Equitrans Midstream Corp Ipo

Equitrans midstream corp ipo


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As filed with the Securities and Exchange Commission on November 1, 2018

Registration No. [    

·

    ]

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Equitrans Midstream Corporation

(Exact name of registrant as specified in its charter)

Pennsylvania


(State or other jurisdiction of
incorporation or organization)

 

4922


(Primary Standard Industrial
Classification Code Number)

 

83-0516635


(I.R.S.

Employer
Identification Number)

625 Liberty Avenue, Suite 2000
Pittsburgh, PA
(724) 271-7200


(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Thomas F.

Karam
President and Chief Executive Officer
625 Liberty Avenue, Suite 2000
Pittsburgh, PA
(724) 271-7200

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Steven Cohen
Victor Goldfeld
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
(212) 403-1000 (Telephone)
(212) 403-2000 (Facsimile)

Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), check the following box.    

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           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    

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           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    

o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    

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           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.

           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 7(a)(2)(B) of the Securities Act.    

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CALCULATION OF REGISTRATION FEE

 

 

 

 

 

 

 

 

 

Title of each class of securities
to be registered(1)


 

Amount to be
Registered(2)


 

Proposed maximum
offering price per
share(3)


 

Proposed maximum
aggregate offering
price(3)


 

Amount of
registration fee(4)


 

Common stock, no par value

 

1,000,000

 

$19.55

 

$19,550,000

 

$2,369.46

 

(1)

This Registration Statement on Form S-1 (this "Registration Statement") covers 1,000,000 shares of common stock of the Company, no par value, authorized for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan (DRSPP).

This Registration Statement shall also cover any additional shares of common stock that become available under the DRSPP by reason of any stock dividend, stock split or other similar transaction.

(2)

In addition, pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the "Securities Act"), this Registration Statement shall also be deemed to cover any additional securities to be offered or issued in connection with the provisions of the DRSPP, which provides for adjustments in the amount of securities to be offered or issued to prevent dilution resulting from stock splits, stock dividends or similar transactions.



(3)

Estimated solely for the purposes of calculating the amount of the registration fee pursuant to Rule 457(c) under the Securities Act, based on the average of the high and low prices on the New York Stock Exchange of the common stock trading on a when-issued basis as of November 1, 2018, the latest practicable date.



(4)

Fee was calculated by multiplying 0.0001212 by the proposed maximum aggregate offering price.

           

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY AND SUBJECT TO COMPLETION, DATED NOVEMBER 1, 2018

PROSPECTUS

EQUITRANS MIDSTREAM CORPORATION

2018 DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN

1,000,000 shares of Common Stock, without par value

        This prospectus relates to 1,000,000 shares of common stock, without par value, of Equitrans Midstream Corporation (the Company or ETRN) reserved for issuance under the Company's Dividend Reinvestment and Stock Purchase Plan (the Plan).

The Plan provides holders of common stock of the Company with a convenient method to reinvest dividends in and to make optional cash payments to purchase, within the limits of the Plan, shares of common stock without payment of any brokerage commissions or service charges.

Equitrans midstream corp ipo

The common stock may be newly issued shares purchased directly from the Company or may be purchased in the open market.

        Participants in the Plan may:

    Have all or a portion of cash dividends on their shares automatically reinvested in shares of common stock.

    Make optional cash payments of not less than $50 nor more than $10,000 per month to be invested in shares of common stock.

    Deposit certificates for the Company's common stock held by them for safekeeping within the Plan.

        The price of common stock if purchased directly from the Company will be the closing price per share for each dividend payment date or interim investment date, as the case may be, to be determined in the principal market in which such shares are traded, as quoted in

The Wall Street Journal

(or in such other reliable publication as the Company may determine to rely upon).

If purchased in the open market, the price will be the then current market price.

