint Venture for the MVP Southgate project. For 2021, the Company expects to make capital contributions of approximately $10 million to the MVP Joint Venture for the MVP Southgate project. The Company will operate the MVP Southgate and, as of March 31, 2021, owned a 47.2% interest in the MVP Southgate project. The MVP Joint Venture submitted the MVP Southgate certificate application to the FERC in November 2018. The Final Environmental Impact Statement for the MVP Southgate project was issued on February 14, 2020. In June 2020, the FERC issued the Certificate of Public Convenience and Necessity for the MVP Southgate; however, the FERC, while authorizing the project, directed the Office of Energy Projects not to issue a notice to proceed with construction until necessary federal permits are received for the MVP project and the Director of the Office of Energy Projects lifts the stop work order and authorizes the MVP Joint Venture to continue constructing the MVP project. On August 11, 2020, the North Carolina Department of Environmental Quality (NCDEQ) denied the MVP Southgate project's application for a Clean Water Act Section 401 Individual Water Quality Certification and Jordan Lake Riparian Buffer Authorization due to uncertainty surrounding the completion of the MVP project. On March 11, 2021, the Fourth Circuit Court of Appeals, pursuant to an appeal filed by the MVP Joint Venture, vacated the NCDEQ's denial and remanded the matter to the NCDEQ for additional review. On April 29, 2021, the NCDEQ reissued its denial of the MVP Southgate project's application for a Clean Water Act Section 401 Individual Water Quality Certification and Jordan Lake Riparian Buffer Authorization. Based on the updated targeted full in-service date for the MVP and expectations regarding MVP Southgate permit approval timing, the Company is targeting commencing construction on the MVP Southgate in 2022 and placing the MVP Southgate in-service during the spring of 2023. See the discussion of litigation and regulatory related delays affecting the completion of the MVP Southgate project set forth in "Item 1. Legal Proceedings" in Part II of this Quarterly Report on Form 10-Q.
•Water Operations. During the three months ended March 31, 2021, the Company invested approximately $4.8 million in its fresh water delivery infrastructure. For 2021, the Company expects to invest approximately $20 million in the operations of its fresh water delivery infrastructure in Pennsylvania and Ohio.
See further discussion of capital expenditures in the "Capital Requirements" section below.
EQT Global GGA.On February 27, 2020, the Company and EQM announced the EQT Global GGA, with EQT, which is a 15-year contract that includes, among other things, a 3.0 Bcf per day MVC (which gradually steps up to 4.0 Bcf per day for several years following the full in-service date of the MVP project) and the dedication of a substantial majority of EQT’s core acreage in Pennsylvania and West Virginia to the Company. Under the EQT Global GGA, EQT receivedwill receive certain gathering fee relief over a period of
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three years following the in-service date of the MVP, subject to any exercise of the EQT Cash Option (as further described in Note 65 to the consolidated financial statements). The EQT Global GGA replaced 14 previous gathering agreements between affiliates of each of EQT and the Company. In addition, on February 27, 2020, the Company and EQM announced a definitive merger agreement between the Company, EQM and certain of their affiliates related to the EQM Merger, pursuant to which, among other things, the Company will acquire all of the issued and outstanding EQM common units (other than EQM common units held by the Company and its subsidiaries). Following the EQM Merger, which is subject to customary closing conditions, including approvals of EQM’s limited partners and the Company’s shareholders, EQM will be an indirect wholly owned subsidiary of the Company and will no longer be a publicly traded entity. The Equitrans Midstream Special Meeting and the EQM Special Meeting are both scheduled to be held on June 15, 2020, and the Company expects the EQM Merger to close in June 2020. See Notes 1, 2, 3, and 6 for additional information regarding the EQM Merger and the EQT Global GGA, and the transactions related thereto.
Under the EQT Global GGA, the performance obligation is to provide daily MVC capacity and as such the total consideration is allocated proportionally to the daily MVC over the life of the contract. In periods that the gathering MVC revenue billed will exceed the allocated consideration, the excess will be deferred to the contract liability and recognized in revenue when the performance obligation has been satisfied. Assuming ana full in-service date of year-end 2020in summer 2022 for the MVP, the deferral to the contract liability is expected to increase by approximately $227$296 million for the remainder of 20202021 and by approximately $14$67 million and $43 million, respectively, during 2021 and 2022. TheWhile the 3.0 Bcf per day MVC capacity became effective on April 1, 2020, additional daily MVC capacity and the associated gathering MVC fees payable by EQT (or its affiliates) to EQMthe Company as set forth in the EQT Global GGA are conditioned upon the full in-service date of the MVP. There are ongoing legal and regulatory matters that must be resolved favorably before the MVP project can be completed which could have a material effect on the performance obligation, and the allocation of the total consideration over the life of the contract and the gathering MVC fees payable by EQT under the contract.
Based on the Henry Hub natural gas forward strip prices as of April 30, 2021 and the terms of the Henry Hub cash bonus payment provision, any further delays in the in-service date for the MVP project, including beyond the most recent targeted full in-service of summer 2022, would decrease the estimated fair value of the derivative asset attributable to the Henry Hub cash bonus payment provision, and such decrease may be substantial. Such changes in estimated fair value, if any, would be recognized in other income on the Company’s statements of consolidated comprehensive income.
For a discussion of Equitrans Midstream'sthe Company's commercial relationship with EQT and related considerations, including risk factors, see Equitrans Midstream'sthe Company's Annual Report on Form 10-K for the year ended December 31, 2019,2020, as updated by this and any subsequent Quarterly Report on Form 10-Q. See also Note 5 to the consolidated financial statements for additional information regarding the EQT Global GGA, and the transactions related thereto. For further discussion on litigation and regulatory challenges affecting the completion of the MVP project, see "Outlook" above and "Item 1. Legal Proceedings" in Part II of this Quarterly Report on Form 10-Q.
Hammerhead Pipeline. On September 23, 2020, EQT and certain affiliates of EQT instituted arbitration proceedings against the Company by filing a Demand for Arbitration with the American Arbitration Association. The arbitration arises out of the Hammerhead gathering agreement, pursuant to which the Company agreed to construct the Hammerhead pipeline and gather gas for EQT. EQT sought a declaratory judgment that it may exercise an early termination right and purchase the Hammerhead pipeline and related facilities under the terms of the Hammerhead gathering agreement. With its Demand for Arbitration, EQT also sought emergency relief, asking that an emergency arbitrator: (i) resolve the parties’ dispute on the merits by October 1, 2020; or (ii) alternatively, toll the contractual deadline for EQT’s exercise of its termination right, which was set to expire on October 11, 2020, until after the parties’ dispute was resolved. On October 6, 2020, the emergency arbitrator issued an order denying EQT’s request for emergency resolution on the merits but tolling the early termination deadline until the arbitration has been resolved. The Company’s answer to the Notice of Arbitration was filed on October 8, 2020, and the parties are currently engaged in arbitration with a hearing currently scheduled for June 28, 2021. The Company will vigorously defend against EQT’s claims and litigate the Company’s rights, including the assertion of appropriate counterclaims.
Gulfport Bankruptcy. On November 13, 2020, Gulfport commenced bankruptcy proceedings. On November 24, 2020, Gulfport moved to reject its gas gathering agreements with the Company and made certain related court filings, which motions the Company opposed. On April 21, 2021, Gulfport acted to assume the gas gathering agreements with the Company, which assumption was confirmed by the bankruptcy court in a subsequent hearing.

Commodity Prices. The Company’s business is dependent on continued natural gas production and the availability and development of reserves in its areas of operation. Low prices for natural gas and natural gas liquids haveNGLs adversely affectedaffect development of additional reserves and production that is accessible by EQM’sthe Company’s pipeline and storage assets, which also negatively affects EQM’sthe Company’s water services business.

The Henry Hub natural gas price ranged from $1.68 per MMbtu to $2.17 per MMbtu between January 1, 2020 and March 31, 2020. While the natural gas forward strip price has increased since March 31, 2020 primarily as a result of expected declines of production of associated gas (partially due to measures implemented by federal, state and local governments to control the spreadoutbreak of COVID-19 and resulting declinesdirectly resulted in a significant decrease in demand for oil and NGLs and, together with events affecting the level of oil supplies, negatively impacted the prices of those commodities. The revised outlook for oil and other liquids prices caused a significant reduction in the number of operating drilling rigs in the United States from January 2020 levels (according to a lesser extentaverage rig count data from Baker Hughes) and oil and associated natural gas and continued economic uncertainty,NGL production to be curtailed during portions of 2020. Although commodity prices have stabilized and improved from 2020 lows, the number of operating drilling rigs has not returned to pre-COVID-19 levels as well as the failure, in March 2020, of Saudi Arabiaexploration and Russia to agree to cut oil production which contributed to a sharp drop in the price of oilcompanies remain focused on capital discipline and an imbalance between the supply of demand for oil) and only a modest negative impact on demand for natural gas resulting from the COVID-19 pandemic,free cash flow generation rather than growth. Accordingly, the natural gas forward price strip pricehas been positively impacted based on the continued market expectation that reduced production of associated gas from basins such as the Permian Basin will result in higher natural gas prices relative to trend downward2020 lows at least in the near- and medium-term.

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Although Henry Hub natural gas prices generally have improved from the 2020 lows (and temporarily spiked during the first three monthsquarter of 2020. Further,2021), Henry Hub spot and local spot natural gas prices were under pressure prior to the COVID-19 outbreak and market prices for natural gas in the Appalachian Basin continue to be lower than Henry Hub natural gas prices. Lowerprices and were significantly lower during portions of 2020. While the natural gas forward price strip as of April 30, 2021 indicated higher prices during 2021 and potentially into 2022 relative to 2020 lows, the length and extent of that price recovery (if any), including in the Company’s local markets, and its effect on the development plans of the Company’s customers, which impact both the Company’s ability to execute new commercial agreements with its customers as well as the volumetric-based fee revenues the Company earns under existing contracts, will be impacted by, among other things, global demand for natural gas (which will likely continue to be impacted by, among other things, increasing focus on climate change, energy transition from fossil fuels, and demand for alternative forms of energy), rates of natural gas production (including in the Appalachian Basin, as well as amounts of associated gas from the Permian Basin, which certain analysts have projected will increase in 2021 and later years), producers’ focus on capital discipline and free cash flow generation rather than growth, storage levels, and the length and severity of the COVID-19 outbreak. There is no assurance that any elevated natural gas prices have caused producers to determine to reduce their rig count, shut in a portion of their wells or otherwise take actions to slow production growth and/or reduce production, which when effectedindicated by EQM's producer customers reduces the demand for, and usage of, EQM’s services. While the near-term outlook for natural gas prices has improved significantly since March 31, 2020, a sustained periodforward price strip as of depressed natural gas production and prices could cause producers in EQM's areasApril 30, 2021 will be realized or be realized for any particular length of operation to take further actions to reduce natural gas production and supplytime or in the future and may adversely affect such producer customers' respective business, financial condition, resultsCompany’s local markets, or that producers will increase production volume as a result of operation, access to capital and/or liquidity.any particular price level.

EQM’s customers, including EQT, Range Resources and Gulfport Energy Corporation (Gulfport), have announced reductions

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in their capital spending forecasts for 2020 and may continue to lower capital spending in the future based on commodity prices access to capital, investor expectations for positive free cash flow, or a desire to reduce or refinance leverage (includingon the perceived ability to do so), or other factors. On January 13, 2020, EQT publicly announced a 2020 capital expenditure forecast of $1.25 billion to $1.35 billion, compared to 2019 capital expenditures of $1.85 billion to $1.95 billion, which represented an approximate 30% decrease in capital expenditures compared to EQT’s projected 2019 capital expenditures. On March 16, 2020, EQT announced a further reduction in its 2020 capital expenditure forecast to $1.075 billion to $1.175 billion, or an approximate 13% reduction from EQT's initial 2020 capital expenditure forecast. Longer-term price declines and sustained periods of low natural gas and natural gas liquids prices could continue to have an adverse effect on creditworthiness of EQM's customersCompany and related ability to pay firm reservation fees under long-term contracts and/or affect activity levelsrisks, see Part I, “Item 3. Quantitative and accordingly, volumetric-based fees, which could affect the Company’s resultsQualitative Disclosures About Market Risk” of operations, liquidity or financial position. Each of S&P, Moody's and Fitch has taken negative ratings actionsthis Quarterly Report on a number of Appalachian exploration and production companies, including EQT, Range Resources and Gulfport, citing, among other things, lower natural gas price assumptions and current and future financing needs. Many of EQM’s customers, including EQT, have entered into long-term firm reservation transmission and gathering contracts or contracts with MVCs on EQM's systems. However, approximately 42% of EQM’s operating revenues for the first quarter of 2020 were volumetric-based fee revenues. For more information, seeForm 10-Q, as well as "Decreases in production of natural gas in EQM'sour areas of operation have adversely affected, and future decreases could further adversely affect, itsour business and operating results and reduce itsour cash available to make distributionspay cash dividends to its unitholders, including us.our shareholders." included in Item "1A. Risk Factors - Risks Related to EQM's Business"Factors" of the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Potential Future Impairments. During the first quarter of 2020, the Company recognized an impairmentimpairments of long-lived assets of approximately $55.6 million, including $37.9 million related to certain Hornet-relatedHornet Midstream-related gathering assets and $17.7 million related to certain Hornet-relatedHornet Midstream-related intangible assets associated with the Eureka/Hornet reporting unit.assets. See Note 43 to the consolidated financial statements for additional information. As of the filing of this Quarterly Report on Form 10-Q, the Company cannot predict the likelihood or magnitude of any future impairment.
The accounting estimates related to impairments are susceptible to change, including estimating fair value which requires considerable judgment. For goodwill, management’s estimate of a reporting unit’s future financial results is sensitive to changes in assumptions, such as changes in stock prices, weighted-average cost of capital, terminal growth rates and industry multiples. Similarly, cash flow estimates utilized for purposes of evaluating long-lived assets and equity method investments (such as in the MVP Joint Venture) require the Company to make projections and assumptions for many years into the future for pricing, demand, competition, operating cost, commencement of operations, resolution of relevant legal and regulatory matters, and other factors. The Company evaluates long-lived assets and equity method investments for impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable (meaning, in the case of equity method investments, that such investments have suffered other-than-temporary declines in value under ASC 323). For the Company’s equity investmentsinvestment in the MVP Joint Venture, management must evaluate the Company’s investmentsinvestment for other-than-temporary-declinesother-than-temporary declines in fair value under ASC 323. The Company believes the estimates and assumptions used in estimating its reporting units’, its long-lived assets' and its equity investments’investment's fair values are reasonable and appropriate;appropriate as of March 31, 2021; however, assumptions and estimates are inherently subject to significant business, economic, competitive, regulatory, judicial and other risks that could materially affect the calculated fair values and the resulting conclusions regarding impairments, of goodwill and equity investments, which could materially affect the Company’s results of operations and financial position. Additionally, actual results could differ from these estimates. For the period ended March 31, 2020, the Company performed a sensitivity analysis for the RMP PA Gas Gathering reporting unitestimates and the merged EQM Opco reporting unit to quantify the effect of certain changes to assumptions used in the interim goodwill assessment. It was determined that a 1% increase to the weighted average cost of capital and a corresponding 1% decrease to the terminal cash flow growth rate wouldmay not have resulted in an impairment of goodwill as of March 31, 2020.be realized. The Company also continues to evaluate and monitor the ongoing legal and regulatory matters related to the MVP and MVP Southgate projects that affect project that must be resolved favorably (and timely) before the project can be completed,completion, as further described in Part II, “Item 1. Legal Proceedings” in Part II of this Quarterly Report on Form 10-Q. Adverse or delayed developments with respect to such matters or other adverse developments, including the most recently announced delay of the targeted in-service date for the MVP project, could require that the Company modify assumptions reflected in the probability-weighted scenarios of discounted future net cash flows (including with respect to the probability of success) utilized to estimate the fair value of its equity investment in the MVP Joint Venture, which could result in an other-than-temporary decline in value, resulting in an impairment of that investment. See also Note 43 to the consolidated financial statements, andas well as “Reviews of our goodwill, and intangible and other long-lived assets have resulted in significant impairment charges and reviews of our goodwill, intangible and other long-lived assets (including equity method investments) could result in future significant impairment charges.charges, including with respect to our investment in the MVP Joint Venture.” included in Part II, “Item 1A. Risk Factors,"Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and the Company's discussion of "Critical Accounting Policies and Estimates" included in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
As of the filing of this Quarterly Report on Form 10-Q.

