10-Q 1 etrn-20220331.htm 10-Q etrn-20220331
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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, 2022
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) 
Pennsylvania 83-0516635
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)

2200 Energy Drive, Canonsburg, Pennsylvania     15317
(Address of principal executive offices)     (Zip code)
(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 FilerAccelerated Filer                 Emerging Growth Company
Non-Accelerated FilerSmaller 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 
The number of shares of common stock outstanding (in thousands), as of April 30, 2022: 432,763



EQUITRANS MIDSTREAM CORPORATION
Index
 Page No.
  
  
 
   
 
   
 
   
   
 
   
 
  
  
  
  
  
 
  
2

EQUITRANS MIDSTREAM CORPORATION
Glossary of Commonly Used Terms, Abbreviations and Measurements
2021 Water Services Agreement – that certain mixed-use water services agreement entered into on October 22, 2021 by the Company and EQT (as defined below), as subsequently amended, which became effective on March 1, 2022 and replaced the Water Services Letter Agreement (as defined below) and certain other existing Pennsylvania water services agreements.
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.
Amended EQM Credit Facility – that certain unsecured revolving credit facility of EQM Midstream Partners, LP, as previously amended and restated, including by an amendment entered on March 30, 2020 (such facility, as so amended in March 2020, the First Amended EQM Credit Facility) and a subsequent amendment entered into on April 16, 2021.
Amended 2019 EQM Term Loan Agreement - that certain term loan agreement entered into in August 2019 and amended on March 30, 2020 by EQM, which term loan agreement was terminated on January 8, 2021.
Annual Revenue Commitments (ARC or ARCs) - contractual term in a water services agreement that obligates the customer to pay for a fixed amount of water services annually.
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.
delivery point the point where gas is delivered into a downstream gathering system or transmission pipeline.
EQM – EQM Midstream Partners, LP 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 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 (as defined below) and ARC (as defined above) contracts.
gas – natural gas.
liquefied natural gas (LNG) – natural gas that has been cooled to minus 161 degrees Celsius for transportation, typically by ship. The cooling process reduces the volume of natural gas by 600 times.
Minimum volume commitments (MVC or MVCs) – contracts for gathering or water services that obligate the customer to pay for a fixed amount of volumes daily, monthly, annually or over the life of the contract.
Mountain Valley Pipeline (MVP) – an estimated 300-mile, 42-inch diameter natural gas interstate pipeline with a targeted capacity of 2.0 Bcf per day that is designed to 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 the 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 (as defined below) projects.
3

MVP Southgate – a proposed 75-mile interstate pipeline that is contemplated to extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. The project is subject to ongoing discussions between the MVP Joint Venture and the project shipper, Dominion Energy North Carolina, as discussed in Part I, "Outlook" in "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q.
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.
Preferred Interest – the preferred interest that the Company has in EQT Energy Supply, LLC (EES), a subsidiary of EQT.
throughput – the volume of natural gas transported or passing through a pipeline, plant, terminal or other facility during a particular period.
Water Services Letter Agreement – that certain letter agreement entered into on February 26, 2020 by the Company 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, which letter agreement was replaced by the 2021 Water Services Agreement on March 1, 2022.
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 the context otherwise requires, a reference to a “Note” herein refers to the accompanying Notes to Consolidated Financial Statements contained in Part I, "Item 1. Financial Statements."
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
Mcf = thousand cubic feet
FERC – U.S. Federal Energy Regulatory Commission
MMcf  = million cubic feet
GAAP – United States Generally Accepted Accounting Principles
MMgal  = million gallons
IRS – United States Internal Revenue Service
NGA – Natural Gas Act of 1938
NYMEX – New York Mercantile Exchange
NYSE – New York Stock Exchange
SEC – U.S. Securities and Exchange Commission
4