        The Company is currently a wholly owned subsidiary of EQT that, after the separation of the Company from EQT, will hold (i) an approximate 91.3% limited partner interest and the entire non-economic general partner interest in EQGP Holdings, LP (EQGP), a publicly traded partnership that trades on the New York Stock Exchange (NYSE) under the ticker symbol EQGP, and (ii) an approximate 12.7% limited partner interest in EQM Midstream Partners, LP (EQM), a publicly traded partnership that trades on the NYSE under the ticker symbol EQM.

Additionally, EQGP holds an approximate 1.2% general partner interest, an approximate 17.9% limited partner interest and all of the incentive distribution rights in EQM.

        The Company expects that a limited market, commonly known as a when-issued trading market, will develop on or about the record date for the Distribution and that regular-way trading of the Company's common stock will begin on the first trading day following the completion of the Distribution.

The Company has been authorized to have its common stock listed on the NYSE under the ticker symbol ETRN.

News Details

        

In reviewing this prospectus, you should carefully consider the matters described under the caption "Risk Factors" beginning on page 23.

        

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this prospectus is truthful or complete.

Any representation to the contrary is a criminal offense.

This prospectus does not constitute an offer to sell or the solicitation of an offer to buy any securities.

   

The date of this prospectus is [    

·

    ], 2018.


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Presentation of Information

        Except as otherwise indicated or unless the context otherwise requires, the information included in this prospectus about the Company assumes the completion of all the transactions referred to in this prospectus in connection with the Separation and Distribution (defined below).

Unless the context otherwise requires and except in the historical financial statements included herein:

    references in this prospectus to the Company, Equitrans Midstream, we, us and our refer to Equitrans Midstream Corporation, a Pennsylvania corporation, and its consolidated subsidiaries after the Distribution;

    references in this prospectus to EQT refer to EQT Corporation, a Pennsylvania corporation, and its consolidated subsidiaries (other than, after the Distribution, the Company and its consolidated subsidiaries);

    references in this prospectus to the Separation refer to the separation of EQT's Midstream Business from its Upstream Business and the creation, as a result of the Distribution, of an independent, publicly traded company, Equitrans Midstream, to hold the assets and liabilities associated with the Midstream Business after the Distribution;

    references in this prospectus to the Distribution refer to the distribution of 80.1% of the shares of the Company's common stock to EQT's shareholders on a pro rata basis;

    references in this prospectus to the Midstream Business refer to the separately managed gathering, transmission and storage, and water services operations of EQT;

    references in this prospectus to the Upstream Business refer to the natural gas, oil and natural gas liquids development, production and sales and commercial operations of EQT;

    references in this prospectus to the Company's historical assets, liabilities, business, operations or activities generally refer to the historical assets, liabilities, business, operations or activities of the Midstream Business as conducted prior to completion of the Separation and Distribution;

    because the Company has no operating activities independent from its investments in and control of EQGP and EQM, and EQGP has no operating activities independent from its investment in and control of EQM, references to the operating activities of the Company or the Midstream Business generally refer to the operating activities of EQM, including those operations acquired by EQM through the Drop-Down Transaction and the EQM-RMP Mergers;

    references in this prospectus to the Appalachian Basin refer to 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;

    references in this prospectus to EQGP refer to EQGP Holdings, LP, a Delaware limited partnership that trades on the NYSE under the ticker symbol EQGP;

    references in this prospectus to EQM refer to EQM Midstream Partners, LP, a Delaware limited partnership that trades on the NYSE under the ticker symbol EQM, and its consolidated subsidiaries;

    references in this prospectus to RMP refer to RM Partners LP, a Delaware limited partnership, and its consolidated subsidiaries;

    references in this prospectus to EQGP General Partner refer to EQM GP Services, LLC (formerly known as EQT GP Services, LLC), the general partner of EQGP;

    references in this prospectus to EQM General Partner refer to EQM Midstream Services, LLC (formerly known as EQT Midstream Services, LLC), the general partner of EQM;

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    references to Equitrans Midstream Corporation Predecessor have the meaning as described in the Equitrans Midstream Corporation Predecessor audited combined consolidated financial statements and notes thereto included in the "Index to Financial Statements" section of this prospectus; and

    references in this prospectus to RMP General Partner refer to EQM Midstream Management, LLC (formerly known as Rice Midstream Management LLC), the general partner of RMP.