10-Q, the Company cannot predict the likelihood or magnitude of any future impairment.
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For a discussion of capital expenditures, see "Capital Requirements" below.
Capital Resources and Liquidity
The Company's liquidity requirements are to finance EQM'sits operations, EQM'sits capital expenditures, potential acquisitions and other strategic transactions and capital contributions to joint ventures, including the MVP Joint Venture, to pay cash dividends and distributions and to satisfy any indebtedness obligations. The Company's ability to meet these liquidity requirements depends on the Company's cash flow from operations, (through EQM operations)the continued ability of the Company to borrow under its credit facilities and the Company's and EQM's ability to raise capital in banking, capital and other markets which(including refinancing existing credit facilities as they mature). Cash flow and capital raising activities (including the ability in refinancings to obtain similar terms to those currently present in existing credit facilities) may be affected by prevailing economic conditions in the natural gas industry and other financial and business factors including(including market forces causing shifts in investor sentiment away from fossil fuels and credit allocations to industries and companies perceived as being more sustainable, having better growth opportunities and/or stronger ESG metrics and practices, as well as the current COVID-19 pandemic,outbreak), some of which are beyond the Company's control. The Company's available sources of liquidity include cash from operations, cash on hand, borrowings under its subsidiaries' revolving credit facilities, issuances of additional debt and issuances of additional debt or equity securitiessecurities. As of March 31, 2021, pursuant to the terms of the Amended EQM Credit Facility, EQM would have been able to borrow approximately $1.9 billion under the Amended EQM Credit Facility. The amount the Company is able to borrow under the Amended EQM Credit Facility, as amended by the Company or EQM. Pursuant to the Tax Matters Agreement (defined inSecond Amendment, is bounded by a maximum consolidated leverage ratio. See Note 78 to the consolidated financial statements), the Company is subject to certain restrictions related to certain corporate actions, including restrictions related to the issuance of Company and EQM securities beyond certain thresholds as set forth in the Tax Matters Agreement for a two-year period following the Separation and Distribution. See "We may determine to forgo or be required to forgo certain transactions in order to avoid the risk of incurring material tax-related liabilities or indemnification obligations under the tax matters agreement." statements included in "Item 1A. Risk Factors – Risks Related to the Separation," in the Company’s Annualthis Quarterly Report on Form 10-K10-Q. See Note 12 for discussion of the year ended December 31, 2019. The Company is not forecasting any public equity issuance for currently anticipated organic growth projects.Second Amendment (as defined in Note 12) to the Amended EQM Credit Facility.


In February 2020, S&P and Fitch downgraded EQM'sSee “Security Ratings” below for a discussion of EQM’s credit ratings from investment grade to non-investment grade. In addition, in April 2020, Moody's further downgraded EQM's credit rating from Ba2 (with a negative outlook) to Ba3 (with a negative outlook), and S&P further downgraded EQM's credit rating from BB (with a stable outlook) to BB- (with a negative outlook).as of March 31, 2021. The non-investment grade ratings from Moody's, S&P and Fitch have caused EQMthe Company to incur higher borrowing costs under the Amended EQM Credit Facility and, prior to its termination, the Amended 2019 EQM Term Loan Agreement and may make it more difficultwhen compared to raise capital in banking, capital or other markets.prior periods during which EQM's credit ratings were investment grade. As a result of thedowngrades in February 2020, downgrades, EQM was also obligated to deliver additional credit support to the MVP Joint Venture which includedin the form of letters of credit, which, in the amountscase of the MVP project (based on the targeted cost for the project), is in the amount of approximately $220.2$273.1 million and $14.2 million with respect tois, in the MVP andcase of the MVP Southgate, projects, respectively.$14.2 million, in each case as of the filing date of this Quarterly Report on Form 10-Q. Additionally, pursuant to the EQT Global GGA, if EQM does not maintain minimum credit ratings from two of three credit rating agencies of at least Ba3 with respect to Moody's and BB- with respect to S&P and Fitch, from two of the three credit rating agencies, EQM will be obligated to provide additional credit support in an amount equal to approximately $196 million to EQT in support of the potential payment obligation related to the EQT Cash Option (the Cash Option Letter of Credit). See Note 5 to the consolidated financial statements for a discussion of the EQT Cash Option, which will become exercisable by EQT commencing on January 1, 2022. See "A further downgrade of EQM's credit ratings, including in connection with the MVP project or changes in thecustomer credit ratings of EQT,changes, including EQT's, which are determined by independent third parties, could impact EQM'sour liquidity, access to capital, and costs of doing business." included in "Item 1A. Risk Factors – Risks Related to EQM's Business,"Factors" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.2020.
Operating Activities
Net cash flows provided by operating activities were $229.6 million for the three months ended March 31, 2021 compared to $249.3 million for the three months ended March 31, 2020 compared to $122.2 million for the three months ended March 31, 2019.2020. The increasedecrease was primarily driven by an increase in Gathering revenues primarily associated with the entities acquired in the Bolt-on Acquisition, an increase in Water revenueshigher interest payments and the timing of working capital receipts and payments.
Investing Activities
Net cash flows used in investing activities were $70.7 million for the three months ended March 31, 2021 compared to $196.3 million for the three months ended March 31, 2020 compared to $352.62020. Capital expenditures decreased by approximately $91.1 million for the three months ended March 31, 2019. The2021, as compared to the three months ended March 31, 2020, primarily due to decreased spending on the Hammerhead pipeline and various wellhead gathering and transmission projects. In addition, net cash flows used in investing activities for the three months ended March 31, 2021 decreased as a result of a decrease in cash used was primarily attributable to decreased capital contributions to the MVP Joint Venture consistent with a lower level of construction activities for the MVP project and decreasedproject. See “Capital Requirements” below for a discussion of forecasted 2021 capital expenditures during 2020 as further described in "Capital Requirements".and capital contributions to the MVP Joint Venture.
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Financing Activities

Net cash flows used in financing activities were $135.0 million for the three months ended March 31, 2021 compared to $65.3 million for the three months ended March 31, 2020 compared to net cash flows provided by financing activities of $15.3 million for2020. For the three months ended March 31, 2019.2021, the primary use of financing cash flows was the payment for retirement of the EQM Term Loans and termination of the Amended 2019 EQM Term Loan Agreement, the Company's purchase of an aggregate principal amount of $500 million of EQM's 2023 Notes pursuant to the Tender Offers and the payment of dividends to shareholders, while the primary sources of financing cash flows were the issuance of the 2021 Senior Notes and borrowings under the Eureka Credit Facility. For the three months ended March 31, 2020, the primary useuses of financing cash flows waswere the payment for retirement of the ETRN Term Loans and termination of the ETRN Term Loan Credit Agreement, payments on borrowings under the Amended EQM Credit Facility, the payments of dividends and distributions to shareholders and unitholders (including distributions paid to holders of EQM Series A Preferred unitholders)Units) and the payment forpayments under the Share Purchase Agreements. The source of financing cash flows for the three months ended March 31, 2020 was borrowings on the Amended EQM Credit Facility. For the three months ended March 31, 2019, the source of financing cash flows was borrowings on the Company's and EQM's credit facilities partially offset by the purchase of the EQGP common units, payments on the Company's and EQM's credit facility borrowings, payment of dividends to Company shareholders and distributions to noncontrolling interest unitholders.

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Capital Requirements
The gathering, transmission and storage and water services businesses are capital intensive, requiring significant investment to develop new facilities and to maintain and upgrade existing operations.
 Three Months Ended March 31,
 2020 2019
 (Thousands)
Expansion capital expenditures (a)(b)
$115,551
 $176,509
Maintenance capital expenditures (b)
10,177
 9,428
Headquarters capital expenditures1,876
 3,396
Total capital expenditures (c)
$127,604
 $189,333
(a)Expansion capital expenditures do not include capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $45.2 million and $144.8 million for the three months ended March 31, 2020 and 2019, respectively.
(b)Includes approximately $11.3 million of expansion capital expenditures and $1.2 million of maintenance capital expenditures related to the noncontrolling interest in Eureka Midstream for the three months ended March 31, 2020.
(c)The Company accrues capital expenditures when the capital work has been completed but the associated bills have not been paid. Accrued capital expenditures are excluded from the statements of consolidated cash flows until they are paid. See Note 5 to the consolidated financial statements.
Expansion capital expenditures decreased by approximately $61.0 million for the three months ended March 31, 2020, as compared to the three months ended March 31, 2019, primarily due to decreased spending on the Hammerhead project and various wellhead gathering expansion projects, partly offset by spending on the Eureka Midstream gathering system in the first quarter of 2020 following the Bolt-on Acquisition.
Maintenance capital expenditures increased by approximately $0.7 million for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, primarily as a result of additional assets in service, including the assets acquired in the Bolt-on Acquisition.
For the remainder of 2020,2021, capital contributions to the MVP Joint Venture are expected to be approximately $565$265 million to $615$315 million (includingdepending on timing of the construction of the MVP project and approximately $15$10 million related to the MVP Southgate project),project, and expansion capital expenditures are expected to be $350$335 million to $365$385 million (including approximately $30$20 million attributable to the noncontrolling interest in Eureka Midstream), net of expected reimbursements.. The Company's future capital investments may vary significantly from period to period based on the available investment opportunities, and the timing of the construction of the MVP, MVP Southgate and other projects. Maintenance capital expenditures are also expected to vary quarter to quarter.projects, and maintenance needs. The Company expects to fund future capital expenditures and capital contributions primarily through cash on hand, cash generated from operations and borrowings under its subsidiaries' credit facilities and additional debt transactions. The Company is not forecasting any public equity issuance for currently anticipated organic growth projects.facilities.
Credit Facility Borrowings
See Note 98 to the consolidated financial statements for discussion of the Amended EQM Credit Facility, the Amended 2019 EQM Term Loan Agreement (prior to its termination) and the Eureka Credit Facility.
See Note 12 for discussion of the Second Amendment (as defined in Note 12) to the Amended EQM Credit Facility.

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Security Ratings
The table below sets forth the credit ratings for EQM's debt instruments of EQM at March 31, 2020.
2021.
EQM
EQMSenior Notes
Senior Notes
Rating ServiceRatingRatingOutlook
Moody'sBa2Ba3Negative
S&PBBBB-Stable
FitchBBBBNegative


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On February 4, 2020,Moody's, S&P, downgradedand Fitch affirmed EQM's credit to a BB+ rating, with a negative outlook, from a BBB- rating following S&P's downgrade of EQT. On February 27, 2020, S&P further downgraded EQM's credit to a BB rating, with a stable outlook. On February 18, 2020, Fitch downgraded EQM to a BB rating, with a negative outlook, from a BBB- rating, citing a downgrade of EQT’s credit rating from BBB- to BB, with a negative outlook, on February 14, 2020, as well as uncertainty around the MVP project, as the principal reasons for the ratings action. On February 27, 2020, Moody's downgraded EQM's credit from Ba1, with a negative outlook, to Ba2, with a negative outlook, citing EQT's weakening credit profile, risks to completion of MVP and the increase to EQM's financial leverage resulting from actions in connection with the EQM Merger andissuance of the Share Purchases. On April 2, 2020, Moody's further downgraded2021 Senior Notes. There were no changes to EQM's credit rating from Ba2, with a negative outlook, to Ba3, with a negative outlook, following Moody's downgrade of EQT's credit rating. Finally, on April 7, 2020, S&P further downgraded EQM's credit rating from BB, with a stable outlook, to BB-, with a negative outlook, following S&P's further downgrade of EQT's credit rating. The ETRN Term Loans were paid off onratings during the three months ended March 3, 2020 with proceeds from the EQM Credit Facility and the ETRN Term Loan Credit Agreement was terminated; therefore, the Company no longer has any credit ratings assigned to its debt.

31, 2021. EQM's credit ratings are subject to further revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. The Company cannot ensure that a rating will remain in effect for any given period of time or that a rating will not be lowered or withdrawn entirely by a credit rating agency if, in its judgment, circumstances so warrant, including in connection with the MVP project or the creditworthiness of EQM's customers, including EQT. As of April 2, 2020,March 31, 2021, EQT's public debt had credit ratings of BB-BB from S&P (with a negativestable outlook), Ba3Ba2 from Moody's (with a negativestable outlook) and BB from Fitch (with a negativepositive outlook). As of December 31, 2019, EQT's credit ratings with each of S&P, Moody's and Fitch were considered investment grade. If any credit rating agency further downgrades or withdraws EQM's ratings, including for reasons relating to the MVP project (such as delays in the targeted full in-service date of the MVP project or increases in such project’s costs), EQM’s leverage or credit ratings of the Company's customers, the Company's access to the capital markets could become more challenging, borrowing costs will likely increase, EQMthe Company may be required to provide additional credit assurances (the amount of which may be substantial), including the Cash Option Letter of Credit, and in support of commercial agreements such as joint venture agreements, and, if applicable, construction contracts, and the potential pool of investors and funding sources may decrease. In order to be considered investment grade, a company must be rated Baa3 or higher by Moody's, BBB- or higher by S&P, or BBB- or higher by Fitch. Anything below these ratings, including allAll of EQM's credit ratings are considered non-investment grade.
Commitments and Contingencies
In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company and its subsidiaries, including EQM.subsidiaries. While the amounts claimed may be substantial, the Company and EQM areis unable to predict with certainty the ultimate outcome of such claims and proceedings. The Company and EQM accrueaccrues legal and other direct costs related to loss contingencies when incurred. Each of theThe Company and EQM, as applicable, establishes reserves whenever it believes it to be appropriate for pending matters. Furthermore, after consultation with counsel and considering available insurance, the Company believes that the ultimate outcome of any matter currently pending against it EQM or any of their respectiveits consolidated subsidiaries will not materially affect its business, financial condition, results of operations, liquidity or ability to pay dividends to its shareholders.
See "The regulatory approval process for the construction of new midstream assets is very challenging, and recent decisions by regulatory and judicial authorities in pending or potential proceedings could impact EQM'sour or the MVP Joint Venture's ability to obtain or maintain in effect all approvals and authorizations necessary to complete certain projects on the projectedtargeted time frame or at all or EQM'sour ability to achieve the expected investment returnreturns on the projects." under "Item 1A. Risk Factors – Risks Related to EQM's Business"Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 20192020 and Part II, "Item 1. Legal Proceedings" in Part II of this Quarterly Report on Form 10-Q for discussion of certain litigation and regulatory proceedings, including related to the MVP project.and MVP Southgate projects.
See Note 1416 to the annual consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 20192020 for further discussion of the Company's commitments and contingencies.
Dividend
On February 27, 2020, the Company announced its intention to reduce its quarterly dividend from $0.45 per share to $0.15 per share, a decrease of approximately 67% per share, in connection with the announcement of the EQM Merger, commencing with the first quarter 2020 dividend. On February 27, 2020, EQM also announced its intention to reduce its quarterly distribution from $1.16 per unit to $0.3875 per unit, a decrease of approximately 67% per unit, in connection with the announcement of the EQM Merger, commencing with the first quarter 2020 distribution. Following the announcement of the EQM Merger, the decreases in the Company's dividend and EQM's quarterly distribution reflect a financial and distribution policy that is designed to deliver highly predictable revenues and substantial cash flows after total capital expenditures, dividends and distributions.

