a closer look at eqt midstream's q2 earnings

Q2 Earnings at EQT Midstream Partners

Meet the metrics

EPS is meaningless for MLPs, we’re going to look at the distribution, coverage ratio, and DCF/unit before

addressing anything specific that came up in EQT Midstream’s conference call instead.

Distribution

$0.52 per unit

That’s $2.08 annually, good for a 2.2% yield at today’s price.

Distribution

That yield leaves a lot to be desired, but given the stock is up ~60% this year and 105% TTM, it’s not that surprising.

Ultimately, this is a 30% increase year-over-year, and a 6% increase quarter-over-quarter. That’s outstanding.

Distribution coverage ratio

1.54x distributions paid

EQT Midstream generated enough distributable cash flow to cover its general partner and

limited partner distributions 1.5 times. Taken with its massive growth, the distribution story

at $EQM looks good right now.

Distribution coverage ratio

Coverage was 1.56x payouts in the first quarter of this year, and 1.08x payouts a year ago. That’s more than ample coverage, but is refreshing given the 30% YOY distribution increase.

DCF per Unit

$0.81/unit

This is definitely a strong point for the quarter.

DCF per UnitWeighted Avg Limited Partner Units Outstanding

Q2 2013 Q2 2014~34.77 million ~47.94 million

DCF/UnitQ2 2013 Q2 2014

$0.61 $0.81

DCF per Unit

In other words, despite a massive equity issuance, EQT Midstream managed to grow the value of its

units on an annual basis.

Conference call insight

• Expect distribution to head back closer to 1.1x payouts in the future

• Organic growth is the focus near-term, third-party business (i.e. customer other than EQT) is growing

• “We now expect to maintain the $0.03 per unit increase each quarter at least through the end of 2016”

• “We can do the $0.03 without doing any additional drops, but we intend to do additional drops…”

Read the whole transcript here.

Sum it all upEQT Midstream Partners posted a great quarter, featuring excellent distribution growth while also growing the value of its units. As of right now, the distribution growth visibility is high, and the organic growth plan looks sound. The latter will depend on securing open season commitments for its projects and executing on time and on budget. Overall, things look great here.

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