PART I.  FINANCIAL INFORMATION
Item 1. Financial Statements
EQUITRANS MIDSTREAM CORPORATION
Statements of Consolidated Comprehensive Income (Unaudited)
 Three Months Ended March 31,
 20222021
 (Thousands, except per share amounts)
Operating revenues$342,146 $379,996 
Operating expenses:  
Operating and maintenance 32,834 34,099 
Selling, general and administrative 28,126 35,494 
Depreciation67,043 68,618 
Amortization of intangible assets16,205 16,205 
Total operating expenses144,208 154,416 
Operating income 197,938 225,580 
Equity income (a)
4 3 
Other income, net6,348 7,599 
Loss on extinguishment of debt (41,025)
Net interest expense(93,121)(95,144)
Income before income taxes111,169 97,013 
Income tax expense6,261 20,416 
Net income 104,908 76,597 
Net income attributable to noncontrolling interests3,775 3,914 
Net income attributable to Equitrans Midstream101,133 72,683 
Preferred dividends14,628 14,628 
Net income attributable to Equitrans Midstream common shareholders$86,505 $58,055 
Earnings per share of common stock attributable to Equitrans Midstream common shareholders - basic$0.20 $0.13 
Earnings per share of common stock attributable to Equitrans Midstream common shareholders - diluted$0.20 $0.13 
Weighted average common shares outstanding - basic433,318 432,983 
Weighted average common shares outstanding - diluted433,913 433,158 
Statement of comprehensive income:
Net income$104,908 $76,597 
Other comprehensive income, net of tax:
Pension and other post-retirement benefits liability adjustment, net of tax expense of $12 and $12
34 34 
Other comprehensive income 34 34 
Comprehensive income 104,942 76,631 
Less: Comprehensive income attributable to noncontrolling interests3,775 3,914 
Less: Comprehensive income attributable to preferred dividends14,628 14,628 
Comprehensive income attributable to Equitrans Midstream common shareholders$86,539 $58,089 
Dividends declared per common share$0.15 $0.15 

(a)Represents equity income from Mountain Valley Pipeline, LLC (the MVP Joint Venture). See Note 5.

The accompanying notes are an integral part of these consolidated financial statements.
5

EQUITRANS MIDSTREAM CORPORATION
Statements of Consolidated Cash Flows (Unaudited)
 Three Months Ended March 31,
 20222021
 (Thousands)
Cash flows from operating activities:  
Net income$104,908 $76,597 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 67,043 68,618 
Amortization of intangible assets16,205 16,205 
Deferred income taxes4,603 20,406 
Equity income (4)(3)
Other income(6,501)(7,254)
Loss on extinguishment of debt 41,025 
Non-cash long-term compensation expense2,990 4,445 
Changes in other assets and liabilities:
Accounts receivable34,759 17,725 
Accounts payable(7,679)1,337 
Accrued interest(74,812)(46,934)
Deferred revenue86,652 72,019 
Other assets and other liabilities(42,218)(34,634)
Net cash provided by operating activities185,946 229,552 
Cash flows from investing activities:  
Capital expenditures(71,285)(61,265)
Capital contributions to the MVP Joint Venture(72,537)(10,723)
Principal payments received on the Preferred Interest 1,351 1,277 
Net cash used in investing activities(142,471)(70,711)
Cash flows from financing activities:  
Proceeds from revolving credit facility borrowings55,000 77,500 
Payments on revolving credit facility borrowings(112,000)(70,000)
Proceeds from the issuance of long-term debt 1,900,000 
Debt discounts, debt issuance costs and credit facility arrangement fees (24,204)
Payment for retirement of long-term debt (1,936,250)
Dividends paid to holders of Equitrans Midstream Preferred Shares(14,628)(14,628)
Dividends paid to common shareholders(64,901)(64,871)
Distributions to noncontrolling interests (2,500)
Net cash used in financing activities(136,529)(134,953)
Net change in cash and cash equivalents(93,054)23,888 
Cash and cash equivalents at beginning of period134,661 208,023 
Cash and cash equivalents at end of period$41,607 $231,911 
Cash paid during the period for:  
Interest, net of amount capitalized$165,631 $140,199 
Cash paid for taxes$815 $ 
The accompanying notes are an integral part of these consolidated financial statements.
6