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Dividends
On April 27, 2020,2021, the Company's Board of Directors declared a cash dividenddividends for the first quarter of 20202021 of $0.15 per common share and $0.4873 per Equitrans Midstream Preferred Share, in each case, payable on May 21, 202014, 2021 to shareholders of record at the close of business on May 12, 2020.
See Note 2 to the consolidated financial statements for discussion of EQM distributions.5, 2021.
Critical Accounting Policies and Estimates
The Company's critical accounting policies are described in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC on February 27, 2020. Any new accounting policies or updates to existing accounting policies as a result of new accounting
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pronouncements have been included in the notes to the Company's consolidated financial statements in Part I, Item 1"Item 1. Financial Statements" of this Quarterly Report on Form 10-Q for the period ended March 31, 2020.10-Q. The application of the Company's critical accounting policies may require management to make judgments and estimates about the amounts reflected in the consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments. Different amounts could be reported using different assumptions and estimates.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk. Changes in interest rates affect the amount of interest the Company earns on cash, cash equivalents and short-term investments and the interest rates EQM and Eureka Midstream pay on borrowings under their respective revolving credit facilities and term loans, as applicable.facilities. The Amended 2019 EQM Term Loan Agreement, the Amended EQM Credit Facility and the Eureka Credit Facility provide for variable interest rates and thus expose the Company, through EQM and Eureka Midstream, to fluctuations in market interest rates. In addition, EQM's interest rates under the Amended 2019 EQM Term Loan Agreement and the Amended EQM Credit Facility are impacted by changes in EQM's credit ratings (which may be caused by factors outside of EQM's control). Eureka's interest rates under the Eureka Credit Facility are also impacted by changes in Eureka's Consolidated Leverage Ratio (as defined in the Eureka Credit Facility) which may fluctuate based on Eureka Midstream's liquidity needs. Such changes in interest rates expose EQM and, as applicable, Eureka Midstream, to fluctuations in interest rates, which may accordingly impact the Company's results of operations and liquidity, including the amount of cash EQM has available to make quarterly cash distributions to its unitholders, including the Company. Changesliquidity. Further, changes in interest rates may affect the distribution rate payable on EQM's Series A Preferred Units after the twentieth distribution period (and may also affect the dividend payable on the Equitrans Midstream Preferred Shares upon issuance thereof),after March 31, 2024, which could affect the amount of cash EQMthe Company has available to make quarterly cash distributionsdividends to its other unitholders, including the Company.shareholders. Additionally, on March 30, 2020,April 16, 2021, EQM executed the Second Amendment to the Amended EQM Credit Facility, Amendment and Term Loan Amendment which, among other things, increased the interest rates applicable to the borrowings under the Amended EQM Credit Facility and the Amended 2019 EQM Term Loan Agreement.facility. EQM's senior notes are fixed rate and thus do not expose the Company to fluctuations in market interest rates. Changes in interest rates do affect the fair value of EQM's fixed rate debt. See Notes 98 and 109 to the consolidated financial statements for discussions of borrowings and fair value measurements, respectively. See Note 12 for discussion of the Second Amendment (as defined in Note 12) to the Amended EQM Credit Facility. EQM and Eureka Midstream may from time to time hedge the interest on portions of borrowings under the revolving credit facilities, and Amended 2019 EQM Term Loan Agreement, as applicable, in order to manage risks associated with floating interest rates.rates (however, there may be no assurance that such hedges will fully mitigate interest rate risk).
See also "Changes in the method of determining the London Interbank Offered Rate (LIBOR), or the replacement of the LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt." included in "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
Credit Risk. The Company is exposed to credit risk, which is the risk that it may incur a loss if a counterparty fails to perform under a contract. The Company actively manages its exposure to credit risk associated with customers through credit analysis, credit approval and monitoring procedures. For certain transactions, the Company requests letters of credit, cash collateral, prepayments or guarantees as forms of credit support. Equitrans, L.P.'s FERC tariffs require tariff customers that do not meet specified credit standards to provide three months of credit support; however, the Company is exposed to credit risk beyond this three-month period when its tariffs do not require its customers to provide additional credit support. For some of the Company's more recent long-term contracts associated with system expansions, it has entered into negotiated credit agreements that provide for other credit support if certain credit standards are not met. The Company has historically experienced only minimal credit losses in connection with its receivables.
The Company is exposed to the credit risk of its customers, including EQT, its largest customer.EQT. As of MarchDecember 31, 2020, EQT had $0.7$0.8 billion of letters of credit outstanding under its revolving credit facility (inclusive of an $83.6 million letter of credit issued to the MVP Joint Venture). At March 31, 2020,2021, EQT's public senior debt had non-investment grade credit ratings. See "Security Ratings" under Part I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for further discussion ofinformation regarding EQT's credit ratings.
In connection with the execution of the EQT Global GGA andSee Note 6 for information regarding the Credit Letter Agreement EQM agreed to, amongst other things, relieve certain credit posting requirements forand associated EQT in an amount of up to approximately $250 million under its commercial agreements with EQM, subject to EQT maintaining a minimum credit rating from two of three rating agencies of (i) Ba3 with Moody’s, (ii) BB- with S&P and (iii) BB- with Fitch.requirements. In addition, EQT has guaranteed the payment obligations of certain of its subsidiaries, up to a maximum amount of $115 million, $131 million and $30 million related to gathering, transmission and water services, respectively, across all applicable contracts, for the benefit of the subsidiaries of the Company providing such services. See Note 1315 to the annual consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 20192020 for further discussion of the Company's exposure to credit risk.

See "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 and "Gulfport Bankruptcy" under "Outlook" in this Quarterly Report on Form 10-Q for information on Gulfport's bankruptcy proceedings.

Commodity Prices. The Company's business is dependent on continued natural gas production and the availability and development of reserves in its areas of operation. Low prices for natural gas and natural gas liquids,NGLs, including those resulting from regional
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basis differentials, could adversely affect timing of development of additional reserves and production that is accessible by the Company'sCompany’s pipeline and storage assets, or result in lower drilling activity, which would decrease demand foralso negatively affects the Company's services.Company’s water services business, and may affect the creditworthiness of the Company’s customers. Lower regional natural gas prices could also cause producers to determine in the future that drilling activities in areas outside of the Company's current areas of operation are strategically more attractive to them. The

Natural gas and NGL prices affect capital spending levels of the Company's customers, which in turn affect production levels and, accordingly, demand for the Company's services and therefore its results of operations. Certain of the Company’s customers, including EQT and Range Resources, and Gulfport, have announced reductions in theirFebruary 2021 modest capital spending andforecast increases as compared to 2020 actual capital expenditures. Although EQT announced a modest increase in its 2021 capital expenditure forecast compared to EQT's 2020 actual capital expenditures, EQT's 2021 sales volume forecast is approximately flat relative to its pro-forma 2020 sales volume (adjusted for acreage acquired by EQT from Chevron U.S.A Inc. in 2020). Such customers may announce lower capital spending in the future based on commodity prices, access to capital, investor expectations regarding positive free cash flow, a desire to reduce or refinance leverage (including the perceived ability to do so) or other factors. Unless

Relatedly, lower natural gas prices have caused, and may in the future cause, certain producers, including customers of the Company, is successfulto determine to reduce or hold generally steady their rig count (and thereby delay or not increase production), temporarily shut in attracting and retaining new customers,portions of their production or otherwise take actions to slow production growth and/or reduce production, which when effected by the Company's abilityproducer customers reduces the demand for, and usage of, the Company’s services. For instance, temporary production curtailments effected in 2020 by EQT and certain other Company customers resulted in a decrease in the Company's volumetric-based fee revenues for portions of 2020. An extended period of low natural gas prices and/or a slow or inconsistent recovery of natural gas prices in 2021 or future periods, including locally, could cause EQT or other producers to maintain or increasetake similar actions in the capacity subscribedfuture, which could have a significant negative effect on the demand for the Company's services and volumes transported under service arrangements ontherefore its transmission and storage system,results of operation. Many of the volumes gathered on its gathering systems, or the volumes of water provided by its water services business will be dependent on receiving consistent or increasing commitments from its existing customers. WhileCompany’s customers, including EQT, has dedicated a substantial portion of its core acreage to the

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Company and hashave entered into long-term firm reservation transmission and gathering and transmission contracts andor contracts with MVCs on certain of the Company's systems EQT may determine in the future that drilling in the Company's areas of operations is not economical. Other than with respect to its MVCs under existing contracts, EQT is under no contractual obligation to continue to develop its acreage dedicated to the Company. See also Note 6 to the consolidated financial statements for a discussionand approximately 66% of the EQT Global GGA and the Water Services Letter Agreement with EQT.
The Company's cash flow profile is underpinned by both firm reservation fee revenues and volumetric-based fees, with approximately 58% of itsCompany’s operating revenue for the three months ended March 31, 20202021 was generated by firm reservation fee revenues. Accordingly,fees. As a result, the Company believes that the effect of short- and medium-termtemporary declines in volumes of gas gathered, transported or stored on its systems may be mitigated because firm reservation fee revenues are paid regardless of volumes supplied to the system by customers. See "EQM's exposure to direct commodity price risk may increase in the future." under "Item 1A. Risk Factors - Risks Related to EQM's Business" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. Sustained periods of low commodity prices could have a further adverse effect on customer creditworthiness and related ability to pay firm reservation fees under long-term contracts and/or affect activity levels and accordingly volumetric-based fees, which could affect the Company's results of operations, liquidity or financial position. Significantcustomers (although significant declines in gas production in the Company's areas of operations would adversely affect the Company's growth potential.results of operations, financial condition and liquidity as approximately 34% of the Company’s operating revenues for the three months ended March 31, 2021 was generated by generated by volumetric-based fee revenues).

Price declines and sustained periods of low natural gas and NGL prices could have an adverse effect on the creditworthiness of the Company's customers and related ability to pay firm reservation fees under long-term contracts and/or affect, as discussed above, activity levels and, accordingly, volumetric-based fees, which could affect the Company’s results of operations, liquidity or financial position. For example, each of S&P, Moody's and Fitch took negative ratings actions on EQT during 2020, citing, among other things, lower natural gas price assumptions and current and future financing needs (although all three ratings agencies later took positive action on EQT citing, among other things, subsequent debt reduction and improvements in natural gas fundamentals). On November 13, 2020, Gulfport filed for Chapter 11 bankruptcy protection, as further described above under "Gulfport Bankruptcy." Credit risk and related management is further discussed above under “Credit Risk” in Part I, “Item 3. Quantitative and Qualitative Disclosures About Market Risk” of this Quarterly Report on Form 10-Q.

Unless the Company is successful in attracting and retaining new customers, the Company's ability to maintain or increase the capacity subscribed and volumes transported, gathered or provided on its systems will be dependent on receiving consistent or increasing commitments and production from its existing customers, which may be impacted by commodity prices, including regional commodity prices. While EQT has dedicated a substantial portion of its core acreage to the Company and has entered into long-term firm gathering and transmission contracts and contracts with MVCs on certain of the Company's systems, EQT may determine in the future that drilling or continuing to produce gas from existing wells in the Company's areas of operations is not economical above the amount to fulfill its required MVCs. For example, in 2020, EQT publicly disclosed that it had made the strategic decision to temporarily curtail significant portions of its production, and certain other Company customers also curtailed portions of their production during 2020. Other than with respect to its MVCs and other firm commitments under existing contracts, EQT is under no contractual obligation to continue to develop its acreage dedicated to the Company. See also Note 5 to the consolidated financial statements for a discussion of the EQT Global GGA and the Water Services Letter Agreement.
The fair value of the Company’s derivative instruments is largely determined by estimates of the NYMEX Henry Hub natural gas forward price curve. A hypothetical 10% increase in NYMEX Henry Hub natural gas futures prices would increase the valuation of EQM’sthe Company’s derivative instruments by $10.2$15.8 million, while a hypothetical 10% decrease in NYMEX Henry Hub natural gas futures prices would decrease the valuation of the Company’s derivative instruments by $11.0$17.0 million. This fair value change assumes volatility based on prevailing market parameters at March 31, 2020.2021. See Note 10Notes 5 and 9 to the consolidated financial statements for a discussion of the Henry Hub cash bonus payment provision.
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For further discussion of commodity prices and related risks, see "Commodity Prices" under "Outlook” in this Quarterly Report on Form 10-Q and "Our exposure to direct commodity price risk may increase in the future." and "Decreases in production of natural gas in our areas of operation have adversely affected, and future decreases could further adversely affect, our business and operating results and reduce our cash available to pay cash dividends to our shareholders", each under "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2020.
Other Market Risks. The Amended EQM Credit Facility, as amended by the Second Amendment, is underwritten by a syndicate of 21 financial institutions, each of which is obligated to fund its pro rata portion of any borrowings by EQM. No one lender of the financial institutions in the syndicate holds more than 10% of the facility. EQM's large syndicate groupsgroup and relatively low percentage of participation by each lender is expected to limit EQM'sthe Company's exposure to disruption or consolidation in the banking industry.

The Eureka Credit Facility is underwritten by a syndicate of 14 financial institutions, each of which is obligated to fund its pro-rata portion of any borrowings by Eureka. Only one lender of the financial institutions in the syndicate holds more than 10% of the facility (approximately 13% held by ABN AMRO Capital USA LLC). Eureka's large syndicate group and relatively low percentage of participation by each lender is expected to limit Eureka's exposure to disruption or consolidation in the banking industry.

See Note 8 to the consolidated financial statements and "Capital Resources and Liquidity" in Part I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information on the Amended EQM Credit Facility and the Eureka Credit Facility. See Note 12 for discussion of the Second Amendment (as defined in Note 12) to the Amended EQM Credit Facility.

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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of management, including the Company’s Principal Executive Officer and Principal Financial Officer, an evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was conducted as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting. During the first quarter of 2020, the Company completed the implementation of the initial phase of an enterprise resource planning (ERP) system, and revised and updated the related controls. These changes did not materially affect the Company's internal control over financial reporting. As the Company implements the remaining functionality under this ERP system through the first six months of 2021, it will continue to assess the impact on its internal control over financial reporting.
There were no changes in the Company's internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that occurred during the first quarter of 20202021 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II.  OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of business, various legal and regulatory claims and proceedings are pending or threatened against the Company and its subsidiaries, including EQM.subsidiaries. While the amounts claimed may be substantial, the Company and EQM areis unable to predict with certainty the ultimate outcome of such claims and proceedings. The Company and EQM accrueaccrues legal and other direct costs related to loss contingencies when incurred. Each of theThe Company and EQM, as applicable, establishes reserves whenever it believes it to be appropriate for pending matters. Furthermore, after consultation with counsel and considering available insurance, the Company believes that the ultimate outcome of any matter currently pending against it EQM or any of their respectiveits consolidated subsidiaries will not materially affect its business, financial condition, results of operations, liquidity or ability to pay dividends to its shareholders.
Hammerhead Pipeline Dispute

See “Hammerhead Pipeline” under Part I, “Outlook” in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” for additional information.
Environmental Proceedings

Pennsylvania DEP Consent Assessment of Civil Penalty, Fresh Water Withdraw System:Swarts Storage Field. During the third quarter of 2019,On September 2, 2020, the Pennsylvania Department of Environmental Protection (PADEP) issued(the PADEP) notified the Company that it was assessing a draftstipulated penalty in the amount of $490,000 due to the alleged failure of the Company to submit information required pursuant to an October 29, 2019 Consent Assessment of Civil Penalty to EQM, citing a failure to report monthlyOrder and total withdraws from certain freshwater sources, failure to register a source,Agreement. The Company disputed the PADEP’s claim and failure to maintain a source/tap. EQM has implemented corrective actions including registration of all water sources and installation of equipment to prevent non-compliance events. EQM andsought initial dispute resolution proceedings based on the Company’s position that it had submitted the information multiple times since October 2019. On September 29, 2020, the PADEP executed a consent order which included a civil penalty of $180,000 on April 7, 2020.