        References to the Company in the historical financial statements included herein refer to the Company as defined in such financial statements. The pro forma operational information included in this prospectus gives pro forma effect to the Pro Forma Events as described in the section entitled "Unaudited Pro Forma Condensed Combined Financial Statements" as if they occurred on (i) January 1, 2017 in the case of the unaudited pro forma condensed combined statements of operations data for the six months ended June 30, 2018, and the year ended December 31, 2017 and (ii) June 30, 2018 in the case of the unaudited pro forma condensed combined balance sheet data.

The pro forma information should be read in conjunction with the section entitled "Unaudited Pro Forma Condensed Combined Financial Statements."

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PROSPECTUS SUMMARY

        

The following is a summary of material information discussed in this prospectus.

This summary may not contain all the details concerning the Separation (defined below) or other information that may be important to you. To better understand the Separation and the Company's business and financial position, you should carefully review this entire prospectus. Except as otherwise indicated or unless the context otherwise requires, the information included in this prospectus about the Company assumes the completion of all the transactions referred to in this prospectus in connection with the Separation and Distribution.

Unless the context otherwise requires and except in the historical financial statements included herein, (i) references in this prospectus to the Company, Equitrans Midstream, we, us and our refer to Equitrans Midstream Corporation, a Pennsylvania corporation, and its consolidated subsidiaries after the Distribution and (ii) references in this prospectus to EQT refer to EQT Corporation, a Pennsylvania corporation, and its consolidated subsidiaries (other than, after the Distribution (defined below), the Company and its consolidated subsidiaries).

        

Because the Company has no operating activities independent from its investments in and control of EQGP and EQM, and EQGP has no operating activities independent from its investment in and control of EQM, references to the operating activities of the Company or the Midstream Business generally refer to the operating activities of EQM, including those operations acquired by EQM through the Drop-Down Transaction and the EQM-RMP Mergers.

Equitrans midstream corp ipo

Please refer to the section entitled "Presentation of Information" for a list of other defined terms used in this prospectus.

Equitrans Midstream Corporation

Business

The Company Overview

        The Company is a Pennsylvania corporation formed on May 11, 2018 to hold EQT's Midstream Business.

Following the Separation, the Company will be one of the largest natural gas gatherers in the United States, with a premier asset footprint in the Appalachian Basin.

Strategically located in the heart of the Marcellus Shale

The Company will directly and indirectly hold investments in the entities conducting EQT's Midstream Business, including the following:

    an approximate 91.3% limited partner interest and the entire non-economic general partner interest in EQGP, which was formed in January 2015 by EQT to hold EQT's partnership interests in EQM.

    EQM owns, operates, acquires and develops natural gas gathering, transmission and storage, and water services assets in the Appalachian Basin. EQGP has no independent operations and its only cash-generating assets are its partnership interests in EQM, which include: (i) 21,811,643 EQM common units, representing an approximate 17.9% limited partner interest in EQM, (ii) 1,443,015 EQM general partner units, representing an approximate 1.2% general partner interest in EQM, and (iii) all of the incentive distribution rights in EQM; and

    in addition to the interests in EQM held by EQGP, 15,433,812 EQM common units will be held by the Company, representing an approximate 12.7% limited partner interest in EQM.

        EQM's assets and liabilities include the legacy assets and liabilities of Rice Midstream Holdings LLC (Rice Midstream Holdings).

EQT obtained control of Rice Midstream Holdings on November 13, 2017, when, pursuant to the Agreement and Plan of Merger dated as of June 19, 2017 (as amended, the EQT-Rice Merger Agreement), by and among EQT, Rice Energy Inc.

(Rice Energy) and a wholly-owned subsidiary of EQT (EQT Merger Sub), Rice Energy became an indirect, wholly-owned subsidiary of EQT (the Rice Merger) and EQT became the indirect parent of Rice Midstream Holdings.