EQUITRANS MIDSTREAM CORPORATION
Consolidated Balance Sheets (Unaudited) 
March 31, 2022December 31, 2021
(Thousands)
ASSETS
Current assets:  
Cash and cash equivalents$41,607 $134,661 
Accounts receivable (net of allowance for credit losses of $2,683 and $2,696 as of March 31, 2022 and December 31, 2021, respectively)
231,985 252,301 
Other current assets52,306 59,867 
Total current assets
325,898 446,829 
Property, plant and equipment9,061,829 9,004,602 
Less: accumulated depreciation(1,278,247)(1,217,099)
Net property, plant and equipment7,783,582 7,787,503 
Investment in unconsolidated entity1,278,992 1,239,039 
Goodwill486,698 486,698 
Net intangible assets635,567 651,771 
Other assets307,965 308,924 
Total assets$10,818,702 $10,920,764 
LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS' EQUITY  
Current liabilities:  
Accounts payable$47,649 $59,627 
Capital contributions payable to the MVP Joint Venture39,159 72,188 
Accrued interest77,097 151,909 
Accrued liabilities43,814 83,852 
Total current liabilities207,719 367,576 
Long-term liabilities:
   Revolving credit facility borrowings448,000 505,000 
   Long-term debt6,437,703 6,434,945 
   Contract liability907,994 821,342 
   Regulatory and other long-term liabilities97,156 99,333 
Total liabilities8,098,572 8,228,196 
Mezzanine equity:
Equitrans Midstream Preferred Shares, 30,018 shares issued and outstanding as of March 31, 2022 and December 31, 2021
681,842 681,842 
Shareholders' equity:  
Common stock, no par value, 432,677 and 432,522 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
3,960,588 3,957,756 
Retained deficit(2,407,250)(2,428,171)
Accumulated other comprehensive loss(2,020)(2,054)
Total common shareholders' equity1,551,318 1,527,531 
Noncontrolling interests486,970 483,195 
Total shareholders' equity2,038,288 2,010,726 
Total liabilities, mezzanine equity and shareholders' equity$10,818,702 $10,920,764 


The accompanying notes are an integral part of these consolidated financial statements.
7

EQUITRANS MIDSTREAM CORPORATION
Statements of Consolidated Shareholders' Equity and Mezzanine Equity (Unaudited)
Mezzanine
Equity
AccumulatedEquitrans
Common StockOtherMidstream
 SharesNoRetainedComprehensiveNoncontrollingTotalPreferred
 OutstandingPar ValueDeficitLossInterests EquityShares
 (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 interests— — — — (2,500)(2,500)— 
Dividends 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 

Mezzanine
Equity
AccumulatedEquitrans
Common StockOtherMidstream
SharesNoRetainedComprehensiveNoncontrollingTotalPreferred
OutstandingPar ValueDeficitLossInterests EquityShares
(Thousands, except per share amounts)
Balance at January 1, 2022432,522 $3,957,756 $(2,428,171)$(2,054)$483,195 $2,010,726 $681,842 
Other comprehensive income (net of tax):
Net income— — 86,505 — 3,775 90,280 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)
— — (65,584)— — (65,584)— 
Share-based compensation plans, net155 2,832 — — — 2,832 — 
Dividends paid to holders of Equitrans Midstream Preferred Shares ($0.4873 per share)
— — — — — — (14,628)
Balance at March 31, 2022432,677 $3,960,588 $(2,407,250)$(2,020)$486,970 $2,038,288 $681,842 
The accompanying notes are an integral part of these consolidated financial statements.
8

EQUITRANS MIDSTREAM CORPORATION
Notes to Consolidated Financial Statements (Unaudited)
1.    Financial Statements
Nature of Business. The Company provides midstream services to its customers in Pennsylvania, West Virginia and Ohio through its three primary assets: the gathering system, which includes predominantly dry gas gathering systems of high-pressure gathering lines; the transmission system, which includes FERC-regulated interstate pipelines and storage systems; and the water network, which primarily consists of water pipelines and other facilities that support well completion activities and produced water handling activities.
Basis of Presentation. References in these financial statements to Equitrans Midstream or the Company refer collectively to Equitrans Midstream Corporation and its consolidated subsidiaries for all periods presented, unless otherwise indicated.
The accompanying unaudited consolidated financial statements have been prepared in accordance with generally 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, 2022, the results of its operations, cash flows and equity for the three months ended March 31, 2022 and 2021. The consolidated balance sheet at December 31, 2021 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, 2021, which includes all disclosures required by GAAP.
Due to, among other things, the seasonal nature of the Company's utility customer contracts, as well as producers’ well completion activities and varying needs for fresh and produced water (which are primarily driven by horizontal lateral lengths and the number of completion stages per well), the interim statements for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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, 2021, as well as Part I, "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" contained herein.
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 and the 2021 Eureka Credit Facility (as defined in Note 6), 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. 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 financial statements and related disclosures.
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 were effective for fiscal years beginning after December 15, 2021. The Company adopted this standard on January 1, 2022 with no significant effect on the Company's financial statements or related disclosures.
9