Eureka System Environmental Remediation. On April 10, 2019, EQM acquired a 60% equity interest in Eureka Midstream. Eureka Midstream received one notice of violation (NOV) in April 2019 and two NOVs in June 2019notified the Company that it was no longer pursuing penalties arising from the OEPA associated with legacy slips. The Company cannot predict with certainty whether any facts or circumstances willalleged violation referenced in the September 2, 2020 letter, but it did not officially withdraw the stipulated penalty. Despite the PADEP’s notification that it was no longer pursuing the stipulated penalty, as a result of the PADEP not officially withdrawing the stipulated penalty, the PADEP could pursue the stipulated penalty in a state environmental agency issuing additional NOVs.the future. If penalties are pursued and ultimately imposed, an individual penalty or the aggregate of these penalties could result in monetary sanctions in excess of $100,000.$300,000. However, the Company does not believe that the penalties, if imposed, would have a material impact on the Company's financial condition, results of operations or liquidity.
Separately, on April 8, 2021, the PADEP notified the Company that it considered certain aspects of the storage field to be out of compliance due to an alleged failure to plug or recondition wells within 2,000 feet of ongoing coal mining activities by CONSOL Energy Inc. and that a number of wells on the property allegedly did not meet current plugging standards. The Company disputes these claims and is working with the PADEP and CONSOL Energy Inc. to resolve these issues. Based on the discussion with the PADEP, the Company anticipates a notice of violation (NOV) will be issued. If penalties are pursued and ultimately imposed, the penalties could result in monetary sanctions in excess of $300,000. However, the Company does not believe that the penalties, if imposed, would have a material impact on the Company's financial condition, results of operations or liquidity.
PADEP Notice of Violations, Beta System. In the fourth quarter of 2020 and the first quarter of 2021, the Company received several NOVs from the PADEP related to the Company’s Beta gathering system. The NOVs include (i) a lack of permanent stabilization on two repaired slip areas, (ii) five current slip areas in need of repair that have not been repaired due to the PADEP’s ongoing review of the slip repair plans, (iii) an unpermitted disturbance that occurred during construction in 2017, and (iv) failure to implement and maintain erosion and sediment best management practices to minimize the potential for accelerated erosion and sedimentation. The Company also voluntarily notified the PADEP of other unpermitted, disturbed areas on the Beta gathering system. The Company is continuing to pursue negotiations with the PADEP. The Company expects that this matter could result in monetary penalties in excess of $300,000, but does not believe that if imposed the penalties will have a material impact on the Company's financial condition, results of operations or liquidity of the Company or EQM.
Pennsylvania DEP Consent Assessment of Civil Penalty, NIRI S001 Pipeline. On April 4, 2018, the PADEP issued a NOV to EQM, noting fifty-seven (57) violations that included seventeen (17) erosion and best management practices failures, nine (9) pollution discharges to streams and wetlands, and additional failures to temporarily stabilize rights of way. The PADEP conducted its follow-up inspection on April 14, 2018 and noted that all violations were resolved. On December 3, 2019, the PADEP issued a proposed consent order to settle all violations. EQM and the PADEP executed a consent order which included a civil penalty of $250,000 in February 2020, and all amounts have been paid.liquidity.
MVP Matters
The MVP Joint Venture is currently defending certain agency actions and judicial challenges to the MVP that must be resolved favorably before the project can be completed, including the following:
•
Sierra Club, et al. v. U.S. Army Corps of Engineers, et al., consolidated under Case No. 18-1173, Fourth Circuit Court of Appeals (Fourth Circuit).

•Sierra Club, et al. v. U.S. Army Corps of Eng'rs (Huntington District) Fourth Circuit Court of Appeals (Fourth Circuit), Case No. 20-2039 and Sierra Club, et al. v. U.S. Army Corps of Eng'rs (Norfolk District), Fourth Circuit Court of Appeals, Case No. 20-2042. In February 2018, the Sierra Club filed a lawsuit in the Fourth Circuit against the U.S. Army Corps of Engineers (the U.S. Army Corps). The lawsuit challenges the verification by the Huntington District of the U.S. Army Corps that Nationwide Permit 12, which generally authorizes discharges of dredge or fill material into waters of the United States and the construction of pipelines across such waters under Section 404 of the Clean Water Act, could be utilized in the Huntington District (which covers all but the northernmost area of West Virginia) for the MVP project. The crux of Sierra Club's position was that the MVP Joint Venture, pursuant to its FERC license, planned to use a certain methodology (dry open cut creek crossing methodology) to construct the pipeline across streams in West Virginia that would take considerably longer than the 72 hours allowed for such activities pursuant to the terms of West Virginia's Clean Water Act Section 401 certification for Nationwide Permit 12. A three-judge panel of the Fourth Circuit agreed with the Sierra Club and on October 2, 2018, issued a preliminary order stopping the construction in West Virginia of that portion of the pipeline that is subject to Nationwide Permit 12. Following the issuance of the court's preliminary order, the U.S. Army Corps' Pittsburgh District (which had also verified use of Nationwide Permit 12 by MVP in the northern corner of West Virginia) suspended its verification that allowed the MVP Joint Venture to use Nationwide Permit 12 for stream and wetlands crossings in northern West Virginia. On November 27, 2018, the Fourth Circuit panel issued its final decision vacating the Huntington District's verification of the use of Nationwide Permit 12 in West Virginia. West Virginia subsequently revised its Section 401 certification for Nationwide Permit 12; however, unless and until the U.S. Army Corps' Huntington and Pittsburgh Districts re-verify the MVP Joint Venture's use of Nationwide Permit 12, or the MVP Joint Venture secures an individual Section 404

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permit with the concurrence of both Districts, the MVP Joint Venture cannot perform any construction activities in any streams and wetlands in West Virginia. In June 2018, the Sierra Club filed a second petitionlawsuit in the Fourth Circuit against the Army Corps in Sierra Club, et al. v. U.S. Army Corps seeking review and a stayof Engineers, et al., consolidated under Case No. 18-1173. The lawsuit challenged the verification by the Huntington District of the U.S. Army Corps Norfolk District's decision to verifythat Nationwide Permit 12, which generally authorizes discharges of dredge or fill material into waters of the United States and the construction of
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pipelines across such waters under Section 404 of the Clean Water Act, could be utilized in the Huntington District (which covers all but the northernmost area of West Virginia) for the MVP project. The crux of Sierra Club's position was that the MVP Joint Venture'sVenture, pursuant to its FERC license, planned to use a certain methodology (dry open cut creek crossing methodology) to construct the pipeline across streams in West Virginia that would take considerably longer than the 72 hours allowed for such activities pursuant to the terms of West Virginia's Clean Water Act Section 401 certification for Nationwide Permit 12. A three-judge panel of the Fourth Circuit agreed with the Sierra Club and on October 2, 2018, issued a preliminary order stopping the construction in West Virginia of that portion of the pipeline that is subject to Nationwide Permit 12. In August 2018, the WVDEP initiated an administrative process to revise its 401 Water Quality Certification for the Army Corps Nationwide Permits and requested public comment to, among other things, specifically revise the 72-hour limit for stream crossings noted as problematic by the Fourth Circuit as well as other conditions (the WVDEP 401 Rulemaking Proceedings). Pending the resolution of the WVDEP 401 Rulemaking Proceedings, the Army Corps' Pittsburgh District and Norfolk District (each of which had also verified use of Nationwide Permit 12 for stream crossings in Virginia. The Fourth Circuit deniedby the Sierra Club's request for a stay on August 28, 2018. On October 5, 2018,MVP Joint Venture) suspended their verifications that allowed the U.S. Army Corps' Norfolk District suspended its verification underMVP Joint Venture to use Nationwide Permit 12 for stream and wetlands crossings in Virginia pending the resolution of thenorthern West Virginia proceedings outlined below.and Virginia, respectively. On December 10, 2018,April 24, 2019, the U.S.WVDEP submitted a modification to its 401 Water Quality Certification developed in the WVDEP 401 Rulemaking Proceedings to the EPA for approval, which approval was received in August 2019. The Army Corps filed a motion to placeapproved the case in abeyance which the court grantedWVDEP's modification on January 9, 2019. Until the U.S. Army Corps lifts its suspension,24, 2020, and the MVP Joint Venture cannot perform any construction activities in any streams and wetlands in Virginia. Oncesubmitted a new permit application to the Army Corps on January 28, 2020. On September 25, 2020, the Huntington and Pittsburgh District issues are resolved,districts approved MVP Joint Venture’s Nationwide Permit 12 and the Norfolk District will be in the position to consider lifting thedistrict lifted its suspension of the verification for the MVP Joint Venture's use of Nationwide Permit 12. TheOn September 28, 2020, Appalachian Mountain Advocates, on behalf of Sierra Club and certain other petitioners, filed a petition for review of the Huntington and Norfolk permits. On October 5, 2020, Appalachian Mountain Advocates requested from the Fourth Circuit an administrative proceeding described below is addressingstay of the issues raisedArmy Corps' verifications to the MVP Joint Venture's Nationwide Permit 12. On November 9, 2020, the Court entered an order granting the motion to stay the verifications and issued a written opinion on December 1, 2020 on the issuance of the stay. While the case was scheduled to be fully briefed and argued by the court. However,March 31, 2021, on February 19, 2021, the MVP Joint Venture, cannot guaranteeas part of its initiated broader strategy to obtain authorization for stream and wetland crossings discussed above under Part I, "Outlook" in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations," requested that the agencies'Army Corps' Huntington, Pittsburgh, and Norfolk Districts administratively revoke the previously-issued Nationwide Permit 12 verifications for the project. On March 2, 2021, the Army Corps revoked the Nationwide Permit 12 verifications for the project in accordance with the MVP Joint Venture's request. The parties have agreed to the dismissal of the existing litigation challenging the now-revoked verifications as moot pending resolution of administrative issues unrelated to the MVP.

•Jefferson National Forest Crossing and Associated Authorizations. In a different Fourth Circuit appeal, Sierra Club, et al. v. U.S. Forest Service, et al., consolidated under Case No. 17-2399, Fourth Circuit Court of Appeals, filed in December 2017, the Sierra Club challenged a Bureau of Land Management (BLM) decision to grant a right-of-way to the MVP Joint Venture and a U.S. Forest Service (USFS) decision to amend its management plan to accommodate the MVP, both of which affect the MVP's approximate 3.5-mile segment in the Jefferson National Forest (JNF) in Virginia. On July 27, 2018, agreeing in part with the Sierra Club, the Fourth Circuit vacated the BLM and USFS decisions, finding fault with the BLM's analysis of the practicality of alternate routes and the USFS' analysis of erosion and sedimentation effects. The USFS published a draft Supplemental Environmental Impact Statement (SEIS) to the 2017 FERC Final Environmental Impact Statement for MVP in the Federal Register on September 25, 2020 with a public comment period that closed on November 9, 2020. On December 11, 2020, the USFS published a Final Supplemental Environmental Impact Statement that addressed the issues raised in the prior proceedings and evaluated the most recent sedimentation analysis submitted to the agency consistent with the findings presented in MVP’s Biological Opinion and Incidental Take Statement issued by the Department of the Interior's Fish and Wildlife Service (FWS) on September 4, 2020. See Appalachian Voices, et al. v. U.S. Dep’t of Interior below for additional information. On January 11, 2021, the MVP Joint Venture received final approval of the Record of Decision from the USFS and, on January 15, 2021, the BLM issued the required right-of-way permit for the MVP’s 3.5-mile segment in the JNF in Virginia (the JNF Right-of-Way). On January 11, 2021, Sierra Club, et al. filed a petition with the Fourth Circuit to reverse the USFS approval of the Record of Decision and, on January 15, 2021, filed a petition with the Fourth Circuit challenging BLM’s grant of the JNF Right-of-Way. See Wild Virginia, et al. v. United States Forest Service, et al., No. 21-1039(L).The Fourth Circuit consolidated the challenges to the Record of Decision and the JNF Right-of-Way and briefing is to be completed by the end of May 2021.
On August 3, 2018, citing the court's vacatur and remand in Sierra Club, et al. v. U.S. Forest Service, et al., consolidated under Case No. 17-2399, the FERC issued a stop work order for the entire pipeline pending the agency actions will not be challenged oron remand. The FERC modified its stop work order on August 29, 2018 to allow work to continue on all but approximately 25 miles of the project (the Exclusion Zone). On October 10, 2018, the Fourth Circuit granted a petition for rehearing filed by the MVP Joint Venture for the limited purpose of clarifying that the U.S. Army Corps Districts will act promptly or be deemed to have acted properly if challenged, in which case reverification may be further delayed. Additionally,July 27, 2018 order did not vacate the timingportion of these actions may be affected by the decision in Northern Plains Resource Council, outlined below.BLM's Record of Decision authorizing a right-of-way and temporary use permit for the MVP

•
WVDEP Rulemaking Proceedings - Section 401 Nationwide Permit. On April 13, 2017, the West Virginia Department of Environmental Protection (WVDEP) issued a 401 Water Quality Certification for the U.S. Army Corps Nationwide Permits. In August 2018, the WVDEP initiated an administrative process to revise this certification and requested public comment to, among other things, specifically revise the 72-hour limit for stream crossings noted as problematic by the Fourth Circuit as well as other conditions. The WVDEP issued a new notice and comment period for further modifications of the 401 certification. On April 24, 2019, the WVDEP submitted the modification to the United States Environmental Protection Agency (the EPA) for approval (since the WVDEP is also required to obtain the EPA's agreement to the modified 401 certification) and provided notice to the U.S. Army Corps. The EPA's agreement to the WVDEP's modification of its water quality certification was received in August 2019 and, accordingly, the MVP Joint Venture anticipates that it will once again secure from the U.S. Army Corps Districts within West Virginia verification that its activities, including stream crossings, may proceed under Nationwide Permit 12 as re-certified by the WVDEP. The U.S. Army Corps approved the WVDEP's modification of its Nationwide Permit on January 24, 2020. The MVP Joint Venture submitted a new permit application on January 28, 2020 anticipating a permit decision in mid-2020. However, the timing of the decision may be affected by the decision in Northern Plains Resource Council, outlined below. Further, the MVP Joint Venture cannot guarantee that the WVDEP's action will not be challenged or that the U.S. Army Corps Districts will act promptly or be deemed to have acted properly if challenged, in which case reverification may be further delayed.