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Prior to the completion of the transactions discussed below, the operations of Rice Midstream Holdings were primarily conducted through RMP, Rice West Virginia Midstream LLC (now

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known as EQM West Virginia Midstream LLC) (EQM WV), Rice Olympus Midstream LLC (now known as EQM Olympus Midstream LLC) (EQM Olympus) and Strike Force Midstream Holdings LLC (Strike Force Holdings).

In addition, through Strike Force Holdings, Rice Midstream Holdings owned 75% of the outstanding limited liability company interests in Strike Force Midstream LLC (Strike Force Midstream), a Delaware limited liability company.

        In 2018, EQM obtained control of the operating entities of Rice Midstream Holdings through the following transactions:

    On April 25, 2018, EQM, RMP and certain of their affiliates executed an agreement and plan of merger, pursuant to which EQM agreed to acquire RMP and the RMP General Partner (the EQM-RMP Mergers).

    The EQM-RMP Mergers closed on July 23, 2018.

    On May 22, 2018, EQM, through its wholly owned subsidiary EQM Gathering Holdings, LLC, a Delaware limited liability company (EQM Gathering), acquired all of the outstanding limited liability company interests in each of (i) Rice WV, (ii) Rice Olympus and (iii) Strike Force Holdings (the Drop-Down Entities), pursuant to the terms of the Contribution and Sale Agreement (the Contribution Agreement), dated as of April 25, 2018, by and among EQM, EQM Gathering, EQT, and Rice Midstream Holdings (the Drop-Down Transaction).

    As a result of the closing of the Drop-Down Transaction, Rice WV, Rice Olympus and Strike Force Holdings are each wholly owned subsidiaries of EQM Gathering.

    In addition, on May 1, 2018, EQM acquired the remaining 25% of the outstanding limited liability company interests in Strike Force Midstream from an affiliate of Gulfport Energy Corporation (the Gulfport Transaction).

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    As a result, EQM indirectly owns 100% of Strike Force Midstream.

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        The following diagram depicts the Company's simplified organizational and ownership structure following the Distribution:


(1)

MVP Joint Venture partners include EQM (45.5%), NextEra Energy, Inc., (31%), Consolidated Edison, Inc.

(12.5%), WGL Holdings, Inc. (10%), and RGC Resources, Inc. (1%). EQM's ownership interest in MVP Southgate, a recently announced project under the MVP Joint Venture, is 32.7%.

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Overview of Operations

        The Company has no operations independent from its investments in EQGP and EQM, and EQGP has no operations independent from its investment in EQM.

The general partner of EQGP is a wholly owned subsidiary of the Company and controls EQGP, which in turn controls EQM through EQGP's ownership of the general partner of EQM. References to the operating activities of the Company or the Midstream Business generally refer to the operating activities of EQM, including those operations acquired through the Drop-Down Transaction and the EQM-RMP Mergers.

        The Company provides midstream services to EQT and multiple third parties in Pennsylvania, West Virginia and Ohio through its three primary assets: the gathering system, which delivers natural gas from wells and other receipt points to transmission pipelines; the transmission and storage system, which delivers gas to local demand users and interstate pipelines for access to demand markets; and its water services assets, which consist 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 recycling or disposal.

        The Company provides a majority of its natural gas gathering, transmission and storage services under contracts with long-term, firm reservation and/or usage fees. This contract structure enhances the stability of the Company's cash flows and limits its direct exposure to commodity price risk.

Approximately 84% of the Company's revenues, or 60% of the Company's revenues on a pro forma basis, were generated from capacity reservation charges under long-term firm contracts for the year ended December 31, 2017.

See the section titled "Unaudited Pro Forma Condensed Combined Financial Statements" for a description of the Pro Forma Events. When including contracts associated with expected future capacity from expansion projects that are not yet fully constructed but for which the Company has executed firm contracts, the Company's firm gathering contracts had a weighted average remaining term of approximately 8 years and the Company's firm transmission and storage contracts had a weighted average remaining term of approximately 15 years, in each case as of December 31, 2017, based on total projected contractual revenues.