2.    Financial Information by Business Segment
The Company reports its operations in three segments that reflect its three lines of business of Gathering, Transmission and Water, which reflects the manner in which management evaluates the business for making operating decisions and assessing performance.
 Three Months Ended March 31,
 20222021
 (Thousands)
Revenues from customers:  
Gathering$219,790 $250,076 
Transmission110,795 111,419 
Water11,561 18,501 
Total operating revenues$342,146 $379,996 
Operating income (loss):  
Gathering$115,621 $139,854 
Transmission84,562 81,488 
Water(1,856)4,477 
Headquarters (a)
(389)(239)
Total operating income$197,938 $225,580 
Reconciliation of operating income to net income: 
Equity income (b)
$4 $3 
Other income, net (c)
6,348 7,599 
Loss on extinguishment of debt (41,025)
Net interest expense(93,121)(95,144)
Income tax expense6,261 20,416 
Net income $104,908 $76,597 
(a)Includes certain unallocated corporate expenses.
(b)Equity income is included in the Transmission segment.
(c)Includes unrealized gains on derivative instruments recorded in the Gathering segment.
March 31, 2022December 31, 2021
 (Thousands)
Segment assets:  
Gathering$7,610,869 $7,638,877 
Transmission (a)
2,798,661 2,769,097 
Water148,875 151,151 
Total operating segments10,558,405 10,559,125 
Headquarters, including cash260,297 361,639 
Total assets$10,818,702 $10,920,764 
(a)The equity investment in the MVP Joint Venture is included in the Transmission segment.
10

 Three Months Ended March 31,
 20222021
 (Thousands)
Depreciation:  
Gathering$48,255 $46,547 
Transmission13,894 13,800 
Water4,517 8,175 
Headquarters377 96 
Total$67,043 $68,618 
Capital expenditures:
Gathering (a)
$53,147 $48,113 
Transmission (b)
4,226 3,505 
Water9,565 4,807 
Headquarters12 1,157 
Total (c)
$66,950 $57,582 
(a)Includes capital expenditures related to the noncontrolling interest in Eureka Midstream Holdings, LLC (Eureka Midstream) of approximately $3.0 million and $1.7 million for the three months ended March 31, 2022 and 2021, respectively.
(b)Transmission capital expenditures do not include aggregate capital contributions made to the MVP Joint Venture for the MVP and MVP Southgate projects of approximately $72.5 million and $10.7 million for the three months ended March 31, 2022 and 2021, 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. 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 $4.3 million and $3.7 million for the three months ended March 31, 2022 and 2021, respectively.
3.    Revenue from Contracts with Customers
For the three months ended March 31, 2022 and 2021, all revenues recognized on the Company's statements of consolidated comprehensive income are from contracts with customers. As of March 31, 2022 and December 31, 2021, all receivables recorded on the Company's consolidated balance sheets represented performance obligations that have been satisfied and for which an unconditional right to consideration exists.

Summary of disaggregated revenues. The tables below provide disaggregated revenue information by business segment.
Three Months Ended March 31, 2022
GatheringTransmissionWaterTotal
(Thousands)
Firm reservation fee revenues (a)
$132,597 $102,870 $5,752 $241,219 
Volumetric-based fee revenues 87,193 7,925 5,809 100,927 
Total operating revenues$219,790 $110,795 $11,561 $342,146 
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 