•
Sierra Club, et al. v. U.S. Forest Service, et al., consolidated under Case No. 17-2399, Fourth Circuit Court of Appeals. In a different Fourth Circuit appeal filed in December 2017, the Sierra Club challenged a Bureau of Land Management (BLM) decision to grant a right-of-way to the MVP Joint Venture and a U.S. Forest Service (USFS) decision to amend its management plan to accommodate MVP, both of which affect the MVP's 3.6-mile segment in the Jefferson National Forest in Virginia. On July 27, 2018, agreeing in part with the Sierra Club, the Fourth Circuit vacated the BLM and USFS decisions, finding fault with the USFS' analysis of erosion and sedimentation effects and the BLM's analysis of the practicality of alternate routes. On August 3, 2018, citing the court's vacatur and remand, the FERC issued a stop work order for the entire pipeline pending the agency actions on remand. The FERC modified its stop work order on August 29, 2018 to allow work to continue on all but approximately 25 miles of the project. On October 10, 2018, the Fourth Circuit granted a petition for rehearing filed by the MVP Joint Venture for the limited purpose of clarifying that the July 27, 2018 order did not vacate the portion of the BLM's Record of Decision authorizing a right-of-way and temporary use permit for MVP to cross the Weston and Gauley Bridge Turnpike Trail in Braxton County, West Virginia. On October 15, 2018, the MVP Joint Venture filed with the FERC a request to further modify the August 3, 2018 stop work order to allow the MVP Joint Venture to complete the bore and install the pipeline under the Weston and Gauley Bridge Turnpike Trail. On October 24, 2018, the FERC granted the MVP Joint Venture's request to further modify the stop work order and authorize construction. However, work on the 3.6-mile segment in the Jefferson National Forest must await a revised authorization, which the MVP Joint Venture is working to obtain.

•
Challenges to FERC Certificate, Court of Appeals for the District of Columbia Circuit (DC Circuit). Multiple parties have sought judicial review of the FERC's order issuing a certificate of convenience and necessity to the MVP Joint Venture and/or the exercise by the MVP Joint Venture of eminent domain authority. On February 19, 2019, the DC Circuit issued an order rejecting multiple consolidated petitions seeking direct review of the FERC order under the Natural Gas Act and certain challenges to the exercise by the MVP Joint Venture of eminent domain authority in Appalachian Voices, et al. v. FERC, et al., consolidated under Case No. 17-1271. No petitions for rehearing or

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to cross the Weston and Gauley Bridge Turnpike Trail in Braxton County, West Virginia. On October 15, 2018, the MVP Joint Venture filed with the FERC a request to further modify the August 3, 2018 stop work order to allow the MVP Joint Venture to complete the bore and install the pipeline under the Weston and Gauley Bridge Turnpike Trail. On October 24, 2018, the FERC granted the MVP Joint Venture's request to further modify the stop work order and authorize construction. Additionally, on October 9, 2020, the FERC authorized construction to resume project-wide (as it had been stopped by the FERC on October 15, 2019 in relation to a separate matter discussed below), other than with respect to the Exclusion Zone, which requires additional authorization. On December 17, 2020, the FERC again modified the stop work order and authorized construction to resume in 17 miles of the Exclusion Zone. The Company cannot guarantee whether or when the FERC will act in respect of any or all of the remaining portions of the Exclusion Zone (although the MVP Joint Venture anticipates seeking FERC authorization to lift the Exclusion Zone stop work order should water body crossing authorizations be received as discussed above under "Outlook" in Part I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations"). The FERC's October 9, 2020 and December 17, 2020 actions are the subject of challenges filed by the Sierra Club in Sierra Club, et al. v. FERC, Case No. 20-1512 (consolidated with No. 21-1040), D.C. Circuit Court of Appeals on December 22, 2020 and January 25, 2021, respectively (a stay request filed by the Sierra Club on January 29, 2021 was denied by the Court of Appeals for the D.C. Circuit (DC Circuit) on February 19, 2021). As of the filing date of this Quarterly Report on Form 10-Q, a briefing schedule in respect of Sierra Club, et al. v. FERC, Case No. 20-1512 (consolidated with No. 21-1040), D.C. Circuit Court of Appeals has not been set. If any of the challenges to the Record of Decision, the JNF Right-of-Way or the FERC's October 9, 2020 and December 17, 2020 orders are successful, it could result in the Record of Decision, the JNF Right-of-Way or the FERC's orders, as applicable, being vacated and/or additional agency proceedings (the outcome of which the Company cannot predict) and cause a delay in the targeted in-service date for the MVP project (and consequent impacts relating to such delay).

•Challenges to FERC Certificate, Court of Appeals for DC Circuit. Multiple parties have sought judicial review of the FERC's order issuing a certificate of public convenience and necessity to the MVP Joint Venture and/or the exercise by the MVP Joint Venture of eminent domain authority. On February 19, 2019, the DC Circuit issued an order rejecting multiple consolidated petitions seeking direct review of the FERC order under the Natural Gas Act and certain challenges to the exercise by the MVP Joint Venture of eminent domain authority in Appalachian Voices, et al. v. FERC, et al., consolidated under Case No. 17-1271. No petitions for rehearing or petitions for rehearing en banc were filed by the April 5, 2019 deadline. The mandate was issued on April 17, 2019. Another group of parties filed a complaint in the U.S. District Court for the District of Columbia asserting that the FERC's order issuing certificates is unlawful on constitutional and other grounds in Bold Alliance, et al. v. FERC, et al., Case No. 1:17-cv-01822-RJL.17-1822. The district court plaintiffs seeksought declaratory relief as well as an injunction preventing the MVP Joint Venture from developing its project or exercising eminent domain authority. In December 2017 and January 2018, the FERC and the MVP Joint Venture, respectively, moved to dismiss the petitions for lack of subject matter jurisdiction. The court granted the motion and dismissed plaintiffs' complaint on September 28, 2018. On October 26, 2018, plaintiffs appealed the decision in Case No. 17-1822 to the DC Circuit in Bold Alliance, et al. v. FERC, et al., Case No. 18-5322.18-5322. On December 3, 2018, the FERC, as appellee, filed a joint motion with the appellants to hold Case No. 18-5322 in abeyance pending completion of the appeals of the final agency orders related to the MVP certificate in consolidated Case No. 17-1271 and Atlantic Coast Pipeline’s (ACP) certificate. The MVP Joint Venture filed a motion to dismiss the case as to some of the plaintiffs. On February 15, 2019, the DC Circuit entered an order holding this appeal in abeyance pending rulings on the appeals from the ACP and MVP FERC proceedings. Although the members of the ACP project announced the cancellation of that project on July 5, 2020, ACP's proceeding remains pending. Case No. 18-5322 remains in abeyance. Similarly, another group of parties filed a complaint in the U.S. District Court for the District of Columbia in Bohon et al. v. FERC et al., Case No. 20-00006, asserting that the delegation of authority to FERC under the NGA violates the nondelegation doctrine and separation-of-powers principle of the U.S. Constitution. The MVP Joint Venture and the FERC filed motions to dismiss which were granted by the court. On July 6, 2020, the landowners filed a notice of appeal to the DC Circuit in Case No. 20-5203. On November 30, 2020, appellants asked the DC Circuit to overturn the decision of the lower court. Oral argument before the DC Circuit was scheduled for March 29, 2021, but the court cancelled and held oral argument in abeyance and directed the parties to file motions to govern future proceedings following a decision by the U.S. Supreme Court in PennEast Pipeline Co. v. New Jersey, No. 19-1039. Due to the uncertainty regarding the timing of permitting and the outcome of legal challenges facing the MVP project, on August 25, 2020, the MVP Joint Venture filed a request with the FERC for and, on October 9, 2020, the FERC granted, an extension of time to complete the MVP project for an additional two years through October 13, 2022. On December 22, 2020, a challenge to the FERC’s action to grant an extension of time to complete the MVP project was filed in the DC Circuit in Sierra Club, et al. v. FERC, Case No. 20-1512 (consolidated with No. 21-1040, DC Circuit). On January 29, 2021, Sierra Club requested a stay of the FERC’s action to grant the MVP Joint Venture an extension of time to complete the MVP project from the DC Circuit, which stay request was denied by the DC Circuit on February 19, 2021. If any of these challenges were successful, it could result in the MVP Joint Venture's
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certificate of public convenience and necessity being vacated and/or additional proceedings before the FERC, the outcome of which the Company cannot predict.

•Appalachian Voices, et al. v. U.S. Dep’t of Interior, et al., Fourth Circuit Court of Appeals, Case No. 20-2159. In August 2019, Wild Virginia and certain other petitioners filed a petition in the Fourth Circuit in Wild Virginia et al. v. United States Department of the Interior; Case No. 19-1866, to challenge the MVP Joint Venture’s Biological Opinion and Incidental Take Statement issued by FWS which was approved in November 2017 (the Original BiOp). On October 11, 2019, the Fourth Circuit issued an order approving the petitioners’ requested stay of the Original BiOp and holding the litigation in abeyance until January 11, 2020. On October 15, 2019, the FERC issued an order requiring the MVP Joint Venture to cease all forward-construction progress (the FERC modified this order on October 9, 2020 and December 17, 2020, which the Sierra Club has appealed to the DC Circuit as discussed above under "Jefferson National Forest Crossing and Associated Authorizations"). On September 4, 2020, FWS issued the MVP Joint Venture a new Biological Opinion and Incidental Take Statement (the New BiOp) for the MVP project and the Fourth Circuit subsequently dismissed the litigation regarding the Original BiOp. On October 27, 2020, Appalachian Voices et al. filed a petition with the Fourth Circuit challenging the New BiOp and filed a request for an administrative stay of the New BiOp with FWS, which FWS subsequently denied. On November 2, 2020, the petitioners filed a motion to stay the New BiOp with the Fourth Circuit. On November 18, 2020, the Fourth Circuit issued an order denying the requested stay. The matter was fully briefed as of March 19, 2021 and oral argument is expected to be scheduled by June 2021. If this challenge were successful, it could result in the New BiOp being vacated and/or additional proceedings (the outcome of which the Company cannot predict) and cause a delay in the targeted in-service date for the MVP project (and consequent impacts relating to such delay).
Other Proceedings Relevant to the MVP Project
Grand Jury Subpoena. On January 7, 2019, the MVP Joint Venture received a letter from the U.S. Attorney's Office for the Western District of Virginia stating that it and the EPA were investigating potential criminal and/or civil violations of the Clean Water Act and other federal statutes as they relate to the construction of the MVP. The January 7, 2019 letter requested that the MVP Joint Venture and its members, contractors, suppliers and other entities involved in the construction of the MVP preserve documents related to the MVP generated from September 1, 2018 to the present. In a telephone call on February 4, 2019, the U.S. Attorney's Office confirmed that it had opened a criminal investigation. On February 11, 2019, the MVP Joint Venture received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Virginia requesting certain documents related to the MVP from August 1, 2018 to the present. The MVP Joint Venture began a rolling production of documents responsive to the subpoena after the U.S. Attorney’s office narrowed its subpoena inquiry to five farms in Virginia containing twenty streams or wetlands. On March 4, 2021, the U.S. Department of Justice notified the MVP Joint Venture that it had concluded its investigation without an adverse determination to the MVP Joint Venture.
MVP Southgate Matters
The MVP Joint Venture is currently challenging or defending certain agency actions and judicial challenges to the MVP Southgate project that must be resolved before the project can be completed, including the following:
•Sierra Club et al. v. FERC; Case No. 20-1427, DC Circuit. On June 18, 2020, the FERC issued an order granting a certificate of public convenience and necessity for the MVP Southgate project. However, the FERC, while authorizing the project, directed the Office of Energy Projects not to issue a notice to proceed with construction until necessary federal permits are received for the MVP project and the Director of the Office of Energy Projects lifts the stop-work order and authorizes the MVP Joint Venture to continue constructing the MVP project. Certain opposition parties subsequently requested rehearing of the certificate order. On August 20, 2020, the FERC issued an order denying requests for rehearing of that certificate order, and on September 17, 2020, the FERC issued an order addressing the arguments raised on rehearing. On October 9, 2020, Sierra Club, among other petitioners, filed an appeal of these orders with the DC Circuit. The matter is scheduled to be fully briefed by August 18, 2021. If this challenge were successful, it could result in the MVP Joint Venture'sSouthgate project’s certificate of public convenience and necessity being vacated and/or additional proceedings before the FERC, the outcome of which the Company cannot predict.

•
Mountain Valley Pipeline, LLC v. 6.56 Acres of Land et al., Case No. 18-1159,•Mountain Valley Pipeline, LLC v. North Carolina Department of Environmental Quality, No. 20-1971, Fourth Circuit Court of Appeals. On August 11, 2020, the North Carolina Department of Environmental Quality (NCDEQ) denied the MVP Southgate project’s application for a Clean Water Act Section 401 Individual Water Quality Certification and Jordan Lake Riparian Buffer Authorization and such denial was reissued by the NCDEQ on April 29, 2021. See "MVP Southgate Project" under "Outlook" in Part I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information. The Company is evaluating the NCDEQ's April 29, 2021 action and cannot guarantee whether the application, if the denial is challenged, or a new application will ultimately beSeveral landowners filed challenges to the condemnation proceedings by which the MVP Joint Venture obtained access to their property in various U.S. District Courts. In each case, the district court found that the MVP Joint Venture was entitled to immediate possession of the easements, and the landowners appealed to the Fourth Circuit. The Fourth Circuit consolidated these cases and issued two opinions in 2019, one granting the MVP Joint Venture immediate access for construction of the pipeline and the other finding that the MVP Joint Venture did not have to condemn the interest of coal owners and that coal owners are not entitled to assert claims in the condemnation proceedings for lost coal on tracts for which they do not own a surface interest being condemned. A group of landowners filed a writ of certiorari with the United States Supreme Court regarding the Fourth Circuit’s ruling on immediate access which was denied on October 7, 2019. District court trials on just compensation are ongoing.

•
Greenbrier River Watershed Ass’n v. WVDEP, Circuit Court of Summers County, West Virginia. In August 2017, the Greenbrier River Watershed Association appealed the MVP Joint Venture's Natural Stream Preservation Act Permit obtained from the West Virginia Environmental Quality Board (WVEQB) for the Greenbrier River crossing. Petitioners alleged that the issuance of the permit failed to comply with West Virginia's Water Quality Standards for turbidity and sedimentation. The WVEQB dismissed the appeal in June 2018. In July 2018, the Greenbrier River Watershed Association appealed the decision to the Circuit Court of Summers County, asking the court to remand the permit with instructions to impose state-designated construction windows and pre- and post-construction monitoring requirements as well as a reversal of the WVEQB's decision that the permit was lawful. On September 18, 2018, the Circuit Court granted a stay. A hearing on the merits was held on October 23, 2018. The court has not yet issued a decision. In the event of an adverse decision, the MVP Joint Venture would appeal or work with the WVDEP to attempt to resolve the issues identified by the court.

•
Sierra Club et al. v. U.S. Dep’t of Interior et al., Case No. 18-1082, Fourth Circuit Court of Appeals. On August 6, 2018, the Fourth Circuit held that the National Park Service (NPS) acted arbitrarily and capriciously in granting the ACP a right-of-way permit across the Blue Ridge Parkway. Specifically, the Fourth Circuit found that the permit cited the wrong source of legal authority and the NPS failed to make a “threshold determination that granting the right-of-way is ‘not inconsistent with the use of such lands for parkway purposes’ and the overall National Park System to which it belongs.” Even though the MVP Joint Venture is not named in the ACP litigation, the MVP route crosses the Blue Ridge Parkway roughly midway between mileposts 246 and 247 of the pipeline route and implicates some of the same deficiencies addressed by the court. The MVP Joint Venture elected to request that the NPS temporarily suspend its Blue Ridge Parkway permit until the deficiencies identified in the ACP litigation are resolved. While the MVP and ACP rights-of-way share some of the same regulatory issues, unlike ACP the portion of the MVP pipeline that crosses the Blue Ridge Parkway is completely constructed. NPS granted the MVP Joint Venture the ability to continue final restoration efforts on that portion of the pipeline during the course of the suspended permit. The MVP Joint Venture is working with the NPS to address MVP-related right-of-way issues.