The Company's operations are primarily focused in southwestern Pennsylvania, northern West Virginia and southeastern Ohio, strategic locations in the natural gas shale plays known as the Marcellus, Utica and Upper Devonian Shales. This same region is also the primary operating area of EQT, the Company's largest customer. EQT accounted for approximately 74% of the Company's revenues, or 79% of the Company's revenues on a pro forma basis, for the year ended December 31, 2017.

        EQT's Upstream Business strategy is transitioning from one focused on volume growth to one focused on capital efficiency and free cash flow generation. In preparation for the Separation, EQT has been evaluating the long-term pace of development of its Upstream Business in order to achieve the optimal balance between free cash flow generation and volume growth.

News Details

Based on this evaluation, EQT is currently targeting mid-single digit annual production growth over the next five years.

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        The following is a map of our operations.

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Business Segments

        The Company conducts its business through three business segments: Gathering, Transmission and Water.

These segments include all of the Company's operations.

        As of December 31, 2017, the gathering system included approximately 630 miles of high pressure gathering lines with approximately 2.3 billion cubic feet (Bcf) per day of total firm contracted gathering capacity, compression of approximately 305,000 horsepower and multiple interconnect points with the transmission and storage system and five interstate pipelines.

The gathering system also included approximately 1,500 miles of Federal Energy Regulatory Commission (FERC)-regulated low pressure gathering lines.

        In the ordinary course of its business, the Company pursues gathering expansion projects for EQT and third-party producers. The Company invested approximately $255 million on gathering projects in 2017 that added 475 million cubic feet (MMcf) per day of firm gathering capacity in southwestern Pennsylvania.

This included the final phase of the header pipeline for Range Resources Corporation (Range Resources), which was placed in-service during the second quarter of 2017. The system now provides total firm gathering capacity of 600 MMcf per day at a total project cost of approximately $240 million. This system, other expansion projects, primarily for EQT, and the assets acquired in the Rice Merger supported increased gathered volumes of 34% and gathering revenues of 28% in 2017.

        In 2018, the Company estimates capital expenditures of approximately $750 million on gathering expansion projects, primarily driven by wellhead and header projects in Pennsylvania and West Virginia. These expansion projects include approximately $225 million on expansion of the legacy RMP gathering system, approximately $235 million on expansion of the gathering systems obtained in the Drop-Down Transaction and approximately $150 million on commencing construction activities on the Hammerhead project.

The Hammerhead project is a 1.2 Bcf per day gathering header connecting Pennsylvania and West Virginia production to the Mountain Valley Pipeline (MVP) primarily for EQT that is expected to cost a total of $555 million and be placed in service in the fourth quarter of 2019.

3rd largest gatherer of natural gas in the U.S.

        As of December 31, 2017, the transmission and storage system included an approximately 950-mile FERC-regulated interstate pipeline (Equitrans) that connects to seven interstate pipelines and local distribution companies. The transmission and storage system is supported by 18 associated natural gas storage reservoirs with approximately 645 MMcf per day of peak withdrawal capacity, 43 Bcf of working gas capacity and 41 compressor units, with total throughput capacity of approximately 4.4 Bcf per day and compression of approximately 120,000 horsepower as of December 31, 2017.

Equitrans midstream corp ipo

Transmission also includes the Company's investment in the MVP which is treated as an equity investment for accounting purposes; as a result, Transmission's portion of the MVP's operating results is reflected in equity income and not in Transmission's operating income.

        In the ordinary course of its business, the Company pursues transmission projects aimed at profitably increasing system capacity. The Company invested approximately $111 million on transmission and storage system infrastructure in 2017. Revenues in 2017 increased by approximately $41 million or 12% compared to 2016.

The Company intends to focus on the following transmission projects:

    Mountain Valley Pipeline.

      The MVP Joint Venture is a joint venture with affiliates of each of NextEra Energy, Inc., Consolidated Edison, Inc., WGL Holdings, Inc. and RGC Resources, Inc. EQM is the operator of the MVP and owned a 45.5% interest in the MVP Joint Venture as of December 31, 2017.

