Equitrans Midstream Corp. is making headway to increase natural gas connectivity in the Appalachian Basin, with management evaluating shipper interest received during a recent open season.
The binding open season was related to Equitrans’ transmission system. It would increase shipper access to downstream markets in the Midwest and Gulf Coast, primarily through existing delivery interconnects with interstate pipelines in Clarington, OH.
Management is evaluating the shipper requests, “and there were several,” according to Equitrans COO Diana Charletta. Also under evaluation are the costs to complete the expansion and the project economics.
“There is still some back and forth with those shippers as far as where they want to come from and where they want to go,” Charletta said Tuesday during the second quarter earnings call with investors. “So, we’re working through all of that right now with shippers, and we should have final results in the next couple of months.”
Meanwhile, construction continues on the long-delayed Mountain Valley Pipeline (MVP).
Charletta said crews have been working since the spring on all approved upland areas for MVP and are on track to complete work in the fall. Once the upland work is done, the remaining work would include about 10 miles related to water crossings and eight miles in areas in and around the Jefferson National Forest.
A recent notice of schedule published by FERC indicates that the environmental assessment for MVP would be published by the middle of August. Charletta said the permitting timelines for the Federal Energy Regulatory Commission and the U,S. Army Corps of Engineers remain consistent with summer 2022 service. The total project cost estimate also remains around $6.2 billion.
Charletta also took the time to provide some insight into plans to reach net-zero carbon emissions by 2050. The midstreamer recently announced that MVP would purchase carbon offsets for the emissions in its first 10 years of operations.
Equitrans is “spending a lot of time developing strategies to continue to reduce” greenhouse gas emissions. Management is “taking some time to learn right now” and “doing small things” in waste, heat and hydrogen research “to make sure that we’re really paying attention.” As the balance sheet strengthens, “and we get MVP behind us,” then there may be an opportunity to “size up a bit on what we’ve learned,” Charletta said.
Construction on the MVP Southgate Project, meanwhile, is expected to start in 2022, with in-service targeted for the spring 2023. The 75-mile expansion is designed to receive gas from MVP in Virginia for transport to new delivery points in North Carolina’s Rockingham and Alamance counties. The project is backed by a 300 MMcf/d firm capacity commitment from Dominion Energy North Carolina and could be expanded to 900 MMcf/d of total capacity.
Equitrans management struck an optimistic tone for increasing utilization of its assets for the remainder of the year. The gathering and transmission throughput each came in ahead of forecasts during 2Q2021, “with the natural gas price drop providing some tailwinds,” according to Charletta. As a result, operating revenue for 2Q2021 increased by $7.7 million year/year. Henry Hub prices “had a nice uptick” during the quarter, which continued in July.
“While our customers remain focused on free cash flow generation over volume growth, the pricing strength means we have not experienced the same price-driven production curtailments we saw last summer,” the COO said.
Equitrans management is “cautiously optimistic” that prices are to remain strong into the winter withdrawal season. This would result in modest year/year gathered volume growth.
At the same time, continued system optimization on the gathering system is driving a reduction in capital expenditures (capex). Favorable contract pricing and deferring some projects into 2022 also are steering the $50 million decline in capex from previous guidance.
Senior Vice President Justin Macken, who oversees Gas Systems Planning and Engineering, said some deferrals are related to pad timing in 2022. “Our goal is really always to avoid winter construction where possible. So if a pad is scheduled for early 2022, we would generally construct those lines in the fall of 2021. But if the pad moves to later in 2022, we can shift that build into the spring of 2022 and still meet the producers’ timing.”
Macken said the “level of transparency and communication” with exploration and production customers, including EQT Corp., creates a lot of the benefits in aligning projects and optimizing spending. “The coordination efforts between the organizations is what really makes that level of scheduling possible.”
Equitrans reported 2Q2021 net income of $40 million (5 cents/share), compared with net income of $143 million (10 cents) in the year-ago period. Free cash flow was $220 million, up from $155 million in 2Q2020.
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 1532-1266 |