•
Wild Virginia et al. v. United States Department of the Interior; Case No. 19-1866, Fourth Circuit Court of Appeals. Petitioners filed a petition in the Fourth Circuit to challenge MVP’s Biological Opinion and Incidental Take Statement issued by the Department of the Interior’s Fish and Wildlife Service (FWS) which was approved in November 2017 (BiOp). Petitioners also requested a stay of the application of MVP’s BiOp during the pendency of the court case. FWS subsequently requested that the court approve a stay of the litigation until January 11, 2020. On August 15, 2019,

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approved or, if approved, whether conditions may be included as part of such approval or whether the MVP Joint Venture submitted a project-wide voluntary suspension of construction activities that pose a risk of incidental take, based on the BiOp. On October 11, 2019, the Fourth Circuit issued an order approving the stay of the BiOp and held the litigation in abeyance until January 11, 2020 pending re-consultation between FWS and the FERC regarding FWS’s review of the BiOp. In response to the Fourth Circuit's order, on October 15, 2019, the FERC issued an order to the MVP Joint Venture to cease all forward-construction progress. Subsequently, the FERC authorized certain limited construction activities to resume. After completion of the consultation period which was recently extended until May 27, 2020, the Company anticipates that FWS will issue a new biological opinion and incidental take statement for the MVP project, whichapplication would impact the current litigation.
Other Proceedings that May Affect the MVP Project
•
Cowpasture River Preservation Association, et al. v. U.S. Forest Service, et al., Case No. 18-1144, Fourth Circuit Court of Appeals. On December 13, 2018, in an unrelated case involving the ACP, the Fourth Circuit held that the USFS, which is part of the Department of Agriculture, lacked the authority to grant rights-of-way for oil and gas pipelines to cross the Appalachian Trail. Although the MVP Joint Venture obtained its grant to cross the Appalachian Trail from the BLM, a part of the Department of Interior, the rationale of the Fourth Circuit's opinion could apply to the BLM as well. On February 25, 2019, the Fourth Circuit denied ACP’s petition for en banc rehearing. The federal government and ACP filed petitions to the United States Supreme Court on June 26, 2019 seeking judicial review of the Fourth Circuit's decision. On October 4, 2019, the Supreme Court formally accepted the Petitioners' writ of certiorari. The oral arguments occurred on February 24, 2020. Based on general court practice, the Company anticipates that the Supreme Court will issue its decision before the end of the 2019-2020 term in June 2020. The MVP Joint Venture is continuing to pursue multiple options to address the Appalachian Trail issue, including but not limited to, administrative, regulatory and legislative options.
•
Grand Jury Subpoena. On January 7, 2019, the MVP Joint Venture received a letter from the U.S. Attorney's Office for the Western District of Virginia stating that it and the EPA are investigating potential criminal and/or civil violations of the Clean Water Act and other federal statutes as they relate to the construction of the MVP. The January 7, 2019 letter requested that the MVP Joint Venture and its members, contractors, suppliers and other entities involved in the construction of the MVP preserve documents related to the MVP generated from September 1, 2018 to the present. In a telephone call on February 4, 2019, the U.S. Attorney's Office confirmed that it has opened a criminal investigation. On February 11, 2019, the MVP Joint Venture received a grand jury subpoena from the U.S. Attorney's Office for the Western District of Virginia requesting certain documents related to the MVP from August 1, 2018 to the present. The MVP Joint Venture is complying with the letter and subpoena but cannot predict whether any action will ultimately be brought by the U.S. Attorney's Office or what the outcome of such an action would be. The MVP Joint Venture began a rolling production of documents responsive to the subpoena after the U.S. Attorney’s office narrowed its subpoena inquiry to five farms in Virginia containing twenty streams or wetlands.
•
Northern Plains Resource Council, et al. v. Army Corps of Engineers., Case no. CV-19-44-GF-BMM, U.S. District Court for the District of Montana. In Northern Plains Resource Council, et al. v. Army Corps of Engineers, Judge Brian Morris of the U.S. District Court for the District of Montana found that the U.S. Army Corp was required to conduct Endangered Species Act (ESA) consultations with federal wildlife agencies when it last revised Nationwide Permit 12 in 2017, the general permit governing dredge-and-fill activities for pipeline and other utility line construction projects. The Court enjoined the U.S. Army Corps from authorizing any dredge or fill activities under Nationwide Permit 12 in Montana. Based on these findings, the order vacated Nationwide Permit 12, remanded it to the U.S. Army Corps to consult with the applicable federal wildlife agencies, and prohibited the U.S. Army Corps from authorizing projects under Nationwide Permit 12 until consultation is complete. Following the order, the U.S. Army Corps suspended Nationwide Permit 12 which could cause the U.S. Army Corps to decline to verify future construction activities submitted under Nationwide Permit 12 pending further court action. On April 28, 2020, the Court denied the Department of Justice's motion to stay the vacatur pending appeal but granted a motion for expedited briefing. On May 11, 2020, Judge Morris denied the U.S. Army Corps' motion to stay the order pending appeal, and narrowed the original opinion's scope to allow use of Nationwide Permit 12 on non-pipeline construction activities and routine maintenance, inspection and repair activities on existing Nationwide Permit 12 projects. The Department of Justice appealed the decision to, and requested an administrative stay from, the Ninth Circuit Court of Appeals on May 13, 2020. Such actions will take time and outcomes remain uncertain. If the ruling is applied nationwide, Equitrans Midstream expects a delay in obtaining approval of the MVP Joint Venture's pending Nationwide Permit 12 permits which were submitted to the U.S. Army Corps in January 2020.
For additional information on legal proceedings, see also "Item 3. Legal Proceedings" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

then be further challenged.
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Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 20192020, other than the risks described below.
The outbreak
Risks Related to Our Operations

Increasing scrutiny and changing stakeholder expectations in respect of COVID-19 (or any future pandemic),ESG and sustainability practices may adversely impact our business and our stock price and expose us to new or additional risks.

Companies across all industries are facing increasing scrutiny from stakeholders related declines in economic outputto their ESG and associateddemand for natural gas, could harmsustainability practices. Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG and sustainability practices and matters and on the implications and social cost of their investments. Stakeholders’ increased focus and activism related to ESG and sustainability matters may potentially adversely affect our business, financial condition, results of operations, and financial condition of each of EQMliquidity, as well as our stock price, and us.expose us to new or additional risks, including as described below.


In December 2019, COVID-19 was reported in China,Increased focus on ESG and in January 2020, the World Health Organizationdeclared it a Public Health Emergency of International Concern. COVID-19 has since spread to additionalcountries including the United States, causing significant business, employment and economic disruptions. Measures adopted by governments to help reduce the spread of the virus have adversely affected the economic and financial markets in the United States and many other countries, resulting in an economic downturn of unknown duration and severity. 
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the COVID-19outbreak (or any other outbreak) on the domestic economy, the natural gas industry, or EQM or us; however, our and EQM’s business, results of operations and financial condition could be negatively affected in numerous ways, including, without limitation, that:

•
EQM’s customers may be adversely affected if the outbreak results in an economic downturn or recession and/or causes declines in the price of, demand for and production of natural gas or prevents such customers (particularly EQM’s largest customer) from conducting, or curtails their ability to conduct, field operations and continue natural gas production, which could reduce demand for EQM’s services, negatively affect throughput on EQM’s systems or heighten EQM’s exposure to risk of loss resulting from the nonpayment and/or nonperformance of its customers;

our and EQM’s operations may be disrupted or become less efficient if a significant portion of our employees or contractors are unavailable due to illness or if EQM’s field operations, includingsustainability matters, particularly in respect of projects in development, were to be suspended or temporarily shut down or restricted due to outbreak control measures;

legalclimate change and regulatory processes relating to EQM’s projects in development, including the MVP project,related demand for renewable and alternative energy, may be disrupted or slowed, such as if relevant governmental authorities suffer reduced workforce availability due to the virus; and

resultant disruption to, and instability in, financial and credit markets may adversely affecthinder our and EQM’s access to capital leveragegiven our fossil fuel-based operations and/or adversely affect demand for our services. See “If we or our subsidiaries are unable to obtain needed capital or financing on satisfactory terms, our ability to execute our business strategy and liquidity levels and credit ratings, as well as EQM’s counterparties’ accesspay dividends to capital, business continuity, financial stability, leverage and liquidity levels and credit ratings (which could heighten counterparty credit risk to which EQM is exposed in the ordinary course of its business).
Additionally, the Equitrans Midstream shareholder and EQM limited partner votes in respect of the EQM Merger could be delayed, and the ability of the post-EQM Merger consolidated company to realize benefits from the EQM Mergerour shareholders may be adversely affected bydiminished. Additionally, financing transactions may increase our financial leverage or could cause dilution to our shareholders.” and “Increased competition from other companies that provide gathering, transmission and storage, and water services, or from alternative fuel sources, could have a negative impact on the COVID-19 outbreak (including as a result of the occurrence of any of the above-described factors). Although we believe that we and EQM are following best practices under COVID-19 guidance and intend to continue to refinedemand for our practices as additional guidance is released, there is no guarantee that efforts by EQM and us or any other entity or authority to mitigate potential adverse impacts of the COVID-19 outbreak, whether on a local, state or national level, will be effective. 

Each of EQM and us also may incur additional costs to further attempt to mitigate potential impactscaused by COVID-19 related disruptions,services, which could adversely affect our financial condition and results ofresults.” operations. Further, the COVID-19 pandemic may have the effect of heightening many of the other risks set forth in “Itemunder "Item 1A. Risk Factors”Factors" in ourthe Company's Annual Report on Form 10-K for the year ended December 31, 2019,2020.

We recognize that our shareholders, employees, customers, regulators, and other stakeholders expect us to continue to focus on long-term sustainable performance, including by addressing significant, relevant ESG factors, further working to prioritize sustainable energy practices, reducing our carbon footprint and promoting sustainability. We expect to continue to incur costs in doing so. Further, if we do not adapt to or comply with investor or other stakeholder expectations and standards (or meet sustainability goals that we set), which are evolving, or if we are perceived not to have responded appropriately or quickly enough to growing concern for ESG and sustainability issues, our business could suffer, including from reputational damage.

In addition, as we continue to focus on long-term sustainable performance and address ESG factors, and as disclosure standards continue to evolve, including as a result of potential regulatory initiatives, we have expanded and expect to further expand our public disclosures in these areas. Such disclosures may reflect goals, cost estimates and other expectations and assumptions, including over long timelines, which goals, cost estimates, and other expectations and assumptions are necessarily uncertain and may not be realized. Failure to realize (or timely achieve progress on) such goals, cost estimates, and other expectations or assumptions may adversely impact us. Further, a multitude of organizations that provide information to investors have developed ratings processes for evaluating companies on their approach to ESG and sustainability matters, and unfavorable ratings or perceptions of (or activism directed towards) us or our industry as a result of such ratings or our ESG and sustainability practices may adversely affect investor sentiment and cause investment funds to be allocated to other companies or industries.

The occurrence of any of the foregoing may adversely affect our business, financial condition, results of operations, liquidity and/or our stock price.

Terrorist or cyber security attacks and threats aimed at us or third parties, as well as any noncompliance by us with applicable laws and regulations governing data privacy, could adversely affect us.

We have become increasingly dependent upon digital technologies, including information systems, infrastructure and cloud applications, to conduct our business, and the maintenance of our financial and other records has long been dependent upon such technologies. We depend on both our own systems, networks, and technology as well as the systems, networks and technology of our vendors, customers and other business partners. The U.S. government has issued public warnings that indicate that energy assets might be specific targets of cyber security threats. Our systems (or those of third parties with whom we are connected) that are designed to protect against cyber security risks may not be sufficient, and deliberate attacks on, or unintentional events or security breaches affecting, our systems or infrastructure, the systems or infrastructure of third parties or the cloud could adversely affect us, including by leading to corruption or loss of our proprietary data and potentially sensitive data, delays in the performance of services for our customers, difficulty in completing and settling transactions, challenges in
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maintaining our books and records, communication interruptions, environmental damage, regulatory scrutiny, personal injury, property damage and other operational disruptions, as well as damage to our reputation, financial condition and cash flows and potential legal claims and liabilities. Further, as cyber incidents continue to evolve, we likely will be required to expend additional resources to continue to modify or enhance our protective measures and/or to investigate and remediate vulnerabilities to or consequences of cyber incidents (and there can be no assurance that any protective or remedial measures are or will be adequate to address a risk that arises).

The regulatory landscape with regard to data privacy and the unauthorized disclosure of personal information also continues to develop. New laws and regulations governing data privacy and the unauthorized disclosure of personal information may potentially elevate our compliance costs. Any failure by us, a company that we acquire, or one of our technology service providers, to comply with these laws and regulations, where applicable, including as a result of a cyber incident, could adversely affect us, including by resulting in reputational harm, penalties, regulatory scrutiny, liabilities, and/or mandated changes in our business practices.

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.

The respective debt agreements of EQM and Eureka contain various covenants and restrictive provisions that limit EQM’s and Eureka's, as applicable, ability to, among other things:

•incur or guarantee additional debt;

•make distributions on or redeem or repurchase units;

•incur or permit liens on assets;

•enter into certain types of transactions with affiliates;

•enter into burdensome agreements, subject to certain specified exceptions;

•enter into certain mergers or acquisitions; and

•dispose of all or substantially all of their respective assets.

See Note 8 to the consolidated financial statements for a discussion of the Amended EQM Credit Facility and the Eureka Credit Facility and Note 12 to the consolidated financial statements for a discussion of the Second Amendment to the Amended EQM Credit Facility. As amended by the Second Amendment, the Amended EQM Credit Facility contains certain negative covenants, that, among other things, establish for EQM a maximum consolidated leverage ratio that varies over the course of the term ranging from not more than 5.95 to 1.00 to not more than 5.00 to 1.00, tested as of the end of each fiscal quarter (which in limited circumstances is increased for certain measurement periods following the consummation of certain acquisitions). Under the Eureka Credit Facility, Eureka is required to maintain a consolidated leverage ratio of not more than 4.75 to 1.00 (which in limited circumstances is increased for certain measurement periods following the consummation of certain acquisitions). Additionally, as of the end of any fiscal quarter, Eureka may not permit the ratio of consolidated EBITDA (as defined in the Eureka Credit Facility) for the four fiscal quarters then ending to Consolidated Interest Charges (as defined in the Eureka Credit Facility) to be less than 2.50 to 1.00. EQM’s and Eureka’s ability to meet these covenants can be affected by events beyond their respective control and we cannot assure our shareholders that EQM or Eureka will continue to meet these covenants. In addition, the Amended EQM Credit Facility, as amended by the Second Amendment, and the Eureka Credit Facility each contain certain events of default, including the occurrence of a change of control.

In addition to the above-described facilities, EQM has issued senior unsecured notes which remain outstanding.