    Equitrans Midstream Corporation

    The 42 inch diameter MVP has a targeted capacity of 2.0 Bcf per day and is

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      estimated to span 300 miles extending from Transmission's existing transmission and storage system in Wetzel County, West Virginia to Pittsylvania County, Virginia providing access to the growing Southeast demand markets.

      As currently designed, the MVP is estimated to cost a total of approximately $4.6 billion, excluding allowance for funds used during construction (AFUDC), with EQM funding approximately $2.2 billion through capital contributions made to the joint venture, which includes approximately $65 million in excess of EQM's ownership interest.

      In 2018, EQM expects to provide capital contributions of $0.8 billion to $1.0 billion to the MVP Joint Venture. The MVP Joint Venture has secured a total of 2.0 Bcf per day of firm capacity commitments at 20-year terms, including an initial 1.29 Bcf per day firm capacity commitment by EQT, and is currently in negotiation with additional shippers that have expressed interest in the MVP project.

      Although the current targeted capacity of the MVP is fully subscribed, additional shippers have expressed an interest in subscribing to the MVP if the MVP Joint Venture adds compression to the currently planned pipeline system, which would allow additional volumes to be transported without additional pipe in the ground, or extends the pipeline through projects such as the MVP Southgate project.

      In October 2017, the FERC issued the Certificate of Public Convenience and Necessity for the project. 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 discussed under "

      The regulatory approval process for the construction of new midstream assets is challenging, and recent decisions by regulatory and judicial authorities in pending proceedings could impact EQM's or the MVP Joint Venture's ability to obtain all approvals and authorizations necessary to complete certain projects on the projected time frame or at all or its ability to achieve the expected investment return on the project

      " under "Risk Factors—Risks Related to EQM's Business," and under "Business—Legal Proceedings," there are several pending challenges to certain aspects of the MVP project that must be resolved before the MVP project can be completed.

      The MVP Joint Venture is working to respond to the court and agency decisions and restore all permits. The MVP is targeted to be placed in-service during the fourth quarter of 2019, subject to litigation and regulatory-related delay further discussed under "Risk Factors."

      In April 2018, the MVP Joint Venture announced a proposed 70-mile interstate pipeline that will extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina.

      This MVP Southgate project is anchored by a firm capacity commitment from PSNC Energy. The preliminary project cost estimate is $350 million to $500 million, which is expected to be spent in 2019 and 2020. EQM has a 32.7% ownership interest in the project and will operate the pipeline. Subject to approval by the FERC, the MVP Southgate project has a targeted in-service date of the fourth quarter 2020.

    Transmission Expansion.

      In 2018, the Company estimates capital expenditures of approximately $100 million for other transmission expansion projects, primarily attributable to the Equitrans, L.P.

    Expansion project. The Equitrans, L.P. Expansion project is designed to provide north-to-south capacity on the mainline Equitrans, L.P.

    system for deliveries to the MVP.

        Water supports a full cycle of water services for natural gas development activities. Water's assets include water pipelines, impoundment facilities, pumping stations, take point facilities and measurement facilities used to support well completion activities and to collect flowback and produced water for recycling or disposal for EQT and third parties in Washington and Greene Counties, Pennsylvania, and Belmont County, Ohio.

As of December 31, 2017, Water's Pennsylvania assets provided access to 29.4 million gallons (MMgal) per day of fresh water from the Monongahela River and several other regional water sources, and Water's Ohio assets provided access to 14.0 MMgal per day of fresh water

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from the Ohio River and several other regional water sources.

In 2018, the Company plans to invest approximately $25 million on water infrastructure projects.

Strategy

        The Company's strategy is to leverage its existing pipeline and storage infrastructure systems by developing organic projects that will expand its footprint across the Appalachian Basin. These organic projects will primarily involve gathering and transporting natural gas supplies from the most prolific natural gas basin in North America; providing water and other midstream services to producers across the basin; and increasing access to local, regional, and national markets.