(a) For the three months ended March 31, 2022, firm reservation fee revenues associated with Gathering included approximately $2.7 million of MVC unbilled revenues. 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 of MVC unbilled revenue, respectively.
(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. 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 sheets 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, 2022 and 2021:
Unbilled Revenue
20222021
(Thousands)
Balance as of beginning of period$16,772 $18,618 
  Revenue recognized in excess of amounts invoiced (a)
4,692 10,188 
  Minimum volume commitments invoiced (b)
(14,884)(16,931)
  Amortization (c)
(110) 
Balance as of end of period$6,470 $11,875 
(a)Primarily includes revenues associated with MVCs that are generally included in firm reservation fee revenues within the Gathering and Water segments. During the three months ended March 31, 2021, also includes other contractual commitments of approximately $6.2 million.
(b)Unbilled revenues are transferred to accounts receivable once the Company has an unconditional right to consideration from the customer.
(c)Amortization of capitalized contract costs paid to customers over the expected life of the agreement.
Contract liabilities. The Company's contract liabilities consisted of deferred revenue primarily associated with the EQT Global GGA. Contract liabilities are classified as current or non-current according to when such amounts are expected to be recognized. As of March 31, 2022, total contract liabilities were $909.1 million, of which $1.1 million was classified as current and recorded in accrued liabilities and $908.0 million was classified as non-current and recorded in contract liability on the Company's consolidated balance sheet. As of December 31, 2021, total contract liabilities were $822.4 million, of which $1.1 million was classified as current and recorded in accrued liabilities and $821.3 million was classified as non-current and recorded in contract liability on the Company's consolidated balance sheet.
The following table presents changes in the Company's contract liability balances during the three months ended March 31, 2022 and 2021:
Contract Liability
20222021
(Thousands)
Balance as of beginning of period$822,416 $398,750 
  Amounts recorded during the period (a)
86,920 72,019 
  Amounts transferred during the period (b)
(268)$ 
Balance as of end of period$909,068 $470,769 
(a)Includes deferred billed revenue during the three months ended March 31, 2022 and 2021 primarily associated with the EQT Global GGA.
(b)Deferred revenues are recognized as revenue upon satisfaction of the Company's performance obligation to the customer.

Summary of 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, MVCs and/or ARCs as of March 31, 2022 that the Company will invoice or transfer from contract liabilities and recognize in future periods.
 
2022(a)
2023202420252026ThereafterTotal
 (Thousands)
Gathering firm reservation fees
$65,980 $105,804 $157,621 $150,060 $141,227 $1,277,907 $1,898,599 
Gathering revenues supported by MVCs334,378 457,843 429,233 448,262 459,424 3,477,205 5,606,345 
Transmission firm reservation fees260,613 359,260 376,572 363,629 358,800 3,228,443 4,947,317 
Water revenues supported by ARCs28,125 37,500 37,500 37,500 37,500 193,750 371,875 
Total (b)
$689,096 $960,407 $1,000,926 $999,451 $996,951 $8,177,305 $12,824,136 
(a)    April 1, 2022 through December 31, 2022.
(b)    Includes assumptions regarding timing for placing certain projects in-service. Such assumptions may not be realized and delays in the in-service dates for projects have substantially altered, and additional delays may further substantially alter, the remaining performance obligations for certain contracts with firm reservation fees, MVCs and/or ARCs. The MVP Joint Venture is accounted for as an equity investment and those amounts are not included in the table above.
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 14 years and 13 years, respectively, as of March 31, 2022.
4.    Related Party Transactions
As of March 31, 2022, EQT was a related party of the Company due to its ownership of 22,796,026 shares of Equitrans Midstream common stock, which represented an approximately 5.3% ownership interest in the Company, excluding the impact of the Equitrans Midstream Preferred Shares. In the ordinary course of business, the Company 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, transportation service and precedent agreements, storage agreements and water services agreements. As of May 3, 2022, EQT is no longer a related party of the Company.
The following table summarizes the Company's related party transactions.
Three Months Ended March 31,
20222021
(Thousands)
Operating revenues$198,386 $224,957 
Equity income 4 3 
Interest income from the Preferred Interest1,395 1,469 
Capital contributions to the MVP Joint Venture (72,537)(10,723)
Principal payments received on the Preferred Interest1,351 1,277 
The following table summarizes the Company's related party receivables and payables.
March 31, 2022December 31, 2021
(Thousands)
Accounts receivable$168,114 $190,410 
Contract asset 2,246 
Investment in unconsolidated entity1,278,992 1,239,039 
Preferred Interest98,487 99,838 
Capital contributions payable to the MVP Joint Venture 39,159 72,188 
Contract liability905,578 818,658 


