Equitrans Earnings: With MVP Due Online in Early 2024, Earnings Should Increase Rapidly

With the major Mountain Valley Pipeline, or MVP, updates already disclosed, which we discussed in our Oct. 19 note, Equitran’s ETRN third-quarter results were more pedestrian in comparison. We don’t expect to change our $15 fair value estimate or narrow moat rating. Adjusted EBITDA declined slightly to $250 million from $259 million last year, primarily due to higher SG&A expenses, likely associated with legal and professional fees attached to the MVP. Equitrans expects to own 48.8% of the pipeline via a subsidiary and be the operator.

With the MVP finally edging closer to being in service, we think it’s worth recapping the related earnings attached to MVP and its associated projects. In total, we expect about $390 million in incremental EBITDA, which would be roughly a 40% increase over Equitrans’s 2023 EBITDA of around $1 billion. The MVP should deliver about $220 million in adjusted EBITDA by itself. There are also two related efforts, Hammerhead (gas gathering header designed to feed the MVP) and the Equitrans Expansion project (also boosting deliveries to MVP) where commitments will begin when the MVP enters service that will add an incremental $95 million in EBITDA. We also consider the MVP can be expanded 500 million cubic feet per day for very little cost, which would add an incremental $55 million in EBITDA. Debottlenecking efforts by peer Williams would also facilitate this growth.

The MVP Southgate has long been part of Equitrans’ plans (it was originally announced in 2018) as a way to extend the MVP pipeline into serving end users in South Virginia and North Carolina and could contribute an incremental $20 million in EBITDA. With the delays in the MVP, Southgate has moved from more firm in-service dates to a discussion with shippers and customers regarding its design, scope, and timing. We think those discussions are likely to move forward fairly aggressively once the MVP enters service.