Organic growth projects, in conjunction with ongoing asset optimization efforts, disciplined capital spending, and operating cost control, will be complemented by the Company's focus on strategically aligned acquisition and joint venture opportunities. We believe this strategy will maximize shareholder value by increasing cash available for distribution.

        The Company's assets, located in southwestern Pennsylvania, northern West Virginia, and southeastern Ohio, are uniquely positioned across the Marcellus, Utica, and Upper Devonian Shales. The Equitrans transmission and storage system provides flexibility to producers and marketers, as well as to on-system and off-system demand customers through its diverse supply, numerous storage pools, and interconnectivity to other pipeline systems.

Likewise, the Company's other midstream assets provide interconnectivity to even more takeaway options. Along with these existing asset connectivity options, additional contracted projects that are in the execution phase, including the MVP, MVP Southgate, and several pipeline extensions to in-basin power plants, will increase the strategic nature of the Company's pipeline infrastructure system by accessing new and growing demand markets.

Markets and Customers

        Gathering Customers.

    For the year ended December 31, 2017, EQT accounted for approximately 88% of Gathering's revenues.

Gathering has secured dedications from certain EQT affiliates under various fixed price per unit gathering and compression agreements covering approximately 246,000 gross acres of EQT's acreage position in Washington and Greene Counties, Pennsylvania as of December 31, 2017, which are subject to certain exceptions and limitations pursuant to the gas gathering and compression agreements.

Gathering also has acreage dedications pursuant to which EQM has (i) the right to elect to gather all natural gas produced from wells under an area covering approximately 40,000 acres in Pennsylvania through agreements with EQT and (ii) the right to elect to gather all natural gas produced from wells under an area covering approximately 166,000 acres in Ohio through agreements between EQM Olympus or Strike Force Midstream with EQT and third parties.

        Gathering provides services in two manners: firm service and interruptible service. The fixed monthly fee under a firm contract is referred to as a firm reservation fee, which is recognized ratably over the contract period based on the contracted volume regardless of the amount of natural gas that is gathered.

Equitrans midstream corp ipo

If there is available system capacity, customers can flow gas above the firm commitment volumes for a usage charge per unit at a rate that is generally the same or lower than the firm capacity charge per unit.

The Company has firm gas gathering agreements in high pressure development areas with approximately 2.3 Bcf per day of total firm contracted gathering capacity as of December 31, 2017. Including expected future capacity from expansion projects that are not yet fully constructed but for which the Company had executed firm gathering agreements, approximately 2.4 Bcf per day of firm gathering capacity was subscribed under firm gathering contracts as of December 31, 2017.

The Company provides interruptible service on its high pressure gathering system primarily through long-term contracts that provide for a fixed price per unit for volumes of natural gas gathered. On the Company's low pressure regulated gathering system, the typical gathering agreement is interruptible and has a one-year term with month-to-month roll over provisions terminable upon at least 30 days' notice. The rates for gathering service on the regulated system are based on the maximum posted tariff

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rate and assessed on actual receipts into the gathering system.

Equitrans midstream corp ipo

The Company generally does not take title to the natural gas gathered for its customers but retains a percentage of wellhead natural gas receipts to recover natural gas used to run its compressor stations and other requirements on all of its gathering systems.

        Transmission Customers.

    In 2017, EQT accounted for approximately 64% of the natural gas throughput and 54% of the revenues for Transmission.

Equitrans midstream corp ipo

Other customers include local distribution companies, marketers, other independent producers and commercial and industrial users. The Company's transmission and storage system provides these customers with access to adjacent markets in Pennsylvania, West Virginia and Ohio and also provides access to the Mid-Atlantic, Northeastern, Midwestern and Gulf Coast markets in the United States through interconnect capacity with major interstate pipelines.

        Transmission generally does not take title to the natural gas transported or stored for its customers. Transmission provides services in two manners: firm service and interruptible service.

The fixed monthly fee under a firm contract is referred to as a capacity reservation fee, which is recognized ratably over the contract period based on the contracted volume regardless of the amount of natural gas that is transported or stored. In addition to capacity reservation fees, Transmission may also collect usage fees when a firm transmission customer uses the capacity it has reserved under these firm transmission contracts.