11

5.    Investment in Unconsolidated Entity
The MVP Joint Venture is constructing the Mountain Valley Pipeline (MVP), an estimated 300-mile natural gas interstate pipeline that is designed to span from northern West Virginia to southern Virginia. The Company will operate the MVP and owned a 47.0% interest in the MVP project as of March 31, 2022. On November 4, 2019, Consolidated Edison, Inc. (Con Edison) exercised an option to cap its investment in the construction of the MVP project at approximately $530 million (excluding AFUDC). The 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 Company's targeted cost for the project of approximately $6.6 billion (excluding AFUDC), the Company's equity ownership in the MVP project will progressively increase from approximately 47.0% to approximately 48.1%. 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 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, which is a proposed 75-mile interstate pipeline that is contemplated to extend from the MVP at Pittsylvania County, Virginia to new delivery points in Rockingham and Alamance Counties, North Carolina. The Company is expected to operate the MVP Southgate pipeline and owned a 47.2% interest in the MVP Southgate project as of March 31, 2022. The MVP Joint Venture continues to evaluate the MVP Southgate project, including engaging in discussions with the project shipper, Dominion Energy North Carolina, regarding options with respect to the project, including potentially refining the project’s design and timing in lieu of pursuing the project as originally contemplated. Dominion Energy North Carolina’s obligations under the precedent agreement in support of the original project are subject to certain conditions, including that the MVP Joint Venture complete construction of the project facilities by June 1, 2022, which deadline is subject to extension by virtue of previously declared events of force majeure. The Company is unable to predict the results of the discussions between the MVP Joint Venture and Dominion Energy North Carolina, including any potential modifications to the project, or ultimate undertaking or completion of the project.
In the fourth quarter of 2021, the Company incurred an other-than-temporary decline in value in its equity investment in the MVP Joint Venture, primarily due to unfavorable decisions by the U.S. Fourth Circuit Court of Appeals that vacated and remanded key authorizations, that resulted in a pre-tax impairment charge of $1.9 billion. As a result of the impairment, the carrying value of the Company's equity investment in the MVP Joint Venture was reduced to $1.2 billion as of December 31, 2021. There is risk that the Company's equity investment in the MVP Joint Venture may be further impaired in the future due to ongoing (and potentially future) legal and regulatory matters, as well as potential macroeconomic factors, including market fluctuations, changes in interest rates, cost increases and other unanticipated events.
In March 2022, 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 the Company, for $39.1 million, of which $18.2 million was paid in May 2022, and $20.9 million is expected to be paid in June 2022. The capital contributions payable and the corresponding increase to the investment balance are reflected on the consolidated balance sheet as of March 31, 2022.
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 construction budget for the MVP project.
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.
Based on EQM’s credit rating levels, EQM has delivered replacement credit support to the MVP Joint Venture in the form of letters of credit, which, in the case of the MVP project is in the amount of approximately $219.7 million and, in the case of the MVP Southgate, is in the amount of approximately $14.2 million, in each case, as of March 31, 2022. The amount of each of the letters of credit is subject to adjustment based upon the applicable project's construction budget. Upon the FERC’s initial release to begin construction of the MVP Southgate project, the Company's then-current letter of credit to support MVP Southgate will be terminated, and the Company will be obligated to deliver a new letter of credit (or provide another allowable
12