The provisions of the debt agreements may affect our ability to obtain future financing and pursue attractive business opportunities and our flexibility in planning for, and reacting to, changes in business conditions. In addition, a failure to comply with the provisions of the debt agreements could result in an event of default, which could enable creditors to, subject to the terms and conditions of the applicable agreement, declare any outstanding principal of that debt, together with accrued and unpaid interest, to be immediately due and payable. If the payment of the debt is accelerated, our assets may be updatedinsufficient to repay such debt in full, and in turn our shareholders could experience a partial or total loss of their investments. The Amended
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EQM Credit Facility, as amended by risk factor disclosure our Quarterly Reports on Form 10-Q for subsequent periods. The extentthe Second Amendment, also has a cross default provision that applies to any other indebtedness EQM may have with an aggregate principal amount in excess of the impact of COVID-19 on EQM and us will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, duration of the outbreak and related economic effects and aftereffects (including on the natural gas industry), and actions taken to contain COVID-19 or its impact, among others.$25 million.

We and our subsidiaries may further reducein the amountfuture incur additional debt. Our and our subsidiaries’ levels of debt could have important consequences to us, including the cash dividend that we pay on following:

•our common stockability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired, or such financing may not pay any cash dividends at all to be available on favorable terms;

•our shareholders. Our ability to declarefunds available for operations, future business opportunities and pay cash dividends to our shareholders if any,may be reduced by that portion of our cash flow required to make interest payments on our or our subsidiaries’ debt;

•we may be more vulnerable to competitive pressures or a downturn in our business or the economy generally; and

•our flexibility in responding to changing business and economic conditions may be limited.

Our ability to service our subsidiaries’ current, or our or our subsidiaries’ future, respective debts, will depend on variousupon, among other things, our future financial and operating performance, which will be affected by prevailing economic conditions and financial, business, regulatory and other factors, manysome of which are beyond our control.

We If our operating results are not requiredsufficient to declare dividends ofservice our available cashsubsidiaries’ current, or our or our subsidiaries’ future, indebtedness, as applicable, or our operating results affect our ability to comply with covenants in our common shareholders. In addition, as described below,

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following the closing of the EQM Merger,debt agreements, we will be prohibited from payingforced to take actions such as reducing dividends, reducing or delaying our business activities, acquisitions, investments or capital expenditures, selling assets or seeking additional equity capital. We may not be able to effect any of these actions on satisfactory terms or at all.

Our subsidiaries’ current substantial indebtedness and the additional debt we and/or our subsidiaries will incur in the future for, among other things, working capital, capital expenditures, capital contributions to the MVP Joint Venture, acquisitions or operating activities may adversely affect our liquidity and therefore our ability to pay dividends to our shareholders until we pay dividends on the Equitrans Midstream Preferred Shares. On April 27, 2020, our Board of Directors declared a first quarter 2020 dividend that is 67% lower than our fourth quarter 2019 quarterly dividend. Our Board of Directors may further reduce the amount of the cash dividend that we pay on our common stock or may decide not to declare any dividends in the future. Any payment of future dividends will be at the sole discretion of the Board of Directors and will depend upon many factors, including the financial condition, earnings, liquidity and capital requirements of our operating subsidiaries, covenants associated with certain debt obligations, legal requirements, leverage, regulatory constraints and other factors deemed relevant by our Board of Directors.shareholders.

Upon the closing of the pending EQM Merger, former EQM common unitholders will own approximately 50% of the total voting power of our common stock (which includes the Equitrans Midstream Preferred Shares to be issued in connection with the EQM Merger, which will have the right to vote on an as-converted basis with our shareholders). As a result, our current shareholders will experience significant dilution as a result of the EQM Merger.

If the EQM Merger is successfully completed, we expect that we will issue approximately 203.2 million shares of our common stock at the effective time in connection with the EQM Merger. In connection with the EQM Merger, we will also issue newly-created Equitrans Midstream Preferred Shares that will be convertible into our common stock and which will have the right to vote on an as-converted basis with our shareholders. In addition, in the future we may issue common stock or other equity to raise cash for our projects, operations, acquisitions or other purposes and may also acquire interests in other companies by using a combination of cash and our equity or just our equity.

Any of these events may dilute the ownership interests of the current holders of our common stock, reduce our earnings per share and have an adverse effect on the price of our common stock. The issuance of these new shares and the sale of additional shares from time to time could have the effect of depressing the market value for our common stock. The increase in the number of shares of our common stock outstanding, and any resulting dilution, may cause holders to sell shares of our common stock or may create the perception that such sales may occur, either of which may adversely affect the market for, and the market value of, our common stock.

We and EQM are and in the futuresubsidiaries’ significant indebtedness may be targets of securities class action and derivative lawsuits,viewed negatively by credit rating agencies, which could result in substantialincreased costs and may delay or preventfor us to access the completioncapital markets. Any future additional downgrade of the debt issued by EQM Merger.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements in an effortcould significantly increase our capital costs or adversely affect our ability to enjoin the relevant merger or seek monetary relief. We and EQM are currently defendants in lawsuits related to the EQM Merger Agreement and the EQM Merger and, even if the pending or any future lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. We and EQM cannot predict the outcome of these lawsuits, or others, nor can either company predict the amount of time and expense that will be required to resolve such litigation. An unfavorable resolution of any such litigation surrounding the EQM Merger could delay or prevent its consummation. In addition, the costs of defending the litigation, even if resolved in our or EQM’s favor, could be substantial and such litigation could distract us and EQM from pursuing the consummation of the EQM Merger and other potentially beneficial business opportunities.

As part of the EQM Merger and the related Restructuring, EQM has agreed to redeem $600.0 million aggregate principal amount of EQM’s issued and outstanding Series A Preferred Units for cash at 101% of the Series A Preferred Unit Purchase Price plus any accrued and unpaid distribution amounts and partial period distribution amounts and, after giving effect to such redemption, we have agreed to issue 2.44 Equitrans Midstream Preferred Shares in exchange for each remaining Series A Preferred Unit.

In April 2019, EQM sold an aggregate of 24,605,291 Series A Preferred Units to the Investors and certain of their affiliates in a private placement for a cash purchase price equal to the Series A Preferred Unit Purchase Price.

Under the EQM Partnership Agreement, the Investors are entitled to make certain elections as to treatment of their Series A Preferred Units in respect of certain change of control events of EQM. In lieu of making an election, and in satisfaction of the Investors’ rights under the EQM Partnership Agreement upon a change of control of EQM, the holders of the Series A Preferred Units and we have agreed that, at the effective time of the EQM Merger, (i) EQM will redeem $600.0 million aggregate principal amount of EQM’s issued and outstanding Series A Preferred Units for cash at 101% of the Series A Preferred Unit Purchase Price plus any accrued and unpaid distribution amounts and partial period distribution amounts, and (ii) after giving effect to such redemption, we will create and issue 2.44 new Equitrans Midstream Preferred Shares in exchange for each remaining Series A Preferred Unit.


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At the time of issuance, the Equitrans Midstream Preferred Shares will have the following rights and preferences:

•
The Equitrans Midstream Preferred Shares are a new class of security that will rank pari passu with any other outstanding class or series of our preferred stock and senior to all shares of our common stock with respect to dividend rights and rights upon liquidation.

•
The Equitrans Midstream Preferred Shares will vote on an as-converted basis with our common stock and will have certain other class voting rights with respect to any amendment to our Certificate of Designations relating to the Equitrans Midstream Preferred Shares or our Amended and Restated Articles of Incorporation that would be adverse (other than in a de minimis manner) to any of the rights, preferences or privileges of the Equitrans Midstream Preferred Shares.

The holders of the Equitrans Midstream Preferred Shares will receive cumulative quarterly dividends at a rate per annum of 9.75% for each quarter ending on or before March 31, 2024, and thereafter the quarterly dividends at a rate per annum equal to the sum of (i) three-month LIBOR as of a LIBOR Determination Date (as definedraise capital in the Certificate of Designations) in respect of the applicable quarter and (ii) 8.15%; provided that the rate per annum in respect of periods after March 31, 2024 shall not be less than 10.50%.future.

We will not be entitled to pay any dividends on any junior securities, including any shares of our common stock, prior to paying the quarterly dividends payable to the Equitrans Midstream Preferred Shares, including any previously accrued and unpaid dividends.

Each holder of the Equitrans Midstream Preferred Shares may elect to convert all or any portion of the Equitrans Midstream Preferred Shares owned by it into our common stock initially on a one-for-one basis, subject to certain anti-dilution adjustments and an adjustment for any dividends that have accrued but not been paid when due and partial period dividends (referred to as the “conversion rate”), at any time (but not more often than once per fiscal quarter) after April 10, 2021 (or earlier liquidation, dissolution or winding up of us), provided that any conversion involves an aggregate number of Equitrans Midstream Preferred Shares of at least $20.0 million (calculated based on the closing price of our common stock on the trading day preceding notice of the conversion) or such lesser amount if such conversion relates to all of a holder’s remaining Equitrans Midstream Preferred Shares or if such conversion is approved by our Board of Directors.

So long as the holders of Equitrans Midstream Preferred Shares have not elected to convert all of their Equitrans Midstream Preferred Shares into our common stock, we may elect to convert all of the Equitrans Midstream Preferred Shares for our common stock at any time after April 10, 2021 if (i) our common stock is listed for, or admitted to, trading on a national securities exchange, (ii) the Equitrans Midstream Preferred Share Issue Price for the 20 consecutive trading days immediately preceding notice of the conversion, (iii) the average daily trading volume of our common stock on the national securities exchange on which our common stock is listed for, or admitted to, trading exceeds 1,000,000 shares of our common stock (subject to certain adjustments) for the 20 consecutive trading days immediately preceding notice of the conversion, (iv) we have an effective registration statement on file with the SEC covering resales of our common stock to be received by such holders upon any such conversion and (v) we have paid all accrued quarterly dividends in cash to the holders.

Upon certain events involving a Change of Control (as defined in the Certificate of Designations) in which more than 90% of the consideration payable to us, or to the holders of our common stock is payable in cash, the Equitrans Midstream Preferred Shares will automatically convert into our common stock at a conversion ratio equal to the greater of (i) the quotient of (a) the sum of (x) the Equitrans Midstream Preferred Share Issue Price plus (y) any accrued and unpaid dividends on such date, including any partial period dividends with respect to the Equitrans Midstream Preferred Shares on such date, divided by (b) the Equitrans Midstream Preferred Share Issue Price and (ii) the quotient of (a) the sum of (x) (1) the Equitrans Midstream Preferred Share Issue Price multiplied by (2) 110% plus (y) any accrued and unpaid dividends on such date, including any partial period dividends, with respect to the Equitrans Midstream Preferred Shares on such date, divided by (b) the volume weighted average price of the shares of our common stock for the 30-day period ending immediately prior to the execution of definitive documentation relating to the Change of Control.

In connection with other Change of Control events that do not satisfy the 90% cash consideration threshold described above, in addition to certain other conditions, each holder of Equitrans Midstream Preferred Shares may elect to (a) convert all, but not less than all, of its Equitrans Midstream Preferred Shares into our common stock at the then applicable conversion rate, (b) if we are not the surviving entity (or if we are the surviving entity, but our common

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stock will cease to be listed), require us to use commercially reasonable efforts to cause the surviving entity in any such transaction to issue a substantially equivalent security that has rights, preferences and privileges substantially equivalent to the Equitrans Midstream Preferred Shares (or if we are unable to cause such substantially equivalent securities to be issued, to exercise the option described in clause (a) or (d) hereof or elect to convert such Equitrans Midstream Preferred Shares at a conversion ratio reflecting a multiple of invested capital), (c) if we are the surviving entity, continue to hold the Equitrans Midstream Preferred Shares or (d) require us to redeem the Equitrans Midstream Preferred Shares at a price per share equal to 101% of the Equitrans Midstream Preferred Share Issue Price, plus accrued and unpaid dividends, including any partial period dividends, on the applicable Equitrans Midstream Preferred Shares on such date, which redemption price may be payable in cash, our common stock or a combination thereof at our election (and, if payable in our common stock, such common stock will be issued at 95% of the volume weighted average price of our common stock for the 20-day period ending on the fifth trading day immediately preceding the consummation of the Change of Control). Any holder of Equitrans Midstream Preferred Shares that requires us to redeem its Equitrans Midstream Preferred Shares pursuant to clause (d) above will have the right to withdraw such election with respect to all, but not less than all, of its Equitrans Midstream Preferred Shares at any time prior to the fifth trading day immediately preceding the consummation of the Change of Control and instead elect to be treated in accordance with any of clauses (a), (b) or (c) above.

At any time on or after January 1, 2024, we will have the right, subject to applicable law, to redeem the Equitrans Midstream Preferred Shares, in whole or in part, by paying cash for each Equitrans Midstream Preferred Share to be redeemed in an amount equal to the greater of (a) the sum of (i)(1) the Equitrans Midstream Preferred Share Issue Price multiplied by (2) 110%, plus (ii) any accrued and unpaid dividends, including any partial period dividends, with respect to the Equitrans Midstream Preferred Shares on such date and (b) the amount the holder of such Equitrans Midstream Preferred Share would receive if such holder had converted such Equitrans Midstream Preferred Share into shares of our common stock at the then-applicable conversion ratio and we liquidated immediately thereafter.

Pursuant to the terms of the Restructuring Agreement, in connection with the closing of the Restructuring, we have agreed to enter into the Registration Rights Agreement pursuant to which, among other things, we will give the Investors certain rights to require us to file and maintain one or more registration statements with respect to the resale of the Equitrans Midstream Preferred Shares and the shares of our common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares, and which, upon request by certain Investors party to the Registration Rights Agreement, will require us to initiate underwritten offerings for the Equitrans Midstream Preferred Shares and the shares of our common stock that are issuable upon conversion of the Equitrans Midstream Preferred Shares and use our best efforts to cause the Equitrans Midstream Preferred Shares to be listed on the securities exchange on which the shares of our common stock are then listed.
The creation and issuance of the Equitrans Midstream Preferred Shares present a number of risks to current and future holders of our common stock, including a preference in favor of holders of Equitrans Midstream Preferred Shares in the payment of dividends on our common stock, the risk of dilution occurring as a result of the conversion of the Equitrans Midstream Preferred Shares into our common stock and the ability of the holders of the Equitrans Midstream Preferred Shares to vote with the holders of our common stock on most matters, as well as the risk that the holders of the Equitrans Midstream Preferred Shares will have certain other class voting rights with respect to any amendment to our organizational documents that would be adverse (other than in a de minimis manner) to any of the rights, preferences or privileges of the Equitrans Midstream Preferred Shares.

Reviews of our goodwill and intangible and other long-lived assets have resulted in significant impairment charges and reviews of goodwill, intangible and other long-lived assets (including equity method investments) could result in future significant impairment charges.

GAAP requires us to perform an assessment of goodwill at the reporting unit level for impairment at least annually and whenever events or changes in circumstance indicate that the fair value of a reporting unit is more likely than not less than its carrying amount.

We may perform either a qualitative or quantitative assessment of potential impairment. Our qualitative assessment of potential impairment may result in the determination that a quantitative impairment analysis is not necessary. Under this elective process, we assess qualitative factors to determine whether the existence of events or circumstances leads us to determine that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, we determine that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then performing a quantitative analysis is not required. However, if we conclude otherwise, then we perform a quantitative impairment analysis. If we choose not to perform a qualitative assessment, or if we choose to perform a qualitative

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assessment but are unable to qualitatively conclude that no impairment has occurred, then we will perform a quantitative assessment. In the case of a quantitative assessment, we estimate the fair value of the reporting unit with which the goodwill is associated and compare it to the carrying value. If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value.