Where applicable, the usage fees are assessed on the actual volume of natural gas transported or stored on the system. A firm customer is billed an additional usage fee on volumes in excess of firm capacity when the level of natural gas received for delivery from the customer exceeds its reserved capacity.

Customers are not assured capacity or service for volumes in excess of firm capacity on the applicable pipeline as these volumes have the same priority as interruptible service.

EQUITRANS MIDSTREAM CORPORATION

        Under interruptible service contracts, customers pay usage fees based on their actual utilization of assets. Customers that have executed interruptible contracts are not assured capacity or service on the applicable systems.

To the extent that physical capacity that is contracted for firm service is not fully utilized or excess capacity that has not been contracted for service exists, the system can allocate such capacity to interruptible services.

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        Including expected future capacity from expansion projects that are not yet fully constructed but for which the Company has executed firm contracts, approximately 5.1 Bcf per day of transmission capacity and 31.3 Bcf of storage capacity, respectively, were subscribed under firm transmission and storage contracts as of December 31, 2017. Transmission's firm transmission and storage contracts had a weighted average remaining term of approximately 15 years as of December 31, 2017, based on total projected contracted revenues.

        As of December 31, 2017, approximately 89% of Transmission's contracted transmission firm capacity was subscribed by customers under negotiated rate agreements under its tariff. Approximately 9% of Transmission's contracted transmission firm capacity was subscribed at the recourse rates under its tariff, which are the maximum rates an interstate pipeline may charge for its services under its tariff.

The remaining 2% of Transmission's contracted transmission firm capacity was subscribed at discounted rates, which are less than the maximum rates an interstate pipeline may charge for its services under its tariff.

        Transmission has an acreage dedication from EQT pursuant to which Transmission has the right to elect to transport on its transmission and storage system all natural gas produced from wells drilled by EQT under an area covering approximately 60,000 acres in Allegheny, Washington and Greene Counties in Pennsylvania and Wetzel, Marion, Taylor, Tyler, Doddridge, Harrison and Lewis Counties in West Virginia.

EQT has a significant natural gas drilling program in these areas.

        Water Customers.

    During the year ended December 31, 2017, approximately 99% of water service revenues were from EQT.

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Table of Contents

        Water has the exclusive right to provide certain fluid handling services to EQT until December 22, 2029, and thereafter such right continues on a month-to-month basis.

OPTION CHAIN FOR EQUITRANS MIDSTREAM CORP.

The fluid handling services include the exclusive right to provide fresh water for well completions operations and to collect flowback and produced water for recycling or disposal within areas of dedication in Washington and Greene Counties, Pennsylvania and Belmont County, Ohio. Water also provides water services to third parties under fee-based contracts to support well completion activities.

        The following tables provide a revenue breakdown by business segment for the year ended December 31, 2017 and on a pro forma basis for the year ended December 31, 2017:

 

 


 

2017 Revenue Composition %

 

 


 

Firm Contracts

 

Interruptible
Contracts

 

 


 

 


 

Capacity
Reservation
Charges

 

Usage
Charges

 

Usage
Fees

 

Total

 

Gathering

 

 

45

%

 

4

%

 

8

%

 

57

%

Transmission

 

 

39

%

 

2

%

 

1

%

 

42

%

Water

 

 

0

%

 

0

%

 

1

%

 

1

%

 


 

2017 Pro Forma Revenue Composition %

 

 


 

Firm Contracts

 

Interruptible
Contracts

 

 


 

 


 

Capacity
Reservation
Charges

 

Usage
Charges

 

Usage
Fees

 

Total

 

Gathering

 

 

32

%

 

3

%

 

28

%

 

63

%

Transmission

 

 

28

%

 

1

%

 

0

%

 

29

%

Water

 

 

0

Large accelerated filer 

o

 

Accelerated filer 

o

 

Non-accelerated filer 

ý

 

Smaller reporting company 

o

Emerging growth company 

o