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.
The following tables summarize the unaudited condensed consolidated financial statements of the MVP Joint Venture in relation to the MVP project.
Condensed Consolidated Balance Sheets
March 31, 2022December 31, 2021
(Thousands)
Current assets$82,570 $148,820 
Non-current assets6,515,268 6,432,288 
Total assets$6,597,838 $6,581,108 
Current liabilities$146,148 $160,331 
Equity6,451,690 6,420,777 
Total liabilities and equity$6,597,838 $6,581,108 
Condensed Statements of Consolidated Operations
 Three Months Ended March 31,
 20222021
(Thousands)
Operating expenses$(1)$ 
Other income10 6 
Net income$9 $6 
6.    Debt
Amended EQM Revolving Credit Facility. As of March 31, 2022, the Company had aggregate commitments available of $2.25 billion under the Amended EQM Credit Facility, which is set to mature in October 2023. As of March 31, 2022, EQM had approximately $180 million of borrowings and $234.9 million of letters of credit outstanding under the Amended EQM Credit Facility. As of December 31, 2021, EQM had approximately $225 million of borrowings and $234.9 million of letters of credit outstanding under the Amended EQM Credit Facility. During the three months ended March 31, 2022, the maximum outstanding borrowings at any time was approximately $280 million and the average daily balance was approximately $260 million. EQM incurred interest at a weighted average annual interest rate of approximately 2.8% for the three months ended March 31, 2022. During the three months ended March 31, 2021, the maximum outstanding borrowings at any time was approximately $525 million and the average daily balance was approximately $489 million. EQM incurred interest at a weighted average annual interest rate of approximately 2.5% for the three months ended March 31, 2021. For the three months ended March 31, 2022, commitment fees of $1.8 million were paid to maintain credit availability under the Amended EQM Credit Facility. For the three months ended March 31, 2021, commitment fees of $2.3 million were paid to maintain credit availability under the First Amended EQM Credit Facility. As of March 31, 2022, no term loans were outstanding under the Amended EQM Credit Facility.
See Note 10 for discussion of the Third Amendment (as defined in Note 10) to the Amended EQM Credit Facility.
Amended 2019 EQM Term Loan Agreement. On January 8, 2021, EQM (i) applied a portion of the proceeds from the issuance of the 2021 Senior Notes (as defined below) to prepay all principal, interest, fees and other obligations outstanding under the Amended 2019 EQM Term Loan Agreement and (ii) terminated the Amended 2019 EQM Term Loan Agreement and the loan documents associated therewith. EQM repaid outstanding term loans (the EQM Term Loans) with a principal amount of $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, the weighted average annual interest rate was approximately 2.4%.
Eureka Credit Facilities. On May 13, 2021, Eureka Midstream, LLC (Eureka), a wholly owned subsidiary of Eureka Midstream, repaid all outstanding principal borrowings plus accrued and unpaid interest under and terminated its credit facility
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with ABN AMRO Capital USA LLC, as administrative agent, the lenders party thereto from time to time and any other persons party thereto from time to time (the Former Eureka Credit Facility). In conjunction with the termination of, and to fund the repayment of all outstanding amounts under the Former Eureka Credit Facility, on May 13, 2021, Eureka entered into a $400 million senior secured revolving credit facility with Sumitomo Mitsui Banking Corporation, as administrative agent, the lenders party thereto from time to time and any other persons party thereto from time to time (the 2021 Eureka Credit Facility).
As of March 31, 2022, and December 31, 2021, Eureka had approximately $268 million and $280 million, respectively, of borrowings outstanding under the 2021 Eureka Credit Facility. For the three months ended March 31, 2022, the maximum amount of outstanding borrowings under the 2021 Eureka Credit Facility at any time was approximately $280 million and the average daily balance was approximately $277 million and Eureka incurred interest at a weighted average annual interest rate of approximately 2.9%. For the three months ended March 31, 2022, commitment fees of $0.1 million were paid to maintain credit availability under the 2021 Eureka Credit Facility. For the three months ended March 31, 2021, the maximum amount of outstanding borrowings under the Former 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, 2021, commitment fees of $0.1 million were paid to maintain credit availability under the Former 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.
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, 2022, EQM and Eureka were in compliance with all debt provisions and covenants.
7.    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 EQT Global GGA provides for potential cash bonus payments payable by EQT to the Company during the period beginning on the first day of the calendar quarter in which the MVP full in-service date occurs through 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 certain Henry Hub natural gas prices exceeding certain price thresholds. The Henry Hub cash bonus payment provision is accounted for as a derivative instrument and recorded at its estimated fair value 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 for the MVP, risk-free 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 50% 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, 2022 and December 31, 2021, the fair values of the Henry Hub cash bonus payment provision were $58.1 million and $51.6 million, respectively, which were recorded in other assets on the Company's consolidated balance sheets. During the three months ended March 31, 2022 and 2021, the Company recognized gains of $6.4 million and $7.1 million, respectively, representing the