Assessing the recoverability of goodwill requires significant judgments and estimates by management. Fair values of reporting units to which goodwill is recorded are primarily estimated using the discounted cash flow method, which applies significant inputs not observable in the public market (Level 3), including estimates and assumptions related to the use of an appropriate discount rate, future throughput volumes and revenues from volumetric-based fees (which may vary with changes in customer development plans), operating costs, capital spending and changes in working capital. All of our goodwill as of March 31, 2020 relates to businesses that were acquired and valued by EQT's management in the November 2017 acquisition by EQT of Rice Energy Inc. The reporting unit to which goodwill is recorded as of March 31, 2020 is the EQM Opco reporting unit, which is a reporting unit associated with the gas gathering and compression activities of EQM Gathering Opco, LLC, an indirect wholly owned subsidiary of EQM, and which includes, as a result of the EQT Global GGA, the assets under, and operations associated with, the RMP PA Gas Gathering reporting unit. The RMP PA Gas Gathering reporting unit reflected the Pennsylvania gathering assets acquired in connection with EQM's merger with Rice Midstream Partners LP in July 2018 (RMP PA Gas Gathering) and was, effective on the EQT Global GGA Effective Date, merged with and into the EQM Opco reporting unit, with the EQM Opco reporting unit surviving.

During 2019, we recognized impairments to goodwill in the third quarter of $168.9 million and $99.2 million on RMP PA Gas Gathering and the Ohio and West Virginia gathering assets acquired in the Bolt-on Acquisition, respectively. Additionally, for the fourth quarter of 2019, we recognized impairment of goodwill of $433.2 million and $150.5 million on RMP PA Gas Gathering and the Ohio gathering assets acquired by EQM through its indirect acquisition in May 2018 of all the outstanding limited liability company interests in each of Rice West Virginia Midstream LLC (now known as EQM West Virginia Midstream LLC), Rice Olympus Midstream LLC (now known as EQM Olympus Midstream LLC) and Strike Force Midstream Holdings LLC, respectively.

We evaluate long-lived assets, including related intangibles and equity method investments, for impairment when events or changes in circumstances indicate, in management's judgment, that the carrying value of such assets may not be recoverable (or, in the case of equity method investments, that such investments have suffered other-than-temporary declines in value). Asset recoverability is measured by comparing the carrying value of the asset or asset group (or equity method investment) with its expected future pre-tax undiscounted cash flows. These cash flow estimates require us to make projections and assumptions for many years into the future for pricing, demand, competition, operating cost, commencement of operations, resolution of relevant legal and regulatory matters, and other factors. If the carrying amount exceeds the expected future undiscounted cash flows, we recognize an impairment equal to the excess of net book value over fair value as determined by quoted market prices in active markets or present value techniques if quotes are unavailable. The determination of the fair value using present value techniques requires us to make projections and assumptions regarding the probability of a range of outcomes and the rates of interest used in the present value calculations. Any changes we make to these projections and assumptions could result in significant revisions to evaluations of recoverability or whether declines in value are other-than-temporary and the recognition of additional impairments.

As of March 31, 2020, we performed a recoverability test of the Hornet Midstream long-lived assets due to decreased producer activity. As a result of the recoverability test, management determined that the carrying value of the Hornet Midstream long-lived assets (consisting of gathering assets and customer-related intangible assets) acquired in the Bolt-on Acquisition was not recoverable, which resulted in impairment charges of approximately $37.9 million to the gathering assets and approximately $17.7 million to the customer-related intangible assets.

If the operations or projected operating results of EQM's businesses decline significantly, we could incur additional goodwill impairment charges. Further, if we determine that the carrying value of long-lived assets is not recoverable or values associated with equity method investments, such as investments in the MVP Joint Venture, have suffered other-than-temporary declines, we could incur additional impairment charges. Future impairment charges could be significant and could have a material adverse impact on our financial condition and results of operations for the period in which the impairment is recorded. As of March 31, 2020, we had approximately $486.7 million of goodwill (all associated with the EQM Opco reporting unit) and $11.0 billion of long-lived assets, including intangibles and equity method investments, which will be monitored for future impairment. Management will continue to monitor and evaluate the factors underlying the fair market value of acquired businesses and assets and equity method investments to determine if any assessments are necessary and will take any additional impairment charges required.


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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities
The following table sets forth the Company's repurchases of equity securities registered under Section 12 of the Exchange Act that occurred during the three months ended March 31, 2020:2021:
Period
Total number of shares purchased (a)
Average price paid per shareTotal number of shares purchased as part of publicly announced plans or programsApproximate dollar value of shares that may yet be purchased under the plans or programs
January 2021 (January 1 - January 31)— $— — $— 
February 2021 (February 1 - February 28)3,687 7.33 — — 
March 2021 (March 1 - March 31)9,290 8.04 — — 
Total12,977 $7.84 — $— 
(a)Reflects shares withheld by the Company to pay taxes upon vesting of restricted stock.

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Period 
Total number of shares purchased (a)
 Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Approximate dollar value of shares that may yet be purchased under plans or programs
January 2020 (January 1 - January 31) 986
 $11.06
 —
 $—
February 2020 (February 1 - February 29) 24,762
 11.57
 —
 —
March 2020 (March 1 - March 31) (b)
 25,303,440
 6.25
 —
 —
Total 25,329,188
 $6.26
 —
 $—
(a)The number of shares withheld by the Company to pay taxes upon vesting of restricted stock included 986 shares, 24,762 shares and 3,688 shares in January 2020, February 2020 and March 2020, respectively.
(b)
Includes 25,299,752 shares purchased by the Company pursuant to the Share Purchase Agreements.


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Item 6. Exhibits
Exhibit No.
Document DescriptionMethod of Filing
2.1**3.1

Agreement and Plan of Merger, dated as of February 26, 2020, by and among Equitrans Midstream Corporation, EQM LP Corporation, LS Merger Sub, LLC, EQM Midstream Partners, LP and EQGP Services, LLC.

Incorporated herein by reference to Exhibit 2.1 to EQM Midstream Partners, LP's Form 8-K (#001-35574) filed on February 28, 2020.
3.1

Second Amendment to Fourth Amended and Restated Agreement of Limited Partnership of EQM Midstream Partners, LP, dated as of February 26, 2020.


Incorporated herein by reference to Exhibit 3.1 to EQM Midstream Partners, LP's Form 8-K (#001-35574) filed on February 28, 2020.
3.2

Second Amended and Restated Limited Liability Company AgreementArticles of EQGP Services, LLC, dated asIncorporation of October 12, 2018.


Equitrans Midstream Corporation.
Incorporated herein by reference to Exhibit 3.5 to EQM Midstream Partners, LP’s Form 8-K (#001-35574) filed on February 22, 2019.


3.3

Third Amendment to Fourth Amended and Restated Agreement of Limited Partnership of EQM Midstream Partners, LP, dated as of April 29, 2020.

Incorporated herein by reference to Exhibit 3.1 to Form 8-K (#001-35574)(#001-38629) filed by EQM Midstream Partners, LP on April 29, 2020.


28, 2021.
10.1**3.2

Third Amended and Restated Bylaws of Equitrans Midstream Corporation.Preferred Restructuring Agreement,Incorporated herein by reference to Exhibit 3.3 to Form 8-K (#001-38629) filed on April 28, 2021.
4.1
Indenture, dated as of February 26, 2020,January 8, 2021, by and among Equitrans Midstream Corporation,between EQM Midstream Partners, LP and The Bank of New York Mellon Trust Company, N.A., as trustee.
Incorporated herein by reference to Exhibit 4.1 to Form 8-K (#001-38629) filed on January 8, 2021.
10.1
Purchase Agreement, dated January 4, 2021, by and among EQM Midstream Partners, LP, Equitrans Midstream Corporation (for certain limited purposes) and Barclays Capital Inc., as representative of the Investors partyseveral initial purchasers named on Schedule 1 thereto.Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-38629) filed on February 28, 2020.January 5, 2021.
10.210.2*

Loan Agreement, dated as of March 3, 2020, by and between EQM Midstream Partners, LP and Equitrans Midstream Corporation.Corporation Executive Short-Term Incentive Plan.

Incorporated herein by reference to Exhibit 10.110.46 to Annual Report on Form 8-K10-K (#001-38629) filed on March 6, 2020.February 23, 2021.

10.310.3*

Promissory Note, dated as of March 5, 2020, by and between Equitrans Midstream Corporation and EQM Midstream Partners, LP (as assignee of EQT Corporation).2021 Performance Share Unit Program.
Incorporated herein by reference to Exhibit 10.210.47 to Annual Report on Form 8-K10-K (#001-38629) filed on March 6, 2020.February 23, 2021.
10.4#10.4*

Form of Participant Award Agreement under 2021 Performance Share Unit Program.Gas GatheringIncorporated herein by reference to Exhibit 10.48 to Annual Report on Form 10-K (#001-38629) filed on February 23, 2021.
10.5*
Form of Equitrans Midstream Corporation Restricted Stock Award Agreement (2021 Awards).Incorporated herein by reference to Exhibit 10.49 to Annual Report on Form 10-K (#001-38629) filed on February 23, 2021.
10.6#
Letter Agreement, dated as of March 27, 2021, by and Compressionbetween Rice Drilling B LLC and Equitrans Water Services (PA) LLC (formerly known as Rice Water Services (PA) LLC).
Filed herewith as Exhibit 10.6.
10.7#
Letter Agreement, dated as of February 26, 2020,23, 2021, by and among EQM Gathering Opco, LLC, EQT Corporation, EQT Production Company, Rice Drilling B LLC and EQT Energy, LLC.Filed herewith as Exhibit 10.7.
10.8#
Letter Agreement, dated as of February 2, 2021, by and among EQM Gathering Opco, LLC, EQT Corporation, EQT Production Company, Rice Drilling B LLC and EQT Energy, LLC.Filed herewith as Exhibit 10.8.
10.9#
Letter Agreement, dated as of February 9, 2021, by and among EQM Gathering Opco, LLC, EQM Olympus Midstream, LLC, EQT Corporation, EQT Production Company, Rice Drilling B LLC, EQT Energy, LLC and EQM Gathering Opco,Rice Drilling D LLC.Incorporated herein by reference toFiled herewith as Exhibit 10.4 to Form 8-K/A (#001-38629) filed on March 13, 2020.10.9.
10.5#10.10#

Credit Letter Agreement, dated as of February 26, 2020,3, 2021, by and betweenamong EQM Midstream Partners, LP andGathering Opco, LLC, EQT Corporation.
Filed herewith as Exhibit 10.5.

10.6

Water Services Letter Agreement, dated as of February 26, 2020, by and amongCorporation, EQT Production Company, Rice Drilling B LLC EQM Gathering Opco, LLC and Equitrans Water Services (PA)EQT Energy, LLC.Incorporated herein by reference toFiled herewith as Exhibit 10.6 to Form 8-K/A (#001-38629) filed on March 13, 2020.10.10.
10.710.11#

First Amendment to Third Amended and Restated Credit Agreement, dated as of March 30, 2020, by and among EQM Midstream Partners, LP, the lender parties thereto and Wells Fargo Bank, National Association, as administrative agent.Incorporated herein by reference to Exhibit 10.1 to Form 8-K (#001-38629) filed on March 30, 2020.
10.8

First Amendment to Term Loan Agreement, dated as of March 30, 2020, by and among EQM Midstream Partners, LP, the lender parties thereto and Toronto Dominion (Texas) LLC, as administrative agent.Incorporated herein by reference to Exhibit 10.2 to Form 8-K (#001-38629) filed on March 30, 2020.
10.9

Share PurchaseLetter Agreement, dated as of February 26, 2020,18, 2021, by and between EquitransEQM Olympus Midstream, CorporationLLC and EQT Corporation.
Rice Drilling D LLC.		Filed herewith as Exhibit 10.11.

31.1
Incorporated herein by reference toRule 13(a)-14(a) Certification of Principal Executive Officer.
Filed herewith as Exhibit 10.2 to Form 8-K (#001-38629) filed on February 28, 2020.31.1.
31.2

Rule 13(a)-14(a) Certification of Principal Financial Officer.Filed herewith as Exhibit 31.2.

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10.1032

Share Purchase Agreement, dated as of February 26, 2020, by and between Equitrans Midstream Corporation and EQT Corporation.

Incorporated herein by reference to Exhibit 10.3 to Form 8-K (#001-38629) filed on February 28, 2020.

10.11

First Amendment to Third Amended and Restated Limited Liability Company Agreement of Mountain Valley Pipeline, LLC, dated as of February 5, 2020, by and among MVP Holdco, LLC, US Marcellus Gas Infrastructure, LLC, WGL Midstream, Inc., Con Edison Gas Pipeline and Storage, LLC and Mountain Valley Pipeline, LLC. 

Incorporated hereby by reference to Exhibit 10.21(b) to Form 10-K (#001-38629) for the year ended December 31, 2019.

10.12

Transportation Service Agreement Applicable to Firm Transportation Service Under Rate Schedule FTS, Contract No. EQTR19837-1296, dated as of January 8, 2016 and amended through January 9, 2020, by and between Equitrans, L.P. and EQT Energy, LLC. 

Incorporated hereby by reference to Exhibit 10.37 to Form 10-K (#001-38629) for the year ended December 31, 2019.
10.13

Equitrans Midstream Corporation 2020 Performance Share Unit Program.

Filed herewith as Exhibit 10.13.
10.14

Form of Participant Award Agreement under 2020 Performance Share Unit Program.

Filed herewith as Exhibit 10.14.

10.15

Form of Equitrans Midstream Corporation Restricted Stock Award Agreement (2020 Awards).

Filed herewith as Exhibit 10.15.

10.16

Amended and Restated Equitrans Midstream Corporation Short-Term Incentive Plan.

Filed herewith as Exhibit 10.16.

10.17##

Confidentiality, Non-Solicitation and Change of Control Agreement, dated as of April 14, 2020, by and between Equitrans Midstream Corporation and Brian P. Pietrandrea.
Filed herewith as Exhibit 10.17.

10.18

Equitrans Midstream Corporation Amended and Restated Directors’ Deferred Compensation Plan.

Filed herewith as Exhibit 10.18.
31.1

Rule 13(a)-14(a) Certification of Principal Executive Officer.Filed herewith as Exhibit 31.1.
31.2

Rule 13(a)-14(a) Certification of Principal Financial Officer.Filed herewith as Exhibit 31.2.
32

Section 1350 Certification of Principal Executive Officer and Principal Financial Officer.Furnished herewith as Exhibit 32.
101
101Inline Interactive Data File.Filed herewith as Exhibit 101.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).Filed herewith as Exhibit 104.

** SchedulesManagement contract and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. Equitrans Midstream Corporation
hereby undertakes to furnish supplemental copies ofcompensatory arrangement in which any of the omitted schedules and exhibits upon request by the SEC.

director or any named executive officer participates.
# Certain portions of the exhibitsexhibit that are not material and would be competitively harmful if publicly disclosed have been
redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. CopiesA copy of the unredacted exhibitsexhibit will be furnished to the SEC upon request. Omissions are designated with brackets containing asterisks.

## Certain personally identifiable information has been omitted from this exhibit pursuant to Item 601(a)(6) of Regulation S-K.


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Signature
 
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
Equitrans Midstream Corporation
(Registrant)
Equitrans Midstream Corporation
(Registrant)
By:
By:/s/ Kirk R. Oliver
Kirk R. Oliver
Senior Vice President and Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
Date:  May 14, 20204, 2021



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