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change in estimated fair value of the derivative instrument during the respective period. The gains are reflected in other income, net 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 Former Eureka Credit Facility (prior to its termination), the 2021 Eureka Credit Facility and the Amended 2019 EQM Term Loan Agreement (prior to 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. As of March 31, 2022, and December 31, 2021, the estimated fair values of EQM's senior notes were approximately $6,425.6 million and $7,060.5 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, 2022, and December 31, 2021, the estimated fair values of the Preferred Interest were approximately $107.6 million and $117.0 million, respectively, and the carrying values of the Preferred Interest were approximately $98.5 million and $100.0 million, respectively.
8.    Earnings Per Share
The Company excluded 30,137 and 30,076 (in thousands) of weighted average anti-dilutive securities related to the Equitrans Midstream Preferred Shares and stock-based compensation awards from the computation of diluted weighted average common shares outstanding for the three months ended March 31, 2022 and 2021, respectively.
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, 642 and 486 (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, 2022 and 2021, respectively.
9.     Income Taxes
The Company's effective tax rate was 5.6% for the three months ended March 31, 2022, compared to 21.0% for the three months ended March 31, 2021. For the three months ended March 31, 2022 and 2021, the 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 "ordinary" income or loss (pre-tax income or loss excluding unusual or infrequently occurring items) for the periods. The effective tax rate was lower for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 primarily due to a reduction in the valuation allowances that limit tax benefits for the Company’s federal and state deferred tax assets, which valuation allowances were recorded by the Company at December 31, 2021. The effective tax rate for the three months ended March 31, 2022 was lower than the statutory rate primarily due to the reduction in the valuation allowances that limit tax benefits for the Company’s federal and state deferred tax assets. The effective tax rate for the three months ended March 31, 2021 was lower than the statutory rate primarily due to the impact of AFUDC - equity on the MVP project.
For the three months ended March 31, 2022, the Company believes that it is more likely than not that the benefit from a portion of its federal and state net operating loss (NOL) carryforwards and deferred tax assets related to interest disallowance under Internal Revenue Code Section 163(j), net of offsetting deferred tax liabilities, will not be realized. For the three months ended March 31, 2022, the Company recorded a $23.1 million income tax benefit related to changes in valuation allowances because of decreases in federal and state deferred tax assets. As of March 31, 2022, the valuation allowances related to federal and state deferred tax assets that are not more likely than not to be realized were $74.5 million compared to the year ended December 31, 2021, of $97.6 million.
Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that a tax benefit will not be realized. In evaluating the need for a valuation allowance, management considers available evidence, both positive and negative, including potential sources of taxable income, income available in carry-back periods, future reversals of taxable temporary differences, projections of taxable income and income from tax planning strategies. Positive evidence includes reversing temporary differences and projection of future profitability within the carry-forward period, including from tax planning strategies. Negative evidence includes historical pre-tax book losses and Pennsylvania NOL expirations. A review of positive and negative evidence regarding these tax benefits resulted in the conclusion that valuation allowances on the Company’s federal and state NOL carryforwards and deferred tax assets related to interest disallowance under Internal Revenue Code Section 163(j), net of offsetting deferred tax liabilities, were warranted as it was more likely than not that these assets will not be realized. Any determination to change the valuation allowance would impact the Company's income tax expense in the period in which such a determination is made.
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10.     Subsequent Events
On April 22, 2022 (the Amendment Date), EQM entered into an amendment (the Third Amendment) to the Amended EQM Credit Facility. The Third Amendment, among other things:
Replaced LIBOR with SOFR as the benchmark rate for borrowings, including a credit spread adjustment of 0.10% for all applicable interest periods as well as for daily swing line borrowings.
Extended the stated maturity date, with such extension only applicable for the lenders approving the Third Amendment, from October 31, 2023 (the Earlier Maturity Date) to April 30, 2025 (the Later Maturity Date).
Reduced the aggregate commitments available under the Amended EQM Credit Facility, as amended by the Third Amendment, on a non-pro rata basis to approximately $2.16 billion, with approximately $1.55 billion in aggregate commitments available under the Amended EQM Credit Facility, as amended by the Third Amendment, on and after the Earlier Maturity Date and prior to the Later Maturity Date.
Amended the definition of “Applicable Rate” to change the applicable percentages per annum set forth in the “Pricing Grid” for certain pricing levels, which continue to be determined on the basis of EQM’s then current credit ratings. As of the Amendment Date, (i) Base Rate Loans (as defined in the Amended EQM Credit Facility, as amended by the Third Amendment) bear interest at a base rate plus a margin of 1.750% per annum, (ii) SOFR Loans (as defined in the Amended EQM Credit Facility, as amended by the Third Amendment) bear interest at Adjusted Term SOFR (as defined in the Amended EQM Credit Facility, as amended by the Third Amendment) plus a margin of 2.750% per annum, (iii) Daily Simple Swing Line Loans (as defined in the Amended EQM Credit Facility, as amended by the Third Amendment) bear interest at Adjusted Daily Simple SOFR (as defined in the Amended EQM Credit Facility, as amended by the Third Amendment) plus a margin of 2.750% per annum, (iv) the letter of credit fee payable on the daily maximum amount available under each letter of credit is